doing business in norway - arntzen de besche advokatfirma assvartisen is norway’s second largest...

Doing business in Norway

Teamwork, Integrity, Quality and Dedication constitute the main platform of Arntzen de Besche Law Firm’s activities. These values reflect the firm’s and our employees’ commitment and dedicati-on. Arntzen de Besche consists of 170 unique individuals – which jointly are leading.

In addition to its main office in Oslo, Arntzen de Besche is present in Trondheim and Stavanger. We want to be a close partner to private and public stakeholders through goal-oriented collaboration and by using our commercial understanding and sector knowledge to advice our clients. One of the firm’s focus areas is to develop its international operations as part of the internationalization of Norwegian industry and to further assist national authorities in petroleum producing countries globally.

We aim to keep the highest ethical standards at all times and it is important to us that each employee is trusted by our clients, other partners and contacts, and the society in general.

Copyright @ 2017 Arntzen de BeschePublisher: Arntzen de Besche

Design: Idéverkstedet ASProduction: Frode Fjellberg ASPhoto: canstockphoto.com / thinkstockphotos.com / Adobe Stock

Warning and Disclaimer

The information in this book is for general information purposes only and does not claim to be comprehensive or provide legal or other advice. Arntzen de Besche Advokat-firma AS accepts no responsibility for loss which may arise from accessing or reliance on information contained in this book. The book is current as of its date of publication and do not necessarily reflect the present law or regulations.

The contents of this book are protected by copyright under international conventions. Users are permitted to read the contents and make copies for their own personal use. They may also give copies (in paper or electronic form) of reasonable extracts on an occasional basis free of charge to colleagues and clients for their personal use, on terms that (i) Arntzen de Besche Advokatfirma AS is acknowledged as the source, (ii) the text is not altered in any way and (iii) the attention of recipients is drawn to this Warning and Disclaimer. All other use and copying of any of the contents of this site is prohibited unless the prior written consent of Arntzen de Besche Advokatfirma AS is obtained.

ISBN 978-82-990261-7-8

The practice at Arntzen de Besche Law Firm dates back to 1870. Today, our 130 lawyers at the offices in Oslo, Trondheim and Stavanger serve Norwegian and foreign business clients in nearly all fields of the law. We are dedicated to providing advice and expertise at the highest levels, and we have time and again achieved extraordinary results following the distinctive vision of our founders. Client service is the foundation goal of every law firm. Every day of the year, our cohesive team of lawyers focus intensely on solving our clients’ most important problems. Our main objective is to assist our clients in the best possible way. We cannot succeed without continuous work and relentless search for improvements. In our day to day work assisting our clients, we always seek to achieve excellence within the profession, thus helping the clients attain their objectives. By publishing a new edition of Doing Business in Norway we want to give the reader an updated summary of the core elements of Norwegian law. We sincerely hope that this publication will be of interest to companies and individuals contemplating at engaging in business activities in Norway. Although the book covers a number of legal subjects, the intention is limited to providing a brief outline of each area of the law. We hope that you will find this introduction useful and readable.

Sven Iver Steen Managing Partner

Trond Vernegg M&A Partner, Editor

Erlend HaaskjoldLitigation Partner, Editor

Arntzen de Besche

3 D OING BUSINESS IN NORWAY

Svartisen is Norway’s second largest glacier and covers more than 370 square kilometres. The highest point on the glacier rises to 1,595 metres above sea level. The name Svartisen comes from ‘svartis’, or ‘black ice’, an old word used to describe the deep blue colour of the ice and the contrast with the white snow and newer ice on the glacier plateau itself. The lowest part of the glacier is just 20 metres above sea level, making it easily accessible to tourists and glacier walkers.

CONTENTINTRODUCTION .................................................. 10General ...................................................................................11

FORMS OF DOING BUSINESS ..................13

General ................................................................................. 14

LIMITED LIABILITY COMPANIES ............16

Private and public

limited liability companies ..............................................17

Incorporation .......................................................................18

Company capital .............................................................. 20

Shares and shareholders’ rights ....................................21

The general meeting ........................................................22

COMPANY MANAGEMENT ...........................................25

The board of directors .....................................................25

General Manager ...............................................................27

The corporate assembly .................................................28

Auditor .................................................................................28

Representation and signatory power..........................28

DISTRIBUTION OF EQUITY ...........................................31

Dividend ...............................................................................31

Capital reduction ..............................................................32

Merger or demerger ..........................................................32

Repayment following liquidation ................................32

Capital increase .................................................................32

FINANCIAL INSTRUMENTS ..........................................36

Convertible loans ..............................................................36

Warrants shares .................................................................37

Warrants ..............................................................................37

Share capital reduction ...................................................38

MERGERS AND DEMERGERS

BETWEEN LIMITED COMPANIES ..............................40

Merger ..................................................................................40

Demerger ............................................................................ 42

Dissolution and winding-up ......................................... 43

Board liability ....................................................................44

PARTNERSHIPS.................................................... 46

General .................................................................................47

BRANCHES ............................................................... 50

General ..................................................................................51

INSOLVENCY ........................................................... 54

General .................................................................................55

TAX SYSTEM ..............................................................59

General ................................................................................60

Tax administration ..........................................................60

Tax treaties.........................................................................60

Entities subject to tax ......................................................61

Rate of tax ..........................................................................62

Tax losses ............................................................................63

Interest ................................................................................ 64

PARTICIPATION EXEMPTION .................................... 66

Qualifying investments /

Shares in limited liability companies ......................... 66

Investments in partnerships

and hybrid entities .......................................................... 68

Investments in securities’ funds ................................. 68

Investments in other equity instruments ................. 69

Investments in non-equity instruments .................. 69

BUSINESS TAXATION ......................................................71

Depreciation ........................................................................71

R&D (Skattefunn)..............................................................73

Tax consolidation ..............................................................74

Exit taxes .............................................................................76

Tax residency ...................................................................... 77

Taxation of non-residents ..............................................78

Withholding taxes .............................................................79

Mergers and reorganisations .........................................95

CFC regime ........................................................................80

TRANSFER PRICING ......................................................83

Scope of rules ....................................................................83

Documentation ................................................................ 86

Advance Pricing Agreements ....................................... 86

SPECIAL TAX REGIMES ................................................. 88

Transfer of license interests .......................................... 88

Refund of tax value of exploration costs .................. 88

Hydro-electric plants ...................................................... 88

Tonnage tax .......................................................................90

Svalbard ...............................................................................92

Property tax ........................................................................92

Net wealth tax ...................................................................92


VALUE ADDED TAX (VAT) ............................................95

VAT general/VAT registration .......................................95

VAT rates in Norway ........................................................ 96

VAT reporting .................................................................... 96

Import of goods ................................................................97

Customs credit

(duty deferment account) ..............................................97

Invoicing requirements ...................................................97

Exemptions ....................................................................... 99

Transfer and registration taxes ...................................102

Income tax filing ..............................................................103

Income tax payments....................................................103

Reassessment .................................................................103

Penalty taxes ....................................................................103

EMPLOYMENT LAW .........................................109

General Overview .............................................................110

PRE-EMPLOYMENT CONSIDERATIONS ...............110

The EE-register .................................................................110

Types of employment ..................................................... 111

Employment contracts ................................................... 111

MANDATORY EMPLOYEE BENEFITS

AND SOCIAL SECURITY ................................................ 113

Employer’s social security contribution .................... 113

Occupational injury insurance ..................................... 113

Occupational pension .................................................... 113

EMPLOYEES’ REPRESENTATION

STRUCTURES, TRADE UNIONS AND

COLLECTIVE BARGAINING AGREEMENTS ...........114

General overview ..............................................................114

Trade unions and collective

bargaining agreements ..................................................114

Collective disputes .......................................................... 115

Health and safety in the workplace ............................ 115

EMPLOYMENT CONSIDERATIONS .......................... 116

Probation period .............................................................. 116

Holiday ................................................................................ 116

HOURS OF WORK .......................................................... 118

Introduction ....................................................................... 118

Overtime pay .................................................................... 118

Exemptions from the above requirements .............. 119

Provisions on wages ....................................................... 119

TERMINATION OF THE

EMPLOYMENT CONTRACT .......................................120

Introduction ......................................................................120

Procedural requirements ..............................................120

GROUNDS FOR DISMISSAL ........................................ 121

Matters relating to the employee ................................ 121

Summary dismissal – termination

without a notice period .................................................. 121

Matters relating to the

enterprise – redundancies ............................................. 121

Termination of the chief executive

of the undertaking .......................................................... 122

Compensation claims ................................................... 122

INDUSTRIAL AND INTELLECTUAL PROPERTY .................... 123

PATENTS ...........................................................................124

General ...............................................................................124

Application and grant ....................................................124

Patentability ..................................................................... 125

Employee inventions ..................................................... 125

Assignments and licenses............................................ 125

Infringement .................................................................... 126

TRADE MARKS ............................................................... 128

General ............................................................................... 128

Registration and examination .................................... 128

Assignment and license ................................................ 129

Infringement .................................................................... 129

Designs ..............................................................................130

COPYRIGHT ...................................................................... 131

General ................................................................................ 131

Copyright contents .......................................................... 131

Assignment and licensing ............................................. 131


DATA PROTECTION ......................................... 133

General ...............................................................................134

Restriction .........................................................................134

Notification and authorisation ................................... 136

Transfer abroad................................................................ 136

Administrative requirements ...................................... 137

Use of data processors .................................................. 137

Cookies .............................................................................. 137

Sanctions........................................................................... 137

CONSUMER PROTECTION ....................... 139

General .............................................................................. 140

Mandatory content in contracts ................................ 140

Unfair contract terms......................................................141

Financial agreements with consumers ....................143

Information requirements ............................................144

Contract formation requirements .............................. 145

Marketing and sales methods ..................................... 145

Quality and safety requirements ...............................146

Consumer authorities

and organisations ...........................................................146

SOCIAL AND SOCIAL WELFARE .......... 147

General ...............................................................................148

Sickness benefits ............................................................148

Maternity leave ................................................................148

National insurance contributions...............................149

PENSIONS ......................................................................... 151

General ................................................................................ 151

The Norwegian Act relating to

mandatory pension schemes ..................................... 152

The different forms of pension schemes ................ 153

The characteristics of defined

benefit pension scheme ............................................... 153

The characteristics of defined

contribution pension scheme ..................................... 154

The characteristics of a hybrid pension scheme ... 154

IMMIGRATION ....................................................... 156

General ................................................................................157

Foreign nationals comprised

by the EEA/EFTA area ...................................................157

LITIGATION .............................................................. 159

The court system ............................................................160

Courts of First Instance ................................................160

SPECIALISED FIRST INSTANCE COURTS ............ 162

Land Consolidation Court (jordskifterett) ............... 162

Court of Assessment (Skjønnsrett) ........................... 162

Labour Court (Arbeidsrett) ........................................... 162

Appellate Courts ............................................................. 163

Costs ................................................................................... 163

ARBITRATION ....................................................... 165

General ...............................................................................166

DOMESTIC ARBITRATION .......................................... 167

General ............................................................................... 167

The arbitration clause: submission to arbitration .......167

Arbitrators ......................................................................... 168

Proceedings ...................................................................... 169

Award ................................................................................. 169

Legal remedies ................................................................ 170

Enforcement .................................................................... 170

Enforcement of foreign and

international awards ....................................................... 171

ALTERNATIVE DISPUTE RESOLUTION ................ 173

General ............................................................................... 173

Mediation .......................................................................... 174

Other forms of

alternative dispute resolution ..................................... 174

AQUACULTURE AND FISHERIES ........ 176

Overview of the industry ...............................................177

Aquaculture regulation ..................................................177

Fisheries regulation ........................................................ 179

REAL ESTATE ......................................................... 182

Introduction ...................................................................... 183

Land Register ................................................................... 183

Commercial Real Estate ...............................................184

Lease Agreements ......................................................... 185

Zoning Plans .................................................................... 186

Pollution ............................................................................ 186


SECURITIES ANDSTOCK EXCHANGE LAW ............................. 189

Regulation of the

Norwegian Securities Market .......................................190

Market places for trading shares in Norway ............190

Trading, and market surveillance ............................... 192

Continued obligations for listed companies........... 192

The VPS and transfer of shares .................................. 193

Licensing requirements ................................................. 193

Exchange controls ..........................................................194

Insider trading and disclosure obligations ..............194

Take-over regime and

compulsory acquisition ................................................. 195

COMPETITION LAW ......................................... 198

General introduction to the EEA agreement .......... 199

NORWEGIAN COMPETITION RULES......................201

Overview – Harmonization

with EU competition rules ...........................................201

Anti-competitive behavior –

Cartel prohibition ............................................................201

Prohibition on abuse of dominant position ..........202

Sanctions, leniency and compliance ........................202

Merger control – Legislation ......................................203

The filing system – Notification thresholds ...........203

Transactions below thresholds

and minority acquisitions............................................203

Access to files ................................................................ 204

Standstill obligation ..................................................... 204

Procedure and timetables .......................................... 204

PUBLIC PROCUREMENT ...........................206

Legislation and EU harmonization ..........................207

Scope of the procurement legislation......................207

Turnover thresholds ......................................................207

Award of contract ..........................................................208

Complaints, interim measures

and damages actions ...................................................208

OIL AND GAS ......................................... 210PETROLEUM LAW .......................................................... 211

Regulatory bodies and state participation............... 211

THE CONCESSIONARY

AND REGULATORY SYSTEM...................................... 213

Fundamental Regulatory Principles ........................ 213

General legal framework .............................................. 213

The production license

and the exploration licence .........................................214

Joint Operating Agreement

and Accounting Agreement ......................................... 215

THE VARIOUS PHASES OF

THE PETROLEUM ACTIVITIES .................................. 217

The exploration phase ................................................... 217

The development phase ............................................... 217

The production phase ................................................... 218

The decommissioning phase ...................................... 218

Third party access ........................................................... 218

Assignment of a participating

interest or share interest in

companies holding a participating interest ............ 218

Petroleum tax .................................................................. 219

CONTRIBUTORS ................................................ 222


As the sun sinks into the sea and disappears, leaving a golden light on the horizon; as it bids farewell after yet another day in paradise; as its rays shine their last and silence falls over the water and people, that’s a good time to reflect on how lucky we Norwegians are that we can sleep safely in a peaceful country.

Introduction

GENERAL

Norway is a constitutional monarchy where the executive, legislative and judiciary powers are divided between the Government, the Parliament (the Storting), and the civil courts respectively. The legal system is usually described as mixed; elements based on the roman and continental traditions are blended with features from the English common law system.

The Constitution is dated 17 May 1814. The declaration of a sovereign state marked the end of 400 years of Danish rule. The independence, however, was short-lived, as the Swedes made claim to acquire Norway following the end and the outcome of the Napoleonic wars. Following a brief military intervention, Norway accepted a form of union with Sweden, which lasted until Norway’s second declaration of independence in 1905. Since then, Norway has been a sovereign state.

The Constitution sets out the basic principles of the State and its governance. Over time, the powers and authority vested in the King personally have been transferred to the Government as the King’s council. Today, the King acts solely in ceremonial matters. The Government is elected by Parliament. Parliament is elected by a general election every four years. The Supreme Court renders final judgments, which ensures the inde-pendence of the civil court system.

The Constitution also contains a catalogue of fundamental right such as a prohibition against legislation adopted with retroactive effect, freedom of speech, and a right to full compensation in the event of public expropriation of private property. More recently, the Parliament has adopted provisions to ensure the rights of the ethnic-minority groups, and a general right to a healthy and sustainable environment. Public authorities are required to respect the international human rights. Several international conventions have been incorporated into Norwegian law, most notably the European Human Rights Convention.

Today, the King acts solely in ceremonial matters. The Government is elected by Parliament.

11 INTRODUCTION

And fearless men from the North went forth over the sea towards foreign shores… Given good weather a Viking ship could sail more than 150 nautical miles a day!

Forms of doing business

GENERAL

Enterprises in Norway can be organised in several ways. Most businesses are organised as limited liability companies, partnerships (where the participants, either jointly or in the aggregate, are liable for the full amount of the company’s obligations) or through a Norwegian branch of a foreign entity. All enterprises operating business activities in Norway are obliged to register with the Register of Business Enterprises, by which the entity will receive an organisation number and (if applicable) a VAT registration number. As the majority of enterprises in Norway are limited liability companies, this type of company will be the main focus in the following. We will, however, also briefly discuss the law relating to partnerships and branches.

As the majority of enterprises in Norway are limited liability companies, this type of company will be the main focus in the following.

14 FORMS OF D OING BUSINESS

Norwegians have lived amongst snow and ice since they first settled in this area 10,000 years ago. A snow cave or an igloo was often used as shelter. An igloo is made from solid snow blocks laid out in a spiral so the last block at the top will be almost perfectly round. The igloo protects against cold and extreme weather and is usually between two and three metres high.

Limited liability companies

PRIVATE AND PUBLIC LIMITED LIABILITY COMPANIES

As in other jurisdictions, the key distinction in Norwegian corporate law is between companies where the owners have or do not have liability for the company’s obligations. In a limited liability company, the shareholder’s liability is limited to the equity capital they have invested in the company.

A limited liability company may be incorporated as a “public” or “private” company. Private limited liability companies are governed by the Private Limited Liability Companies Act 1997 (PRLLC), and public limited liability companies are governed by the Public Limited Liability Companies Act 1997 (PULLC) (jointly the LLC Acts). The key concep-tual difference is that a company incorporated pursuant to the PULLC is intended to raise capital from a broad investor base and may (but does not have to) be listed on a stock exchange. A company incorporated pursuant to the PRLLC is intended to raise capital from a fewer number of investors, and cannot be listed on a stock exchange. Although the LLC Acts for most parts are identical, regulations differ on certain topics to reflect this conceptual difference. The general meeting of a private or public limited liability company can resolve to transform the company to become a private or public limited liability com-pany, as appropriate. Unless otherwise indicated, all references to a “company” shall be taken to comprise both private and public limited liability companies.

The Opera House in Oslo with the Barcode buildings in the background. In 2016 there will be 10,000 people working and 500 living in this area.

17 LIMITED LIABILIT Y C OMPANIES

INCORPORATION

The minimum mandatory procedure for incorporating a company is relatively straight-forward. The subscriber of shares in the company (the founder(s)) must draw up a memorandum of incorporation which, as a minimum, shall include:

• the company’s articles of association;

• the name and other details of the founders;

• the number of shares to be subscribed by each founder;

• the price payable for each share to be subscribed for by the founders;

• the deadline for paying the subscription price for the shares;

• the names of the company’s directors; and

• the name of the company’s auditor (if applicable). It is permitted, subject to certain qualifications, for smaller companies to resolve that the board shall be permitted to

decide that the company’s accounts shall not be subject to annual audits.

If the contribution payable to the company for shares shall be settled by way of contri-bution in kind – only payment in NOK is considered “cash” for these purposes, all other means of settlement, including foreign currency, is considered as contribution in kind – the founders must also prepare a statement on the value of the contributed asset, as well as an opening balance sheet which shall be attached to the memorandum of incorporation. The additional documentation shall serve to confirm that the value of the assets contributed as payment for the shares, has a value which at least is equal to the equity contribution made on the shares.

The company’s receipt of the full contribution payable by the founders shall be con-firmed by a Norwegian certified auditor or alternatively, if the contribution shall be made in cash, by a financial institution. Norwegian corporate law does not include the concept of no par value shares or shares that are issued yet not fully paid-up.

The founder(s) shall date and sign the memorandum of incorporation. When all the founders have done so – there is no requirement that the company has more than one founder, and there is no upper limit on how many founders there can be – the shares are


subscribed and the company is formed. The incorporation of the company shall then be reported to the Register of Business Enterprises within three months. Limitations apply to the company’s ability to take on obligations by contract and otherwise until registra-tion is complete.

Furthermore, the board of directors shall without delay ensure creation of a register of shareholders of the company. In public limited liability companies the register of share-holders shall be managed by a central security registry. Evidence of share ownership consists solely of the share register. The concept of physical share certificates is no longer recognised or part of Norwegian corporate law for newly incorporated companies.

Norway is one of the world’s leading fishing nations and export a range of different species of fish. In 1946 Norway was the first country in the world to establish a Ministry of Fisheries.


COMPANY CAPITAL

The minimum share capital requirement for a private limited liability company is NOK 30,000. For public limited liability companies the minimum requirement is NOK 1,000,000. The share capital shall be divided into one or more shares. All shares, regard-less of whether the share capital is divided into more than one class of shares, shall have the same par value.

Regardless of its registered share capital (which essentially represents a matter of accounting and has limited financial or legal significance, but see below in this paragraph), a company shall at all times maintain equity and liquidity which is adequate in terms of the risk and scope of the company’s business. Considerations as to whether the company meets the equity and liquidity test must be made by the board of directors on a regular basis, all depending on the nature of the company’s business. If equity and liquidity falls below the level which the board reasonable believes is the minimum required for the company in view of its business operations and risk exposure, and always if equity is deemed to be less than half of the company’s registered share capital, the LLC Acts impose upon the board to within reasonable time call a general meeting, in which it shall report to the shareholders on the company’s financial position. The board of directors shall propose to the general meeting measures to restore the equity to acceptable levels. If the board of directors does not find proposing such measures justified or such measures are found not to be reasonably feasible, it shall propose liquidation of the company.

All distributions of the company’s assets are subject to and may only be done in accord-ance with the LLC Acts’ provisions on payment of dividends, capital reduction, merger or demerger of companies, and repayment following liquidation. If a distribution has been made in without following the rules set out in these provisions, the recipient is subject to a strict and unlimited obligation to return the received assets (or their corre-sponding value, if the asset itself e.g. has been consumed or further traded).

The company shall at all times have a level of equity and liquidity which equals or exceeds the reasonable mini-mum for the type of business the company conducts.


SHARES AND SHAREHOLDERS’ RIGHTS

All shares in a company carry equal rights, unless the shares pursuant to the company’s articles of association are divided into different classes of shares. The articles of associ-ation shall in such case specify the distinctions between the share classes, the total par value and number of shares within each class.

As a general rule, shares in public limited liability companies are freely transferable, i.e. transfer of title to shares is not subject to board consent, shareholder right of first refusal or other restrictions. The general rule is the opposite in private limited liability companies where a share transfer, unless otherwise set out in the articles of association, is subject to the board of directors’ consent (not to be unreasonably withheld) and also existing shareholders’ right of first refusal.

Legal protection for title to shares in a company is secured by notification to the compa-ny that title has passed to the new owner. The new holder (by acquisition or otherwise) of a share in a PRLLC shall therefore immediately notify the company of its acquisition. Following such notice, the company is obliged to register the new owner in the register of shareholders without undue delay and state the date of registration. In a PULLC, it is, however, the former owner who shall ensure that the change in ownership is reported to the relevant central security registry. This is because it is the former owner which has to instruct its securities account agent to transfer title to the shares to the new owner versus the central securities register.

The purchaser may only exercise the rights that pertain to a shareholder (a) when the transfer has been entered in the company’s register of shareholders, or (b) when the transfer has been reported and evidenced towards the company without being prevented by restrictions such as board approval or existing shareholders’ pre-emption right.

Legal protection for title to shares in a company is secured by notification to the company that title has passed to the new owner.


THE GENERAL MEETING

The highest authority in a company is exercised by its shareholders through the general meeting. This means that the general meeting can pass resolutions regarding any matter relating to the company. However, where a general meeting resolution is not required by law or the company’s articles of association, the board of directors will have authority to discuss and resolve the matter. The general meeting will nevertheless have a right of instruction and reversal of decisions made by the board of directors.

Unless otherwise prescribed by LLC Acts or specific provisions in the company’s articles of association, resolutions by the general meeting are passed by a simple majority of the votes cast. Certain resolutions do, however, require a qualified majority, as follows:

• Amendment of the articles of association: requires the support of at least two-thirds of a) the votes cast; and b) of the share capital represented at the general meeting. A resolution to amend the articles of association which detracts from the rights of an entire class of shares requires the support of two-thirds of the represented capital of that class. Moreover, at least half the votes of the shareholders who do not own shares in any other class must be cast in favour of the proposal.

• Qualified majority requirement: a resolution which in respect of issued shares causes the shareholders’ right to dividend or the company’s assets to be reduced;

requires the supporting vote of owners of shares making up more than nine-tenths of the share capital represented at the general meeting, in addition to a majority as for amend-ments of the articles of association. The same majority is required for certain resolutions changing the transferability of issued shares.

Requirement of unanimity etc.: a resolution requires the consent of all the shareholders (whether present in the general meeting or not) when, in respect of issued shares, it im-plies that (i) the obligations of the shareholders towards the company are increased; (ii) the right to assign or acquire shares in the company is restricted (otherwise than as such resolutions requiring qualified majority described above); (iii) shares may be subject to compulsory redemption; (iv) the legal relationship among formerly equivalent shares is altered; or (v) the right of shareholders to collect dividends or to the company’s capital is reduced by a provision to change the company’s object to not generating profit for the shareholders.


Sheep farming is an important part of Norwegian agriculture. Today there are about 1.1 million sheep in Norway spread over 18,000 farms. Sheep farming secures about 10,000 jobs, but is mainly done as a side line. The most common breed of sheep in Norway is Norsk kvit sau, or Norwegian white sheep, which thrive on the coast and in the mountains.

It is permitted for the shareholders to include in the articles of association that certain resolutions shall require higher majorities than set out above to be passed. In addition, the LLC Acts include general limitations regarding resolutions adopted by the general meeting which potentially may give certain shareholders or others an unreasonable benefit at the expense of the other shareholders in the company. Resolutions which unreasonably benefit certain shareholders or others can be invalidated by way of legal proceedings.

Then they came sailing in through the fjord, these mighty ships with their characteristic shape. The technological invention, the keel, made the Viking ships go much faster than previous vessels.


COMPANY MANAGEMENT

THE BOARD OF DIRECTORS

The board of directors is a mandatory body in a company and is elected by the general meeting as the shareholders’ representatives responsible for the management of the company. The board shall:

• ensure proper organisation of the business of the company;

• draw up plans and budgets for the company’s business and also lay down guidelines for the business;

• keep itself informed of the company’s financial position;

• ensure that the company’s activities, accounts and capital management are subject to adequate control; and

• effectuate any inspections the board considers necessary in order to perform its tasks.

If a PRLLC does not have a general manager (a PULLC shall always have a general man-ager, as further set out in General Manager), the Board is also responsible for organising and managing the day-to-day operations of such company. If the company has appointed a general manager, the board of directors is responsible for supervising the day-to-day administration and the company’s business in general. In conducting this responsibil-ity the board of directors may issue instructions for the general manager, and may at any time require that the general manager reports to the board of directors on specific matters.

Resolutions by the board of directors are, unless otherwise set out in the articles, passed by a simple majority of the votes cast. Minutes shall be kept of the board of directors’ proceedings.

In a company with more than 30 employees and no corporate assembly (cf. The cor-porate assembly below), a majority of the employees may require the election of one member of the board of directors and one observer by and amongst the employees. If the company has 50 employees and no corporate assembly, a majority of the employees may require the election of up to one third and at least two of the board members. If the company has more than 200 employees and no corporate assembly, the majority of the employees shall elect one additional board member and two additional observers.


At least half the members of the board of directors shall reside in Norway or be nationals of states that are parties to the EEA Agreement and reside in such state. It is possible to apply to the Ministry of Trade, Industry and Fisheries for an exemption from this requirement.

The general manager of a PULLC may not be a member of its board of directors. Other than that, there are no statutory limitations on the shareholders right to elect executive directors. It is, however, worth observing that in Norway as opposed to, e.g. in the US and the UK, it is not common to elect directors from the ranks of the executives, as this is deemed detrimental to corporate governance. Incidentally, executive board members are allowed in a company. Note, however, that executive board members are considered unfortunate from a corporate governance perspective. Finally, the board of directors of public limited liability companies shall be comprised of both sexes, in accordance with detailed provisions in the PULLC.

The Royal Palace in Oslo was built for King Karl III Johan and was finished in 1849, after 25 years of planning. The architect behind this beautiful building was the Dane von Linstow,

who took his inspiration from similar buildings in Denmark and Germany.


GENERAL MANAGER

Public limited liability companies are required by statute to have a general manager, whilst this is optional for private limited liability companies.

The general manager is the highest executive officer in a limited liability company, and the only executive whose responsibilities are governed by the LLC Acts. Other executives and employees are appointed by the general manager or its subordinates.

The general manager is appointed by the board of directors to be in charge of the day-to-day management of the company’s business, and to always be in compliance with instruc-tions issued by the board of directors. The general manager does not have the authority to decide on matters which are deemed to be “unusual” or of material importance.

The general manager may, however, also decide in matters beyond the board’s instruc-tions and the day-to-day management, if the board’s decision cannot be awaited without major inconvenience to the company. The board shall be notified as soon as possible of such decision. Furthermore, it is among the fiduciary duties of the general manager to ensure that the company’s accounts are made in accordance with statutory law and regu-lations, and that the company’s capital management is properly organised.

At least every four months for private limited liability companies and at least each month for public limited liability companies, the general manager shall report to the board with information on the company’s business, position and profit/loss development. There are no statutory requirements as to form or content for such reporting, other than that by its nature it must provide such information as to reasonably permit the board to keep itself informed about the operational and financial development of the company.

The general manager shall reside in Norway, or if she or he is a national of a state that is a party to the EEA Agreement, reside in such state. It is possible to apply to the Ministry of Trade, Industry and Fisheries for an exemption from this requirement.

The general manager is the highest executive officer in a limited liability company.


THE CORPORATE ASSEMBLYA company with more than 200 employees is, unless otherwise agreed between the com-pany and the employees, required to have a corporate assembly of at least 12 members. The duties of the corporate assembly include the election of the members and the chair-man of the board of directors, supervising the board of directors, and being the general manager’s administration of the company. At the proposal of the board of directors the corporate assembly may also adopt resolutions in certain matters.

The company and a majority of the employees or unions comprising two-thirds of the employees may agree that the company shall not have a corporate assembly.

AUDITORPublic limited liability companies are required to appoint an auditor. The general meet-ing of a private limited liability company may, however, authorise the board of directors to decide not to have an auditor; subject to the company’s operating revenue, balance sheet amount and number of employees being below certain statutory nominal thres-holds. The auditor shall be elected by the general meeting.

If a PRLLC has resolved not to have its annual accounts audited, it will still need auditor confirmations in relation to a number of corporate actions, such as a capital increase/decrease, mergers and demergers and liquidation process. It may therefore be practical even for such companies to maintain a relationship with an auditor which is familiar with the company and its management.

REPRESENTATION OF THE COMPANY AND AUTHORITY TO SIGN FOR THE COMPANYThe board of directors represents the company towards external parties and has the full corporate authority to act with binding effect for the company. The board of directors may also appoint directors, the general manager or named employees as having author-ised signatory power for the company (individually or jointly). It is also common to include provisions in the articles of association, by which the shareholders have specified that, in addition to the full board acting jointly, e.g. the general manager and any board member, acting jointly, shall hold the authorised signatory powers for the company.

The company shall notify the Register of Business Enterprises of who it has appointed as having authorised power of signature on behalf of the company. Once registered, this information can be relied upon by third parties, in the sense that any disposition made


by the authorised signatories towards third parties will be binding for the company, unless the third party knew or should have known that the relevant authorised signatory did in fact not have internal authorisation to act in such way, and if it would represent an act of bad faith to uphold such disposition.

It is, however, important to understand that it is not a requirement for a disposition to be binding on the company that it is taken by an authorised signatory. By the powers vested in that position, the general manager represents and is authorised to act with binding effect for the company in all matters relating to the day-to-day management (as further discussed above). Within the limitations of its own authority, the general manager may also authorise anyone else to contract or otherwise represent the company. Such author-ity can be implied in the relevant employee’s position – a chief operating officer will for example be deemed to have wide authority to act on behalf of the company in matters relating to its operations – or express in the form of a formal POA structure by which various individuals are appointed as attorney-in-fact for specific purposes.

The company shall notify the Register of Business Enterprises of who it has appointed as having authorised power of signature on behalf of the company.


There is a Norwegian saying claiming that Norwegians are ‘born with skis on their feet’. In Nordmarka outside Oslo cross country skiers can enjoy over 2,600 kilometres of well prepared tracks. There are also many nice cafés where skiers can take a break and relax before moving on. And if the planned trip turns out to be too long, they can stay overnight at one of the 24 Turistforeningen (Norwegian Trekking Association) cabins in the Oslo area.

DISTRIBUTION OF EQUITY

The LLC Acts exhaustively regulate the various methods by which the company’s equity is permitted to be distributed to the shareholders. Any distribution of the company’s equity not in compliance with these provisions is illegal, not binding on the company and shall be repaid by the recipient. Any such illegal distribution may further expose the board of directors, general manager and/or shareholders, and also the company’s audi-tors and other advisors who may have facilitated the distribution, to financial liability and criminal prosecution.

DIVIDENDA company may only distribute dividend to the extent that after the distribution it maintains net assets with a book value at least equal to the company’s share capital and any other restricted equity (certain types of balance sheet equity which is categorised as non-distributable due to its nature) in the balance sheet. The calculation shall be made on the basis of the balance in the company’s last auditor approved balance sheet, however so that it is the registered share capital on the time of resolving the dividend payment that applies.

Distribution of dividend is resolved by the general meeting with simple majority follow-ing a proposal by the board of directors for such distribution. As a reflection of the board of directors’ responsibility to ensure that the company maintains a certain level of equity and liquidity (as described above), the general meeting is not permitted to resolve the distribution of dividend in excess of the amount proposed by the board.

Dividend capacity based on the balance sheet of the statutory annual accounts for the preceding financial year can be paid out in one or several tranches, in each case subject to a board proposal for such distribution and a general meeting resolution for the same. It is also permitted to resolve interim dividends based on an updated audited balance sheet at any time during the course of the year, subject always to the same restrictions and procedure as set out above.

Distribution of dividend is resolved by the general meeting with simple majority following a proposal by the board of directors for such distribution.


CAPITAL REDUCTIONShareholders may resolve to distribute the company’s equity by way of a reduction of the share capital, as further set out in Demerger.

MERGER OR DEMERGERShareholders may resolve to distribute the company’s equity by way of a merger or demerger as further set out in Dissolution and winding-up.

REPAYMENT FOLLOWING LIQUIDATIONShareholders will also receive any surplus equity which remains after having settled all obligations towards creditors after having dissolved the company.

CAPITAL INCREASEThe company’s share capital is increased either by subscription of new shares or by increasing the par value of the existing shares.

Equity can be contributed a) by way of subscribing for new shares at a subscription price equal to the face value of the company’s shares, in which case the full amount contributed is booked as share capital which is considered tied-up equity and subject to distribution restrictions; or b) by way of subscribing for shares at a price higher than their face value, in which case the full amount paid in excess of the face value will represent premium, which subject to the company’s equity at any given time may be available for distribution.

Share capital can further be increased by way of transfer of the company’s own funds from unrestricted equity to share capital (bonus issue); the conversion of loans granting the creditor the right to convert the loan into shares, the conversion of warrants shares (shares which gives the holder a right to subscribe for further shares), or conversion of warrants.

In addition to cash (for the purpose of capital increases, only NOK is considered as cash, all other ways of contributions are either settled in kind, including typically foreign cur-rency, or by set off against debt owed by the company to the subscriber), it is permitted to resolve that contribution for new shares can be settled in kind by any asset which the com-pany pursuant to accounting rules is permitted to book as an asset in its balance sheet. If contribution shall be made in kind or be settled by set-off, the board must issue a statement by which it confirms that the value of the assets received by the company at least equals the amount to be contributed pursuant to the subscriptions made. The statement shall be confirmed by an auditor. The valuation of the assets the company is to take over cannot be carried out earlier than four weeks before the general meeting’s resolution.


To resolve the increase of the company’s share capital, the board must submit a proposal to the general meeting specifying the details of the proposed increase and also the appropriate changes to the capital provision of the company’s articles of association. The board must present a proposal for the specific resolution for the capital increase, and must therefore, among other requirements, specify whether the new share capital shall be raised by cash or in kind contributions, by transferring funds, by converting debt or by requesting further shareholder contributions (see further details below).

The board must also describe the reason for its proposal to increase the share capital, and a brief statement must be provided on matters of importance which subscribers should consider in connection with the subscription of new shares.

In connection with a capital increase by subscription of shares in return for cash contribu-tions, the existing shareholders have a preferential right to subscribe for the new shares in proportion to their current shareholdings in the company. It is permitted, subject to certain conditions, for the board to propose and the general meeting to resolve that the shareholders’ preferential right shall be waived in relation to each specific capital increase.

A resolution to increase the share capital shall be adopted by the general meeting. The general meeting may, based on a proposal by the board of directors, also grant a power of attorney to the board of directors to increase the share capital. The general meeting’s res-olution granting power of attorney to the board of directors must be registered with the Register of Business Enterprises without delay, and be advised that the board of directors cannot use such power of attorney to issue new shares before it has been registered. Once the power of attorney is registered with the Register of Business Enterprises, the board may, subject to the limitations set out in the resolution of the general meeting, resolve to increase the share capital without any further general meeting resolution.

As a minimum, a resolution to increase the company’s share capital must always state the amount by which the share capital is to be increased, or specify upper and lower limits for such an increase, the par value of the shares, the amount to be paid for each share and who that is entitled to subscribe for the new shares. In addition, the resolution must give information about the subscription deadline, which cannot be longer than three months from the date on which the general meeting adopted the resolution, time and place for the settlement, from which date the new shares will entitle the shareholders to a dividend, if there are or are to be shares of different classes in the company and the estimated expenses in connection with the capital increase.


The amount of share capital, number of shares and par value of shares are always set out in the company’s articles of association. Hence, a capital increase will also require that the general meeting resolves to amend the articles of association.

If the capital increase takes the form of a bonus issue, the resolution must, as a min-imum, state the amount by which the share capital is to be increased, whether the increase shall take place through raising the par value or through issuing new shares and the class of shares to which the new shares are to belong if there are, or are to be, shares of different classes in the company.

The Register of Business Enterprises must be notified of the capital increase within three months after the final date for subscription – which may be a later date than the general meeting resolution – or the resolution will lapse. The notification must include the share capital amount and a confirmation from either the auditor or financial institution confirming the payment of the capital amount. If the contribution is a non-cash con-tribution, a board of directors’ statement describing the contribution and the valuation of such contribution shall also be included in the notification together with an auditor confirmation of such statement. The share capital is considered increased by the notified amount specified in the notification when the capital increase is registered in the Register of Business Enterprises.

The valuation of the assets the company is to take over cannot be carried out earlier than four weeks before the general meeting’s resolution.


Dog sledding at Svalbard, a group of islands situated about half way between the Norwegian mainland and the North Pole. The islands were initially used as a base for whalers, and from the 19th century also for coal mining. In 1925 Svalbard became a part of Norway. Its location north of the Arctic Circle means that Svalbard experiences both the Midnight Sun in the summer and the Polar Night in the winter.

FINANCIAL INSTRUMENTS

The LLC Acts include regulations governing the procedure and corporate actions necessary for the issue of certain types of financial instruments. These financial instru-ments, when properly issued, give the holder the right to convert them into shares in the company without any further corporate actions (e.g. GM resolutions) being necessary. Although the company may contract with third parties that they shall have the right to subscribe for new shares, such right will always, unless in the form of a financial instrument as described below, be subject to the condition that the shareholders of the company pass the resolutions required for the issue of such new shares. The below repre-sents a conceptual description of the three types of financial instruments convertible into shares and a summary of certain key characteristics only.

CONVERTIBLE LOANSA convertible loan is a loan that has been issued by the company by shareholder resolution in the general meeting – with such majority as required to amend the articles of asso-ciation – pursuant a proposal by the board of directors, and which as per the terms of the agreement and the general meeting resolution may be converted into new shares in the company. The resolution to issue a convertible loan contains several of the same elements as a resolution for a general increase of the company’s share capital as described above. The right to subscribe to new shares is directly tied to and cannot be separated from the creditor position pursuant to the loan agreement.

Upon conversion, in accordance with the agreed terms of the loan agreement, the company can issue the required number of shares to the convertible loan holder as an executive action without shareholder approval, the effect of which is that the relevant portion of the loan is set off against the creditor’s (subscribers’) obligation to pay for the new shares. The maximum period for the right to convert the loan into shares is five years from the date of the general meeting resolution.

As is the case in relation to ordinary capital increases, the existing shareholders have the preferential right to subscribe for a convertible loan, cf. same above. It is also permitted for the general meeting to grant the board of directors a power of attorney to issue con-vertible loans. The convertible loan, and a board power of attorney to issue convertible loans, shall be registered with the Register of Business Enterprises.


WARRANTS SHARESWarrants shares are shares which give the holder the right to subscribe for additional new shares in the company, subject to the terms of the general meeting resolution issuing the warrants shares, e.g. by allowing a subscriber for one share the right to subscribe for one more share within a pre-defined period of time and at a pre-defined subscription price. The right to demand the issue of new shares is inseparable from the share. The maximum period for the right to convert the warrants shares into shares is five years from the date of the general meeting resolution. The shareholder preferential right to subscribe for new shares issued by the company does not apply upon the conversion of warrants shares into shares.

The resolution to issue warrants shares is passed by the general meeting with such majority as is required to amend the articles of association. The issue of warrants shares, and the maximum resulting share capital increase, shall be registered with the Register of Business Enterprises.

WARRANTSWarrants are subscription rights that are not attached to any shares in the company. As opposed to warrants shares, ordinary warrants may therefore be traded by the holder, if so permitted pursuant to the terms of issue. The maximum period for the right to con-vert the warrants into shares is five years from the date of the general meeting resolution. The shareholder preferential right to subscribe for new shares issued by the company does not apply upon the conversion of warrants into shares. There is no requirement that a premium is payable for the warrant itself. The resolution to issue warrants is passed by the general meeting with such majority as is required to amend the articles of association. The issue of warrants, and the maximum resulting share capital increase, shall be registered with the Register of Business Enterprises.

The right to subscribe to new shares is directly tied to and cannot be separated from the creditor position pursuant to the convertible loan.


SHARE CAPITAL REDUCTION

The shareholders may, subject to a proposal by the board of directors, resolve to reduce the share capital in the company. Reduction of the share capital requires a resolution by the general meeting. The amount to which the reduction relates may only be used for

1. covering a loss that cannot be covered in any other way;

2. distribution to the shareholders or cancellation of the company’s own shares;

3. allocation to reserves to be used in accordance with the general meeting’s resolution.

The resolution must state the reduction amount and the purpose for which it is to be used. It must also be stated whether the reduction in capital is to be implemented by the redemption of shares or by a reduction in par value of the share. Any reduction of the share capital pursuant to alternatives 2 and 3 above will always be subject to the require-ment that the company retains equity and liquidity which is adequate in terms of the risk and scope of the company’s business. The auditor must confirm that there will be full cover for the company’s restricted equity after the reduction.

If the full amount of the reduction amount is to be used to cover a loss (alternative 1 above), the reduction in the capital will take effect when the notification of the reduction has been registered with the Register of Business Enterprises and without notice to any creditors. In such case, a dividend in the company cannot be declared until three years after the registration with the Register of Business Enterprises, unless the share capital has again been increased by an amount that is at least equivalent to the reduction.

If the reduction of the amount is to be used in whole or part in accordance with alterna-tives 2 or 3 above, the resolution of the reduction must be registered with the Register of Business Enterprises which will make the resolution public in its electronic publication platform and by notifying the company’s creditors that any objection to the reduction must be submitted to the company within six weeks of the public notice. When the deadline has expired and the relationship with any creditors is settled, the resolution on a reduction in capital will enter into force when a new notification thereof is registered with the Register of Business Enterprises.


There are 2,534 glaciers in Norway, covering an area of about 2,692 square kilometres. Several of the glaciers can be explored on foot both in the summer and winter.

MERGERS AND DEMERGERS BETWEEN LIMITED COMPANIES

The Limited Liability Acts set out mandatory rules as to how statutory mergers and demergers between Companies are to be prepared, resolved, implemented, including how the assets and shares of the company are to be managed, and procedures taken for consideration by its governing bodies.

When the merger or demerger has been registered with the Registry of Business Enter-prises, the acquiring company may, in accordance with general rules, transfer formal positions as the owner of or holder of rights to assets that have belonged to the transfer-ring company. It is a general rule (the continuity principle) that mergers and demergers are completed with a company law and tax law continuity. The continuity principle means that the merging or demerging companies and its shareholders will continue in the companies to which they are transmitted. In relation to tax matters, the continuity principle therefore implies that the tax positions of companies will continue unchanged in the acquiring companies.

The below is a description of the main rules that apply in a merger/demerger between independent companies. Cross-border mergers and demergers, mergers between a par-ent company and a wholly owned subsidiary, mergers between companies with the same owner, and demergers when the acquiring companies own all the shares in the transferor company, may be completed using somewhat simplified procedures.

MERGERA statutory merger is a transaction whereby one company (the Transferring company) takes over one or more of another company’s (the acquiring company) assets, rights and obligations as a whole, and by the shareholders in the Transferring company receiving a consideration in the form of

• shares in the acquiring company; or

• such shares plus an additional payment which must not exceed 20 per cent of the total consideration.


The boards of directors of the merging companies must prepare and sign a joint merger plan. When the merger plan has been completed, the board of directors of each company must prepare a written report on the merger and the effects it will have on the company. The report must give an account for the reasons for the proposed merger and the signif-icance of the merger to the employees of the company. Employee representatives in the merging companies must be given information and shall have the right to discuss the merger in accordance with the Norwegian Working Employment Act.

In the individual company, the merger shall be resolved by the general meeting ap-proving the merger plan. In the Transferring company, the approval also has effect as subscription for the shares that are to be received as consideration from the acquiring company. The consideration shares shall be issued in accordance with the procedure for an ordinary capital increase if the merger is completed by takeover and in accordance with the procedure for incorporation if the merger is completed by formation of a new company.

The resolution must be reported to the Register of Business Enterprises no later than one month after the merger plan has been approved by the general meetings and, if applicable, by the boards of directors in all the companies participating in the merger. The Register of Business Enterprises will make public the merger resolutions in its elec-tronic publication platform and by that notify the creditors. When the six week deadline has expired for all the companies participating in the merger and the relationship with any creditor which has objected to the merger has been settled, the acquiring company must again notify the Register of Business Enterprises that the merger is to enter into force, with the following effects:

1. the Transferring company is dissolved;2. the acquiring company is formed or the share capital in the company is increased;3. the transferor company’s assets, rights and obligations are transferred to the acquiring company; and4. the shares in the transferor company are exchanged for the shares in the acquiring company.

A merger may trigger a requirement for a merger filing to be made to the Norwegian Competition Authority. Merger filing is required if the companies involved have a total revenue in Norway of more than NOK 1 billion, but not if only one of the companies has an annual revenue in Norway of more than NOK 100 million – the test is made against the revenue set out in the latest statutory annual financial statements of the companies.


DEMERGER

A statutory demerger is a transaction by which some or all of the transferor company’s assets, rights and obligations are to be divided between one or more acquiring compa-nies in return for the shareholders in the Transferor company receiving consideration in the form of

• shares in the company or in one or all of the acquiring companies; or• such shares plus an additional payment which must not exceed 20 per cent of the total consideration.

The board of directors of the Transferring company must draw up and sign a demerger plan containing certain information and describing the distribution of the company’s assets, rights and obligations between the Transferring company and the acquiring company/companies, the distribution of shares and other considerations between the shareholders in the Transferring company. In the company that is to be split, the resolu-tion on a demerger shall be adopted by the general meeting approving the demerger. In connection with a demerger by a transfer to an existing company, the resolution shall be correspondingly adopted in the acquiring company.

The demerger must be reported to the Register of Business Enterprises no later than one month after the demerger plan has been approved. The Register of Business Enterprises will make public the demerger resolution in its electronic publication platform and by that notify the creditors. After a deadline of six weeks has expired and the relationship with any creditor has been settled, the demerger must be reported to the Register of Business Enterprises as completed.

If the demerger is to be carried out by the transferor company’s assets, rights and obli-gations being divided between two or more acquiring companies that, together, own all the shares in the Transferor company, the demerger can be carried out by the board of director’s adopting the resolution in the company to be demerged and without payment of a consideration.

If the company that is liable for an obligation pursuant to the demerger plan fails to meet the obligations, the companies that have participated in the demerger are jointly and severally liable for such obligation towards the relevant creditor. However, each of the other companies’ liability shall be limited to an amount equivalent to the net value that was received by it in connection with the demerger.


DISSOLUTION AND WINDING-UP

Companies are wound up and deregistered in two stages.

The winding-up and dissolution of a company requires a resolution by the general meeting by the same majority as is required for an amendment to the articles of associ-ation, based on a proposal from the board of directors. The general meeting must elect a committee of liquidators that shall act as the board of directors during the winding-up proceedings and will replace the former board and managing director of the company. When dissolution has been decided, the company must add the words “in liquidation” to its business name in letters, notices and other documents. The resolution of dissolution must be notified to the Register of Business Enterprises and made public in the electronic publication platform. The creditor’s deadline to report their claims is six weeks and starts from the date the notice is published.

For companies such claims are filed with the chair of the board of liquidators, who will ensure that they are included in the winding-up accounts. The company’s assets shall be converted into cash wherever necessary to meet its obligations. Any distributions to shareholders or profits other than dividends may not be effected before the compa-ny’s obligations have been discharged and at least six weeks have elapsed since the last announcement of the notification to creditors in the Register of Business Enterprises’ electronic publication platform.

On completion of the distribution an audited financial statement shall be submitted to the general meeting. When the financial statement has been approved a notification shall be sent to the Register of Business Enterprises stating that the company has been finally dissolved.

In the company that is to be split, the demerger shall be resolved and approved by the general meeting.


BOARD LIABILITY

The board’s statutory responsibilities and liabilities are regulated in the relevant LLC Act, and by general Norwegian background law of damages. Board members can be held economically liable for loss caused by negligent or willful acts or omissions, whilst failure to comply with mandatory law also may result in criminal liability as the case may be. Criminal liability may result in fines or, in aggravating circumstances, imprisonment for up to one year. The company itself may also be subject to criminal liability for its acts or omissions in breach of applicable criminal law.

The company, a shareholder or others may hold the general manager, a member of the board of directors, member of the corporate assembly, independent experts, investigator or shareholder liable for any damage which they, in the capacity mentioned, have inten-tionally or negligently caused such party.

The company, a shareholder or others may also hold a party who, intentionally or negli-gently, has contributed to damage as mentioned above, liable for the damage. Damages can be claimed from such person even though the individual who was primarily respon-sible cannot be held liable because he or she did not act with intent or negligence.

Each board member is required to perform his fiduciary duties with appropriate care and execute the tasks and responsibilities in a suitable manner. The test as to whether a board member has acted with the proper level of diligence is both subjective and objec-tive. The subjective part relates to the director’s individual knowledge, skill and experi-ence. The objective part relates to the general knowledge, skill and experience that can reasonably be expected of a person carrying out the functions of a director.

Each board member is required to perform his fiduciary duties with appropriate care and execute the tasks and responsibilities in a suitable manner.


Dried fish is one of Norway’s most popular exports. It is primarily cod that is being conserved in this traditional way. The fish is hung up on ‘hjell’, a rack to hang the fish on, and this is done while there is still snow on the ground to protect the fish from insects. The climate in the north of Norway is perfect for drying the fish, which is used to make ‘lutefisk’, amongst other things.

Partnerships

GENERAL

Partnerships are subject to the provisions of the Partnership Act 1985.

The distinct characteristic of an unlimited liability partnership, as opposed to a limited liability company, is that although the partnership is a legal entity separate from its partners, the partners are, subject to the variations described below, jointly and severally liable for all the obligations of the partnership itself. Both the partnership and the part-ner can be held directly liable for the partnership’s obligations, although creditors must first seek settlement from the partnership itself.

The following forms of partnership exist, all of whom having in common that the partnership’s obligations towards third parties are fully covered by the partners:

• Unlimited liability partnerships: partnership where the partners have unlimited personal liability for the total obligations of the partnership, undivided or for parts which altogether constitute the total obligations of the partnership and who act as such in relation to third parties.

• Limited partnership: partnership where at least one partner has unlimited liability for the obligations of the partnership and at least one other partner has limited liability up to a stipulated sum of the obligations of the partnership.

In each partnership, a dated written partnership agreement shall be drawn up and signed by all partners. Later amendments shall be made in the same manner unless the amend-ments appear from a record of a partners meeting. A partner who joins the partnership after it has been established shall accede to the partnership agreement in writing.Partnership agreements shall at least contain provisions concerning:

• the name of the partnership;

• the name and address of each partner;

• the object of the partnership;

• the municipality in which the partnership will have its head office; and

• whether the partners will contribute capital, and the value of any contributed assets.

The partners exercise the highest authority in the partnership through the partnership meeting. Only the partners have voting rights and all resolutions require the unanimous support of all voting partners. Minutes shall be kept of the proceedings in the partners meeting.

47 PARTNERSHIPS

It may be agreed that the partnership shall have a board of directors who shall conduct the general administration of the partnership and particularly ensure that the capital administration is organised in a satisfactory manner. The directors are elected by the partners meeting. Board resolutions are adopted by a majority of the attending directors. However, a valid resolution always requires the supporting vote of more than one-third of all the directors.

The partners meeting may also engage a general manager to conduct the everyday management of the partnership and particularly ensure that the capital administration is safely organised. The general manager shall comply with the guidelines and instructions issued by the partners meeting or board of directors. If appointed, the general manager’s authorities in a partnership are similar to his authorities in a limited liability company as described in General.

Vigelandsparken in Oslo is one of the best known sculpture parks in the world. In the background you can see the famous Monolitten, or The Monolith, which

stands 17 metres tall and consists of 121 human figures.

48 PARTNERSHIPS

The puffin is a colourful addition to our coastal fauna and can be found on the West Coast and further north. The largest colony is in Lofoten, where several thousands of birds are nesting. They can beat their wings rapidly, up to 400 times per minute, to reach a maximum speed of 85 kilometres an hour.

Branches

GENERAL

A foreign company may conduct its business in Norway through a branch, which in legal terms is referred to as a “Norwegian registered foreign enterprise”, abbreviated as “NUF”. Foreign enterprises conducting business in Norway are obliged to register with the Reg-ister of Business Enterprises.

There are no specific requirements for the legal structure of the foreign business. Both businesses with limited and unlimited liability may register a NUF. The Norwegian branch is not a separate legal entity but considered to be part of the foreign company.The NUF does not have a legal personality different from that of the main foreign com-pany. This means that the NUF is always acting on behalf of the foreign company. Only the foreign company may be party in litigations and the internal organisations of the NUF, and the power to enter into agreements, decision-making procedure and distribu-tion of dividend is governed by the jurisdiction of the main foreign company.

Even though NUFs are acting on behalf of the foreign home office, NUFs are not subject to any particular corporate restrictions and may – as an extension of the home office – enter into contracts, buy and sell, hire and dismiss employees and in general conduct business as any other regular commercial entity with full legal personality.

51 BR ANCHES

There is no requirement for a NUF to have a board of directors as long as the NUFhas a contact person that is registered with the Register of Business Enterprises.

A NUF does not provide the foreign company with protection against liability connected to the business in Norway. Thus, when a foreign enterprise is operating in the form of a NUF, it will be liable for all obligations undertaken by its NUF to the extent of its entire capital at home and abroad, and not only to the extent of the capital invested in the NUF.

Registration of a NUF in the Register of Business Enterprises does not in itself result in a tax liability to Norway. The tax liability, with an obligation to submit annual accounts, occurs when the NUF has, joins or conducts business activities in Norway that results in taxable income, or when the NUF has wealth or income from properties or movables in Norway.

If the branch does not operate from a fixed place of business in Norway and is liable for value added tax (VAT) according to the provisions of the VAT Act, a Norwegian repre-sentative for VAT must be registered. The branch will normally be tax liable to Norway and will otherwise have to comply with Norwegian regulations.

There are more than 2,000 glaciers and seven large national parks at Svalbard. There are also two large nature reserves covering 77,000 square kilometres.

52 BR ANCHES

Many think that Geirangerfjord is the most beautiful fjord in Norway. With its snowcapped mountain tops, wild waterfalls, lush mountain sides and deep blue waters, this area is veritable fairy tale. Amongst the fjord’s many attractions are the waterfall called Seven Sisters, the road construction called The Knot, and the viewpoint Flydalsjuvet.

Insolvency

GENERALNorwegian insolvency legislation is regulated by the Norwegian Bankruptcy Act of June 8, 1984 No. 58 (Konkursloven) (the Bankruptcy Act), which sets forth the various procedures to be followed both in the case of court-administered debt negotiations and bankruptcy proceedings, and the Creditors Recovery Act of June 8, 1984 No. 59 (Dekningsloven) (the Recovery Act) containing provisions on, among other things, the priority of claims.

The key features of the Norwegian bankruptcy proceedings are (i) the seizure and sub-sequent disposal of the debtor’s assets, (ii) the assessment and ranking of claims, (iii) the testing and revocation of transactions (including the securing of existing claims) made prior to bankruptcy, (iv) the handling of the debtor’s contractual relationships and (v) the distribution of funds (if any) in accordance with the priority rules. If the business operations of the bankrupt company are continued, they are in practice continued at the risk of, and only to the extent guaranteed by, the creditors.

Bankruptcy proceedings may be opened provided that, and only if, the debtor is insol-vent. Both the debtor and the creditors (holding or alleging to hold a claim) can petition for bankruptcy.

There are two requirements for a debtor to be deemed to be insolvent: (i) the debtor must be unable to service its debts as they becomes due (the liquidity test) and (ii) the debtor’s debts must exceed the sum of its assets and revenue, based on real, and not book, values (the balance sheet test).

During bankruptcy proceedings the debtor’s assets are controlled by the courtappointed liquidator (usually a lawyer), on behalf of the bankruptcy estate. The main task of the liquidator is to turn all the debtor’s assets into cash in the manner assumed to be most profitable for the estate (the creditors), and then distribute the available cash to the rightful creditors.

In the case of bankruptcy, all of the debtor’s assets will be seized by the bankruptcy estate, and the debtor may not dispose of the seized assets in any way while the bank-ruptcy proceedings are ongoing. The bankruptcy estate may also seize assets owned by third parties, if these assets before the bankruptcy were acquired from the debtor in an unlawful manner, if the acquisition lacks legal protection, or if the transaction can be reversed according to the Recovery Act. The bankruptcy estate is a separate legal entity, which is authorised to exercise all ownership interests and rights with respect to the seized assets, including but not limited to the realisation of assets.

55 INSOLVENCY

Secured creditors are, in principle, not deemed to be part of the bankruptcy proceedings to the extent that the value of the security is sufficient to cover the underlying obliga-tions of the debtor. The secured creditors may, in principle, realise the security, and cover their claims; however, the realisation of a number of categories of security during the first six months after the opening of a bankruptcy will be subject to the approval of the bankruptcy estate – the same principles apply to official debt negotiations. The bankruptcy estate has the right, subject to certain conditions being fulfilled, to realise the security and divide the proceeds between the secured creditors and other creditors holding legal rights in the assets.

Furthermore, the bankruptcy estate has a statutory first lien, ahead of any other credi-tor, on up to 5 per cent of the estimated value or sales value of all assets secured by the debtor for its own debt or by a third-party for the debtor’s indebtedness, but limited to NOK 602,000 (which is 700 times the ordinary Norwegian court fee of NOK 860). Such statutory lien is not applicable to financial security (cash deposits and financial instru-ments) established pursuant to the Norwegian Financial Collateral Act no.17/2004 (the Financial Collateral Act) or the Norwegian Liens Act No.2/1980 s.6-4(9).

Any undersecured amount (the amount of debt exceeding the value of the assets securing it) will be deemed to be an ordinary (unsecured) trade claim.

In a Norwegian bankruptcy, the creditors will be paid according to the following priority:

1. secured claims – valid and perfected security covered up to the value of the secured asset, either after the realisation by the secured creditor itself or after realisation undertaken by the bankruptcy estate;

2. super priority claims – claims that arise during the bankruptcy proceedings, liquidator’s costs and obligations of the estate;

3. salary claims – within certain limitations;

4. tax claims – such as withholding tax and value-added tax within certain limitations;

5. ordinary unsecured claims – all other claims unless subordinated, including unsecured debt, trade creditor claims and indemnity claims; and

6. subordinated claims – including interest incurred after the opening of bankruptcy proceedings, claims subordinated by agreement, liquidated damages and penalty claims.

56 INSOLVENCY

Pursuant to the Recovery Act, the bankruptcy estate may be entitled to set aside or reverse transactions carried out in the three to twelve-month period – and, in respect of transactions representing an economic gain in favour of related parties, up to two years – before the opening of the bankruptcy, such as extraordinary payments of certain cred-itors, security established for existing debt and transactions at an undervalue. The bank-ruptcy estate may also, under certain circumstances, be entitled to set aside or reverse transactions made in bad faith or negligently which in an improper manner increase the debtor’s debt, favour one or more creditors at the expense of others or deprive the debtor of assets which may otherwise have served to cover the creditors’ claims, in which case the time limit for challenges by the estate is increased to ten years.

If the debtor is incorporated under the laws of Norway, insolvency proceedings with respect to any of those entities would be likely to proceed under, and be governed by, Norwegian insolvency law – assuming the country of main business interests of the company is Norway and this remains the case, and the company has no establishments elsewhere. The Norwegian insolvency law may be less favourable to your interests as a creditor than the bankruptcy laws of any other jurisdiction you may be familiar with, including, in respect of priority of creditors, the ability to obtain post-petition interest and the ability to influence proceedings and the duration thereof, and this may limit your ability to receive payments due on any debt. In the event that any one or more of the company or the Guarantors experience financial difficulty, it is not possible to pre-dict with certainty the outcome of insolvency or similar proceedings.

As stated above, provided the country of main business interests of the insolvent com-pany remain in Norway, and the company does not have business establishments in other jurisdictions, insolvency proceedings relating to other countries are likely to be commenced in Norway. However, it should be noted that the concepts of a company’s centre of main interests and its other establishments are fluid and factual concepts that may change. To the that extent the laws of such other country allows for insolvency pro-ceedings for foreign companies with business establishments in that country, such other jurisdictions’ insolvency laws may become relevant.

In the case of bankruptcy, all of the debtor’s assets will be seized by the bankruptcy estate, and the debtor may not dispose of the seized assets in any way while the bankruptcy proceedings are ongoing.

57 INSOLVENCY

With the power of water and great patience, glaciers and snow, streams and rivers, white water rapids and waterfalls have shaped the Norwegian landscape and its beautiful fjords.

Tax system

GENERALThe Norwegian tax system generally consists of business income tax, personal income and net wealth tax, local real estate taxes (if applicable), the value-added tax and special and registration duties. As Norway is not a member of the European Union, the EU directives pertaining to income and value-added tax are not applicable with respect to taxes imposed by Norway. However, Norwegian taxing powers are constrained by the EEA Agreement. More specifically, the EU law on the four freedoms and nondiscrim-ination applies equally with respect to Norway. The EEA Agreement further contains prohibitions against state aid which limits Norway’s ability to grant tax benefits limited to specific taxpayers or industries.

TAX ADMINISTRATIONFor most corporate and individual taxpayers the tax assessments are conducted by the regional tax offices. Currently, the Norwegian tax administration is divided into five regions. In addition, there are three special tax offices dealing with taxation of large enterprises, oil companies and non-resident companies and individuals. The regional and special tax offices are administratively governed and instructed by the national Directorate of Taxes. Tax collection is undertaken by municipal tax collectors.

Administrative appeals are decided by an independent board. The appeal is supported by a secretariat which prepares the cases and drafts the appeal board decisions.

TAX TREATIESNorwegian taxes imposed may be reduced or, in certain instances, eliminated by appli-cation of a tax treaty for the avoidance of double taxation of income. Currently, Norway has entered into tax treaties with close to 90 countries. The Norwegian Ministry of Finance keeps an up-to-date list of current tax treaties, treaties awaiting ratification and treaties under negotiation on the following website:

www.regjeringen.no/en/topics/the-economy/taxes-and-duties/tax-treaties-between-norway-and-other-st/id417330

60 TAX SYSTEM

http://www.regjeringen.no/en/ topics/the-economy/taxes-and-duties/tax-treaties-between-norway-and-other-st/id417330

http://www.regjeringen.no/en/ topics/the-economy/taxes-and-duties/tax-treaties-between-norway-and-other-st/id417330

ENTITIES SUBJECT TO TAXThe main distinction between entities which are separate taxpayers and entities which are transparent for tax purposes is drawn based on whether or not the owners’ liabilities are limited to the paid in capital or not. The liability is limited to the paid in capital for entities such as the public limited liability companies (allmennaksjeselskaper/ ASA) and private limited liability companies (aksjeselskaper/AS). Companies organised under foreign law will be treated as a separate taxpayer if the owners’ liability is limited in the same manner. Further, entities such as cooperatives, associations and foundations are taxed as separate entities.

Entities which are separate taxpayers are taxable on a worldwide income basis inNorway.

Partnerships are taxed at the level of the owners. The partners’ share of the taxable income is, however, computed at the level of the partnership and then allocated to each partner as a net share of the taxable income earned by the partnership. The most common types of partnerships include:

• general partnership (ansvarlig selskap/ANS) where all partners bear an unlimited liability;

• limited partnership (kommandittselskap/KS) where at least one owner has unlimited liability; and

• share liability partnership (selskap med delt ansvar/DA) where the partners bear an unlimited nominal liability individually capped by their interest share.

Certain entities which would normally be subject to ordinary income tax are, regardless of their legal form, generally exempted on the basis of not having a commercial purpose. Nevertheless, the exemption does not fully extend to all business income realised.

Further, physical persons resident in Norway will be taxable on their worldwide income.

Entities which are separate taxpayers are taxable on a worldwide income basis in Norway.

61 TAX SYSTEM

RATE OF TAX

Norway has adopted a dual income tax system whereby all income is subject to a flat income tax at 24 per cent. This is referred to as tax on ordinary income. It is levied on a net basis and applies to all categories of income such as business income, capital income, wages and pensions. It applies to both corporate and individual taxpayers. Costs which are incurred to generate taxable income are deductible in the basis for ordinary income tax. For personal taxpayers, certain costs incurred in relation to employment income are included in a standardised deduction set at the lowest of 44 per cent of the income or NOK 94,750 (per 2017).

For certain areas in Northern Norway, including Finnmark and seven municipalities in Troms, the tax rate on ordinary income for physical persons is reduced to 20.5 per cent.

For individuals, the ordinary income tax is complemented with a progressive tax on employment income and business income (sole proprietorships). The progressive rates are levied on a gross basis and – per the 2017 income year – set as follows:

• Level 1: 0.93 per cent for income below NOK 164,100

• Level 2: 2.41 per cent for income in excess of NOK 164,100



In addition, individuals are subject to a gross basis social security contribution on employment income at 8.2 per cent. Pension income is subject to a rate of 5.1 per cent. Sole proprietors are subject to a corresponding gross basis social security contribution at11.4 per cent.

For individuals, the ordinary income tax is complemented with a progressive tax on employment income and business income.

62 TAX SYSTEM

TAX LOSSES

With few exceptions, tax losses may be utilised to offset ordinary income from other sources. For instances, if an individual taxpayer suffers significant capital losses, these losses will be available to reduce the amount of employment income to be taxed as ordinary income.

Tax losses may be carried forward indefinitely. A tax loss may be carried back up to two years when a business operation ceases to exist or a company or other taxable entity is liquidated.

Losses arising from participations in Controlled Foreign Corporations (CFCs) and limited liability partnerships can only be applied against future profit shares from the same CFC/partnership.

63 TAX SYSTEM

INTEREST

As a general proposition, interest expense is deductible regardless of the amount of debt and regardless of the purpose of the debt. However, for certain taxpayers the deductibility is subject to limitations if the lender is classified as a related party.These limiting rules apply for:

• legal entities treated as separate taxpayers, e.g. limited liability companies (Norwegian and corresponding foreign entities), mutual insurance companies, cooperatives and foundations;

• partnerships (when computing the total net income to be allocated to the partners);

• Controlled Foreign Corporations; and

• branches of non-resident companies.

A related person is defined as a lender directly or indirectly controlling 50 per cent or more of a borrower, or a borrower directly or indirectly controlling 50 per cent or more of a lender. Individuals may be a related party lender based on kinship or marriage; further, a family member’s company may be identified with the owner for purposes of determining whether he or she is a related party lender.

An important feature of the rules is that external lenders are in certain circumstances reclassified as related party lenders to the extent a related party has pledged a security or guaranteed the debt. This rule does not apply when a subsidiary has furnished security for a loan drawn down by the parent company, but will cause a bank loan drawn down by a subsidiary and guaranteed by the parent company to be reclassified as a related party loan.

The interest deductions on related party loans are limited to 25 per cent of an adjusted taxable income. The adjusted taxable income is taxable income increased by net interest costs and tax depreciations, similar to EBITDA. The taxpayer will not be able to deduct interest payments to the extent that such expenses exceed 25 per cent of the mentioned EBITDA. Companies whose net interest costs are below NOK 5 million are exempt.

It should be noted that the rules are drafted so that even companies with accumulated tax losses carried forward may end up with current year tax payables.

Disallowed interest expenses may be carried forward for ten years.

64 TAX SYSTEM

Trollstigen – The Troll’s Path – is Norway’s most visited tourist road. It was opened by King Haakon VII in 1936 after eight years of construction. The road runs between Åndalsnes and Valldal and is a true feat of engineering. On its way to Stigrøra (858 metres above sea level), the Trollstigen road takes 11 hairpin turns as it climbs up the steep mountain side. Some places the road is cut into the mountain, in other places it is built up with stone walls. The road crosses Stigfossen waterfall over an impressive stone bridge.

PARTICIPATION EXEMPTION

QUALIFYING INVESTMENTS / SHARES IN LIMITED LIABILITY COMPANIES

At the outset, shares in Norwegian companies will always constitute a qualifying investment. The effect is that 3 per cent of any dividend income received will have to be included at the statutory rate of 24 per cent, producing an effective tax rate of 0.72 per cent. A dividend may be fully exempt if the taxpayer holds a participation of at least 90 per cent in the distributing company.

Capital gains on these shares will, with the exceptions noted below, be fully exempt regardless of the relative size of the shareholding giving rise to the capital gain. Corre-spondingly, losses are non-deductible.

Rosebay willowherb is a common plant all over Norway, from the edge of the fjord all the way up to the mountain, even above the tree line.

66 TAX SYSTEM

For shares in companies resident within the EU/EEA, an initial assessment has to be made on whether or not the company is resident within a low tax jurisdiction. A low tax jurisdiction is defined as a jurisdiction in which the company is taxed at less than two thirds than what would have been assessed had the company been tax resident in Norway. The analysis is not only confined to a comparison of the tax rates, but also requires a substantive review of how the taxable income is computed.

For instance, if a Norwegian LLC owns shares in a Dutch BV which in turn holds shares comprised by the Dutch participation exemption, it must be analysed whether the latter shares would have been comprised by the Norwegian participation exemption. If not, then Dutch BV could be regarded as being tax resident in a low tax jurisdiction.

For investments in companies resident outside the EEA the applicability of the participation exemption will depend on the following conditions:

• Whether the company is resident in a low tax jurisdiction or not.

• The percentage of vote and capital represented by the shares: – Dividends are only comprised if the Norwegian qualifying shareholder has held at least 10 per cent of vote and capital continuously for a period of two years comprising the distribution date.

– Gains are only comprised if the Norwegian qualifying shareholder has held at least 10 per cent of vote and capital continuously for two years until the realisation date.

– Losses are deductible if the Norwegian qualifying shareholder has not at any point over the past two years held 10 per cent or more of the vote and capital of the company.

A low tax jurisdiction is defined as a jurisdiction in which the company is taxed at less than two thirds than what would have been assessed had the company been tax resident in Norway.

67 TAX SYSTEM

INVESTMENTS IN PARTNERSHIPS AND HYBRID ENTITIESA partnership share will be comprised as a qualifying investment as long as the value of the portfolio of equity investments held by the partnership itself does not include 10 per cent or more of non-qualifying investments. As a general proposition, all entities, whether formed under Norwegian or foreign law, will be classified as a partnership for Norwegian tax purposes as long as one or more of the owners have an unlimited liability for the partnership’s total liability.

If a foreign entity does not qualify as a partnership under this test, it is necessary to analyse if the company is comparable to a qualifying Norwegian entity.

Some special considerations are needed if the entity in question is treated as a transparent entity in its state of residence but as a separate entity for Norwegian tax purposes, i.e. that no owner has unlimited liability. Typical examples could be Lux FCPs, US non-listed LLCs and UK unlimited companies. These entities will be comprised as long as they are either

• organised under the laws of an EEA member state; or• organised under the laws of a ‘normal tax jurisdiction’; and• do not receive income from companies resident in low tax jurisdictions outside the EEA.

INVESTMENTS IN SECURITIES’ FUNDSSecurities’ funds may rely on the participation exemption for investments in shares and equity instruments. The participation exemption is even extended to comprise all capital gains on shares in companies from outside the EEA. Income on debt instruments is taxable, but the fund may claim deductions for distributions to unit holders to the extent the distributed amount is taxed as interest in the hands of the unit holder. The latter will, in turn, depend on the value of the shares held by the fund relative to other non-equity instruments. If the fund is composed of more than 80 % shares then all distributions are treated as dividends for the unit holders, and, therefore, no deduction is available to the fund. If the relative value of the shares are below 20 % then all distributions are treated as interest income for the unit holder with a corresponding deduction for the fund. If the relative value of shares is between 20 % and 80 % then a proportional amount is treated as dividend with a corresponding partial disallowance of deduction.

68 TAX SYSTEM

INVESTMENTS IN OTHER EQUITY INSTRUMENTSAs a general proposition, all derivatives with shares as the underlying object are comprised by the participation exemption as long as the underlying shares themselves are qualifying investments. This would apply to warrants, subscription rights and stock options.

A derivative which is based on an index is comprised only if the index reflects shares which would have been comprised by the participation exemption. In practice, the tax authorities appear to have accepted that up to 10 per cent of the value of the index may represent shares outside the scope of the participation exemption, i.e. that 90 per cent of the value of the index is linked to shares in companies within the EEA. The tax authorities have further stated that this requirement should not be applied rigidly and it is accepted that – for “shorter periods” – the 90 per cent threshold is not met because of market fluctuations.

INVESTMENTS IN NON-EQUITY INSTRUMENTSDebt instruments fall outside the scope of the Norwegian participation exemption. This includes bonds which are coupled with other instruments such as bonds convertible to shares or bonds where the interest rather than a fixed coupon interest is derived from a share index etc. As long as the principal amount is guaranteed, the instrument will likely be classified as a debt instrument. Interest on these instruments will therefore be taxable at the ordinary income tax rate. When a convertible bond is exchanged into shares, the shares will have to be analysed on a stand-alone basis.

Bonds fall outside the scope of the Norwegian participation exemption.

69 TAX SYSTEM

Oslo Opera House was designed by the Snøhetta architects and was opened in April 2008. The building has already received many awards for its grand architecture and is also listed by the Directorate for Cultural Heritage. The beautiful building has led to an increased interest in opera amongst the Norwegian people, and events on the roof are very popular. In the opening year alone more than a million people visited the Opera; this striking building has become one of Oslo’s most popular tourist attractions.

BUSINESS TAXATION

DEPRECIATION

An asset employed in business operations has to be capitalised for tax purposes if the asset is “permanent and significant”. The asset will meet this threshold if they have a cost basis of at least NOK 15,000 and are presumed to have a useable lifetime in excess of three years. If either of these two tests are failed, the expense is immediately deductible.

Tangible “permanent and significant” assets are depreciated on a declining balance. The annual rates are as follows:

1. office machinery (pc, printer etc): 30 per cent;

2. acquired goodwill: 20 per cent;

3. trailers, trucks, busses, vans, taxis and vehicles for transporting disabled persons: 24 per cent;

4. cars, tractors, machinery, tools, instruments, fixtures: 20 per cent;

5. ships, vessels, rigs: 14 per cent;

6. planes, helicopters: 12 per cent;

7. electric power transmission and production plants: 5 per cent;

8. buildings, plants, hotels, rooming houses and public houses (restaurants, cafes etc): 4 per cent;

9. office buildings: 2 per cent; and

10. permanent technical installations in buildings (e. g. ventilations and elevators): 10 per cent.

Once the balance is reduced to NOK 15,000 it may be immediately expensed.

71 TAX SYSTEM

If assets in groups a, c, d and j are realised at a loss, the balance may become negative and an amount equaling the respective depreciation rate must be included in income annually until the NOK 15,000 threshold is met.

The realised amount in groups e–i are listed on a gain and loss account and included with at least 20 per cent annually, if positive, and deductible with up to 20 per cent annually if negative.

A realisation of developed goodwill which, unlike acquired goodwill, does not give rise to annual depreciations may be entered into the account for acquired goodwill. The consequence is that the gain is deferred and only 20 per cent of the gain will be included annually.

Intangible assets and assets with a limited usable life are not depreciated under the declining balance method. Intangible assets may only be depreciated to the extent the taxpayer can demonstrate that the intangible has suffered a significant and permanent loss in value.

For assets with a limited useable life, they are depreciated linearly of their expected lifetime.

A realisation of developed goodwill which, unlike acquired goodwill, does not give rise to annual depreciations may be entered into the account for acquired goodwill.

72 TAX SYSTEM

R&D (SKATTEFUNN)

Companies conducting research and development may be awarded a tax relief under the Skattefunn scheme, provided that the research program has been approved by the Research Council of Norway. The scheme is open to all branches of industry and all types of companies subject to taxation in Norway. The business may be engaged in research and development activity on their own or through collabouration with others.

The tax relief is under normal conditions limited to 18 per cent of the company’s R&D costs, with a maximum relief of NOK 25 million. However, under specific conditions the tax relief may be awarded with an amount corresponding to 20 per cent of the company’s R&D costs, with a maximum tax relied of NOK 50 million. The deduction is applied and granted through the annual tax assessment.

The polar bear is the largest predatory land animal in the world and is only found in Arctic areas. There is a large polar bear population at Svalbard.

73 TAX SYSTEM

TAX CONSOLIDATION

Norwegian tax law does not allow for filing a joint or consolidated tax return. However, a consolidation of taxable profits may be achieved by way of the group contribution scheme. The rules are drafted with regard to contributions between Norwegian limited liability companies, but a group contribution may also be rendered to and received from branches of limited liability companies resident within the EU/EEA area. Limited liabil-ity companies resident in tax treaty jurisdictions outside the EU/EEA area may render group contributions but cannot be the recipient.

A group contribution is a unilateral and gratuitous transfer of profits from one company to another. The transferor company may – to the extent of its taxable income (ordinary income) – deduct the contributed amount whereas the transferee will have to include the amount as taxable income.

The same company law restrictions which apply to dividend distribution apply to group contributions.

If the group contribution exceeds the taxable income of the transferor it will not have any tax effect, i.e. the contribution cannot cause the transferor to recognise a tax loss.

However, there will not be a corresponding inclusion at the level of the transferee for the excess amount. This entails that the group contribution may be utilised to transfer funds from one entity to another within the group without following the corporate structure as required for dividend distributions.

Although there is no requirement that funds are actually transferred, a receivable must at least be booked between the entities in question.

Norwegian tax law does not allow for filing a joint or consolidated tax return.

74 TAX SYSTEM

Aurlandsfjord in the county of Sogn og Fjordane. There are almost 1,200 fjords in Norway, and the Norwegian coast is one of the areas in the world with the most fjords. The longest Norwegian fjords are Sognefjord at 204 kilometres and Hardangerfjord at 180 kilometres. Only Greenland have longer fjords than Norway. Many of the fjords have waterfalls that cascade straight into the sea.

EXIT TAXES

When assets are removed from the Norwegian taxing jurisdiction, an exit tax is trig-gered. The tax is applicable for all transactions which are not deemed as a realisation for Norwegian tax purposes.

More specifically, the tax is triggered when

• a resident taxpayer shifts residency out of Norway and the assets are no longer subject to Norwegian taxing jurisdiction;

• a non-resident closes down a permanent establishment or withdraws assets from a permanent establishment; or

• a CFC is no longer considered a CFC because it is no longer subject to Norwegian control.

For companies shifting tax residency from Norway, an exit charge is imposed on all assets and liabilities as if they had been realised at fair market value the day before the move. If the assets or liabilities after the move will form part of a Norwegian permanent establishment then no exit tax is triggered. Thus, it is feasible to conduct an outbound merger of a Norwegian company without immediate taxation only if the assets of the Norwegian transferee entity is maintained in a permanent establishment.

The ski track waits by tarns and moors, in the forest and in the wide open expanse above the tree line. The ski track is like writing in the snow

all the way to the everwhite plateau at the top of the mountain.

76 TAX SYSTEM

Further, if the taxpayer moves to a state within the EU/EEA a deferment of the tax payment may be available. However, 1/7th of the deferred tax amount must be annually included as of the year of the exit. Interest will be applied to the deferred tax amount and a security may be required if there is a true risk that the tax will not be paid. Further, the deferment does not comprise gain on intangible assets and current assets.

For individual taxpayers, the exit tax only applies to inherent gains on shares in limited liability companies and partnerships (whether Norwegian or not) as well as equity instruments (warrants, options and other derivatives). Further, the rules only apply if the total gain exceeds NOK 500,000 at the time the individual taxpayer shifts residency out of Norway.

TAX RESIDENCYCompanies and legal entities which are managed from Norway are generally considered to be tax resident in Norway. The key issue is whether board level decisions are made in Norway. With respect to entities organised under foreign law, it may be that decisions which are ordinarily made at the board level under Norwegian law could be adopted by other corporate bodies. In that case, administrative practice would still deem those decisions to be made at the “board level”.

For practical purposes, all companies organised under Norwegian law will be treated as tax resident in Norway unless the company itself claims residency in another state or there are clear indications that all management activities take place in another state.

Tax resident entities are taxable to Norway on a worldwide basis.

Individuals are treated as resident in Norway if they stay in Norway for 183 days in any 12 month period or 270 days in any 36 month period. The individual is taxed as resident in Norway as of the income year when the number of days has been met.

Resident individuals who move to another state are treated as maintaining tax residency in Norway until it can be documented that the individual has not been in Norway for more than 61 days during the income year, and that neither the individual nor spouse (whether legal or common law), nor underage children dispose a dwelling in Norway. If the individual has been a tax resident for ten years or more at the time of moving, the tax residency under domestic law is in force until after the close of the third income year after the move. The tax residency is foregone only if the individual has not been present in Norway for more than 61 days in any of the income years and that neither the individual nor any close relative, as mentioned above, dispose a dwelling in Norway.

77 TAX SYSTEM

TAXATION OF NON-RESIDENTS

Non-resident companies are taxable to Norway on income from business operations which are either conducted or managed from Norway. As a general observation, the threshold for becoming taxable under domestic law is fairly low.

A business is conducted in Norway if activities of an economic nature is undertaken in Norway. If the foreign entity, for instance, has employees or premises in Norway through which a business operation is conducted the threshold is met. If the active business operations are conducted outside Norway but managed from within Norway, the busi-ness will still be taxable to Norway.

• The tax is computed in the same manner as for resident entities.

• Non-resident individuals are taxable to Norway on income from employment conducted in Norway as well as directorships in Norwegian entities.

• Income from real property situated in Norway is taxable in Norway.

People need harmony, and it can be found in nature. Nothing is more harmonious than a river bathed in sunshine as it winds through the landscape.

78 TAX SYSTEM

WITHHOLDING TAXESNorway does not impose withholding taxes on payments of interest, rents or royalties. Dividends are, however, generally subject to a 25 per cent withholding tax when paid to a non-resident shareholder. The withholding tax may be eliminated or reduced, either by operation of domestic law or under an applicable tax treaty with the home state of the shareholder. The exemption under domestic law is only available for corporate share-holders which are “actually established and conducts genuine economic activity” within the European Economic Area.

With respect to tax treaty relief, Norway currently has a zero rated dividend withhold-ing tax in treaties with 16 countries. All treaties subject the reduced withholding tax to a condition that the recipient is the “beneficial owner” of the dividend. This concept is unknown in domestic law, and the administrative guidance is sparse. However, as a general proposition, Norwegian tax authorities and courts can be expected to adhere to the OECD commentaries when interpreting and applying the term. Currently, the only court decision in this matter is a city court decision from 2014. The ruling is extensive and places great emphasis on the OECD commentaries.

MERGERS AND REORGANISATIONSA merger or a demerger is at the outset a taxable event at both the company and shareholder level. However, these transactions may be done on a roll-over basis for tax purposes provided that certain requirements are met. The key requirement is that there is full continuity of ownership, i.e. that the transaction does not alter the economic rights between the shareholders. Nevertheless, it is feasible to carry out the transaction with up to 20 per cent boot, e.g. cash or other non-equity consideration which is taxed as a realisation of shares.

A merger can be carried out between two legal entities which are substantially similar with respect to legal organisation and tax treatment. Thus, a partnership taxed entity cannot merge with an entity which is taxed separately from its owners.

Cross-border mergers and demergers are feasible within the EU/EEA. However, it should be noted that to the extent assets or business operations are transferred out of Norway as a result of the transaction an exit charge may be imposed.

Within a tax group, it is feasible to transfer assets from one entity to another without immediate taxation. The gain is, however, preserved and triggered at the time the asset is actually sold or either the transferor or transferee company no longer forms part of the group.

79 TAX SYSTEM

CFC REGIME

The Norwegian legislation on controlled foreign companies (No:NOKUS) has been in place since 1992. The rules apply if the following criteria are met:

• Norwegian shareholders, i.e. shareholders resident in Norway for tax purposes whether or not they are physical or legal persons, own 50 per cent, directly or indirectly, or more of the foreign company; and

• the foreign company is subjected to a taxation which is lower than two thirds of the effective tax it would have been imposed had it been resident in Norway.

The ownership test is conducted both at the start and the end of the income year. Please note, however, that if the foreign company was deemed a CFC in the preceding year it will be treated as a CFC for the current year even if the Norwegian ownership has dropped below 50 per cent by the close of the year. This exception does not apply if the Norwegian ownership has dropped under 40 per cent during the year.

Further, a CFC will exist regardless of the rules described above if the Norwegian owner-ship at the end of the year exceeds 60 per cent.

For practical purposes, the CFC taxation entails that the foreign company is regarded as a transparent entity for tax purposes. Consequently, each Norwegian shareholder – regardless of the ownership share – will be taxed on their allocable share of the CFC’s net income. If profits are distributed from the CFC they may be received free of tax to the extent that they are distributed from previously taxed profits.

To the extent the CFC earns income which would have qualified under the participation exemption, it does not trigger tax at the level of Norwegian corporate shareholders. Such income is also treated as previously taxed income with regard to subsequent distribu-tions to the corporate shareholders.

The ownership test is conducted both at the start and the end of the income year.

80 TAX SYSTEM

In Norway the dream of your very own jetty by the water, far from people, can still become a reality.

Small fishing boats in winter attire are a much loved sight along the Norwegian coast. These boats are in Papperhavn at Hvaler, one of Østfold county’s most idyllic marinas. The boats are mostly used for fishing mackerel and transporting wrasse back to Papperhavn from Havnholmen out in the sea.

TRANSFER PRICING

SCOPE OF RULESPursuant to s.13-1 of the Tax Act, the Norwegian tax authorities may adjust the pricing in cases where there is a “community of interest” between two parties. This will typically be for transactions between companies that are directly or indirectly fully owned within the same group, but also cover situations where there is less than 100 percent ownership, provided there is common control, substantial influence or other basis for a community of interest that could impact the terms for such dealings.

Section 13-1 follows a two-step approach. Firstly, the tax office must substantiate that there is reason to assume taxable Norwegian income has been reduced. Secondly, the correct price must be determined. The courts can always test the first criterion for a transfer pricing adjustment, while there are certain limitations to how far a court will go in testing the price assessed by the tax office.

Where there is a community of interest between the parties to a transaction, and as a result Norwegian taxable income has been reduced, tax authorities may adjust the pric-ing for basically all types of transactions and agreements. The tax authorities carry the burden of proof to substantiate that it is more likely than not that the income has been reduced because of wrongful pricing. The tax authorities may normally not adjust terms of the dealings other than the price. However, typically in the area of thin capitalisation, a reclassification may be carried out in the sense that debt might be reclassified as equity, or vice versa.

Where income has been reduced and the other party to the transaction is a resident out-side the EEA, the burden of proof is with the taxpayer to demonstrate that the income reduction is not due to the community of interest between the parties. However, the practical implication of this rule is somewhat unclear as the tax authorities, in any event, have to prove that the income has been reduced.

For the sale of crude oil and propane, taxable income is determined using a price list presented by the Norm Price Board every quarter. The daily price for each field/product is set based on averages of observed transactions. The Norm Price Board has represent-atives from the government and from oil companies. The norm price may also be set for natural gas, but has so far only been used for crude oil and propane. The norm price sys-tem for petroleum is not explained any further within the framework of this handbook.

83 TAX SYSTEM

Norway is a country of long distances, a small population and a difficult topography. Investment in public transportation networks is a priority in order to improve welfare and economic growth. Road and bridge building projects in the less populated areas can shorten travel time into the cities and contribute to economic growth, which covers the investment.

Norwegian transfer pricing rules apply to transactions where one of the parties is a Norwegian tax resident and the other one is not, as well as to transactions where both parties are residents in Norway. In practice, they are normally not invoked for purely domestic transactions, unless the transaction implies a value transfer that could be viewed as irregular dividend from a fully or partly owned company, or concerns trans-actions involving the 78 percent special tax regime on the NCS and the ordinary (27 percent) corporate tax regime.

Dealings with companies that reside in a tax haven are normally dealt with under the same principles as dealings with companies in other countries. However, the OECD guidelines are not directly applicable. Hence, where the Norwegian tax base has been eroded due to wrongful pricing, it might be more difficult in such cases to challenge the concrete pricing as assessed by the tax office.

The allocation of profits to a permanent establishment follows the same principles as laid down in the OECD guidelines and is therefore heavily influenced by the same arm’s length standard as applied under the transfer pricing rules. This entails that the profit of the permanent establishment shall be allocated between the head office and the permanent establishment as if the latter had been a separate legal entity dealing with both the head office and related companies on terms consistent with the transfer pricing guidelines.

85 TAX SYSTEM

DOCUMENTATIONThere are detailed regulations outlining the content requirements for transfer pricing documentation. These adhere very closely to the OECD guidelines on documentation. Among the requirements that may be mentioned is a description of the business envi-ronment in which the company operates, the legal structure, business areas and busi-ness units, important competition factors, financial relations, types and size of internal transactions, functional analysis, centralised service performance, intellectual property, choice of pricing methods, comparable prices and the internal agreements.

The regulations explicitly state that documentation based on the EU Code of Conduct on transfer pricing documentation between associated enterprises is accepted. The docu-mentation must be presented in Norwegian, English, Swedish or Danish.

ADVANCE PRICING AGREEMENTSNorwegian tax authorities do not issue unilateral APAs. On a case-by-case basis, it is possible to discuss the transfer pricing principles with the tax office, but they will not issue a formally binding pricing acceptance, either in the form of an agreement or a ruling. In practice, where the principles are disclosed and discussed prior to implemen-tation, unless the tax office has indicated that other methods might be superior, the tax office will normally respect the applied principles. The Ministry of Finance has announced that they are considering introducing APA regulations.

In the case of sales of gas between related parties, a special APA procedure exists within the oil tax authorities (so far, this has not been used much in practice).

Recently, Norway has opened itself up for mutual APA negotiations with other coun-tries. Only a handful of pilot cases have so far been dealt with under such MAP/APA approach.

Dealings with companies that reside in a tax haven are normally dealt with under the same principles as dealings with companies in other countries.

86 TAX SYSTEM

Saltfjellet-Svartisen is a large and varied national park. Svartisen consists of two separate glaciers, Vestisen and Østisen. The glacier landscape has river plains with sand and clay sediments which are constantly being changed by the glacial rivers. The three big valleys Glomdalen-Vesterdalen, Stormdalen and Bjøllådalen are important elements of the park with lush and biodiverse forest in places.

SPECIAL TAX REGIMES

TRANSFER OF LICENSE INTERESTSAll (direct or indirect) assignments of petroleum production licenses on the NCS as well as investments in Gassled are subject to the approval by the Ministry of Petroleum and Energy (MPE) under the Petroleum Tax Act p. 10-12 and the Ministry of Finance (MoF) under the PTA p. 10 and Regulation 1 July 2009 no. 956.

Transactions will as a main rule take place at an after tax basis, i.e. the consideration is not regarded as taxable income for the seller nor as a tax deductible cost for the buyer. The existing tax balances (depreciation and uplift) will (as the main rule) have to be transferred from the seller to the buyer together with the assets. Thus, there will be no step up of the tax balances as a result of a transaction.

REFUND OF TAX VALUE OF EXPLORATION COSTSIn order to increase the exploration activity on the NCS, an exploration refund scheme was introduced in Norway with effect from 2005. The Ministry of Finance aimed at making the NCS more attractive for new, smaller companies.

Under the exploration refund scheme, companies not being in tax position may annu-ally claim a refund from the State of the tax value of direct and indirect costs, except financial charges, incurred in exploration for petroleum resources, cf. the PTA s.3c (5), e.g. costs related to drilling on exploration licenses, purchase of seismic, wages to per-sonnel engaged in exploration activities etc. The tax value is set to the total of direct and indirect costs multiplied with the tax rate, currently 78 per cent. The refund will reduce the tax loss carried forward correspondingly. The amount of exploration costs may not exceed the annual net loss from the petroleum activities of the taxpayer, to ensure that the costs are not already set off against taxable income.

HYDRO-ELECTRIC PLANTSIn addition to the ordinary income tax at 24 per cent, hydro-electric plants are subject to a 34.3 per cent natural resource rent tax. The additional tax is intended to capture the extra profits generated by the limited natural resources employed in the business. An amount equal to the normal rate or return on the investment is shielded against the ad-ditional tax. The basis for the natural resource rent tax is the spot price less actual costs and income representing the ordinary rate of return. The income is computed at the level of each plant.

88 TAX SYSTEM

In addition, the hydro-electric plants are subject to a municipal natural resource extrac-tion tax of NOK 0.013 per produced kwh. The tax is computed with one seventh of the combined production for the income years and the six years preceding the income year. The tax is creditable towards the ordinary income tax and will thus not ordinarily create an additional tax burden. Any uncredited tax may be carried forward with interest.Hydro-electric plants may also be subjected to municipal property tax.

The amount of exploration costs may not exceed the annual net loss from the petroleum activities of the taxpayer, to ensure that the costs are not already set off against taxable income.

89 TAX SYSTEM

TONNAGE TAXOnly limited liability companies can opt for the Tonnage Tax regime (TT). In theory, TT is available for any EU/EEA based company, however, all of the company’s activity/ assets would have to be taxable to Norway and qualify for the regime. Hence, in practice only Norwegian companies can qualify, or an EU/EEA based company with a qualifying branch in Norway.

There is a distinction between qualifying assets, which the company must own in order to qualify for TT, and permissible assets that the company may own in addition to its qualifying assets.

Ships are qualifying assets. The definition of a ship is partly provided in the regulations, partly through practice and generally influenced by what the EU has approved under state aid guidelines. There is some level of variation between for example what the Netherlands accept under its TT and Norway, UK, Denmark, etc, but less so after the2010 clarifications by the EU Commission. A building contract is sufficient. Also ships owned indirectly through partnerships (including IS) is sufficient, but the minimum ownership requirement is 3 per cent of the partnership. The income at the partnership level is taxed at the hand of the partners and each (corporate) partner may choose indi-vidually whether or not to apply TT.

The qualification test must be met 1.1 and continuously through the year including 31.12.

Permissible assets are, in addition to qualifying assets, shares in listed companies and shares/parts in shipping pools/JV.

A TT company may generally only earn “passive income” and will typically lease out the vessel on bare boat terms to affiliated companies who operate the vessel, or engage third parties to provide management and crewing. However, certain types of employees/ activities are accepted within the TT company. This is limited to marine crew as well as technical and commercial managers for vessels owned by the TT company. The charter income is exempt from tax. Taxable income related to vessels is instead calculated as a moderate number based on tonnage/weight of vessels. Financial income is taxable in line with ordinary companies outside the TT regime. Because charter income is tax free, there is an incentive to place interest carrying debt in companies outside TT, to be able to be benefit from the interest deduction. Therefore there is a rule stating that if a TT company has less than 30 % debt, an interest component will be calculated and added back as taxable financial income.

90 TAX SYSTEM

A TT company cannot be grouped for tax purposes with other Norwegian companies. There is no exit tax or similar upon selling the vessel and leaving the TT regime, oron dividend.

Formally the decision to opt for TT is binding for 10 years. If the company nevertheless chooses to exit and be under the ordinary tax regime, the practical consequence is that a re-entry is not possible until the original 10 year period has lapsed (but a new different TT company may be started by the same company group). Further, the choice to enter TT must be made for all companies within a group which otherwise qualifies for TT.

As a starting point there is no flagging requirement. Some offshore locations may require the establishment of a local ship owning company in order to fly their flag. Such com-panies will typically be CFC for Norwegian tax purposes when established by a Norwe-gian owner. Such CFC companies will be both qualifying and permissible assets under Norwegian TT.

In years where the average EU/EEA portion of EU/EEA flags is reduced, Norway will however enforce a flagging requirement. This requirement will then say that the propor-tion of EU/EEA flagged vessels cannot be reduced in proportion to other flags. This was the case for example in 2012. For a company with only one ship this is never an issue.The tonnage tax rates are as follows:

• vessel NET DWT tax per day per 1,000 tons;

• first 1,000 NOK 0;

• 1,001–10 000 NOK 18;

• 10,001–25 000 NOK 12; and

• 25,001 and more NOK 6.

The definition of a ship is partly provided in the regulations, partly through practice and generally influenced by what the EU has approved under state aid guidelines.

91 TAX SYSTEM

SVALBARDAlthough forming part of Norway, the Svalbard archipelago is a separate tax jurisdiction. It is generally treated as a foreign country when applying the ordinary Norwegian tax legislation and it is not comprised by any tax treaties. Nevertheless, the rules for comput-ing the income generally follows the same principles as the general Tax Act applicable to residents in Norway.

The corporate income tax rate is 16 per cent for income up to NOK 15m and 27 per cent of the excess of the income over 10 times the salary cost and 0.2 times the tax value of real property situated on Svalbard. The marginal personal income tax rate is a propor-tional rate of 22 per cent.

PROPERTY TAXThere is no national property tax in Norway. The introduction of property tax is left to the local municipalities, and the income from the tax belongs to the municipality. The tax rate must be between 0.02 and 0.07 per cent of the value basis of the property. The value is based on a property assessment conducted every tenth year. The municipal authorities may also decide to use the residential property value (capital basis) estab-lished by the Tax Administration as a basis of the calculation of the property tax.

Municipalities may choose to apply a reduction factor when valuing properties.

The municipality may decide to impose property taxes on all categories of property, or only on certain categories as private property (homes and vacation homes), business property or industrial property. The municipality may also choose to impose property tax only in certain zones of the municipality. Special valuation rules apply in the case of property tax on hydro power stations; these are based on the value of what is produced, subject to minimum and maximum limits. Through 2016, 365 of 428 municipalities have introduced property tax. This constitutes a 2.8 per cent increase from 2015. The munici-palities’ total income from property tax was about NOK 11.1 billion in 2015.

NET WEALTH TAXIndividuals resident in Norway as well as certain legal persons such as foundations, coop-eratives, savings banks and mutual insurance companies are subject to a net wealth tax.

The tax is in part municipal and in part a state tax and is levied on the net wealth as of 1 January in the year following the income year. The rates are 0.85 per cent of all amounts in excess of NOK 1,480,000. As a starting point, the taxpayer’s property will be

92 TAX SYSTEM

valued at fair market value. However, for certain types of property there are exceptions to this rule. For instance, for real property the value will be determined by reference to the size of the residence multiplied by a regionally differentiated rate fixed by the tax authorities. The taxpayer can in any event require that the value is reduced to 30 per cent of the market value for a primary residence.

Real property which is intended for business use is valued based on a computed rental value. There are also certain special valuation rules for real property which forms part of the primary industries.

There is no national property tax in Norway. The introduction of property tax is left to the local municipalities, and the income from the tax falls to the municipality.

93 TAX SYSTEM

In 2009 The Oslo Opera House won the Mies van der Robe Award, the European Union’s award for contemporary architecture. Perhaps the most eye-catching thing about the building are the large tiles of white carrara marble covering the façade.

VALUE ADDED TAX (VAT)

VAT GENERAL/VAT REGISTRATION

As Norway is not a member of the European Union, the Norwegian VAT legislation may differ significantly from the EU VAT legislation. VAT is levied on all supplies of goods or services made within the Norwegian territorial border. The territorial application for VAT purposes includes Norway and its territorial seas, but not Spitsbergen (Svalbard), Jan Mayen and the Norwegian dependencies. A “supply” includes sales of goods and ser-vices against compensation. The VAT registration threshold in Norway is NOK 50,000.

The threshold relates to VAT taxable supplies within a 12-month period. The standard registration form “Supplement for the Value Added Tax Register” must be submitted by paper or electronically to the Regional Tax Office in order to obtain a VAT registration. The VAT registration process takes approximately 2–6 weeks.

Information required for VAT registration:

• estimated startup date;

• a short description of the activities that will be performed in Norway; phone number;

• Norwegian bank account number;

• name of the person(s) authorised to sign the registration form; and

• documentation showing that the threshold is exceeded.

Please note that there are two options for pre-registration:

1. the company’s costs in Norway has exceeded NOK 250,000; and

2. the threshold will be exceeded within three weeks subsequent to the start up. Please note that there is no separate VAT number in Norway. The Norwegian 9-digit business organisation number is also the VAT number.

95 TAX SYSTEM

VAT RATES IN NORWAY

• The standard VAT rate is 25 per cent.

• A reduced rate of 15 per cent applies for foodstuff (except from pharmaceutical medicaments and alcoholic beverages).

• A reduced rate of 10 per cent applies for domestic passenger transport and accommodation.

• A 0 per cent rate (zero rate) applies for export sales, specific supplies to certain aircraft and certain vessels, and specific goods and services for petroleum activities etc.

VAT REPORTING

VAT reporting periods and due dates:

VAT PERIOD MONTHSDUE DATE FOR

SUBMITTING THE RETURNDUE DATE FOR

PAYMENT OF THE VAT

1 January February

10 April 10 April

2 March April

10 June 10 June

3 May June

31 August 31 August

4 July August

10 October 10 October

5 September October

10 December 10 December

6 November December

10 February 10 February

VAT returns shall be submitted electronically each VAT period at the Norwegian public reporting portal Altinn: www.altinn.no/en. In order to submit VAT returns, a Norwegian ID-number (D-number) is mandatory. In Altinn, it is possible to delegate roles to another Altinn user, for example to an accountant.

96 TAX SYSTEM

http://www.altinn.no/en

IMPORT OF GOODSImport of goods to Norway attracts import VAT. Some types of goods are liable to customs duties and/or excise duties, such as textiles, alcoholic beverages, tobacco products, sugary products and mineral products. The Customs Tariff lists all goods that are liable to customs duties. Goods that are liable to excise duties are listed in specific annual regulations.

CUSTOMS CREDIT (DUTY DEFERMENT ACCOUNT)Enterprises can apply for a customs credit (duty deferment account) in order to simplify the customs clearance and payment of import duties. For companies registered for VAT in Norway there has been a change as of January 2017. Import VAT shall be reported through the VAT return and customs credit will not be relevant for these companies what concerns the import VAT. Regardless of registration for VAT in Norway, customs credit will still be applicable for imports subject to excise and customs duties, and for companies not registered for VAT.

In order to apply for customs credit the following is needed:

• estimated import duties over a two-month period (two peak months);

• contact person for customs matters; and

• Norwegian bank account number.

INVOICING REQUIREMENTSInvoices may be issued in the following languages: Norwegian, Swedish, Danish or English. The sales price may be invoiced in any currency. However, the VAT amount must be stated in NOK on the invoice. The Norwegian business organisation number (nine digits) followed by the letters “MVA” must be stated on the invoice. In addition, the expression “Foretaksregisteret” (Register of Business Enterprises) must be stated on the invoice. It is not allowed to issue an invoice with VAT prior to the formal VAT registration. In the case where a company/branch will have to issue an invoice before the VAT registration is completed, there are two options which are both approved by the VAT Authority:

1. Issue the invoice without VAT, and then issue a separate VAT invoice (VAT amount only) as soon as the VAT registration is completed.

2. Issue the invoice without VAT, and then issue a credit note and a new invoice including VAT as soon as the VAT registration is completed.

97 TAX SYSTEM

The lynx is a rare but beautiful part of Norwegian wildlife. The species was almost extinct 80 years ago but can now be hunted just like any other big game. It is mainly sought after for its fur, which is highly prized.

EXEMPTIONS

The following services are exempt from VAT – these activities will not give the right to deduct input VAT:

• healthcare services;

• alternative therapy;

• social services;

• educational services;

• financial services;

• certain services within art and culture;

• certain services within sports;

• public authority duties;

• state services;

• sale and letting of immovable goods;

• certain goods and services by non-profit/charitable organisations;

• lottery services;

• ceremonial services in connection with burials and cremations;

• services as a member of a board etc;

• postage stamps, notes and coins as collectors’ items;

• goods used privately; and

• retiring carbon allowances.

99 TAX SYSTEM

The following services are exempt from VAT (zero rated) – these activities will give the right to deduct input VAT:

• newspapers (paper versions);

• certain periodicals;

• books (paper versions) at the final link of the supply chain;

• Parish magazines, school magazines, street magazines etc;

• electric power for household use in Northern Norway;

• electric vehicles;

• sale of vessels of at least 15m length for use in passenger transport, goods transport, towing, salvaging or rescue, ice-breaking or hunting at sea;

• sale of specialised vessels for use in petroleum activities off shore;

• sale of school vessels;

• sale of vessels of at least 10m length for use by the Norwegian Armed Forces;

• sale of research/meteorological vessels;

• sale of vessels of at least 6m length for use in commercial fishing;

• hiring of specific vessels;

• sale and hiring of aircraft for commercial aviation activities and military aircraft;

• sale and hiring of drilling platforms and other mobile platforms;

• construction of embassy buildings;

• sale of goods and services to international military forces;

• transfer of going concern;

• biological material;

• export of goods and services;

• international transportation of passengers or goods;

• goods and services for certain vessels and aircraft; and

• goods and services for petroleum activities.

100 TAX SYSTEM

Northern Lights are created when particles from the Sun reach the Earth’s atmosphere. When they hit the magnetic field they are led towards a circle around the magnetic North Pole, and the energy which is released creates Northern Lights. When you dream about and plan to see the Northern Lights, you have to remember that it is all up to nature, which loves to play hide and seek. It would be a good idea to spend a few days in the area where you are likely to experience Northern Lights. When the lights finally appear in the night sky, the waiting will be forgotten!

TRANSFER AND REGISTRATION TAXES

There are no general stamp duties or transfer taxes in Norway.

Norwegian properties are registered in the land register, which is the official register of legal rights and obligations associated with real property. The land register lists owner-ship and encumbrances such as mortgages, leasing rights, pre-emptive purchasing rights etc. The registration of a transfer of title to a real property triggers a registration fee in the amount of 2.5 per cent of the fair market value of the property.

A registration fee is also imposed when registering title to cars, caravans and commercial vehicles such as lorries, trailers and busses etc. The fee is computed by reference to the total weight of the vehicle and the year of its first registration. For 2016 the highest fee is NOK 5 945.

America wasn’t discovered by Columbus in 1492. Leif Eiriksson, a Viking, discovered it in the year 1000.

102 TAX SYSTEM

INCOME TAX FILINGThe statutory deadline for filing the corporate tax return is 31 May in the year following the income year. The filing must be done electronically. As of the 2017 income year, the tax authorities will no longer assess the taxable income, rather, the taxable income is automatically computed based on the taxpayer’s submission of information.

INCOME TAX PAYMENTSCorporations are subject to advance corporate income tax payments. These are computed based on taxable results from previous years and are due on 15 February and 15 March in the year following the income year, with half the amount on each day. If the tax assessment entails an incremental tax liability the amount becomes due three weeks after the tax assessment was sent to the taxpayer which is usually between early August and mid-October.

REASSESSMENTThe tax authorities may amend or fully reassess the income within five calendar years after the close of the income year.

PENALTY TAXESPenalty tax is a sanction for incomplete or incorrect filings. The ordinary penalty tax rate is 20 per cent of the evaded tax. In instances where the taxpayer has willfully or with gross negligence submitted the incomplete or incorrect information with the tax return the penalty tax rate may be increased to 40 per cent or even 60 per cent.

It should be noted that the imposition of penalty tax is regarded as “punishment” under the European Convention on Human Rights (ECHR) art. 6 and therefore provide the taxpayer with additional procedural rights in addition to those offered under domestic law. These rights are triggered at the moment a notification of a possible penalty tax is submitted to the taxpayer.

103 TAX SYSTEM

The acrobat of the sea, with a colourful beak and bright red feet. Sometimes called sea parrots, they return in their thousands in April – the puffin has become quite the attraction visited by people from all over the country!

At Easter, Norwegians dream of a cabin high up in the mountains with ski tracks across the crisp snow and a sun trap by the cabin wall. And while the population of Oslo is reduced by 200,000 over the Easter holiday, the population of Trysil increases by 230 per cent!

When National Romanticism became the main art movement in Norway, it spurred a renewed interest in the country’s wild and dramatic nature: the fjords, glaciers, waterfalls and wide open mountains. The value of fjords as a national symbol had already been ‘discovered’ by Romantic artists and travellers from England, Germany and Denmark.

The fjord lies dark in the freezing November cold. The wind whips the crests of the waves into white foam. Suddenly the dark sea starts shimmering like silver and comes alive. Seconds later your boat is surrounded by black fins on all sides. The characteristic black and white bodies are unmistakeable; you find yourself in the middle of a pod of killer whales hunting a school of silvery herring.

Dog sledding has become a popular sport in recent years, also amongst amateurs. Many winter sports places in Norway will rent out dog teams with four to six dogs. One of the toughest dog sledding races in Norway is Finnmarksløpet, the longest in Europe at about 1,000 kilometres. For races that long the participants are allowed to use as many as 14 dogs at the start!

Employment law

GENERAL OVERVIEW

Norwegian employment legislation is governed by Acts of legislation, statutory regulations and collective agreements in addition to regulation which derives from non- statutory practice. The Norwegian Act of 17 June 2005 No. 62 relating to working environment, working hours and employment protection, etc (WEA) is the principal act within the Norwegian employment law legislation. Other relevant legislation includes the Holiday Act, the Gender Equality Act, the Discrimination Act, the Temporary Lay-Off Act, The Labour Disputes Act, the National Insurance Act and the Occupational Pension Act.

PRE-EMPLOYMENT CONSIDERATIONS

THE EE-REGISTERAll employers in Norway are required to register in the NAV State Register of Employers and Employees (the EE-register) subsequent to the National Insurance Act p. 25(1). The employer is required to give notification of inclusion, change in, and termination of employment to the EE-register. Please note that the employer cannot employ foreign individuals for work in Norway, unless they have work permits allowing them to work in Norway.

An employee shall, as a main rule, be granted permanent employment.

110 EMPLOYMENT L AW

TYPES OF EMPLOYMENT

An employee shall, as a main rule, be granted permanent employment. Temporary em-ployment is, however, permitted to a limited degree, and subject to statutory limitations.

1. Limited general right to temporary employment: It is permitted for the employer to offer temporary employment for a period of up to 12 months, without naming any special circumstances justifying that the employment is temporary instead of permanent. Employees employed on a temporary basis may represent up to 15 per cent of the employer’s workforce (which is also permitted e.g. if the employer only has one employee). Temporary employment on such general grounds may not exceed 12 months, and will trigger a quarantine period of 12 months upon expiration, during which the relevant position may not be filled by another temporary employee. The quarantine period is not triggered if the temporary employee is offered permanent employment in the same or another position.

2. Temporary employment in certain specific circumstances: Temporary employment is also permitted, without regard to the above-mentioned restrictions, under the following circumstances: – when warranted by the nature of the work and the work differs from that which is ordinarily performed in the undertaking; – temporary replacement for another person; – work as a trainee; – participants in labour market schemes; and – athletes, trainers referees and other leaders within organised sports.

Illegal temporary employment will be deemed as permanent employment: If a temporary employment is agreed or maintained in breach of these provisions, the temporary employee may claim that the employment is permanent. The legal effect would be that the employee is deemed as permanently employed, and thereby has the same protection against dismissal as a permanent employee. The employee may also claim compensation for illegal temporary employment.

EMPLOYMENT CONTRACTSAll employee relationships shall be subject to a written employment contract, which should be entered into “as soon as possible”, but no later than one month following commencement of the employment at the latest. The minimum requirements regard-ing the content of the employment contract are listed in the WEA s.14-6 and include provisions on work place, work hours, salary and benefits, probation time, starting date of employment, notice periods upon termination etc.

111 EMPLOYMENT L AW

Similar to a pelican, the frigatebird is a rare sight on the Norwegian coast. Those who are lucky enough to see it will no doubt notice its large wingspan of over two metres and the long, straight beak with a hook at the end.

MANDATORY EMPLOYEE BENEFITS AND SOCIAL SECURITY

EMPLOYER’S SOCIAL SECURITY CONTRIBUTIONThe employer is obliged to pay contributions to the National Insurance scheme on wages and other remuneration for work and assignments carried out in or outside employment in Norway or on the Norwegian Continental Shelf. The obligation to pay employer’s National Insurance contributions may apply even if the employer is not engaged in activity in Norway that is liable for tax and irrespective of whether the employee is personally liable for tax in Norway.

An employer’s National Insurance contributions are calculated as a percentage of the pay and other remuneration paid for work carried out in Norway or on the Norwegian Continental Shelf. The rate payable differs between various regions in Norway, with the highest currently being 14.1 per cent, and the lowest currently being 0 per cent in certain remote rural areas.

OCCUPATIONAL INJURY INSURANCEAn employer is obliged to take out Occupational Injuries Insurance covering all em-ployees. As a general rule, such insurance shall include cover for injuries and illnesses occurring during performance of work, during working hours and at the workplace. The insurance must cover actual loss and future loss of income and future expenses incurred as a consequence of the occupational injury.

OCCUPATIONAL PENSIONThe employer is obligated to provide for a pension scheme for all employees who are 20 years or older, and who are employed in a position representing at least 20 per cent of a full-time employment. The obligation concerns only retirement pension – not disability pension or dependents’ pension, which are optional schemes. The minimum level is a 2 per cent contribution for salary between 1 G and 12 G. The maximum contribution rates are 7 per cent of salary up to 7.1 G, and 25.1 per cent of salary up to 12 G. The factor “G” is the national insurance base amount, which is updated yearly. As of 2016, 1 G equals NOK 92,576,-. Pension contributions in accordance with national pension law are not subject to taxation for the employee, up until payout during retirement. Contributions outside of the pension law limitations will be taxable as income.

113 EMPLOYMENT L AW

EMPLOYEES’ REPRESENTATION STRUCTURES, TRADE UNIONS AND COLLECTIVE BARGAINING AGREEMENTS

GENERAL OVERVIEWEmployee representation structure depends on the size of the company, the line of business, the presence of unions and, accordingly, the presence of collective bargaining agreements.

The WEA includes several provisions regarding information and consultation with the employees and/or the employee representatives. In undertakings that regularly employ at least 50 employees, the employer is obligated to provide information concerning issues of importance for the employees’ working conditions and discuss such issues with the employees’ elected representatives.

TRADE UNIONS AND COLLECTIVE BARGAINING AGREEMENTSA new entity will not be bound by any collective agreement directly before any trade unions call for such an agreement, and the entity concludes one. However, if the entity becomes a member of an employers’ association, and there are trade union members amongst the company’s employees, the employer will normally be directly bound by the relevant agreement between the employers association and the relevant trade unions.

An employer is obliged to take out an Occupational Injuries Insurance covering the employees.

114 EMPLOYMENT L AW

COLLECTIVE DISPUTESEmployees protected under Norwegian labour legislation enjoy the right to strike and to use other labour dispute instruments under specified circumstances. The employer’s right to carry out a lockout is in Norway equal to the employees’ right to strike. Jointly, these are referred to as labour dispute instruments.

In order to understand the regulations concerning strike and other labour dispute instruments, it is necessary to know that Norwegian collective labour law draws a line between interest conflicts and legal disputes.

Disagreements regarding changes in the level of wages and other employment terms and conditions that are regulated in a Collective Bargaining Agreement (CBA) are considered interest conflicts which may be resolved through labour dispute instruments (strike/lockout) provided that certain requirements are met. Labour dispute instruments are usually combined with negotiations.

The starting point therefore, is that any conflict of interest may be solved through labour dispute instruments. However, during the tariff period (the period while the CBA is in force), the parties are subject to an obligation to keep industrial peace. The obligation to keep industrial peace is closely interlinked with the collective agreements and the obliga-tion applies to all issues which are directly or indirectly governed by the CBA.

On the other hand, if no CBA is entered into the previous agreement has been terminated, the obligation to keep industrial peace does not apply. Unions are entitled to demand that a CBA shall be entered into and initiate a strike if the demand is not met.

HEALTH AND SAFETY IN THE WORKPLACEPursuant to the WEA, the employer is responsible for maintaining a safe, sound and proper working environment. A safety delegate shall be elected among employees at all undertakings. At companies with less than ten employees, the parties may agree on a different arrangement in writing.

Undertakings which regularly employ at least 50 employees shall have a “Working Environment Committee”, cf. WEA s.7(1). Working environment committees shall also be formed in undertakings with between 20 and 50 employees when so requested by the employer or the employee representatives. It is the responsibility of the employer to ensure that a working environment committee is established when required.

115 EMPLOYMENT L AW

EMPLOYMENT CONSIDERATIONS

PROBATION PERIODIf the employee has not previously been employed by the company, the parties may include in the employment contract that the employee for a period not exceeding the first six months of employment shall be employed on probation.

During the probation period, a dismissal with notice may be warranted upon the employee’s lack of suitability for the work, lack of proficiency or lack of reliability. In practice, the employee enjoys a lesser degree of protection against dismissal during the probation period than what is the case for employees not under probation. Customary notice period during the probation period is 14 days, running from the day the other party receives the notice of dismissal.

HOLIDAYAccording to the Norwegian Holiday Act the employees are entitled to an annual holiday of the minimum of 25 working days. According to the Holiday Act terminology, Saturdays are considered “working days”, and thus the minimum amount of holiday is 4 weeks and one day. The employer is required to pay holiday pay by an amount equal to 10.2 per cent of the annual remuneration. It is, however, market practice to grant five weeks of holiday annually (equal to 30 working days), with a corresponding 12 per cent holiday pay.

Ordinary salary is not earned when the employee is absent on holiday. As a substitute, the employee is entitled to holiday pay, based upon last year’s remuneration. According to the Holiday Act, holiday pay should be paid out immediately prior to the vacation. It is, however, permitted to agree on a different payout schedule. To simplify the holiday pay procedure, most enterprises will instead deduct the monthly payment in June – plus 4/26 of the July remuneration if the employee is entitled to 30 workdays of vacation – and replace the ordinary salary payable in June with the last year’s holiday pay, irrespective of when the employee in fact is absent due to holidays.

According to the Holiday Act, holiday pay should be paid out immediately prior to the vacation.

116 EMPLOYMENT L AW

The Midnight Sun – a sun which doesn’t sink below the horizon but is visible all day and night. This fantastic phenomenon can be experienced north of the Arctic Circle. The chance to see the Midnight Sun increases the nearer you get to the North Pole – at the Arctic Circle the Midnight Sun will be visible for about a month every year, while at the North Pole it is visible for six months depending on weather conditions.

HOURS OF WORK

INTRODUCTIONThe regulations concerning working hours are extensive and particularly detailed. WEA determines that normal working hours must not exceed nine hours per 24 hours and 40 hours per seven days, cf. s.10-4(1).

The WEA does, however, permit that the employer and the employee in writing agree that normal working hours may be arranged in such a way that, on average, during a period not exceeding 52 weeks, they are no longer than described above, whilst actual work during certain days and weeks may be longer or shorter than these limitations. Total daily and weekly working hours may, however, still not exceed ten hours per 24 hours and 48 hours per seven days, cf. s.10-5(1). It is also permitted to agree that the 48-hour weekly maximum is averaged out over up to eight weeks, in effect so that it is possible to concentrate work hours to a much higher degree, provided that this is com-pensated with time off later.

The WEA s.10-8 determines that an employee shall have at least 11 hours continuous off-duty time per 24 hours. The off-duty period shall be placed between two main work periods. Further, an employee shall have a continuous off-duty period of 35 hours per seven days. Work performed from 18.00 on the day preceding a Sunday or public holiday until 22.00 on the day preceding the next working day is regarded as holiday work. Requiring employees to work during holidays is only permitted if warranted by the nature of the work.

OVERTIME PAYWork in excess of agreed working hours must not take place except in cases when there is an exceptional and time-limited need for it. If an employee’s work hours exceed the limit prescribed by the Act for normal working hours, the time in excess is regarded as overtime. Overtime hours shall be compensated by at least an extra 40 per cent of the ordinary hourly pay. The employer and the employee may agree in writing that overtime hours shall wholly or partly be taken out as off-duty time on agreed dates.

Overtime hours shall be compensated by at least an extra 40 per cent of the ordinary hourly pay.

118 EMPLOYMENT L AW

EXEMPTIONS FROM THE ABOVE REQUIREMENTSExemption from the general rules on working hours (and overtime payment) applies to leading and especially independent personnel. This would typically include management positions, but also to certain independent positions outside management. The necessary conditions to be met are that the employee controls his own working hours himself and is mainly free to decide the extent of his work without employer approval. An individual assessment is needed for each position designated as exempt from the rules on working hours, and the boundaries can be unclear.

PROVISIONS ON WAGESThe WEA includes no definition of wages, bonuses or other kinds of remuneration. There are no regulations on national minimum wages. Wage conditions are regulated through negotiations, individual or collective.

The employer has a statutory duty whenever paying out wages, salaries etc, to deduct the correct amount of income tax and remit this to the tax office.

An individual assessment is needed for each position designated as exempt from the rules on working hours, and the boundaries can be unclear.

119 EMPLOYMENT L AW

TERMINATION OF THE EMPLOYMENT CONTRACT

INTRODUCTIONAn employee may terminate the employment contract in accordance with the proce-dures set forth in the employment contract. The parties may also agree upon termination of the employment contract, often in combination with severance pay. If the employer considers terminating the employment contract unilaterally, certain mandatory legal provisions must be taken into consideration.

According to the WEA s.15-7, notice of dismissal from the employer should be “objec-tively justified” on the basis of circumstances relating to “the undertaking, the employer or the employee”.

PROCEDURAL REQUIREMENTSBefore making the final decision regarding termination of an employment contract, the employer shall, if possible, discuss the matter with the employee. The employee is entitled to bring an advisor of his own choice, and should be informed about this right in writing prior to the meeting.

Failure to follow the set out procedure may result in the termination being found invalid. Invalidity will most likely entail costly claims of compensation from the employees.A notice of dismissal should be in writing, and should contain certain compulsory infor-mation about the employee’s rights under national law.

An employee may terminate the employment contract in accordance with the procedures set forth in the employment contract.

120 EMPLOYMENT L AW

GROUNDS FOR DISMISSAL

MATTERS RELATING TO THE EMPLOYEECircumstances that may allow the employer to terminate based on matters relating to the employee include: denial of order, breach of a confidentiality clause, absence without a legitimate reason or criminal offences committed during work performance. If the grounds are related to minor disciplinary actions, a prior formal warning in writing would generally be advisable. Note that the threshold for having adequate grounds for dismissal based on circumstances relating to the employee is high in Norway.

SUMMARY DISMISSAL – TERMINATION WITHOUT A NOTICE PERIODThe employer may summarily dismiss an employee who is guilty of a gross breach of duty or other serious breach of the contract of employment. Summary dismissal implies that the conditions of employment are terminated with immediate effect as the employer revokes the contract of employment.

MATTERS RELATING TO THE ENTERPRISE – REDUNDANCIESAs long as the employer can document that a reorganisation or reduction of the work force is necessary and warranted, and that the selection of employees in a process of redundancy is fair, the court will most likely accept the termination of the employment contract. The employer will still have to consider the interest of the company versus the consequences for the affected employees.

When selecting employees for redundancy, the employer must base his decision on relevant criteria, such as qualifications, seniority and age. Seniority should be given special consideration. A dismissal with notice will not be warranted if it is solely due to a transfer of the undertaking.

The obligation to consult on the redundancy process only applies to the elected representatives and not to the employees as such, neither as a group, nor as individuals. Individual employees only have a right to be informed.

However, the individual meetings before a notice of termination is sent should be in the form of a consultation with the employees likely to be affected.

When all the possible individual meetings have been held, the employer may take the decision on which employees are to be given notice of termination.

121 EMPLOYMENT L AW

As a main rule, an employee has both a right and an obligation to continue working during the entire notice period. This means that he is entitled to normal salary and holiday payments, regardless of whether the company closes down before the end of the notice period.

TERMINATION OF THE CHIEF EXECUTIVE OF THE UNDERTAKINGThe chief executive of the undertaking may, in writing, agree to a specified severance pay in exchange for waiving his/her protection from dismissal under the WEA. Severance pay in some form is an absolute requirement, and it must be sufficient to make up for the loss of protection. This only applies to the chief executive of the undertaking.

COMPENSATION CLAIMSA dismissed employee is entitled to commence legal proceedings. While such proceed-ings remain pending before the courts, which may take several months and sometimes more than a year or two, the employee is generally entitled to remain in his post and receive his normal salary.

Because of the general right to remain in post, a challenged termination can be quite costly for the employer, even if the court eventually upholds it. This is part of the reason why severance agreements are quite common, although Norwegian law contains no statutory obligation to provide severance.

122 EMPLOYMENT L AW

Industrial and intellectual property

PATENTS

GENERALNorway adheres to various international conventions relevant to patents, such as, amongst others, the Paris Convention, the PCT Treaty, the EPC convention, the WIPO convention, the TRIPS Agreement, and the London Agreement. Norway is, however, for amongst other constitutional reasons, not expected to implement the European unitary patent system.

Norwegian patents are primarily governed by the Patents Act 1967 (patentloven) and the Patent Regulation 2007 (patentforskriften). Inventions made by employees are gov-erned by the Employee Invention Act 1970 (arbeidstakeroppfinnelsesloven). Norwegian patents are valid for 20 years from the date of the application. Supplementary Protection Certificates may be granted for pharmaceutical and medicinal products, with the effect that the period of protection is extended with 5 years. Norwegian law does not offer protection under a utility model system.

APPLICATION AND GRANTPatent are granted by the Norwegian Industrial Property Office (patentstyret.no). Applications may be filed by the inventor or such other person/entity to which the inventor has assigned the rights in the invention.

As a result of Norway’s adherence to the EPC convention, the EPO may also grant pat-ents that are valid in Norway, provided the patent holder files a translation of the patent to the Norwegian Patent Office and pays a registration fee within applicable deadlines. Translation requirements are limited following the implementation of the London agree-ment, and patents can be in English language except for the patent claims.

A Norwegian patent may on certain conditions enjoy priority from the former date of filing in another jurisdiction, provided such patent application enters the national phase in Norway within applicable deadlines.

The processing of the patent application may be speeded up if the patent has already been granted in certain other jurisdictions, on basis of the Patent Prosecution Highway arrangement to which the Norwegian Industrial Property Office is a party.

The validity of a patent grant may be challenged subsequent to the grant, and this is frequently done as a defence in infringement cases.

124 INDUSTRIAL AND INTELLECTUAL PROPERT Y

http://patentstyret.no

PATENTABILITYTo be patentable, an invention must meet criteria of novelty and inventive step, be of a technical nature and have industrial application. A patent will not be granted for: (1) a discovery, scientific theory or mathematical method; (2) aesthetic creations; (3) schemes, rules or methods for performing mental acts, playing games or doing business, or pro-grams for computers; (4) presentations of information; or (5) certain types of biological processes, and surgical or therapeutic methods. Computer programs as such are in general protected by copyright law, not patent law. Patentable inventions may however encompass computer programs.

EMPLOYEE INVENTIONSEmployee inventors will as a formal starting point retain the rights to their inventions, but are obliged to report the invention to the employer. An employer may demand to have assigned the rights to the inventions from the employee. The employee may on certain conditions be entitled to a reasonable compensation for such assignment.

ASSIGNMENTS AND LICENSESThe right to exploit a patented invention may be assigned or licensed. There are no particular formal requirements to such agreements, and the contents of such agree-ments are not restricted by mandatory legislation. A licensed right can however not be assigned or sub-licensed, unless otherwise has been expressly agreed or is clearly implied between the parties. To be fully protected against creditors and other third parties, a license agreement must be registered with the Norwegian Industrial Property Office. A compulsory license to use a patented invention may be granted by the courts of the competition authorities, amongst others, in cases where the patent holder does not itself use the invention. This possibility is in practice hardly ever applied.

Employee inventors will as a formal starting point retain the rights to their inventions, but are obliged to report the invention to the employer.


INFRINGEMENTAn action for the infringement of a patent may be brought by the owner of the patent, or by an exclusive licensee. Infringement law suits must be brought before the Oslo City Court as the exclusive legal venue, regardless of where in Norway the infringement has taken place.

An infringement may result in a court order to cease the infringement, as well as claims for damages and orders to destruct or withdraw the infringing product from the market. Claims for damages may be calculated as the higher of: a) the losses suffered by the pat-ent holder; b) a reasonable royalty for the use; or c) the net profit made by the infringer. In cases of bad faith or gross negligence, the infringer may be liable for a royalty based on twice the market license rate. The plaintiff may on certain conditions request a pre-liminary injunction from the courts in order to prohibit further infringements pending ordinary trial.

Infringement law suits must be brought before the Oslo City Court as the exclusive legal venue, regardless of where in Norway the infringement has taken place.


In the last couple of decades, cranes have become a regular sight by the water’s edge. Many cities have seen old industrial buildings turned into exclusive apartments. Oslo, Tønsberg, Fredrikstad and Porsgrunn have all got examples of this kind of repurposing.

TRADE MARKS

GENERALNorway adheres to the Paris Convention of 1883, as amended, the Madrid Agreement of 1891, and various other international conventions relevant to trademarks. Norway has implemented EU Council Directive 2008/95/EC of 22 October 2008 and is expected to implement Directive 2015/2436, which sets forth minimum standards for the trade mark legislation of EU member states. The EU Community Trademark is not implemented in Norway.

Norwegian trademarks are primarily governed by the Trademarks Act 2010 (varemerke-loven) and the Trademark Regulation 2010 (varemerkeforskriften). Trademark protec-tion is obtained through registration, or through usage that has resulted in the trade-mark being well-known. Different types of trademarks may be protected. In addition to the more traditional product names and logos, also sounds, shapes and slogans may potentially be registered as trademarks.

REGISTRATION AND EXAMINATIONTrademarks are registered by applications to the Norwegian Industrial Property Office (www.patentstyret.no). Alternatively, international applications filed in other countries may be extended to Norway on basis of the Madrid Agreement.

Any individual or legal entity, whether Norwegian or foreign, may register a trade mark in Norway. Registrations remain in force for 10 years, but may be renewed indefinitely for additional periods of 10 years. A fixed registration or renewal fee must be paid for each class of goods or services for which the mark is registered. If a registered trade mark is not used for a period of five years, an action can be brought to have the registration deleted.

Trademark applications may be rejected for formal reasons, such as incorrect comple-tion of the application form or lacking payment of the registration fee. Applications may also be rejected if the trademark does not meet the substantive conditions for applications, e.g. if it is purely generic or lacks distinctive character, is contrary to pub-lic policy or good morals, or is misleading. The Industrial Property Office is not obliged to examine whether or not a trademark application infringes the rights of third parties, such as, e.g. a previously registered trademark or company name. Possible conflicts with third party rights must however be examined if the Industrial Property Office becomes aware of them.


http://www.patentstyret.no

For a three-month period from the date of publication of the application, anyone may file an opposition to registration with the Industrial Property Office. The right to file an opposition is not limited to third parties whose rights are infringed by the registration of the trademark. A granted trademark may later be declared invalid. This can be done either by the courts, or on basis of an administrative process starting with the Industrial Property Office.

The decisions of the Industrial Property Office may be appealed and brought before the Norwegian Board of Appeal for Industrial Property Rights (www.kfir.no). They may thereafter be brought before the courts of law.

ASSIGNMENT AND LICENSETrademarks can be assigned or licensed, either together with or separate from the busi-ness for which it was originally registered. A license cannot be assigned or sublicensed, unless this has been agreed. The transfer or license agreement is not subject to any par-ticular formal requirements. A transfer or license agreement must however be registered with the Industrial Property Office to enjoy protection against third parties, such as the assignor’s creditors.

INFRINGEMENTThe infringement of a trademark can result in civil and criminal liability. A licensee can also bring an action for infringement, provided the infringement has taken place within the area of the license. Infringement law suits must be brought before the Oslo City Court as the exclusive legal venue, regardless of where in Norway the infringement has taken place.

The court may order the infringement to stop, as well as award damages. Such damages are calculated as the higher of 1) the loss suffered by the trademark holder, 2) the profits made by the infringer, or 3) a reasonable royalty for the illegal use of the trademark. If the infringement was willful or grossly negligent, the plaintiff is entitled to an amount set as twice such reasonable royalty rate. The court may also impose measures to hinder further infringement, such as order the destruction of counterfeit goods. A preliminary injunction may also be imposed to stop unauthorised use.

Trademark protection is obtained through registration, or through usage that has resulted in the trademark being well-known.


http://www.kfir.no

DESIGNSNorway is party to various conventions related to designs, including the Paris Conven-tion 1883, the Locarno Convention 1968 and the Trips Agreement. Designs are under Norwegian law protected under the Design Act 2003 (designloven), which implements EC Directive 98/71/EF. Further, designs may alternatively or in addition be protected by copyright law or the passing-off provisions under the Norwegian Marketing Act (markedsføringsloven). The EU Community Design does not apply in Norway.

Protection under the Design Act is obtained through registration with the Industrial Property Office. Alternatively, international registrations under the WIPO system may be extended to Norway. The design must be new and have individual character. Designs cannot be registered to the extent the visual aspects are determined by the technical function of the product. The duration of protection is up to 25 years from the date of registration. The creator’s rights are protected by civil and criminal sanctions.

The duration of protection is up to 25 years from the date of registration. The creator’s rights are protected by civil and criminal sanctions.


COPYRIGHT

GENERALThe Copyright Act (åndsverksloven) protects intellectual works regardless of their type, form of expression, merit or intended use. Protected works include, e.g. books, lectures, dramatic works, choreographic works, computer programs, musical compositions, cinematographic works, designs, paintings, architectural works, works of applied art, etc. Translations and adaptations of works of the imagination are similarly protected, subject to the rights of the author of the original work.

In addition, the Copyright Act protects certain so-called neighbouring rights that are not protected through copyright as such, including databases, photographs and certain artistic performances.

Copyright is vested in the author automatically upon creation of the work. There is no registration scheme for copyrights, and it is not required to mark any materials with copyright symbols. Copyright in computer programs developed by employees is auto-matically transferred to the employer. For other types of copyrighted materials, there is no such automatic transfer of rights, and an assignment requires that this follows expressly or implied from the employment contract.

COPYRIGHT CONTENTSCopyright gives the rights holder an exclusive right of presentation (i.e. by public recital or dramatic presentation) and right of reproduction (i.e. by printing, engraving and recording). These rights are limited in extent by, among other things, the right to make copies for private use. The rights subsist for 70 years following the author’s death. In addition, the author has “moral rights”, which give the author the exclusive right to determine whether his work shall be published; to protect the work against any attempt to change its nature or alter it; and to change it. This moral right attached to the person of the author, is perpetual, inalienable and not subject to prescription.

ASSIGNMENT AND LICENSINGCopyright may be assigned and licensed, except for the moral rights as mentioned above. No particular formal requirements apply to such agreements. An assigned copyright may not be further assigned, unless this has been agreed with the assignor, or the copyright is assigned further as part of a business.


Winter in the manmade landscape at Mølen near Nevlunghavn. With its 230 burial cairns it is the grandest of its kind in Norway. Chieftains and servants were buried here under large and small piles of stone. The area contains 16 large burial cairns, four of them huge rocky mounds with a diameter of 25-35 metres. There are also 192 smaller rock piles in eight rows parallel with the water line.

Data protection

GENERAL

Norwegian laws on data protection are primarily found in the Data Protection Act2000 (personopplysningsloven) and the Data Protection Regulation 2000 (person- opplysningsforskriften). These legislative instruments implement the EC Directive 95/46/EC, meaning that Norwegian data protection laws are to a large extent aligned with the laws of the other European countries. It is expected that EU General Data Protection Regulation will be adopted by Norway in May 2018, and at such time replace the current legislation.

The supervisory authority for data protection in Norway is the Data Protection Authority (DPA) (www.datatilsynet.no). The DPA receives notification and grants authorisations for the processing of personal data, provides guidance on the understanding of the legal requirements, and also enforces the legislation by issuing orders to comply and adminis-trative fees for non-compliance.

The personal data legislation has a broad scope, and applies to all electronic processing of personal data. Non-electronic processing is only covered to the extent it concerns registers over persons. Processing of data for strictly personal purposes is however exempted from the legislation. The jurisdictional scope of the Norwegian laws is limited to processing of personal data by 1) controllers established in Norway, and 2) control-lers established outside the EU/EEA that use equipment in Norway for their processing, except for equipment used for transfers only.

RESTRICTIONProcessing of personal data is only allowed to the extent there is legal basis for such processing. The Personal Data Act lists several alternatives in this respect, one of which is the consent of the data subject. Other grounds allowing the processing is that it is necessary in order to 1) fulfil a contract to which the data subject is party, 2) enable the controller to fulfil a legal obligation, 3) protect the vital interests of the data subject, 4) perform a task in the public interest, or 5) exercise official authority. Finally, processing is allowed when necessary in order to enable the controller or third parties to whom the data are disclosed to protect a legitimate interest, provided such interest is not overrid-den by the interests of the data subject.

134 DATA PROTECTION

http://www.datatilsynet.no

The number of domesticated reindeer is huge in Norway. An estimated 200,000 reindeer roam around our expansive country, with 70 per cent found in the northernmost county, Finnmark.

In order to process sensitive data, certain additional requirements must be met. Sensitive data is defined as personal data relating to a) racial or ethnic origin, or political opinions, philosophical or religious beliefs, b) the fact that a person has been suspected of, charged with, indicted for or convicted of a criminal act, c) health, d) sex life, and e) trade-union membership.

Even if the above referred to conditions are met, the processing of person data is only allowed when used for “explicitly stated purposes that are objectively justified by the activities of the controller”. The personal data must not subsequently be used for other purposes that are incompatible with the original purpose of the collection, without the consent of the data subject. The data must also be accurate and up-to-date, adequate, relevant and not excessive in relation to the purpose of the processing.

NOTIFICATION AND AUTHORISATIONAs a starting point, any processing of personal data must be notified to the DPA, and any processing of sensitive personal data is subject to authorisation from the DPA. A number of exceptions to this starting point are found, meaning that many ordinary types of data processing are exempted from both the notification and authorisation requirements. For instance, processing of ordinary employee data, customer and supplier data for adminis-trative purposes does not have to be notified to or authorised by the DPA.

TRANSFER ABROADTransfers or personal data abroad from Norway are allowed to countries within the EU/EEA, and to third countries that the EU Commission has concluded has an adequate level of protection. Personal data may also be transferred to data processors in third countries if the EU model contracts for such transfers are used. Such contracts must be notified to the DPA. Transfers abroad can also be justified on other grounds, including the consent of the data subject and approved Binding Corporate Rules. Personal data could previously also be transferred to the US on basis of the Safe Harbor arrangement, but this opportunity ceased with the Schrems decision of the European Court of Justice.

It is expected that EU General Data Protection Regulation will be adopted by Norway, and at such time replace the current legislation.

136 DATA PROTECTION

ADMINISTRATIVE REQUIREMENTSThe processing of personal data is subject to a number of administrative requirements. In particular, the data controller must be able to document that it meets requirements to data security and internal control systems. The data controller is obliged to reply to cer-tain inquiries concerning the data processing being conducted. This must be done free of charge and within 30 days upon receipt of the request. The data controller must also on certain conditions inform the data subject about the data processing when collecting data. Personal data that is incorrect or incomplete must be rectified. Personal data that is no longer necessary to carry out the purpose of the processing must be deleted.

USE OF DATA PROCESSORSA controller may use a data processor to process data on its behalf. The agreement with the processor must be in writing, and the processor may only process personal data in such way as is agreed with the controller. It must be stated in the agreement with the processor that the processor shall carry out such data security measures as is required by the Personal Data Act. The controller still remains liable for the processing. The processor also has its own duty to, amongst others, ensure sufficient data security.

COOKIESThe use of cookies is restricted in the Electronic Communication Act s.2-7. Use of cook-ies is as a starting point conditional partly upon the user being informed about the data processed, the purpose of the processing, and who processes the data – and partly upon the user consenting to such use. It is assumed that consent may be provided through browser settings. The restrictions on the use of cookies do not apply when the purpose of the cookie is solely to transfer communication in an electronic communication net-work, or necessary to provide an information society service that has been requested by the user.

SANCTIONSViolations of the Personal Data Act may result in administrative fines of up to an equiva-lent of about €100,000, as well as orders to cease the illegal processing and daily coercive fines if such orders are not complied with. In principle, violations are also subject to criminal liability in the form of fines or imprisonment up to a maximum of three years. Criminal prosecution is however unlikely and has not been seen in practice so far. The level of sanctions is expected to be increased with the implementation of the GDPR in 2018.

137 DATA PROTECTION

Today there are 107 lighthouses in Norway, of which about 80 are listed buildings. The first lighthouse to be built was Lindesnes fyr in 1655. All the lighthouses in Norway today are automated and no longer inhabited.

Consumer protection

GENERALNorwegian law offers protection for consumers through a number of legislative mecha-nisms. An overview will be presented in the following. There is no universal definition of “consumer”, and the notion may vary from one piece of legislation to another. In many statutory instruments, a consumer is defined as a natural/physical person not acting predominantly in a business capacity.

Norway has implemented the EU Consumer Rights Directive 2011/83, as well as a num-ber of other EU directives related to consumer protection. This means that Norwegian law to some extent is harmonised with the laws of other European countries in terms of the consumer protection in this area. Some particular Norwegian consumer protection provisions may also be found, such as the mandatory maximum warranty period of up to 5 years in the Consumer Purchase Act.

MANDATORY CONTENT IN CONTRACTSIn Norway, several statutes contain mandatory provisions that govern contracts with consumers. When a contractual relationship is subject to mandatory regulations, the parties cannot with binding effect agree to terms that would be less favourable to the consumer than those prescribed by the Act.

Examples of such legislation are the Consumer Purchase Act 2002, the Right of Cancel-lation Act 2014 (and implementation of directive 2011/83/EU on consumer rights), the Marketing Practice Act 2009, the Trade and Craft Service for Consumers Act 1989, the Tenancy Act 1999 and the Housing Construction Act 1997. These Acts are results of a need for a set of rules that provide adequate protection for consumers.

Some of these Acts stipulate that none of their provisions can be departed from by agreement to the detriment of the consumer. Examples of such mandatory content can be the provisions on delivery, defects, delay, sanctions and remedies. Some Acts are only mandatory in part. Examples on this are the Act on Agreements 1918 and the Sale of Real Property Act 1992. These Acts are as a starting point non-mandatory, but contain certain explicitly stated exceptions.

The mandatory legislation will often determine the consequences of a breach of contract by the professional counterparty. This can include definitions of what is a breach, when such breach can justify termination of the contract, which other remedies are available to the consumer, and how late the consumer can complain without the claim being time-barred. As an example, whilst a fundamental breach of contract is required in order

140 C ONSUMER PROTECTION

for private parties to terminate the agreement pursuant to the Sale of Goods Act, the Norwegian Consumer Purchase Act provides the consumers with a right to terminate the agreement where the breach is “not unessential”. Another example is the principle of strict liability for losses suffered by consumers as a result of defective products. This principle is inter alia seen in the Norwegian Consumer Purchase Act.

The legislative consumer protection satisfies the provisions of various EU directives regarding consumer rights. Consequently, the Norwegian consumer rights are similar to those of the other EU/EEA countries. However, some directives only establish minimum requirements, such as Directive 1999/44. This means that the Member States may adopt more stringent provisions to ensure a higher level of consumer protection. This has inter alia led to a waiver from EU/EEA regulation on consumer protection in terms of the rules on the warranty period. In the Norwegian Consumer Purchase Act, the two-year warranty period as stipulated in Directive 1999/44 art.5 is increased to five years.

The five-year warranty period applies to all products or parts of products meant to last significantly longer than two years. The products’ expected lifetime must be subject to an individual assessment. Case law shows that most consumer electronics, such as mobile phones, are covered by the five-year warranty period. The two-year rule as stipulated in Directive 1999/44 shall apply for products meant to last shorter. The five-year “warranty” is often misunderstood, and does not mean that the product is warranted to last for five years. The five-year “warranty” only means that the consumer customer may complain as late as five years from the date of purchase, provided it turns out that the product was defective at the time of delivery. The product is not defective simply because it does not last for five years. The issue of whether a product breakdown or other problem material-izing before the end of the 5 year period will constitute a defect, will depend on separate assessments, such as reasonable expectations to merchantable quality in light of informa-tion given and the nature of the product.

UNFAIR CONTRACT TERMSThe Norwegian Act on Agreements of 1918 (avtaleloven) p. 36, has mandatory provi-sions that sanction unfair contract terms. According to p. 36, “an agreement may be wholly or partially set aside or amended if it would be unreasonable or in conflict with generally accepted business practice to invoke it”. The provision does in principle apply to both consumer agreements and other agreements. However, whether an agreement is unreasonable and thus can be set aside or amended, will depend on the position of the parties. This means that the threshold for applicability of the clause is lower for contracts entered into with consumers, than contracts entered into with professionals.


The application of the clause requires a broad assessment of the individual case, where several aspects are taken into account. The decisive factor is not the clause as such, but the results of applying it in the situation the parties are in at the time.

In addition, the Norwegian Marketing Act of 2009 (markedsføringsloven) stipulates a general prohibition against unfair terms and conditions in consumer relations. The Act is in accordance with several EU directives, including Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market and Directive93/13/EC on unfair terms in consumer contracts. The Marketing Act may be used to sanction standard terms and conditions as such, and not only set aside obligations en-tered into in individual consumer contracts.

As an example on the use of the Marketing Act for purposes as mentioned, the Norwe-gian Consumer Ombudsman filed a complaint against Apple on the grounds that the company provides itself with a right to one-sided change of the consumer’s conditions for the use of ICloud. The Consumer Ombudsman found that Apple’s practice was unfair and thus contravenes with the Norwegian Marketing Act and the underlying EU obligations.

Furthermore, the Marketing Act stipulates requirements relating to guarantee conditions in consumer relationships. If a guarantee is provided, the guarantee conditions shall provide certain information as stipulated in s.23 litra a-e in a clear and plain manner. This includes the content of the guarantee and any limitations and special conditions that may apply.

The Norwegian Act on Agreements 1918 prevents circumventions of the consumer protection against unfair contract terms. Pursuant to s.37 i.f, under s.37(3) of the Act an agreement on the choice of law of a non-EU/EEA jurisdiction may be set aside if the law of such other jurisdiction will give the consumer less protection than otherwise. This provision facilitates a comparison between the provisions of the national law which has been selected and the rules that would otherwise have been applicable.As a party to the convention on jurisdiction and the enforcement of judgments in civil and commercial matters of 1988 (Lugano Convention), the Norwegian rules on jurisdic-tion also contribute to ensure that the provisions on consumer protection are complied with. The Lugano Convention limits the contracting parties’ freedom to agree on legal venue in a jurisdiction other than the state where the consumer is domiciled. The Nor-wegian Act relating to mediation and procedure in civil disputes of 2005 (the Dispute Act) incorporates the Lugano Convention into Norwegian law pursuant to ss.4–8.


FINANCIAL AGREEMENTS WITH CONSUMERSConsumers entering into financial agreements enjoy the protection of the Financial Agreements Act (FAA). The FAA cannot be departed from to the detriment of consum-ers. The FAA applies in some cases also to financial institutions established outside of Norway, including when such foreign financial institution has marketed its products in Norway or the financial agreement in question has been entered into in Norway. The application of Norwegian law, and thus the FAA, may be set aside by a choice of the laws of a jurisdiction within the EU/EEA, but not the choice of a jurisdiction outside the EU/ EEA, to the extent this weakens the position of the consumer.

The FAA implements several EU directives, including 2007/64/EC on payment services in the inner market, and EC 2008/48/EC on consumer credit. The substantive scope of the FAA includes provisions on bank accounts and deposits, payment services, credit agreements and guarantees for loans/credits. A number of detailed obligations are im-posed on financial institutions in relation to consumers, some examples of which are:

• Information obligations: This includes information about the identity of both the financial itself and the products offered, including the key terms and conditions of the agreement. Particular requirements apply to information about, amongst others, the costs of a credit such as the effective interest rate, and information about the risk of guaranteeing for loans, etc.

• Advice against obligations: Financial institutions must advice against the taking up of a loan or issuing a guarantee by a customer, if the financial capabilities of the customer suggest so.

• Agreement and product content requirements: The FAA gives the customers certain rights to, e.g. terminate the financial agreement and provide settlement mechanisms when this is done. There are also product content requirements, such as to, e.g. payment transfer times. Liability in case of breach of agreement is also subject to mandatory provisions.

• Form of agreement: Financial agreements must be in writing.

The Marketing Act may be used to sanction standard terms and conditions as such, and not only set aside obligations entered into in individual consumer contracts.


INFORMATION REQUIREMENTSBefore entering into a contract with a consumer, a business will in some cases be re-quired to provide certain information to the consumer. The information required can be about the characteristics of the product itself, about the key terms and conditions of the agreement, or about the identity of the business. An example is the information require-ments related financial agreements as described above. Another example is the Consumer Sale of Goods Act, according to which goods can be considered defective if the vendor has not provided such information about them as the buyer could reasonably expect.

Particular information obligations apply in the case of distance sales, as further detailed in Distance Selling Act 2014. The information required on basis of the Distance Selling Act must be provided in Norwegian if the marketing is directed towards Norwegian consumers. Similar information obligations apply in case of online sales, on basis of the E-commerce Act. Further, the Price Information Regulation has detailed requirements to the information about and presentation of the price of a product. For certain types of products, particular labelling requirements apply. This is in particular relevant to food and other nutritional products. On basis of the implementation of EU Directive 1169/2011, information must be given on the product about, e.g. ingredients, nutritional values, and allergens.

The beautiful Norwegian fjords have become very popular with foreign tourists. The number of cruise tourists visiting Norway has increased from about 200,000 to almost 700,000 a year over the last 15 years.


CONTRACT FORMATION REQUIREMENTSAs a starting point, no formal requirements apply to the entering into of a consumer contract. Both verbal and electronic agreements are normally binding. Certain agree-ments must be in writing, such as financial agreements. Distance selling agreements must also be confirmed in writing in order to be binding. Requirements for written contracts are in most cases met by an electronic contract.

The Distance Selling Act 2014 requires that it is made clear to the consumer when an obligation to pay is taken on. If an order resulting in a payment obligation is placed by clicking on, e.g. a button, this button should be marked with wording such as “obligation to pay” or similar. It is not required that contracts are in Norwegian language, and it is as a starting point up to the consumer whether or not to enter into a contract in another language. An exception is found for certain types of distance sales agreements.

MARKETING AND SALES METHODSThe Marketing Act 2009 restricts the types of marketing and sales methods allowed, and implements, amongst others, EU Directives 2005/29/EC and 2011/83/EC. Misleading marketing and unreasonable and aggressive business practices are prohibited. Detailed requirements are provided in this context, including regulations on unreasonable mar-keting practice and comparative marketing.

The use of individual electronic marketing communications, such as email and SMS, is not allowed unless the recipient has previously consented thereto, or the recipient is an existing customer for products similar to those being promoted. Recipients of such marketing communication must in any case always be given the chance to opt out from receiving further such communications.

Individual marketing by use of phone calls and letters is as a starting point allowed, how-ever so that no such communication can be directed to individuals that have registered themselves in the Reservation Register.

The above referred to restrictions of the Marketing Act apply also to marketing from other jurisdiction, if it is directed towards the Norwegian market. Distance sales are sub-ject to the requirements of the Distance Sales Act 2014, which amongst others establishes obligations to give certain information to the customer, and the right to cancel the pur-chase within certain deadlines. The customer must be given a specific form that can be used for cancelling the purchase, and if such form is not provided, the deadlines before which the option to cancel must be used will be extended.


QUALITY AND SAFETY REQUIREMENTSIn Norway, product quality and safety is mainly ensured through requirements stipulated in the Product Control Act 1976 (produktkontrolloven) and the Norwegian Product Liability Act 1988 (produktansvarsloven). Both Acts transpose several EU regulations into Norwegian law.

The Product Control Act applies to production, including testing, importing, marketing, use and other handling of products and to consumer services. The primary purpose of the Act is to prevent products, hereunder consumer products, or consumer services from causing damage to health or disturbances of the environment. A number of regulations are attached to the Act. These regulations stipulate detailed quality and safety require-ments applicable to specific sectors, such as the regulation on safety of toys of 2013 and regulation on machines of 2009.

Any person that wilfully or negligently contravenes provisions set out in or issued under the Product Control Act or conditions laid down in s.7 of the Act, may be liable for fines and/or imprisonment for up to three months.

The Product Liability Act applies to the liability of a producer for damage caused by a product made or supplied for sale as part of its profession, business or equivalent activity. The Act establishes a strict liability for manufacturers, importers, distributers and sellers of goods.

CONSUMER AUTHORITIES AND ORGANISATIONSThe Consumer Ombudsman (www.forbrukerombudet.no) and the Market Council (www.markedsradet.no) are independent administrative public bodies that have been established to protect the interests of the consumers. This is done by supervising market conditions and influencing traders to observe the regulatory framework. They act upon complaints from consumers and traders, but will also at their own initiative look at marketing measures. The said bodies have authority to issue decisions banning unlawful marketing and contract terms and conditions in standard contracts when deemed neces-sary in the interests of consumers.


http://www.forbrukerombudet.no

http://www.markedsradet.no

Social and social welfare

GENERAL

Norway is a well-developed welfare state with a high degree of social security. The rules are governed by a number of Acts and regulations including:

• The National Insurance Act 1997 (Folketrygdloven), which provides economic benefits in situations of unemployment, maternity, alone childcare, sickness or injury, disability, old age and death.

• The Act relating to Social Services in the work and welfare sector of 2009 (Sosialtjeneste- loven), the purpose of which is to promote financial and social security and to improve the living conditions of disadvantaged persons. Furthermore, the Act contributes to greater equality of human worth and social status, and to the prevention of social problems.

• The Act relating to health authorities and health trusts (Health Authorities and Health Trusts Act, Helse-og omsorgstjenesteloven) of 2011 prevents, treats and facilitates to cope with disease, injury, suffering and disabilities. The Act relating to patients’ rights (the Patients’ Rights Act, Pasient-og brukerrettighetsloven) of 1999 helps to ensure that all citizens have equal access to good quality health care by granting patients rights in their relations with the health service.

In the following we provide a short overview of important rules under the NationalInsurance Act.

SICKNESS BENEFITSThe Norwegian National Insurance provides sickness benefit to employees for a period of one year. The employer is obliged to pay the sickness benefit for the first 16 days of any sickness period. Sickness benefit from the National Insurance covers salary up to ap-proximately NOK 540,000. It is not unusual that the employer has agreed to pay the dif-ference between the sickness benefit received from the National Insurance and the actual salary. The employer must establish occupational injury insurance for all the employees.

MATERNITY LEAVEEmployees have the right to pay during maternity and paternity leave. The compensation is either 80 per cent of the salary for 59 weeks or 100 per cent for 49 weeks. For leave of absence due to adoption the compensation is either 80 per cent of the salary for 56 weeks or 100 per cent for 46 weeks. Compensation during this period is covered by the National Insurance. Parental benefits cover the loss of income within an indexed maximum limit of six times the Base Amount, currently approximately NOK 540,000 per year. Many public and private sector employers make up any differences between

148 SO CIAL AND SO CIAL WELFARE

their employees’ actual salaries and the statutory entitlement. Three weeks before the birth and the first six weeks after the birth are reserved for the mother. In the event that both parents are entitled to parental benefits, then ten weeks of the benefit period are reserved for the father (the father’s quota) and ten weeks are reserved for the mother (the mother’s quota, including the six weeks after birth). The remaining part of the bene-fit period of 26 or 36 weeks may be shared between the parents.

Furthermore, parents have the right to take leave of absence for an additional year with-out compensation. Parental benefit may be combined with reduced working hours. The benefit is then reduced, but the period is extended. Employees who return to work after maternity or paternity leave are entitled to the same position they held before the leave of absence. Employees are also entitled to take paid leave of absence for a certain number of days each year to care for their children when they are sick.

NATIONAL INSURANCE CONTRIBUTIONSEmployer’s contribution is paid by employers to the National Insurance scheme. It is calculated on the basis of gross pay and allowances. Normally the employers’ National Insurance contributions will be 14.1 percent of the salaries. These contributions partly finance social security contributions (for example unemployment benefit), retirement pensions and disability pensions.

Employees have the right to pay during maternity and paternity leave. The compensation is either 80 per cent of the salary for 59 weeks or 100 per cent for 49 weeks.


O Norway, my Norway! Do give me a May when sunny waves sigh and heave! But hear me, o hear me: as day fades away And renders my brow dark with eve Teach me then to wither, o land of my birth And make me a bed in your own holy earth When summer is ready to leave!

(Theodor Caspari 1901) Translated from Norwegian

PENSIONSGENERALThe Norwegian pension scheme went through a reform in 2010/2011. Norwegian law accepts various forms of defined contribution schemes as well as defined benefit schemes. Each form of qualified pension scheme has its corresponding specific pension act: “Foretakspensjonsloven” regulates defined benefit schemes. “Innskuddspensjonsloven” provides the legal framework for qualified defined contribution schemes, whilst “Tjeneste-pensjonsloven” provides the framework for “hybrid” models i.e. defined contribution schemes combined with insurance of expected lifelong benefit levels. The overall trend is that defined benefit schemes are being phased out. Norwegian pension legislation is based upon the Norwegian Act relating to mandatory pension schemes of 2006 (Lov om Obligatorisk Tjenestepensjon (OTP)), which outlines the general obligation of companies to provide for a qualified pension scheme. In the following we provide an overview of important provisions under this Act.

The timber wharves or warehouses by the river in Trondheim were originally used by the city’s merchants for storage and stock. The oldest warehouses are from the 18th century,

but sadly many have been lost in fires in the city over the years. Most of the remaining warehouses are now converted into apartments in a charming part of Trondheim city centre.


THE NORWEGIAN ACT RELATING TO MANDATORY PENSION SCHEMES

The Norwegian Act relating to pension schemes establishes an obligation for the employer to provide for an occupational pension scheme in accordance with one of the three specific pension acts mentioned above. All employers that are taxable to Norway and with a minimum of one employee employed in Norway are comprised by the law. The employer is obligated to provide for a pension scheme for all the employees who are 20 years or older, and who are employed 20 per cent of full-time or more. The obligation concerns only old-age retirement pension – not disablement pension or dependents’ pension; these are optional schemes. The employer is, however, required to provide a waiver of premiums in the event of disability. The minimum level of contribution in a defined benefit or hybrid scheme is a 2 per cent contribution for salary between approx-imately NOK 90,000 and 1,080,000 (1–12 G). G is the Norwegian welfare service base amount, currently NOK 90 480 (2015). Salary exceeding 12G, currently approximately 1,080,000 is not pensionable. Pension contributions under a qualified pension scheme are tax-deductible, and not subject to payroll tax, hence the limitations.

Operating a qualified pension scheme for all employees will both serve to fulfill the obligation to operate a pension scheme under the Act relating to mandatory pension schemes, and qualify for the associated tax benefits. Norwegian life assurance companies offer a wide range of different pension schemes, with a variety of investment options and associated insurances. The employer may also establish its own pension fund, but this is rare, at least for smaller employers.

The employer may choose which pension scheme shall be established and which life insurance company is to be used. The employer may also decide the level of the pension scheme, within the limits of the law.

If the pension scheme includes 15 or more members, the company shall establish a steering committee for the pension scheme. The steering committee shall consist of a minimum of three persons, of which a minimum of one person shall be elected from and by the members. The steering committee shall be consulted when it comes to mat-ters concerning the pension scheme. The steering committee is non-decision-making authority; it has only a consultative function. The company’s annual report or annual accounts must show that the company has a pension scheme in accordance with the minimum requirement established in the law. Pension contributions under a qualified pension scheme are tax-deductible for the employer.


THE DIFFERENT FORMS OF PENSION SCHEMESThe different forms of qualified pension schemes include defined benefit schemes, defined contribution schemes and a so called hybrid schemes as mentioned above.

THE CHARACTERISTICS OF DEFINED BENEFIT PENSION SCHEMEA defined benefit scheme guarantees that the employee, at the age of retirement, receives a defined yearly benefit, for example a total pension equal to 65 per cent of salary from public and private pension combined. This entails that the company’s future annual premium payment is hard to predict. The return of the pension contribution remains in the pension fund and so it “devolves” on the company.

The company has a limited codetermination concerning where to invest the pension contribution. In practice the company may choose between standard portfolios which the life assurance companies offer for the management of defined benefit schemes.

One disadvantage concerning defined benefit pension scheme is that the scheme gives the company lack of cost control, and allocates the total risk of any future development to the company. In addition to this, when it comes to the management of the fund, the risk of return lies with the company.

The capital in the pension fund may be invested in many different ways. The employee may get determinative influence concerning the investment portfolio, and the return of the payment devolves on the employee.


THE CHARACTERISTICS OF DEFINED CONTRIBUTION PENSION SCHEMEUnder a defined contribution scheme, the company pays an annual premium equivalent to a percentage of each employee’s wage, or an agreed annual amount. The premium must at least correspond with the minimum requirement established in the new law as mentioned above (which is 2 per cent of pensionable salary). Upper contribution limits are 7 % for salary between 0 and 7.1 G. For salary between 7.1 G and 12 G, an extra contribution of up to 18.1 % may be added. The much higher rate for salary exceeding 7.1 G is meant to allow compensation for less attractive public pension accrual for higher paid employees.

The capital in the pension fund may be invested in many different ways. The employee may get determinative influence concerning the investment portfolio, and the return of the payment devolves on the employee. At the same time the risk of the return lies with the employee and not the company. The company’s cost control is normally better under a defined contribution scheme than a defined benefit scheme. In addition to this the risk of the return lies with the employee and not the company.

The pension scheme may, as a main rule, be amended by the employer’s discretion, provided that the new pension scheme is in accordance with the minimum require-ment established in the law, and provided also that the employer is not prohibited from amending the scheme according to the individual (employment) agreements.

THE CHARACTERISTICS OF A HYBRID PENSION SCHEMEThe so called hybrid schemes largely provide similar pension accrual as defined contribution schemes. There is, however, one notable difference: In a defined benefit scheme, the employee’s pension accrual will be the sum of all contributions and any return on investment. This amount belongs to the employee, and can be paid out as an annuity over a selected number of years. If the employee lives longer than expected, the payments will stop once the pension capital is spent. If the employee lives short-er than expected, the remaining capital will go to his estate. In a hybrid scheme the yearly pension benefits are calculated in the same way, accrual and return divided by expected years of benefits. However, the employee does not hold title to the actual pension capital. Instead, the yearly calculated benefit is insured or guaranteed as a lifelong benefit, so the employee will continue to receive the same benefit even if he or she lives much longer than expected. A hybrid scheme can be combined with several other insurances. The hybrid schemes were introduced by law in 2013, and have not grown popular so far.


The national tourist road Atlanterhavsvegen zig-zags over seven low bridges out in the sea between Molde and Kristiansund by the fjords to the west. The Atlanterhavsvegen road itself is a little over 8 kilometres long and was opened in 1989, while the National Tourist Route Atlanterhavsvegen between Kårvåg and Bud is 36 kilometres.

Immigration

GENERALA Norwegian immigration scheme consists of several acts and regulations. The Norwegian Act of 15 May 2008 no. 35 on the entry of foreign nationals into the kingdom of Norway and their stay in the realm (Immigration Act) and Regulations of 15 October 2009 no. 1286 on the entry of foreign nationals into the Kingdom of Norway and their stay in the realm (Immigration regulations) are the principal acts within the Norwegian immigra-tion law legislation. The Acts are in accordance with various EU/EEA regulations. They include regulations on labour immigration, including chs. 3, 6, 13 under the Immigra-tion Act and ch. 19 in under the Immigration Regulations.

Norway is, represented by the Labour and Welfare Service, part of the EURES network (European Employment Services), which is a cooperation between the European na-tional employment services and the EU Commission. The purpose of this cooperation is to provide assistance to jobseekers who want to work in other European countries and employers who want to recruit people from other European countries. Below we provide an overview of the most important and potentially relevant Norwegian labour immigra-tion legislation regarding nationals comprised by the EFA/EFTA area.

FOREIGN NATIONALS COMPRISED BY THE EEA/EFTA AREAForeign nationals covered by the EEA Agreement and the EFTA convention (EEA nationals) are subject to special provisions in the Norwegian Immigration Act ch. 13. Pursuant to p. 111, an EEA national who has a valid identity card or passport has a right of residence for up to three months from the entry date, provided that the person in question does not become an unreasonable burden for public welfare systems. An EEA national’s right of residence applies correspondingly to a family member who is not an EEA national, as long as the family member accompanies or is reunited with the EEA national and holds a valid passport, cf. p. 111 second para.

If the EEA national is seeking employment, he/she has a right of residence for up to six months, cf. p. 111 third para. Are certain conditions, as stipulated in p. 112, met, EEA nationals have a right of residence for as long as the conditions are fulfilled.

When the EEA nationals have had a continuous lawful stay of five years, they are granted a right of permanent residence, cf. p. 115. A family member, who is not an EEA national, achieves a similar right, when he/she, pursuant to p. 114 first para, has lived with an EEA national and has had a continuous lawful stay in the realm of five years, cf. p. 116.

157 IMMIGR ATION

Norway was mapped out using cairns. Many still build new cairns on new peaks to mark their visit.

Litigation

THE COURT SYSTEMThe Norwegian court system is based on unitary courts with general jurisdiction. There are three instances of judicial courts: local courts of first instance, regional courts of appeal, and the Supreme Court. With a few exceptions, there are no specialised courts in Norway, not even in commercial matters. The general courts handle criminal matters and all civil disputes. Even matters relating to public administration and tax are within the jurisdiction of the ordinary courts. Some civil disputes will have to be heard by a board of conciliation (forliksråd) before the general courts will assume jurisdiction.

Within specific areas of law, administrative bodies have been established to resolve disputes. Consumer disputes may be referred to the Consumer Complaints Board (Forbrukertvistutvalget), insurance disputes may be referred to the Insurance Com-plaints Board (Forsikringsskadenemnda), and certain disputes with banks and financial institutions may be referred to the Complaints Board for Consumers in Banking and Financial Matters (Bankklagenemnda). In general, all rulings rendered by such bodies may subsequently be tried in the civil courts. It should also be mentioned that a separate Ombudsman gives reasoned opinions in matters relating to the exercise of public authority. Although not legally binding, the Ombudsman’s opinion is normally respected.

COURTS OF FIRST INSTANCEThe Courts of First Instance handle all criminal, civil, commercial and administrative matters, irrespective of the amount in dispute or the complexity of the matter. The only exceptions are the few legal areas which belong to the jurisdiction of a specialised court. Some claims must be dealt with by a Conciliation Board before they can be brought before Courts of First Instance. Such claims are mostly claims with value less than NOK 125,000.

As a general rule, the proceedings before the Courts are, oral. Parties shall present their case and they shall present relevant evidence. Oral testimony occurs often, both by par-ties and witnesses. Written evidence must be orally presented to the Court. The Court shall only try the claims raised by the parties. At the end of the hearing, the parties shall present their claim for legal costs.

With a few exceptions, there are no specialised courts in Norway, not even in commercial matters.

160 LITIGATION

Detail from the Oseberg ship, one of the best preserved Viking ships in Norway. A richly decorated oak vessel 21.5 metres long, it was found buried outside Tønsberg in 1903. Amongst the artefacts found during the excavation were a carriage with four wheels, three sleighs and five pillars carved with animal heads.

SPECIALISED FIRST INSTANCE COURTS

LAND CONSOLIDATION COURT (JORDSKIFTERETT)The Land Consolidation Court tries matters of public land consolidation. The Court consists of one judge with legal education and two lay judges with specialist knowledge. In complicated cases, the Court may be set with four lay judges while in simpler cases the court may only be set with a legal judge. It is not common for the parties to use legal counsel, but lawyers do appear in 30–40 per cent of the cases. There are in total 34 Land Consolidation Courts in Norway, and five Land Consolidation Courts of Appeal. The decisions by the Land Consolidation Court can be appealed either to a Land Consolida-tion Court of Appeal or a general Court of Appeal.

COURT OF ASSESSMENT (SKJØNNSRETT)The Court of Assessment is established in individual cases by the Ministry of Local Government. The Ministry will only form the Court if the municipal where the dispute has arisen submits an application for the establishment of such Court. In some cases, the general civil courts can resolve the dispute by assessment, and so there is no need to establish an individual Court of Assessment. The Court of Assessment shall consist of five members. One is required to be a legal judge, and shall be appointed by the Ministry. The remaining four are lay judges who are appointed by the general First Instance Court.

LABOUR COURT (ARBEIDSRETT)Disputes between employees and employers about tariff agreements and liability in cases of breach of tariff agreements, illegal lock-outs and strikes are handled by the Labour Court. The Labour Courts are composed by seven members. Three members are legal judges, and the remaining four are lay judges who are chosen by the labour organisa-tions where the employees and the employers are members. The decisions by the Labour Courts can in general not be appealed, but there are some small exemptions to this rule.

The Norwegian Supreme Court is the court of highest authority over questions of law, this involves questions of both written and unwritten law and also questions of constitutional law.

162 LITIGATION

APPELLATE COURTSThere are six different Courts of Appeal in Norway. Each Court of Appeal has its own geographical jurisdiction. Each of these six Courts receives only appeals from First Instance Courts within this geographical jurisdiction. An appeal is a complete rehearing of issues both of law and/or of fact, depending on which part of the First Instance Courts’ decision is appealed.

The Norwegian Supreme Court is the court of highest authority over questions of law, this involves questions of both written and unwritten law and also questions of constitu-tional law. There is no particular Constitutional Court in Norway. The Supreme Court can try both issues of law and fact, but mostly it tries fundamental questions of law. It also tries both civil and criminal cases. The Supreme Court has a panel of appeal, con-sisting of three judges. This panel decides whether or not the Supreme Court will try the appealed case. The Supreme Court will only try cases of fundamental questions that have meaning beyond the individual case. All other cases will be dismissed by the panel of appeal. The Supreme Court regularly consists of five judges. In larger cases, the Supreme Court can consist of seven judges, and in cases of particular importance, the Supreme Court often consists of eleven judges.

COSTSThe general rule in Norway is that a winning party is entitled to full compensation for his legal costs from his opponent. The losing party may be exempted from this liability for costs if there was justifiable cause for having the case tried, if the successful party can be reproached for bringing the action or rejecting a reasonable offer to settlement, or if the case was important to the welfare of the losing party and they were in an inferior position.

If neither party can be said to have won the case, the main rule is that each party shall bear their own costs. A party, who has been successful to a significant degree without winning the case, may be awarded costs if there are reasonable grounds for it. In certain situations, a party may be awarded costs irrespective of the outcome of the case, particu-larly if the opposite party can be fully reproached.

The Dispute Act aims to reduce the parties’ legal fees. Active case management and pro-portionality reviews should be the central instrument for achieving this.

163 LITIGATION

Several of the Norwegian fjords are on the list of UNESCO World Heritage Sites. One of them is Nærøyfjord, a part of the Aurlandfjord in the county of Sogn og Fjordane. Nærøyfjord is one of our most beautiful fjords and in 2013 it inspired the backdrop for the town of Arendelle in the Disney film Frozen.

Arbitration

GENERALIn Norway, arbitration is the preferred dispute resolution mechanism for commercial disputes. The legal rules for domestic arbitration are codified in the Norwegian Arbitration Act 2004. The law applies to arbitration which takes place in Norway, and it applies both if the parties are Norwegian or foreign. The purpose of this chapter is to outline the rules of law regarding the organisation and conduct of domestic Norwegian arbitration as well as the enforcement of Norwegian arbitral awards. The enforcement of international arbitral awards in Norway will also be mentioned.

Polar bears became a protected species in 1973. There are still about 5,000 polar bears at Svalbard.

166 ARBITR ATION

DOMESTIC ARBITRATION

GENERALA valid contract may provide for the resolution of disputes through arbitration. The courts may only process matters if the law specifically gives them jurisdiction. There are some exceptions where the parties cannot decide arbitration.

First, the parties cannot decide to resolve their dispute through arbitration if the case concerns legal matters of which the parties have no right of disposition. Such matters are for instance matters regarding the status of persons (marriage, divorce), matters con-cerning children or compulsory interventions by administrative authority. Neither can the parties decide on arbitration in matters regarding the public law effects of competi-tion law. Secondly, an arbitration agreement is generally not legally binding before a con-sumer if the agreement is made before the dispute has arisen. Thirdly, specific legislation might, in some cases, forbid arbitration.

Other than the above-mentioned exemptions, parties are free to resort to arbitration as a means of dispute resolution. Arbitration can be agreed upon by the parties, and in some cases, law may also require arbitration. Once a dispute arises, the existence of an arbitration clause compels the parties to submit the dispute to arbitration. The courts shall dismiss all matters that have been submitted to arbitration. The court may treat matters only if the arbitration clause is void, or if the court finds that arbitration cannot be held by other reasons.

THE ARBITRATION CLAUSE: SUBMISSION TO ARBITRATIONAn arbitration clause is an agreement to submit to arbitration disputes that may arise under a contract. Arbitration can also be agreed upon after a dispute arises. The clause may only regard a specific legal relation, and cannot be a general clause regarding all legal relations between the parties.

There are no formal requirements regarding the arbitration agreement. The arbitration agreement may be oral and informal. An oral agreement may however be difficult to prove if there should arise a separate dispute regarding the existence of the agreement. An arbitration clause will not automatically become unenforceable if the underlying contract is declared invalid. The clause may only be declared invalid if the clause itself suffers from reasons of invalidity.

167 ARBITR ATION

The arbitration agreement will usually contain a designation of arbitrators. The parties may agree upon the number of arbitrators and the individuals that are appointed as arbitrators. The Norwegian Arbitration Act requires that the selected arbitrators are impartial and independent from both parties. They must also be qualified for the role as arbitrator. The parties may derogate from these requirements.

Shall the parties fail to appoint the arbitrators jointly, then the law demands that there shall be three arbitrators. Each party may appoint one arbitrator, and the two appointed arbitrators shall jointly appoint the third arbitrator. If the arbitral tribunal cannot be constituted in accordance with these proceedings, the parties may claim that a court of law appoints the arbitrators. These proceedings are determined in the Norwegian Arbitration Act. The parties may derogate the law regarding these proceedings, and may agree to another method of appointment.

ARBITRATORSThe arbitrators must be individuals. Should a legal entity be named arbitrator, a repre-sentative for the entity must be appointed. The appointed arbitrator shall, unsolicited, inform of circumstances that might give rise to justifiable doubts as to his impartiality or independence. The duty to inform the parties of such circumstances applies throughout the arbitral proceedings.

After the appointment, a party may only challenge the arbitrator for reasons the party became aware of after the appointment was made. Such reasons must concern the impartiality or independence of the arbitrator, or his qualifications to act as arbitrator. Should an arbitrator be removed from his duty, a new arbitrator must be elected by the regulations above.

A valid contract may provide for the resolution of disputes through arbitration.

168 ARBITR ATION

PROCEEDINGSThe proceedings are carried out as established by the parties. If nothing is established by the parties, the arbitrators decide the rules of the proceedings. The Norwegian Arbitration Act only requires that both parties are treated equally and that they are given equal opportunity to perform their case.

It is the duty and the right of the parties to enlighten the dispute and case before the arbitrators. They may perform evidence as desired, and the arbitrators may only forbid evidence that clearly has no relevance to the dispute. The arbitrators may also appoint expert witnesses to enlighten certain questions before the arbitrators. The arbitrators shall use the legal rules decided by the parties to resolve the dispute. The Court of Arbitration may only use fairness to resolve the dispute if the parties explicitly have authorised the Court to do so. The Court shall only try the claims raised by the parties. The Court may decide upon resolving one or several claims in separate proceedings, unless the parties have decided otherwise.

AWARDThe arbitral award is settled by a majority vote. If a majority vote cannot be achieved, the leading arbitrator shall settle the award. Procedural questions may always be settled by the leader without involvement by the other arbitrators. The award must be in writing, and shall be signed by all arbitrators. In cases with several arbitrators, it is sufficient that only the majority signs the award provided that the reason for lack of signatures is stated in the award. The award shall contain the following, unless the parties have agreed differently:

1. the name(s) of the arbitrators;

2. whether the award is unanimous;

3. the date of arbitration;

4. the place of arbitration; and

5. the reasons upon which it is based.

In cases of dissenting votes, the award shall also contain:

1. the name(s) of the dissenting judge(s); and

2. the aspects the dissenting vote(s) concern.

The award shall be sent to the parties, and one signed copy shall also be sent to the general Court of First Instance for storage in the Court’s archives.

169 ARBITR ATION

LEGAL REMEDIESAn arbitral award cannot be appealed, unless the parties have agreed upon reasons and possibility for appeal. The award can only be found invalid by the general civil courts. If a party wishes to set aside the award, legal action has to be initiated within three months of the day the party received the award.

Only the following are grounds for invalidity:

1. one of the parties to the arbitration agreement lacked legal capacity;

2. the arbitration agreement is invalid under the rules of law to which the parties have agreed to subject it, or the parties fail the agreement under Norwegian law;

3. the party instituting the invalidity action was not given sufficient notice of the appointment of an arbitrator or of the arbitration case, or has not been given the opportunity to present his views on the case;

4. the arbitral award falls outside the scope of the arbitral tribunal’s jurisdiction;

5. the composition of the arbitral tribunal was incorrect; or

6. the arbitral procedure was contrary to law of the parties’ agreement, and it is obvious that the error may have had an impact on the decision.

Under the following circumstances, the court shall of its own accord set aside the award when issue of validity is brought before the courts:

• the dispute cannot be settled by arbitration under Norwegian law; or

• the arbitral award is contrary to public policy.

If the grounds for invalidity only affect parts of the award, then only such parts shall be invalid.

ENFORCEMENTEnforcement is only required when there is no voluntary compliance with the award. The rules of enforcement of the award are set forth in the Arbitration Act and the Enforcement Act. The Enforcement Act states that an award can be submitted for enforcement when the award is legally binding and the time for voluntary performance is exceeded. The enforcement can be established by the local enforcement officer or the general Court of First Instance.

170 ARBITR ATION

The Arbitration Act states specific circumstances which may prevent enforcement. Such circumstances are the same as the grounds for invalidity. In addition, enforcement shall be refused if an arbitral award is not yet binding on the parties, or it has been set aside by a court of the place of arbitration, or by a court of the country which law has been applied when deciding the dispute. If reasons for refusing enforcement only affect parts of the award, only such parts shall be refused enforcement.

ENFORCEMENT OF FOREIGN AND INTERNATIONAL AWARDSRules of enforcement of foreign and international awards are adopted in several international conventions. The most important of such conventions is the New York Con-vention of 10 June 1958. The Convention binds each contracting state to recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon. The parties may refuse recognition and enforcement under the same circumstances as under Norwegian law.

The Arbitration Act states specific circumstances which may prevent enforcement. Such circumstances are the same as the grounds for invalidity.

171 ARBITR ATION

Today there are more than three million domesticated reindeer in the world. More than three quarters of them are found in Sibiria. In Norway domesticated reindeer are a common sight along the roads in Northern Norway.

ALTERNATIVE DISPUTE RESOLUTION

GENERALA number of different mechanisms are available for non-litigious resolution of civil dis-putes. It has been much debated whether the legal system benefits from private dispute resolution mechanisms, which are normally subject to confidentiality obligations. As the majority of large commercial disputes is already resolved through arbitration, it will be difficult to monitor developments in case law. However, with increasing costs of litiga-tion, it seems inevitable that commercial parties will look for quicker and less expensive methods for dispute resolution. A main advantage with arbitration is the finality of the award. Thus, the parties save the risk of expensive appeal proceedings. In later years, we have seen mediation emerging as an important factor in settling disputes. Commercial contracts often set out meditation prior to arbitration proceedings, and we also see court assisted mediation playing an important role.

The Holmenkollen ski jump is a historic landmark and symbol of the spirit and success of Norwegian winter sports. Inside is a ski museum, the oldest of its kind in the world, and the observation deck at the top offers panoramic views of Oslo.

173 ARBITR ATION

MEDIATIONIn the past decade, the Ministry of Justice has supported and promoted initiatives to introduce mediation as a regular means of resolving disputes. This was further empha-sised in the Dispute Act, where the courts now, at any stage of the proceedings, shall consider the possibilities of achieving an amicable settlement of the dispute. The court may initiate mediation, or decide on court assisted mediation. This is carried out by the judge who handles the case, or a judge from a group of dedicated trained mediators of the court in question. If the mediation is unsuccessful, the judge may only participate in the continued proceedings if the parties agree, and the judge sees no objections. The larger courts have set aside resources to train mediators, and have established dedicated groups of judges for mediation. According to the courts, the rate of success, i.e. reaching settlements, is very high.

OTHER FORMS OF ALTERNATIVE DISPUTE RESOLUTIONWe also see disputes referred to other forms of resolution, which may be deemed more appropriate. Disputes related to financial and accounting matters are often referred to determination by accountants or auditors, in particular if the dispute is within certain values. Disputes in excess of the thresholds will often be referred to the arbitration procedure of contracts. We also see procedures where disputes are resolved by techni-cal experts, such as in large construction contracts. The objective is to avoid mounting unresolved disputes related to variations in the project. Within insurance, there is a long tradition for referring disputes in respect of valuation to experts. A large part of, for instance disputes related to business interruption and to valuations of property damage, are resolved by experts appointed by the two parties.

As the majority of large commercial disputes is already resolved through arbitration, it will be difficult to monitor developments in case law.

174 ARBITR ATION

Snow scooters are a popular means of transport at Svalbard. The number of snow scooters keeps increasing but so far wildlife has been protected from the growing traffic. However, many think that polar bears, seals, Svalbard reindeer and Arctic foxes are suffering from the exhaust and noise from the many thousands of scooters.

Aquaculture and fisheries

OVERVIEW OF THE INDUSTRYWhilst fish and fish products have been an important part of Norwegian exports throughout the known history, the sector has in recent years taken an ever more central part in Norwegian business life. The export value of Norwegian seafood exceeded 91 billion NOK in 2016, making Norway the world’s second largest exporter of fish and other seafood products. Much of the growth in the sector can be ascribed to the highly successful aquaculture industry where Norway is a world leader in production of farmed salmon. Together with neighbouring coastal states, Norway also shares some of the most productive wild fish stocks in the world. There is a growing industry of suppliers to fisheries and aquaculture and new industries based on marine ingredients are being developed. A number of companies within the fisheries and aquaculture sector have developed a turnover and profit placing them among the most interesting and profitable companies in Norway. In later years both Norwegian and foreign seafood companies have been listed on Oslo Stock Exchange (Oslo Børs), which is the world’s largest and most important financial marketplace for the seafood sector.

AQUACULTURE REGULATIONThe main regulation of the aquaculture sector is the Aquaculture Act of 20051 (in force from 1 January 2006). The purpose of this Act is to promote the profitability and competitive power of the aquaculture industry within the framework of a sustainable development and to contribute to creation of value in the coastal areas.

In order to engage in aquaculture in Norway it is necessary to obtain a license from the aquaculture authorities. An aquaculture license is necessary in order to engage in pro-duction of parent fish, hatchery-produced fish for stocking and edible fish.

The act aims to balance aquaculture against other interests such as environmental con-siderations, the weighing of land use interests in the coastal zone, market access, as well as food safety, fish health and fish welfare issues. It is a requirement for the granting of an aquaculture license that necessary licenses and clarifications from all relevant authori-ties are obtained, these being:

• The Municipality who registers and announces the application with a four week time limit for the general public to give any comments. It also clarifies the conformity with the land use plan and makes any decisions. Aquaculture licenses cannot be granted in conflict with the land use plan with legal basis in the Planning and Building Act of 2008.

• The County Governor who assess on the application pursuant to the Pollution Control Act of 19812 and gives statements on the effects on nature conservation, recreational, fishing and game interests.

177 AQUACULTURE AND FISHERIES

• The Food Safety Authority who assess on the application and gives necessary licenses pursuant to the Act relating to food production and food safety of 2003Act3 (Food Act) and the Animal Welfare Act of 2009

• The Norwegian National Coastal Administration who assess the application and issues license pursuant to the Harbour and Fairways Act of 20094.

• The Norwegian Water Resources and Energy Directorate (regional offices) who are involved if there is a need for extraction of water (for example hatcheries) and hold the authority to grant licenses.

Following the taining of the necessary licenses and clarifications, the County Governor or Directorate of Fisheries may issue an aquaculture license.

The main product in Norwegian aquaculture is sea farmed atlantic salmon. Licenses for sea such sea production gives the right to hold a biomass up to a limit of 780 tons (945 tons in the two northernmost regions of Troms and Finnmark) per licence. Licences for sea farmed Salmon have been granted with irregular intervals (latest in 2009 and 2013) with differing criteria for allocation. Since 2002 there has been a requirement for payment of compensation for aquaculture licences for sea farming of salmon and trout. While some licences in the 2013 allocation were granted based on a fixed compensation of 10 million NOK, compensation up to 66 million NOK were paid for one licence.

The relevant public authorities as listed above performs supervision and inspection in order to ensure that regulations are complied with both before, during and after the aquaculture production on the relevant locations.

Aquaculture licences may be transferred without prior consent of the authorities. The aquaculture act also gives statutory basis for mortgage over aquaculture licences. Such mortgages are generally held to be an important security in the financing of aquaculture companies. The aquaculture licenses and any mortgages are registered in the Aquacul-ture registry.

There are no regulatory limitations on foreign ownership in the Norwegian aquaculture industry.

1 www.regjeringen.no/globalassets/upload/kilde/fkd/reg/2005/0001/ddd/pdfv/255327-l-0525_akvakulturloveneng.pdf 2 www.regjeringen.no/en/dokumenter/pollution-control-act/id1718933 app.uio.no/ub/ujur/oversatte-lover/data/lov-20031219-124-eng.pdf 4 www.regjeringen.no/en/dokumenter/animal-welfare-act/id571188


http://www.regjeringen.no/globalassets/upload/kilde/fkd/reg/2005/0001/ddd/pdfv/255327-l-0525_akvakulturloveneng.pdf

http://www.regjeringen.no/en/dokumenter/pollution-control-act/id171893

http://app.uio.no/ub/ujur/oversatte-lover/data/lov-20031219-124-eng.pdf

http://www.regjeringen.no/en/dokumenter/animal-welfare-act/id571188

FISHERIES REGULATIONThe Act relating to the management of wild living marine resources of 20085 (Marine Resources Act – in force from 1 January 2009) is the central regulation for administration and management of wild living marine resources. The act aims to secure a responsible overall resource management and the act applies to all marine resources, such as fish, shellfish, seaweed etc. The government may also reserve the right to compensation for use of Norwegian marine genetic material.

The act applies to the territorial waters, the Norwegian Economic Zone, the fishery protection zone around Svalbard and the fishery zone around Jan Mayen.

The main objective with the act is to ensure a sustainable and sosio-economic profitable management of the wild marine resources and the genetic materials, and to contribute to secure employment and settlement in the coastal regions.

There is no private ownership to the wild marine resources.

The act enables the ministry to give regulations for allocation of quotas between different parts of the fishing fleet, for exercise of the catching and harvesting of resources, as well as deciding on protection and preservation measures, as well as control and sanc-tioning of any breach of regulations. Each year the ministry decides on total allowable catches for the most important fish stocks, deciding on what the different groups of vessels, and ultimately, what the individual vessel may catch.

There is a general prohibition of discards of any catch at sea. All catch is to be brought ashore.

Today there are about 11,000 active fishermen in Norway. The participation in com-mercial fisheries is regulated by the Participation Act of 1999 (in force from 1 January 2000). In order to engage in commercial fisheries it is necessary to obtain an acquisition permit for a fishing vessel. The requirements to obtain such licence are relatively easily met for owners of smaller vessels (under 15 m). However, for most of the commercial fisheries additional permit is required. For the ocean-going fleet, such permits are given as permanent licences. In the coastal fisheries, participation is regulated by annual permits with specific requirements for participation stated in annual regulations. By the end of 2015 there were registered 350 ocean-going vessels holding 588 licences, and 2134 coastal vessels holding almost 3000 annual permits.6 To provide for the profitability and 5 app.uio.no/ub/ujur/oversatte-lover/data/lov-20080606-037-eng.pdf6 www.fiskeridir.no/Yrkesfiske/Statistikk-yrkesfiske/Statistiske-publikasjoner/Fiskefartoey-og-fiskere-konsesjoner-og-aarlige-deltakeradganger


http://app.uio.no/ub/ujur/oversatte-lover/data/lov-20080606-037-eng.pdf

http://www.fiskeridir.no/Yrkesfiske/Statistikk-yrkesfiske/Statistiske-publikasjoner/Fiskefartoey-og-fiskere-konsesjoner-og-aarlige-deltakeradganger

efficiency in the fleet there is in place a marked-based system for quota consolidation, which allows the fleet to consolidate licences/permit on fewer vessels within certain restrictions.

It is a requirement that the majority of the crew and the master of a fishing vessel are domiciled in a coastal municipality in Norway.

In order to obtain licence to acquire a commercial fishing vessel it is necessary to be a registered fisherman/woman and there is a requirement of previous activity (having worked 3 of the last 5 years in commercial fishing on a Norwegian vessel). For compa-nies a licence to acquire a fishing vessel can only be granted if persons fulfilling this requirement hold more than 50% of the ownership interest, and have corresponding actual control over the operation. The authorities can make exemptions from these requirements if there are particular industrial or regional concerns to account for. Exemptions given under this provision has allowed a limited number of fish producing plants to hold ownership of fishing vessels.

Licence to acquire a fishing vessel can only be granted to a Norwegian Citizen or person equal to Norwegian citizen. The following companies and organisations are considered equal to a Norwegian citizen.

• Private and public limited companies and other companies with limited liability when the main office and the seat of the board is in Norway, the majority of the board members and the chairman of the board are Norwegian citizens and domiciled in Norway and have been domiciled in Norway for the last two years, and Norwegian shareholders own shares equivalent to at least 6/10 of the company capital and can exercise voting rights in the company for at least 6/10 of the votes.

• Shipping partnership or other Norwegian company when the members hold unlimited responsibility for the company’s obligations, and Norwegian co-owners own at least 6/10.

• Limited partnership when Norwegian citizens own at least 6/10 of the liable capital and Norwegian citizens own at least 6/10 of the partnership capital.

• The Norwegian state and what is owned by the Norwegian state and institutions or funds governed by the Norwegian state and Norwegian municipalities.

A foreigner domiciled in Norway is considered equal to a Norwegian citizen, but can only be granted licence to acquire a fishing vessel under 15 meters long.


Besides oil, fish farming has been Norway’s big industrial fairy tale over the last decades. Mostly salmon, but trout has become increasingly popular in recent years. The value of fish and shellfish sales in 2014 was 44.3 billion kroner. Norway exports more than 90 per cent of its produce from fish farming.

Real estate

INTRODUCTIONThe real estate market in Norway has for a long period of time been considered a very good investment. This is due to quite a stable market and good infrastructure for inves-tors concerning financing, commercial issues and public authorities.

LAND REGISTERA vital part of a functional commercial real estate market is a good and well-kept property register. In Norway the Land Register is governed and owned by the Kingdom of Norway, which is keeping an updated Land Register covering all of Norway. The different land numbers are however organised by each municipality with specific land numbers for each real estate.

In the Land Register registration of land takes place, registration and change of encumbrances and registration of any other right or obligation concerning a specific land number.

Registration in the Land Register is not mandatory, but is the only way to ensure a legal protection of any position taken in a specific land number. Registration of deeds etc. is then highly recommended in any transaction concerning real estate.

Stamp duty is payable at the following scale per January 2017:

• Registration of deed 2,5 % of the actual value of the real estate, added NOK 525.

• Mortgage NOK 525, regardless of the actual sum of the mortgage loan.

• Lease contracts etc. NOK 525.

Minor increase of these amounts will take place from year to year.

The Norwegian Land Register has a high rate of trustworthiness, which covers both a negative effect and an affirmative effect. The negative effect means that any legal issues concerning a real estate will not have any effect against bona-fide buyer, even if any negative issues exist. The opposite, affirmative effect, means that any bona-fide buyer can base their decision on information found in the Land Register, even though later on the investigations should show that the fact described is not correct.

This system will then give bona-fide buyers or a purchaser a higher grade of comfort regarding relevant information for any investment decisions.

183 REAL ESTATE

COMMERCIAL REAL ESTATEDue to stamp duty concerning deed registry (mentioned above), commercial real estates are very often organised in single purpose companies.

Any transaction regarding this real estate will then take place as a share transfer between buyer and the seller. Since the actual ownership of the real estate continues to be owned by the private limited company, no notification to the land registry is necessary; hence no stamp duty for the deed will be payable. The transaction will then be notified in the shareholders register, which will secure legal protection according to the Joint Stock Company Act.

Still, it is possible to register mortgage that might be needed in the land registry with a limited stamp duty as shown above.

In this respect it is important to be aware of the fact that mortgage of the actual real estate to finance purchase of the shares, is in principle forbidden under Norwegian law. However, one exception is made if the private limit company do not have other creditors, no employees and no other business is conducted in the company then actually owning the real estate at hand, it is possible to mortgage the property in the company to secure payment of the shares (financial assistance).

An investor must also be aware of the regulation of thin capitalisation. If the tax author-ities conclude that the target company is to thinly capitalised they may after their own discretion reduce interest allowance in the target company.

Since this is a common way to organise ownership in commercial real estate, the agree-ment and procedures used to transfer such a company between different investors are well established and follow well known routines in Norway. Even though there always will be some individual adjustments and adaptions, the commercial conditions and terms are fairly well established in the commercial market. This is due to established standards widely used.

In this respect it is important to be aware of the fact that mortgage of the actual real estate to finance purchase of the shares, is in principle forbidden under Norwegian law.

184 REAL ESTATE

LEASE AGREEMENTS Specifically in commercial real estate a rather large part of the buildings are hired out to different type of tenants. This will be the situation for shopping centres, office build-ings etc., normally for a prolonged period of time up to periods of 10, 15 or 20 years or longer. Some lease agreements will also be limited down to 3 years or even shorter. Either case a lease agreement is quite often combined with a possible right for prolonga-tion by either party in the agreement.

These types of lease agreements are common and thereby also well known in the Norwegian market. Even though the parties do have a large degree of contractual freedom, these lease agreements do tend to follow a specific norm or patterns which for most commercial participators are well known. This is due to established standards widely used in the marked.

The length of the lease agreements is of high importance when evaluating the actual value of the real estate at hand. This is due to the fact that any purchase of real estate (or single purpose companies) almost without exceptions are valued based on a yield consideration. The actual yield will vary from region to region; the lowest yields in large cities and with a higher yield in more rural areas.

The Barcode Project in Bjørvika, near the new Opera, consists of a row of office and apartment buildings with highly distinctive façades. Built on former dock and

industrial land in central Oslo, they create a new and easily recognisable skyline.

185 REAL ESTATE

ZONING PLANSThe rights and regulations of how to use a commercial building is regulated in the Planning and Building act of 2008. This Act is administrated locally through each municipality by the Agency for planning and building services.

In developed areas the building/property can normally only be developed according to local zoning plans. Any alterations of the actual use may also be considered by the local municipality if the change is substantial, i.e. office buildings turned into apartment buildings as a practical example.

Minor adjustments will normally not be subject to approval by the local authorities as long as the planned activity is considered to be within the existing zoning plan.

The zoning plans are easily accessible through the Agency of Planning and Building ser-vices and will give any investor good guidelines on what to expect concerning use of the commercial property in the future, and what to expect if any major changes are planned.

If a zoning plan has to been adjusted due to future plans, specific procedures are de-scribed in the Planning and Building Act on how to proceed to obtain the desired result.

In more rural areas zoning plans might not exist and the local authorities will then con-sider each plan and request individually before any permission eventually is granted.

POLLUTIONIn Norway the pollution authorities are organized in two levels.

First you have the local pollution authorities which are organised through each munici-pality. The local authorities will handle minor pollution issues or issues that are uncom-plicated even though somewhat larger in volume.

The second level is the governmental body Miljøverndirektoratet (MiD) which handle all other issues concerning pollution.

When discovering minor pollution issues at a real estate that is not acute, the public authorities will normally address the responsible party and request for a report and proposals on how to solve the matter. The authorities will be open to any professional suggestions that may amend the existing situation in a cost efficient way. Their main focus will be to avoid damage and any spreading of pollution in the area, and any pro-posals from the responsible party will routinely be addressing that issue. The potential damage and spreading of pollution will of course vary from site to site, pending on the local variations in geology etc.

186 REAL ESTATE

Polluted masses may be kept at the site if the pollution can be isolated in one way or another as long as the pollution is not above pollution class 3 for future industrial (commercial) use. If the pollution is above the mentioned class 3, i.e. class 4 or 5, it is expected that the authorities will demand that these polluted masses are removed according to existing routines. The different pollution classes are based on the chemical characteristics of the pollution.

If the planned use of the area in the near future will include non-industrial activity under a revised zoning plan, one has to expect that the public authorities will request further pollution clean-up included polluted masses below polluting class 3.

The principal rule under the Norwegian pollution legislation is that it is the polluter that covers all cost related to pollution clean-up. The pollution authorities will always look for who is actually responsible for the pollution (event). If they do not succeed in uncovering who the actual polluter is, they may in more complicated matters address the owner of the real estate, regardless of whether it is the owner that has caused the pollution.

If the owner is excluded as possible polluter of the property the authorities may choose to address the lessee concerning any pollution discovered instead of the land owner. The latter is a consideration of the fact that the activity of the lessee is the most likely cause of the pollution, and based on the principal rule that the actual polluter shall cover all clean-up costs, the lessee will then be made responsible by the authorities.

The pollution authorities may require that that the polluter/property owner/lessee takes action to clean up the polluted area to avoid any further damage or damage risk to the environment or people. The actual extent of the pollution clean-up will be dependent upon future expected use of the site and the existing zoning plan for the area which the site is a part of. As mentioned above, any industrial (commercial) activity may continue on the real estate if the pollution is below pollution class 3, and any spreading of the pollution is not likely as the pollution is secured in a proper way.

Our general impression is that the authorities are willing to discuss any proposals that are found reasonable, and suited to solve the existing situation in a satisfactory way, also with regard to the pollution clean-up costs.

187 REAL ESTATE

Prekestolen, or Pulpit Rock, is a famous tourist attraction in Forsand in Rogaland county. The steep cliff rises 604 metres above the waters of Lysefjord and the approximately 25 by 25 metre plateau at the top offers breathtaking views of the fjord.

Securities and stock exchange law

REGULATION OF THE NORWEGIAN SECURITIES MARKETThe Norwegian securities market falls under the scope of the EEA agreement and is accordingly heavily influenced by EU law. The main regulations are the Norwegian Secu-rities Trading Act of 29 June 2007 no. 75 (the “NSTA”), the Norwegian Securities Trading Regulations of 29 June 2007 no. 876 (the “NSTR”), the Norwegian Stock Exchange Act of 29 June 2007 no. 74 and the Norwegian Stock Exchange Regulations of 29 June 2007 no. 875. The above acts and regulations implements relevant EU directives for capital markets, inter alia the EU Markets in Financial Instruments Directive (2004/39/EC) (“MiFID”), the EU Prospectus Directive (2003/71/EC) as amended by directive 2010/73/EU (the “Prospectus Directive”), the EU Transparency Directive (2004/109/EC) (the “Transparency Directive”), the EU Markets Abuse Directive (2003/6/EC) (“MAD”), the EU Take-over Directive (2004/25/EC) (the “Take-over Directive”), the EU Short Selling Regulation (236/2012) (the “Short Selling Regulation”).

The EU is currently revising a number of directives and regulations with relevance for the capital market, inter alia the second Markets in Financial Instruments Directive, the Market Abuse Regulation and the revised EU Transparency and Prospectus Directives. These revisions will necessitate material amendments to Norwegian securities legislation over the years to come. The Norwegian legislative work is already in progress, and imple-mentation of a number of changes is expected during 2017 and 2018.

MARKET PLACES FOR TRADING SHARES IN NORWAYNorway has two regulated market places for trading shares, namely Oslo Stock Exchange and Oslo Axess.

Oslo Stock Exchange is a fully regulated stock exchange in accordance with relevant EU regulations while Oslo Axess is licensed as a regulated market place. Both market places are owned and operated by Oslo Børs ASA. Oslo Axess targets small-and medium sized companies as well as start-up companies, while Oslo Stock Exchange targets larger companies with a larger shareholder base and at least three years’ of operating history. Provided that the quantitative and qualitative listing requirements are fulfilled, a compa-ny may however choose which platform to list on. Both market places have access to the same trading platform and market surveillance and are generally deemed equal in terms of quality.

In addition to Oslo Stock Exchange and Oslo Axess, Oslo Børs ASA also owns and operates Merkur Market which is a multilateral trading facility targeting small and medium-sized enterprises. Merkur Market is not a “regulated market” in accordance

190 SECURITIES AND STO CK EXCHANGE L AW

with relevant EU regulation, but is considered semi-regulated due to the listing rules and continuing obligations applicable to the market place which to a large extent corresponds to the rules applicable to companies listed on Oslo Stock Exchange and Oslo Axess. Below you will find a brief outline of the main quantitative and qualitative requirements for listing on the different market places:

LISTING REQUIREMENTOSLO

STOCK EXCHANGEOSLO AXESS MERKUR MARKET

Public company under local law

Yes Yes No7

Validly and legally incorporated

Yes Yes Yes

Market value NOK 300 million NOK 8 million No minimum requirement

12 months liquidity Yes Yes No8

Annual accounts and half-yearly accounts

3 years 1 half yearly account No

Operating history 3 years No No

Eligible management Yes Yes Yes

Eligible board Yes Yes Yes

Independent directors At least 2 At least 2 No

Audit Committee9 Yes Yes No

Spread of share ownership 25% 25% 15%

Number of shareholders 500 100 30

Free transferability of shares

Yes Yes Yes

Minimum market value per share

NOK 10 NOK 1 NOK 1

Registration with a CSD10 Yes Yes Yes

7 Private limited companies may be admitted to listing8 If not satisfied, the company must demonstrate the shortfall and the plan to remedy9 Certain exemptions apply10 Central Securities Depository

In addition to the above marketplaces which are operated by Oslo Børs ASA, the Norwegian Securities Dealers Association operates the N-OTC which is an unregulated information system for unlisted shares providing over-the-counter trading. The N-OTC has more lenient requirements and a quicker admission process than the regulated market places.


TRADING, AND MARKET SURVEILLANCETrading of securities on Oslo Stock Exchange, Oslo Axess and Merkur Market is carried out in an electronic trading system. Official trading takes place between 09:00 CET and 16:20 CET each trading day, with a pre-trade period between 08:15 CET and 09:00 CET, a closing auction between 16:20 CET and 16:25 CET and a post-trade period from 16:25 CET to 16:30 CET. The settlement period for trading in Norway is two trading days (T+2).

The Oslo Stock Exchange monitors all market activity on a continuous basis in accord-ance with legal requirements in Norway. Market surveillance systems are largely auto-mated, promptly warning department personnel of abnormal market developments.

CONTINUED OBLIGATIONS FOR LISTED COMPANIESListed companies are subject to continuing and periodic disclosure obligations in accordance with the NSTA and in the continuing obligations established for the relevant market place.

In accordance with the NSTA, listed companies must promptly release any inside information (i.e., precise information about financial instruments, the issuer thereof, or other matters that are likely to have a significant effect on the price of the relevant financial instruments or related financial instruments, and that are not publicly available or commonly known in the market). A company may, however, delay the release of such information in order not to prejudice its legitimate interests, provided that it is able to ensure the confidentiality of the information and that the delayed release would not be likely to mislead the public.

Companies are also required to publish annual and half-yearly financial reports within certain deadlines, and are required to prepare such financial statements in accordance with IFRS/IAS or IFRS equivalents. Companies listed on Merkur Market may instead choose to prepare the financial accounts in accordance with Norwegian GAAP or certain other local GAAPs approved by Oslo Stock Exchange.

In addition to the disclosure obligations described above, listed companies are also required to publish certain corporate actions on a continuing basis, such as inter alia changes to the Board of Directors, change of CEO, proposal for issuance of loans, proposal for amendments to the articles of association and changes to the share capital etc. The specific disclosure obligations are set out in the continuing obligations for the relevant market place.


THE VPS AND TRANSFER OF SHARESThe VPS is the Norwegian paperless centralized securities register. It is a computerized bookkeeping system in which the ownership of, and all transactions relating to, Norwegian listed shares must be recorded. No physical share certificates are, or may be, issued. The VPS also provides for registration of depositary receipts representing the beneficial interest in shares issued by non-Norwegian companies.

The VPS must provide information to the Norwegian Financial Supervisory Authority (the “Norwegian FSA”) on an on-going basis, as well as any information that the Norwegian FSA requests. Further, Norwegian tax authorities may require certain information from the VPS regarding any individual’s holdings of securities, including information about dividends and interest payments.

Under Norwegian law, shares are registered in the name of the beneficial owner of the shares. As a general rule, there are no arrangements for nominee registration, and Norwegian shareholders are not allowed to register their shares in a Norwegian comp-any in the VPS through a nominee. However, foreign shareholders and shareholders in non-Norwegian companies registered in the VPS may register their shares in the VPS in the name of a nominee (bank or other nominee) approved by the Norwegian FSA.

LICENSING REQUIREMENTSInvestment services in Norway may only be provided by Norwegian investment firms holding a license under the Norwegian Securities Trading Act, branches of investment firms from a member state of the European Economic Area (the “EEA”), or investment firms from outside the EEA that have been licensed to operate in Norway. Investment firms in an EEA member state may also provide cross-border investment services into Norway.

The Oslo Stock Exchange monitors all market activity on a continuous basis in accordance with legal requirements in Norway.


EXCHANGE CONTROLSThere are currently no foreign exchange control restrictions in Norway that would potentially restrict the payment of dividends to a shareholder outside Norway, and there are currently no restrictions that would affect the right of shareholders of a Norwegian company who are not residents in Norway to dispose of their shares and receive the proceeds from a disposal outside Norway. There is no maximum transferable amount either to or from Norway, although transferring banks are required to submit reports on foreign currency exchange transactions into and out of Norway into a central data regis-ter maintained by the Norwegian customs and excise authorities. The Norwegian police, tax authorities, customs and excise authorities, the National Insurance Administration and the Norwegian FSA have electronic access to the data in this register.

INSIDER TRADING AND DISCLOSURE OBLIGATIONSPursuant to the Norwegian Securities Trading Act, subscription for, purchase, sale or ex-change of financial instruments that are listed, or subject to the application for listing, on a Norwegian regulated market, or incitement to such dispositions, for own or third party account, must not be undertaken by anyone who has inside information, as defined in section 3-2 of the NSTA. The same applies to the entry into, purchase, sale or exchange of options or futures/forward contracts or equivalent rights whose value is connected to such financial instruments or incitement to such dispositions. Persons in possession of inside information are furthermore prohibited from giving advice regarding financial instruments to which the inside information relates.

Pursuant to the NSTA, a person, entity or group acting in concert that acquires or disposes shares or rights to shares (i.e. convertible loans, subscription rights, options for shares or other similar rights to shares) which results in beneficial ownership, directly or indirectly, in the aggregate, reaching or exceeding or falling below the respective thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 and 90% of the share capital or a corresponding portion of the votes in a company whose shares are quoted on Oslo Stock Exchange or Oslo Axess is obligated to notify Oslo Stock Exchange and the company (issuer) immediately. Notifications that have been published are available at www.newsweb.no.

Certain voting rights are counted on equal basis as shares and rights to shares, for in-stance proxies without limitation. A change in ownership level due to other circumstanc-es (i.e. other than acquisition or disposal) may also trigger the notification obligations when the said thresholds are passed, e.g. changes in the company’s share capital.


http://www.newsweb.no

There are additional disclosure obligations for certain permanent insiders in the Com-pany (so-called “primary insiders”). This relates to inter alia members of the executive management, members of the Board of Directors and certain other functions. This additional disclosure obligation implies that such primary insiders must disclose to the market all trades made in the issuer, including trades made by the related parties of such primary insider, regardless of number of shares held.

The disclosure obligations are subject to the supervision and sanctioning by the Norwegian FSA.

TAKE-OVER REGIME AND COMPULSORY ACQUISITIONPursuant to the Securities Trading Act, any person, entity or group acting in concert that acquires shares representing more than 1/3 (with a repeated trigger at 40% and at 50%) of the voting rights of a Norwegian company whose shares are listed on Oslo Stock Ex-change or Oslo Axess are obliged to make an unconditional general offer to acquire the remaining shares in the company within four weeks or, within the same period, dispose of a number of voting shares which brings the percentage of voting rights down to or below 1/3. The take-over regime does not apply with respect to shares listed on Merkur Market.

An offer is subject to the prior approval by Oslo Stock Exchange. The offer price per share must be at least as high as the highest price paid or agreed to be paid by the offeror in the six-month period prior to the date when the threshold was exceeded, but at least equal to the market price if it is clear that the market price was higher when the manda-tory offer obligation was triggered. A mandatory offer must be unconditional and must contain a cash-alternative. Until an offer has been made or a disposal completed, the shareholder will have no voting rights or other rights relating to the shares exceeding the offer threshold apart from the right to receive dividends and pre-emption rights in the event of a share capital increase.

A shareholder may, in connection with a planned take-over elect to structure the transaction as a voluntary take-over in accordance with the NSTA. A shareholder is required to structure the offer in accordance with the rules for voluntary offer if the offer, if accepted by all the shareholders which can accept the offer, would bring the shareholder above the mandatory offer threshold. The rules for voluntary offers are similar, however somewhat more lenient than the mandatory offer rules. For instance there is no requirement that the offer comprise a cash alternative and the offer may be conditional.


Pursuant to the Norwegian Public Limited Companies Act and the NSTA, a shareholder who, directly or indirectly, acquires shares representing 90% or more of the total number of issued shares in a Norwegian public limited liability company, as well as 90% or more of the total voting rights, has a right, and each remaining minority shareholder of the company has a right to require such majority shareholder, to effect a compulsory acqui-sition for cash of the shares not already owned by such majority shareholder. Through such compulsory acquisition the majority shareholder becomes the owner of the remain-ing shares with immediate effect.


The Barcode buildings are a part of Oslo’s new architectural profile and a distinctive addition to the modern urban cityscape.

Competition law

GENERAL INTRODUCTION TO THE EEA AGREEMENTEver since its establishment on 1 January 1994, the European Economic Area (EEA) has united the EU Member States and the three EFTA States Iceland, Liechtenstein and Norway. The overall objective is to create a homogenous European Economic Area by strengthening trade and economic relations between the contracting parties. By enabling Norway to participate fully in the Internal Market, the EEA Agreement is the corner-stone of Norway’s relations to the EU.

The EEA Agreement guarantees the EU Internal Market’s “four freedoms”, i.e. the free movement of goods, workers, capital, and freedom of establishment and to provide ser-vices within the EEA. However, the EEA Agreement does not cover the EU policies on agriculture and fisheries, customs, foreign and security matters, justice and home affairs or the Economic and Monetary Union.

An important consequence of the EEA is the influence of the EU on Norwegian legisla-tion. Approximately 30 % of the Norwegian legislation in total have been initiated by the EU or amended on EU initiatives, and Norway has implemented approximately 75 % of the EU legislation.

By enabling Norway to participate fully in the Internal Market, the EEA Agreement is the cornerstone of Norway’s relations to the EU.

199 C OMPETITION L AW

Oslo’s City Hall, Rådhuset, with its two distinctive square towers, is famous for hosting the Nobel Peace Prize ceremony. The site of the former shipyard nearby has been redeveloped into a lively area with shops, apartments and restaurants by the fjord.

NORWEGIAN COMPETITION RULES

OVERVIEW – HARMONIZATION WITH EU COMPETITION RULESThe Norwegian Competition Act, which entered into force on 1 May 2004, is to a large extent harmonized with the EU competition rules.

ANTI-COMPETITIVE BEHAVIOR – CARTEL PROHIBITIONSection 10 of the Act corresponds to Section 101 TFEU11 and 53 of the EEA Agreement, thus prohibiting agreements between competitors, decisions by associations of under-takings and concerted practices that have as their object or effect to prevent, restrict or distort competition (e.g. price and bid fixing, market sharing, retail price maintenance etc). The prohibition applies to both horizontal and vertical relations (non-compete clauses, exclusivity agreements etc.)

Section 10 (2) provides that agreements (or clauses) that infringe the prohibition in Section 10 (1) are wholly or partially void. This means that a court will not be able to order the parties to fulfil their contractual obligations if the provisions in question in-fringe Section 10. Moreover, fines up to 10 % of the company’s turnover may be imposed for infringements of the Competition Act. An agreement which falls within Section 10 (1) of the Competition Act is not necessarily automatically void. If the restrictive agreement produces sufficient net benefits (effectiveness), the agreement may be ex-empted under Section 10 (3) of the Act.

With respect to the scope of application of section 10, Norway has adopted regulations corresponding to the EU block exemptions (vertical agreements, motor vehicles, technology transfers etc.).

11 Treaty on the Functioning of the European Union

The Norwegian Competition Act, which entered into force on 1 May 2004, is to a large extent harmonized with the EU competition rules.


PROHIBITION ON ABUSE OF DOMINANT POSITIONThe Norwegian prohibition on abuse of dominant position, which is laid down in Sec-tion 11 of the Act, is harmonized with article 102 TFEU and 54 EEA. As under the EU rules, the undertaking(s) in question must (i) have a dominant position and (ii) in some way have abused its market position to the detriment of competition.

Although there have been a few investigations by the NCA into potential abuse of domi-nance cases, the Norwegian case law with respect to section 11 is quite limited. When the NCA in 2016 issued a statement of objections against Telenor, one of the largest mobile network providers in Norway, and thereby proposed a fine of NOK 906 million (approx. 100 MEUR) for violating section 11 of the Act, this was the first abuse of dominance case since 2007. On this background, EU case law and the Commission’s Guidance on the Commission’s enforcement priorities (art. 82) play important roles in the interpretation of the Norwegian provision.

SANCTIONS, LENIENCY AND COMPLIANCEA company that has breached the Competition Act may be sanctioned either by ad-ministrative penalties (up to 10 % of the company’s turnover) or by penalties and/or imprisonment.

Leniency may be granted to undertakings that assist the Competition Authority by revealing that it or others have infringed the prohibition of anti-competitive agreements in Section 10 of the Competition Act. To be granted full leniency, a company must be the first company involved in the infringement to, on its own initiative, provide the NCA with evidence, to cooperate with the NCA during the entire process, and cease any fur-ther involvement in the infringement or any other actions related to the case.

The NCA has the powers to carry out dawn raids if it has reasonable grounds to believe that the Act is violated. The NCA has wider power to enter premises, properties, transport vehicles, and other places where evidence may be found. In certain cases the NCA may also enter personal residences or vehicles to search for evidence. Evidence may be sealed, confiscated or copied. It is advised that companies operating in Norway establish internal guidelines and training programmes in order to meet a potential future issue of dawn raids. A compliance programme would consist of instructions for management, receptionists, IT, etc., in addition to an overview of do’s and don’ts in relation to the prohibitions against anti-competitive cooperation and abuse of dominance. Such programmes may serve to minimize risk for a breach of competition law and to train staff in a situation where police and competition authorities are entering the company’s premises.


MERGER CONTROL – LEGISLATION Mergers and acquisitions (concentrations) are subject to control under Chapter 4 of the Competition Act. A mandatory filing system applies to any ‘concentration’ between undertakings. The definition corresponds to the definition of concentration in the Merger Regulation and comprises mergers, acquisitions of control on a lasting basis, including the creation of a full-function joint venture (JV). The rules on JVs correspond to Article 3(4) of the EC Merger Regulation, and the Commission’s case law is relevant when assessing the criteria. The Norwegian Competition Authority (NCA) has also issued best practice guide-lines for merger control proceedings and guidelines on notifications of a concentration. Relevant legislation and guidelines are available in English on the NCA’s webpage.

Even though the Norwegian merger control system to a large extent is harmonized with the EU system, there are certain distinct features that should be noted.

THE FILING SYSTEM – NOTIFICATION THRESHOLDSConcentrations are subject to mandatory notification if the undertakings concerned have a combined annual turnover in Norway exceeding 1 billion Norwegian kroner (NOK) (approximately 110 MEUR) and at least two of the undertakings concerned each have an annual turnover in Norway exceeding 100 MNOK (approximately 11 MEUR). The filing system has ordinary (full) notifications as the standard requirement. However, provided that certain conditions are met, the parties may file a simplified notification. Full notifications are required to be drafted in Norwegian, however a simplified notifica-tion is permitted to be drafted also in English.

Mergers with an EU or EEA dimension are governed exclusively by EU or EEA merger control provisions, and are not subject to national merger control. A one-stop-shop approach applies under the EEA Agreement. Revenue originating from sales to Norway does not apply when calculating the EU thresholds with the Commission, due to the fact that Norway is not a member of the EU.

TRANSACTIONS BELOW THRESHOLDS AND MINORITY ACQUISITIONSThe NCA has the competence to intervene in transactions below the notification thresh-olds. The main reason behind this competence to require notifications and intervene in merger cases below thresholds is closely linked to the NCA’s priority to protect local/regional and niche markets.

A minority acquisition is not subject to mandatory notification, however the NCA shall under the same conditions as those for an acquisition of control, intervene against minority acquisitions if it finds that the acquisition will significantly impede effective


competition. On that background, the NCA has the competence to require notifications in concentrations where only a minority share is acquired within three months after the agreement is final. The NCA has ordered notification for minority acquisitions only on a very infrequently basis.

ACCESS TO FILESAll concentrations that are notified to the NCA will be published on the NCA website, with a brief description of the concentration, the undertakings concerned, and the affected markets. The right for third-party access to file is also wide, giving any third party access to a non-confidential version of the notification and its appendixes.

STANDSTILL OBLIGATIONA breach of the standstill obligation may be subject to administrative fines or criminal sanctions. The NCA actively enforces breaches of standstill obligations. The maximum administrative fine is 10 per cent of the worldwide annual turnover of the company.

PROCEDURE AND TIMETABLESOnce notified, certain procedures and timetables apply. The clock starts the day after a complete and final public version of the notification is received by the NCA. As a start-ing point, Phase 1 lasts for 25 working days from the time of notification. If the NCA can show that there are ‘reasonable grounds to believe’ that the transaction would create, strengthen or significantly impede competition, the case enters into phase 2 which may last for a total of 80 working days from the time of notification. The parties may propose and negotiate all kinds of remedies, both structural and behavioural, with the NCA. It is possible to propose remedies at any stage of the regulatory process.

It is possible to notify a transaction before a final agreement has been reached between the parties, however it is important to note that all transactions that are notified will be publicly known (as stated above).

Further, it is common and also recommended to initiate a pre-notification process with the NCA for cases that are complex.


The seafront warehouses in Stavanger were built during the 19th century when there was a huge boom in herring fishing, and at one point consisted of 240 retail and store houses of all sizes. Despite the recent situation in the oil market, Stavanger is still the centre of Norway’s oil industry.

Public procurement

LEGISLATION AND EU HARMONIZATION As a member of the EEA Agreement, Norway has implemented the EU legislation on Public Procurement into Norwegian law. First of all, the legislation consists of the Public Procurement Act of 4 April 2016, which is general and sets the main principles of the public procurement rules, whereas the more detailed provisions are found in the public procurement regulations.

The Public Contracts Regulation of 2016 implements directive 2014/24/EU. This is the main regulation on public procurement under Norwegian law, and includes a compre-hensive set of rules on how to organise and carry out different types of tendering proce-dures. The Utilities Contracts Regulation of 2016 implements directive 2014/23/EU, stat-ing the legislation on public procurement within the utilities sector, including inter alia supply of water, energy and transport. As far as the EU Utilities Directive is concerned, Norway has received an exception for procurement within the field of oil and gas.

SCOPE OF THE PROCUREMENT LEGISLATIONThe main objective of the public procurement rules is to create wealth by ensuring the most effective use of public resources. This objective shall be achieved by following the main principle of competition in the awarding of contracts, together with equal treatment of tenderers, transparency, non-discrimination, integrity and good business practice in the entire process of a public procurement.

In conformity with the EC public procurement directives, the Norwegian legislation covers all types of public contracts, including contracts for supply of goods, service contracts and work contracts (building and civil engineering). There are however several exemptions for certain types of contracts, e.g. for service concession contracts, contracts for hire of land, etc.

TURNOVER THRESHOLDSEven more important however, is that there are different set of rules governing the con-tracts based on their value. The value of the contract/purchase in questions is decisive for which parts of the public procurement legislation that governs the contract and must be followed through the procurement process. As a main rule, the higher value of the contract, the more detailed rules applies to the tendering procedure prior to the award-ing of the contract. The Public Contracts Regulation is divided into three parts. Irre-spective of the value of the contract in question, all tendering procedures that are subject to the public procurement rules are governed by the Public Procurement Act and the Public Contracts Regulation part I.

207 PUBLIC PRO CUREMENT

There are two main threshold values under the Public Contracts Regulation that deter-mine which set of rules that apply to the contract in question; the national threshold at NOK 1.1 million and the EEA threshold at NOK 1.75 million. This implies that public contracts governed by this Regulation are subject to three different set of rules, depend-ing on their value. One may say that the rules are more formal for high value contracts than for low value contracts.

AWARD OF CONTRACTThe awarding of the contract may either be based on which tenderer that offers the lowest price, or the offer that is economically most advantageous.

The purchaser is obliged to inform the tenderers in advance of the criteria that will be taken into account in the evaluation of the different offers. Whereas the only criterion that may be considered in the first alternative is the price, the latter may involve several criteria like inter alia price, quality, and human resources available.

If the contract in question is of a value above the EEA threshold, the purchaser normally has to notify the tenderers of the weight to be given to each of the criteria, e.g. price 60%, quality 40%.

COMPLAINTS, INTERIM MEASURES AND DAMAGES ACTIONSPrior to the signing of the contract, the providers who have participated in the tendering procedure may file a complaint to the public purchaser about irregularities in the tendering procedure. The Regulation states that after all tenderers have been informed in writing by the purchaser of the decision to award the contract, there shall be a 10 days stand-still period where the purchasing authority may not sign the contract. During this period of time the participants may request access to documents, file a complaint or apply for an interim measure (injunction) before the courts. Only an interim measure will stop the purchasing authority from signing the contract when stand still period has expired.

After the signing of the contract there are no remedies available under the public pro-curement rules that allows for a change of the award of the contract or to stop or alter the tendering procedure. The contract will remain with the chosen provider, and the only remedy available for other potential providers that participated in the competition is to seek damages from the public purchaser. Thus, if a provider who has participated in the tendering procedure wants to use the remedies available to try and stop the purchaser from signing the contract with the provider initially awarded the contract, it is required to obtain an injunction. An application for injunction must be filed with the local District Court.

208 PUBLIC PRO CUREMENT

Nationaltheateret, Norway’s National Theatre building, opened in 1899 and was listed in 1983. The first theatre manager was Bjørn Bjørnson, son of the famous author and playwright Bjørnstjerne Bjørnson whose statue stands outside the theatre. The building has four stages, and the main stage with 741 seats is one of the most beautiful in the country. With its central location and splendid façade it has become a landmark building in Oslo.

Oil and gas

PETROLEUM LAW

REGULATORY BODIES AND STATE PARTICIPATION

The ultimate regulatory authoritative body governing the petroleum activities on the Norwegian Continental Shelf (“NCS”) is the Norwegian Parliament. Executive powers rest with the Government, which is responsible for carrying out petroleum policy and is accountable to the Norwegian Parliament. The Government is assisted in this role by the ministries and subordinate agencies.

The Nidarosdomen cathedral in Trondheim is the northernmost medieval cathedral in the world and famous for its West Wall. It is said to have been built over the grave

of Norway’s patron saint, Saint Olav, and still attracts pilgrims as well as tourists.

211 OIL AND GAS

The Ministry of Petroleum and Energy (“MPE”) is responsible for resource management and the petroleum sector as a whole. It is also responsible for managing the state’s own-ership interests in Statoil ASA, Gassco AS and Petoro AS, and also for the State’s Direct Financial Interest (“SDFI”) in the petroleum industry.

The Norwegian Petroleum Directorate (“NPD”) is a subordinate agency of the MPE. NPD plays a key role in petroleum management and is an important advisory body for the MPE. The NPD exercises administrative authority over petroleum exploration and production on the NCS, and has powers to adopt regulations and make decisions under the petroleum legislation.

The Petroleum Safety Authority (“PSA”) is the regulatory authority responsible for technical and operational safety and for the working environment (HSE). The PSA is subordinated to the Ministry of Labour and Social Affairs.

The Ministry of Finance has the overall responsibility for the taxation system for the petroleum sector. The Ministry of Finance is also responsible for management of the Government Pension Fund Global. Operative responsibility has been delegated to Norges Bank (the Norwegian central bank). The Petroleum Tax Office is part of the Norwegian Tax Administration, which is subordinate to the Ministry of Finance. The main function of the Petroleum Tax Office is to ensure correct assessment and collection of the taxes laid down by the political authorities.

The Ministry of Transport and Communications is responsible for preparedness and response to acute pollution in Norwegian waters. The Norwegian Coastal Adminis-tration is one of its subordinate agencies and is responsible for governmental oil spill preparedness and response. The Ministry of Climate and Environment has overall responsibility for environmental policy and environmental protection in Norway. The Norwegian Environment Agency is a subordinate agency of the Ministry, and has in-spection and enforcement responsibilities under the Pollution Control Act.

The Ministry of Trade, Industry and Fisheries is consulted as part of the procedures for awarding licences, to facilitate coexistence between the petroleum and fisheries industries.

The level of state participation in the Norwegian petroleum industry is high. The Norwegian State is the largest player on the NCS, by way of its 67% shareholding in Statoil ASA, and through the SDFI, whereby the State participates directly in various production licenses. The SDFI is managed by the State-owned company Petoro AS.

212 OIL AND GAS

THE CONCESSIONARY AND REGULATORY SYSTEM

FUNDAMENTAL REGULATORY PRINCIPLES

The overall objective of Norway’s petroleum policy has always been to provide a frame-work for the profitable production of oil and gas for the benefit of the Norwegian society as a whole from a long-term perspective. It has also been considered important to ensure that the largest possible share of the value creation accrues to the state to the benefit of the society as a whole. Oil and gas activities must take place within a sound health, safety and working environment framework, and environmental concerns are to be taken into account throughout the industry. Petroleum activities must also take place in coexistence with other industries. Another fundamental regulatory principle is that the profit shall be obtained by the companies based on their production of petroleum, and not through their ownership of infrastructure.

To ensure that value creation benefits Norwegian society to the greatest possible extent, the tax rate for oil and gas companies is 78 %. The petroleum taxation system is based on ordinary company taxation (currently 24%), but an additional special tax of 54 % is levied. One key consideration in designing the petroleum taxation system was to ensure that incentives for companies to make investments were maintained. Projects that are profitable for society should also be profitable for the oil companies. It is therefore the companies that are taxed, not the oil and gas fields. The companies are entitled to deduct all relevant costs from the tax basis. Deductions for investments (depreciation and an extra deduction from the special tax basis, called uplift), are designed to prevent the high tax rate from reducing the willingness of companies to invest on the Norwegian shelf. To ensure that companies are treated equally regardless of whether or not they are liable to pay tax, there is a system whereby companies can claim reimbursement of costs in the exploration phase as an alternative to deducting them from the tax base.

GENERAL LEGAL FRAMEWORK Section 1-1 of the 1996 Petroleum Activities Act (“PAA”) establishes that the Norwegian State has the proprietary right to subsea petroleum deposits. The PAA provides the legal framework for the concessionary system, whereby exploration and production licenses are awarded, and for all petroleum activities on the NCS. The legal basis for taxation of offshore petroleum activities is the 1975 Act Relating to Taxation of Subsea Petroleum Deposits.

213 OIL AND GAS

The legal framework for petroleum activities in Norway stipulates a comprehensive set of licenses, approvals, agreements and other mechanisms, to govern each phase of the petroleum activities (exploration, development, production and transportation of petroleum, and decommissioning).

In addition to the PAA and other applicable acts, the licensees are subject to a very comprehensive system of regulations and approvals. Notable examples include the Regulations to the Petroleum Activities Act, which mainly addresses resource manage-ment; and the HSE Regulations addressing health, safety and environmental aspects of the activities. The HSE Regulations are function-based and risk-based, leaving it up to the licensees to choose how to fulfill the requirements. This differs from the approach of HSE regulations in certain other jurisdictions, which often stipulate specific require-ments to be fulfilled by the various actors. The Norwegian system also implies a “see-to” duty on the licensees, meaning that the oil companies have a duty to see to it that all of its contractors and subcontractors comply with applicable regulations. The non-opera-tors (licensees) also have a see-to duty towards the operator.

THE PRODUCTION LICENSE AND THE EXPLORATION LICENCE The production license entails an exclusive right to exploration, exploration drilling and production of petroleum deposits in areas covered by the license. The production license is awarded to a joint venture, which is constituted by licensees having a participating interest in the production license. The licensee becomes the owner of the petroleum which is produced.

Upon award of a production license, one of the licensees is appointed as the operator by the MPE. The operator is responsible for the daily operations of the parties’ joint activities pursuant to the production license. If the licensees make a discovery and wish to continue work under the production licence after they have fulfilled their work obligation, they are entitled to an extension period for the production licence. The duration of the extension period is determined by the MPE when the production licence is awarded, and is in most cases 30 years.

The production license governs the licensees’ rights and obligations towards the Norwegian State. The license is awarded for a fixed period within which a specified work obligation must be fulfilled (the so-called “initial period” up to ten years).

The award of production licenses is normally made through numbered licensing rounds which are announced by the MPE. Currently, the invitation to the 24th round has been

214 OIL AND GAS

published. In addition, all unlicensed acreage in the mature areas is open for application in annual award procedures (“Awards in Predefined Areas” – “APA”).

Companies may apply for license awards individually or together as a group. To be eligible for license award, the company must be pre-qualified as a licensee. In order to be pre-qualified as a licensee, the company must fulfil certain criteria regarding in particular technical qualifications, organisational requirements and financial strength. Pre-qualification is a de-facto requirement for all newcomers on the NCS.

The MPE may at any stage require that the licensee provides security for its potential liabilities and obligations towards the State. Often, the MPE requires that the parent company of the licensee provides a parent company guarantee. It is also a statutory requirement that licensees take out insurance to cover potential liabilities.

Companies can also apply for an exploration license, for the purpose of performing geological and other surveys (excluding drilling) in a certain area; however, this license does not give any exclusive rights in the relevant area, and is usually applied for prior to applying for a production license.

JOINT OPERATING AGREEMENT AND ACCOUNTING AGREEMENTOne of the conditions for the award of a production license is that the licensees enter into a Joint Operating Agreement (the “JOA”) in a standard format prepared by the MPE. The JOA governs the relationship between the licensees, and forms the basis for day-to-day management of the activities, allocation of costs, decision making processes, etc. Appurtenant to the JOA, the licensees must also conclude an Accounting Agree-ment (“AA”) with detailed provisions regarding accounting and financial aspects of the partnership.

The production license is awarded to a joint venture, which is constituted by licensees having a participating interest in the production license.

215 OIL AND GAS

The 17 metre tall Monolith is perhaps the most famous of Gustav Vigeland’s sculptures, taking pride of place among the more than 200 bronze, granite and wrought iron works in the Vigeland sculpture park at Frogner in Oslo. The site, built mainly between 1939-49, is the world’s largest sculpture park made by a single artist and one of Norway’s most popular tourist attractions.

THE VARIOUS PHASES OF THE PETROLEUM ACTIVITIES

THE EXPLORATION PHASEAs mentioned, a production license grants the licensees the right to exploration drilling. The operator obtains consent from the PSA prior to the commencement of the drilling operations. The operator must submit detailed information with regard to both technical and environmental aspects of the planned operation. Comprehensive HSE procedures must be in place, including the establishment of emergency preparedness procedures. Permits to discharge pollutants to sea and air must also be obtained from the Norwegian Climate and Pollution Agency, if relevant.

THE DEVELOPMENT PHASEIn order to develop a petroleum discovery, the licensees of a production license must submit a plan for development and operation (“PDO”) to the authorities. The PDO sets out i.a. the development solution, estimated development costs and a production profile for the deposit. The PDO must be approved by the MPE, and shall also be submitted to the Parliament for its approval if the estimated investment exceeds NOK 10 billion. According to the provisions of the JOA, a licensee can choose not to participate in the development. If a licensee does not accede to a PDO which has been decided by the ma-jority, the other licensees may carry out the project on their own. The non-participating licensee retains its rights in the license acreage outside the part which is comprised by the PDO.

In order to construct and operate facilities and pipelines for the processing and transpor-tation of petroleum, a plan for installation and operation (“PIO”) must be submitted to the MPE for approval.

The operator must submit detailed information with regard to both technical and environmental aspects of the planned operation.

217 OIL AND GAS

THE PRODUCTION PHASEBased on the PDO, the NPD issues annual production permits which allow the licensees to produce defined volumes of petroleum, considering i.a. proper resource management. The main principle for the NPD is to ensure maximum depletion of petroleum from the reservoirs.

THE DECOMMISSIONING PHASEWhen an oil field approaches the end of production, the licensees are required to submit to the MPE a plan for decommissioning and cessation of the petroleum activities. The MPE then decides, based on the plan, on the disposal of the facilities. The licensees are liable for the decommissioning costs, which are tax deductible.

THIRD PARTY ACCESSBy way of government regulation, owners of transportation and/or processing facilities are under obligation to give access to third parties for the use of such facilities. Third Party Access is highly regulated by PAA, different Regulations (in particular by the Regulations relating to the use of facilities by others and Regulations relating to the stipulation of tariffs etc. for certain facilities), as well as by model tie-in agreements. If no agreement on third party access is reached by the relevant production licenses (host and user groups, respectively), the MPE can impose a solution on the parties, including the commercial terms for third party use, such as tariffs.

Gassled JV is the joint venture being the owner of the Norwegian offshore gas trans-portation infrastructure (known as Gassled). Standard provisions apply for the access to the Gassled. Such access may be limited by capacity restraints, and existing users and Gassled owners have priority over new users. The operator of Gassled is Gassco AS, a 100% state owned company. Gassco AS exercises its operator duties pursuant to provi-sions of the Petroleum Act and in accordance with an operator agreement with Gassled.

ASSIGNMENT OF A PARTICIPATING INTEREST OR SHARE INTEREST IN COMPANIES HOLDING A PARTICIPATING INTERESTAssignment of a participating interest in a production license is subject to approval by the MPE, and also to a tax clearance by the Ministry of Finance. The Ministry of Finance applies a principle of tax neutrality, which as a main rule means that the seller’s gain from the sale shall not be taxable, and the purchaser’s costs in acquiring the interest shall not be deductible. When considering whether or not approval shall be granted, the MPE will carry out considerations like the considerations carried out under a license applica-tion (i.e. organisational requirements, technical and financial capability).

218 OIL AND GAS

Transfer of controlling share interests in companies being licensees is also subject to approval from the MPE and the Ministry of Finance. In practice, the MPE has distinguished between various levels of control: Negative control (generally, over 33,3 %), positive control (generally, over 50 %), full control (generally, over 66,7 %) and full ownership (will generally apply at 90 % as this triggers a squeeze-out right for the shareholder over the remaining shares). The requirement for approval by the MPE arises if a shareholder/an investor by the acquisition of share interest obtains a higher level of control.

It should be noted that the assignor will remain secondary liable towards the remaining licensees for the decommissioning costs. This requirement was introduced in 2009 as a result of many smaller and financially less capable players having entered the NCS over the last ten years. In our experience, this rule has in practice affected the market for license share transactions, as assignors will regularly demand additional security from the assignee in order to be held harmless for such potential secondary liability. The pro-vision of such security can prove costly for many smaller players.

If a petroleum deposit extends over more than one production license, the affected production licenses must enter into an unitisation agreement which governs the licensees’ rights in the discovery (the “joint deposit”). A standard Unit Agreement (replaces the JOA) must be entered into by the unit owners, i.e. the licensees of the relevant production licensees comprising the unit area. The unit owner’s rights are divided in accordance with the physical distribution of the deposit between the pro-duction licenses. This distribution may be subject to later redeterminations, which will affect the parties’ participating interests in the joint deposit.

PETROLEUM TAXFor companies engaged in oil and gas operations on the Norwegian Continental Shelf, there are two partially overlapping income tax regimes: ordinary income tax imposed by the general rules in the Norwegian General Tax Act 1999 (the GTA) and the special petroleum tax on income imposed by the Petroleum Tax Act of 1975 (the PTA). As a result, the total marginal income tax rate for companies engaged in E&P activities on the NCS is 78 per cent, consisting of a 24 per cent general income tax and a 54 per cent special petroleum tax to the State. The 78 per cent tax is assessed on the income of a company engaged in exploitation, treatment or transportation of petroleum, see the PTA s.5. The petroleum tax applies on a corporation net profit level, not on a ring-fenced basis. Although different licenses on the NCS are not ring-fenced, the company as such

219 OIL AND GAS

is ringfenced. Losses generated by other activities may not be set off against assessed income for special tax (54 per cent) purposes and there are limitations on the right to set of other losses against the general tax (24 per cent) basis.

Taxable income is computed according to the general tax legislation and particular rules set out in the PTA. Gross income generated by oil sales is assessed according to a norm price system, whereby the sales prices are fixed by an administrative body with the ob-jective of arriving at fair market prices. Income generated by gas sales is, as a main rule, assessed on actual sales prices.

Although certain important deductible expenses are dealt with in the PTA, the deducti-bility of expenses is based on the general rules in the GTA. The timing of deductions for tax purposes generally follows the realisation principle, i.e. when the expense is uncondi-tionally incurred by the taxpayer. Provisions in the accounts based on prudent account-ing principles are generally not deductible for tax purposes (for example reserves built up for removal of offshore installations).

Depreciations are allowed for tax purposes under a declining balance system. For petro-leum tax purposes depreciations of production installations are deductible with 16 2/3 per cent annually from the year in which the investments take place, i.e. a linear depreci-ation over 6 years. In addition the basis for 54 per cent special tax shall be reduced with (Norw, friinntekt) calculated of the same base as depreciation, at 5.4 per cent annually for four years, aggregated 21.6 per cent.

220 OIL AND GAS

Norwegian nature is big, beautiful and diverse. Just look at the masses of ice at Svartisen near Meløy. Here the ice offers a spectrum of colours from see-through and crystal clear ice to white, turquoise, and pale and deep shades of blue.

CONTRIBUTORSDoing Business in Norway is the result of a team work involving a number of the Lawyers in ARNTZEN de BESCHE Advokatfirma AS. We thank each of those who have contributed by writing:

• Fredrik Alver

• Silje Andreassen

• Espen I. Bakken

• Frida May Behrens

• Per Ragnar Bronken

• Hege Dahl

• Cecilie Dyrnes

• Ida Espolin Johnson

• Erlend Haaskjold

• Maria Heiberg Løvik

• Anders Heieren

• Magnus Høegh Krohn Viddal

• Erling Høyte

• Bente Langsrud

• Ingrid Lund

• Even Næstvold

• Ingvild Ombudstvedt

• Pål A. Reinertsen

• Marianne Sahl Sveen

• Espen Sandvik

• Eyvind Sandvik

• Thea Susanne Skaug

• Gard A. Skogstrøm

• Stein Ove Solberg

• Bjørn Sørgård

• Rune Tjomsås Andersen

• Steinar Eskild Trovåg

• Marius Tryland

• Synnøve Vedde-Fjærestad

• Emilie Veggeland Knudsen

• Snorre Waage Sand

• Jenny Walderhaug Jensen


Doing Business in Norway is an easy-to-follow guide to the Norwegian legal system for companies and their advisers operating or planning to operate in Norway.

Comprehensive topic indexing provides ready access to the text and makes the publication a practical tool for companies and individuals which have just recently started business in Norway and those considering doing so.

doing business in norway - arntzen de besche advokatfirma assvartisen is norway’s second largest...

Documents