In Norway waterfalls acquired for energy production by entities other than the state are subject to concession. In principle, concessions are granted for a limited period, up to a maximum of 60 years. At the end of that period undertakings are obliged to return all installations to the state without compensation. However, this rule does not apply to:

  • municipalities;

  • counties;

  • state owned undertakings (as defined by Act 16 of December 14 1917); or

  • limited liability companies that are at least two-thirds state owned.

Such undertakings have the right to unlimited concessions.

On February 20 2002 the European Free Trade Association Surveillance Authority (ESA) issued a Communication to Norway concluding that this legislation breaches the European Economic Area (EEA) fundamental freedoms of establishment and movement of capital. In its press release February 21 2002 the ESA declared:

"In its reasoned opinion the authority maintains the position expressed in its letter of formal notice sent in June 2001. According to the authority, the very existence of the difference in treatment between Norwegian public undertakings, which enjoy concessions for an unlimited period of time, and private undertakings, which are only granted concessions for a maximum of 60 years and which must return all installations to the state without compensation at the end of the period, only favours undertakings of Norwegian nationality. This rule is contrary to the freedom of establishment provided by Article 31 of the EEA Agreement. Moreover, the fact that the Norwegian act allows situations where private undertakings may only, in some circumstances, run the concession for a limited period of time may deter investors from acquiring shares in those undertakings, contrary to the provisions on the free movement of capital (Article 40 of the EEA Agreement)."

In the authorities' opinion Norway has not demonstrated that its national measures are justified. Norway was given two months to take the measures necessary to comply with the ESA's demands.

In a press release of April 19 2001 the Norwegian government stated that national control of water resources falls outside the scope of the EEA Agreement. Nevertheless, the government found grounds to put forward a proposal to the Parliament to alter the legislation on waterfall concessions. The government asked the ESA to postpone further action until Parliament has considered the proposal. The proposal has not yet been put forward and the details of planned changes are thus not known. If Parliament accepts this proposal, private and foreign investors will be given the same opportunities to achieve ownership in the Norwegian energy sector as public owned entities.

According to the press release the government will propose limiting all concessions on public entities to 60 years, and that all undertakings - including those owned by the state and municipalities - must return the installations to the state without compensation by the end of the period. The duration of concessions granted to private entities will not be affected.

For further information on this topic please contact Kristin Bjella at Haavind Vislie by telephone (+47 22 40 21 00) or by fax (+47 22 40 21 013) or by email ([email protected]).