I INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK
The Kingdom of Denmark comprises Denmark, Greenland and the Faroe Islands. In general, Denmark, Greenland and the Faroe Islands share their legal system and culture, but certain features of Greenlandic and Faroese law are not part of the Danish legal system.
Danish and Nordic law share several common denominators with continental European legal systems. Notwithstanding this, the legal systems of the Nordic countries have evolved with their own distinctiveness and, despite many common law traits, Denmark and its fellow Nordic countries make up a legal family of their own.
The main sources of law are statutes. Preparatory works, case law and legal doctrine constitute secondary sources of law. Danish law is characterised by extensive bodies of systematic and written law. Private law is dominated by a range of individual statutory acts and, in some areas, by unwritten law guided mainly by cases and custom. Generally, criminal law is governed by the Criminal Code, and administrative law is governed by two general statutory acts of public administration and a complex body of sector-specific statutory acts.
Denmark’s membership of international organisations and participation in international conventions have changed the legal landscape significantly throughout the past 50 years. Since 1973, Denmark has been a member of the European Union, which has significantly influenced the Danish legal system. Denmark has four opt-outs from EU cooperation. The Danish opt-outs were agreed among the Member States following a referendum in 1992 where a majority voted ‘no’ to the Maastricht Treaty. The opt-outs are outlined in the Edinburgh Agreement2 and concern the monetary union, common security and defence policy, justice and home affairs, and citizenship of the European Union.
Denmark has held two referenda on the opt-outs. In 2000, the Danes voted ‘no’ to the euro. As a consequence, Denmark has kept the krone as its currency. In December 2015, the Danes voted against an opt-in model for Denmark’s participation in justice and home affairs.
Denmark is also a party to the European Convention on Human Rights, which has conferred a number of legal guarantees and standards on the courts and the court procedure in both civil and criminal cases.
Executive, legislative and judiciary powers in Denmark are divided between the government, the parliament and the courts, respectively. This is a fundamental principle that has been enacted by the Danish Constitution since it was adopted in 1849. The Danish Constitution ensures the judiciary’s organisational, functional and personal independence. It also provides the fundamental principles and standards on which the Danish legal system is built.
The Danish legal system is based on the ‘two-tier principle’, which means that the parties generally have the option of appealing the ruling of one court to a higher instance. Most cases begin at district court level with the option of appealing to one of the two High Courts.
In 2007, the Danish courts went through significant structural and organisational changes, often referred to as ‘the statutory reform of court proceedings’.
Since 1 January 2007, the judiciary system has comprised:
- a the Supreme Court;
- b the High Courts;
- c the Maritime and Commercial High Court;
- d 24 district courts; and
- e the Land Registration Court.
The court of the Faroe Islands and the courts of Greenland are also part of the Danish legal system. In addition to the courts, some sector-specific disputes may be settled by specialised bodies such as the Danish Press Council, the Danish Consumer Council and the Danish Bar and Law Society.
Finally, Danish law allows for the settling of disputes privately by way of arbitration or mediation. Arbitration is governed by the Arbitration Act (No. 553 of 24 June 2005), which is based on the UNCITRAL Model Law on International Commercial Arbitration of 1985. Institutional arbitration is widely used, and the Danish Institute of Arbitration plays an important role in relation to commercial disputes in Denmark.
II THE YEAR IN REVIEW
Liability cases characterised the year 2017 in the Danish courts, one regarding product liability and one regarding professional liability. A new tax commission was also established.
i Liability for defective products
Product liability rules impose strict liability on both manufacturer and intermediate seller for products causing damage to persons or objects. However, there is no strict liability when a product damages itself, as these situations are covered by the Danish Sale of Goods Act, which does not include strict liability in these situations. Therefore, whether a product damages a person or an object, or damages itself, is an important consideration for product liability in Danish law.
On 13 September 2017, the Supreme Court delivered a clarifying judgment. It considered whether a lubrication system located inside the engine of a ship should be considered as part of – and therefore as an ingredient of – the engine, or if the lubrication system should be considered as a separate product to – and therefore as a component of – the engine. Pursuant to the preparatory works of the Danish Product Liability Act, the pertinent question was whether the product (the ship’s engine) was sold as one single unit. If so, any damage to the product would be considered self-caused and therefore covered by the Danish Sale of Goods Act. The Supreme Court held that the ship’s engine was sold as one single unit to the plaintiff, and that the damage incurred should therefore be dealt with according to the law pertaining to the sale of goods (i.e., without consideration of strict liability).
ii Liability of directors, managers and auditors
In the wake of the financial crisis, 12 Danish banks were wound up and taken over by the state-owned company, Financial Stability, to ensure the stability of the Danish economy. Following the banks’ takeover, Financial Stability initiated legal proceedings for professional liability and mismanagement against the board of directors and management (and in some of the cases the auditors) in seven of the banks. The scope and grounds for professional liability and mismanagement were different in each case.
The hearing for the largest of the bank cases commenced in November 2015 against Roskilde Bank and ended at first instance in the summer of 2017. The Roskilde Bank case is the longest-running commercial case in the Danish courts.
On 7 November 2017, the Eastern High Court delivered its judgment. It found that the operation of Roskilde Bank gave rise to criticism in specific areas, such as granting loans on an expedited basis without the board’s involvement. In addition, the Court found that Roskilde Bank had large-scale exposure in the market-sensitive real estate sector. However, the Court did not find reckless management of the bank.
Financial Stability has appealed the judgment to the Supreme Court.
iii A new tax commission
In 2005, the Danish Ministry of Taxation was allocated the responsibility of collecting overdue tax debt, and commenced the development of a joint digital collection system (EFI is the Danish acronym) the same year. EFI was originally scheduled to be implemented in 2007 but there were several delays and in 2014 it was decommissioned due to a severe lack of performance. Principally, EFI was unable to identify overdue tax debt nor able to calculate total debt due. It is estimated that EFI’s failure has cost the Danish treasury approximately 100 billion kroner.
On 13 September 2017, the Danish Minister of Justice appointed a fact-finding commission to investigate the events relating to, inter alia, the planning, development and decommissioning of EFI, in order to identify where responsibility lies. The commission’s work is expected to last a minimum of two years.
III COURT PROCEDURE
Danish court proceedings are governed by the Danish Administration of Justice Act (No. 1101 of 22 September 2017), which sets out detailed rules of procedure. The Administration of Justice Act was originally adopted in 1916, and is complex legislation with more than 1,000 provisions.
The Administration of Justice Act is based on three fundamental principles that are predominant in Danish judicial procedure: the principles of immediacy, orality and concentration.
According to the principle of immediacy, the court may only base its judgment on what has been said and argued at the main hearing.3 The principle of orality entails that the parties, in principle, have to present their full case at the main hearing and that witnesses must appear before the court to give their testimony in person. The principle of concentration entails that the case should be heard and concluded at the main hearing, and that no new evidence should be presented during the main hearing.
The above principles mean that during the course of the proceedings parties are able to dispose materially of the subject matter of the case. In this context, the court plays a very limited role, although the court may ask questions if a party’s allegations are unclear. Thus, the Danish court system may generally be described as an adversarial system.
Even if the above principles are predominant in court proceedings, they have been modified by means of a revision of the Administration of Justice Act in 2008. Following this revision, the parties are no longer required to read aloud all of the documents and present all facts and circumstances on which they seek to rely, but may now refer to the case file instead. Further, in special circumstances, the parties may now also present witness statements in writing.4 The purpose of the 2008 revision of the Administration of Justice Act was to increase the efficiency and speed of court cases.
Anyone can attend court proceedings; subject to certain criteria, the court may decide that the proceedings for the entire case or a part of it are conducted behind closed doors.
Danish law contains no formal rules in relation to the courts’ evaluation of evidence and the level of proof required. The courts are free to evaluate the evidence on its merits. In principle, the courts are not entitled to apply a subjective evaluation of the evidence in question, but the principle of the courts’ freedom of evaluation entails that the discretion of the courts is very wide. It should be mentioned that the courts are not bound by experts’ reports or other kinds of expert evidence.
i Overview of court procedure
In Denmark, civil disputes may be brought before the courts by natural and legal persons. Foreigners generally have the same procedural legal status as Danish nationals, and are therefore entitled to bring a civil dispute before the Danish courts provided that the Danish courts have jurisdiction. However, the defendant may demand that a foreign plaintiff provides security for the payment of the cost of the proceedings. This does not apply to nationals of EU countries and certain other countries.5
All cases are usually initiated before a district court as the court of first instance. However, the parties may request that the case is referred to a High Court or the Maritime and Commercial High Court, or the district court may refer the case on its own motion, if the case is important for the application or the development of the law, or is in the general public interest.
A fundamental principle of the Danish legal system is the ‘two-tier principle’. This principle allows the parties to appeal a judgment to a higher instance. If the case is brought before a district court (as the court of first instance), the parties may appeal the judgment to a High Court, and cases brought before a High Court as the court of first instance may be appealed to the Supreme Court. Cases may be brought before the Supreme Court as the court of third instance if the case concerns principles of general public interest. The Appeals Permission Board decides whether a case may be tried in three instances.
District courts comprise ordinary civil and criminal courts. In addition, district courts encompass enforcement courts and probate courts. Enforcement courts deal, inter alia, with enforcement of judgments and interlocutory remedies. The probate courts handle the administration of estates or insolvency cases, such as bankruptcies and applications for debt restructuring.
The High Courts are divided into a Western High Court and an Eastern High Court.
The highest instance of the Danish court system is the Supreme Court. It is the court of appeal for judgments decided by the High Courts. The Supreme Court is also the court of appeal for judgments decided by the Maritime and Commercial High Court, if in the general public interest; otherwise the court of appeal is a High Court.
The Maritime and Commercial High Court is a special court with jurisdiction over market-related disputes, such as matters regarding competition and intellectual property cases, cases which have an international commercial dimension, or cases concerning sea, air or land transportation.
Third instance/second instance
Second instance/first instance
Western High Court
Eastern High Court
The Maritime and Commercial High Court
The Courts of Greenland
The Court of the Faroe Islands
ii Procedures and time frames
Danish court proceedings can be divided into two phases: the preparation and the main hearing.
Civil proceedings commence when the plaintiff submits a statement of claim. The Administration of Justice Act sets out strict requirements as to the information required in a statement of claim, and the courts may dismiss a case if the statement of claim does not fulfil those requirements.6
Upon the court’s receipt of the statement of claim, court proceedings have officially been initiated. The court will then fix a date for the defendant’s submission of a statement of defence. Any claim for dismissal on formality grounds, such as lack of jurisdiction, shall be submitted in the statement of defence. If the defendant does not submit the statement of defence within the prescribed deadline set by the court, the court may issue a judgment in accordance with the claim of the plaintiff. Following the first round of pleadings, the parties will normally be allowed to exchange further pleadings.
As a part of the preparation phase, the court might summon the parties to appear at a ‘preparatory meeting’. During this meeting the court is in charge of the agenda and will set the deadlines of the procedural calendar, including, if possible, the date for the main hearing. If a party has submitted a claim for dismissal on formality grounds, the court may decide upon this claim separately, and an oral hearing may be held to deal with those questions.
During the preparation phase, the courts will normally refrain from making any actual examination of the evidence, the allegations or the claims. The court will restrict itself to managing the exchange of submissions during the proceedings and to looking into any formality issues. However, the court often has to decide on issues such as expert evidence and the potential appointment of a court-appointed expert.
Following the conclusion of the preparation phase, the parties will prepare a summary on the exchange of submissions and the court will set a date for the main hearing. After this date, the parties may no longer submit new claims or allegations without the opponent’s and the court’s consent.
The main hearing may be divided into the following three phases:
- a the opening address;
- b the presentation of evidence and the hearing of witnesses; and
- c the closing arguments.
The first phase is commenced upon each party’s presentation of its claims before the court. Subsequently, the plaintiff’s legal representative will review and explain the case to the court on the basis of the documents presented to the court by the parties. Following the opening address, the defendant’s legal representative is invited to comment. The opening address must be objective.
The next phase constitutes the parties’ presentation of evidence and the hearing of witnesses. The witness is first examined by the party who called the witness, and then the opponent is allowed a cross-examination.
At the closing arguments, counsel summarise the case and the legal arguments.
Following the closing arguments, the court will withdraw directly for its deliberations. The court must pass its final judgment as soon as possible following the hearing and usually within four weeks or two months after the main hearing. The court may, at its own discretion, suggest a settlement or issue an advisory opinion, but the parties may at any time request a final judgment.
On 1 January 2008, special rules governing ‘small’ claims were introduced into the Danish Administration of Justice Act. The guiding principle is that the court will guide proceedings and instruct the parties both on factual and legal circumstances to allow parties to litigate in person. The small-claims procedure is only available for claims with an economic value equal to or less than 50,000 kroner. Appeal of a judgment of 20,000 kroner or less requires permission from the Appeals Permission Board.
iii Class actions
In 2008, provisions on class actions were included in the Danish Administration of Justice Act. The new provisions allow ‘similar claims’ to be filed with the Danish courts as a class action on behalf of a group of people or legal entities.7 The class action scheme in Denmark is based on an opt-in system, which entails that plaintiffs must affirmatively opt-in in order to join the class action. To ensure an effective opt-in scheme, the Danish courts publish an inventory list of all class actions on their official website.
Class actions are brought before the courts. No special court or tribunal deals with class actions. As the class action scheme is fairly new, the case law is still scarce. The first class action case before the Supreme Court was the BankTrelleborg case in January 2012, regarding a collective shareholder action.8
iv Representation in proceedings
Only Danish-qualified attorneys may represent parties in court. However, natural persons have procedural capacity and are competent to represent themselves in court,9 and legal persons may be represented by employees. The court may order the party to retain an attorney if, given the circumstances of the case, it is of the opinion that professional representation is required.10
v Service out of the jurisdiction
Documents in civil matters may be served outside the jurisdiction, within as well as outside the framework of treaties and conventions.
For service of documents within the European Union, EU Regulation No. 1393/2007 applies by means of a parallel agreement between Denmark and the European Union. The Regulation provides that Danish courts may forward an application directly to the competent authority in the Member State where service is required.
For service of documents within the Nordic countries, the 1974 treaty between Finland, Denmark, Iceland, Norway and Sweden, the Nordic Convention on Mutual Legal Assistance in Service and Taking of Evidence, applies.11 Pursuant to Article 1 of the Convention, a contracting state may apply directly to the competent authority in the Nordic state for the service of documents and the taking of evidence.
Denmark has also ratified the Hague Convention of 15 November 1965, on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, and this Convention applies between Denmark and the signatory states.
vi Enforcement of foreign judgments
For a foreign court judgment to be enforced in Denmark, a treaty on enforcement between Denmark and the foreign state is normally required.
Where a judgment has been issued by a court of a state in respect of EU Regulation No. 1215/2012 (the recast Brussels Regulation), or where the Lugano Convention applies, the judgment will be enforceable in Denmark (also by way of a parallel agreement as regards the Regulation).
Judgments from states with which Denmark has concluded no treaties are, as a matter of principle, not enforceable in Denmark. Scholarly writings have discussed whether Danish law under certain criteria allows for recognition of foreign judgments, even if Denmark is not bound by a treaty obligation, but case law is very scarce.
vii Assistance to foreign courts
EU Regulation No. 1206/2001 on mutual assistance within the EU on the taking of evidence does not apply to Denmark.
As noted above, Denmark is party to the Nordic Convention on Mutual Legal Assistance in Service and Taking of Evidence. This Convention is based on direct contact, and a request for legal assistance shall be submitted directly to the relevant authority.
Finally, the Hague Convention of 18 March 1970, on the Taking of Evidence Abroad in Civil and Commercial Matters, governs Denmark’s assistance to foreign courts of signatory states in taking evidence in Denmark.
viii Access to court files
The main rule is that court hearings and court files are open to the public. Certain information such as trade secrets may, however, be kept secret.
ix Litigation funding
Litigants generally fund their litigation by themselves or by means of insurance. However, public aid to civil proceedings may be granted to parties with low personal and capital income or under certain other conditions. If a person is granted public aid by the state, the person shall not pay court fees, is reimbursed for all expenses relating to the case and is exempted from paying the counterparty’s costs.
IV LEGAL PRACTICE
i Conflicts of interest and Chinese walls
Conflicts of interest are managed within the framework of the Danish Bar and Law Society. The overriding principle is that any member of the Danish Bar and Law Society should be independent and not represent conflicting interests. Chinese walls are not accepted.
ii Money laundering, proceeds of crime and funds related to terrorism
The current Act on Measures against Money Laundering (No. 651 of 8 June 2017) implements the fourth EU Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.12
Under the Act, attorneys are under an obligation to confirm the identity of new clients and conduct client due diligence checks before taking on a matter within certain practice areas. Matters such as disputes are generally excluded from these obligations. Members of the Danish Bar and Law Society are under an obligation to notify the Public Prosecutor for Special Economic Crimes of any suspected money laundering.
iii Data protection
The Danish Act on Personal Data (No. 429 of 31 May 2000) applies to the processing of all personal data carried out by electronic data processing and to non-electronic processing of personal data contained in a file. Processing is generally prohibited, unless the person in question has given his or her consent. On 25 May 2018, a new personal data EU regulation will apply, tightening processing rules and increasing sanctions.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
The relationship between attorney and client is privileged; correspondence and other documents of the attorney’s file may not be subject to disclosure and attorneys may (with minor exceptions) refuse to testify on issues relating to the client–attorney relationship. There are no specific rules concerning in-house counsel, and communication with in-house counsel is not privileged.
ii Production of documents
At the request of a party, the court may order another party to produce certain documents. The party seeking production shall identify the documents with reasonable specificity and explain what the documents are intended to prove. Certain categories of documents may also be requested.
The parties are not obliged by law to disclose the requested documents. However, if a party fails to produce the documents requested, the court may draw adverse inferences.
VI ALTERNATIVES TO LITIGATION
i Overview of alternatives to litigation
Disputes are generally settled by the Danish courts. Although the courts remain the standard forum in relation to commercial disputes, the use of arbitration is increasing and the figures of the Danish Institute of Arbitration illustrate that the trend is continuing. Further, as part of a general reform of the Danish courts, the courts offer mediation.
Arbitration is commonly used to settle commercial disputes in Denmark.
The Danish Arbitration Act is based on the UNCITRAL Model Law, and applies to national and international arbitration proceedings taking place in Denmark.13
The overriding principle of the Danish Arbitration Act is party autonomy. The control of the dispute lies with the parties, and they may to a large extent agree on how the arbitration is conducted. Consequently, the majority of the rules are non-mandatory.
Denmark is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, and arbitration awards are therefore recognised as binding and enforceable, and a valid arbitration agreement will normally deprive the courts of their jurisdiction. However, the Danish courts can refuse to recognise and enforce the award in special circumstances.14 In a judgment rendered by the Supreme Court in 2016, it was held that an arbitral award may only be set aside in extraordinary circumstances; for example, if the arbitral tribunal has committed such extraordinarily serious mistakes that the arbitral award is manifestly incompatible with the domestic legal system (public policy).15
Arbitration proceedings commence when the respondent receives the written request for the dispute to be referred to arbitration, unless the parties agree otherwise.16 Generally, this request includes a summary of the dispute, a preliminary statement of the relief sought, and if three arbitrators, appointment of an arbitrator. The respondent will then generally submit a reply and, if three arbitrators, also appoint an arbitrator. The arbitration is normally concluded after an oral hearing.
In 2008, rules on court-based mediation were introduced in the Administration of Justice Act.17 The parties to a civil dispute are, as a matter of routine, given the option to attempt mediation within the court system before starting the litigation proceedings. The court-based mediation scheme in Denmark is voluntary. Thus, both parties have to agree on mediation. The mediator is appointed by the court and is normally a judge or attorney with special training in mediation.
Mediation is slowly becoming more popular as an alternative dispute resolution method. It is prevalent in family-related and probate matters, such as divorce, paternity, child support and child custody. Also, in relation to large commercial matters, it is becoming more common to have a multi-tier clause referring the matter to mediation before the case goes to arbitration.
VII OUTLOOK and CONCLUSIONS
In the past decade, the government has focused on modernising the civil court system and implementing effective rules in relation to court proceedings. The emphasis has been on expediting court proceedings and employing cost-effective solutions.
In the area of arbitration, the Danish Institute of Arbitration has revised its rules on arbitration to further enhance Denmark’s position as a venue for arbitration. The institute has also adopted new rules on mediation to ensure alignment with international standards. In relation to maritime and offshore industry disputes, the Nordic Offshore and Maritime Arbitration Association is now established and starts work in January 2018.
1 Jacob Skude Rasmussen is a partner and Andrew Poole is a dispute resolution consultant at Gorrissen Federspiel. The authors acknowledge the valuable assistance of assistant attorney Christian Rasmussen in producing this chapter.
2 The Edinburgh Agreement was entered into on 12 December 1992 by the European Council. The Edinburgh Agreement, inter alia, included the four opt-outs from EU cooperation requested by Denmark in its memorandum ‘Denmark in Europe’ of 30 October 1992. See Part B of the Edinburgh Agreement.
3 See Section 338 of the Administration of Justice Act.
4 See Section 297 of the Administration of Justice Act.
5 See Section 321(1) of the Administration of Justice Act.
6 See Section 348(2) of the Administration of Justice Act.
7 See Chapter 23a of the Administration of Justice Act. This was implemented by Act No. 181 of 28 February 2008 on the amendment of the Administration of Justice Act and other acts.
8 BankTrelleborg of 27 January 2012.
9 See Section 259(1) of the Administration of Justice Act.
10 See Section 259(2) of the Administration of Justice Act.
11 The Nordic Convention was ratified on 26 April 1974 by Executive Order No. 100 as of 15 September 1975.
12 Directive 2015/849/EU of the European Parliament and of the Council of 20 May 2015.
13 Section 1 of the Arbitration Act.
14 Section 37(2) of the Arbitration Act.
15 The Supreme Court judgment case 142/2014 of 28 January 2016.
16 Section 21 of the Arbitration Act.
17 See Chapter 27 of the Administration of Justice Act and Act No. 168 of 12 March 2008 on the amendment of the Administration of Justice Act, the Act on Court Fees and the Inheritance Act.