DOING BUSINESS IN NORWAY ISBN 978-82-998570-4-8 DOING BUSINESS IN NORWAY Grette – 3 CONTENTS I. INTRODUCTION...............................................................5 II. CIVIL LAW............................................................................6 1. CIVIL LAW SYSTEM...............................................6 2. CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS .....................................................6 3. COMMERCIAL AGENCY CONTRACTS........6 4. CONSTRUCTION CONTRACTS........................7 4.1 Norwegian construction contracts......7 4.2 Norwegian offshore contracts...............7 5. CONSUMER PROTECTION................................8 5.1 Consumer protection laws.......................8 5.2 Consumer Purchase Act............................9 6. STATUTE OF LIMITATION....................................9 7. ACQUISITION RESTRICTIONS......................10 7.1 General............................................................10 7.2 Competition Act.........................................10 7.3 General Concession Act.........................11 III. BUSINESS ENTITIES..................................................13 1. LIMITED LIABILITY COMPANIES................13 1.1 General............................................................13 1.2 Equity...............................................................13 1.3 Board of directors.....................................13 1.4 Corporate assembly.................................14 1.5 Management................................................14 1.6 General meeting.........................................14 1.7 Reporting requirements.........................15 1.8 Incorporation...............................................15 1.9 Listed companies.......................................16 2. PARTNERSHIPS....................................................16 2.1 General............................................................16 2.2 General partnerships...............................16 2.3 General partnerships with proportional liability................................17 2.4 Limited partnerships...............................17 3. NORWEGIAN BRANCH OF A FOREIGN COMPANY......................................17 IV. REAL ESTATE..................................................................18 1. GENERAL..................................................................18 1.1 Concessions.................................................18 1.2 Form requirements...................................18 1.3 Legal framework........................................18 1.4 Ground lease................................................19 1.5 Standard contracts...................................19 1.6 Real estate agents....................................20 2. ACQUISITION OF REAL ESTATE...................20 2.1 Alienation Act..............................................20 2.2 Transaction structure..............................20 2.3 Contract conclusion..................................21 2.4 Due diligence................................................21 2.5 Signing and closing....................................22 2.6 Financing........................................................22 2.7 Tax and duties..............................................23 3. LEASE OF REAL ESTATE..................................24 3.1 Tenancy Act...................................................24 3.2 Standard contracts...................................24 3.3 Lease period.................................................24 3.4 Rent..................................................................25 3.5 VAT.....................................................................25 V. EMPLOYMENT..............................................................26 1. GENERAL..................................................................26 2. WORKING HOURS...............................................26 3. EMPLOYMENT CONTRACTS........................26 4. REDUNDANCIES AND DISMISSALS.........26 4.1 Justified dismissal.....................................27 4.2 Employee discussions.............................27 4.3 Notice and notice period........................27 4.4 Claims of wrongful dismissal...............28 5. TRIAL PERIOD........................................................28 6. TEMPORARY ENGAGEMENTS....................28 7. NON-COMPETE CLAUSES..............................29 8. HOLIDAY PAYMENTS.........................................30 DOING BUSINESS IN NORWAY 4 – Grette 9. PENSIONS................................................................30 9.1 Minimum requirements..........................30 9.2 Pension schemes.......................................30 9.3 Change of pension scheme...................31 9.4 Transport of pension................................31 9.5 Pensionable income..................................31 10. FOREIGN EMPLOYEES.....................................31 11. BUSINESS TRANSFER......................................32 VI. TAX............ ..........................................................................33 1. CORPORATE INCOME TAX..............................33 2. TAXATION OF RESIDENT COMPANIES .......33 2.1 General............................................................33 2.2 Expenses........................................................33 2.3 Capital gains.................................................33 2.4 Losses.............................................................34 2.5 Participation exemption method.......34 3. PETROLEUM TAX.................................................35 4. TAXES ON ASSETS.............................................35 5. EMPLOYER CONTRIBUTIONS......................35 6. INTERNATIONAL ASPECTS............................35 6.1 Resident companies.................................35 6.2 Non-resident companies........................36 7. GROUP TAXATION...............................................36 8. TRANSACTIONS...................................................37 9. TRANSFER PRICING..........................................37 9.1 General............................................................37 9.2 Reporting and documentation requirements...............................................37 9.3 Thin capitalisation.....................................38 10. PARTNERSHIPS....................................................38 11. TAX ADMINISTRATION.....................................38 12. TAXATION OF INDIVIDUALS..........................39 13. VAT ...............................................................................39 13.1 General.........................................................39 13.2 Place of taxation.....................................39 13.3 Non-resident enterprises...................40 VII. INTELLECTUAL PROPERTY..................................42 1. GENERAL..................................................................42 2. PATENTS...................................................................42 2.1 National patents.........................................42 2.2 PCT applications........................................42 2.3 EPO patents.................................................42 3. TRADEMARKS.......................................................42 3.1 National trademarks................................42 3.2 Madrid Protocol.........................................43 3.3 Community trademarks.........................43 4. DESIGN REGISTRATIONS................................43 5. COPYRIGHT............................................................43 6. DOMAIN NAMES..................................................44 7. TMT..............................................................................44 8. PRIVACY AND E-MARKETING.......................44 VIII. DISPUTE RESOLUTION..........................................46 1. GENERAL..................................................................46 2. COURT SYSTEM...................................................46 2.1 General............................................................46 2.2 Conciliation boards...................................46 2.3 District courts.............................................47 2.4 Courts of appeal.........................................48 2.5 Supreme Court............................................48 3. OTHER COURTS OF LAW.................................48 4. ENFORCEMENT OF JUDGEMENTS RENDERED BY FOREIGN COURTS.............49 5. DEBT COLLECTION.............................................49 6. ARBITRATION........................................................49 FINAL NOTE ..........................................................................51 CONTACTS .............................................................................53 DOING BUSINESS IN NORWAY Grette – 5 The Norwegian market offers great business opportunities and excellent legal framework conditions for foreign enterprises, both within the oil and gas sector, which is one of Norway’s major areas of business, and also within various other areas of business and industry. As a result of Norway’s outstanding financial and economic position, which is – among others – based on the income from its oil and gas resources, public investments will continue at a significantly higher level than in other European countries. In the years ahead, the Norwegian government will be looking at comprehensive investments, for example in the Norwegian infrastructure, and thus there will be many interesting business opportunities within construction. In addition, Norwegian private households are relatively wealthy compared with other European countries, and the unemployment rate is very low. Hence there will also be business opportunities in the private sector involving consumer goods and other products. Norway is not a member of the European Union (EU), but it is a member of the European Economic Area (EEA). As a consequence, a large number of Norwegian laws are harmonised with European laws. However, there remains a huge variety of national laws which are either not fully governed by the EEA Agreement or are not fully harmonised for other reasons. For example, in Norwegian civil law, certain areas such as consumer protection law and commercial agency law are harmonised with, or even based on, European law, whereas other areas are still purely national law. The latter also applies to Norwegian tax law. This guide to “Doing business in Norway” aims to provide an introduction to various legal aspects which we suggest foreign enterprises should be aware of before entering the Norwegian market. Furthermore, this guide may be of help to foreign enterprises that have already established ongoing business activities in Norway. Oslo, February 2014 I. INTRODUCTION DOING BUSINESS IN NORWAY 6 – Grette II. CIVIL LAW 1. CIVIL LAW SYSTEM The Norwegian civil law system is based on a collection of written laws. However, unlike Germany or France, there is no general civil law book which consolidates legislation specific to civil law. All Norwegian written laws, whether relating to civil, criminal or public law, are collated privately by the University of Oslo in the collection ‘Laws of Norway’ (Norges Lover). Despite being privately published, this collection is used in all courts of law. A revised collection is published annually and a continuallyupdated version is available online (www.lovdata. no). The laws are organised in chronological order starting with the oldest law and ending with the newest law. One fundamental law in Norwegian civil law is the Norwegian Contracts Act of 1918, which regulates the rules regarding offer and acceptance when entering into a contract. As a rule, there are no requirements regarding the form of the contract, and thus both oral and written contracts are considered to be binding in Norway. There is no need for notarisation of contracts, and only a very few contracts require written form or certification of the signatories’ signatures. Norwegian law also relies quite heavily on legal precedent as set by the judgments of the courts of law, especially the Norwegian Supreme Court. However, the application of precedent is not identical to that of the common law countries. Norwegian Supreme Court judgments are used as guidance in order to find the correct interpretation of the laws. 2. CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS The United Nations Convention on Contracts for the International Sale of Goods (CISG) has been in effect in Norway since 1 August 1989. It is worth noting, however, that Norway has filed declarations under Article 92 and Article 94. The Article 92 declaration means that Part II of the CISG regarding the formation of a contract does not apply. The Article 94 declaration means that the CISG as a whole does not apply to the sale of goods between parties resident in Norway, Denmark, Finland, Iceland or Sweden. With the exception of Part II, the CISG was incorporated into Norwegian law in the Norwegian Sale of Goods Act of 1988. Thus, the Norwegian Sale of Goods Act applies to international sales of goods except for certain provisions which do not apply to sales between parties resident in the Scandinavian countries. The UNIDROIT principles have been the subject of considerable attention in Norwegian academic and commercial circles. The UNIDROIT principles are seen as providing a possible alternative to the situation created by the Norwegian refusal to accept Part II of the CISG. However, the UNIDROIT principles have not played a significant part in the premises of the judgements by the Norwegian Supreme Court. 3. COMMERCIAL AGENCY CONTRACTS The Norwegian Agency Act of 1992 regulates commercial agency contracts in order to protect the interests of the commercial agent against the principal. The parties cannot enter into a commercial agency contract that binds the commercial agent to a less favourable agreement than that which follows DOING BUSINESS IN NORWAY Grette – 7 from the Norwegian Agency Act. It is not possible to enforce a contract which favours the principal more than is permitted by the Norwegian Agency Act. The most important rule under the Norwegian Agency Act is that the commercial agent may claim compensation from the principal upon termination of the contract. The size of such compensation must be calculated on the basis of new customers and increased business won from the commercial agent’s activities. However, the compensation is limited to the average of one annual commission over the last 5 years. In line with other European countries, the Norwegian laws regarding commercial agents are based on EU directives implemented by the EEA Agreement. The Norwegian Agency Act – including, for example the rule on compensation becoming due upon termination of the contract – is, therefore, similar to rules in other EU/EEA countries. 4. CONSTRUCTION CONTRACTS 4.1 Norwegian construction contracts Norwegian Standard (NS) contracts provide standard sets of terms and conditions. NS contracts are initiated and prepared by a committee consisting of experts appointed by interest groups, and then approved and published by Standard Norway, the Norwegian member of ISO (International Organization for Standardization) and CEN (Comité Européen de Normalisation). While for the most part ISO has developed technical standardisations, Standard Norway has mainly developed standards for the real property, construction and electronics industries. NS regulates how testing, certification and accreditation are to be carried out. Nonetheless, NS is merely a proposed solution for the contracting parties, and making it a part of the contract, either through a simple reference or by inclusion of the text, is optional. Even though the incorporation of NS in a contract is optional, NS are commonly used and looked upon as agreed documents. Furthermore, NS often refers to relevant EU directives, national laws and regulations, and provides a more detailed description of these. One purpose of NS is to contribute to making products, production processes and services more expedient and secure. All NS carry a number beginning with “NS” such as NS 8405 which is the basic construction contract. However, certain standard documents containing technical specifications carry other identification numbers including numbers which are used Europewide. 4.2 Norwegian offshore contracts In the Norwegian offshore industry, various standard contracts for different purposes are available. Norwegian Fabrication (NF) contracts contain standard terms and conditions for the fabrication and production of large components, mainly for the petroleum industry on the Norwegian continental shelf. NF contracts are comprehensive documents and are revised periodically. The current contract is from 2007 (NF 07) and is an agreed document negotiated by the Hydro and Statoil companies (merged to form StatoilHydro in 2007, and now DOING BUSINESS IN NORWAY 8 – Grette II. CIVIL LAW renamed Statoil) on one side and by the Technology Companies’ Union (TBL, known as Norwegian Industry since 2006) on the other side. NF are intended to provide continuous improvement in safety, health and environment and increased added value in the Norwegian petroleum industry. The Norwegian Total (NTK) contract is a similar standard contract, developed and negotiated by the same parties as NF 07 and intended for use of contracts regarding deliveries that include engineering, procurement, construction and installation (EPC(I) - Engineering, Procurement, Construction (Installation)) for the Norwegian continental shelf. The current contract is from 2007 (NTK 07). In addition, the parties have developed the NTK 07 Mod which is meant for modification contracts which contain a significant amount of new building work. In addition, standard terms and conditions have been developed for contracting within the subsea segment (NSC 05) and the supply of machinery and other mechanical, electrical and electronic equipment (NL 09). The Norwegian Subsea Contract 05 (NSC 05) is a set of standard conditions developed for contracting within the subsea segment on the Norwegian continental shelf. The intended application of the NSC 05 is contracts for marine operations such as installation of pipelines, cables, umbilicals and other subsea structures as well as related subsea construction work where the use of vessels is involved. The standard captures both contracts containing only installations, as well as full EPC(I) type contracts and addresses specific risks in connection with subsea work and the operation of vessels. The General Conditions for the Supply of Machinery and other Mechanical, Electrical and Electronic Equipment in Denmark, Finland, Norway and Sweden (NL 09) were issued in 2009 and are also used by suppliers of components to the offshore industry. The NL 09 replaces the earlier NL 01 and is based on the terms and conditions developed by ORGALIME, the European Engineering Industries Association. Additional terms to NL 09 have also been developed, named NLT and NPV, meant for deliveries containing either assembling or software. 5. CONSUMER PROTECTION 5.1 Consumer protection laws There are several rules aimed at strengthening consumer rights and protection in various sources of law in Norway. The most important rules are contained in the Norwegian Right of Cancellation Act of 2000, the Norwegian Marketing Practice Act of 2009, the Norwegian Trade and Craft Service for Consumers Act of 1989, the Norwegian Housing Construction Act of 1997, the Norwegian Alienation Act of 1992, the Norwegian Tenancy Act of 1999 and the Norwegian Consumer Purchase Act of 2002. The consumer protection laws are all in accordance with various EU directives regarding consumer rights. These consumer rights should therefore not differ significantly from the consumer protection laws and regulations in other EU/EEA countries. One notable difference, however, is the 5-year warranty period under the Norwegian Consumer Purchase Act which applies to all goods made for a lifetime significantly longer than 2 years. The lifetime of DOING BUSINESS IN NORWAY Grette – 9 products must be assessed individually. However, most consumer electronics, including mobile phones, are covered by the 5-year warranty period. For products with a shorter expected lifetime, a warranty period of 2 years applies, similar to other European jurisdictions. Consumers can forward complaints regarding consumer affairs to the Norwegian Consumer Council and the Norwegian Market Council, which amongst other things can intervene and pass judgment in some consumer-related cases. This allows consumers to resolve their disputes more simply than going through the courts of law. 5.2 Consumer Purchase Act The Norwegian Consumer Purchase Act, like the Norwegian Sale of Goods Act, consists of regulations regarding the sale and purchase of goods. Whilst the Norwegian Sale of Goods Act regulates purchases between any private parties, the Norwegian Consumer Purchase Act regulates purchases where the buyer is a consumer and the seller, or his representative, functions as a professional commercial seller. The Norwegian Sale of Goods Act is designed to meet the needs of sales and purchases in the business world, and was not designed for consumer purchases. Hence the Norwegian Consumer Purchase Act was the result of a need for a set of rules that would provide adequate protection for consumers in particular. The legislation in both laws is for the most part similar. However, the Norwegian Consumer Purchase Act generally has lower thresholds and more lenient terms and conditions when it comes to the type of claims a consumer can make due to breach of contract by the seller. The Norwegian Consumer Purchase Act is also mandatory, which means that the parties cannot agree to terms that would be less favourable to the consumer than those contained in the act. 6. STATUTE OF LIMITATION In Norway, like most other jurisdictions, claims fall under the statute of limitation and, thus become time-barred at the expiration of the applicable limitation period. Pursuant to the Norwegian Statute of Limitation Act of 1979, the general limitation period is 3 years. The general limitation period commences on the day on which the creditor is first entitled to demand performance. In the event of claims for compensation due to any breach of contractual obligations, the general limitation period commences on the day on which such a breach occurs. With regard to claims which had not been asserted due to the fact that the creditor lacked necessary knowledge of the claim or the debtor, such claims are subject to an additional limitation period of 1 year. The additional limitation period shall commence on the day on which the creditor first obtained, or should have obtained, knowledge of the claim and the debtor. However, such additional limitation period of 1 year shall not lead to the general limitation period being prolonged for more than 10 years. As a result, any such claim becomes time-barred at the very latest 13 years from the commencement of the general limitation period. DOING BUSINESS IN NORWAY 10 – Grette II. CIVIL LAW In addition to the general limitation period of 3 years, there are specific limitation periods provided for by other laws. Furthermore, as to the general limitation period, the parties may agree to a limitation period shorter than 3 years and, after the claim has arisen, to prolong the limitation period by up to additional 10 years. The statute of limitation may be interrupted by acknowledgement of the claim by the debtor or by initiating legal proceedings against the debtor. Unlike other jurisdictions, negotiations between the parties to the claim are not sufficient. Even if a claim has not become time-barred, the claim may no longer be asserted if the period within which the counterparty must be notified of the claim, has expired. Such notification periods may be agreed upon by the parties or are provided by law. An example of such notification periods is the warranty periods under the Norwegian Consumer Purchase Act. With regard to contracts on the international sale of goods, it is worth noting that the Convention on the Limitation Period in the International Sale of Goods – which provides for a limitation period of 4 years – applies if, at the time of the conclusion of the contract, the places of business of the parties are in contracting states. Norway is party to such convention. However, Norway is not party to the amendments by the protocol adopted in 1980, which provides that the convention also applies if the rules of private international law make the law of a contracting state applicable to the contract. Furthermore, the convention does not apply to contracts concluded by parties with places of business in Denmark, Finland, Iceland, Norway and Sweden. 7. ACQUISITION RESTRICTIONS 7.1 General There are no general restrictions on foreigners acquiring assets (asset deals) or shares and interests in Norwegian companies and partnerships (share deals). However, some restrictions may apply due to the Norwegian Competition Act of 2004, which regulates the control of concentrations between enterprises through the Norwegian Competition Authority. In addition, there are also certain restrictions on acquiring real property which are regulated by the Norwegian General Concession Act of 2003. 7.2 Competition Act The material law of structural control (merger control etc.) contained in the Norwegian Competition Act is in line in many material aspects with the EU merger regulations such as Council Regulation No 139/2004 and the system adopted by the EEA Agreement. This includes the definition of concentration. The Norwegian Competition Authority shall intervene against a concentration if it finds that the concentration will create or strengthen a significant restriction of competition. However, the Norwegian Competition Authority shall, on the same conditions, also intervene against the acquisition of minority shares. If an acquisition of minority shares has been made through successive purchases, the Norwegian Competition Authority may intervene against the transactions that have taken place within two years of the date of the most recent acquisition. Such intervention may include prohibitions, orders and conditional approvals. DOING BUSINESS IN NORWAY Grette – 11 As a main rule, concentrations must be notified to the Norwegian Competition Authority. The obligation to notify transactions does not apply to acquisitions of minority shares. As under the EU merger regulations, the Norwegian system contains revenue thresholds. If the involved undertakings do not exceed these thresholds, there is no need to file a notification with the Norwegian Competition Authority. Therefore, only concentrations where the involved undertakings each have an annual turnover in Norway exceeding NOK 100,000,000 and a combined annual turnover in Norway being equal to or exceeding NOK 1,000,000,000 must be notified to the Norwegian Competition Authority. Thus, if only one of the undertakings concerned has an annual turnover in Norway exceeding NOK 100,000,000, the notification is not required. Only turnover realised in Norway will be taken into account irrespective of whether the undertaking is Norwegian or foreign. The abovementioned thresholds apply to the “involved undertakings”. In a merger, the involved undertakings are the parties being merged. In an acquisition, the involved undertakings are the purchaser and the target company (share deal). If only a certain division of an undertaking is acquired (asset deal), it is – besides the purchaser – only the acquired division that is deemed an involved undertaking. The seller of an undertaking or a part thereof is not deemed an involved undertaking. In the event of an acquisition, the turnover of all undertakings which are members of the same group as the purchaser must be included for the purposes of calculating the total turnover of this group. Intragroup transactions must be deducted. Regarding the target company, the turnover of the target company and the turnover of its subsidiaries must be included for the purposes of calculating the total turnover of the target group. Again, intra-group transactions must be deducted. The Norwegian legal system also contains regulations on cartels and the abuse of dominant positions. In this respect, the Norwegian legal system is even more in line with the EU regulations, and the definitions of cartels and abuse are direct translations of the EU regulations. Norway has also adopted a leniency system which may allow for a full pardon or a partial reduction in fines to companies that co-operate with the Norwegian Competition Authority in revealing illegal market behaviour. For example, a company participating in a cartel will, under certain conditions, be entitled to a full pardon if it provides the Norwegian Competition Authority with sufficient evidence of the other company’s participation in the cartel. 7.3 General Concession Act The purpose of the Norwegian General Concession Act is to regulate and control the acquisition of real property in order to preserve agricultural areas and maintain an ownership structure which will preserve the needs of future generations, the agricultural industry, the environment and land for development, and also help maintain the population in rural Norway. In principle, all acquisitions of real property require a concession. However, a general exemption exists DOING BUSINESS IN NORWAY 12 – Grette for real property which is built upon and which is smaller than 10 ha with less than 2.5 ha of cultivated land. It should be noted, however, that local municipalities may impose a requirement for the dwelling to be a permanent residence, in order to prevent houses being used solely as holiday homes. II. CIVIL LAW DOING BUSINESS IN NORWAY Grette – 13 III. BUSINESS ENTITIES Thus, in the event of a cash contribution to the bank account of the company, the cash may be used instead of keeping it in the bank account. Different classes of shares with different rights can be established in the articles of association. However, the default situation is that there are no different classes of shares and hence all shares are equal, i.e. they carry equal rights and have the same nominal value. Change of ownership of shares in an AS, which has been incorporated as from 1 January 1999, requires the consent of the company unless it is specified in the articles of association that the shares are freely transferable. The company’s consent is given by the board of directors but consent may only be withheld on reasonable grounds, and on grounds set out in the articles of association. The other shareholders of an AS also have the right of first refusal upon any transfer of shares unless otherwise specified in the articles of association. However, with regard to the ASA, and an AS which has been incorporated prior to 1 January 1999, the shares in the company are freely transferable unless there are restrictions specified in the articles of association. 1.3 Board of directors The AS must have a board of directors consisting of a minimum of 1 board member elected by the general meeting. The articles of association may state the number of members of the board of directors, or state the lowest and highest number of members. The ASA must always have at least 3 members of the board of directors, and if the company has a 1. LIMITED LIABILITY COMPANIES 1.1 General In Norway, limited liability companies may be incorporated either as a private limited liability company (aksjeselskap – AS) or a public limited liability company (allmennaksjeselskap – ASA). The AS can be compared to the UK private limited liability company and the German Gesellschaft mit beschränkter Haftung (GmbH), and the Norwegian ASA can be compared to the UK public limited company and the German Aktiengesellschaft (AG). As with their UK and German counterparts, the major difference between the AS and the ASA is that only the ASA may be listed on a stock exchange and thus have access to the general capital market. Both the AS and the ASA are companies where none of the shareholders has personal liability for the obligations of the company. The AS and the ASA are regulated by two separate laws, which are the Norwegian Private Limited Liability Companies Act of 1997 for the AS, and the Norwegian Public Limited Companies Act of 1997 for the ASA. The two laws have a similar structure and the contents of both laws are largely identical. 1.2 Equity The minimum share capital of an AS is NOK 30,000, while the minimum share capital of an ASA is NOK 1,000,000. The entire share capital may be held by one single shareholder. After the contributions to the minimum share capital have been made, the share capital may be used by the board of directors and the managing director of the company at their sole discretion. DOING BUSINESS IN NORWAY 14 – Grette III. BUSINESS ENTITIES corporate assembly, the board must have at least 5 members. Much international attention has been focused on the requirement in Norway for each gender to be represented by at least 40% of the members of the board of directors of an ASA. The requirement is therefore gender-neutral but in effect has required an increased number of female board members. In both the AS and the ASA with more than 30 employees, the employees are entitled to elect between one and up to one third of the members of the board from among the employees. The exact number depends on the number of employees in the company. The employee board members have the same voting rights as the other board members. At least one half of the members of the board of directors must be resident in Norway or be citizens of, and with their residential address in, an EU/EEA country. 1.4 Corporate assembly Companies with more than 200 employees are required to have a corporate assembly unless the company and a majority of the employees agree not to have one. If such companies do not have a corporate assembly, the employees are entitled to an additional member of the board in addition to those already allocated to the employees by law. Two thirds of the members of the corporate assembly are elected by the general meeting and one third by the employees. The corporate assembly has responsibilities as specifically set forth by, or assigned to the corporate assembly pursuant to, applicable law. These responsibilities include electing the members of the board of directors as well as supervising the management of the company by the board of directors and the managing director. 1.5 Management The board of directors is responsible for supervising the management of the company. However, the day-to-day management is the responsibility of the managing director. Only the ASA is required to have a managing director to be appointed by the board of directors. In an AS, the company may elect not to have a managing director. If the company chooses not to have a managing director, the board of directors is responsible for the duties for which the managing director otherwise is responsible. The managing director must be resident in Norway or be a citizen of, and with a residential address in, an EU/EEA country. Under Norwegian law, managing directors qualify as employees. 1.6 General meeting The shareholders of both the AS and the ASA are represented in the general meeting. Resolutions by the general meeting are passed by a majority of the votes cast, unless otherwise provided for by law or in the articles of association. There are no quorum requirements for a general meeting which has been correctly called. Resolutions to amend the articles of association, however, require a majority of at least two thirds of the votes cast. Shareholders representing at least 10% of the share capital in an AS, and at least 5% of the share capital in an ASA, may demand that the board of DOING BUSINESS IN NORWAY Grette – 15 directors calls an extraordinary general meeting. All shareholders have the right to propose matters to be dealt with at the general meeting, and the board of directors is required to include all such matters on the agenda. Further, in an AS, if all shareholders agree, extraordinary general meetings may be held without having been called by the board of directors. Resolutions that are passed by the general meeting are legally binding on the company. 1.7 Reporting requirements As a rule, both the AS and the ASA are required to have an auditor. Annual accounts for the company must be prepared and audited and then approved by the ordinary general meeting within 6 months following the end of the business year. The approved annual accounts must be filed with the Norwegian Register of Company Accounts. However, if an AS qualifies as a small company, the AS may waive the requirement of having the annual accounts audited. In order to qualify as a small company, the AS must have, as a rule, an annual turnover of less than NOK 5,000,000, a balance sheet total of less than NOK 20,000,000 and no more than 10 employees. The waiver becomes effective upon registration in the Norwegian Register of Business Enterprises. If any of the above conditions are no longer met in a business year, the AS will have the annual accounts for the subsequent business year to be audited. 1.8 Incorporation The typical Norwegian subsidiary of foreign enterprises is the AS. The incorporation of an AS is relatively simple. The subscribers to the shares of the new company must draft a memorandum of association which also contains the articles of association. In addition, further information such as the shareholders, the members of the board of directors and the price payable for each share must be included. Furthermore, in the event of incorporation by means of contributions in kind, an opening balance sheet must be prepared by the subscribers and confirmed by an auditor. Finally, a declaration from an auditor or, in the event of cash contributions, a financial institution confirming payment of the share capital contribution must be attached. Both the AS and the ASA may be incorporated using cash or non-cash share contributions. However, non-cash contributions require the preparation of a report confirming the value of the assets. For the incorporation of an AS, this report may be prepared by the subscribers and then confirmed by an auditor. For the incorporation of an ASA, the report must be prepared by independent experts. If members of the board of directors or the managing director are to include foreign nationals, then these persons must apply for a D-number. A D-number is a registration number for foreign nationals in Norway, who are not registered in the Norwegian National Register, and therefore have not been assigned a Norwegian national identification number. Both the AS and the ASA must be registered with the Norwegian Register of Business Enterprises. When filing for registration, the memorandum of association, which also contains the articles DOING BUSINESS IN NORWAY 16 – Grette III. BUSINESS ENTITIES of association, must be included. Third parties may request copies of the articles of association. Therefore, it might be advisable for the articles of association to contain basic provisions only, whilst any other rules are set out in a shareholders’ agreement which does not have to be filed with the Norwegian Register of Business Enterprises. Certain information on Norwegian companies – and partnerships – is available on the Norwegian Register of Business Enterprises website (http:// www.brreg.no). However, such information does not replace the official register extracts which are only available in writing and, thus, must be ordered from the Norwegian Register of Business Enterprises. 1.9 Listed companies Changes in ownership of shares in an ASA listed on a Norwegian regulated market, such as the Oslo Stock Exchange, must be notified to the Norwegian Financial Supervisory Authority whenever a person’s shareholding exceeds or falls below 5%, 10%, 15%, 20%, 25%, one third, 50%, two thirds or 90%. Any person who acquires shares representing more than one third of the shares in an ASA listed on a Norwegian regulated market is obliged to make a bid for the remaining shares of the company. 2. PARTNERSHIPS 2.1 General Business activity may also be organised as a partnership. Partnerships are regulated by the Norwegian Partnerships Act of 1985. The Norwegian Partnerships Act defines a partnership as a commercial business which is conducted for the joint account and at the risk of two or more partners where the obligations of the partners together constitute the total obligations of the business, or where at least one has unlimited personal liability for the total obligations of the business. 2.2 General partnerships The general partnership is distinguished by the partners being jointly and severally liable for all the obligations of the partnership. Creditors must first seek payment from the partnership, but may then pursue individual partners for any outstanding amounts. There is no equity requirement for the formation of a general partnership. The partnership meeting is the highest authority of the partnership. There is no requirement for the general partnership to have a board of directors or a managing director. Should the partners decide to have a board of directors or a managing director, the Norwegian Partnerships Act contains rules for their organisation. All the partners are authorised to sign on behalf of the company unless otherwise stipulated in the partnership agreement or where there is a board of directors. All partners are eligible to vote at the partnership meeting, and all decisions must be unanimous, unless the partnership agreement provides for otherwise. As a rule, a general partnership is not required to undergo annual audits unless the general partnership has annual sales revenue of more than NOK 5,000,000. General partnerships which have annual sales revenue of more than NOK 5,000,000 have full accounting obligations including the preparation of annual accounts. DOING BUSINESS IN NORWAY Grette – 17 General partnerships must be registered with the Norwegian Register of Business Enterprises. When filing for registration, the partnership agreement must be included. Third parties may request copies of the partnership agreement. 2.3 General partnerships with proportional liability The basic structure of a general partnership with proportional liability is identical to that of the general partnership. However, the general partnership with proportional liability is distinguished by the fact that the partnership’s creditors can only hold each partner liable for a proportional share of the total obligations of the partnership. The apportionment of liability must be set forth in the partnership agreement and in order to be binding in relation to third parties, the partnership agreement must have been filed with the Norwegian Register of Business Enterprises. 2.4 Limited partnerships The limited partnership is distinguished by having one or more general partners with unlimited personal liability and one or more limited partners whose liability is limited to a set amount. As with general partnership, the limited partnership is regulated by the Norwegian Partnerships Act, but with certain amendments. Unlike Germany, for example, the general partners must commit to pay at least 10% of the partnership capital. The partnership meeting is the highest authority of the partnership. However, only the general partners are responsible for the management of the partnership. 3. NORWEGIAN BRANCH OF A FOREIGN COMPANY Foreign companies may operate in Norway as a Norwegian-registered foreign branch (Norskregistrert Utenlandsk Foretak – NUF). The branch must be registered as an NUF in the Norwegian Register of Business Enterprises. However, the branch is not a separate legal entity from the foreign company. Therefore, any legal acts such as the conclusion of any contracts are – in legal terms – executed by the foreign company itself. There has been a boom in Norwegians establishing a UK limited liability company with a share capital of GBP 1 and then operating in Norway as a NUF. This practice has been common amongst less serious actors and has given the NUF a somewhat tarnished reputation in Norway. However, there are also major international companies operating in Norway as NUFs. DOING BUSINESS IN NORWAY 18 – Grette 1. GENERAL 1.1 Concessions In principle, there are no legal requirements that must be fulfilled in order to own, lease or in other ways invest in real estate in Norway. However, direct acquisition of real estate (instead of acquiring the shares in a real estate company) is, as a rule, subject to concession pursuant to the Norwegian General Concession Act of 2003. The concession requirements are the same for both Norwegian individuals/companies and foreign individuals/ companies. In principle, all acquisitions of real estate require a concession. However, the exceptions from the Norwegian General Concession Act cover a broad spectre of real estate acquisitions, and concession is therefore rarely a risk in a real estate transaction. In respect to undeveloped large properties, agricultural areas, industrial properties or rights to waterfalls etc., stricter requirements apply. 1.2 Form requirements The main rule in Norwegian law is that there are no requirements regarding the form of contracts. An oral agreement is just as binding as a written one. Further, there is no need for notarisation of real estate acquisition contracts or any other contracts. Furthermore, legally binding contracts will be established already when the parties have agreed upon all of the main terms for the transaction. In other words, legally enforceable contracts may be entered into even if less important details in the contract are still not agreed upon and the contract has in fact not been signed. Thus, it is common – and recommendable – that professional parties, in negotiations regarding real estate lease and acquisition contracts, make the reservation that a binding contract can only be established when the contract and all of the terms have been considered and accepted by the board of directors, and that the contract has been duly signed. 1.3 Legal framework Unless the parties specifically have derogated from applicable law, the background law will supplement real estate acquisition and lease contracts. The direct acquisition of real estate (asset deal) is regulated by the Norwegian Alienation Act of 1992. However, the acquisition of shares in real estate companies (share deal) is initially regulated by the Norwegian Sale of Goods Act of 1988. Note that in addition, the Norwegian Alienation Act may apply to such share deals. Lease contracts are regulated by the Norwegian Tenancy Act of 1999, which supplements the terms of lease contracts. The Norwegian Alienation Act and the Norwegian Tenancy Act regulate the acquisition and lease, respectively, of both residential and commercial properties. In contracts between professional parties, one may derogate from most provisions of both acts, however, the acts are to a large extent invariable when one party is a consumer. Between professional parties, derogation from several provisions of the acts in favour of the lessor/seller is considered to be a standard practice within the market. Several other acts may apply to real estate transactions and the conclusion of lease contracts, such as IV. REAL ESTATE DOING BUSINESS IN NORWAY Grette – 19 the Norwegian Housing Cooperative Act of 2003, the Norwegian Housing Construction Act of 1997, the Norwegian Estate Agency Act of 2007, the Norwegian Property Unit Ownership Act of 1997, the Norwegian Mortgage Act of 1980, the Norwegian Easement Act of 1968, the Norwegian Land Registration Act of 1935 and the Norwegian Ground Lease Act of 1996. 1.4 Ground lease Generally, the owner of a building also owns the ground on which the building stands. However, ground lease is also extensively used in Norway, where the lessee leases the ground pursuant to a ground lease contract with the property owner and erects buildings for his own expense. When leasing the ground, the lessee owns the buildings, whilst the lessee leases the ground. Such ground leases are therefore generally entered into for a long period of time, usually for periods of 50 - 100 years. The ground lease model is widespread in Norway compared to other countries. There are approximately 350,000 ground leases in Norway, encompassing both residential and commercial properties. The Norwegian Ground Lease Act consists of several complicated legal issues, and the act is frequently amended due to political controversy regarding the ground lease model of ownership to the ground for residential purposes. In general, buildings based on a ground lease are valued lower than a full ownership. Furthermore, for contracts regarding commercial property, it is important to derogate from regulations in the Norwegian Ground Lease Act, which are meant to protect the consumer’s rights regarding housing. Any investor should be aware that the acquisition of property based on leased ground implies particular risk factors that must be thoroughly evaluated. 1.5 Standard contracts It is characteristic for the Norwegian real estate market that standard contracts have been developed, and are widely used, where the background law is replaced by contract based regulations. The contracts are updated approximately every second year, because of both changes in the legal framework and for incorporation of market signals. These contracts, for both the acquisition of and lease of real estate, are regarded as being relatively balanced and commercially sound, and regulate the most important and central terms that the parties should incorporate into a contract. Still, it is important to be aware of the fact that the contracts should be adjusted, in order to become suitable for the individual acquisition or lease. Furthermore, it is fair to say that the standard contracts, to some extent, have been seller/lessor friendly. However, in the recent past, the updates have been tilted more towards purchaser/lessee friendly terms. However, in negotiations between equal parties, it is common to grant the purchaser/lessee some improvement on the agreed balance of legal position. There are standard contracts for both direct acquisition of real estate (asset deals), and for the acquisition of real estate through acquisition of shares in a real estate company (share deals). Separate standard contracts for, respectively, the Norwegian private limited liability company and other company structures that are common in Norway have been developed. DOING BUSINESS IN NORWAY 20 – Grette IV. REAL ESTATE Various contract standards for lease contracts have also been prepared, such as for lease of new/used premises, lease of new/used complete buildings and bare-house lease contracts, which can be compared with – albeit with some distinctions – triple-net lease contracts. In addition, standard regulations for alteration for lease objects that are to be built/shall be adjusted for the lessee, have been made. One of the reasons for the widespread use of the standard contracts is that it simplifies the transaction process, including due diligence investigations, when the structure and content of both the acquisition contracts and the lease contracts are well known from before. This is a contributing factor to the relatively short time-span, and limited investigations during transactions in the Norwegian real estate market. 1.6 Real estate agents It is common practice to engage professional real estate agents who are specialised within the commercial real estate segment, both when acquiring or leasing property. In medium or large transactions, both parties are represented by real estate agents and lawyers. For more complex investment structures, investment firms with concession under the Norwegian Securities Trading Act of 2007 are key advisors for the parties involved in the transaction. 2. ACQUISITION OF REAL ESTATE 2.1 Alienation Act The direct acquisition of real estate in Norway, including both residential and commercial property, is governed by the Norwegian Alienation Act. If the transaction is structured as a share deal, the Norwegian Sale of Goods Act does apply, and the Norwegian Alienation Act may apply. Norwegian direct acquisition contracts are often less complex than standard acquisition contracts used in other countries, as the provisions of the Norwegian Alienation Act will apply as background law. Therefore, as a main rule, the parties to a real estate transaction only agree on provisions regarding specific matters in respect of which they want to derogate from the Norwegian Alienation Act. It is important to be aware of the fact that under the Norwegian Alienation Act, the seller of real estate is liable for substantial hidden defects, even if the property is sold “as is”. However, the parties to a commercial real estate transaction normally derogate from the Norwegian Alienation Act in this respect, as the seller limits its liability to situations where information given by the seller to the purchaser has been incorrect or incomplete. More specific elements, in order to protect the purchaser, are typically governed by guarantees from the seller. Furthermore, under the Norwegian Alienation Act, the time period within which the purchaser may claim damages due to any defects which the seller is liable for, is 5 years. Still, the claim may become time-barred due to the limitation period of 3 years having expired. However, the parties to a commercial property transaction normally derogate from the Norwegian Alienation Act in this respect as well, and agree on a period of which the seller is liable for any defects of 1 or 2 years. 2.2 Transaction structure In an asset deal structure, the purchaser acquires the title to the real estate. The acquisition contract DOING BUSINESS IN NORWAY Grette – 21 is then entered into directly with the owner of the real estate. In a share deal structure, the purchaser does not acquire the title to the property itself, but to the shares in the company which owns the real estate. The real estate is therefore not transferred to the purchaser, but remains with the company in which the shares have been acquired. Share deals are normally relevant only when the target’s single purpose is to own real estate. The purchaser is normally not interested in acquiring other assets or taking over other risk factors. The share deal structure also has an impact on the legality of using the target company’s assets, i.e. the real estate, as mortgage when financing the share acquisition. Most transactions of commercial real estate in Norway are share deals, and in addition to the aforementioned reasons, a share deal will often involve lower transaction costs due to lower taxes and duties than what is the case for asset deals. 2.3 Contract conclusion Transactions for commercial real estate in Norway are characterised by having very short offer deadlines compared to the common practice in other countries. Seeing as the purchaser’s offer and the seller’s acceptance form the basis for the contract that is to be entered into, it is very important that one is careful in the preparation of the offer. Over the last years, however, the market has been adjusted to the expectations from foreign investors which conduct more thorough investigations. The basis for the parties’ subsequent agreement will be the purchaser’s and seller’s agreed acceptance of the offer. In practice, this is done by the purchaser making an offer on certain terms which the seller may accept, or perhaps make a counter offer with different terms. This negotiation process will usually last a relatively short period of time, often only a few days. During the offer and acceptance period, it is customary that the parties make reservations for satisfactory financing and for significant findings during technical/financial/legal due diligence and that the boards of directors of the respective parties approve the final acquisition contract that the parties shall negotiate. When the parties have reached an agreement on the contents of the acceptance of the offer, the next phase of the acquisition process – which is the due diligence and further contract negotiations – begins. It is customary to agree upon a deadline for when the due diligence shall be finalised and when all reservations in the offer shall be lifted. 2.4 Due diligence Prior to closing a real estate transaction, it is recommended to carry out a due diligence. If one does not carry out a due diligence before making an offer for real estate or a real estate company, one should make reservations for the closing of the transaction being subject to any findings in the due diligence. The due diligence process will vary and be more extensive in a share deal structure than in an asset deal structure. In the event of an asset deal, one would normally go through the financial, technical and legal aspects of the real estate. This can typically be the legal basis for the ownership, tax and VAT issues, encumbrances, lease contracts that DOING BUSINESS IN NORWAY 22 – Grette follow the real estate, management agreements, public permissions and development plans. In a share deal structure, one will, in addition to the above, conduct a review of the company in which the shares are acquired. Seeing as the purchaser takes over all of the company’s obligations, it is therefore important to examine the company’s obligations towards any employees, tax and duty positions, documents such as minutes from board of directors meetings and general meetings, as well as other contractual commitments the company may have. Simultaneously with the due diligence process, the parties will usually negotiate further on the provisions in the acquisition contract regarding conditions and guarantees. The contract will often, but not necessarily, be based on a standard contract. 2.5 Signing and closing Legally binding contracts may be established through negotiations, regardless of whether some of the details in the contract remain to be agreed upon. It is therefore customary to make reservations both regarding signing the contract and the board of directors’ approval, in order to avoid that the contract becomes legally binding. When a final agreement has been reached on all details in the contract, the parties will lift these reservations and the contract can be signed. Pursuant to Norwegian law, the contract will be legally binding when the parties have signed it. A notarisation of the contractual documents is, as opposed to what is the case in some other countries, not necessary in Norway. In the contract, the parties will have scheduled a time for closing, the time where the risk and rights to the real estate or the shares are transferred from the seller to the purchaser and where the seller receives payment. In a share deal, the new shareholder is entered into the shareholder register of the company, and in an asset deal, the real estate should be transferred by deed and the purchaser should be registered in the Norwegian Land Registry. The registration in the Norwegian Land Registry is not a condition in order to carry out the transfer of title to the real estate from the seller to the purchaser. However, such registration is necessary for the purchaser to obtain legal protection against good faith third parties and seller’s creditors. The closing process is a very important part of the transaction process, and without professional assistance the parties will be exposed to unnecessary risk, such as bankruptcy of the other party. It is therefore customary that the parties use a settlement broker to assist with the settlement. 2.6 Financing If the real estate is purchased as a share deal, there are certain legal limitations for using the real estate as security for the loan obtained for acquiring the shares in the company. Generally, it is against the law to establish mortgage in the target company’s assets as security for the acquisition of shares in the target company. There is, however, an exception for mortgages in real estate that is fully developed by single purpose companies with no other creditors. If the bank claims security in other assets, for example cash flow under the lease contracts, a dispensation from the authorities must be obtained. IV. REAL ESTATE DOING BUSINESS IN NORWAY Grette – 23 If the company has employees, is engaged in real estate management or real estate development, the company will not be considered to be a single purpose company within the above meaning and, due to this, there will basically be no possibility of establishing valid mortgages on the real estate. If the real estate is nevertheless used as security, the result will be that the mortgage is invalid and may expose the bank or the purchaser to substantial economic loss. 2.7 Tax and duties On the direct sale of real estate, the seller must pay tax on any profits generated under the sale. The income tax rate is currently 27%. If the transaction is made as a share deal, the seller must pay tax on any profits as well. If the shares are owned by an individual, the income tax rate on the profits will be 27%. However, if the shares are owned by a company, Norwegian tax law has a significantly reduced tax rate, as long as no share dividend is paid out to individuals (exemption method). If the seller in a share deal structure is a company, only 3% of the taxable profits will be taxed with 27%. The effective income tax on the profits is therefore only 0.81%. In an asset deal structure, it is customary to register the purchaser as the new owner of the real estate in the Norwegian Land Registry. The registration itself triggers a small fee of NOK 525. In addition, there is a stamp duty of 2.5 % of the real estate’s sales value. As a main rule, the Norwegian Land Registry calculates the stamp duty from the purchase price, but if the purchase price differs from market value, the market value will form the basis for calculating the duty. There is no stamp duty for share deals. There is no obligation to register the new purchaser in the Norwegian Land Registry, and the stamp duty will only accrue if such registration is made. However, registration is the only way the purchaser can ensure itself against extinction from good faith third parties and against creditor seizures from the seller’s creditors. It is recommended that the purchaser is registered despite the stamp duty, but in some cases – e.g. where the purchaser is taking a very short-term ownership in for example development projects – it may be financially beneficial to omit registration. Alternatives do exist, but they are not adequate safeguards against good faith third parties and seller’s creditors. When a real estate transaction is conducted as an asset deal, the purchase price, or parts of it, can be depreciated for tax purposes. However, when a real estate transaction is conducted as a share deal, the value of the real estate has already been subject to depreciation for some time. The effects are that the purchaser obtains a lower property value for tax deduction purposes, and that the purchaser acquires an unrealised tax liability that may be an advantage if the purchaser intends to sell the real estate as an asset deal. This, amongst other tax and VAT related issues, will normally be taken into consideration when calculating the purchase price of the shares. The parties usually agree upon using the value of the real estate as a basis for the calculations of the purchase DOING BUSINESS IN NORWAY 24 – Grette price. The purchase price of the shares shall be equal to the real estate value including the additions and deductions of the real estate company’s tax and VAT liabilities, as well as gains or rights to adjustments related to VAT. In connection with reduced depreciation basis, the parties will usually agree upon making a deduction equal to a percentage of the difference between the real estate value, after the deduction of the estimated market value of the land, (because of the fact that the land does not qualify for any depreciation charge) and the basis for tax depreciation on the real estate as per closing. The agreed percentage is normally between 9% and 11%, but this may vary and depends on which of the different depreciation groups that apply. Technical installations in buildings have a higher depreciation rate than the building itself, and the depreciation rate may vary for different types of buildings as well. All supplies of goods and services are generally subject to VAT. The standard VAT rate is 25%. However, the supply of real estate (land and buildings) is exempt (without credit) for VAT purposes. Although the supply of real estate is VAT exempt, the lease of real estate benefits from an option of tax scheme. This scheme implies that VAT may be deducted for construction, maintenance and, in general, most costs related to the real estate, to the extent that the real estate is used for purposes that are VAT liable. Adjustment rules for such deducted VAT apply to a variety of transactions such as mergers, demergers and asset deals. VAT clauses in the agreements and separate VAT adjustment agreements are essential tools in successfully closing real estate transactions. 3. LEASE OF REAL ESTATE 3.1 Tenancy Act Lease contracts are governed by the Norwegian Tenancy Act which applies to the lease of both residential and commercial properties. As the Norwegian Tenancy Act is regarded as rather tenant friendly, commercial parties normally agree on extensive deviations from the Norwegian Tenancy Act. 3.2 Standard contracts As mentioned above, there are several standard contracts for different types of commercial real estate leases, based on generally accepted commercial market standards. The main deviation from the standard contracts and the Norwegian Tenancy Act implies that the lessor gets a more secure cash flow as the tenant can not withhold or deposit rent, or set off the rent with claims against the lessor. The lessor’s maintenance obligations is also usually, to a large extent, transferred to the tenant, as the tenant must pay for renovations of parts of the leased real estate. With regard to the Norwegian Tenancy Act, the standard contracts also set significant restrictions on the tenant’s possibility to sublet the leased real estate, as well as restrictions on the possibility of selling the shares in the tenant company. 3.3 Lease period Commercial lease contracts are normally entered into for a long period of time, for example 5, 10, 15 or even 20 years. The contract can normally not be terminated by either party during this period. The lease contracts often provide an option in favour of the tenant to renew the lease contract on the same terms for one or more shorter periods. IV. REAL ESTATE DOING BUSINESS IN NORWAY Grette – 25 3.4 Rent Normally, a fixed rent is paid on the lease of business premises, but for the lease of retail or restaurant/ catering premises, it is customary that the tenant pays a lease based on a percentage of the revenue, although no less than a minimum fixed rent. The tenant will normally cover a proportionate share of the real estate’s common costs which are paid during the year, before a final settlement takes place the following year, when the lessor has a complete overview of the actual costs. When making the settlement, the tenant will generally have the right to inspect the lessor’s accounts showing the common costs. Typical common costs will be electricity for heating and lighting of the common areas, technical installations that serve the tenants of the building, public dues, renovation, cleaning and maintenance of common areas as well as maintenance of technical installations such as ventilation and lifts etc. As a main rule, the rent is subject to an annual regulation in accordance with the consumption price index. 3.5 VAT The lease of real estate is exempt for VAT purposes, however, leasing benefits from an option of tax scheme. The consequences of opting to pay tax for lease of real estate are that input VAT may be deducted on costs, whilst the consideration (rent) is subject to output VAT at the standard rate of 25%. The option to pay tax is therefore beneficial when the lessee is taxable for VAT purposes with a right to deduct input VAT. In order to benefit from this, a number of formal requirements must be met by the lessor, such as voluntary registration and detailed accounting. Formal requirements must also be met by the lessee. Breach of such formal requirements has severe consequences for both parties. The clauses regarding VAT in the lease contract regulates which one of the parties that must bear any VAT loss or other VAT related disadvantages, and are therefore essential. DOING BUSINESS IN NORWAY 26 – Grette 1. GENERAL Norwegian employment law is codified, in particular, by the Norwegian Employment Act of 2005. The Norwegian Employment Act applies to all employees including employees in leading positions and managing directors. As a rule, it also applies to employees working in Norway for foreign employers. The Norwegian Employment Act regulates matters such as limits on working hours, requirements for employment contracts, redundancies and dismissals, working environment, employer obligations and employees’ status and rights in connection with business transfers (asset deals). 2. WORKING HOURS As a rule, normal working hours must not exceed 9 hours per 24 hours and 40 hours per 7 days. However, the employer and the employee may agree in writing that such working hours can be exceeded, provided that over a period not exceeding 52 weeks, the average working hours are not longer than 9 hours per 24 hours and 40 hours per 7 days. Working hours may be prolonged to 9 hours per 24 hours and 48 hours per 7 days through a written agreement between the employer and the employees. However, the average working hours may not exceed 9 hours per 24 hours and 40 hours per 7 days over a period not exceeding 52 weeks. 3. EMPLOYMENT CONTRACTS All employment contracts must be issued in writing. In employment relationships with a total duration of more than one month, a written employment contract must be entered into as soon as possible, and no later than one month following commencement of the employment. In employment relationships with a shorter duration than one month, a written employment contract must be entered into immediately. The employment contract must state all factors of major significance for the employment relationship, including: • the place of work, or, if there is no fixed or main place of work, information to the effect that the employee is employed at various locations and stating the registered place of business or, where appropriate, the address of the employer • a description of the work or the employee’s title, position or category of work • the date of commencement of the employment • the expected duration of the employment and if the employment is of a temporary nature • provisions, where appropriate, in relation to a trial period of employment • the employee’s right to holiday and holiday pay and the provisions concerning the fixing of dates for holidays • the period of notice applicable to the employee and the employer • duration and timing of the agreed daily and weekly working hours • salary 4. REDUNDANCIES AND DISMISSALS Employees in Norway benefit from strong legal protection. It is therefore of great importance to act in compliance with required procedures and to take into consideration the stipulations of the Norwegian Employment Act. V. EMPLOYMENT DOING BUSINESS IN NORWAY Grette – 27 4.1 Justified dismissal Employees may not be dismissed unless the dismissal can be justified objectively by circumstances relating to either the employer or the employee. The provision is based on individual objectivity, which entails that the dismissal has to be justified in relation to the individual employee. Dismissal due to cuts in production, reorganisation and similar events are usually considered justified providing that the employer does not have any other suitable work to offer the employee within the enterprise. The employer must therefore consider whether other suitable forms of work exist. When dismissals are due to reorganisation, the employer must also weigh the needs of the enterprise against the disadvantages caused by the dismissal for the individual employee. Alternative solutions must be considered, i.e. relocating the employee, reducing hours etc. The employer also has to exercise great care when selecting which employees are to be given notice. Relevant factors are the length of service, qualifications and social conditions. A dismissal due to a breach of the employee’s obligations under the employment contract or of any other work related duties is, as a rule, also considered justified. However, in these cases the employer must also weigh the needs of the enterprise against the needs of the employee. 4.2 Employee discussions Before making a decision regarding dismissal, the employer shall, to the extent that it is practically possible, discuss the matter with the employee and the employee’s elected representatives, unless the employee does not desire this. The purpose of the discussion is to ensure that the decision is made on the correct basis. The employee should be informed about the reason for the meeting in advance, and should be informed about the right to bring an elected representative or another counsellor, i.e. a lawyer. In the meeting, the employer should explain the reason for the dismissal. The employee should be given the opportunity to give his or her point of view. In addition, the employer should seek information on the employee’s potential social conditions, i.e. any family responsibilities, which may be taken into consideration in the balance of interests. 4.3 Notice and notice period Notice must be delivered in writing. Notice from the employer should be given to the employee personally or sent by registered letter to the address provided by the employee. It is advisable to give notice in writing to the employee and to have the employee sign a copy of the written notice as evidence that the employee has received the written notice and the time when the notice was received. The notice period depends on the employee’s age and seniority and varies from one to 6 months. The notice period starts from and includes the first day of the month following the month in which notice was given. During the notice period, the employer is obliged to offer work to the employee, and the employee is obliged to work, unless the parties agree otherwise. DOING BUSINESS IN NORWAY 28 – Grette V. EMPLOYMENT 4.4 Claims of wrongful dismissal If the employee is of the opinion that the dismissal is wrongful, the employee may request negotiations with the employer within 2 weeks of receiving the notice. Furthermore, the employee may sue the employer within 8 weeks of the date on which the negotiations were concluded, or if negotiations were not held, within 8 weeks of receiving the notice. If the employee has sued the employer, the employee is, as a rule, entitled to continue working until the courts of law have made a final decision in the matter, i.e. until the possibilities for appeal have been exhausted, or until the time limit for appeal has lapsed. 5. TRIAL PERIOD The employer and employee may agree that the first period of employment is to be regarded as a trial period. This must be included in the employment contract. The purpose of such a trial period is a mutual right to see how the parties work together. The maximum trial period is 6 months. It may be regarded as easier to terminate the employment in the trial period. The dismissal must be on the grounds of the employee’s lack of suitability for the work, or lack of proficiency or reliability. However, the employee may still be given notice due to circumstances relating to the employer or the employee. Unless otherwise stated in the employment contract or in a collective wage agreement, the notice period during the trial period is 14 days. 6. TEMPORARY ENGAGEMENTS As a rule, employment relationships must be permanent. However, it is accepted that temporary engagements are necessary in some cases. Examples of permitted temporary engagements include: • if a temporary engagement results from the nature of the work and if such work differs from the normal work of the employer • as a temporary replacement for another person or persons Unless otherwise agreed in writing or laid down in a collective wage agreement, temporary employment contracts shall expire at the end of the agreed period or when the specific work is completed. An employee who has been employed for more than 1 year shall receive written notification of the date on which the employment terminates, not later than 1 month prior to such date. If the time limit is not observed, the employer cannot require the employee to leave until 1 month after notification has been given. If the provisions for temporary engagements are not fulfilled, the employee may demand that the employment be considered permanent. This question may be decided by the courts of law. In the event that the temporary engagement is considered unlawful, the employee may also claim compensation. Norway implemented the Temporary Employment Agency Directive No 2008/104/EC in July 2012. The purpose of the directive is mainly to improve the working conditions of employees who are not employed by, but only hired-in by an employer. Central in the directive is the requirement for equal treatment DOING BUSINESS IN NORWAY Grette – 29 which involves that the salary and further principal working conditions for such employees shall at least be equivalent to the conditions these employees would have if they were employed by the employer to perform the same type of work. The principle of equal treatment applies to both private and public employers when hiring-in manpower, both from Norwegian and foreign temporary employment agencies. The formal employer – the temporary employment agency – shall ensure that the employees are granted the working conditions as provided for in the directive. 7. NON-COMPETE CLAUSES As a rule, non-compete clauses can be included in the employment contract, on the condition that the clauses do not constitute an unreasonable obstacle to the employee’s chance of making a living, and that the clauses do not go further than necessary with regard to protecting the employer against competition. This restriction also applies to employees in leading positions and to managing directors. The employer is not completely free to fix the duration of non-compete clauses – it must be assumed that the courts of law will be reluctant to accept non-compete clauses which will be effective for more than 2 years after the employment has been terminated. The test of unreasonableness is an overall evaluation where no individual element in itself will be decisive. Elements taken into account in the evaluation include the following: • whether the non-compete clause restricts the employee’s access to another employment • geographical area • size of any possible compensation • duration of the non-compete clause Should the non-compete clause in question represent a violation of the Norwegian Contracts Act, this may entail that the clause will cease to apply, but the courts also have the alternative of revising the clause. For example, courts have upheld the noncompete clause, but limited its duration. Against this background, the Norwegian government proposed to amend the Norwegian Employment Act in respect of these types of non-compete clauses. According to the proposal, such clauses may only be agreed upon for a certain duration and must be in writing. Furthermore, the employer has to prove that special conditions exist which justify the non-compete clause. Such special conditions might be the employer’s basic needs for protection against competition, the employee’s position and the consequences for the employee. In addition, such clauses are only enforceable if the employee resigns himself and receives certain compensation. If the non-compete period is for no longer than 6 months, the compensation must be equal to at least 50% of the employee’s total annual salary at the time of resignation. If the non-compete period is for longer than 6 months, the compensation must be equal to at least 100% of the employee’s total annual salary. Non-compete clauses for a duration of longer than 1 year are not enforceable. During the non-compete period, the employer may demand information about the former employee’s salary at his new employment and, under certain circumstances, reduce the size of the compensation. DOING BUSINESS IN NORWAY 30 – Grette 8. HOLIDAY PAYMENTS According to the Norwegian Holiday Act of 1988, employees are entitled to at least 4 weeks and 1 day of vacation. The normal holiday entitlement in Norway is, however, 5 weeks. During the holiday period, employees do not receive any salary, but they do receive holiday pay. However, holiday pay is earned on the basis of the salary for the previous year. Holiday pay amounts to 10.2% of the salary for the previous year in cases where the holiday is 4 weeks and 1 day, and 12% in cases where the holiday is 5 weeks. This means that during the first year of employment an employee is not entitled to any holiday payments and in the second year the holiday pay is pro-rata for the period the employee worked in the first year. 9. PENSIONS 9.1 Minimum requirements According to the Norwegian Act on Mandatory Occupational Pensions of 2005, Norwegian employers have to ensure occupational pension for their employees. All employers with a minimum of 2 employees, each with working hours and a salary of 75% or more have to provide a pension scheme. This also applies to all employers with at least 1 employee who does not have ownership interest in the employer company, with working hours and salary of 75% or more, as well as all employers with employees, each with at least 20% working hours and salary if these employees together make up for at least 2 fulltime positions. The following minimum requirements apply to the pension scheme: • the contribution amount shall be set at a minimum of 2% of the employees’ salary, between 1 and 12 times the Norwegian national insurance scheme base rate which currently amounts to NOK 85,245/year • the costs from the pension scheme shall be covered by the employer • the pension savings shall continue even if the employee becomes disabled 9.2 Pension schemes The employer is allowed to choose between a defined contribution scheme, a defined benefit scheme or a so-called hybrid pension scheme. A defined contribution scheme is a pension scheme where the employer, each year, sets aside an amount based on a percentage of the employees’ salary at a minimum of 2%. The defined benefit scheme is a pension scheme where the employer decides on the future pension level for the employees at the time when they reach the pension qualifying age, often between 60% and 70% of the salary after deduction of payments by the Norwegian national insurance scheme. The defined contribution scheme is a far more predictable solution for the employer, whilst the defined benefit scheme may lead to greater uncertainty for the employer regarding the annual payments. The third type – the hybrid pension scheme – is a mix of the defined contribution scheme and the defined benefit scheme which combines the benefits from the other two pension schemes. V. EMPLOYMENT DOING BUSINESS IN NORWAY Grette – 31 9.3 Change of pension scheme Many employers see the need to change their pension scheme from a defined benefit scheme to the more predictable defined contribution pension. As a rule, a change such as this is allowed. This basically implies that the employer can unilaterally modify the employees’ pension scheme. The prerequisite is that the employer has not, by agreement or otherwise, committed itself to maintaining the existing pension scheme. To determine whether the employer is entitled to unilaterally modify the pension scheme, a specific evaluation of the contractual relationship between employer and employees must be implemented. 9.4 Transport of pension If an employee leaves the employer, the employee will receive a pension capital certificate (a so-called paid-up policy) if the employee has been a member of the pension scheme for 12 months or more. This capital may normally be transferred to a new employer, but it is also possible for the employee to continue saving on the employee’s own account. If the employee has been employed for less than 12 months, as a rule, the saved up funds will be transferred back to the employer. 9.5 Pensionable income The pensionable income is basically all taxable income from personal services. Whether varying additions such as bonuses are to be included in the pensionable income must be assessed specifically. Pension schemes that meet the statutory requirements are tax-favoured. The employer obtains tax-deductible expenses while the employees avoid taxation of payments and returns during the saving period. Pensions paid out are taxed as pension income, i.e. with low contributions to the Norwegian national insurance scheme. 10. FOREIGN EMPLOYEES In order to work in Norway, most foreign employees will need to acquire a residence permit which includes a right to work. Work is defined as any kind of work or business activity, whether for remuneration or not. Employees may apply for a residence permit from within Norway. Employees in enterprises from EU/ EEA countries, who are performing services in Norway on a temporary basis, can work in Norway without a permit for up to 3 months. If the stay is going to last for more than 3 months, a residence permit with a right to work is required. Applications for residence permits which include the right to work must be filed with the local police station if the employee is already living in Norway. Otherwise, the application should be filed with a Norwegian foreign service mission. Citizens from the EU/EEA countries may enter Norway freely, and take up employment right away. They may stay and work in Norway for up to 3 months without a residence permit. For employment lasting longer than 3 months, they need to apply for a residence permit which includes a right to work. If they are seeking employment, they may stay in the country for 6 months without such a permit. Again, applications for residence permits which include the right to work must be filed with the local police station if the employee is already living in NorDOING BUSINESS IN NORWAY 32 – Grette way. Otherwise, the application should be submitted to a Norwegian foreign service mission. The employee will also receive a so-called D-number which is a registration number for foreign nationals in Norway, who are not registered in the Norwegian National Register, and therefore have not been assigned a Norwegian national identification number. The D-number is required when communicating with public authorities and when carrying out certain transactions in Norway, for example opening a bank account in Norway. Both Norwegian and foreign employees must be registered in the Register of Employers and Employees (Aa-register) at the Norwegian Social Security Authority (NAV). Foreign employees working on construction or building sites or on the Norwegian continental shelf are exempt from this requirement. They should be reported to the Central Office – Foreign Tax Affairs (SFU). 11. BUSINESS TRANSFER In the event of a business transfer (asset deal), the employees being part of the business are transferred from the seller to the buyer by operation of law. The provisions of the Norwegian Employment Act which apply to such business transfers are based on the European Directives 77/187/EEC, 98/50/EC and 2001/23/EC. The significant test for the application of these provisions is as to whether: • the business being transferred represents an independent economic unit • such unit is transferred to a new owner • the unit keeps its identity subsequent to the transfer However, the employees may object to the transfer (objection right). If such objection were to occur, it would result in the employees not being transferred to the buyer. If an employee objects to the transfer to the buyer, the employment relationship will be terminated and, thus, will not continue with the seller. However, if later on, the seller intends to hire a new employee for the same position, the former employee may claim to be preferred, i.e. to be hired instead of any third persons (preference right). Such claim must be made within a period of one year from the business transfer. If no objection is made within the applicable time period, the consequence is that the employee is regarded as employed by the buyer. If the employee then does not wish to be employed by the buyer, the employee may terminate the employment relationship by giving termination notice to the buyer, however, subject to applicable notice periods. However, if the employment conditions are changed by the buyer essentially, the employee may claim his employment relationship to be continued with the seller. This right is not set forth in the Norwegian Employment Act, but based on decisions by the Norwegian Supreme Court. Neither the seller nor the buyer may dismiss employees due to the business transfer alone. However, the surplus of employees, which may arise for the buyer as a result of the transfer, may be solved by redundancies. The buyer, however, must follow the Norwegian Employment Act’s requirements for objective termination reasons and the procedure that the act otherwise requires. V. EMPLOYMENT DOING BUSINESS IN NORWAY Grette – 33 1. CORPORATE INCOME TAX Companies tax resident in Norway are subject to a corporate income tax of 27%. Special tax regimes apply to income from the exploration of petroleum resources, shipping income and income from the production of hydropower. Companies resident in Norway are taxed based on their worldwide income. Non-resident companies are taxed based on their Norwegian source income only. For tax purposes, partnerships are considered as transparent and taxation is therefore done on the partners’ level. 2. TAXATION OF RESIDENT COMPANIES 2.1 General Generally, all kinds of income derived from any source may be taxed as corporate income in Norway, for example ordinary business income, interest and dividends, capital gains on the disposal of assets and ownership interests, as well as foreign-source income. 2.2 Expenses When computing net taxable income, the general principle is that all ordinary expenses incurred in connection with obtaining, or securing, an income, or an income source, are deductible. As a starting point, deductible business expenses include interest on debts, losses on bad debts, management fees, indirect taxes, salaries and related social security contributions, losses on the sale of bonds or shares and formation expenses. Distributed dividends are not deductible when computing taxable income. All interest on business debts is deductible, whether paid periodically or discounted. However, new interest deduction rules are implemented from 2014. The interest deduction rules include restrictions on the deduction of interest paid to related parties. Research and development costs directly related to an asset must be capitalised. Otherwise, such costs may be deducted immediately. Entertainment expenses, excess depreciation charges (i.e. where financial reporting depreciation exceeds tax depreciation), appropriations, donations, taxes on income, extraordinary charges with no relation to normal business and bribes as well as similar payments, are not deductible. The amount of tax-allowable depreciation is determined by the tax legislation and may differ from the accounting rules. There are two alternative methods for determining the deductible amount: • the declining balance method which applies to most tangible assets and goodwill as well as provides for statutory depreciation rates which are designed to match, as far as possible, the economic depreciation, varying from 2% to 30% and is not intended to allow build-up of any reserves • the linear method which applies to intangibles that are not covered by the declining balance method Land and plots are not depreciable, whilst commercial buildings may be depreciated. 2.3 Capital gains There is no separate tax on capital gains, and hence capital gains are taxed as ordinary income at the general income tax rate of 27%. Capital gains are VI. TAX DOING BUSINESS IN NORWAY 34 – Grette only included in ordinary income on realisation. As a general rule, capital gains are computed to the selling price less the historical costs reduced by tax-deductible depreciations. For capital gains arising from the disposal of assets used in the normal course of business, Norwegian tax law allows the seller to defer taxation on parts of the gain to later years under certain conditions. 2.4 Losses Operating losses incurred in business, including losses on receivables, are normally deductible from other income in the year in which they occur. Losses may be carried forward and set off against profits without limitation in time. When a company is liquidated, losses may be carried back and set off against profits of the preceding 2 years. Otherwise, a carry-back of losses is not allowed. 2.5 Participation exemption method For corporate shareholders, an exemption regime (exemption method) is applicable for dividends and gains on shares. As a starting point, the exemption method applies to, for example, private and public limited liability companies and share funds. For companies covered by the exemption method, gains on shares are generally tax-exempt. Corresponding losses will accordingly not be deductible. Intra-group dividends from Norwegian companies are exempt if the shareholder owns and controls more than 90% of the subsidiary, or the ultimate parent owns and controls, directly or indirectly, more than 90% of the shares in both companies. Intra-group dividends from companies resident in an EU/EEA country are also 100% exempt if the dividends qualify under the participation exemption method. Dividends from a company which is not part of a tax group are also tax-exempt, with the exception of 3% of the company’s total amount of received dividends, which are taxable at 27%. The exempt dividends are accordingly subject to effective taxation of 0.81%. Dividends and capital gains on shares of Norwegianresident companies are tax-exempt irrespective of the participation and holding period. Dividends and capital gains on shares in companies resident in an EU/EEA country are also exempt, irrespective of the participation and holding period. However, companies resident in a low-tax jurisdiction within the EEA must be genuinely established and conduct real economic activity (substantial business test) to be comprised by the exemption method. The interpretation of the substantial business test is not entirely clear and will be based on the particular facts and circumstances. Dividends and capital gains on shares in a company resident outside the EEA, but not residing in a lowtax jurisdiction, are tax-exempt provided that the shareholder holds at least 10% of the shares and capital for a period of minimum 2 years. Dividends and gains on shares in companies in low-tax jurisdictions outside the EEA are not tax-exempt, and losses on such shares will be deductible. VI. TAX DOING BUSINESS IN NORWAY Grette – 35 Norwegian branches of foreign companies are covered by the participation exemption method irrespective of the state of residency of the foreign company. 3. PETROLEUM TAX All petroleum-related income on the Norwegian continental shelf is governed by the Norwegian Petroleum Tax Act of 1975; however, the general tax legislation will also apply. The petroleum tax regime is characterised by a very high marginal income tax rate of 78%, which to some extent is offset by relatively generous tax deductions, such as the immediate expense of all exploration costs, linear tax depreciation, a higher allowance for special tax purposes and a tax deduction for financial costs related to upstream business activity. The income tax under the Norwegian Petroleum Tax Act comprises the ordinary corporate tax rate of 27% and a special tax rate of 51%. There are no ring-fencing arrangements, and all exploration costs may be deducted. The state will give companies in a loss position a cash refund of the tax value (i.e. 78%) on the exploration costs. This also applies to the tax value of any unused losses the company may have when going out of the exploration and production business. A norm price, set by a separate norm price board, replaces the actual sales price when calculating the taxable gross income from the sale of crude oil, regardless of the actual sales price being higher or lower. There is no dividend withholding tax on distribution from profits subject to the special tax of 51%. 4. TAXES ON ASSETS Companies do not have to pay any wealth tax on their net assets. However, in some municipalities, companies have to pay tax on real estate located in such municipalities. 5. EMPLOYER CONTRIBUTIONS Employers with employees working in Norway are required to pay employer contributions on the gross remuneration received by the employees, including benefits in kind and pension contributions. An employer resident abroad is also required to pay employer contributions in respect of employees working in Norway, subject to a possible exemption. Employer contributions are deductible for corporate income tax purposes. The rate of employer contributions depends on where in Norway the business is carried out. The general rate is 14.1%, but reduced rates apply to certain regions and municipalities in northern Norway and other sparsely populated areas. There are 5 zones with reduced rates of 10.6%, 7.9%, 6.4%, 5.1% and 0%. 6. INTERNATIONAL ASPECTS 6.1 Resident companies Limited liability companies and partnerships incorporated under Norwegian law and registered in the Norwegian Register of Business Enterprises, as well as foreign companies whose effective management and control at board level is carried out in Norway, are considered to be tax-resident in Norway. DOING BUSINESS IN NORWAY 36 – Grette 6.2 Non-resident companies According to Norwegian law, the threshold for nonresident companies to be considered to have a taxable present in Norway is very low. Generally, according to bilateral tax treaties, companies that are conducting, participating and carrying out business in Norway from a fixed place will be considered having a permanent establishment (PE) in Norway. If a company is deemed to have a PE in Norway, the foreign company becomes liable for tax on all income allocated to the Norwegian business. The allocation of income between a foreign head office and a Norwegian permanent establishment should be calculated according to the arm’s-length principle. A foreign company may run a business in Norway through the agency of a broker, a commission agent or some other independent representative, and the sole presence through such will not constitute a permanent establishment. Most Norwegian bilateral tax treaties are based on the OECD Model Convention, and accordingly the definition of permanent establishment included therein is applicable. Activities on the Norwegian continental shelf related to petroleum resources will always constitute a taxable presence pursuant to Norwegian domestic law. The companies are therefore taxable from the first working day. In relation to tax treaty states, the companies may be taxable after 30 days. Gains on shares realised by non-resident corporate shareholders are not liable for tax in Norway unless the foreign shareholder has a permanent establishment in Norway. The shares are in effect connected to the permanent establishment and are not covered under the participation exemption method previously mentioned. When the company ceases to be tax-resident in Norway, all business assets and liabilities are regarded as realised at marked value, and gains or losses are subject to tax or tax deduction. If assets are moved within the EEA, the tax payable on tangible assets (except for merchandise) may, subject to certain conditions, be deferred. For intangible assets and merchandise, the exit tax is definitive and is payable on the day of exit. Dividends paid to foreign shareholders are, as a general rule, subject to a 25% withholding tax. However, corporate shareholders resident in EU/ EEA countries are tax-exempt under the participation exemption method. Furthermore, the withholding tax rate will normally be reduced to 15%, or lower, when paid to corporate shareholders resident in tax treaty states. Interest and royalties paid to foreign companies are not subject to withholding tax. 7. GROUP TAXATION There is no consolidation of groups for tax purposes, but relief for losses may be claimed within a group by way of group contributions. Group contributions are deductible for the contributor and taxable income in the hands of the recipient. VI. TAX DOING BUSINESS IN NORWAY Grette – 37 A company resident in Norway which holds, directly or indirectly, more than 90% of the shares in other resident companies and which controls a corresponding number of votes in the general meeting may give a group contribution. Generally, the same applies to foreign companies resident within EEA which are considered comparable to Norwegian companies regarding group relief as long as they are taxable to Norway through a permanent establishment and the group relief is taxable to Norway. Also, under non-discrimination clauses of bilateral tax treaties, group relief is available for contributions made from branch of a foreign resident company to a Norwegian subsidiary of the same tax group. The tax deduction for a group contribution is conditioned by the contribution not exceeding the taxable income of the contributor, and that the requirements for contributions under the Norwegian Private Limited Liability Companies Act of 1997 as well as the Norwegian Public Limited Liability Companies Act of 1997, respectively, must be met. These acts require that any contribution from a company to a shareholder, except for repayment of the share capital, must conform to the rules concerning dividends. Both the contributor and the recipient must affirm that the required conditions are fulfilled at the end of the income year. Group contributions may be used by the recipient company to offset tax losses. When taking over another company by acquiring more than 90% of the shares, group contributions may be used to offset losses from years before the company was taken over. 8. TRANSACTIONS Mergers and demergers are, subject to certain requirements, allowed to be tax-free if all the companies involved are resident in Norway. Mergers will, if they are carried out in accordance with applicable Norwegian tax law, have continuity for tax purposes and thus maintain their tax positions. Cross-border mergers between companies within the EEA may be carried out tax-free if the transaction is carried out pursuant to the principles for fiscal continuity applicable in the state where the assigning company is resident. However, if the transferring company is resident in Norway, the company’s assets must be kept in a permanent establishment in Norway. If the assets are taken out of Norway, the assets will be liable to tax upon exit. Cross-border mergers and demergers will not be tax-exempt if one or more of the companies taking part in the merger or demerger is resident in a low-tax jurisdiction within the EEA, or if the company or companies do not fulfil the substance requirements. 9. TRANSFER PRICING 9.1 General Transfer pricing refers to the pricing of transactions between related parties, both domestic and crossborder transactions. Any transfer of tangible or intangible property or any provision of services or financial instruments within multi-national groups will trigger transfer pricing issues. Transfer prices of affiliated companies are to be fixed according to the arm’s-length principle. 9.2 Reporting and documentation requirements Transfer pricing documentation rules impose an obligation for companies to prepare specific transfer DOING BUSINESS IN NORWAY 38 – Grette pricing documentation as an attachment to their tax returns. Reporting requirements and transfer pricing documentation rules apply to companies that own or control, directly or indirectly, at least 50% of another legal entity. A Norwegian permanent establishment with its head office in a foreign country and a foreign permanent establishment with its head office in Norway are covered by the rules. Furthermore, partnerships where one or more of the partners are taxable in Norway are covered by the rules. The taxpayer must generally be prepared to file transfer pricing documentation (type and volume of the transactions, functional analysis, comparable analysis and a report of the transfer pricing method used) within 45 days of a written notice from the tax authorities. 9.3 Thin capitalisation Norwegian tax law contains no specific statutory or regulatory prescriptions on thin capitalisation but refers to the arm’s-length principle. All interest paid is, as a rule, deductible. The tax authorities may, in general, contest the deductibility of interest paid to a parent company if the paying company is thinly capitalised. Even though there is no general rule prescribing a specific debt-to-equity ratio, a debt-to-equity ratio of 20/80 will normally be acceptable. A 2010 Supreme Court decision (Telecomputing ASA) shows, however, that a higher ratio may be accepted as long as the loan is commercially sound. 10. PARTNERSHIPS Partnerships are treated as transparent for tax purposes and taxation is therefore done on the partners’ level, regardless of whether there is a distribution or not. The income is however, as a starting point, calculated in the same way as for companies. For partners covered under the participation exemption method, gains on the partnership shares may also be tax exempt under the participation exemption method. Such gains will be tax exempt provided that at least 10% of the partnership’s investments in shares are covered under the participation exemption method. 11. TAX ADMINISTRATION The income tax year follows the calendar year, and companies have to file tax returns by the end of May in the year following the income year. As the general rule, this also applies to foreign companies operating in Norway, but the company may apply for a diverging tax year. Penalty tax will be imposed if the company gives misleading or incomplete information about its income and this results in – or could have resulted in – an underassessment. The penalty tax can be raised to 45% or 60% if the information was filed intentionally or due to gross negligence. Rulings may be obtained from the tax authorities and from local tax inspectors in respect of direct taxes, social security contributions and VAT. The limitation period for reassessment at the taxpayer’s detriment is 2 years, but 10 years if the taxpayer has given misleading or incomplete information about his or her income. The limitation period for changes in favour of the taxpayer is 3 years. VI. TAX DOING BUSINESS IN NORWAY Grette – 39 12. TAXATION OF INDIVIDUALS Individuals who are considered tax-resident in Norway are subject to income tax on their worldwide income, regardless of where the income is earned or the asset is located. According to Norwegian law, a person generally becomes resident in Norway if present in Norway for a period exceeding 183 days during any 12-months’ period, or if the stay exceeds 270 days during any 36-months’ period. Income from personal services carried out through private or public employment in Norway by non residents temporarily in Norway, including persons sent to Norway by employment agencies, are taxable in Norway from day one. However, an applicable bilateral tax treaty can limit Norway´s right to tax. To the net income, a combined municipal and national tax rate of 27% applies. A marginal national tax of 9% applies to the personal income for the amount between NOK 527,400 and NOK 857,300 for all taxpayers, and a marginal tax of 12% applies to personal income that exceeds 857,300. These thresholds may vary from year to year. The social security contribution is 8.2%, and is paid in addition to municipal and national tax. Furthermore, individuals have to pay a wealth tax of 1% on the net assets that exceed NOK 1,000,000 in taxable value. In addition, in some municipalities, they have to pay tax on real estate located in such municipalities. 13. VAT 13.1 General The Norwegian value added tax (VAT) is a multi-stage, non-cumulative general tax on consumption of goods and services. It is payable to the tax authorities by the VAT registered person on the value that the person has added in the supply chain (output VAT less input VAT). As most other OECD countries, Norway applies a net consumption VAT, calculated according to the indirect subtraction method. The 27 EU member states and the 3 EFTA member states which are parties to the EEA Agreement form one single market governed by the same basic rules. However, since taxation, including indirect taxation, is not covered under the EEA Agreement, Norway is not required to harmonise its VAT law with the EU VAT law. Fiscal frontiers still exist between Norway and the EU, and transactions between the two are still treated as traditional import and export supplies with the associated customs formalities and paperwork. The standard rate of VAT is 25%. A reduced rate of 15% applies to foodstuffs. A super-reduced rate of 8% applies to passenger transport, the national television licence fee, cinemas, hotel and accommodation services as well as admission fees to museums, amusement parks and sports events. The zero rate applies to exports and a number of other supplies. 13.2 Place of taxation The Norwegian VAT Act of 2009 does not contain any specific provisions on the place of supply of goods and services. Certain principles can, however, DOING BUSINESS IN NORWAY 40 – Grette be deduced from various sections of the law and the relevant regulations. The starting point is the territoriality principle: transactions taking place in Norway are subject to Norwegian VAT, and, vice versa, transactions taking place abroad are outside the scope of Norwegian VAT. This general principle applies to the supply of both goods and services. In brief, the determination of the place of supply is based on: • the physical location of goods at point of supply • the actual place of performance of services • the place of use of services • the place of establishment of the supplier and the customer • the status of the supplier and the customer • the type of services supplied In general, the place of supply of goods is Norway if the goods are physically located in Norway when sold. If the goods are transported abroad, the place of supply remains in Norway, but the export sale is zero-rated. On the other hand, the sale of goods physically located abroad is outside the scope of Norwegian VAT. Imports are subject to Norwegian VAT merely by the fact that goods are entering Norwegian customs territory from abroad. This generally applies independently of the place where the supplier or the customer is established. The taxation of imports and the zero-rated exports reflect the destination of goods principle. Services physically performed in Norway, for example work on movable assets and real property located in Norway, are generally subject to Norwegian VAT, regardless of whether such services are performed by a resident or non-resident taxable person. On the other hand, services physically performed abroad are not subject to Norwegian VAT. With respect to services capable of delivery from a remote location, the place of supply is abroad if the recipient is resident abroad, and is an enterprise or a public body. For electronic communication services, the same applies irrespective of the foreign recipient’s status. The place of supply of services from abroad capable of delivery from a remote location to a Norwegian enterprise or public body is Norway if the recipient is resident in Norway. The mechanism for taxing the supply is not the registration of the foreign enterprise in Norway, but the customer accounting for the Norwegian VAT that is due. Entities that are not registered for VAT purposes, apart from private individuals, must file a special quarterly VAT return on the services purchased. 13.3 Non-resident enterprises In general, the VAT provisions applicable to resident enterprises apply to non-resident enterprises as well. A foreign enterprise with a place of business in Norway must be registered with the appropriate regional tax authorities if the enterprise makes supplies that are subject to VAT above the registration threshold of NOK 50,000. A foreign enterprise that does not have a place of business in Norway must be registered through a fiscal representative, provided that such enterprise makes supplies in Norway that are subject to VAT VI. TAX DOING BUSINESS IN NORWAY Grette – 41 above the said registration threshold and the reverse charge mechanism does not apply. The fiscal representative and the foreign enterprise are jointly and severally liable for correct reporting and any tax payable, unless a mutual information and collection agreement has been entered into with the state where the foreign enterprise is established. Such agreements are entered into between Norway and the following states: Belgium, the Czech Republic, Denmark, Finland, France, Iceland, Italy, Malta, the Netherlands, Poland, Portugal, Slovenia, Spain, Sweden and the United Kingdom. The representative must have his residence or place of established business in Norway. In practice, the foreign enterprise is registered with the regional tax authorities of the place of establishment of the representative. The Norwegian fiscal representative scheme is very business unfriendly and cumbersome. The EFTA Surveillance Authority (ESA) has issued a reasoned opinion concluding that parts of the rules represent a restriction on the fundamental freedoms under the EEA Agreement. The Norwegian government has changed some of the unfortunate features of the rules and has informed that further relaxation of the rules will take place. A foreign enterprise that is not required to register for VAT purposes in Norway may nevertheless claim a refund of input VAT paid for goods and services to be used for business purposes in Norway. A refund is granted if the VAT is attributable to an activity carried out by the enterprise abroad, provided that the enterprise would be required to be registered in Norway for VAT purposes if the activity were carried out there, and the VAT on the activity would be deductible. The Norwegian Ministry of Finance may make the refund subject to the condition of reciprocity, i.e. if the home country of the foreign enterprise offers Norwegian businesses the same refund opportunity, although such conditions have so far not been imposed. 42 – Grette DOING BUSINESS IN NORWAY 1. GENERAL Generally speaking, Norway has ratified most of the international conventions in the field of intellectual property. In addition, Norway has a well-functioning Patent Office that handles patent, trademark and design applications. Also, the Norwegian ordinary courts of law are well equipped to try cases within the area of intellectual property. 2. PATENTS 2.1 National patents The Norwegian Patent Office is a public administrative body which considers patent applications filed in Norway and grants Norwegian patents based on patent applications that fulfil the legal requirements. The Norwegian patent system is available both to residents and non-residents of Norway. If the Norwegian Patent Office refuses a patent, the applicant may appeal the decision to the Norwegian Board of Appeal for Industrial Property Rights. It is also possible for third parties to file for a post-grant opposition against a Norwegian patent in an administrative proceeding before the Norwegian Patent Office, and a decision by the Norwegian Patent Office may be appealed to the Norwegian Board of Appeal for Industrial Property Rights. A refusal to grant a patent may also be tried by the applicant before the ordinary courts. It is also possible for a third party to oppose a granted patent before the ordinary courts, or for the patent holder to file an infringement case against an infringing third party. Patent cases are tried in the ordinary court system. Thus, there are no special patent courts in Norway. However, the District Court of Oslo is the mandatory venue for patent cases in the first instance. All patent infringement cases as well as patent validity cases must be filed before the District Court of Oslo. 2.2 PCT applications Norway has ratified the Patent Cooperation Treaty (PCT). Therefore, it is possible to file for a Norwegian national patent with an earlier priority date from the PCT application, provided that Norway has been designated in the PCT application. 2.3 EPO patents With effect from 1 January 2008, Norway ratified the European Patent Convention (EPC), which means that patent applications filed with the European Patent Office (EPO) on or later than 1 January 2008 can be validated in Norway. One of the conditions for validation in Norway is that the patent specification is translated into Norwegian. A validated European patent enjoys the same protection in Norway as a national Norwegian patent. 3. TRADEMARKS 3.1 National trademarks The Norwegian Patent Office also handles national trademark applications and grants trademark protection in Norway. As in the case of patents, the Norwegian Patent Office offers a post-grant opposition system for third parties. Decisions by the Norwegian Patent Office may be appealed to the Norwegian Board of Appeal for Industrial Property Rights. Trademarks may also be opposed in the ordinary court system, which has the authority to delete VII. INTELLECTUAL PROPERTY DOING BUSINESS IN NORWAY Grette – 43 trademark registrations on the grounds that the statutory conditions for registration are not present, or on the grounds of non-use. However, the District Court of Oslo is the mandatory venue for trademark cases in the first instance, i.e. for trademark infringement cases as well as for cases concerning validity or non-use. 3.2 Madrid Protocol Norway has ratified the Madrid Protocol, therefore a trademark holder outside of Norway may designate Norway under the Madrid Protocol. 3.3 Community trademarks As Norway is not a member of the EU, community trademarks are not valid in Norway. 4. DESIGN REGISTRATIONS The Norwegian Patent Office also offers national design registrations. Norway has also ratified the Geneva Agreement, and Norway may therefore be designated in an application under the Geneva Agreement. The District Court of Oslo is the mandatory venue in the first instance for design infringement cases as well as validity cases. As Norway is not a member of the EU, Norway is not covered by a registered community design. 5. COPYRIGHT The Norwegian Copyright Act of 1961 protects an author’s rights in literary, scientific and artistic works, such as written works, musical works, visual art works and computer programs. The Norwegian Copyright Act also protects performing artists’ and producers’ rights. Norway has ratified the Berne Convention for the protection of literary and artistic works and the Rome Convention for the protection of performers, producers of phonograms and broadcasting organisations, and gives national treatment to authors from other Berne Convention signatory countries and performers and producers from other Rome Convention signatory countries. Copyright is not subject to registration in Norway. Norway is also obliged to implement EU directives in the field of copyright and has, for example, implemented the Copyright Directive No 2001/29/EC. Norwegian copyright applies extended collective licensing, i.e. collective societies may conclude license agreements that are valid also for copyright works in which non-members own the copyright. The primary area for collective licensing concerns literary works, which is managed by Kopinor, the reproduction rights organisation of Norway. Remuneration collected from the use of foreign works in Norway is distributed through collecting societies in the author’s home country, provided that a reciprocal agreement between the collecting societies has been entered into. Under Norwegian law, the author’s rights in copyright works may be transferred by the author to any third party. Norwegian law sets out that the copyright in computer programs written by an employee in the fulfilment of his obligations are automatically transferred to the employer, and this will often also be the case for other types of copyright works created in the course of 44 – Grette DOING BUSINESS IN NORWAY VII. INTELLECTUAL PROPERTY employment. However, the author may not waive his moral rights in the works in advance, such as the author’s right to be named and the right of respect towards the author and the work. 6. DOMAIN NAMES The publicly owned company UNINETT Norid AS runs the registry for the Norwegian national domain (.no) and maintains the .no database. UNINETT Norid AS is also responsible for the Norwegian domain name policy. Registrations of .no domain names are carried out by UNINETT Norid AS accredited registrars, a list of which can be found on UNINETT Norid AS’ website (http://www.norid.no). In order to register a domain name under the .no domain, the applicant must have a 9-digit Norwegian registration number from the Norwegian Central Coordinating Register for Legal Entities, which is the coordinating register for, among others, the Norwegian Register of Business Enterprises. NORID maintains a domain name dispute resolution policy, similar to the Uniform Domain-Name Resolution policy modelled by ICANN. Under the policy, third parties who have legitimate rights in the domain name may complain against domain name registrations that have been carried out in bad faith. This remedy is available for a period of 3 years after the domain name was registered or transferred to a new registrant. Complaints against domain name registrations may also be filed with the Norwegian ordinary courts, normally as a part of a trademark infringement case. 7. TMT TMT is an important industry in Norway, with a number of national service providers and a growing demand among customers. IT service providers offering to deliver IT services or software to the Norwegian public may be met by a set of State Standard Agreements (SSA) drafted by the public body the Agency for Public Management and eGovernment (DIFI). The SSA agreements are available in official English language versions, as well as in Norwegian, and can be found on DIFI’s website for public procurement (http://anskaffelser.no). IT service providers should note that these agreements are very customer-friendly and may need revision before being signed by the provider. Standard agreements drafted by the Norwegian ICT organisation IKT-Norge are also available. These tend to be more supplier-friendly. The Norwegian telecoms market is heavily regulated in order to counter-balance the market power of the former public telecommunication services provider Telenor. 8. PRIVACY AND E-MARKETING Norway has implemented the Data Protection Directive No 95/46/EC and data protection in Norway is therefore in line in all major aspects of the EU rules concerning data protection. Data processing carried out by controllers established in other EU/EEA countries can be done under the rules of the country of establishment, even if the processing concerns individuals resident DOING BUSINESS IN NORWAY Grette – 45 in Norway. Personal data may be transferred freely to and from Norway and other EU/EEA countries or other countries offering an adequate level of protection as decided by the EU commission, provided that the purpose of the transfer is in line with the purpose for which the data was originally collected. Norway has also implemented the E-Commerce Directive No 2000/31/EC and recognises that other EU/EEA countries can provide information society services under the rules of their respective countries of incorporation. Direct email marketing to individuals in Norway will, however, always be subject to Norwegian law, even if the sender of the emails is established in another EU/EEA country or in any other country. Norwegian law is based on an opt-in principle, and protects email addresses belonging to individuals, including email addresses issued by an employer to employees for use in connection with the employment. 46 – Grette DOING BUSINESS IN NORWAY 1. GENERAL Disputes between individuals and business entities as well as other private legal entities, and any disputes between individuals or private legal entities on the one hand and public authorities on the other hand, may be brought before the ordinary courts of law for mediation or judgement. In addition, the parties to a dispute may request the ordinary courts to issue preliminary injunctive orders, a form of interim relief. Parties to a dispute may initiate legal proceedings and represent themselves before the ordinary courts of law without being required to be represented or otherwise assisted by a lawyer. However, if the court is of the opinion that a party is not able to represent itself in a proper way, the court may require such a party to be represented by a lawyer. In the vast majority of cases, parties to litigation choose to have legal representation. Any Norwegian lawyer may represent any party before any Norwegian court. The only exception is the Norwegian Supreme Court where representation is only allowed by lawyers admitted to the Norwegian Supreme Court. Court fees are moderate, starting at NOK 4,300 for one day in court, and NOK 2,580 for each additional day. Thus, court fees do not depend on the value of the dispute. Whilst court fees are laid down by law, lawyers’ fees must be agreed between the lawyer and his client. Lawyers’ fees for representation in court are subject to Norwegian VAT and VAT has to be invoiced and paid on all legal assistance that relates to such representation. The general rule is that the party that wins the case is awarded costs. The court awards “necessary” costs and most courts will base their decision on the lawyers’ fee notes that are submitted at the end of the trial. It is not unusual for the court to award less than that what is requested. 2. COURT SYSTEM 2.1 General In Norway, the legal hierarchy consists of 3 instances: The district courts (first instance), the courts of appeal (second instance) and the Norwegian Supreme Court (third instance). Prior to bringing disputes to the district courts, any dispute will usually have to be heard before a so-called conciliation board for conciliation proceedings. The venue for any dispute brought before either the conciliation board or the district court is the venue upon which the parties to the dispute have agreed or, if the parties have not agreed upon a specific legal venue, the venue as otherwise set forth in the Norwegian Dispute Act of 2005. 2.2 Conciliation boards The conciliation boards are judicial bodies. They are comprised of 3 lay persons, often senior citizens, such as retired local politicians. Most of the municipalities have their own conciliation board, whilst some conciliations boards cover more than one municipality. The function and purpose of the conciliation boards is to try to assist the parties in reaching an amicable settlement. If the parties do not succeed in agreeing on a settlement, the conciliation board may render a judgement if the value of the dispute is lower than NOK 125,000 and if either of the parties requests a VIII. DISPUTE RESOLUTION DOING BUSINESS IN NORWAY Grette – 47 judgment, or if the value of the dispute is equal to or higher than NOK 125,000 and both parties request a judgment. In any other case, the conciliation board may not render a judgement. It may however continue the conciliation proceedings. In the event that conciliation does not succeed, the conciliation board shall discontinue its efforts to get the parties to reach a settlement and refer the case to the district court. Appeals against judgements rendered by the conciliation board may also be taken to the district court. For certain disputes, such as disputes in connection with real property lease agreements, the dispute must be brought before special conciliation boards instead of the general conciliation boards as described above. Special conciliation boards are not located in all municipalities. If there is no special conciliation board in a certain municipality, the disputes must be brought to the local general conciliation board. If the value of the dispute is equal to or higher than NOK 125,000 and if both parties are represented by lawyers, conciliation proceedings before the – general and special – conciliation boards are not mandatory, and the dispute may be brought directly before the district court. Hence a defendant can delay the process by abstaining from being officially (externally) represented by a lawyer in order to force the plaintiff to initiate conciliation proceedings. 2.3 District courts There are 66 district courts in Norway. The most important district court in terms of the number of disputes decided and staff is the District Court of Oslo. Proceedings before the district court are instituted by submitting a writ of summons to the court. Writs of summons can be submitted orally, although not if the plaintiff has legal representation, but are almost always submitted in writing. The writ of summons must include certain minimum information, such as the name of the court, the names and addresses of both parties, the claim upon which the action is based and the factual and legal grounds for the claim. In general, the writ of summons should provide a sound basis for both parties and the court to prepare and evaluate the case. The district court will serve the writ on the defendant, normally by post, and will set a deadline for the defendant to submit a defence plea. The deadline is normally 3 weeks from service of the writ. On the basis of the writ of summons and the defence plea, the district court will summon the parties to a case management conference in which the date of the main hearing is fixed, and certain other procedural matters are dealt with. The main hearing should be no later than 6 months from the date when the court received the writ of summons. The court will base its decision on the case on the main hearing. In the main hearing, the parties present all underlying facts and circumstances and provide evidence of the extent to which such facts or circumstances are in dispute. It is not sufficient to refer to written documents such as the writ of summons and the defence plea. In addition, each 48 – Grette DOING BUSINESS IN NORWAY VIII. DISPUTE RESOLUTION party presents its legal analysis supporting its claims, counterclaims and other motions. As a result, the hearings often take several days. Unless the parties agree on a settlement during the hearings, the district court decides the dispute by means of a judgement. Judgements are returned within 2 to 3 weeks after the main hearing. However, there are exceptions and it sometimes takes longer. 2.4 Courts of appeal There are 6 courts of appeal in Norway. In general, most judgements rendered by district courts can be appealed to a court of appeal within 1 month of the judgement being served. However, if the amount in dispute in the case is less than NOK 125,000, leave must be granted for the appeal to be heard by the court of appeal. A judgement may be appealed on the grounds of a wrongful decision based on underlying facts and circumstances or a wrongful application of the law, and on the grounds of wrongful application of mandatory procedures in the district court. Unless the parties agree to a settlement at the court of appeal, the court of appeal decides on the dispute by rendering a judgement. 2.5 Supreme Court A judgment rendered by a court of appeal may be appealed to the Norwegian Supreme Court in Oslo. Under certain conditions, judgements rendered by a district court may also be directly appealed (in part or as a whole) to the Norwegian Supreme Court. The appeals committee of the Supreme Court decides if the appeal is to be heard by the Supreme Court. Only about 13% of all civil appeals are heard. In order to be heard, the appeal should involve issues of relevance for other cases or issues of such general importance that they require a judgement from the Norwegian Supreme Court. 3. OTHER COURTS OF LAW As a rule, the ordinary courts of law have jurisdiction over almost all kinds of dispute. Hence there are no special courts for disputes relating to employment law, tax law, administrative law or criminal law, for example. All disputes including disputes relating to the said areas of law are brought before the ordinary courts of law. One of the few exceptions is the Norwegian Labour Court in Oslo. The Norwegian Labour Court decides on disputes relating to collective agreements. Therefore, as a rule, only the parties to collective agreements may bring such disputes to the Norwegian Labour Court. There is no possibility of appeal against the judgements rendered by the Norwegian Labour Court. Another exception is the Norwegian Social Security Court in Oslo which decides on social security and pension disputes arising under the Norwegian National Insurance Act of 1997. Judgements rendered by the Norwegian Social Security Court may be appealed to the court of appeal at the venue. In addition, there are 34 land consolidation courts and 5 land consolidation courts of appeal. They decide on land consolidation measures taken under DOING BUSINESS IN NORWAY Grette – 49 the Norwegian Land Consolidation Act of 1979. However, certain decisions by the land consolidations courts must be appealed to the general courts of appeal. Finally, the District Court of Oslo has exclusive jurisdiction over patent, trademark and design infringement as well as validity cases. 4. ENFORCEMENT OF JUDGEMENTS RENDERED BY FOREIGN COURTS Foreign courts do not have jurisdiction in Norway and as a rule, judgements rendered by foreign courts do not have any legal effect in Norway. Consequently, such judgements cannot be enforced in Norway. The major exception to this rule is the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters dated 30 October 2007, which became effective in Norway on 1 January 2010. On the basis of the Lugano Convention, judgements rendered by courts from states which have signed the Lugano Convention (EU/EEA countries) may be enforced in Norway, subject to having first been acknowledged by the Norwegian district court at the venue. Such recognition proceedings may take up to half a year. 5. DEBT COLLECTION In Norway, claims for payment of money may be enforced on the basis of payment requests (for example invoices) issued by the creditor to the debtor if the payment request complies with certain formalities and to the extent to which the underlying claim is undisputed between the parties. Therefore, from a debtor’s point of view, it is important to dispute any payment requests within the term of payment. In the event of a dispute, the creditor is not entitled to initiate enforcement directly, but has to bring the dispute to the conciliation board or the district court for conciliation, mediation or judgement. 6. ARBITRATION As an alternative form of dispute resolution, disputes may also be resolved by arbitration. According to the Norwegian Arbitration Act of 2004, arbitration proceedings are subject to the parties having mutually agreed to arbitrate, either in writing or orally. In the event of disputes to which a consumer is party, the arbitration agreement must have been entered into before the relevant dispute arose and must be confirmed by a written agreement signed by both parties. Furthermore, a consumer who actually engages in arbitration proceedings must be made aware of the limited availability of appeal or review by a judicial body. The consumer also has to be made aware of the fact that an arbitration agreement which does not fulfil the mandatory requirements, is not legally binding for him. Norway has ratified the New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards of 1958. In this respect it is worth mentioning that foreign arbitral awards rendered in other states which also are party to the New York Convention can actually be enforced in Norway. As this might not be the case for ordinary court judgements, parties to an international contract should consider arbitration as a possible better alternative to dispute resolution in the ordinary courts. DOING BUSINESS IN NORWAY 50 – Grette DOING BUSINESS IN NORWAY Grette – 51 FINAL NOTE This guide “Doing business in Norway” aims to provide an introduction to various aspects under Norwegian law. We hope that this guide is of assistance to foreign enterprises and anyone else who is interested in Norwegian law. Whilst we have taken reasonable care to ensure that the information in this guide is accurate and up to date at the date stated in the Introduction, we assume no responsibility for information in this guide that may prove to be insufficient, incorrect or outdated. This guide is only an information service and is not intended to replace legal advice. Recipients and readers of this guide should not rely on this information exclusively and should seek legal advice from us or from other lawyers qualified to advise on Norwegian law. Grette is a Norwegian law firm located in Oslo which provides advice and solutions to private and public enterprises across the entire field of business law. About 75 lawyers with first-rate expertise, a high level of professional skills and relevant hands-on industry experience put the clients’ needs and interests first. For further information on this guide as well as on Grette and our services, please contact Dr. Roland Mörsdorf at (+47) 94 17 65 30 or firstname.lastname@example.org.
DOING BUSINESS IN NORWAY Grette – 53 Jens Kristian Johansen Partner Email: email@example.com Mobile: (+47) 99 70 87 78 Dag Henden Torsteinsen Partner Email: firstname.lastname@example.org Mobile: (+47) 93 60 62 11 Dag Horsberg Hansen Partner Email: email@example.com Mobile: (+47) 90 73 14 03 Dr. Roland Mörsdorf Partner Email: firstname.lastname@example.org Mobile: (+47) 94 17 65 30 Thomas Alnæs Partner Email: email@example.com Mobile: (+47) 93 28 99 90 Nils Eriksen Partner Email: firstname.lastname@example.org Mobile: (+47) 95 25 50 40 Øystein Flagstad Partner Email: email@example.com Mobile: (+47) 91 34 85 01 Amund Brede Svendsen Partner Email: firstname.lastname@example.org Mobile: (+47) 91 17 39 45 CONTACTS Civil Law Tax Business Entities Real Estate Employment VAT Intellectual Property Dispute Resolution DOING BUSINESS IN NORWAY 54 – Grette Advokatfirmaet Grette DA Filipstad Brygge 2 P.O. Box 1397 Vika, 0114 Oslo, Norway Tel.: (+47) 22 34 00 00 email@example.com www.grette.no ISBN 978-82-998570-4-8