I INTRODUCTION TO CLASS ACTIONS FRAMEWORK
The Norwegian system of civil justice was overhauled at the beginning of this century and a new Civil Procedure Act was adopted in 17 June 2005 and entered into force 1 January 2008.2 The overall aim of the reform was to ensure fair justice with greater efficiency (faster and cheaper).
As part of the reform, class actions were introduced in the Civil Procedure Act. The introduction was made with a particular view on promoting access to justice in cases involving small claims and to obtain more efficient and effective justice in such cases. The American and in particular the Swedish rules served as inspiration for the specific chapter in the Civil Procedure Act devoted to class actions (Chapter 35). In addition to specific rules applicable to class actions the Civil Procedure Act also allows, to a rather large extent, joinder of parties in ordinary proceedings, provided that certain conditions are fulfilled.
The enactment of the class action rules was preceded by considerable debate in Norway. Simply put, advocates for consumer interest saw class action as a vital and important instrument to ensure justice, while advocates for business interest warned against adopting class action rules and feared ‘ill-founded blackmailing' lawsuits. However, the rules were adopted unanimously by the Norwegian parliament.
The Civil Procedure Act includes the possibility for both opt-in and opt-out class actions. According to the preparatory works, the main rule for class action shall be deemed to be opt-in. Which of the two procedures that is most suitable for a specific class action is ultimately left to the court to decide.
Class actions may be brought either by a claimant meeting the conditions for becoming a group member provided that the action is approved or representative or public bodies, provided that the action falls within their purpose and natural sphere of activity (e.g., the Consumer Council).
Class actions are heard before the ordinary courts (i.e., there are no specialised courts for class actions). Norway has a court system with three tiers. In civil cases the court is composed by one legal judge in the Court of First Instance, three legal judges in the Court of Appeal and five legal judges in the Supreme Court. In the Court of First Instance and in the Court of Appeal the court may, in an individual case, be strengthened by two technical expert judges. There is no jury in civil cases in Norway.
Class actions have been brought on different areas involving different areas of law (pension law, tax law, consumer law etc.). However, class actions typically involve some kind of monetary claim (i.e., the class is seeking to obtain damages, repayment or similar from the defendant).
II THE YEAR IN REVIEW
In the early years following the entry into force of the class action rules there was some uncertainty whether class action would play any significant role in Norway. Furthermore, for some cases that were brought as class actions in this early phase there seemed to have been no point in applying the class actions rules (e.g., the number of claimants was very small and all the (potential) claimants were known at the time the class action was instigated).
The development during the past years seems, however, to imply that the legal environment has matured. A number of class actions have been brought, or discussed, in cases where there may be a real benefit from applying the class action rules (see below).
In 2013, three unions brought a class action against several oil and offshore companies alleging that a certain night-time tariff that was paid to employees should also be included in the basis for the employee's pensions arrangements. The class action was approved as an opt-out action and had approximately 7,000 members. The class did not succeed in its action.
In 2016, the Home Owners Association instigated a class against the municipality of Oslo alleging that property tax, which was introduced following the municipal election in 2015, is invalid, and that illegally recovered property taxes should be repaid. Some 2000 citizens in Oslo have so far joined the class actions, which is handled as an opt-in class action. The case will be heard before the District Court in April 2017.
In 2016, the Norwegian Consumer Council instigated a class action against DNB, the largest Norwegian bank alleging that some 180,000 customers have lost a total of approximately 700 million kroner by paying excessive fees for management of their savings. The average claim per customer is somewhat below 4,000 kroner. The class action, which has been brought as an opt-out action, was approved as a class action by the District Court in January 2017, but DNB has appealed the case to the Court of Appeal and argued that the action should not be approved as a class action. The case is still pending before the Court of Appeal.
In 2016-2017, there has been a debate about whether to instigate another class action against the municipality of Oslo claiming repayment of refuse collection charges. Almost all households in Oslo have experienced garbage not being collected after the company running the refuse collection on behalf of the municipality of Oslo had severe problems. A claim for repayment of refuse collection charges would probably not constitute any large amount for the individual household (around 100 kroner each) but multiplied by the number of households (over 300,000) the total claim may be significant.
Section 35-1(2) of the Civil Procedure Act defines class action as an ‘action that is brought by or directed against a class on an identical or substantially similar factual and legal basis, and which is approved by the court as a class action'. The characteristic feature of a class action, as opposed to an ordinary action with several plaintiffs, is that it is the class (group) as such that is party to the litigation.
i Types of action available
The Civil Procedure Act recognises two different forms of class actions:
- a Opt-in: anyone who falls within the scope of the class as defined by the court in its approval of the class action is entitled to be registered as a member within the time limit set by the court.
- b Opt-out: anyone who falls within the scope of the class as defined by the court in its approval of the class action is automatically a member of the group (and will be bound by a subsequent ruling) unless he or she withdraws from the class.
In order for a class action to be approved under the opt-out alternative, the claims or obligations must be of such a minor value individually that they would not justify a separate legal action and it must be assumed that the claims or obligations will not raise issues that need to be heard individually.
The class action rules have been prepared with a class comprising of claimants in mind. However, pursuant to Section 35-15 the class action rules in Chapter 35 apply mutatis mutandis to class actions whether the class is defendant, except that class membership without registration (i.e., opt-out, for natural reasons) is excluded. Applying the class action rules in a case where the class is defendant will give basis for a series of question, and it is ‘questionable whether such actions will be of any practical use since defendant members are entirely free not to register as members and will then not be bound by a judgment'.3 So far there have been no class actions where the class is the defendant.
In addition to class actions the Civil Procedure Act also allow for joinder of parties in ordinary proceedings. An action may be brought by several plaintiffs (or against several defendants), for instance, when the factual and legal basis for the claims is the same or substantially similar, provided that all claims fall under Norwegian jurisdiction and the court is the correct venue for one of the claims, and the claims can be heard by a court with the same composition and pursuant to the same procedural rules. There are no formal limits as to how many parties that may participate in such a lawsuit and there are many examples in case law with several hundred parties. Several parties on the same side in a legal action shall be regarded as independent parties in relation to the opposite party.
Another option under the Civil Procedure Act is consolidation of actions (cases), which means that two or more actions raising similar issues are joined to be heard in one hearing or be adjudicated jointly.
ii Commencing proceedings
A class action may be instituted by anyone who fulfils the conditions for class membership if approval to bring the action is granted. For example, in a case against a bank concerning the legitimacy of an increase in borrowing rates, action may be brought by any bank customer being affected by the increase. Furthermore, a class action may also be brought by an association, trust or public body if the action falls within the scope of their purpose and field of activity. As this alternative indicates, there is no requirement that the organisation has its own claim similar to that of potential class members in order to initiate a class action lawsuit. This alternative will, inter alia, allow the Consumers' Council to bring class actions on behalf of consumers.
The class action shall be brought by submission of a writ of summons to the court. The writ of summons shall contain information necessary for the court to assess whether the conditions for a class action are fulfilled. In the writ of summons it shall also be stated whether the class action is sought to be brought as an opt-in or opt-out action.
Pursuant to Section 35-4 of the Civil Procedure Act the court must approve that the action is brought as a class action. In order for a class action to be approved the following conditions, set out in Section 35-2, must be met:
- a several persons have claims or obligations whose factual or legal basis is identical or substantially similar;
- c the claims can be heard by a court with the same composition and in the main pursuant to the same procedural rules;
- e class procedure is the most appropriate way of dealing with the claims; and
- f it is possible to nominate a class representative.
There is no formal lower limit with respect to the number of members; the statutory requirement merely refers to ‘several persons', cf. letter a). In practice there have been some cases where the number of group members has been on the very low side. If the number of group members is low, this will have to impact the court's assessment of whether class procedure is the most appropriate way of handling the case, cf. letter c). A low number of (potential) group members will weigh against handling the case as a class action. However, at the same time it must be kept in mind that a feature of the class action institute is to ensure that the action is made public - so that potential group members are informed of the lawsuit. In some cases it may be significant uncertainty as to how many group members that exist. In such cases it may be argument in favour of class action that class action is the only way to get in touch with potential members or claimants.
In order for an action to be approved as class action, the members of the group must have ‘claims or obligations whose factual or legal basis is identical or substantially similar', cf. also letter a). This is often a matter of debate in actions that are being pursued as class actions and it is quite common that the defendant is arguing that the requirement is not met. When assessing whether this requirement is met the court cannot only apply the claimants' perspective but must also take into account possible ‘objections' from the defendant. The claimants may rightfully argue that the basis for their claim is very similar (e.g., they were all customers in the same bank, acquired share in the same share fund, got the same standard information, etc.). However, when looking at the objections from the defendant it may be that the requirement is not met after all, because it may be necessary to decide whether some of the customers have lost their rights due to statutory limitation, some of the customers were given specific information prior to entering into the agreement or whether there are other individual circumstances on the customers' side.
In general, however, the class action rules have been designed in a manner to cater for certain possible individual differences and to ensure that such differences will not be an obstacle for a class action. Pursuant to Section 35-10, the court may decide that the provisions on class actions shall not apply to the hearing of issues in the dispute that only relate to a limited number of class members, but that the class members themselves rather shall have control over the issues. The court may also decide to establish two or more subgroups if the class consists of a large number of class members and the same or substantially similar legal or factual issues apply to several of them but differ from the issues that apply to the class as a whole.
Pursuant to Section 35-2, there is also a requirement that ‘the claims can be heard by a court with the same composition and in the main pursuant to the same procedural rules', cf. letter b). This requirement will typically be fulfilled as long as the case concerns ordinary civil claims.
A class action may only be approved if the procedure is the most appropriate (i.e., ‘best' way of dealing with the claims, cf. letter c). This is a vague criterion and leaves the court faced with a petition for a class action with a margin of appreciation. Based on the preparatory works, the following elements should, however, be taken into account:
Finally, class action may only be approved if it is ‘possible to nominate a class representative', cf. letter d). Any person who fulfils the requirements to initiate a class action and who is willing may serve as class representative. However, it is left to the court to appoint the class representative. Pursuant to Section 35-9(3) the representative must be able to safeguard the interests of the class in a satisfactory manner and also be able to cover the class's potential liability for costs towards the other party.
Provided that the court approves the class action, the court shall also define the scope of claims to be covered by the class actions and thereby also the range of class membership. There is no limitation as to who that may be member of the group, in other words, both private individuals and corporations, nationals and foreigners may be members - depending on how the court has described the scope. However, only persons who could have brought or joined an ordinary legal action before the Norwegian courts may be class members. This may to a certain extent limit the possibility for foreigners to join a Norwegian class action. An example, taken from the preparatory works, will illustrate this: A Norwegian resident consumer having purchased tangible goods from a professional party. Germany will be able to instigate ordinary legal proceedings in Norway against the German trader.4 The Norwegian consumer will thus also be able to join a class action against the German trader. However, a consumer who is resident in Denmark and enters into an agreement with the same German trader will have to instigate litigation against the trader either in Denmark or in Germany; the Danish consumer will not be able to take legal action in Norway. Consequently, the Danish consumer will not be able to join a class action against the German trader in Norway.
If the class action is disallowed by the court as a class action, interested parties may bring individual actions that may be brought as a joint action if the conditions for joinder are fulfilled.
iii Procedural rules
Once a class action has been approved, the court shall ensure that those who may qualify for class membership are informed of the action by notification, public announcement or otherwise. The notice or announcement shall state what the class action and the class procedure implies, including the consequences of registering or withdrawing as a class member, the potential liability for costs that may be incurred and the authority of the class representative to settle the action. The notice shall further state the time limit for registering. The court shall decide the content of the notice and how notice shall be given, including whether the class representative shall take charge of issuing the notice or announcement and paying the expenses thereof.
The court's approval of the class action may later be amended or withdrawn if it becomes evident that it clearly is not suitable to continue the case as a class action or that the scope of claims covered by the class action ought to be adjusted. Parties who are then no longer included in the class action may, within one month after the ruling for reversal or amendment becomes final and enforceable, require the court to continue to hear their claims as individual actions.
Apart from the specific rules in Chapter 35 of the Civil Procedure Act, class actions are handled by the courts in the same manner as ordinary individual cases. Courts are inter alia obliged to keep an active dialogue with the parties during the preparatory stage of the proceedings.
As a main rule the main hearing in a civil case shall, unless there a special circumstances, take place within six months from the date of submission of the writ of summons to the court. This also applies for class actions. However, in class action cases it is rather common that the defendant contests that the criteria for bringing the action as a class action are met. This may lead to exchange of pleadings and in some cases also a separate hearing with respect to the approval issue. In case the class action is approved, the approval may also be appealed to the Court of Appeal. Thus, in many class actions it will not be possible to schedule the main hearing until later.5
The class shall be represented in court by a class representative nominated by the court when giving approval to hear the action. The representative shall keep the class members informed of the handling of the action. The representative is liable for costs awarded to the opposite party but can claim reimbursement from the class members individually if this was made a condition for registration as a class member. As a main rule the class is required to be legally represented by counsel, who shall be an advocate, in addition to the class representative.
iv Damages and costs
When the class actions rules were adopted it was emphasised that it was not the intention to make any changes to the substantive law (tort, contractual liability, etc.). This means that the same rules with respect to burden of proof, documentation for economic loss, etc. will apply in a class action, and damages will be awarded based on each member's individual loss. However, in a class action involving a significant number of members, a certain standardisation may in practice take place. Norwegian law does, to a very limited extent, recognise the concept of punitive damages.
With respect to costs for legal fees, etc., Norwegian law is based on the loser pays principle (i.e., the party being successful in a class action will be entitled to recover its cost from the losing party, provided that the court finds that the costs have been necessary to incur in view of the importance of the case). These rules also apply to class actions. For class actions, Section 35-13(1) also provides that the court shall determine the class representative's and the legal counsel's fees and coverage of expenses.
Class members in opt-in actions will be liable towards the class representative for costs imposed on the representative for remuneration and refund of disbursements insofar and to the extent that such liability is a condition for registration. On application from the person who has brought the class action or the class representative, the court may namely decide that registration shall be subject to the class members accepting liability for a specified maximum amount of costs. In cases where the class action is brought by a private individual or the class representative is a private individual this is typically done. In cases where the class representative is an organisation or similar, the organisation sometimes decides that it will cover all the costs itself.
Class members in opt-out actions will not have any liability towards the class representative (or towards the other party in the action for that matter) for costs.
Pursuant to the ethical guidelines from the Norwegian Bar Association, it is prohibited for a lawyer to agree a fee arrangement whereby the client's claim in whole or in part is acquired by the lawyer so that the lawyer's fee is dependent on the outcome of the case.
In the case of a class action, there is neither any direct public funding, nor any generally available private funding. In principle each member of the group must cover his or her share of the costs, unless he or she is eligible for legal aid. So far there have been no examples of third-party financing or similar arrangements.
Pursuant to Section 35-11(3), settlement in a class action pursuant to Section 35-7 (opt-out) requires the approval of the court. This requirement is a consequence of the claims or obligations having a low individual value and where it therefore cannot be expected that the group members will have any active role on the proceedings or as part of a settlement discussion. The requirement is also a consequence of the fact that the members of the class action may be completely unaware of the action. The court's approval has thus been seen as important in order to safeguard the members' interest.
The court's approval has two aspects. Firstly, the court must ensure that the process leading up to the settlement has been satisfactory (i.e., that the group members, to the extent possible and taking into account that it as an opt-out action, have been informed of the settlement). Secondly, the court must also ensure that the content of the settlement is satisfactory. With respect to the latter, very little guidance is provided in the preparatory works as to how the court shall exercise its control with the settlement. With reference to how similar provisions have been understood in Denmark and Sweden, it is probably correct to assume that the court should approve the settlement unless it is clearly unreasonable or discriminatory towards some group members. In general, the parties should have a wide margin of appreciation when it comes to agreeing on an amicable solution.
Court approval is not necessary for an opt-in action, but it is emphasised in the preparatory works that it is important that the group representative consults with the group members prior to any settlement.
In case of a settlement, both in case of opt-in and opt-out, the settlement will be binding for all that are members at the time the settlement is made.
IV CROSS-BORDER ISSUES
In general, it is difficult to see that there are any specific cross-border issues arising from class actions in Norway. As noted above there may, however, be some limitations for foreign residents to join a Norwegian class action. To the extent that a foreign resident will be able to join the class action the foreign member will be treated in the same manner as any national member.
Norway is not a member of the EU. However, Norway's cooperation with the EU through the EEA Agreement provides for the inclusion of EU legislation covering the four freedoms, as well as non-discrimination and rules of competition, into Norwegian law. Provisions equal to the EU antitrust rules (Articles 101 and 102 TFEU), prohibiting such as cartels or abuse of a dominant position in the market, are also found in the EEA Agreement Article 53 and 54 and are also implemented in secondary legislations. With respect to the competition area, where private enforcement and class actions have been subject to great interest, it should be mentioned that Directive 2014/104/EU has not yet been made part of the EEA Agreement. However, the Norwegian Ministry Trade, Industry and Fisheries in December 2015 launched a consultation setting out a proposal for possible amendments to Norwegian law if the directive is made part of the EEA Agreement. The inclusion of this directive has been somewhat controversial in the sense that the EEA EFTA states are of the opinion that that provisions on civil procedure are, in general, not EEA relevant and fall outside the scope of the EEA Agreement.6 In general, it remains to be seen to what extent any EU initiative on this area (e.g., if the current Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law is followed by a directive or a regulation) will impact Norwegian law.
V OUTLOOK AND CONCLUSIONS
The Norwegian rules concerning class actions are soon to ‘celebrate' their 10-year-anniversary. As previously noted, the application of the rules seems to have matured during these years and class actions are now a natural part of the Norwegian legal landscape and are being brought in cases where there is a real benefit to applying the rules.
At the same time it may seem as though the consumer side, strongly advocating class action rules, may have had expectations that were somewhat too high. On the other hand, the sceptics from the business organisations appear to have been too pessimistic. The scepticism from the business organisations seems to have continued into the court room, in the sense that private corporations facing class action, as a first line of defence, take the position that the requirements for class actions are not fulfilled. In some cases it is difficult to see why it is argued against the class action. A class action may to a certain extent be advantageous also for a defendant; it will be sufficient for the defendant to engage with the class representative (and not multiple counter parties) and the court has, through the appointment of the class representative, made sure that the representative has sufficient financial strength to cover the defendant's legal fees. Public bodies have taken a perhaps more pragmatic approach and not opposed the case being litigated as a class action.
1 Andreas Nordby is a partner at Arntzen de Besche.
2 An unofficial (and not necessarily updated) translation of the Civil Procedure Act into English may be found at the following page: http://app.uio.no/ub/ujur/oversatte-lover/data/lov-20050617-090-eng.pdf.
3 Inge Lorange Backer, ‘The Norwegian Reform of Civil Procedure', Scandinavian Studies in Law Volume 51, 2007, page 41-75 on page 61.
4 Also, Norwegian law recognises that consumers to a certain extent may take legal action against a professional party in the before the courts for the place where the consumer is domiciled, cf. also Article 16 of Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
5 Illustrative is perhaps the case against DNB, where the writ of summons was submitted 21 June 2016 and where the District Court approved the class action 6 January 2017. This approval has now been appealed to the Court of Appeal and it is hardly likely with a main hearing on the merits before some time during autumn 2017.
6 This is, for example, also the background for why Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, which also contains some procedurals rules, has not been made part of the EEA Agreement.