Gassled's origin and function
How did this happen?
Amending tariff regulations
District court case
Court of appeal case


On June 30 2017 the Borgarting Court of Appeal rendered its judgment in Gassled,(1) a case of major importance for:

  • the upstream Norwegian Continental Shelf (NCS) industry;
  • natural gas buyers in Europe; and
  • the Norwegian government, as resource owner and NCS regulator.

If the judgment becomes final and binding, it will benefit the European gas supply. However, it may be a rude awakening for institutional investors in NCS infrastructure.

The court rejected the appeal of four institutional investors, which claimed that the government did not have adequate legal grounds to reduce the transportation tariff for the Gassled natural submarine gas gathering and landing pipeline network. It also rejected the secondary claim that amending the tariff breached the property rights protected by the European Convention on Human Rights.(2) Finally, the court rejected the claim that even if the government had had legal grounds to reduce the tariff, the procedure that it followed was negligent to the extent that the investors were entitled to compensation for future economic loss under tort law.

The judgment is not binding, but the time limit for appeal expires in mid-September 2017. If appealed, the Supreme Court is not compelled under Norwegian law to take on the case, as it has already been heard by a district court and by the appeals court, both of which ruled in the government's favour (albeit with some procedural differences).

The case was initiated by four Gassled owners (institutional investors), which challenged the Ministry of Petroleum's (MPE's) competence and conduct as a regulator in amending a ministerial decree containing the so-called 'Tariff Regulation',(3) which determines the tariff level for bookings affecting the future shipping of natural gas volumes through Gassled. The Tariff Regulation applies only to Gassled; no other NCS pipeline systems are directly affected. The amendment drastically reduced one of the major components of the tariff calculation – the capital element – which would affect bookings made after July 1 2013 for volumes to be transported from October 1 2016. The timing of the amendment also seems to have been controversial.

If the judgment becomes final or the Supreme Court elects to take on the case and rules equally, the result will have long-term effects for European buyers of Norwegian gas. It will also have a significant impact on existing Gassled owners, future investors, gas shippers and the government.

Gassled's origin and function

Gassled is the largest submarine gas gathering, transportation and landing pipeline system in the world. It stretches from the inlet flange on various offshore field facilities located on the NCS – some nearly as far away as the Arctic Circle. From these sources, dry and wet gas is gathered, processed and delivered according to commercial specifications at the outlet flange of ultimate landing terminals, which are located almost entirely in Europe and the United Kingdom.

The Gassled system comprises:

  • a substantial number of large diameter submarine pipelines;
  • several interconnection points on offshore facilities;
  • three onshore terminals on the Norwegian mainland; and
  • seven ultimate terminals in Belgium, France, Germany and the United Kingdom.

All export pipelines are regulated by bilateral treaties between Norway and the gas receiving jurisdiction which has the landing terminal on its territory. Before Brexit, the European Union received approximately 110 billion cubic metres a year (roughly one-quarter of its natural gas consumption) from the NCS through Gassled. Norway has been one of Europe's most important natural gas suppliers and, under existing production forecasts and established pipeline systems, can continue to supply such volumes for decades.

How did this happen?

One of the key questions is how this apparently sudden change to what has, for many years, been considered one of the most predictable and stable petroleum regimes happened. Transportation tariffs are contracted on a long-term basis between the shipper and owner and are not subject to government intervention of this nature. Thus, to understand the implications of the government's decision and what the court cases are essentially about, a brief look at Gassled's legal foundation is necessary.

Gassled is governed by Norwegian petroleum law (incorporating EU internal market rules as European Economic Area obligations), including some specific legal provisions applicable only to Gassled. Gassled is an unincorporated joint venture. At present, a slight majority of participation interests is held by entities that hold NCS production licence interests in addition to their Gassled participation interest – meaning that they are both Gassled owners and shippers. The remaining four Gassled non-shipper owners hold slightly less than half of the total participation interests in Gassled. The entire system is operated by Gassco AS, a company wholly owned by the Norwegian state. The company cannot:

  • own or trade gas volumes;
  • have or control any participation interest in Gassled or another pipeline system; or
  • hold any production licence participation interest.

All previous Gassled owners, before the non-shippers acquired their Gassled participation interests, were prominent NCS operators and subsidiaries of companies such as ExxonMobil, Total, Statoil, Shell and Eni. These sellers of Gassled participating interests had a long history of petroleum activity on the NCS and are still active as operators and production licensees. They remain in need of Gassled capacity as shippers to be able to deliver their gas to the European market.

The Gassled non-shippers are Norwegian companies, either subsidiaries of foreign entities or owned and controlled directly by foreign investors, such as pension or sovereign funds. Most of the acquisitions of participation interests in Gassled by these investors were approved by the MPE between 2011 and 2012, at an aggregate sum of close to NKr32 billion.

Amending tariff regulations

In January 2013, on the basis of the existing Gassled regulatory regime and the conditions established for the approval of the Gassled system, the government circulated to the industry a proposal informing interested parties that the MPE was considering amending the Tariff Regulation. The Tariff Regulation is a ministerial decree, issued pursuant to the Petroleum Act 1996 and the Petroleum Regulations 1997, which is applicable only to Gassled. The proposed reduction of the tariff for future bookings became a core issue of dispute. A public hearing on proposed amendments to the regulatory regime is a legal requirement and well-established practice in Norway and the petroleum industry has been extended further courtesies in this regard than legally required since the start of NCS activity in the mid-1960s. As such, the system has been seen by the industry as strict, but collaborative.

Non-shipper Gassled owners voiced their opposition to the proposed changes to the Tariff Regulation. In their view, the proposed reduction of the capital element in the calculation of the tariff – which would affect future bookings – would greatly reduce their expected tariff income and thereby the return on their investment in the Gassled joint venture. The government proposal would not consider the investment made by buyers. The MPE maintained that the return on investment relevant for calculating the capital element of the tariff was not what the new investors had paid to acquire their participating interest, but rather the investment made in the system itself – represented by the systems construction and installation costs, including systems merged into Gassled since 2002. Gassled owners that were also gas shippers were less critical about the MPE's amendment proposals than the non-shippers. This was unsurprising, as they are substantially more balanced in their economic interest.

The amendment to the Tariff Regulation was passed as an amendment decree on June 26 2013 in a predominantly identical form to that proposed by the MPE.

District court case

In January 2014 the four non-shipper Gassled owners – Njord Gas Infrastructure AS, Silex Gas Norway AS, Solveig Gas Norway AS and Infragas Norway AS (holding an aggregate participating interest of 43.85 % in the Gassled joint venture) – went to the district court, claiming that the MPE's amendment of the Gassled tariff regime was illegal and thus invalid.

The companies secondarily claimed that if the court found that the MPE Tariff Regulation amendment as a decree was legal under Norwegian law, it still amounted to the amendment of an existing and approved transportation arrangement. Such an amendment should legally be addressed as an amendment to an individual administrative decision, which is more strongly protected by law against amendments than an amendment to a ministerial regulation by decree.

The companies also claimed that regardless of the nature of the ministerial decree, the Gassled tariff had been established through an agreement between the government and the Gassled owners when Gassled was established. The companies claimed that a retroactive application of restrictive rules on existing contractual rights of this nature would be unconstitutional.

Alternatively, the companies maintained that the tariff reduction was in breach of Protocol 1 of the European Convention on Human Rights,(4) as ratified and implemented through incorporation legislation – which protects private property ownership rights. This claim was based on the notion that the result of the amendment to the Tariff Regulation as implemented was detrimental to a reasonably expected profit from their investment. This profit being the owner's only remaining right to exercise in the otherwise strictly regulated upstream regulatory system.

The companies further claimed that even if not protected by illegality or the convention, the MPE had acted in such a negligent way that the government, under tort law, was liable for the negligent conduct of government employees and their performance when introducing and enforcing the changes to the tariff regime. The negligent and insufficient information provided by the MPE was said to constitute a breach of its obligations in the form of a lack of active diligence and failure to provide required information to investors and their advisers. According to the companies, the MPE was required by law to inform new entrants to the NCS of the risk that a Gassled tariff reduction may be imposed, particularly when it turned out that the investors had applied for and obtained approval of their acquisition merely two years before the Gassled tariff reduction was actually imposed on them.

The Oslo District Court rejected the plaintiffs' claims,(5) but made several critical comments with regard to the government's performance and conduct. Even though the court materially ruled in the government's favour, it stated that the plaintiffs had reasonable cause to go to court in order to clarify their status and legal position. The court did not, as is common under Norwegian procedural rules, for this reason award the defendant any coverage of their legal costs associated with mounting their defence, including the cost of proceedings before the district court.

Court of appeal case

The plaintiffs appealed the district court judgment to the Borgarting Court of Appeal, which published its judgment on June 30 2017. The proceedings before the appeals court brought further facts and information to light and clarified a number of issues that were insufficiently addressed during the district court proceedings. The appeals court ruled entirely in the government's favour, rejecting all of the plaintiffs' claims. The amendment to the tariff regulation was upheld as properly legally founded and justified. The court found that the tariff amendments applied only to future bookings. Bookings under the standard transportation terms established by system operator Gassco AS represented the binding transportation agreement under Norwegian law. Changes to future terms for contracts not yet concluded were not, in the court's view, unconstitutional retroactive legislation. The court rejected the notion that Gassled owners, old and new, had any legitimate expectation that the tariff structure implemented though the Tariff Regulation in 2002 (as amended due to the expansion of the Gassled infrastructure) amounted to an individual administrative decision which afforded the owners the protected right to maintain the tariff level up to the expiry of the pipeline concession period (ending in 2028).

The court also rejected the argument that the amendment to the Tariff Regulation made by way of the ministerial decree was in breach of the protection afforded to private property by the European Convention on Human Rights. Finally, the court rejected the argument that the MPE and its representatives had acted negligently and in a fashion that entitled the Gassled owners to compensation from the government as their employer under the Tort Act. However, the court criticised the government for failing to establish a monitoring system that was transparent for investors and users with regard to tariffs collected, which could have enabled such investors and users to establish when the return on their investment in the infrastructure had reached the prescribed 7% real return before tax over the project period. According to the court, this would have enabled the market, including investors and users, to anticipate a government-imposed reduction in the capital element of the transportation tariff.


The big questions now are whether:

  • the judgment will be appealed to the Supreme Court; and
  • the Supreme Court Appeals Review Board will admit the case to the Supreme Court.

Speculation is rife. Several observers think it will be appealed, but rejected. There is not long to wait, as the time limit for submitting an appeal is about to expire.

For further information on this topic please contact Bjørn-Erik Leerberg at Simonsen Vogt Wiig Advokatfirma by telephone (+47 21 95 55 00) or email ([email protected]). The Simonsen Vogt Wiig Advokatfirma website can be accessed at


(1) Saksnr 16-05707ASD-BORG/01.

(2) The European Convention for the Protection of Human Rights was signed in Rome on November 4 1950 and ratified by Norway by way of the Royal Decree of December 21 1951. It entered into force on September 3 1953 and was incorporated into Norwegian law by Act 21 of May 1999.

(3) MPE Decree establishing Regulation 1724 of December 20 2002 on the stipulation of tariffs, among other things, for certain facilities on the basis of Act 72 of November 29 1996 pertaining to petroleum activities (Sections 4 to 8) and Royal Decree 653 of June 29 1997 relating to Act 29 (Section 70, cfr Section 63).

(4) See Article 1 of the protocol.

(5) September 25 2015, Saksnr 14-010957TVI-OTIR/08.