All arbitration that takes place in Norway – both domestic and international – is governed by the Norwegian Arbitration Act (NAA).2 The NAA is based on the UNCITRAL Model Law (Model Law), and applies to all types of cases, small and large, professional parties and consumers.
Since the NAA applies also to all domestic arbitration cases, the content of the NAA is a bit different to the Model Law. Further, the NAA is more detailed than the Model Law.
Some issues that can be highlighted include the following:
i Confidentiality and public access
According to Section 5 of the NAA, arbitral proceedings and arbitral awards are not confidential unless the parties have specifically agreed to this regarding the specific case at hand. The agreement on confidentiality has to be entered into after a dispute has arisen: it is not sufficient to agree to this beforehand in the agreement containing the arbitration clause.
The Model Law does not have such a clause.
ii The arbitration agreement
NAA Section 10 has provisions regarding arbitration agreements, and does not require arbitration agreements to be in writing; however, for evidential purposes, it is advisable to have the arbitration agreement in writing, and in practice, most arbitration agreements are in writing. According to NAA Section 10 Paragraph 2, an assignment of a contract also includes the assignment of an arbitration clause if the opposite has not been agreed by the parties.
NAA Section 28 has regulations regarding evidence. In Paragraph 1, it is stated that the parties to a case have the responsibility for presenting the evidence in the case, and that the parties have the right to submit whatever evidence they want. However, according to Paragraph 2, an arbitration tribunal may refuse evidence that clearly is not significant to a case. Further, an arbitration tribunal may limit the submission of evidence if the amount of submitted evidence is disproportionate to the significance of the dispute for the parties or the significance the evidence can have for the decision of the dispute. However, it is very rare that an arbitral tribunal uses its power according to this provision if a complaint has not been made by either of the parties.
iv Application of law
Although Section 31 of the NAA is based on Article 28 of the Model Law, if the parties have not decided on any substantial law, the arbitration tribunal shall apply the Norwegian conflict of laws rules. The arbitration tribunal can only make its decision based on reasonableness if the parties have explicitly agreed to this.
Chapter 8 of the NAA (Sections 39 to 41) contains regulations regarding the determination of costs to arbitration tribunals (Section 39), the allocation of determined costs to arbitration tribunals and parties' case costs between the parties (Section 40), as well as provisions regarding security for costs (Section 41). Such provisions are not found in the Model Law.
According to Section 39, the arbitration tribunal determines its own remuneration and expenses to be covered, if nothing else has been agreed between the arbitral tribunal and the parties. Traditionally, it has been uncommon in Norwegian arbitration to agree on the remuneration of the arbitration tribunal beforehand. However, this seems to have become more common in recent years, as more parties want to have control of this cost element. It is possible to appeal an arbitration tribunal's decision on its remuneration to the ordinary courts within one month of a decision. However, it is very rare that parties do this.
The parties are jointly liable for the costs of an arbitration tribunal,3 but, upon request from one of the parities, the arbitration tribunal can divide the costs of the arbitration tribunal between the parties as the arbitration tribunal finds right.4 According to NAA Section 41, the arbitration tribunal can demand that the parties provide security for the costs of the arbitration tribunal if the opposite has not been agreed between the arbitration tribunal and the parties. It is normal that the arbitration tribunal demands security and that this is divided between by the parties. If the demanded security is not provided, the arbitration tribunal can stop an arbitration. However, if one of the parties does not provided its security, the other party can provide the security so that the arbitration is not stopped.
Upon request from one of the parties, the arbitration tribunal can decide that the other party has to cover all or part of the costs of the opposing party to the extent the arbitration tribunal finds this appropriate. Although the regulations in the Norwegian Dispute Act5 do not apply to arbitration proceedings, it has been quite common for arbitration tribunals to look to the regulations regarding costs in the Dispute Act and apply more or less the same principles. The main rule in the Dispute Act is that the party who wins in full or for the substantial part will get its costs covered by the losing party.6 However, there seems to be a tendency in arbitration to let the parties bear their own cost a bit more often than in civil disputes before the ordinary courts.
vi Consumer protection
According to NAA Section 11, arbitration agreements entered into before a dispute has materialised are not binding on consumers. However, a consumer can agree to arbitration after a dispute is a fact. In such a case, an arbitration agreement where a consumer is a party has to be in writing in a separate document signed by both parties.
The above said, in general it is fair to say that deviations from the Model Law are immaterial. It is also possible for the parties to contract out of the provisions of the NAA, and hence adjust deviations from the NAA if desired.
Regarding the composition of the arbitration tribunal, the main rule is a tribunal of three arbitrators. In smaller cases, it is quite common that the parties agree on a single arbitrator. Where the tribunal is to consist of three members, the main rule is that the parties try to agree on all three arbitrators and that the whole tribunal is appointed jointly by the parties without getting to know which of the parties nominated each of the arbitrators. This procedure works quite well and is followed in most cases. The fall back position, if the parties do not agree to the full composition of the arbitration tribunal, is that each party nominates one arbitrator each and that these two jointly appoint the chairperson. If the two nominated arbitrators cannot agree on a chairperson, the chairperson will be appointed by the district court. However, it is quite seldom that this back-up procedure has to be followed.
Arbitration in Norway has historically mostly been, and still is, ad hoc arbitration. A likely reason for this is that there have not been any strong arbitration institutions in Norway. A consequence of this is that most arbitrations in Norway have been domestic arbitrations or arbitrations with at least one Norwegian party. There have been quite few international arbitrations where none of the parties have been Norwegian.
However, this might be on the brink of changing. The Arbitration and Dispute Resolution Institute of the Oslo Chamber of Commerce (OCC Institute) has revitalised its rules to make them more attractive, and at the end of 2017 a new arbitration institute, the Nordic Offshore and Maritime Arbitration Association (NOMA), was established. The main purpose of NOMA is to facilitate international arbitration in the Nordic countries, and it has already been used in several cases. This is elaborated on below.
ii the year in review
i Developments affecting international arbitration
NOMA was established in November 2017 on the initiative of the Danish, Finnish, Norwegian and Swedish maritime law associations. The association is registered in Norway, and its members are the maritime law associations of Denmark, Finland, Norway and Sweden. It offers institutionalised arbitration proceedings, although a very light version as compared to those of most other arbitrational institutions such as the ICC, SCC and SCMA. For instance, there are no fees payable to NOMA, and the association is not involved in administrating the proceedings.
The Nordic countries have a long tradition of settling disputes within the maritime and offshore industry by ad hoc arbitration. Nevertheless, the industry, as well as the Nordic legal environment, for quite some time recognised that it would be useful to develop a more common approach to Nordic arbitration and to establish an institutionalised alternative to ad hoc arbitration. One reason was that ad hoc arbitrations, particularly in Denmark and Norway, to a significant degree relies upon non-codified practices and custom developed by the legal community over time. In addition, the Arbitration Acts of Denmark and Norway are fairly general, and most provisions can be deviated from by agreement between the parties. Although these characteristics allow for smooth and often cost-effective proceedings where the parties to a significant degree are in control of the process, it can be challenging for non-Nordic parties to get a thorough understanding of the process, for instance with regard to certain procedural steps such as disclosure and the taking of evidence. With the introduction of NOMA, there is now an institutionalised alternative that aims to give the best of both worlds: maintaining the flexibility that follows from ad hoc arbitration, while at the same time giving users more predictability by using a set of rules without being bound by the strictness often experienced when using institutionalised arbitration.
The NOMA rules are mandatory and based on the Model Law. They are, however, shorter than those of the Model Law, and thus more in line with the Nordic tradition. For NOMA arbitration proceedings that are agreed to take place in Norway, the NAA will apply and supplement the NOMA Rules. However, since the parties to a Norwegian arbitration proceeding are allowed to deviate from most of the provisions in the NAA, the rather comprehensive and all-inclusive nature of the NOMA Rules means that the provisions in the NAA have very limited application.
When it comes to the composition of the tribunal, the default position of the NOMA Rules is the appointment of three arbitrators unless otherwise agreed by the parties.8 The parties shall seek to appoint the arbitrators jointly. If they fail to agree, the parties shall appoint one arbitrator each, who shall jointly appoint the third arbitrator who will act as the chairperson.9 If a party fails to nominate its arbitrator, the other party may request NOMA to appoint such arbitrator.
It follows from the NOMA Rules Article 15 that, subject to the Rules, a tribunal may conduct the arbitration in such manner as it considers appropriate; however, the tribunal shall take the NOMA best practice guidelines (NOMA Guidelines: further described below) into consideration when exercising its discretion. The tribunal may, at the request of a party, grant interim measures ordering a party to, inter alia, refrain from taking action that is likely to prejudice the arbitral process itself, or to provide the means of preserving assets out of which a subsequent award may be satisfied or to preserve evidence.10
The costs of the arbitration shall in principle be borne by the unsuccessful party or parties.11 The fees and expenses of the arbitrators shall be reasonable, taking into account relevant circumstances such as the amount in dispute, the complexity of the subject matter and the amount of time spent by the arbitrators. If the arbitrators have issued terms of engagement prior to their appointment, then these terms may be referred to NOMA for review. Alternatively, if no such terms have been issued, each party may refer the tribunal's fee proposal to NOMA for review. The tribunal may request the parties to deposit an equal amount as an advance for the arbitrators' fees.12
As a starting point, an arbitration award is confidential, but it may, with the consent of all parties, be made public.13 An award is considered final and binding after 30 days from receipt of the award. A party may, within such 30-days deadline, request the tribunal to correct any error in computation, any clerical or typographical error, or any error or omission of a similar nature.14 Unless explicitly agreed, there is no right of appeal. However, the NAA contains mandatory provisions allowing the Norwegian courts to invalidate an award, inter alia, on grounds that:
- one of the parties to the arbitration agreement lacked legal capacity;
- the agreement is invalid under the laws to which the parties have agreed;
- the award falls outside the scope of the tribunal's jurisdiction; or
- the appointment of the tribunal or the composition of the tribunal is incorrect.15
In addition to the NOMA Rules there are the NOMA Guidelines, which aim to ensure a predictable, transparent, cost-efficient and fair arbitration process within the framework of the NOMA Rules. As noted above, a tribunal shall take the NOMA Guidelines into consideration when exercising its discretion to conduct proceedings as it considers appropriate. The NOMA Guidelines can also be used in ad hoc arbitration proceedings by simply having the parties agree that the proceedings shall follow the NOMA Guidelines.
The NOMA Guidelines, inter alia, provide for a case management conference to be held as soon as possible after a tribunal has been established.16 The object of the conference is to agree on the procedure to be followed to ensure a prudent and cost-effective resolution of the dispute within a reasonable time. During the conference, the parties should, among other things, seek to agree the dates for the main hearing and deadlines for submissions and subsequent pleadings. The NOMA Guidelines also include provisions detailing the format and procedure for conducting oral hearings and rules on the taking of evidence. The latter rules are mainly based on the IBA Rules on the Taking of Evidence in International Arbitration. The parties and the tribunal may adopt these rules in whole or in part, or merely agree to use them as guidelines in developing their own procedures.
NOMA has been well received and must so far be considered a success. An increasing number of ship owners and operators, shipyards and other players in the shipping and offshore industries have already opted for NOMA arbitration in their contracts, and several arbitration proceedings under the NOMA Rules have already been commenced. An important milestone was achieved in late 2018 when the Nordic Marine Insurance Plan adopted NOMA as a dispute resolution mechanism from 1 January 2019. For insurance effected with a non-Nordic claims leader, NOMA is the default dispute resolution option, and it is optional for insurances effected with a Nordic claims leader.
In late 2018, an initiative was launched to develop rules concerning mediation and small claims procedures for inclusion under the NOMA umbrella. At the time of writing, working groups are drafting proposals which will then be discussed between the various stakeholders in the Nordic countries in preparation for a possible proposal for adoption by NOMA later in 2019. One group is also looking at broadening NOMA's reach beyond the shipping, oil services and marine insurance industries.
The OCC Institute was established in 1984. It provides for various forms of mediation in addition to both ordinary and fast-track arbitration. Its rules have been revised several times, most recently in 2016 when an extensive review was carried out. This resulted in a new set of Rules for Arbitration, which came into force on 1 January 2017 (OCC Rules). The OCC Rules are harmonised with the Norwegian Arbitration Act and the Model Law.
Arbitrations are initiated by making a request for arbitration to the OCC Institute.18 The OCC Institute will thereafter fix a time limit for the respondent to submit a written response to the request for arbitration. Unless otherwise agreed, the arbitration tribunal shall consist of three arbitrators to be jointly appointed by the parties. Upon failure to reach an agreement the parties appoint one arbitrator each while the third arbitrator, being the chairperson of the tribunal, shall be appointed by the OCC Institute.19 An oral hearing shall be conducted unless the tribunal considers it unnecessary and it has not been requested by any of the parties.20 The tribunal may, at the request of a party, order any party to take such interim and conservatory measures as the tribunal considers necessary.21
The administrative fees payable to the OCC Institute are based on fixed fees depending on the amount in dispute. The tribunal shall determine its own remuneration based on the OCC Institute's remuneration schedule, which operates with minimum and maximum fees depending on the amount in dispute and where the co-arbitrators each receive 60 per cent of the fee of the chairperson. The costs of the tribunal, as well as the costs of the parties, are allocated between the parties as the tribunal finds appropriate.
An arbitration award is final and enforceable, although a party may ask that the tribunal corrects an award that, due to clerical or arithmetical errors, or similar manifest errors, has not been formulated in a manner that reflects the intention of the tribunal.22 In addition, the Arbitration Act, which supplements the OCC Rules, includes invalidity provisions in the NAA Chapter 9 that allow a Norwegian court to set aside an award. The OCC Rules contain no provisions concerning confidentiality. Thus, it follows from the NAA that unless explicitly agreed otherwise, arbitration proceedings, as well as arbitration awards, are not subject to any confidentiality requirements.
The OCC Rules also contain provisions for fast-track arbitration that apply subject to agreement between the parties.23 Under such rules, the tribunal shall consist of one arbitrator appointed by the OCC Institute. The number of pleadings are limited, and an oral hearing may normally not exceed three days.
Due to the tradition of ad hoc arbitrations in Norway, only a limited number of cases have been referred to arbitration conducted through the OCC in the past. It is, however, believed that, with an increased understanding of the benefits of conducting institutionalised arbitrations in Norway, coupled with the recently revised set of OCC Rules paving the way for an efficient and cost-effective means of conducting arbitration proceedings via the OCC, the number of referrals to the OCC will increase in the years to come.
ii Arbitration developments in local courts
Only a limited number of lawsuits regarding arbitration matters are brought before the ordinary courts. However, it occasionally happens, and in the past few years there have been some interesting decisions. Three of them are discussed below.
Regarding the range of an arbitration clause
IM Skaugen Marine Service Pte Ltd v. MAN Diesel & Turbo SE, Man Diesel & Turbo Norge AS24
In late 2017, the Supreme Court decided on the range of an arbitration clause in a contract between a Chinese shipyard and a German engine supplier.25 The summary of the Supreme Court's decision reads as follows:
A Norwegian shipping company that had ordered ships from a shipyard in China had decided to use engines from a German supplier. The shipyard entered into a contract with this supplier. The contract contained a provision for arbitration in China. Later, the shipyard entered into a contract with the engine supplier's Danish subsidiary regarding purchase of more engines. This contract contained a provision for arbitration in Denmark. The Supreme Court heard the case in chambers, and dismissed the shipyard's claim for damages against the engine supplier with regard to the engines that had been purchased by the Danish subsidiary, since the claim was covered by the arbitration clause, see the Arbitration Act section 7 subsection 1. The fact that the claim was based on non-contractual liability was not deemed decisive, as there was a sufficiently close connection between the claim and the contract entered into. On the other hand, the claim for damages was not dismissed with regard to the engines that had been supplied to the shipyard in China. The relevant arbitration clause governed the relationship between the shipyard and the engine supplier, and the shipping company was not party to this contract. The claim for damages was also a different claim than the one the shipping company could have filed against the engine supplier.
It should be noted that in its decision, the Supreme Court states that in principle Norwegian courts must comply with the Norwegian procedural rules – lex fori – when deciding on their jurisdiction. However, this is only a starting point.26 The Supreme Court continues to state in Section 65:
When assessing whether a legal relationship is subject to arbitration abroad, and whether the arbitration agreement is invalid, one must seek to reduce the risk of miscarriage of justice or double hearing. It would be highly unfortunate if an action is dismissed in Norwegian courts because the case, under Norwegian law, is regarded as subject to arbitration, whereas under the rules the arbitration court itself will apply, it falls outside the scope of the arbitration agreement. It would also be unfortunate if both Norwegian courts and the arbitration court, under different sets of rules, should find that they have jurisdiction in the dispute.
The Supreme Court also emphasised that it is an international principle that an arbitration agreement or an arbitration clause is an independent agreement separated from the underlying contract – the separation principle – with reference to, for instance, the House of Lords decision of 17 October 2007 in Premium Nafta Products Limited and others v. Fili Shipping Company Limited and others, Paragraph 17. Further, the Supreme Court noted that under Norwegian law, this principle is applied in the NAA Section 18, and that this entails that the arbitration clause as a starting point will persist even if the underlying contract is found to be invalid. Nor could the Supreme Court find any invalidating factors of the underlying contract that could be transferable to the arbitration agreement.27
Regarding the question of whether Skaugen was bound by the arbitration agreement between Man and the shipyard, the Supreme Court stated that it was not obvious which country's law is applicable. Since the case had mainly been litigated based on Norwegian law, the Supreme Court applied Norwegian law. However, the Supreme Court added that foreign sources of law may be relevant by virtue of their argumentative value, especially in connection with arbitration where Norwegian rules are by far adjusted to international rules.
It also seems to be in line with an international arbitration trend that these issues are resolved based on what one may refer to as a denationalised approach and freer deliberations regarding the parties' common qualifications and fair expectations. The Law Applicable to the Arbitration Clause, from the collection Improving the Efficiency of Arbitration Agreements and Awards: 40 years of Application of the New York Convention28 mentions that the question of to what extent an arbitration agreement is binding on parties other than those immediately bound by it is often subject to a denationalised approach, which has also partially influenced parties' litigation before the Supreme Court to the extent Norwegian law has not been applied. Under any circumstances, Norwegian judges' views on which conclusions can be drawn from a denationalised approach will to some extent be coloured by the habitual Norwegian legal approach.
With regard to international matters, a third party may also be bound by an arbitration agreement based on implied consent. A third party in most developed legal systems may be bound by an arbitration agreement without explicitly having consented to it:
Where a party conducts himself as if it were a party to a commercial contract, by playing a substantial role in negotiations and/or performance of the contract, it may be held to have impliedly consented to be bound by the contracts. In the words of the Swiss Federal Tribunal 'a third party who interferes in the execution of the contract containing the arbitration agreement is deemed to have accepted it, by way of conclusive acts'.29,30
Nevertheless, in the concrete assessment the Supreme Court found that Skaugen was not bound by the arbitration clause in the engine supply contract between the Shipyard and MAN Germany. Hence, Skaugen's claim for compensation based on non-contractual performance against the respondent MAN entities was not dismissed from the Norwegian courts.
Regarding the validity of an arbitral award
Gdansk Shiprepair Yard 'Remontowa' SA v. Torghatten Nord AS31
Lawsuits before the ordinary courts regarding the validity of arbitration awards have been rather rare in Norway. However, in 2018 an arbitration award was challenged in Oslo District Court.32 The arbitration was held in 2017 between the Norwegian company Torghatten Nord AS (Torghatten) and the Polish company Gdansk Shiprepair Yard 'Remontowa SA' (Remontowa). Torghatten had ordered four ships from Remontowa that were delivered in 2012. The ships were to use liquefied natural gas (LNG) as fuel. Torghatten experienced problems with the ships, and claimed certain redeliveries and compensation from Remontowa. In the arbitration award rendered in June 2017, Torghatten got approval regarding some of the claims. In August 2017, Remontowa issued a writ to Oslo District Court alleging that parts of the arbitration award were invalid. The alleged legal basis for this was the NAA Article 43 Letter c) that 'the arbitral award falls outside of the scope of the jurisdiction of the arbitral tribunal' and Article 43 Letter e) that 'the arbitral procedure was contrary to law or the agreement of the parties, and it is obvious that this may have impacted on the decision'.
The parties agreed that item 1B in the conclusion of the arbitral award was outside of the parties' statement of claim and statement of defence. Hence, the District Court had to base its decision on this consensus. Consequently, item 1B of the conclusion of the arbitral award was invalid. However, the parties disagreed on whether item 1B was so closely linked to item 1A that item 1A was also invalid, and if invalidity could affect all sides of what the arbitral tribunal had assessed in the arbitral award item 11. In its concrete assessment, the District Court stated that item 1A was also affected since this also was part of the scope of the claim. Hence, the District Court concluded that the arbitral award was partly invalid under the NAA Section 43 Paragraph 3. Thus, items 1A and 1B of the arbitral award were deemed invalid as far as they concerned Torghatten's claim that two of the ships were defective since they could not go in and out of the harbour using LNG in normal weather.
The District Court also found that the arbitration tribunal had not given a thorough enough reasoning regarding parts of the compensation measurements, and that it was obvious that this could have had an impact on the decision. Hence, item 6 of the arbitral award conclusion was also found to be partly invalid. The allegations regarding lack of contradiction and lack of reasoning regarding item 3 of the arbitration award's conclusion were dismissed.
Regarding the execution of an arbitration award
Oma Baatbyggeri AS v. Rolls-Royce Oy Ab33
In Gulating Appeal Court's decision in this case, the question was whether a declaration of set-off after the arbitration award was rendered, but before a claim for execution of the arbitration award was submitted for distrain, was valid. The Appeal Court stated, with reference to previous decisions of the Supreme Court, that the only objections that can be made against a claim that is established in an arbitral award are the objections stated in NAA Chapter 10, and of which Article 46 is relevant. Set-off is not mentioned as a possible ground for objection to the enforcement of an arbitral award.
iii Investor–state disputes
Norway has not entered into many investor–state bilateral treaties, and the most recent treaties were entered into in the early 1990s. Currently, Norway is not involved in any investor–state disputes. At the time of writing, one Norwegian company, Staur Eiendom AS, is involved in an investor–state dispute under the ICSID arbitration rules. This is a dispute with the Republic of Latvia under the bilateral investor treaty between Norway and Latvia dating from 1992.34
iii outlook and conclusions
The use of arbitration has been quite stable in Norway over the past few years. Although arbitration in Norway traditionally has been mostly domestic ad hoc arbitration, Norway is well suited to host far more international arbitrations. The creation of the NOMA, and the introduction of the new OCC rules, mean that it is much easier to perform institutional arbitration in Norway than it was. Hence, there is currently optimism regarding arbitration in Norway going forward.
1 Carl E Roberts and Norman Hansen Meyer are partners at Advokatfirmaet Selmer AS.
2 Norwegian Arbitration Act of 14 May 2004 No. 25.
3 NAA Section 39 Paragraph 2.
4 NAA Section 40 Paragraph 1.
5 Act 17 June 2005 No. 90 regarding mediation and procedure of civil disputes.
6 Dispute Act Section 20-3.
8 NOMA Rules Article 5.
9 NOMA Rules Article 7.
10 NOMA Rules Article 23.
11 NOMA Rules Article 37.
12 NOMA Rules Article 38.
13 NOMA Rules Article 30.
14 NOMA Rules Article 33.
15 NAA Chapter 9 (Sections 42-44).
16 NOMA Guidelines Clause 3.
18 OCC Rules Article 4.
19 OCC Rules Article 8.
20 OCC Rules Article 14.
21 OCC Rules Article 20.
22 OCC Rules Article 29.
23 OCC Rules Articles 34–36.
24 The Supreme Court HR-2017-1932, IM Skaugen Marine Service Pte Ltd v. MAN Diesel & Turbo SE, Man Diesel & Turbo Norge AS.
26 Section 64.
27 Sections 96–98.
28 Blessing, The Law Applicable to the Arbitration Clause, from the collection Improving the Efficiency of Arbitration Agreements and Awards: 40 years of Application of the New York Convention, 1999, pages 168–88.
29 Born, International Commercial Arbitration, second edition, volume 1, 2014, pages 1428–9.
30 Sections 113–115.
31 Oslo District Court case No. 17-125770TVI-OTIR/07, Gdansk Shiprepair Yard 'Remontowa' SA v. Torghatten Nord AS.
32 Oslo District Court case No. 17-125770TVI-OTIR/07.
33 Gulating Appeal Court case No. LG-2019-19778, Oma Baatbyggeri AS v. Rolls-Royce Oy Ab.
34 ICSID case No. ARB/16/38.