Arbitration
Introduction
As a general rule, any civil matter may be referred to arbitration in Norway. The arbitration must be based on an agreement between the parties.
Traditionally, arbitral proceedings in Norway have been conducted on an ad hoc basis, and not by way of institutional arbitration. As ad hoc arbitrations are not publicly available or registered to the same extent as ordinary court cases, no public statistics are available to fully reflect the frequency of arbitration in Norway. However, certain legal practice areas – such as construction, transport, oil and gas, franchising, reinsurance, etc. – stand out with a preference for arbitration. In these areas, the prevailing standard contracts will typically contain arbitration clauses.
Arbitral awards are usually not published, with a few exceptions such as for maritime and marine insurance law matters.
Ad hoc arbitrations in Norway usually involve the exchange of written submissions and an oral hearing similar to the main hearing before the ordinary courts. In most cases such arbitral proceedings are completed within one year of initiation. However, the conduct of ad hoc arbitration varies significantly.
For many Norwegian entities, ad hoc arbitration is deemed to be more efficient and flexible, and less costly than institutional arbitration. Furthermore, Norway has a large pool of experienced arbitrators, e.g. retired judges, academics, experienced litigators and other legal professionals, etc.
Even though ad hoc arbitration is dominant in Norway, institutional arbitration has been gaining a foothold in recent years.
Overview of institutional arbitration in Norway
The Arbitration and Dispute Resolution Institute of the Oslo Chamber of Commerce, established in 1984, is the only general provider of institutional arbitration in Norway. The Institute provides regular arbitration, fast-track arbitration and mediation for all fields of commercial law. The current version of its Arbitration Rules, dated 2017, are harmonised with the Arbitration Act of 2004 and the UNCITRAL Model Law. The arbitration administration fee of the Institute is based on the amount in dispute, ranging currently from NOK 10,000 to 70,000.
For Nordic arbitration in offshore and maritime matters, a recent establishment (2017) is the Nordic Offshore & Maritime Arbitration Association. This has been established by the national maritime law associations in Denmark, Finland, Norway and Sweden, and provides an arbitration scheme largely similar to ad hoc arbitration, although within an institutional framework comprising a board with members from all Nordic countries, which may intervene in specific arbitration matters if called upon by the parties.
There are no administrative fees for such arbitration, and the parties are free to choose the place of arbitration, the nationalities of arbitrators, the language of arbitration, etc. The Association has also published rules based on the UNCITRAL Arbitration Rules, as well as Best Practice Guidelines. These Guidelines are not binding, but are fairly detailed and often resorted to by arbitrators and parties alike.
Although institutional arbitration is less common in Norway than ad hoc arbitration, there are recent indications of an increased uptake, both for the Arbitration and Dispute Resolution Institute of the Oslo Chamber of Commerce and the Nordic Offshore & Maritime Arbitration Association. This is probably most pronounced for international arbitrations in Norway, as non-Norwegian and multinational enterprises may be more comfortable with, and used to, institutional arbitration.
Pros and cons of arbitration
Pros
One benefit of arbitration is the access to expertise. As the arbitrators are appointed by the parties, the parties have the ability to choose from a range of expertise and experience, whereas the judges in the ordinary courts are appointed more or less randomly, on the basis of availability and other factors which are not under influence from the parties. There are no specialised courts in Norway with a few exceptions, none of which are particularly relevant for commercial disputes.
A second benefit is efficiency. Receiving a final arbitral award may be significantly more time efficient than receiving a judgment from the courts. In an efficient arbitration, the arbitral tribunal may produce an enforceable award within approximately one year from initiation, whereas receiving a final and binding judgment from the courts may take several years, mainly due to slow case processing and appeals.
A third benefit, typically associated with institutional arbitration, is professionalised case management, by employing the rules and procedures of the institute in question, and using case management conferences and procedural orders to structure the proceedings and set the necessary milestones.
Fourth, in arbitration the parties often agree upon a common language, such as English, for the preparations and proceedings. This could be apprehended as more balanced and even cost-effective, in international disputes.
Fifth, arbitral proceedings are not open to the public as opposed to proceedings before the courts. Furthermore, the parties may agree on confidentiality for the award, see more below.
Another benefit is the access to more expedient enforcement, see the section on "Enforcement of Norwegian and non-Norwegian arbitral awards" below.
Cons
One disadvantage is that arbitration is generally more expensive than even litigation in the first instance as arbitration require fees for the tribunal and other additional costs for the proceedings, and guarantees or deposits for such in advance. However, the total costs of arbitration are usually less than the total costs of litigation in both the District Court and the Court of Appeal.
In some cases, it may be considered a disadvantage to not have the ability to appeal. However, the parties may mitigate this aspect when deciding on the procedural rules, applicable law and the choice of arbitrators etc. so that they can gain a higher degree of trust in the arbitration.
The means for gaining access to evidence from the opponent is also more limited in arbitration than in court case. On the other hand, arbitration is more flexible when it comes to the use of affidavits and expert witness statements.
To some the lack of legal precedent from arbitral awards is a disadvantage, in certain cases.
Appointment of arbitrators
As a general rule under the Arbitration Act, the parties shall appoint the arbitrator or arbitrators jointly. The tribunal normally consists of one or three arbitrators, depending on how the parties weigh the considerations of costs versus legal certainty against each other. The arbitrators are primarily chosen on the basis of their merits, reflecting their expertise and experience within the relevant business area, the claims in question and the character of the dispute. Usually, the presiding arbitrator or sole arbitrator has legal expertise, e.g. as a judge, lawyer or professor of law. In recent years there has been an increased focus on diversity in the appointment of arbitrators.
In practice, the parties often send a joint inquiry on the appointment as arbitrator(s) to the candidate(s). Alternatively, the parties appoint one arbitrator each, whom jointly appoint on the presiding arbitrator. The Arbitration Act provides remedies for the appointment if the parties do not agree on the appointment.
Confidentiality
The arbitral proceedings and the award are not confidential unless agreed by the parties in connection with the initiation of the arbitration. Consequently, an arbitration clause stipulating confidentiality will not suffice unless the parties also agree on confidentiality at the time of referring a specific matter for arbitration.
Costs
The general rule is that the tribunal shall determine its own compensation and the settlement of its expenses. The tribunal may order the parties to provide security for the costs of the tribunal in advance of the proceedings. The determination of costs shall be included in the award or the order termination the case, and the amount falls due for payment one month after the award or order is made. If requested by either of the parties, the tribunal shall allocate the costs of the tribunal between the parties as it sees fit. Furthermore, the tribunal may order one of the parties to pay all or part of its costs if so is requested by the other party. The latter is, however, decided at the full discretion of the tribunal.
Enforcement of Norwegian and non-Norwegian arbitral awards
Both Norwegian and non-Norwegian arbitral awards are enforceable under the Enforcement Act, in the same manner as a ruling handed down by the ordinary courts. Norway is a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. If the award is not made in English, Norwegian, Swedish or Danish, a certified translation of the award is required for enforcement.
Generally, enforcing a Norwegian arbitral award abroad is more efficient pursuant to the New York Convention, than enforcing judgments from the ordinary courts abroad. If the enforcement abroad is challenged, an arbitral award following institutional arbitration is more likely to be accepted.
Arbitral awards are rarely set aside
An arbitral award may only be set aside based on:
- lack of legal capacity
- noncompliance with the principle of adversarial proceedings
- award outside the jurisdiction of the tribunal
- incorrect composition of the tribunal
- arbitral procedure contrary to law or agreement when likely that this has had an impact on the decision
The courts may set an award aside of their own accord if the dispute is not capable of settlement by arbitration under Norwegian law, or if the award is contrary to public policy (ordre public).
If the grounds for invalidity only affect part of the award, only such part will be deemed invalid. The time limit for bringing legal action to set aside an arbitral award is three months after the award was received by the party. The Norwegian courts are generally reluctant to set aside arbitral awards, and this has only happened in a handful of reported court cases in Norway.
