New act on registration of beneficial owners

When the new act enters into force, all who conducts business in Norway through a legal entity must map and document their ownership structure in order to identify the physical persons who own or control more than 25%. Such “beneficial owners ” must be recorded in a national public register.

Mandatory registration of ownership

The new rules are introduced in Norway in order to comply with EU legislation requiring establishment of a register of beneficial owners, i.e. a register showing the physical persons ultimately controlling a corporation or other legal entity. The purpose of the new act is to facilitate access to information about beneficial owners for those under duty to report pursuant anti-money laundering regulations, for public authorities and others. The proposed regulations will enable access to the register for the general public.

The Norwegian Act on register of beneficial owners (Nw; reelle rettighetshavere) (2019-03-01-2) has been adopted but has, as per October 2020, still not entered into force. Proposed regulations supplementing the act have been distributed with deadline for comments on 1 October 2020. It is expected that the new act and the relevant regulations could enter into force during 2021.

The new register will be maintained by the Norwegian Enterprise Register (Nw; Brønnøysundregistrene).

Registration duty for all legal entities

The requirements to collect and register information about real/beneficial owners who control more than 25 % applies to all corporations and other legal entities operating or registered in Norway, including Norwegian limited liability companies (Nw; aksjeselskap, AS), public limited liability companies (Nw; allmennaksjeselskap, ASA), companies with limited liability (Nw; selskap med begrenset ansvar, BA), General Partnerships (Nw; ansvarlige selskap, ANS), General Partnerships with shared liability (Nw; ansvarlige selskap med delt ansvar; DA), limited partnerships (Nw: kommandittselskap, KS), Co-operatives (Nw: samvirkeforetak, SA), European companies (Nw: europeiske selskap), jointly owned shipping companies (Nw: partrederi, PRE), housing cooperatives (Nw: borettslag, BRL), house building cooperatives (Nw; boligbyggelag, BBL), foundations (Nw; stiftelser, STI), associations with business activity (Nw; næringsdrivende foreninger) etc.

Registration duty also for managers of foreign trusts etc.

The duty to register beneficial owners does not only apply to Norwegian entities. It also applies for managers of foreign trusts and similar entities operating in Norway. According to the proposed regulations for the act, a foreign entity shall always be deemed to operate in Norway if it “enters into a customer relationship with anybody in Norway subject to reporting duty under anti-money laundering regulations or if it  acquires real property in Norway”. If these provisions are adopted as proposed, without further guidance or clarification, a duty to register in Norway, including the obligation to change incorrectly recorded information and maintain information for ten years, will unfortunately be triggered already when the foreign trust or other entity opens a bank account in Norway, or hires a lawyer or auditor in Norway.

Norwegian branches of foreign businesses (known in Norway as “NUF”) are also under mandatory registration duty. If however a NUF entity is already under duty to record its beneficial owners in another EU country, the registration in the Norwegian register can be limited to information about the name and internet address to the other register.

Exception from the registration duty

The duty to register beneficial owners does not apply to:

Companies whose shares are listed on a stock exchange or other market place will typically only be required to record information about the name and internet address of the market place where its ownership information is announced.  This limited registration duty is not explicitly applicable for wholly owned subsidiaries of such listed companies, despite that they have identical ultimate owners as its listed parent company. This inconsistency will hopefully be amended in the final regulations.

Duty to identify beneficial owners

Beneficial owners are defined in the act as the physical person(s) who ultimately own or control a legal entity. The proposed regulations state further provisions on which individuals who must be identified for different types of entities. For Norwegian corporations, this will be the physical person(s) who, directly or indirectly, own or may vote for more than 25 % of the shares, or who can appoint more than half of the board members, or in any other manner has actual control (e.g. through a shareholders agreement).

It is also required that the mapping of the ownership is documented in a manner enabling tracking of why a certain individual has been identified (or not) as a beneficial owner. The regulations list documents of incorporation, articles of association, shareholders register and corresponding documents as examples of documentation for such purpose.

The information required to be recorded in the register is the name and ID number of the beneficial owners and how they control the legal entity (through ownership, voting rights or other manner) and the basis for such conclusion (direct or indirect stating also names and registration numbers of any intermediate entities/persons). Ownership and voting rights shall be recorded in the following intervals: 25.01-50%, 50.01-75% and 75.01-100%.

Shareholders agreements may regulate the level of control over a corporation. The shareholders agreement as such do not need to be registered (published), however, if it is relevant for determining the influence over the company and identification of beneficial owner, its existence and how it grants control must be registered.

In the event that a legal entity is unable to identify its beneficial owners, it shall instead record information about its managing director and board members. A conclusion that there are no beneficial owners shall be recorded, and the analysis concluding that there are no beneficial owners or that such cannot be identified, shall be justified and documented. There will be a high threshold before entities may conclude that there are no beneficial owners.

It will also be mandatory to update the information in the national register when the entity becomes aware of changes in its ownership structure that implies that there are new beneficial owners. Such changes must be reported within 14 days.

Documentation mapping beneficial owners shall be kept for ten years by those under duty to register its beneficial owners.

Notice of registration and amendments

Legal entities are also obliged to inform its beneficial owners that they will be recorded in the national public register of beneficial owners.

Misstated information in the register shall be corrected. The Norwegian Enterprise Register may direct that entities amend registered data and the proposed deadline for addressing such messages is 14 days.


The new regulations contain a relatively strict sanctions regime where entities unable to identify beneficial owners (or conclude that there are none) within the ascribed time limits may be subject to daily administrative fines. Imposition of fines may be directed against the board of directors, managing director or others representing the entity. Intentional breaches of the provisions may be penalised by fines or up to one year imprisonment.

Access to the register of beneficial owners

The register will be open for access, not just for banks and public authorities, but also for the general public who may search for names (ID numbers will not be shown) of beneficial owners and/or legal entities. It is suggested that no log in or fees will be required to access the data.

Further process

As mentioned above, the regulations crucial to supplement the relatively limited act are not yet adopted, and the proposed provisions thereunder may still be amended before becoming final. Depending on the outcome of the ongoing “hearing” the regulations may be altered from what is described in this article.

It is expected that these new rules will apply both for the approximately 450,000 existing companies and other legal entities in Norway, and for new companies being incorporated in Norway.

Kvale is following the development of these rules closely and is happy to address any questions you may have on the contents and application hereof for your company, association, foundation or other legal entity and, as soon as it is official, we will also be able to advise on when the rules enter into force.

The future of cyber cover in the nordic marine insurance market

Written by Preben Helverschou (Senior Lawyer) and Sanne Bygholm (Associate).


In recent years, the shipping sector has faced an increasing threat of cyber related incidents. Shipping has gone “online”. Vessels and offshore units are constantly growing in sophistication and in the use of digital solutions, making them vulnerable to cyber-attacks. The threat of cyber-attacks has only increased following the Covid-19 pandemic, as criminals take advantage of changes in working routines and the increased use of remote access systems.

On the shore side, these risks may translate into financial losses caused by interruptions of commercial operations. Examples that received wide publicity were the ransomware attacks on Maersk in June 2017 and on Norsk Hydro in March 2019.

On the offshore side however, these risks are not only financial in nature. There are safety concerns linked to potential cyber-attacks on navigational-, engine-, cargo- and ship management systems. These systems have all become progressively digitalised over time. Therefore, the possibility of an attack against a vessel or offshore unit appears real and could lead to disastrous results. With further advances in technology we may safely anticipate that problems related to cyber risks will rather increase than decrease in the time to come.

In response to the development, the International Maritime Organisation (IMO) has issued guidelines on cyber security on board ships. Shipowners and operators now have until 2021 to incorporate procedures on cyber risk into their ship safety management systems.

The marine insurance market is also reviewing their approach to cyber risks. Traditionally, the Nordic insurance conditions have been “all risk” covers, meaning that whatever risk is not explicitly excluded – is covered. Thereby, some policies have covered cyber risks “silently” because these risks have not been expressly excluded.

Critics to the practice argue that silent cyber cover has been provided by many insurers without fully considering, pricing and reserving for such risk, thereby creating market vulnerability. They further argue that the practice results in an unclear scope of cover and thus uncertainty for assureds, insurers and reinsurers alike.

Supporters to the practice argue that there is nothing which prevents insurers from pricing and reserving for “silent cyber cover” as long as the risks are known, which presumably is the case today. They further argue that silent cover of cyber risks does not result in any more uncertainty than other “silent” risks covered under the NMIP.

Notwithstanding the foregoing, many insurers have excluded cover of cyber risks through the Institute Cyber Attack Exclusion Clause 380 from 2003. However, the clause is to some extent ambiguous, and only excludes cover for cyber-attacks, not also accidental cyber events. Critics therefore argue that the clause is no longer suitable for the cyber risks the shipping industry faces today.

On 30 January 2019 the UK financial supervisory authority (PRA) issued an instruction to all UK insurers that from 1 January 2020, all first party property damage insurance products must either positively affirm, or explicitly exclude cover for cyber risks. Silent cyber cover is thus no longer allowed in the UK market. These changes are also likely to affect the Nordic marine insurance market, as it is influenced by UK requirements through reinsurance programmes and UK co-insurers.

The aim of this article is to examine the cyber cover provided in the Nordic market today, and how this may be affected by the changes in UK requirements. In our review, we will focus on the Hull & Machinery cover (“H&M”) provided under the Nordic Marine Insurance Plan 2013, version 2019 (the “NMIP”), based on Norwegian law. However, the article will also have relevance for other insurance terms, e.g. the Norwegian Cargo Clauses (Cefor Form 261).

For the purpose of this article, we will refer to “cyber risks” as any risk associated with financial loss, disruption or damage to the reputation of an organisation from failure, unauthorised or erroneous use of its information systems.


As stated above, the Nordic insurance conditions are traditionally “all risk” conditions. Thus, they provide silent cover for cyber risks unless explicitly excluded in the insurance contract.

This can be illustrated by NMIP Clause 2-8 reading “An insurance against marine perils covers all perils to which the interest may be exposed, with the exception of: […]“. Clause 2-8, does not list cyber as an excluded risk. Cyber risks are therefore at the outset covered.

The silent cyber H&M cover under the NMIP is however restricted by the general exclusion of war perils in Clause 2-8 (a), cf. Clause 2-9. War perils are customarily covered by a separate hull and machinery war risk insurance (“War H&M”). The distinction between which cyber risks are considered respectively as marine perils and war perils under the NMIP must be drawn based on the wording in Clause 2-9.

Cyber-attacks conducted as part of a war effort, i.e. so-called cyber warfare, clearly qualify as war perils, as per Clause 2-9 (a), whether or not the assured is the target of the attack, or collateral damage only. Most of the major cyber-attacks which have taken place in the last decade fall within this category e.g. Stuxnet, WannaCry etc. For less coordinated attacks or events the position is less clear. “Sabotage” and “acts of terrorism” qualify as war perils and may by its wording comprise certain cyber-attacks. However, under Norwegian law, the term “sabotage” is construed narrowly, in that it presupposes that the action leading up to the loss pursues a specific political, social or similar goal.

This is illustrated by the decision published ND 1990.140 NA “PETER WESSEL”. In the decision, the court found that the costs of interrupting the ship’s voyage due to a bomb threat was recoverable under the H&M insurance against marine perils, as costs of measures to avert or minimise the loss. The crux was that the external circumstances of the threat clearly indicated that this was an act that had no background in political, social or similar circumstances.

Similarly to the construction of the term “sabotage“, the Commentary to the NMIP prescribes that the term “act of terrorism” requires that the “purpose is to promote a political, religious or ideological cause“. Thus, also here, a distinction must be drawn between such acts and ordinary criminal acts, including blackmail, bomb threats, etc., purely for the purpose of financial gain (cyber-crime).

A main factor in determining whether a borderline case qualifies as respectively marine or war perils under the NMIP is therefore the purpose behind the malign act. This creates a special challenge for cyber risks, as it often is difficult to determine the culprit and their true intentions. This is especially the case when the assured is not the target of the attack, and merely an affected party.

This can be exemplified by a ransomware attack. Ransomware is a type of malware that threatens to publish the victim’s data or perpetually block access to it, unless a ransom is paid. Given that the purpose by nature is to get the ransom payment – a financial gain – ransomware attacks will as a starting point be considered as marine perils under the NMIP.

Nevertheless, ransomware can also be used as a tool to achieve a specific political or social goal, or to promote a political or ideological cause, e.g. if the main aim is to intercept trade to or from a specific country, while the potential financial gain is a mere bonus, or a means to finance the attack. In such case, the attack would likely qualify as a war peril. The problem is that the true purpose of a cyber-attack may be challenging to unveil, and even more challenging to prove. This results in legal uncertainty for both insurers and assureds alike.


The new PRA instruction – that all first party property damage risks either must positively affirm, or explicitly exclude cyber cover from 1 January 2020 – has already impacted the UK insurance market.

As a result, and in order to regulate cyber coverage in insurance contracts, the Lloyd’s Market Association has issued new model clauses: LMA5402 – Marine Cyber Exclusion, and LMA5403 – Marine Cyber Endorsement.

In accordance with PRA guidance statements, cyber risks are considered “non-malicious” when they are not explicitly motivated to cause harm. This includes e.g. cyber errors, accidental loss of data, and use of information technology failures that result in physical damage to infrastructure and/or business interruption losses.

In contrast, cyber risks are considered “malicious” when they are explicitly motivated to cause harm. This e.g. includes intentional cyber-attacks such as Distributed Denial-of-Service attacks, and infection of an information technology system with malicious code.

The distinction between non-malicious and malicious cyber in the LMA clauses is similar to the distinction between cyber considered as respectively marine perils and war perils in the NMIP. In both sets of terms, it is the intent that is the deciding factor for which category a cyber-event falls within. However, this is also were the similarities end: whereas a malicious cyber-event under LMA clauses only requires that the event is motivated to cause harm, the NMIP war peril cover also requires that the event’s purpose is to achieve a specific political or social goal, or to promote a political or ideological cause.

The difference can again be illustrated by the ransomware example. Under the LMA clauses a ransomware attack will probably qualify as a malicious cyber-attack irrespective of whether its purpose is pure financial gain or a specific political or social goal. Under the NMIP a pure financially motivated attack will as an outset probably be considered a marine peril, and only a war peril if it serves a specific political or social goal.

The differences between the two sets of insurance terms create certain challenges for shipowners, operators, insurers and reinsurers. In the event a shipowner takes out H&M insurance based on the NMIP, and War H&M based on UK conditions, or the other way around, there will either be gaps or overlaps. The same issue may potentially arise if a Norwegian H&M insurer, which sells insurance based on the NMIP, buys re-insurance in the UK market. Although, it should be noted that this will not be an issue if reinsurance is purchased on the same terms as the underlying insurance, with an express exclusion or endorsement of cyber risks.

The issue of gaps between the NMIP and UK conditions is not new. In the commentary to the NMIP, this is highlighted in relation to piracy. In a H&M policy based on NMIP, piracy would be considered a war peril according to NMIP clause 2-9, and thus excluded from cover. However, under UK conditions, piracy in principle is regarded as a marine peril and as such excluded under a UK war policy. In such a case, the insured would be uninsured against piracy altogether.

The new UK instructions may also have implications for H&M policies written on the NMIP with UK co-insurers. Without an express cyber endorsement or cyber exclusion clause, the policy will not satisfy UK requirements. Further, in the event one wishes to solve this problem by incorporating the LMA5403 – Marine Cyber Endorsement clause, this must also be coordinated with the war policy to avoid gaps in the shipowners’ insurance cover.

In summary, the new UK cyber instructions and the introduced LMA clauses are not directly compatible with the silent cyber cover provided by the NMIP. This can result in unintended gaps in cover, and ambiguity for shipowners, operators, insurers and reinsurers, unless specifically resolved in the relevant insurance contract.


The changes in the UK regulations and the introduction of the LMA model clauses may result in more explicit regulation of cyber in insurance contracts under the NMIP in the years to come.

This raises the question of how the Nordic Insurance market should respond to this development.  We would argue that there are two options going forward to adapt to the new UK regulations.

The first option is that insurers and assureds go on as before, and negotiate whether cyber should be excluded or endorsed for each policy. As advised, silent cyber is not an option for any policy tied to the UK. The LMA model clauses can to some extent be used for this purpose, but the fact that they are not directly compatible with the NMIP implies that certain adaptations should be made.

The second option is to regulate cyber risks explicitly in the NMIP and the Norwegian Cargo Clauses, making the use of such additional clauses superfluous. It is arguable that explicit cyber regulation would increase legal certainty, and make the regulations more accessible for the assureds. It could potentially also accommodate for better operability between the NMIP and UK conditions and ultimately decrease market vulnerability to silent cyber risks. However, the potential downside is that this could make the terms more stringent and leave less room for individual solutions directly in the policies. It is also a solution which to some extent goes against the concept of “all risk cover”, which is a cornerstone in the NMIP.

In the event one would decide to pursue an express regulation, there seem to be two viable alternatives. The first alternative would be to exclude cyber entirely. The exclusion would likely be coupled with an option to buy-back such cover, i.e. so that the assureds have the flexibility to only buy the cover that they need. This solution provides predictability and sets a clear price on cyber cover under the NMIP. However, the solution may result in an unnecessary administrative burden, if a majority of the assureds are interested in buying cover for cyber risks in any event.

The other alternative is to expressly incorporate cyber cover along similar lines as the LMA Cyber Endorsement Clause. This must probably be based on a bespoke wording, adapted to the NMIP, and considering the above-mentioned issues. In particular, one could e.g. consider adopting the distinction between malicious and non-malicious cyber events in the LMA model clauses. As advised, the distinction between marine and war perils in the NMIP is largely based on the intent behind the malicious act. This can be difficult to determine in case of a cyber-attack. To instead draw the line between malicious and non-malicious cyber events, which we understand could be easier to determine from a technical standpoint; may thus provide more predictability and legal certainty for all parties. This would also ensure better interoperability with UK conditions, as there would be no clear gaps between the two sets of conditions.

Which solution will be chosen remains to be seen. The revision of the NMIP is a formalised and complex procedure. The NMIP has status of an agreed document, meaning that changing the current mechanics on cyber would need the approval of all involved parties.

On balance, we anticipate that a factor which may tip the scale, is the respective solutions effects on reassurance costs, and thus in turn premium.


In conclusion “silent cyber cover” is no longer an option for any policies with ties to the UK. This raises the question of how this should be addressed moving forward, i.e. either by bespoke policy adaptations or by amending the NMIP.

How the Nordic market decides to approach this situation waits to be seen. Fortunately, there is some time left to find a flexible and mutually agreeable solution. The new version of the NMIP will not be published before 2023.

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Download PDF here.

Competition law: Collective boycott – A restriction by object

The Norwegian Court of Appeal (Borgarting lagmannsrett) has in a recent judgement concluded on whether a collective boycott constitutes a violation of the competition rules:

The judgement addresses several issues relevant for the interpretation of the Norwegian Competition Act Article 10, which corresponds to the TFEU Article 101 and EEA Article 53. The key issue was whether a collective boycott as such can be considered as a so-called “restriction by object “. A restriction by object is, in short, a type of agreement or concerted practice between competitors which is considered to restrict competition (and therefore harm consumers) by its very nature. Accordingly, by proving a by object-restriction the Competition Authority is not obliged to examine the actual or potential effects which saves significant resources.

Here you may read the whole judgement (in Norwegian).


The Appeal Court was conducting a judicial reviewing of the validity of an infringement decision by the Norwegian Competition Authority’s where four publishers (Cappelen Damm, Gyldendal, Ashehoug and Schibsted Forlag) were found to have exchanged sensitive information and engaged into a concerted practice that leaded to a collective boycott of a distributor, Interpress, that delivered books to the “mass market” (sales of books, usually best-sellers, to non-traditional book stores such as kiosks, grocery stores, gas stations etc). Interpress was at that time owned by Reitan Convenience, who also owns the retailer Narvesen – an important retailer whose sale of books was approximately 20 % of the mass market at that time. There was only one other competing distributor of books to the Norwegian mass market, Bladcentralen, which was controlled by the same four publishers (that together had a joint market share of approximately 70 % of the total market for books in 2014), and some magazine publishers.

Previously, the four publishers had to some extent also distributed their books to the mass market through Interpress. As from March 2014, Interpress did not receive books for distribution from the four publishers, with the exception of one book. Interpress assumed the four publishers had colluded on a collective boycott and filed a complaint to the Norwegian Competition Authority, which conducted a dawn raid at the four publishers and Bladcentralen in April 2014.

The Norwegian Competition Authority imposed fines (press release – in English)on the four publishers for infringement of the Competition Act Article 10 (which corresponds to TFEU Article 101). The decision (here – in Norwegian) was appealed to Oslo District Court by three of the publishers.

Oslo District Court found (here – in Norwegian), as The Norwegian Competition Authority, that the publishers had exchanged sensitive information, and that there was an agreement of a collective boycott between the publishers to exclude the distributor (Interpress) that was considered as a restriction by object. However, the District Court reduced to some extent the amount of fines as compared to the fines set by the Competition Authority. Two of the publishers  appealed the judgement of the District Court.

The Court of Appeal came to the same result as the  District Court in a dissenting judgment (the three judges dissented 2-1), i.e. that there was a collective boycott that amounted to a restriction by object.

Key points from the judgement of the Court of Appeal

Oil Regulation 2020

Partner Yngve Bustnesli at Kvale’s oil and gas department has written an article on oil regulations and other applicable law for the oil industry in the international publication “LEXOLOGY –Getting the Deal Through“, which provides a collection of corresponding articles from 18 countries worldwide.

Reproduced with permission from Law Business Research Ltd. This article was first published in LEXOLOGY – Getting the Deal Through: Oil Regulation 2020, (contributing editor: Bob Palmer)

You can read the complete article here.

Read more about Global Practice Guides at

Biosimilars on the substitution list?

The Norwegian Ministry of Health and Care Services (“the Ministry”) has presented a proposal for amendments to the Norwegian Pharmacy Act section 6-6, suggesting that biosimilars (a biologic medicinal product similar to another already approved biological medicine) may be included on the substitution list. By this, biosimilars will be subject to automatic substitution in pharmacies in the same way as generic medicines. This will increase competition in the Norwegian market between the original biological medicine and the biosimilar medicine.

The proposed amendment is on public consultation ending September 30, 2020.

Current arrangement

At present, automatic substitution in pharmacies of biological or biosimilar products is not allowed. The current substitution list is reserved for generic and parallel imported medicines, and the common understanding in this respect is that biosimilars are not considered to be a generic to a biological medicine. This was confirmed in a first instance decision in 2011 regarding filgrastim (TOSLO-2010-128688), where the decision from the Norwegian Medicines Agency to include filgrastim on the substitution list was ruled to be invalid.

When the regulation came into force back in 2001, biosimilars did not exist. The first biosimilar medicine was granted marketing authorisation in 2006. The Ministry is of the opinion that there is no professional basis for maintaining such a limitation in the substitution list.

The proposal

The Ministry proposes to amend the regulation so that generic, parallel imported and biosimilar medicines can be included in the substitution list when these are considered bioequivalent. The Ministry assumes that when a biosimilar medicine is granted a marketing authorisation, it is a result of it having the same effect and safety profile as the original biological medicine.

When included in the substitution list, the Norwegian Medicines Agency can also decide that the biosimilar shall be subject to the stepped price model (“trinnpris”). This means that the price that will be reimbursed by the National Insurance Scheme will be gradually lowered in two or three steps. The pharmacies will be obliged to offer the patients at least one product at a price equal to the stepped price. This will lead to a substantial price reduction for medicines where there are biosimilar alternatives, leading to savings for both the National Insurance Scheme and the patients.

According to the Ministry, the purpose of the proposal is to facilitate that the substitution system can be managed in accordance with actual medical and regulatory developments, so that the potential for competition and lower prices on medicines can be realized to a better extent than today.

Growth in demanding times

In Kvale, we combine a strong performance culture with a strong collaborative culture to create the best results. Delivery of first-class legal assistance is created through close cooperation both internally and externally with customers, partners, counterparts, courts and public authorities.

The corona pandemic has put our business to the test. We have throughout remained committed to maintaining business as usual making sure that our customers feel that we are still present for them. And where our deliveries are still practical and solution-oriented contributions to our customers reaching their strategic and commercial goals.

This period has confirmed the importance of taking good care of all our employees . From a hectic working day with more than 100 employees in offices in Oslo and Ålesund, we have for several months run a business where everyone has been working from home but continued to cooperate and deliver excellent services.

It has been a period of unprecedented learning and the use of digital working tools has surged.  We have not furloughed any of our people, and we have no intentions of reducing our number of employees.  We will continue to take good care of our people.

So far in 2020 we have welcomed more than 25 new professionals to our firm, and we continue to grow.  Our number of talented lawyers will soon exceed 100. We have hired a number of new partners who strengthen our capabilities in many practice areas and we have established a new office in Ålesund.  The western coast of Norway is widely recognized as a strong and innovative cluster with businesses that serve global markets.  Our ambition is to build the strongest legal environment available to our clients.

We have  seen a strong growth in revenue in 2020.  By close of the first half year, we are ahead of budget and our goal is to grow by 25 to 30 % compared to 2019.  Demanding times for businesses will continue to challenge us in the times ahead, and we are building a top tier practice in Distressed M&A.

Our employees are our most important resources and we continue to invest in our talented people. We already have one of the highest number of female partners in business law firm in Norway, and we are proud to confirm that the development of our talent continue.

Our talented colleagues Anja Flo Lauvik, Pernille Brusdal and Siri T Berge move up to senior lawyers from 1 July and Anette Plassen becomes a senior associate. We are proud of their achievements.

This has been an unusual and remarkable year.  We look forward to continue working together with you and to achieve great results together.

Our best wishes for the summer holidays to our clients and business partners.  Stay safe!

The Norwegian Supreme Court clarifies the right to proceed directly against Norwegian insurers – HR-2020-1328-A

On 24 June 2020, the Norwegian Supreme Court rendered a decision which confirms that Norwegian courts have jurisdiction to try direct action claims against Norwegian liability insurers. The Supreme Court held that it is not necessary to consider whether the material conditions of the direct action claim are satisfied for the Norwegian Courts to have jurisdiction. The question had previously not been tried by Norwegian or foreign courts, but is now finally decided by the Supreme Court.

 Background of the case

The case relates to a collision between the vessels “Thorco Cloud” and “Stolt Commitment” in Indonesian waters. Following the collision, “Thorco Cloud” sank and six crewmembers lost their lives. After the collision, the owners of the “Thorco Cloud” commenced proceedings in Norway against “Stolt Commitment’s” liability (P&I) insurer Gard.  None of the vessels were registered in Norway.

The case has raised several complex legal questions. Before the Supreme Court, the trial scope was confined to the specific interpretation of the wording “when such direct actions are permitted” in the Lugano Convention Article 11 no. 2.

In particular, there were two alternative ways to interpret the Article wording: (i) so that direct actions generally must be permitted in the jurisdiction, or (ii) so that the substance of the direct action claim, in this case insolvency, must be considered to determine whether “such direct actions are permitted“.

The Supreme Court’s clarification

The Supreme Court confirmed that the term “permitted” in the Lugano Convention Article 11 no. 2 must be understood so that it is sufficient that direct actions are generally permitted in the jurisdiction. It is thus not necessary to consider whether the specific direct action would fail or succeed in the particular case in order to establish jurisdiction.

In Norway, an injured party is generally permitted to pursue a claim against the tort feasor’s liability insurer by way of direct action pursuant to the Norwegian Insurance Act Section 7-6.

Kvale’s comments

The Supreme Court decision implies that an injured party may always commence direct action proceedings under liability insurance in Norway, provided that the liability insurer is domiciled here, and the direct action is subject to Norwegian law.

The rule of law established by the Supreme Court decision is in line with the purpose of the Lugano Convention’s rules on jurisdiction in cases related to insurance and support the principle that proceedings may always be brought in the member state the defendant is domiciled.

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Kvale regularly assists clients in relation to direct action proceedings against liability insurers and other matters relating to insurance.

New temporary reconstruction legislation

Bankruptcy protection during creditor negotiations

On 11 May, 2020, a new, temporary act on reconstruction of companies in distress came into force in Norway. Which options does it offer, and what is it lacking?

The new act is based on a proposition from 2016

The new “Temporary Act on Reconstruction to Remedy Financial Distress Caused By the Outbreak of Covid-19” (the Reconstruction Act) was passed by the Norwegian Government on 11 May 2020.

The new act is based on a proposal for a new restructuring legislation by Judge Leif Villars-Dahl, which was subject to a public hearing in 2016. Villars-Dahl cooperated with a reference group of four people, one of whom was Partner Stine D. Snertingdalen in Kvale.

When this article is written about one month after enactment, two reconstruction processes have been initiated under the new legislation.

The corona pandemic has caused serious financial difficulties for many businesses

In Norway, strict measures were introduced by the government in April 2020 to stop the rapid spread of the Covid-19 virus, including closing restaurants, pubs, cinemas, stopping or significantly reducing travelling by plane, train, tram, bus etc. Furthermore universities, schools and kindergartens were closed and most people studied and worked from their homes during April and beginning of May. Many are still working from their homes in June.

This has deeply affected the economy of a wide range of businesses. The income stopped while expenses continued. Numerous employees were temporary suspended with the help of governmental aid, and governmental loans and other crisis packages were put in place.

The strict measures are gradually being lifted, and businesses are in the process of restarting their operations. However, many companies will face increased debt due to postponed payments of costs such as taxes, VAT and rent. At the same time, they will experience lower income as it takes time for various markets to return to their activity level prior to the Covid-19 crisis.

Many of these companies will need tools to reduce their debt and protection from creditors while negotiating a restructuring plan, in order to avoid bankruptcy. The judicial debt negotiation regime, which was applicable up until 11 May of this year, was rarely used and often unsuccessful. It was mainly applied to reduce a company’s unsecured debt.

The Reconstruction Act replaces this legislation, and provides some additional tools and more flexibility, hopefully giving it a higher success rate than its predecessor.

The Reconstruction Act

When can a company file for reconstruction?

Where the previous legislation required a company to be without capacity to pay their debt as it fell due before they could file, the Restructuring Act allows a company to file for reconstruction if it has, or in the foreseeable future will have, serious financial difficulties. The legislators have deliberately made this threshold low and vague, in order to incentive more companies to file while they still have some liquidity left to fund the reconstruction costs, and to be able to present a reconstruction plan the creditors are willing to accept.

Petition requirements

The petition must show how the reconstruction shall be organized and financed. In short, the company must show the court that they have a plan for the process. Further, an advance payment to cover the reconstruction costs must be made, normally minimum NOK 300,000.

Automatic stay

The company is protected from any creditor pursuit throughout the restructuring proceedings, such as bankruptcy petitions, attachments and enforcement proceedings, as well as contracts being terminated due to payment default prior to the opening of proceedings. However, a financial institution’s security over financial instruments, such as pledged bank accounts and shares in subsidiaries, are exempt from the automatic stay.

The debtor is in possession but under supervision

The company, represented by its board of directors, remain in control while being supervised by a court-appointed administrator and one to three creditor representatives, together forming the reconstruction committee. They are granted access to the company’s financial information, and decisive powers and authority to give orders in certain matters.

The reconstruction committee shall give a recommendation to the creditors with respect to the plan proposed by the company, and inform the creditors’ what their alternative outcome is expected to be in a bankruptcy/liquidation.

An auditor may also be appointed to assist the reconstruction committee.

Financing during the reconstruction process – “DIP financing”

In addition to the advance payment to be made when the petition is filed and any income from the business operations during the reconstruction proceedings, the company may – if further financing is needed – obtain a “debtor in possession financing” with security on superpriority. This financing may only be applied to cover costs of the reconstruction work and of the business operations during the reconstruction proceedings. Two kinds of security are provided:

  1. A statutory lien of 5 % the value of all of the debtor’s assets that already secures the debtor’s obligations on priority before existing security holders, and
  2. an additional floating charge (i.e. exceeding the mentioned 5 %) in inventory, receivables and/or machinery and plant, on priority before existing security holders.

Such financing requires consent from the reconstruction committee. The court may, however, reverse the committee’s consent, either at its own discretion or upon a petition from affected security holders, if their overall security is substantially deteriorated by the superpriority financing or if there is not really a need for the financing.

The reconstruction plan: voluntary or compulsory reconstruction

The reconstruction plan to be proposed to the creditors may either be for a voluntary reconstruction, where only one creditor can overturn the plan, or for a compulsory composition, where 50 % in amount of the creditors with voting rights binds the remaining creditors. Certain groups of creditors will not have voting rights, such as secured creditors within the value of the secured asset, closely related parties and employees as far as their claim for wages etc. are preferred claims.

In a voluntary reconstruction, the company is at full liberty with regards to how the plan is composed and is not required to treat its creditors equally. However, it is sufficient to obtain 75 % (in amount) votes for the plan, as long as no one explicitly votes against the plan.

In a compulsory composition, the plan must include one or more of the following:                     (i) payment extension, (ii) debt reduction, (iii) debt-to-equity swap, and/or (iv) a sale of whole or part of the business with the choice of liquidating the company thereafter.

Tax claims are not given priority

It has been decided by regulation that tax claims, except for employees’ tax deduction, shall not have preferential rights under the temporary Reconstruction Act.

Failed reconstruction /the plan does not obtain the required vote

If a plan is overturned, the company may suggest a new plan. However, the court may dismiss a plan even if the voting requirements to accept the plan has been met, if the plan appears offensive or is unfair or unreasonable towards the creditors.

A central element in the reconstruction committee’s and court’s evaluations of a plan is that it must give a better result for the creditors than in a bankruptcy.

A failed reconstruction proceeding will transform into bankruptcy/winding up proceedings, unless the debtor can prove to the court that the company is solvent.

In essence: what is new in the Restructuring Act?

 In essence, some of the most important new tools are the automatic stay during the entire process, the considerably lower threshold for filing for reconstruction, and a possibility to fund the proceedings through “DIP financing”. Furthermore, some companies may be helped by tax and VAT claims no longer having preferential status and the increased flexibility of no longer having a requirement for a minimum dividend payment, as well as being able to include debt to equity swap and a sale of the business as part of the reconstruction plan.

 What is the legislation missing?

In spite the new tools, the Restructuring Act is still lacking certain important mechanisms in order to become an even more effective restructuring option for large businesses in Norway.

Some of the most important shortcomings are:

It should also be mentioned that Norwegian rules on international insolvency proceedings, was passed in 2016 but are still in force. This reduces the legal certainty of the recognition of foreign insolvency proceedings in Norway, and vice versa.

Further legislative work

The interim legislation is only in force until 1 January 2022.

By then, a new and permanent reconstruction legislation needs to be in place. This will hopefully be based on the Reconstruction Act and the EC Insolvency Directive of 2019, and inspired by our neighbouring countries’ implementation of the directive, addressing, amongst others, the shortcomings mentioned above.

Ingvild Hanssen-Bauer and Anne Marie Sejersted – IP Stars 2020

We’re proud to announce that our partners Ingvild Hanssen-Bauer and Anne Marie Sejersted have been selected as IP Stars 2020 by MIP (Managing Intellectual Property), both being ranked as Patent Star 2020 and Trademark Star 2020.

According to MIP, being selected as an IP Star means being considered an experienced senior IP practitioner who’s been recommended by peers and/or clients or someone that is integral to the success of their firm. We congratulate them both and thank our clients for their trust!

Gas Regulation 2020

Partner Yngve Bustnesli in Kvales oil and gas team has contributed to an article about the Norwegian gas regulation in the international publication “LEXOLOGY GTDT – GAS Regulation 2020“, which include a  collection of articles from 24 countries.

Read the article here.

Yngve Bustnesli has in-depth knowledge of the oil and gas industry, and is recognized as one of the leading Norwegian practitioners within petroleum law, joint operating agreements, offshore projects, license transactions with due diligences, offshore contracts, gas sales contracts, decommissioning of offshore installations and health, safety, environment issues.