Legal costs
Introduction
Norwegian legal cost rules are similar to those under the English civil law tradition. Generally, costs "follow the event", i.e. the party prevailing in a legal action is entitled to cost reimbursement. This general principle applies at all levels of the court system. As such, the Norwegian rules differ from those found in the US, where state courts generally have no common law right to award costs to the successful party.
Compensation only cover "necessary costs". In short, the court may reduce a party's cost claim if it considers the costs incurred to be excessive.
Cost claims are decided in connection with the final ruling on the merits in each tier, i.e. not successively during the course of case preparation.
The general rules on legal cost awards
The prevailing party is entitled to compensation
The main rule is that a party prevailing in a legal action is entitled to full compensation for its legal costs from the opponent.
A party is considered to have prevailed if the court either (i) finds in favour of the party "in the whole or in the main" or (ii) the opponent’s claims are dismissed or quashed.
If the case involves multiple claims, the court must consider the overall outcome of the case. If, for example, a party brings both a claim for recission of a contract and a claim for damages, and only the recission claim is upheld, the party will probably not be considered to have prevailed in the main.
Whether the party has prevailed in the whole or in the main will ultimately be subject to the court's discretion.
Exceptions from the main rule of full compensation
1.
If neither party can be said to have prevailed in the whole or in the main, the general rule is that each party pays its own legal costs. However, a party considered to have prevailed in part (without crossing the threshold of "in the whole or in the main"), may be awarded legal costs if there are "compelling grounds" for doing so. However, the "compelling grounds" test is quite strict.
2.
The opponent may be exempted from liability for the prevailing party's legal costs if the court finds that "compelling grounds" justify such an exemption. Again, the "compelling grounds" test is quite strict.
Finally, a party may in certain exceptional circumstances be awarded legal costs in full or in part, irrespective of the outcome of the case.
3.
Finally, a party may in certain exceptional circumstances be awarded legal costs in full or in part, irrespective of the outcome of the case.
Only "necessary" legal costs are awarded
The courts have the power to assess the extent to which the prevailing party's legal costs qualify for compensation. Full compensation shall cover all "necessary" costs incurred by the party in relation to the action.
In addition to legal fees and court fees, such costs may include, inter alia, costs incurred in obtaining an expert opinion, travel costs, etc. If a party's own efforts in relation to the proceedings have been particularly extensive, costs may also include reasonable compensation for such efforts.
When assessing whether the costs were necessary, the courts will consider whether it was reasonable to incur these in view of the nature and complexity of the case. In particular, the value of the claim in dispute will guide the court's assessment.
Legal cost statements are submitted to the court at the end of the main hearing (or in the last written pleading if the dispute is decided without an oral hearing). The court is required to examine the amount of the cost claims regardless of whether the parties object to their opponent's statement. However, if no objection is made, the court will rarely reduce the amount of any legal cost award.
The extent to which the courts actively review legal costs varies. However, the courts have assumed a somewhat more assertive role in the last couple of years, due to a noticeable increase in cost levels.
Appealing legal cost rulings
Legal costs rulings are handed down separately by each court adjudicating the underlying dispute. If, however, a lower court ruling is overturned, the higher court will rule on any cost claim before the lower court(s). A legal cost ruling may be appealed, either as part of an appeal on the merits or separately.
Security for legal costs from foreign claimants
If the claimant is not domiciled in Norway, the respondent may move for the court to order the claimant to furnish security for any legal cost liability. This principle applies irrespective of whether the respondent is domiciled in Norway.
Security cannot be required, however, if (i) the claimant is domiciled in an EEA (European Economic Area) state, if (ii) it would violate an international law obligation relating to the equal treatment of parties domiciled abroad and parties domiciled in Norway, or if (iii) requiring security would be disproportionate in view of the nature of the case, the relationship between the parties and other circumstances.
The exception for international law obligations relating to the equal treatment of parties blocks any claim for security to be furnished by claimants resident in a country that is a signatory to the Convention of 1 March 1954 on Civil Procedure, of which Norway is a signatory member.
The right to a fair trial under Article 6 of the European Convention on Human Rights may in exceptional cases block a claim for the furnishing of security. The threshold for blocking such a claim under the disproportionality principle is very high.
Furthermore, none of the exceptions allow scope for limiting the security amount to only what the claimant is able to raise.
If the conditions for requiring security are met, and none of the exceptions apply, the case will be dismissed if security is not furnished. The court will determine the amount of security to be furnished, having regard to the amount likely to be awarded to the respondent if the respondent prevails on the merits.
