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.
Danish law is characterised by extensive bodies of systematic and written law. The main sources of law are statutes. Preparatory works, case law and legal doctrine constitute secondary sources of 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 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 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:
- the Supreme Court;
- the High Courts;
- the Maritime and Commercial High Court;
- 24 district courts; and
- 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. Institutional arbitration is widely used, and the Danish Institute of Arbitration plays an important role in relation to commercial disputes in Denmark. For example, the Institute has published suggestions for updating the Arbitration Act, including as regards interim remedies.
II THE YEAR IN REVIEW
Highlights from 2018 include three cases from the Danish courts – one is good news for insurers' liability, the second confirms the limitation of locus standi, and the third sets the benchmark for future decisions on manager liability.
Noreco's North Sea oil platform was insured through policies that were based on English marine insurance law. The platform incurred damage and Noreco claimed against insurers for a total of approximately US$383.5 million. The Maritime and Commercial High Court ruled in favour of Noreco regarding the majority of its claims.
The insurers appealed the judgment to the Eastern High Court, and on 4 May 2018 this Court ruled against Noreco regarding the majority of its claims, finding that it had not been proven that the relevant insured event fell within the insurance period.3
In October 2018, the Appeals Permission Board declined permission to appeal to the Supreme Court.
The final judgment confirms that the insured has the burden of proof regarding when an insured event occurred and highlights the Danish courts' facility in considering laws of other jurisdictions.
ii Locus standi
The Patient Data Association was created to protect patient data in the public healthcare system. It brought an action against the Region of Southern Denmark, claiming that the Region had copied unapproved data. The question was whether the association had locus standi. As it was a question of general legal importance, the case was heard at three instances.
On 16 October 2018, the third instance Supreme Court judged that the association did not have locus standi because the association was not specifically and individually affected by the issues that were to be decided in the case.4 The Supreme Court also stated that the law did not grant the association locus standi nor special status in relation to data processing of patient information.
The case highlights the Danish conditions of locus standi, particularly for legal persons such as associations.
iii Manager liability following the financial crisis
In the wake of the financial crisis, several 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 regarding certain of the banks.5
At the end of 2018, the Supreme Court held hearings for the first time for one of these cases. It found that there was no general liability for poor bank management or for heavy loan exposure. However, it did find three individuals liable regarding individual loans, depending on certain factors, for example, if a loan had been granted after the financial crisis or granted in other interests than those of the bank. For such liability, the Supreme Court ordered the chair of the bank's board, a board member and the bank's general manager to pay damages to Financial Stability at a total of approximately 89 million kroner.6
This case sets the benchmark for future Danish court decisions regarding manager liability and confirms that individuals such as board chairs and general managers can be held liable for significant amounts for certain actions taken.
III COURT PROCEDURE
Danish court proceedings are governed by the Danish Administration of Justice Act (No. 1284 of 14 November 2018), 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. 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. Accordingly, 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 the documents and present all the facts 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.7 The purpose of the 2008 revision of the Administration of Justice Act was to increase the efficiency and speed of court cases.
Following this purpose of efficiency, from February 2018 communication with all Danish courts in civil cases must be through a specific court website.8 If a party has a Danish company or civil registration number, methods such as individual emails and letters are no longer possible. However, communication can be made at any time and parties have access to the case documents online.
In general, anyone can attend court proceedings. However, 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 not generally 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. Moreover, the courts are neither bound by experts' reports nor by 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. The defendant may demand that a foreign plaintiff provides security for the payment of the cost of the proceedings, unless the plaintiff is a national of an EU country or of certain other countries.9
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 to the Maritime and Commercial High Court, or the district court may refer the case on its own motion, if the case has general legal importance and is important for the application or the development of the law.
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 at 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 has general legal importance. The Appeals Permission Board decides whether a case may be tried at three instances.
District courts comprise ordinary civil and criminal courts. They also 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 and 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. As noted, 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 the case has general legal importance and is important for the application or the development of the law; 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 that have an international commercial dimension, and cases concerning sea, air or land transport .
|Third instance/second instance||Supreme Court|
|Second instance/first instance||Western High Court||Eastern High Court||The Maritime and Commercial High Court|
|First instance||The Land Registration Court||The Courts of Greenland||District Courts||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,10 and the courts may dismiss a case if the statement of claim does not fulfil these requirements.
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 deadline set by the court, the court may issue a judgment in accordance with the plaintiff's claim. 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 the issue.
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, including the potential appointment of a court-appointed expert.
Following the conclusion of the preparation phase, the parties will usually prepare a summary of submissions and the court will set a date for the main hearing if not done earlier. 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 three subphases:
- the opening address;
- the presentation of evidence and the hearing of witnesses; and
- the closing arguments.
The first subphase 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. The defendant's legal representative is then invited to comment. The opening address must be objective.
The next subphase constitutes the parties' presentation of evidence and the hearing of witnesses. A witness is first examined by the party who called him or her, and then the opponent is allowed a cross-examination.
At the closing arguments, counsel summarise the case and the legal points raised.
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 either 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 Administration of Justice Act.11 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 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.12 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 class actions on their official website.
Class actions are brought before the courts. No special court or tribunal deals with class actions. Case law is still scarce but recent decisions have dismissed such actions owing to the claims not being similar and the class action process not being the best method for resolution.13
iv Representation in proceedings
When acting as parties, natural persons have procedural capacity and are competent to represent themselves in court,14 and legal persons may be represented by employees. Otherwise, only Danish-qualified attorneys may represent parties in court. The court may order a party to retain an attorney if, given the circumstances of the case, it considers that professional representation is required.15
v Service out of the jurisdiction
Documents in civil matters may be served out of 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. 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 Nordic Convention on Mutual Legal Assistance in Service and Taking of Evidence of 1974 applies.16 Pursuant to Article 1 of the Convention, a contracting state may apply directly to the relevant 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.
The Hague Convention of 30 June 2005, on Choice of Court Agreements, entered into force on 1 September 2018. Among other provisions, the Convention states, subject to various exclusions and grounds, that a judgment of a contracting state designated in an exclusive choice of court agreement shall be enforceable in other contracting states.
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 scarce.
vii Assistance to foreign courts
EU Regulation No. 1206/2001 on mutual assistance within the European Union on the taking of evidence does not apply to Denmark.
As noted, 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 is submitted directly to the relevant authority.
The Hague Convention of 18 March 1970, on the Taking of Evidence Abroad in Civil or 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 does not pay court fees, is reimbursed for 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.17
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
On 25 May 2018, the EU General Data Protection Regulation18 (GDPR) came into force, harmonising data protection rules across the European Union, tightening processing rules and increasing sanctions. The Danish Data Protection Act (No. 502 of 23 May 2018) also came into force, supplementing the GDPR's effect in Denmark in areas such as criminal convictions and national identification.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
The relationship between attorney and client is privileged;19 correspondence and other documents on 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 trend of using arbitration is increasing. Further, as part of the general reform of the Danish courts, the courts offer mediation.
Arbitration is regularly used to settle commercial disputes in Denmark.
The Danish Arbitration Act is based on the UNCITRAL Model Law of 1985, and applies to national and international arbitration proceedings taking place in Denmark.20
The overriding principle of the 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 an award in special circumstances.21 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 (i.e., public policy).22
Arbitration proceedings commence when the respondent receives the written request for the dispute to be referred to arbitration, unless the parties agree otherwise.23 Generally, this request includes a summary of the dispute, a preliminary statement of the relief sought, and if three arbitrators, appointment of one arbitrator. The respondent will then generally submit a reply and, if three arbitrators, also appoint one 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.24 The parties to a civil dispute are, as a matter of routine, given the option to attempt mediation within the court system before starting litigation proceedings. The court-based mediation scheme in Denmark is voluntary. Accordingly, 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 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 a 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. Two examples in 2018 are the online-only communication system for all Danish courts in civil cases and granting European Patent Attorneys the same client–attorney privilege as Danish-qualified attorneys. The first increases efficiency and the second brings Denmark in line with other jurisdictions. The Danish legal position on manager liability following the financial crisis has also become clearer with the first Supreme Court judgment on the issue ordering individuals to pay millions of kroner in damages.
The Nordic Offshore and Maritime Arbitration Association is now up and running and is gaining ground as the dispute resolution method of choice among Danish maritime companies.
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 Mathilde Emilie Svensson 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 4 May 2018, Eastern High Court, FED2018.04.
4 16 October 2018, Supreme Court, U.2019.437H.
5 Banks include Eik Bank Danmark, Capinordic Bank and Roskilde Bank.
6 15 January 2019, Supreme Court, Case 226/2015, regarding Capinordic Bank.
7 See Section 297 of the Administration of Justice Act.
8 See www.minretssag.dk.
9 See Section 321(1) of the Administration of Justice Act.
10 See Section 348(2) of the Administration of Justice Act.
11 See Chapter 39 of the Administration of Justice Act.
12 See Chapter 23a of the Administration of Justice Act.
13 See decisions of 12 August 2015, Eastern High Court, U.2016.104Ø and 12 June 2018, Eastern High Court, U.2018.3361Ø.
14 See Section 259(1) of the Administration of Justice Act.
15 See Section 259(2) of the Administration of Justice Act.
16 The Nordic Convention was ratified on 26 April 1974 by Executive Order No. 100 of 15 September 1975.
17 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015.
18 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016.
19 See Section 170 of the Administration of Justice Act. From 1 July 2018, European Patent Attorneys also benefit from client–attorney privilege before the Danish courts.
20 See Section 1 of the Arbitration Act.
21 See Section 39(1) of the Arbitration Act.
22 28 January 2016, Supreme Court, U.2016.1558/2H.
23 See Section 21 of the Arbitration Act.
24 See Chapter 27 of the Administration of Justice Act.