Waterfalls acquired for energy production, other than by state owned entities, are subject to concession in Norway. In principle, concessions are granted for a limited period of time, 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, as this rule does not apply to state owned entities, in 2002 the European Free Trade Association Surveillance Authority (ESA) warned Norway that it is in breach of the European Economic Area Agreement's fundamental rights of freedom of establishment and free movement of capital. Although the Norwegian authorities have declared that the legislation is justified, they have proposed changes to meet the ESA's demands.

Under the proposals all state owned entities will have their concessions limited to a specified time period, in order to avoid discrimination between the different parties in the market. The ESA's demands probably would have been satisfied by ensuring equal conditions in the acquisition process. However, the Norwegian authorities have made more far-reaching proposals under which all state owned concessions will be altered, regardless of changes in ownership. This proposal would imply that state owned companies, which presently have no time limit on their ownership, would be required to return all installations to the state within 60 years, without compensation. This proposal has led to considerable debate and many parties have demanded a closer investigation into its legal and social consequences.

The government has indicated that it will appoint a committee to consider further various aspects of the matter and put forward a proposal to this end. This implies that the changes demanded by the ESA will be postponed. State owned entities will thus retain their greater opportunity to acquire ownership in the Norwegian energy sector than private and foreign investors.

Since the ESA has already stated that the Norwegian legislation is in breach of the European Economic Area Agreement, it is unclear what will happen if a foreign company claims that it has been discriminated against in the acquisition process because of this breach.

For further information on this topic please contact Johan Fredrik Remmen or Kristin Bjella at Haavind Vislie by telephone (+47 22 43 30 00) or by fax (+47 22 43 30 01) or by email ([email protected] or [email protected]).