All questions

Security and enforcement

i SecurityShipping

Under Norwegian law, mortgages over ships can be established and are perfected by registration in either NOR or NIS (as applicable). Such registration will give the mortgage protection from third parties, including the shipowning entity's creditors or bankruptcy estate. Mortgages can also be established in ships under construction. Ship mortgages also create charges over certain parts of the ship's equipment; for example, navigation or rescue equipment, spare parts and tools, whether the equipment is aboard or temporarily removed from the vessel. However, the mortgage does not create charges over bunkers or other consumables. Ship mortgages and other registered rights in the ship rank behind maritime liens according to the Norwegian Maritime Code, which is based on the provisions of the 1967 Brussels Convention on Maritime Liens and Mortgages. If the shipowning entity goes into bankruptcy proceedings, the bankruptcy estate has a mandatory lien in the ship for an amount equal to the lower of 5 per cent of the ship's value or 805,000 kroner.

Apart from a registered mortgage, ship financing is in many cases secured by, inter alia, assignments of earnings and insurances, account pledges and, if the shipowning company is a special purpose vehicle, a share pledge.

It is not possible to validly create and perfect a security right in a charterparty contract (or any other contract as such) under Norwegian law. If the charterparty is governed by UK law, it is quite common practice in Norwegian ship financing to create an assignment of charter governed by UK law. It is, however, uncertain whether such a security right will be enforceable if enforcement is initiated before Norwegian courts, and to our knowledge this issue has never been subject to litigation in Norway.


Mortgages in a Norwegian registered aircraft may be registered in the Norwegian Civil Aircraft Register or in the International Register created pursuant to the Cape Town Convention. Mortgages registered in the Civil Aircraft Register will include certain movable parts such as engines and propellers, even if these are held in 'pools' and not attached to the mortgaged aircraft. A mortgage registered in the International Register in accordance with the Cape Town Convention is not believed to include such equipment. As with ships, registration of a mortgage is necessary to obtain legal protection against third parties, including creditors.

Generally, mortgages and other registered rights in aircraft rank behind salvage charges and costs to preserve the aircraft, which will give rise to mandatory liens and detention rights if the relevant claims are not covered, pursuant to the Norwegian Aviation Code. Further, the non-payment of fees incurred in using a Norwegian airport or fees for services in connection therewith, will give the airport owner the right to detain the aircraft or another aircraft owned or used by the same entity to secure payment. Such detention right is, however, subject to the same limitations as are applicable to the arrest of aircraft (i.e., aircraft that are operating a regular route open to the public, or an aircraft that is presently ready for take-off for the purpose of transporting persons or goods, cannot be detained).

As a consequence of the dual system for registration of security rights in aircraft as described above, creditors have a tendency to charge aircraft both in accordance with national legislation and the Cape Town Convention.

Assignments of insurances and earnings, account pledges and other types of security, including a similar security package as described for ship financing, may be established to secure financing of aircraft.


Norway does not have a specific register for encumbrances over rolling stock. However, locomotives, carriages, etc., can be pledged individually and registered on the owner's sheet in the national register of movable property. This creates a pledge that closely resembles a regular mortgage, including in relation to protection from third parties.

ii Financing of contractsShipping

Shipbuilding contracts are usually financed through traditional secured credit facilities, typically in the range of 50–80 per cent of the purchase price of the new build. The payment of instalments to the yard during the building process will typically be secured by a refund or performance guarantees issued by the yard's bank or an export credit agency; for example, the Norwegian Export Credit Guarantee Agency. Another financing model of building contracts used is sellers' credits granted by the yards, usually secured by guarantees or other security.


In Norway, deliveries of new aircraft are traditionally financed through bank debt or financial leasing, including varieties of sale and leaseback schemes. However, airlines often meet their demand for new aircraft through operational leasing, reducing their need for capital and financing schemes.

Norwegian Air Shuttle has an expansive orderbook financed through a mix of export–import guaranteed funding, syndicated bank facilities, bond issues and sale and leaseback transactions.


As mentioned, state-owned NSB is the main operator and is largely self-financed. However, NSB issues bonds under its EMTN programme when needed, and has an available syndicated facility of 2 billion kroner.

iii Enforcement

Norwegian enforcement rules are based on the main principle that enforcement of security must be carried out through the courts, and contractual terms of the security to the effect that the mortgagee may enforce the security by way of self-help outside the courts will, as a rule, be deemed invalid.

However, the creditor may agree with the debtor to enforce security by way of self-help remedies following the debtor's default, and such arrangements will be upheld by the courts. Further, in relation to account pledges and share pledges, the parties are free to agree on any enforcement procedure, including self-help remedies, pursuant to the Norwegian Act on Financial Collateral. In relation to assigned claims, self-help remedies are also available by operation of law, by way of taking possession or private sale, according to the Norwegian Enforcement Act.

For security in aeroplanes created and registered pursuant to the Cape Town Convention, the self-help remedies set out in the Convention are available to the creditor, without court proceedings or approval.

The most common way to initiate enforcement against a vessel is to apply to the local court for the arrest of the ship while it is in, or bound for, a Norwegian port. If the application is accepted, the vessel will be subject to an obligation to stay in the port. Arrest of ships is a fairly simple procedure to carry out under Norwegian law, and it can be arranged in a timely manner and without excessive costs.

Arrest of aircraft may also be carried out following the above-mentioned procedure. However, aircraft that are operating a regular route open to the public, or aircraft that are presently ready for take-off for the purpose of transporting persons or goods, will not be obliged to stay in the airport if arrest is approved.

In addition to the arrest rules set out in the 1952 Arrest Convention, which has been adopted by Norway, it is generally a requirement under Norwegian law that the creditor can demonstrate a probable cause for arrest. However, in practice, an important exception is made for mortgage claims in a vessel or an aircraft that are due, which are accepted as a basis for arrest without applying a test for probable cause. For aircraft, the above exception only applies if the mortgage is duly registered.

The holder of a registered mortgage over a vessel may request that the court initiates judicial sales proceedings, either by way of a court supervised private sale or an auction. Generally, both sales methods will free the vessel of all encumbrances and debts, except encumbrances with a better priority (if any) than that of the enforcing creditor.

As a starting point, only the ship from which the claim arises can be arrested under Norwegian law. However, Norway recognises the right to seek sister ship arrests in accordance with the Arrest Convention; that is, if two vessels are owned by the same legal entity being the debtor of the relevant claim, an arrest can be initiated against either of the vessels, in respect of a claim related to one of the ships. If each of the 'sister ships' are owned by single-purpose companies that are both owned by the same holding company, the arrest of one sister ship for claims against the other sister ship will not be available.

Arrest of vessels may be made for security only, and the creditor does not have to initiate substantive proceedings in Norway regarding the claim; for example, if proceedings have been initiated in a different jurisdiction.

iv Insolvency regulation in Norway

Bankruptcy and insolvency proceedings are regulated by the Norwegian Bankruptcy Act, which incorporates two formal procedures: debt settlement and bankruptcy proceedings.

However, after Norway's ratification of the Cape Town Convention, some aspects of the insolvency regulation have undergone changes. Among others, Norway adopted Alternative A of Article XI of the Convention's Aircraft Protocol. The provision is relevant in the event of the bankruptcy of airlines, and sets a maximum waiting period of 60 days, after which the bankruptcy estate is obliged to hand over aircraft and its equipment to the mortgagee.