I INTRODUCTION TO THE 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 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 to promoting access to justice in cases involving small claims and to obtain more efficient and effective justice in such cases. The US 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. Such joinder of cases has a long tradition in Norway.
The enactment of the class action rules was preceded by considerable debate in Norway. Simply put, advocates for consumer interest saw the 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, opt-in class actions are deemed to be the general rule. Which of the two procedures 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 who meets 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 courts are composed of 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 in 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 compensation 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 actions 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 action 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).
Developments over the past few years, however, seem to suggest that the legal environment has matured. In some more recent cases, the courts have also taken a somewhat more sceptical approach to the class action institution and have emphasised that class actions should be reserved for typical class action situations and not cases where there may be a simple joinder of cases. At the same time, a number of class actions have been brought, or discussed, in cases where it was possible that there would 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 paid to employees should also be included when calculating the basis for employees' pension arrangements. The class action was challenged by the oil and offshore companies but was approved as an opt-out action and had approximately 7,000 members. The class, however, did not succeed in its action, which ultimately was heard before the Supreme Court.
In 2016, the Home Owners Association instigated a class action against the municipality of Oslo alleging that property tax, which was introduced following the municipal election in 2015, was invalid, and that illegally recovered property taxes should be repaid. Approximately 2,000 citizens in Oslo joined the class action, which was handled as an opt-in class action. The right to hear the action as a class action was not challenged by the municipality. The Supreme Court handed down its decision on the merits of the case in 25 June 2019. The Supreme Court concluded that the municipality had a legal basis for the property tax as such, but that the municipality had failed to comply with a specific deadline, which rendered this taxation null and void. Consequently, the group's action was successful and resulted in a partial refund. As a consequence of the ruling, the municipality decided also to make a refund to those citizens that were not part of the class action.
In 2016, the Norwegian Consumer Council instigated a class action against DNB, the largest Norwegian bank, alleging that some 180,000 customers had lost a total of approximately 700 million Norwegian kroner by paying excessive fees for management of their savings. The class action was brought as an opt-out action. The action was approved as a class action by the district court in January 2017, but DNB appealed the case to the court of appeal and argued that the action should not be approved as a class action. The court of appeal dismissed the appeal from DNB and found that the requirements for an opt-out action were met. DNB further appealed the case to the Supreme Court, which dismissed the appeal. Furthermore, all three instances heard the case on the merits and it was concluded with the Supreme Court handing down its decision 27 February 2020. The group was successful and the Supreme Court ruled that the members of the group were entitled to a 'price reduction'. The case is illustrative of the potential benefits of a class action. The average price reduction for each member was about 1,590 kroner, but the total amount refunded was in the region of 350 million kroner. In addition, the costs involved in the litigation, including those for experts, were rather significant.
In 2016, a class action was brought against a private school on the basis that its tuition fees were too high. In January 2017, the action was approved as a class action with close to 500 members (former students of the school); the action was not challenged as a class action. In September 2017, the district court handed down its decision and ordered the school to repay an amount to the members of the class action. The case has not been appealed.
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 action:
- opt-in class action: 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; and
- opt-out class action: 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.
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 based on a class comprising claimants. However, pursuant to Section 35-15 the class action rules in Chapter 35 also apply mutatis mutandis to class actions in which the class is the defendant, except that class membership without registration is excluded (i.e., in opt-out actions, for obvious reasons). Applying the class action rules in a case where the class is the defendant will give rise to a series of questions 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 allows 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 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 to 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 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 the organisation's purpose and field of activity. As this alternative indicates, there is no requirement for the organisation itself to have a claim similar to that of potential class members in order to initiate a class action lawsuit. This alternative will, inter alia, allow the Consumer 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 the action being brought as a class action. For a class action to be approved, the following conditions, set out in Section 35-2, must be met:
- several persons have claims or obligations whose factual or legal basis is identical or substantially similar;
- the claims can all be heard by the same court, in terms of its composition, and in the main pursuant to the same procedural rules;
- class procedure is the most appropriate way of dealing with the claims; and
- 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' (see point (a) above). 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 an impact on the court's assessment of whether class procedure is the most appropriate way of handling the case (see point (c)). A low number of (potential) group members will weigh against handling the case as a class action. However, it must also be kept in mind that a feature of the class action institution is to ensure that the action is made public – so that potential group members are informed of the lawsuit. In some cases, there may be significant uncertainty as to how many group members exist. In such cases, it may be an argument in favour of a class action that such an action is the only way to get in touch with potential members or claimants. This appears to have been the situation in a case from 2009, which concerned state liability for wrongful implementation of EU directives; the case was approved as a class action because it was suspected that there were many potential claimants (members). The case was, however, nevertheless heard as a class action.
For an action to be approved as a class action, the members of the group must have 'claims or obligations whose factual or legal basis is identical or substantially similar' (see also (a) above). This is often a matter of debate in actions being pursued as class actions and it is quite common for the defendant to argue that the requirement has not been met. When assessing whether this requirement has been met, the court cannot apply only the claimants' perspective but must also take into account possible objections from the defendant. The claimants may rightfully argue that the basis for their claims is very similar (e.g., they were all customers in the same bank, acquired shares in the same fund, got the same standard information, etc.). However, when looking at the defendant's objections, it may be considered that the requirement has not been met after all; for example, it may be found that some customers have lost their rights owing to statutory limitations, or some customers were given specific information prior to entering into the agreement, or because of other particular 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 to 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 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' (see point (b) above). 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., the 'best' way of dealing with the claims (see point (c) above)). This is a vague criterion and leaves room for discretion on the part of the court faced with a petition for a class action. Based on the preparatory works, the following elements should, however, be taken into account:
- the number of parties involved or potentially involved;
- whether the involvement of a number of parties will hamper coordination of the lawsuit;
- the degree of individual factual or legal circumstances;
- whether the (potential) members of the class action are easily identifiable; and
- whether it is necessary to apply the mechanism for notifying the (potential) class members.
In reality, the criterion that a class action has to be the 'best' way of dealing with the claims, seems in practice not to have been important for the courts' decision as to whether an action should be approved or not. It is perhaps illustrative that the Borgarting Court of Appeal, in a ruling of 12 April 2018,4 simply stated that although there were alternatives to a class action, there were at the same time no particular arguments against a class action. While this is of course true in many cases, this approach, taken by the Borgarting Court of Appeal in its ruling in this case, is somewhat difficult to reconcile with the requirement that a class action should be the better choice for the case at issue than the available alternatives.
Finally, a class action may only be approved if it is 'possible to nominate a class representative', as in point (d) above; 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 action and thereby also the range of class membership. There is no limitation as to who may be a 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 of foreigners joining 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 in Germany will be able to instigate ordinary legal proceedings in Norway against the German trader.5 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 of the ruling for reversal or amendment becoming final and enforceable, require the court to continue to hear their claims as individual actions.
Apart from being governed by 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, among other things, obliged to maintain an active dialogue with the parties during the preparatory stage of the proceedings.
As a general rule, the main hearing in a civil case shall take place within six months of the date of submission of the writ of summons to the court, unless there are special circumstances. This also applies for class actions. However, in class action cases it is common for the defendant to contest whether the criteria for bringing the action as a class action have been met. This may lead to an exchange of pleadings and also, in some cases, a separate hearing with respect to the approval issue. If 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.6
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 general rule, in addition to the class representative, the class is required to be legally represented by counsel, who shall be an advocate.
iv Damages and costs
When the class action 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 take place in practice. 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 successful party in a class action will be entitled to recover its cost from the losing party, provided that the court finds that the costs incurred have been necessary and proportional to 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 decide that registration shall be subject to the class members accepting liability for a specified maximum amount of costs. This is typically done in cases where the class action is brought by a private individual or the class representative is a private individual. 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 in class actions. However, there is an increasing interest in such arrangements in Norway.
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 such a low individual value that the group members cannot be expected to have any active role in 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 safeguarding the members' interests.
The court's approval has two aspects. First, 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). Second, 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 should exercise control of the settlement. With reference to interpretations of similar provisions 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 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 for the group representative to consult with the group members prior to any settlement.
In the case of a settlement, in both opt-in and opt-out actions, the settlement will be binding for all those who are class members at the time the settlement is made.
IV CROSS-BORDER ISSUES
In general, it is difficult to identify any specific cross-border issues arising from class actions in Norway. As noted above, however, there may be some limitations on foreign residents joining 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 Agreement on the European Economic Area (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,7 prohibiting cartels or abuse of a dominant position in the market, are also found in the Articles 53 and 54 of the EEA Agreement and are also implemented in secondary legislation. With respect to the area of competition law, where private enforcement and class actions have been the subject of great interest, the Directive on Antitrust Damages Actions8 has not yet been made part of the EEA Agreement. However, in December 2015, the Norwegian Ministry of Trade, Industry and Fisheries 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 European Free Trade Association states are of the opinion that provisions on civil procedure are, in general, not EEA relevant and fall outside the scope of the EEA Agreement.9 In general, it remains to be seen to what extent there will be an impact on Norwegian law from any EU initiative in this area (for example, the proposal for a directive of the European Parliament and the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC).
V OUTLOOK AND CONCLUSIONS
The Norwegian rules concerning class actions have 'celebrated' their 10-year anniversary and are now becoming teenagers. As noted previously, the application of the rules seems to have matured during these years. Class actions are now a natural part of the Norwegian legal landscape and are being brought in cases where there is real benefit in 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 of the business organisations seems to have carried into the court room in the sense that, as a first line of defence, private corporations facing class actions take the position that the requirements for a class action have not been fulfilled. In some cases, it is difficult to see why the class action is opposed. A class action may to a certain extent also be advantageous for a defendant: it will be sufficient for the defendant to engage with the class representative (and not multiple counterparties) 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 cases being litigated as class actions.
The Norwegian Ministry of Justice has carried out a 're-examination' of the Civil Procedure Act and launched a public consultation on proposed changes to the Act. However, to date the proposal has not included changes to the class action rules.
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: https://lovdata.no/dokument/NLE/lov/2005-06-17-90/.
3 Inge Lorange Backer, 'The Norwegian Reform of Civil Procedure', Scandinavian Studies in Law, Volume 51, 2007, pp. 41–75.
5 Also, Norwegian law recognises that, to a certain extent, consumers may take legal action against a professional party before the courts of the place where the consumer is domiciled. See 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.
6 The case against DNB is perhaps illustrative in that the writ of summons was submitted on 21 June 2016 and the procedural issue of whether the case should be heard as a class action was not resolved until 1 September 2017 (when the Supreme Court dismissed DNB's appeal).
7 Articles 101 and 102 of the Treaty on the Functioning of the European Union.
8 Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.
9 This is also a background reason that Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (and which also contains some procedural rules) has not been made part of the EEA Agreement.