International Arbitration 2019

Last Updated August 08, 2019

Denmark

Law and Practice

Authors



Lundsgaard & Partnere is a litigation boutique specialising in litigation and arbitration. This specialisation is a unique characteristic of the firm. No other law firm in Denmark has a similar profile or strategy. Lundsgaard & Partnere has three partners and a total of nine lawyers in Copenhagen. The firm is devoted to the practice areas of dispute resolution and insurance. Lundsgaard & Partnere has extensive experience with some of the biggest and most complicated cases currently and previously heard by the Danish courts, including cases that attract considerable media attention. The firm provides legal assistance to several leading Danish and foreign insurance companies, businesses and private equity funds. Lundsgaard & Partnere acts in major international arbitration cases pending in Denmark, representing leading clients.

Solving legal disputes before a tribunal outside the State-established court system has been accepted and recognised in Denmark for centuries, and, hence, a long time before the first comprehensive act regulating arbitration was enacted in 1972. The use of arbitration as a means of resolving disputes has grown in popularity since this enactment. The possibility of confidentiality, an access for the parties to influence the appointment of arbitrators, the prospects of a quicker process and global enforcement opportunities are some of the main factors driving this increased popularity.

An arbitration agreement is also found in many of the agreed documents most commonly used in Denmark. For instance, most agreements regarding construction projects include an arbitration clause as these agreements often refer to agreed documents (The General Conditions for Consulting Services of October 1989, known as ABR 89, or General Conditions for the provision of works and supplies within building and engineering from 1992, known as AB 92) where arbitration is the default dispute resolution option.

Whether domestic parties resort to the use of international arbitration as a method of resolving disputes depends on the specific circumstances of the case and the requirements of the parties involved. In terms of commercial disputes, arbitration agreements are increasingly the preferred choice of dispute resolution. The use of international arbitration is, however, still more prevalent in disputes involving parties from different countries.

The Arbitration Act of 1972 was revised in 2005. The reasoning behind such revision was, inter alia, that a modern arbitration act would contribute to Denmark's standing as an attractive country for conducting arbitral proceedings. Additionally, a modern law was generally considered beneficial to most industries, particularly sectors with large import and export. These reasons were also cited as arguments for another revision in the report of 2017 published by a committee established by the Danish Institute of Arbitration (DIA) to review the Danish Arbitration Act of 2005.

In its report, the aforementioned committee suggested a revision of the Arbitration Act in force, which is still the act from 2005. Firstly, the committee suggested a strengthening of the rules applicable to interim measures to allow arbitrators to issue interim remedies that, if necessary, can be enforced by the courts. Secondly, the working group suggested the introduction of rules limiting the access to petition decisions of the arbitral tribunal to the national courts. Thirdly, the committee suggested the introduction of rules of a more practical nature regarding, inter alia, cases with multiple parties and the joinder of multiple arbitration proceedings.

Statistics regarding the use of arbitration in general are not available in Denmark. However, the DIA in Copenhagen posts statistics of the cases filed with the institute. The statistics published by the DIA for 2018 show that the most dominant sectors are ‘telecommunication and technology’, ‘general trade’ and ‘finance and insurance’, while the remaining cases are spread across a variety of industries. From this firm's practice and from other dispute resolution actors, there has been an increase in disputes related to M&A agreements as well as a steady and high dispute activity within the insurance sector.

Divided by subjects, the statistics show that the largest bulks are ‘M&A’ and ‘IT/telecommunications’.

The DIA has existed as an institution for arbitration since 1894. The institute in its current form was created as a non-profit, self-governing institution in 1981. In contrast to the sector-specific institutions, the DIA adjudicates cases in a wide variety of subjects. The DIA has prepared a set of rules for the arbitration procedure, with the latest version being in force as of 1 May 2013 (the Rules of DIA).

The Danish Building and Construction Arbitration Board (Arbitration Board) oversees the vast majority of disputes in the construction sector. Along with its predecessors, The General Conditions for Building and Construction Works and Supplies of 21 June 2018 (known as AB 18) is the most commonly used agreed document in agreements concerning the building and construction sector. AB 18 contains an arbitration clause referring to the Arbitration Board as the dispute resolution institute. While dispute resolution before the Arbitration Board is categorised as arbitration in the sense of the Danish Arbitration Act and the New York Convention, the proceedings deviate from international arbitration in relation to the opportunity and custom of appointing technical instead of legal arbitrators. For instance, arbitrators with a legal background are, as a rule, appointed from a committee consisting of judges from the High Courts and the Supreme Court. Further, arbitrators with a professional background in the field of conflict are proposed by the Secretariat of the Arbitration Board.

Institutions of international character, such as the ICC, are also occasionally used by Danish parties.

The central statute governing arbitral proceedings is the Danish Arbitration Act of 2005 (DAA). The act applies when the arbitration is seated in Denmark and does not differentiate between national arbitration (ie, arbitration without international affiliation) and international arbitration (ie, arbitration with international affiliation); see Section 1(1) of the DAA. Some of the provisions of the DAA also apply when the place of arbitration is a foreign country, or when the place of arbitration has not yet been determined; see Section 1(2) of the DAA. The DAA reflects to a large extent the 1985 version of the UNCITRAL Model Law.

One deviation of the DAA compared to the Model Law is the scope of application. The act applies to both national arbitration and non-commercial arbitration.

The DAA contains a number of provisions referring to the national courts. Proceedings at the national courts are regulated by the Administration of Justice Act. Hence, the proceedings will also be subject to this regulation if the national courts are engaged.

If institutional arbitration is chosen, the arbitral proceedings will be subject to the rules in force at that particular institution. An example of this is the Rules of DIA regulating the proceedings taking place at the institute. If the proceedings are filed with the DIA, the arbitration is governed by the Rules of DIA and, where the rules are silent, by any other rules by the parties or, failing that, by rules decided by the tribunal; see Article 18(2) of the Rules of DIA.

As mentioned in 1.2 Trends, a committee established by the DIA has recently reviewed the DAA. The committee has suggested a revision of the DAA to bring the act in accordance with the UNCITRAL Model Law of 2006, particularly with regards to Article 17-17J of the UNCITRAL Model Law of 2006 concerning interim measures granted by arbitral tribunals. The committee has stated the importance of Denmark keeping its status as a 'Model Law-compliant' country.

However, the DAA, pre-dating the Model Law of 2006, still remains unchanged since its latest changes, in 2005.

Neither the DAA nor Danish contract law in general constitutes that the arbitration agreement must meet certain formal requirements. Thus, there are no formal legal requirements for an arbitration agreement to be enforceable. An oral agreement may also suffice, although such an agreement may be difficult to prove. An arbitration agreement based on the parties’ unequivocal behaviour, such as failure to object throughout the proceedings, can also be considered binding for the parties.

However, pursuant to Section 7 of the DAA, arbitration agreements regarding disputes not yet arisen must relate to a specific, concretised legal relationship.

Pursuant to Section 6 of the DAA, it is the principal rule that arbitration can be agreed for disputes relating to subject matters in which the parties have an unrestricted right of disposition. For some matters, specific statutory provisions establish that particular matters are not subject to arbitral agreements; for instance, disputes regarding residential lease cannot be subject to an arbitration agreement.

Disputes pertaining to matters of law protecting interests of public policy are generally non-arbitrable. In these cases, the public interests outweigh the contractual autonomy of the parties. It is possible for public authorities to enter into arbitration agreements when the authority does not act in its capacity of public authority but, for instance, enters into contracts regarding construction of a building.

The arbitral tribunal must ex officio consider the question of arbitrability. A finding contrary to Section 6 of the DAA – ie, if the parties do not have an unrestricted right of disposition – revokes the jurisdiction of a constituted arbitral tribunal. Further, an award relating to a non-arbitrable subject matter is not enforceable; see Section 39(1), No 2, litre a of the DAA.

A list of non-arbitrable subject matters is not set out in the DAA. The question of arbitrability is determined on a case-by-case basis by the arbitral tribunal. Disputes pertaining to public law are not per se non-arbitrable. Thus, the approach to be applied largely depends on the specific circumstances of the case and the interests of that particular legal area.

The considerations that in many other countries have led to the requirement that arbitration agreements must be in written form have traditionally been handled in Danish law by the courts imposing relatively strict requirements for the adoption of the arbitration agreement and the courts have traditionally imposed a restrictive line when determining the disputes covered by the arbitration agreement. However, there is some debate as to whether this traditional approach is still being practised by the national courts. Regardless, the courts’ assessment and interpretation of an arbitration agreement will largely depend on the specific circumstances of the case (namely the wording and context of the agreement).

An enforceable arbitration agreement relating to an arbitrable matter excludes the national courts from being able to decide on the dispute. When a valid arbitration agreement is in force, the national courts are confined to certain specific issues explicitly mentioned in the DAA; see Section 4 of the DAA. These issues include assisting in appointing arbitrator(s) (Section 11(3)), securing and obtaining evidence (Section 27), setting aside the award (Section 37), and refusing recognition or enforcement of the award (Section 39).

Pursuant to Section 8(1) of the DAA, a matter submitted before the Danish national courts, but subject to a valid arbitration agreement, must at a party’s request be dismissed by the court, unless the agreement is invalid or the arbitration cannot be completed due to other reasons. However, if the action is brought after the commencement of arbitral proceedings, the courts only have jurisdiction to rule on the jurisdiction of the arbitral tribunal in respect of whether the subject matter of the dispute is capable of settlement by arbitration (see also 5.3 Circumstances for Court Intervention).

If the arbitration agreement is otherwise in conformity with Danish contract law, the national courts will enforce the agreement. The national courts will also dismiss a case submitted to the courts if the claim is subject to arbitration.

According to the doctrine of separability in Section 16(1) of the DAA (or Article 16(1) of the Rules if the proceedings are filed with the DIA), the examination of the validity of an arbitration clause is to be done separately and detached from a corresponding review of the main agreement. Thus, the arbitral tribunal upholds its competence if it finds the main agreement, in which the arbitral clause is contained, invalid.

The DAA does not contain provisions restricting the parties when selecting the arbitrators. Unless the parties’ agreement (or any institutional rules) provides otherwise, the parties are free to select whoever they find suitable as an arbitrator. Although there are no direct restrictions for the parties when selecting arbitrators, the individual to be appointed arbitrator must still fulfil the general requirements of impartiality and independence. The Rules for arbitration prepared by the DIA contain specific rules on the appointment of arbitrators, including rules on impartiality, disclosure obligations for previous appointments by the parties or their legal advisers, country and domicile (in international arbitration cases). Article 10(2) of the Rules of DIA stipulates that the president of the tribunal, or a sole arbitrator, shall hold a law degree. Further, all appointments of arbitrators are subject to confirmation by the Chairman’s Committee of the DIA; see Article 11(1) of the Rules of DIA.

The DAA contains provisions that regulate the selection process to be applied as default if the arbitral tribunal cannot be established in accordance with the procedure set out in the parties’ agreement or if the parties have not agreed on this issue. Following Section 11(2) of the DAA, if the arbitration agreement does not set out the procedure of constituting the arbitral tribunal, the tribunal consists of three arbitrators. Each party appoints one arbitrator within 30 days of a request to do so from the other party. The two arbitrators appointed engage the third arbitrator, who shall act as chairman of the tribunal.

If the arbitral proceedings are filed with the DIA, the dispute is to be decided by a sole arbitrator if the parties have not agreed upon the number of arbitrators; see Article 10(1) of the Rules of DIA. In special circumstances, however, a panel of three arbitrators can be decided upon.

As mentioned above, it is the main rule that the selection of the arbitrators is subject to the agreement of the parties without intervention from the courts. However, the courts can become involved at the request of a party; see Section 11(3) of the DAA.

If the arbitral tribunal cannot be successfully constituted, a party may request the courts to appoint the arbitrator not appointed. Section 11(3) of the DAA applies if the arbitral tribunal cannot be constituted in accordance with the procedure agreed by the parties or (in the absence of such agreement) in accordance with the default rules mentioned in 4.2 Default Procedures. In appointing an arbitrator, the courts shall have regard to any qualifications required of the arbitrator by the agreement of the parties. The courts must also ensure that the arbitrator to be appointed is impartial and independent of the parties. This provision establishing the constitutive competence of the national courts cannot be derogated from by agreement between the parties; see Section 2(2) of the DAA.

According to Section 13(1) of the DAA, it is the principal rule that the procedure for challenging an arbitrator is to be decided freely by the parties. The Rules of DIA contain provisions establishing that a challenge of a selected arbitrator is to be decided by the institution.

If the parties’ agreement does not regulate the procedure for challenging an arbitrator, Section 13(2) of the DAA applies as a default. According to this provision, a party who intends to challenge an arbitrator must, within 15 days after becoming aware of the constitution of the arbitral tribunal and of the circumstances on which the challenge is based, send a written statement of the reasons for the challenge to the arbitral tribunal. The grounds for a challenge can be that the challenged arbitrator is not impartial or independent, or does not possess the qualifications or characteristics subject to the parties’ agreement. The arbitral tribunal shall decide on the challenge, unless the challenged arbitrator voluntarily resigns from the position or the other party agrees to the challenge. If the arbitral tribunal rules that the challenge is unfounded, the challenging party may within 30 days request the national courts to decide on the challenge; see Section 13(3) of the DAA. Filing a challenge against an arbitrator will in most cases extend the overall timeframe of the proceedings, since such challenge often suspends the proceedings until the challenge has been settled.

If the arbitral proceedings are filed with the DIA, a challenge of arbitrators must be submitted to the secretariat of the DIA within 15 days after having become aware of the appointment and the circumstances on which the challenge is based; see Article 13(1) of the Rules of DIA. The Chairman’s Committee of the DIA decides on the challenge; see Article 13(3) of the Rules of DIA.

Following Section 12 of the DAA, arbitrators must be impartial and independent. Individuals approached to be appointed as an arbitrator as well as acting arbitrators shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence. This includes personal or economic relations with either party or previous appointments by either of the parties.

With inspiration from Sections 60-61 of the Administration of Justice Act (in Danish: Retsplejeloven), which concern the disqualification of judges at the national courts, the approach applied is a case-by-case assessment. For international arbitration in particular, the Guidelines on Conflicts of Interest in International Arbitration from the International Bar Association has had some importance in determining the requirements of impartiality and independence.

At proceedings filed at the DIA, it follows from Article 12 of the Rules of DIA that any individual appointed as an arbitrator must be available, impartial and independent. Similarly to the DAA, the individual must inform of any matters that may give rise to legitimate doubts as to his or her accessibility, impartiality or independence.

At proceedings with the Arbitration Board, it also follows from Section 6(3) that arbitrators must disclose any matters that may cast doubt over his or her impartiality or independence.

As stated in 3.2 Arbitrability, there is no listing of non-arbitral subject matters and the assessment of arbitrability is done on a case-by-case basis (see also 3.3 National Courts' Approach).

As a general rule, fields of law traditionally concerned with public policy – such as family law and criminal law, the grant of patent and other IP rights, and the grant of citizenship – are the exclusive jurisdiction of the national courts.

Arbitration clauses in a consumer contract are not per se invalid. However, an arbitration agreement concluded before the dispute arose is not binding on the consumer; see Section 7(2) of the DAA. A consumer has only waived the right to plea the arbitration agreement as being non-binding if he or she proceeds with the arbitration after being informed that the arbitration agreement is non-binding.

In the first instance, the arbitral tribunal will rule on its own competence. The arbitral tribunal will, in particular, consider whether a binding arbitration agreement covering the dispute is in place between the parties. It is also a prerequisite of the arbitral tribunal’s competence that the subject matter of the dispute is arbitrable. This principle of competence-competence follows from Section 16(1) of the DAA (or Article 16(1) of the Rules of DIA).

If the action addressing issues of jurisdiction is filed with the national court before arbitration is commenced and the dispute is subject to an arbitration agreement, the courts can only assess whether the arbitration agreement is null and void, inoperative or incapable of being performed. This limitation for the courts follows from Section 8(1) of the DAA. If the action is brought before a national court after the commencement of arbitral proceedings, the court is further limited to rule on the jurisdiction of the arbitral tribunal only in respect of whether the subject matter of the dispute is capable of settlement by arbitration; see Section 8(1).

The national courts can also become involved when the arbitral tribunal has ruled on its own jurisdiction in a decision separate from the ultimate award. If it is preliminary ruled by the arbitral tribunal that it has jurisdiction, any party may within 30 days after having received notice of that ruling request the national courts to review the decision of the arbitral tribunal upholding its own jurisdiction; see Section 16(3) of the DAA.

Ultimately, the national courts can invalidate an arbitral award containing decisions on matters beyond the scope of the arbitration agreement since this is one of the explicit grounds on which an award may be set aside; see Section 37(2), No 1, litre c of the DAA.

According to Section 16(2), it is the principal rule that a submission regarding the arbitral tribunal not having jurisdiction must be submitted no later than the submission of the statement of defence. A submission that the arbitral tribunal is exceeding the scope of its authority shall be submitted as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. Similarly, it also follows from Article 16(2) of the Rules of DIA that objections to the jurisdiction of the tribunal must be raised no later than the statement of defence.

A submission concerning the arbitral tribunal not having jurisdiction cannot be invoked in the enforcement process of the arbitral award, unless the subject matter of arbitration was non-arbitrable in the first place as set forth in Section 6 of DAA; see Section 16(4). It also follows from the same provision that a consumer shall not be deemed to have waived the right to raise a plea that the arbitration agreement is not binding on the consumer, unless the consumer proceeds with the arbitration after having been informed that the arbitration agreement is not binding (see also 5.1 Matters Excluded from Arbitration).

The standard of judicial review for jurisdiction or admissibility to be employed is not specified in the statutory provisions of Danish law. There is no conclusive case law on the standard to be applied. Thus, it is a case-by-case assessment to be performed dependent on the specific circumstances of the case.

Traditionally, the Danish courts have been reluctant to set aside decisions from an arbitral tribunal. A national court will most likely be reluctant to set aside a decision from the tribunal ruling on its own jurisdiction.

As mentioned in 5.3 Circumstances for Court Intervention, the national courts must dismiss the case if a dispute covered by an arbitration agreement is filed with the national courts and impose costs on the losing party. Naturally, this does not apply if the arbitration agreement is found null and void, inoperable or incapable of being performed.

As the parties can agree to enter into an arbitration agreement, the same parties can also mutually agree to waive the agreement and proceed at national courts or other means of dispute resolution. If a dispute is filed with the national courts regardless of the dispute perhaps being subject to an arbitration agreement, the national court will generally not raise the question of breach when the parties do not raise objections against the jurisdiction of the court.

The arbitral tribunal generally does not have competency to assume jurisdiction over third parties who have not signed or entered into the arbitration agreement. However, third parties may sometimes be assimilated to a party bound by the arbitration agreement, such as in cases of universal succession (see 13.5 Third Parties).

It has recently been debated whether this principal rule – ie, that only signatories of the agreement are bound by the agreement – is modified by a decision from 2014 issued by the Danish Supreme Court. In this case (U 2014.2042 H), the court ruled that the claim between two parties with no direct contractual relationship (thus, no arbitration agreement between them either) was to be resolved through arbitration, since the agreements of each link contained an arbitration clause that allowed such interpretation. The agreements of each link contained reference to the same agreed document and, hence, the same arbitration clause.

In relation to disputes governed by the Arbitration Board, Section 69(7) of AB 18 provides that when AB 18 (or its predecessor, AB 92) applies to the relationship between the employer and several parties (contractors, suppliers) then the arbitration agreement shall apply to the inter-relations between such parties.

If a party so requests, the arbitral tribunal can order any party to take such interim measure of protection as the arbitral tribunal deems necessary in respect of the circumstances of the dispute; see Section 17 of the DAA. However, if a party does not comply with such order from the arbitral tribunal, there is no legal basis providing for the enforceability of the interim measures of protection ordered by the tribunal. To ensure enforceability, the party must engage the national courts (see 6.2 Role of Courts).

In the majority of the arbitration cases taking place in Denmark, the types of interim relief that the tribunal considers are typically injunctions and actions preserving assets and evidence corresponding to those employed by the national courts (ie, the types found in the Administration of Justice Act).

In arbitral proceedings with the DIA, the tribunal can, upon a request from a party, order another party to take such interim measures as the tribunal considers necessary; see Article 21 of the Rules of DIA.

Pursuant to Section 9 of the DAA, an arbitration agreement does not prejudice a party from petitioning the national courts for preliminary or interim measures in accordance with the provisions found in the Administration of Justice Act.

The courts may order an injunction if the following circumstances are made sufficiently probable or proven by clear and convincing evidence:

  • that the party holds the right for which protection by way of an injunction is sought;
  • that the conduct of the opposing party requires the granting of the injunction; and
  • that the ability of the party to enforce his right will be lost if the party has to await a full trial.

Further, the courts can deny granting an injunction if the damage or inconvenience caused to the counterparty is manifestly disproportionate to the interests supporting such injunction.

Section 9 does not only apply when the seat of the arbitration is in Denmark but also if the place of arbitration is in a foreign country or if it has not yet been determined where the arbitration is taking place; see Section 1(2) of the DAA. The parties cannot agree that Section 9 of the DAA is not applicable; see Section 2(1) of the DAA.

Subject to the provisions in the Administration of Justice Act, the types of reliefs that the national courts can grant are, eg, injunctions and actions preserving assets and evidence, in particular in the case of infringement of IP rights.

Danish law does not contain provisions specifically related to the use of emergency arbitrators. However, as no statutory provisions preclude the use of emergency arbitrators either, the parties can in their arbitration agreement decide to explicitly allow the use of emergency arbitrators.

Article 32 of the Rules of DIA allows for the appointment of an emergency arbitrator where the taking of evidence or interim measures cannot await the confirmation of the 'permanent' arbitrator(s). Cases regarding taking of evidence prior to the confirmation of the arbitrators are regulated by Appendix 2 to the Rules of DIA. When the parties’ arbitration agreement is entered into after 1 May 2013, the cases relating to interim measures to be granted prior to the confirmation of the arbitrators are regulated by Appendix 3, as these rules only apply if the arbitration agreement is after this date; see Article 2(1) of the Rules of DIA. Nevertheless, if the parties’ arbitration agreement pre-dates 1 May 2013, the parties can still agree that Appendix 3 is applicable.

Pursuant to Section 36(1) of the DAA, an arbitral tribunal can order the parties to provide security for the fees and expenses of the tribunal. In most cases, such security will be ordered by the tribunal or the institute at which the arbitration is being conducted. It is the discretion of the arbitral tribunal to determine the nature and extent of the security. Unless agreed otherwise, the arbitral tribunal cannot order security for a party’s costs to the other party. If the parties have agreed to use, eg, the DIA rules, the arbitral tribunal can order a party upon request to provide security for the other party’s costs; see Article 6 of the Rules of DIA.

Specifically in relation to instances where the arbitral tribunal requires a party to take interim measures (see 6.1 Types of Relief), it further follows from Section 17 of the DAA that the arbitral tribunal can require any party to provide appropriate security in connection with such measures. The arbitral tribunal can decide that such security is a condition for employing the requested interim measure.

In proceedings at the national courts filed by a plaintiff not domiciled in the EU/European Economic Area, the courts may order a party to provide security for costs. However, security cannot be ordered by the courts when the plaintiff is domiciled in a country where such security will not be ordered for plaintiffs from Denmark.

Chapter 5 (Sections 18-27) of the DAA contains provisions governing the procedure of arbitration. Save for those specified in 7.2 Procedural Steps, the provisions in this chapter apply as default if the parties have not agreed otherwise. In the absence of agreement between the parties, it follows from Section 19(2) that the arbitral tribunal is vested with a wide discretion to conduct the proceedings in the manner it considers appropriate.

Section 20 of the DAA relates to the place of arbitration. If the place is not determined by the parties’ agreement, the arbitral tribunal decides the place having regard to the circumstances of the case. If the proceedings are filed with the DIA, the place of arbitration is Copenhagen, unless otherwise agreed between the parties; see Article 15(2) of the Rules of DIA.

If the parties have not agreed otherwise, it follows from Section 21 of the DAA that the arbitration commences when a written request for arbitration is received by the respondent. If the proceedings are filed with the DIA, it follows from Articles 4(1) and 4(2) that a statement of the claim must be submitted to the DIA and the date on which the DIA receives this statement of claim is the date on which the arbitration case is considered commenced.

If the language of the arbitration is not agreed by the parties, the language of the arbitration is to be decided by the arbitral tribunal; see Section 22. Section 23 of the DAA relates to the filing of a statement of claim and statement of defence, while Section 25 of the DAA concerns the instances where the claimant or defendant (without showing sufficient cause) fails to submit a statement of claim/defence, does not attend hearings, or fails to produce documentary evidence.

Section 24 of the DAA relates to the question of hearings. If requested by a party, the tribunal must hold such hearings. Otherwise the proceedings can be decided conducted on written basis. The possibility for the arbitral tribunal to appoint experts is found in Section 26 of the DAA.

If it follows from the arbitration agreement that arbitral proceedings are to be filed at a specific institute, the rules of the institute will govern the procedure of the arbitration.

With the exception of Sections 18 and 27, the provisions in Chapter 5 of the DAA only apply when the parties have not agreed otherwise

Section 18 of the DAA sets out the basic principles of equal treatment of the parties and the right for each party to fully present their case. These principles must be respected by the arbitrators.

Furthermore, the parties cannot agree that Section 27 of the DAA does not apply. Pursuant to Subsection 1 of Section 27, the arbitral tribunal or a party with the approval of the arbitral tribunal can request the national courts’ assistance in taking evidence in accordance with the provisions of the Administration of Justice Act. Subsection 2 of Section 27 allows the arbitral tribunal to request the national courts for a referral to the Court of Justice of the European Union (CJEU) if such ruling from CJEU is necessary to enable the arbitral tribunal to issue the award.

Under Section 19 of the DAA, the arbitrators enjoy a wide discretion to conduct the proceedings the way they see fit. According to Section 19(2) of the DAA, it is explicitly stated that the power vested upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

It follows from Section 18 of the DAA that it is the duty of the arbitrators to ensure equal treatment of the parties as well as to ensure that each party is given a fair opportunity to present its case. In accordance with Section 12, arbitrators must also be impartial and independent. Both prospective and acting arbitrators are under a duty to remain impartial and independent of the parties and must disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence.

In arbitral proceedings, there are no statutory provisions outlining particular qualifications or other requirements for the legal representatives. A party can (although not recommended in most cases) decide not to assume legal counsel at all.

However, there are legal requirements for representatives acting on behalf of their client and before the regular courts in Denmark. As a main rule, the legal representative must be a Danish Bar-qualified lawyer (or EU lawyer admitted to practice in Denmark) to appear before the national courts.

While it is to a large extent possible for the parties to customise the proceedings in the way the parties would like it, arbitration in Denmark is often conducted in a uniform manner. It is the principal rule that the parties themselves are responsible for collecting and submitting the evidence they consider relevant and necessary for the case. If relevant, the parties can also agree on the factual circumstances to be assumed by the arbitral tribunal in their award.

In terms of collecting evidence, the parties can request disclosure of documents from the other party and the court can order the party to disclose such evidence requested. If the disclosure order by the tribunal is not complied with, the tribunal can choose to apply adverse inference to the disadvantage of the non-complying party. The courts cannot enforce disclosure towards a party to the case. It is, however, possible to request assistance from the courts to enforce disclosure towards a third party.

The use of written witness statements in arbitration cases has become widely prevalent, particularly in international arbitration cases through the influence from the procedures in international arbitration cases, including the International Bar Association rules. This is in particular applicable for cases before the DIA. The parties also commonly submit separate reports from independent experts; see, for example, Article 19(b) of the Rules of DIA. The tribunal can also instigate a process involving a neutral expert not engaged directly by either of the parties, much alike the process usually followed by the national courts when obtaining expert appraisal; see, for example, the Rules of DIA Article 20.

Section 19(2) of the DAA establishes the arbitral tribunal’s free discretion when assessing and weighing the evidence presented to the tribunal. Hence, the arbitral tribunal can, inter alia, decide which documents of evidence are to be included and which are to be precluded as irrelevant. This principle can, however, be derogated from by agreement between the parties.

Arbitrators are, under Danish law, not vested with powers of compulsion to order the production of documents or require the attendance of witnesses.

The provisions found in the Administration of Justice Act stating the duty to give evidence and the powers of compulsion if the witness refuses to testify are not applicable for an arbitral tribunal. Further, a false testimony given by a witness (or a party) under arbitration is not punishable pursuant to Section 158 of the Criminal Code, but instead as lawsuit fraud. If coercive powers are necessary in order to make a witness testify or if it is found desirable that the testimony is subject to criminal liability, the arbitral tribunal can, pursuant to Section 27 of the DAA, request the national courts’ assistance in taking evidence. While it is the principal rule that everyone has the duty to give testimony before the national courts, this rule is not without exceptions. For instance, individuals closely related to a party do not have such duty.

Additionally, the arbitral tribunal can order any party or third party to set forth certain documents that are (or believed to be) under his or her disposal. However, the arbitral tribunal does not have any coercive powers in the event of non-compliance. In such cases, the arbitral tribunal can refer to the national courts and request for assistance in securing the evidence. In accordance with the provisions found in the Administration of Justice Act, the national courts only have coercive powers if the unwilling subject is a third party.

It is the most common view that there are no general rules in Danish law asserting that arbitral proceedings or material from arbitral proceedings are confidential. Following this view, the parties are not necessarily obliged to keep confidentiality regarding the case. In practice, the hearings are mostly not held with free access for the public. The parties are free to enter into an agreement according to which they undertake a duty of confidentiality. In such cases, it would in principle be possible for the parties to solve the dispute in confidentiality. The extent of the confidentiality will then depend on the terms of the parties’ agreement.

If the arbitral proceedings are filed with the DIA, it follows from Article 18(7) of the Rules of DIA that the arbitral tribunal can (if requested by a party) decide that the proceedings be kept confidential. Additionally, the tribunal can take measures to protect trade secrets and confidential information.

The proceedings at the Arbitration Board are confidential except for the award, which the Arbitration Board can choose to publish in anonymous form, if the parties do not object hereto; see Section 43 of the Rules of the Arbitration Board.

Section 31 of the DAA establishes that the award must be in written form and signed by the arbitrators (or by the majority of the arbitrators). The award must be provided with the date and place as well. In addition, the award must state the reasons on which it is based, unless the parties have agreed otherwise or the parties have asked for a consent award; for example, in cases where a settlement agreement has been reached.

Article 24 of the Rules of DIA outlines similar requirements for form and content of the award.

The DAA contains no explicit time limits on the delivery of the award. If arbitration takes place at the DIA, it is a fundamental principle that the arbitral tribunal ensures that the arbitration is conducted within reasonable time and in an efficient and cost-conscious manner; see Article 18(1) of the Rules of DIA. Further, it follows from Article 24 of the Rules that the award must be submitted by the arbitral tribunal as soon as possible after the conclusion of the oral hearings and, if possible, no later than six months from when the case is referred to the tribunal by the secretariat of the institute.

It follows from Section 25(2) of the Rules of the Arbitration Board that the arbitral tribunal must deliver the award as early as possible and, in so far as possible, no later than four weeks after the hearing is concluded to issue the award.

There are no general limitations in Danish law as to the types of remedies that an arbitral tribunal can award. Unless the parties have agreed otherwise, the arbitral tribunal may award any remedy it finds appropriate. However, the legitimacy of remedies contrary to public policy may be questionable.

Nevertheless, in order for the award to be enforceable at the national courts, the conclusion of the award must be clear, definite and unconditional.

The parties are, under Danish law, entitled to recover interest and legal costs.

Following Section 34 of the DAA, the arbitral tribunal determines its own fees and the settlement of its expenses unless the parties and arbitrators have agreed otherwise. The parties are jointly and severally liable for the costs of the arbitral tribunal (see also Article 27 of the Rules of DIA). With reference to Section 35(1) of the DAA, the arbitral tribunal can allocate which proportion of the arbitral tribunal’s costs each party shall bear. Within 30 days after having received notice of the costs, any party may request the national courts to review the determination of the costs of the arbitral tribunal; see Section 34(3) of the DAA. This access for a party to petition the national courts to review the determination of the costs cannot be derogated from by agreement; see Section 2(2) of the DAA.

In most cases, the losing party will in the award be required to bear (some of) the legal costs of the winning party. However, the exact amount of legal costs recoverable for the winning party from its counterparty is at the discretion of the arbitral tribunal. There has in recent years been a growing tendency towards awarding legal costs closer to the actual amount paid by the parties.

When arbitral proceedings are filed with the DIA, Article 25(1) stipulates that the award shall state the costs of the arbitration and the proportion in which the costs are to be borne by the parties. The costs of the arbitrators are determined on the basis of an appendix to the rules; see Article 26 of the Rules of DIA. Furthermore, the award shall also determine whether a party shall compensate the other party for reasonable costs, including legal costs; see Article 25(3) of the Rules of DIA.

It is the principal rule in Denmark that arbitral awards are unappealable. However, the national courts can, pursuant to Section 37 of the DAA, set aside an arbitral award or, with reference to Section 39, refuse recognition or enforcement of an award. Contest of the validity of an award or refusal of its enforcement can only be done in accordance with the grounds specified in each section (see 12.2 Enforcement Procedure). The specific grounds listed in Section 37 and Section 39 are largely overlapping.

The parties can agree that an arbitral award is appealable. Such agreement will derogate from the principal rule (see 11.1 Grounds for Appeal). The parties cannot agree that Section 37 (grounds for setting aside the award) or Section 39 (refusing recognition or enforcement of the award) are not applicable; see Section 2(1) of the DAA.

As mentioned under 11.1 Grounds for Appeal, the national courts can, under specific circumstances, contest the validity of an arbitral award or refuse recognition or enforcement of the award. The grounds on which an arbitral award according to Section 37 and Section 39 of the DAA may be contested or recognition/enforcement refused are very narrow.

Denmark adopted the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) by ratifying the convention in 1972. Previously, the Danish implementing act set out a reservation to the applicability of the convention. Today, however, the domestic law fully incorporates the New York Convention.

The matters of recognition and enforcement of awards are governed by Chapter 9 (Sections 38-39) of the DAA, which does not deviate substantively from Articles 35 and 36 in the UNCITRAL Model Law. The parties cannot agree to derogate from the applicability of these rules; see Section 2(1) of the DAA.

Subject to Section 39, an arbitral award is recognised as binding and is enforceable in accordance with the provisions regarding enforcement of judgments of the Administration of Justice Act irrespective of the country in which it was made. This applies regardless of whether the award is made in a country that has acceded to the New York Convention.

According to Section 39 of the DAA, enforcement of an arbitral award may, at the request of a party, be refused if that party provides sufficient evidence that (i) a party to the arbitration agreement was under some form of incapacity, or the said agreement is not valid; (ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present his or her case; (iii) the award deals with a dispute not contemplated by or not falling within the terms of the arbitration agreement, or it contains decisions on matters beyond the scope of the submission to arbitration; (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or with the law of the country where the arbitration took place; or (v) the award has not yet become binding on the parties or has been set aside or suspended.

Furthermore, the court can refuse the enforcement of the arbitral award if the court finds that (i) the subject matter of the dispute is not capable of settlement by arbitration under Danish law, or (ii) the recognition or enforcement of the award would be manifestly contrary to the public policy of this country.

Enforcement proceedings can be commenced by filing at the competent enforcement court (in Danish: Fogedretten) in accordance with Chapter 46 of the Administration of Justice Act. The competent enforcement court will generally be where the losing party is domiciled or has its usual place of business.

A party applying for enforcement of an arbitral award must supply the court with a duly certified copy of the award and of the arbitration agreement if the agreement is in writing. The documents shall, if necessary, be accompanied by a duly certified translation into Danish.

The list of grounds for the courts to refuse enforcement in Section 39 is exhaustive and the grounds are generally construed narrowly by the courts. It is the primary rule that it is without relevance whether the court responsible for the enforcement agrees with the assessment of the arbitrators.

The DAA does not contain provisions that allow for class-action arbitration or group arbitration.

Article 9 of the Rules of DIA allows for consolidating various claims between the same parties under the same arbitration case or joinder of third parties (see 13.4 Consolidation). Arbitration cases before the Arbitration Board very often have several parties (see 5.7 Third Parties).

Danish Bar-qualified lawyers acting as legal counsels in arbitration must act in accordance with the ethical codes generally applicable for lawyers. For instance, it follows from Section 12.3 of the Code of Conduct for the Danish Bar and Law Society that a lawyer may not act as an arbitrator if he or she has previously acted for or advised any parties as their representative in matters connected with the dispute at issue. Similarly, after having acted as an arbitrator, the lawyer may not act for or advise any of the parties as their representative in matters pertaining to the dispute at issue.

It is still a relatively rare phenomenon in Denmark that equity funds, investment banks or other third parties fund litigation against a share of the possible outcome of the case. Subject to the parties having agreed otherwise, there are no general rules or restrictions on third-party funding in arbitration.

Whether an arbitral tribunal can consolidate separate arbitral proceedings will depend on the arbitration agreement between the parties. Consolidation can only happen if the arbitration agreement covers all of the parties’ claims. Thus, the defendant can only file a counterclaim to be consolidated under the same arbitral proceedings if the counterclaim is covered by the same arbitration agreement. Provided the newly made claim is covered by the arbitration agreement, it follows from Section 23(3) of the DAA that such claim can be made during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate having regard to the delay in making it.

If the arbitration is agreed to take place at the DIA, consolidation is regulated by Article 9 of the Rules of DIA. Upon the request of a party, the chairman of the arbitral tribunal can decide the separate cases to be consolidated. If the counterparty does not agree to the consolidation, the chairman decides after consulting the parties and confirmed arbitrators in the other proceedings (if any). Pursuant to Article 9(2) of the Rules of DIA, the chairman must – in addition to taking the aforementioned hearings into account – consider all relevant circumstances, including the mutual connection between the cases and/or the parties, and the progress already made in the pending case.

The principal rule of privity of contracts applies in Denmark, meaning that a third party is not bound by an arbitration agreement or an award issued pursuant to this agreement when this third party has not signed the agreement or otherwise has accepted to be bound by the agreement.

However, in the case of succession (both universal and singular) where the agreement in which the third party is succeeded into contains an arbitration clause, this clause will generally be binding for the third party.

In arbitral proceedings before the Arbitration Board involving more than two parties, it is, however, stipulated in AB 18, Section 69(7) that when AB 18 (or its predecessor, AB 92) applies to the relationship between the employer and several parties (contractors, suppliers), the arbitration agreement shall apply to the inter-relations between such parties.

If relevant in a case filed with the national courts, the national courts will interpret the arbitration agreement in order to, inter alia, determine the scope of the agreement. If the national courts find that a foreign third party is subject to or bound by the arbitration agreement to the same extent as elaborated above (see 5 Jurisdiction), the court will bind said third party to the arbitration agreement.

Lundsgaard & Partnere

Grønningen 25
1270
Copenhagen
Denmark

+45 70 232 236

+45 70 23 22 38

kontakt@lundsgaardpartnere.dk www.lundsgaardpartnere.dk
Author Business Card

Law and Practice

Authors



Lundsgaard & Partnere is a litigation boutique specialising in litigation and arbitration. This specialisation is a unique characteristic of the firm. No other law firm in Denmark has a similar profile or strategy. Lundsgaard & Partnere has three partners and a total of nine lawyers in Copenhagen. The firm is devoted to the practice areas of dispute resolution and insurance. Lundsgaard & Partnere has extensive experience with some of the biggest and most complicated cases currently and previously heard by the Danish courts, including cases that attract considerable media attention. The firm provides legal assistance to several leading Danish and foreign insurance companies, businesses and private equity funds. Lundsgaard & Partnere acts in major international arbitration cases pending in Denmark, representing leading clients.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.