Chambers Global Practice Guide: Insurance & Reinsurance 2021

Partner Kristian Lindhartsen og lawyer Marte Kapstad Roen has authored the chapter for Norway in this years “Chambers Global Practice Guide: Insurance & Reinsurance 2021.”

Chambers Global Practice Guides: Definitive global law guides offering comparative analysis from top-ranked lawyers.

The chapter can be read here.

 

Kvale top-rated in WTR 1000

Kvale once again receives top ratings in WTR 1000 (World Trademark Review).

With gold in the category “Prosecution and strategy” and silver in the category “Enforcement and litigation”, we cement our position as the choice one-stop shop for all trademark-related issues ranging from dispute resolution to portfolio and transaction work. In addition to the team as a whole, four of our lawyers are recommended as leading practitioners, Marie Vaale-Hallberg, Anne Marie Sejersted, Ingvild Hanssen-Bauer and Lars Trygve Jenssen.

At Kvale, we combine a strong performance culture with a strong collaborative culture to create the best results, and in a year that has been anything but ordinary, feedback like this from our clients inspires us to keep up the good work:

“Driven by team spirit and dedication, the lawyers at Kvale work together seamlessly and effectively.”

The full ranking can be accessed her:

https://www.worldtrademarkreview.com/directories/wtr1000/rankings/norway

Using FIDIC Yellow Book for Offshore Wind Projects

FIDIC, the International Federation of Consulting Engineers, is the global representative body for national associations of consulting engineers. FIDIC has developed international standard forms of contract for use on national and international construction projects. These forms of contract were developed for use on onshore projects, but are increasingly used also on offshore wind projects. There are several issues with this, as offshore work comes with different risk factors that require different considerations.

Authors: Gry Bratvold and Sanne Kjær Bygholm

Unfamiliar Risk Allocation

Contractors who traditionally have operated in the oil service segment have in the recent years also offered their services and equipment to the offshore wind market. These contractors have considerable knowledge and expertise from offshore work, valuable for the less mature offshore wind market. Contractors coming from an oil service background, should be aware of the different risk allocation provided for in the FIDIC forms of contract compared to the contracts traditionally used on offshore projects.

FIDIC Yellow Book

The FIDIC Plant and Design-Build Conditions of Contract, also called the FIDIC Yellow Book, is reportedly the FIDIC form of contract most commonly used for offshore wind projects. Typical amendments to make it more suitable for offshore work include provisions regulating weather risk, the involvement of a marine warranty surveyor, the use of marine vessel spread and the inclusion of a knock for knock indemnity regime. Another key issue that should be carefully considered, is the concept of “rely upon information”.

Rely-upon Information

Contractors will perform its engineering, procurement, construction and services based on certain available information. Some of this information will generally be provided by the company, and the contractors will need to know which parts of the information can safely be relied on, and what information the contractor is expected to verify himself. If any data identified as “rely upon” should change or is later discovered to be incomplete or incorrect, contractors will generally expect a variation order for any impact this may have on the price and/or schedule. Furthermore, the contractor may want to expressly exclude liability for any defects caused by incorrect rely upon information from its warranties.

Site Data

Data regarding the site where the services are to be performed or the goods are to be installed, is essential for the design and engineering of offshore installations and for timing services to be performed. Such data could include the water depth, soil conditions and current, wave, sea level and meteorological data (metocean data) that requires particular expertise and can be costly to verify. Where the company provides such information, contractors with offshore background will generally expect this to be rely upon information.

Under the FIDIC Yellow Book, contractors are not only expected to inspect and examine the site, including e.g. its sub-surface conditions, but will also be deemed to have performed such inspection before having submitted its tender. Although there are provisions in the Yellow Book modifying the contractor’s risk for site data, the overall exposure is nevertheless likely to be unacceptable to most contractors. When used in the context of an offshore project, the parties may therefore agree that this regulation is not suitable, and include special terms (called ‘Special Provisions’) more suitable for an offshore project.

Shifting the Risk

When amending the risk allocation envisaged in the FIDIC Yellow Book for a given risk factor such as site data, several other provisions of the standard will need to be amended as a consequence to avoid ambiguity and inconsistencies with other related terms. The parties will also need to negotiate and amend or include mechanisms in the ‘Special Provisions’ to provide for what the consequences shall be of any errors or omissions in rely upon information. How to best structure and draft these mechanisms will depend on what risks the parties are willing to accept as well as the particulars of the project. Some examples of issues that the parties generally would need to consider are: the measures the contractor shall take if an error in the rely-upon information is discovered at different stages of the project; the mechanism for dealing with any impact the error or omission may have on cost or schedule and the implications such errors shall have on the contractor’s warranties. These are just examples, and there may be several other implications, depending on the circumstances.

Conclusion

Tailoring the FIDIC Yellow Book into a suitable contract for an offshore wind project, requires careful consideration and drafting. FIDIC has reported that it is looking at launching a set of standard particular conditions of contract for renewable energy projects/offshore wind, but it is unclear when this may be expected. In the meantime, it remains crucial that the necessary adjustments are made when using the FIDIC Yellow Book for offshore wind projects.

Bimco’s new S&P agreement is on the way

On 22 January 2021, the Baltic and International Maritime Council (BIMCO) circulated a preliminary draft for a new standard contract for sale and purchase of ships among relevant parties in the industry.

Kvale’s shipping team received the draft, and is looking forward to contribute to the further development of this new S&P standard. The aim of this newsletter is to summarize our brief initial thoughts on the preliminary draft contract. 

  1. Introduction

At present, the most commonly used form for sale and purchase of ships in the Norwegian market is the Norwegian Salesform 2012 (NSF 2012). The form has also been recognized internationally due to its simplicity and strong core mechanisms, making it the industry standard within many fields. The NSF 2012 was developed jointly by the Norwegian Shipbrokers’ Association (NSA) and Bimco.

The new S&P contract – the Bimco Ship Sale and Purchase Agreement – is developed independently by Bimco. Unlike the NSF 2012, the new form looks more like a Bimco contract, with a Box section setting out the main commercial terms included in Part I and a Clauses section included in Part II. The form is also more comprehensive, and includes more detailed language than the NSF 2012.

That being said, the legal mechanisms and considerable parts of the text are very similar to the NSF 2012. The intention is clearly not to reinvent the wheel, but rather to create a more typical Bimco format, and incorporate certain regularly used additional Clauses.

  1. Key characteristics

The following key characteristics of the new form should be noted:

  1. Summary and the way forward

In summary, our view is that Bimco has prepared a well thought out form adapted to the future of S&P transactions, without too many controversial changes from NSF 2012 as the current industry standard. We are looking forward to contributing our comments to the preliminary draft, and seeing how the final form turns out.

The deadline for submitting comments to the drafting committee is 15 February 2021, and the new contract is scheduled for publication in May 2021.

Kvale regularly assists shipowners and other industry players in S&P transactions. Please do not hesitate to contact us if you have questions to the new Bimco Sale and Purchase Agreement, or if we otherwise can be of assistance.

On-line subscription policies claimed to manipulate consumers

The Norwegian Consumer Council claims that digital cancelling policies can manipulate customers to stay subscribed.

The Norwegian Consumer Council filed this week a complaint against a premium subscription service for alleged breaches of the Marketing Control Act, specifically for manipulating customers to stay subscribed to Amazon’s Prime service.

The Norwegian Consumer Council’s has been engaged in work on dark patterns, such as manipulative design, and claims that Amazon is manipulating consumers to continue using the service in what seems like a deliberate attempt to confuse and frustrate customers.

In the Consumer Council’s press release, it is claimed that companies such as Amazon speculates in discouraging costumers from cancelling their subscriptions either by heavily emphasizing the benefits that will be lost upon cancelling or by making the process so complicated that its users simply give up. So far, Amazon has not been heard and presented their counterarguments so far.

Subscription traps?

The Consumer Council has surveyed how thousand consumers experience their subscriptions, and 25% of these reported difficulties when unsubscribing from the digital content services.  Following this survey, the cancellation policies of Amazon Prime was analysed by the Consumer Council particularly. The Consumer Council then found that consumers who wanted to leave the service was faced with a large number of hurdles, including complicated navigation menus, skewed wording, confusing choices, and repeated nudging. Throughout the process, they also found that Amazon manipulates users through wording and graphic design, making the process needlessly difficult and frustrating to understand.

A decision with potential precedent

The Consumer Council claims that the current practice applied by Amazon is unlawful pursuant to the Unfair Commercial Practices Directive, which is incorporated into the Norwegian Marketing Control Act. They emphasise that the policy should include clear information on how to un-subscribe. As is, the policy is claimed to confuse consumers and create uncertainties, specifically in whether the consumer are in the process of un-subscription or not.

Noting the severe allegations served, it must be expected that the Consumer Authority will desire to draw up the legal boundaries for manipulative practices in subscription policies. The attention the matter has gained abroad indicates that this case will not be of just national interest.

The complaint can be found (in Norwegian) here.

The report done by the Norwegian Consumer Council can be found here.

Court of appeal clarifies scope of Lugano convention in direct action cases

In a recent decision the court of appeal decided that the insured owners can be joined into a direct action law suit against the Norwegian underwriters under the terms of the Lugano convention.

Following the collision between the a bulk vessel and a chemical tanker at the end of 2015, the parties have since been fighting over whether the Norwegian courts are competent to hear the collision liability dispute. The bulk vessel sank with the tragic consequence of six fatalities. From the outset, the owners of the bulk vessel have argued that the Norwegian courts are competent, which has been disputed by the owners of the chemical tanker and its Norwegian underwriter. The issue of jurisdiction has been tried first by the county court, three times by the court of appeal and twice by the Supreme Court. The Norwegian nexus is the underwriter’s domicile here; the owners of the bulk vessel have argued that the underwriters can be sued directly in Norway under the Norwegian law provided that the requirements under article 11 (2) of the Lugano convention are fulfilled. After the Supreme Court’s second suspension of the court of appeal’s decision on this matter, the court of appeal recently decided that there is jurisdiction in Norway for the direct action claim against Gard. This decision is based on domicile, and is now final.

Following this decision, the court of appeal has now decided that the direct action case against the underwriter serves as ‘anchor jurisdiction’ that allows the insured to be joined in the case against the underwriter before the Norwegian courts. The court concluded that the requirements of article 6 (1) were fulfilled and that the insured therefore could be joined. The insured argued, without success, that the claim against the insured was a “matter of insurance” and joinder therefore had to be considered on basis of article 11 (3).  The insured’s argument that the requirements of article 6 (1) were not fulfilled, was also discharged by the court of appeal.

The decision is not legally binding as it is still subject to appeal. However, in our view the decision is based on a correct construction of Lugano convention. We believe that the court of appeal correctly applied article 6 (1) as basis for joining the insured to the proceedings; as this claim is not a claim “relating to insurance”.

For more information on the decision and its implications, please feel free to contacting us. Kvale (w/ Lilly Kathrin Relling and Kristian Lindhartsen) acts for the owners of the bulk vessel.

The Supreme Court rules in favour of the state in what has been defined as the Norwegian “climate lawsuit” of the century

The Norwegian Supreme Court set by all available judges (plenary) gave 22 December 2020 its judgment in the climate lawsuit against the Norwegian state, where the specific risk at stake was that the award of production licences in the 23rd licensing round could be declared invalid (nil and void). The case was heard between the Norwegian state represented by the Ministry of Petroleum and Energy and Greenpeace Nordic, Nature Youth Norway (and other environmental organizations).

Introduction

The core issue was whether the award of production licences in the Arctic/Barents Sea in the 23rd licensing round was a violation of among others Article 112 of the Norwegian Constitution (“Article 112”) with the legal consequence that the award would be declared invalid (nil and void). The Supreme Court ruled in favour of the Norwegian state.

The 23rd licensing round consisted of 40 blocks located in the Barents Sea South and Barents Sea South East. The main activities after award of a production licence are to conduct exploration activities such as seismic surveys and drilling exploration wells in accordance with obligations undertaken in the mandatory work program under the production licence. The initial exploration drilling activities have a minimal environmental impact. Any potential development of the field with subsequent production of oil and gas requires a new approval from the authorities, which will be elaborated on below.

To date, only seven wells have been drilled, resulting in zero commercial discoveries. Hence, it is very uncertain to what extent the award of production licenses in the 23rd licensing round will actually lead to production of oil and gas with potential emissions to the environment as a consequence.

The main legal topics

The main legal question for the Norwegian Supreme Court was whether Article 112, and especially its first paragraph, gives material rights to private persons, and if so, what the content of this right is. The provision states: (unofficial translation)

Every person has the right to an environment that is conducive to health and to a natural environment whose productivity and diversity are maintained. Natural resources shall be managed on the basis of comprehensive long-term considerations which will safeguard this right for future generations as well.

 In order to safeguard their right in accordance with the foregoing paragraph, citizens are entitled to information on the state of the natural environment and on the effects of any encroachment on nature that is planned or carried out.

 The authorities of the state shall take measures for the implementation of these principles.”

If the Supreme Court were to find that Article 112 gave individuals rights enforceable by the courts, then the question would be if licences granted in the 23rd licensing round violated the principle under Article 112, and under how extensive scrutiny such test should be.

The case also included other legal issues. Most notably was the question of whether the 23rd licensing round infringed the right to life under the Article 2 of the European Convention on Human Rights (“ECHR”) and Article 93 of the Constitution and/or the right to respect for private and family life, cf. Article 8 of the ECHR and Article 102 of the Constitution. A unanimous court found that the award of licences was not in breach of these rights.

Lastly, the Supreme Court thoroughly discussed whether the decision from 2013 to open the Barents Sea South East area for petroleum activities had any procedural errors, that would lead to the subsequent administrative decision to award licences being declared invalid (nil and void).

In this brief newsletter, we will provide some key takeaways relating to the interpretation of Article 112 and the procedural errors related to not estimating the theoretical emissions that could follow from opening the Barents Sea South East for petroleum activities.

The majority’s opinion

The Supreme Court was set by all available judges (plenary). The majority, consisting of eleven judges, found that the granting of production licenses in the 23rd licensing round was valid.

The Supreme Court gave a thorough interpretation of Article 112. In the majority’s view, the wording did not provide a clear answer to the question of whether this provision gives material rights to individuals. However, the former Article 110 b, which was replaced by Article 112, and the preparatory works indicated that the main element of Article 112 was the Parliament’s (Norw: Stortinget) duty to implement adequate and necessary measures to combat and mitigate climate change. Article 112 may however provide rights for individuals to be tried before the courts when it comes to environmental issues not expressed in and governed by applicable legislation. The Supreme Court also stated that if the Parliament has not been involved in an administrative decision, Article 112 may serve as a relevant factor for the interpretation.

Where the Parliament has taken a stand, and implemented measures through legislation etc., the Supreme Court found that Article 112 will function as a “legal safety net”. The majority found that a condition for the courts to declare legislation and other formal decisions by the Parliament as invalid, is that the Parliament grossly has set aside its obligations pursuant to Article 112. The threshold is consequently very high.

The Supreme Court did not find that the threshold was reached when the Parliament decided to open the Barents Sea South East for petroleum activities, and added that the award of production licences in the 23rd licensing round was directly linked to the previous decision by the Parliament to open the applicable areas for petroleum activities. Several measures had been implemented to combat the effects of emissions, inter alia, duties related to CO2-emissions, EU’s quota system, measures relating to carbon capture and storage, etc.

When discussing which emissions were relevant, the majority held that the main targets of the Norwegian climate policy is based on international framework agreements, e.g. the Paris Agreement. In these agreements, a bearing principle is that each state is responsible for emissions within its own territory. The majority thereafter concluded that Article 112 was only applicable to emissions in Norway. Hence, global emissions stemming from export of petroleum were both outside the scope of Article 112 and outside the obligations undertaken by Norway in international framework agreements.

In conclusion, the majority found that the Parliament had clearly not grossly set aside its duties under Article 112, and the award of production licenses in the 23rd licensing round was therefore valid.

The dissenting opinion

The minority, consisting of four judges, agreed with the majority regarding the interpretation of Article 112 and the ECHR.

The minority, however, found that procedural errors had been made when opening the Barents Sea South East for petroleum activities in 2013, making the decision to award production licences in the 23rd licensing round invalid. The dissent related to the mandatory impact assessment that shall be carried out before opening an area for petroleum activities, cf. Directive 2001/42/EC as implemented in the Petroleum Regulation Section 6.

In the view of the minority, the assessment did not adequately consider possible future global emissions stemming from the extraction and consumption of the potential petroleum to be produced. The minority held that it was difficult to assess possible impacts before any petroleum was discovered. Still, it noted that the assessment could have been carried out on a higher level, i.e., based on different scenarios for likely discoveries. Consequently, the minority held that the lack of such overriding impact assessments of the potential emissions must lead to the award of licences being declared invalid.

High level comments to the minority’s opinion

The Norwegian state admitted that the potential climate effects of opening the Barents Sea South-East for petroleum activities in 2013 were not assessed in accordance with the Petroleum Regulation Section 6, which implements “Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment” into Norwegian law.

It should be noted that the majority found that it was sufficient, and also most appropriate, to calculate the effects of potential emissions after a commercial discovery is made, and a Plan for Development and Operation of petroleum deposits (PDO) is submitted to the authorities for approval. The discussion below is therefore only related to the minority’s assessments.

Adequate environmental impact assessments must be conducted prior to opening new areas for petroleum activities, and the minority’s reasoning highlight that being in breach of this requirement may lead to the decision being declared invalid.

The principle, as implied by the minority, leading to the decision being declared invalid, is found in Section 41 of the Public Administration Act, which reads (unofficial translation):

If the rules of procedure set out in this Act or regulations made in pursuance thereof have not been observed in dealing with a case concerning an individual decision, the administrative decision shall nevertheless be valid when there is reason to assume that the error cannot have had a decisive effect on the contents of the administrative decision.

In this case an important question was whether the lack of assessments of the potential emissions caused by the opening of the Barents Sea South East for petroleum activities in 2013 could affect the decision to open the area for petroleum activities and the subsequent award of production licences in 2016.

One could argue that although environmental impact assessments of potential emissions was not conducted in compliance with Directive 2001/42/EC, it is appropriate to conclude that this error cannot have had an effect on the decision to open the area for petroleum activities. Although not explicitly stated, the majority’s reasoning may also be interpreted in line with this argument. For case law on the threshold for declaring an administrative decision invalid, see Supreme Court Judgment 2017-2247-A, where it is emphasised that the decision will be invalid if established that it is a not too distant possibility that the error may have affected the decision.

It should be taken into consideration that the award of a production licence does not in itself provide a right to develop a potential petroleum discovery with subsequent C02-emissions as a result. To be able to develop a discovery, a PDO must be submitted to the authorities for approval. The authorities may decide not to approve the PDO or approve the PDO with various conditions attached. The calculation of the potential emissions should therefore be based on the theoretical likely number of commercial discoveries leading to a field development in the Barents Sea South East, and the total resources to be produced in the applicable fields (theoretical high-level assessment).

Only two commercial discoveries have led to field developments and subsequent emissions from production since the Barents Sea South was opened for petroleum activities back in 1989. When conducting a high-level environmental impact assessment of potential emissions related to opening the Barents Sea South East for petroleum activities in 2013, the number of licences awarded in the Barents Sea South during the period 1989-2013 compared with the actual emissions occurred could arguably also be used as guidance.

If the above assessments had been conducted prior to opening the Barents Sea South East for petroleum activities in 2013, it still seems very likely that the Parliament’s decision to open the Barents Sea South East for petroleum activities would be upheld (too distant possibility that the error may have affected the decision). If this assumption is correct, the administrative decision shall despite the error, be valid.

Concluding remarks

The judgment implies that for all environmental issues where the Parliament has taken a position and incorporated legislation, Article 112 of the Constitution will function as a “safety net”. For the courts to overrule an administrative decision in such cases, the Parliament must have grossly set aside its obligations pursuant to Article 112. The threshold is consequently very high. Article 112 may however provide rights for individuals to be tried before the courts when it comes to environmental issues not discussed and governed by applicable legislation.

The judgment is well aligned with the principle of separation of powers. As questions concerning fundamental environmental issues involve political considerations, where extensive and broad priorities must be made, the Supreme Court emphasised that democratic principles entail that such decisions are made by the elected government, not by the courts.

The Supreme Court’s judgment may be brought in before the European Court of Justice, and it therefore remains to be seen whether the final chapter has been reached in this climate lawsuit. In any case, we assume that the Norwegian authorities will ensure that adequate environmental impact assessments will be provided if new areas are opened for petroleum activities in the future and for all upcoming awards of production licences on the NCS.

Chambers Insolvency 2020 Guide

Chambers and Partners publishes “Expert Guides” within various areas of law and jurisdictions, where a selection of legal experts elaborates on important legal issues in relation to the current market situation in the countries/markets.

Stine D. Snertingdalen, Thomas Piro and Ingrid E. S. Tronshaug from our restructuring and insolvency team has authored this years “Chambers Global Practice Guide on Insolvency”.

You may read the full version of the publication here.

The Oil and Gas Law Review

Partner Yngve Bustnesli at Kvale’s oil and gas department has written an article on oil and gas legislation and other applicable law for the oil industry in the international publication “The Oil and Gas Law Review – eighth edition”, which provides a collection of corresponding articles from 25 countries. You can read the complete article here.

Reproduced with permission from Law Business Research Ltd. For further information please visit thelawreviews.co.uk.

Lexology Getting the Deal Through – Restructuring & Insolvency 2021

Partner Stine D. Snertingdalen and Senior Lawyer Ingrid E. S. Tronshaug has written an article on Norwegian legislation in the field of restructuring and insovency in the international publication “ Lexology Getting the Deal Through”, which provides a collection of corresponding articles from 38  jurisdictions.

Reproduced with permission from Law Business Research Ltd. Getting the Deal Through: Restructuring & Insolvency 2021, (published in November 2020) For further information please visit gettingthedealthrough.com

Getting the Deal Through – Restructuring & Insolvency 2021