Shipping 2020

Last Updated February 24, 2020

Norway

Law and Practice

Authors



Advokatfirmaet Thommessen AS has offices in Oslo, Bergen, Stavanger and London and is the only Norwegian firm in the Lex Mundi global network of law firms. The shipping and offshore department consists of seven partners and ten associates, and covers the entire spectrum from shipping and offshore, including marine insurance, to oil services and oil and gas. It co-operates closely with the firm's banking and finance, restructuring and corporate departments, and has been involved in all major restructurings and corporate transactions (including IPOs) within the shipping and offshore sector in the past five years. Thommessen's key areas of expertise are corporate and commercial (including project finance), litigation, marine insurance, shipbuilding and offshore construction.

The superior authority for maritime activities in Norway is the Ministry of Trade, Industry and Fisheries. However, it is the Norwegian Maritime Authority that operates as the administrative and supervisory authority in matters related to safety of life, health, material values and the environment on vessels flying the Norwegian flag and foreign ships in Norwegian waters. The Norwegian Maritime Authority is also responsible for ensuring the legal protection of Norwegian-registered ships and registered rights in those ships. In addition to the Ministry of Trade, Industry and Fisheries, the Norwegian Maritime Authority is subordinate to the Ministry of Climate and Environment, which is the superior authority responsible for environmental and pollution issues.

The main task of the regulatory bodies mentioned above is to prevent accidents and pollution. This is inter alia achieved by controlling certificates on whether ships and ship-owning companies are in compliance with applicable regulations or not. These controls are primarily performed by approved classification societies.

The Norwegian Competition Act of 5 March 2004 No 12 (Norwegian Competition Act) is, to a large extent, harmonised with the Treaty on the Functioning of the European Union (TFEU) Article 101 (anti-competitive co-operation between undertakings), TFEU Article 102 (abuse of a dominant position), and Council Regulation No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.

Commission Regulations Nos 906/2009 and 697/2014 regarding the application of TFEU Article 101(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) apply to the Norwegian maritime industry, as long as the agreement, decision or concerted practice is covered by the exemption. If that is not the case, an assessment taking the relevant circumstances pursuant to the Norwegian Competition Act into consideration will be required.

Norway is not within the top ten Flag States.

Norway has ratified several international conventions. Some of the most important maritime conventions ratified by Norway include:

  • United Nations Conventions on the Law of the Sea 1982 (UNCLOS);
  • International Convention for the Safety of Life at Sea 1974 (SOLAS);
  • International Convention for the Prevention of Pollution from Ships of 1973, as amended 1978 (MARPOL);
  • Convention on Limitation of Liability for Maritime Claims 1976 (LLMC);
  • Convention on International Regulations for Preventing Collisions at Sea 1972 (COLREGs);
  • Maritime Labour Convention 1996 (MLC);
  • International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 (STCW);
  • International Convention on Load Lines 1966 (CLL);
  • International Convention on Tonnage Measurement of Ships 1969;
  • International Convention on Civil Liability for Oil Pollution Damage 1969, as amended in 2000 (CLC);
  • International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (Bunker Convention);
  • Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972 (London Convention);
  • Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal 1989 (Basel Convention);
  • International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious substances by Sea 1996, as amended in 2010 (HNS Convention);
  • International Convention for the Control and Management of Ships' Ballast Water and Sediments 2004 (BWM Convention);
  • International Convention on the Control of Harmful Anti-fouling Systems in Ships 2001 (AFS Convention);
  • The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 2009 (Hong Kong Convention); and
  • Convention for the Protection of the Marine Environment of the North-East Atlantic 1992 (OSPAR).

The above-mentioned list is not intended to be exhaustive.

There are six classification societies recognised by the Norwegian Maritime Authority. These are DNV GL AS, Nippon Kaiji Kyokai (ClassNK), Rina S.p.A (Rina), Lloyd's Register of Shipping (LR), American Bureau of Shipping (ABS) and Bureau Veritas (BV).

The Norwegian Maritime Authority is in charge of inspections of Norwegian ships. Inspections and supervisions may, however, be delegated to the classification societies mentioned above.

Norwegian vessels with a length of 15 metres or more are required to be registered in either the Norwegian Ordinary Ship Register (NOR) or the Norwegian International Ship Register (NIS). Whereas NOR is the ordinary register for Norwegian- or EU/EEA-owned vessels, the NIS is open to owners of all nationalities, provided that certain requirements are fulfilled.

Vessels that are under construction in Norway and contracts regarding future construction in Norway may be registered in the Shipbuilding Register. Mobile offshore units may be registered in either NOR or NIS.

There are no discounts on registration under Norwegian law.

Norwegian law provides for a Norwegian special taxation arrangement (tonnage tax system) as well as a net salary arrangement applying to Norwegian ship-owning companies and Norwegian seafarers.

Instead of ordinary income tax, a company subject to the Norwegian tonnage tax scheme pays a tonnage tax based on the net tonnage of relevant vessels, regardless of whether they have been in operation or not. The tonnage tax scheme is considered to constitute state aid to ship-owning entities and was approved by the EFTA [European Free Trade Association] Surveillance Authority (ESA) in 2017 to run until the end of 2027.

The Norwegian net salary arrangement consists of subsidies to Norwegian ship-owning companies and seafarers and applies to vessels registered in the Norwegian Ordinary Ship Register (NOR), provided that certain requirements are fulfilled. The Norwegian state refunds the amount paid in taxes by the seafarers, meaning that the ship-owning companies in practice pay only the seafarers' net salary. Due to several amendments to the arrangement, ships registered in the Norwegian International Ship Register (NIS) may also apply for grants based on their payments of Norwegian advance tax deductions, social security contributions and employer’s contribution, if certain requirements are fulfilled.

In order to register a vessel in NOR, the ship-owner must be Norwegian or EU/EEA companies or individuals, unless a dispensation has been granted by the Maritime Department of the Ministry of Trade, Industry and Fisheries. The general rule is that, for a company to be deemed "Norwegian", it must be registered in Norway and have 60% Norwegian ownership, with the following modifications for the various types of companies:

  • in a KS (limited partnership), the 60% test refers to the total partnership capital and votes as well as to the partnership capital and votes held by the limited partners;
  • in an ASA/AS (public/private limited liability company), PR (ship-owning partnership) and ANS (ordinary partnership), the 60% test refers to both the capital and the votes. In addition, it is a requirement that a majority of the board of directors, including the chairman, be Norwegian or EU/EEA citizens who have resided in Norway or an EU/EEA state for the past two years.

Furthermore, the Master of the vessel must hold Norwegian or EU/EEA citizenship, or hold a specific permit to work in Norway.

By contrast, NIS does not provide citizenship requirements with regard to the owners' nationality. Registration in NIS is therefore open to owners of all nationalities. However, if the registered owner is a foreign company, a vessel is only eligible for registration if the management (either commercial or technical) of the vessel is carried out by a Norwegian shipping company whose main office is in Norway. Moreover, foreign ship-owners must appoint a legal representative, which can be the Norwegian manager or someone else, for example, the "service agencies" operated by certain Norwegian law firms. If the vessel is owned by a company registered in Norway without a Norwegian majority ownership, the same Norwegian management requirement as for foreign owners will apply, but no legal representative need be appointed. In the same way as for registration in NOR, the Master of the vessel must hold Norwegian or EU/EEA citizenship, or otherwise apply for an exemption from the nationality requirement.

Norwegian law provides for cabotage laws in relation to vessels registered in the NIS. As a main rule, there are no cabotage laws for internationally registered vessels.

Pursuant to section 4 of the NIS Registry Act of 12 June 1987 No 48 (the NIS Act), vessels registered in the NIS (as opposed to vessels registered in the Norwegian Ordinary Ship Registry (NOR)) are not allowed to carry cargo or passengers between Norwegian ports or operate a fixed route for passenger carriage between Norwegian and foreign port(s). Installations for oil and gas activities on the Norwegian continental shelf are in this respect regarded as a "Norwegian port," cf section 4, first paragraph, last sentence of the NIS Act.

However, there are several administrative regulations that may come into play and provide for exceptions to the above-mentioned trading limits, as follows.

According to the administrative regulation on specific trading limits for vessels and mobile offshore units for use in the petroleum industry registered in the NIS of 30 June 1987 No 579 (Regulation 579/1987), permission to operate on the Norwegian continental shelf may exceptionally be granted to particular types of vessels performing special operations, after having submitted an application to the Norwegian Ministry of Trade, Industry and Fisheries. The Regulation does not apply to seismic vessels and offshore construction vessels (from 2016). Hence, such vessels are allowed to trade between Norwegian ports, including on the Norwegian continental shelf.

In 2016, the trading limits for vessels registered in NIS were amended by way of amendments to the administrative regulation on extended trading limits for cargo vessels registered in the NIS of 11 August 1989 No 802 (Regulation 802/1989) and the administrative regulation on extended trading limits for passenger ships registered in the NIS of 9 July 1993 No 596 (Regulation 596/1993).

Cargo vessels registered in NIS are now allowed to carry cargo between ports at Svalbard and between Svalbard and the Norwegian mainland.

In addition, chapter 2 of the Regulation 802/1989 states that a NIS-registered cargo vessel, in which a significant part of the vessel's operations is carried out outside Norwegian waters, is permitted to carry cargo between Norwegian ports when this occurs:

  • as part of a regular trading route between Norwegian ports; or
  • when the vessel is carrying petroleum in bulk from a facility on the Norwegian continental shelf; or
  • occasionally for three months.

Moreover, a NIS-registered cargo vessel designed or equipped to carry particular types of cargo, is permitted to carry such cargo between Norwegian ports when the vessel is on its way to or from a foreign port carrying cargo, and the carriage is not part of a fixed route. The Master must be a Norwegian or EU/EEA citizen. Furthermore, it is an additional requirement that the carriage leads to rational utilisation of the vessel's available tonnage and that the carriage does not lead to undesirable consequences for vessels registered in the Norwegian Ordinary Ship Register (NOR). Cargo vessels are not permitted to carry cargo according to the provisions set out in Regulation 802/1989 before permission is obtained from the Norwegian Maritime Authority.

Passenger ships registered in NIS are permitted to carry passengers between ports at Svalbard and between Svalbard and the Norwegian mainland. Special provisions concerning cruise ships are set out in chapter 2 of the Regulation 596/1993.

Norwegian and Norwegian-based banks are among the largest shipping banks in the world.

Oslo remains an important hub for international ship financing, and the largest banks, the boutique banks and the investment banks and managers offer full service competence within financing (loans, bonds and private placements), investment banking, and M&A advice tailored towards the domestic and international shipping sector.

Norway has a strong historic background in shipping, with many large ship-owners and investors, and is a preferred listing exchange for shipping companies. Norwegian managers have been very successful in exporting the Norwegian high-yield bond product, which during recent years has played an important role in providing capital to the shipping sector.

Mortgages in respect of Norwegian registered vessels must be registered with the Norwegian Ship Registry. Depending on the specific security package, other floating charges (typically over trade receivables, operating assets) must be registered with the Norwegian Register of Mortgaged Movable Properties.

It is not a requirement that any finance documents, other than certain specific security documents, be registered with any public registries in Norway.

Ship mortgages may be registered in English or Norwegian and no translations are required.

Ship mortgage registration forms or ship mortgage discharge documents must be sent in original to the relevant register, and may be sent in escrow pending registration for up to three weeks.

In the context of providing security interests, the main collateral guarantees (other than ship mortgages) are monetary claims charges (earnings, insurance proceeds, inter-company loans, and bank accounts), as well as share charges over the relevant vessel-owner and parent-company guarantees.

Information on entries in the Norwegian International Ship Register and the Norwegian Ordinary Ship Register (including vessels details, ownership information and registered liens) can be found on the Norwegian Maritime Authority's homepage (www.sdir.no/en).

Certificates issued by the Norwegian Ship Registries are available in English. Otherwise, any such certificates will be issued in Norwegian. Details of the vessel registration are usually certified in a transcript of registry. This is typically delivered one to three days from the request, depending on workload, but a preliminary registration certificate is typically issued on the same day. Transcripts/certificates of registry are available by contacting the Norwegian Maritime Authority (post@nis-nor.no).

The Norwegian ship registries work very well with other registries during reflagging, and also offer extended opening hours to account for time differences in other jurisdictions.

Ship title and encumbrances are subject to registration in the Norwegian International Ship Register or the Norwegian Ordinary Ship Register. The registration cost for a ship mortgage registration in the Norwegian International Ship Register is NOK2,531 as of January 2020 (approximately USD250).

Norwegian flagged vessels can be encumbered by more than one mortgage, and priority between multiple mortgages is determined based on the time of the respective registrations. Whether registration of a new mortgage is prohibited by a current mortgage depends on the particular mortgage in question.

Charges over certain assets granted by Norwegian entities must be registered with public registrations to obtain third-party protection (typically operating assets, trade receivables). Security over insurances, bank accounts, shares and other monetary claims are not subject to any public registration.

Norwegian law accepts only a limited number of maritime liens, which will prevail over a ship mortgage and other claims. According to section 51 of the Norwegian Maritime Code of 24 June 1994 No 39 (Norwegian Maritime Code), the various maritime liens are as follows:

  • wages and others sums due to the Master and other persons employed on board in respect of their employment on the vessel;
  • port, canal and other waterway dues and pilotage dues;
  • damages in respect of loss of life or personal injury occurring in direct connection with the operation of the ship;
  • damages in respect of loss of or damage to property, occurring in direct connection with the operation of the ship, provided that the claim is not capable of being based on contracts; and
  • salvage reward, compensation for wreck removal and general average contribution.

As far as Norwegian-flagged vessels are concerned, maritime liens arising under foreign law will be accepted only if they are also valid under Norwegian law. With regard to foreign vessels, foreign maritime liens will be accepted, but they will rank after any registered mortgages, cf section 75 (2) of the Norwegian Maritime Code.

A vessel subject to a mortgage cannot be sold or deleted from the registry without the mortgagee's written consent, unless by court order. If a mortgage expires, it will automatically be cancelled in the registry (however, it would be expected that the Norwegian Ship Register would contact the mortgagee in advance to confirm status).

Norwegian law provides for a very limited access for the government to requisition vessels registered in Norway. If Norway is involved in a war or a war threatens the independence or security of the country, the Norwegian government may, to the degree the government considers it necessary to protect Norwegian interests, requisition Norwegian-registered vessels, or vessels owned by either Norwegian citizens, persons resident in Norway or conducting shipping-related activities from an Norwegian-located office, or companies registered or operating in Norway, cf section 1 of the Norwegian Act on requisition of vessels, etc, during war or national emergency of 19 December 1952 No 2.

The most typical means of raising capital in Norway include bank financing (vessel/ship-owning SPV-level or fleet/corporate group level) and bond financing (usually fleet/corporate group level). Finance is also provided through the equity markets, mainly by specialised investment companies and, to some extent, private investors.

Syndicated loans are frequently used in the Norwegian market. Mortgages are typically registered on a per-vessel basis.

Banks will have a strong view on which flags they will accept when providing financing, taking into account, among other things, safety measures and enforcement.

Securitisation in ship finance is not used in the Norwegian market.

The 2014 dip in the oil price had an impact on the Norwegian offshore industries, and consequently also the capital markets' interest for shipping transactions in the offshore support segments. Several large-scale restructurings in the shipping market have taken place since then.

This led to a reduced but refined shipping portfolio, where outlooks are positive and the capital markets keep contributing new capital.

Looking at more recent numbers, Norwegian ship-owners' income, as a whole, increased by about one tenth from 2017 to 2018. Growth is expected to continue in 2019 and 2020. Transaction volume is therefore on the rise compared with the past several years.

During the last couple of years there has also been an increase in the number of IPOs within traditional shipping. Measured by the number of listed companies, the Oslo Stock Exchange is the largest securities marketplace for shipping in Europe and the second largest globally, offering a variety of listing opportunities for Norwegian and foreign companies.

The Maritime Labour Convention 2006 (MLC) is the main maritime labour convention in Norway. Several of the provisions of the MLC have been implemented to the Norwegian Ship Labour Act of 16 June 2017 No 51 (Ship Labour Act), which constitutes the most important act governing maritime labour law in Norway. The Ship Labour Act contains general rules with respect to employment, termination, discharge, etc. For NIS vessels, these rules may to a large extent be set aside by collective bargaining agreements but not by individual employment contracts. In addition, there are a number of other Acts and regulations governing working hours, conflict resolution, etc, on vessels.

Norwegian law does not require a minimum number of local seafarers to be on board an international sea-going vessel registered in Norway.

On NOR vessels, the Master must hold Norwegian or EU/EEA citizenship, or hold a specific permit to work in Norway. On NIS vessels of 250 GRT or more, the general rule is that the Master must be an EEA citizen, whereas the rest of the crew may be foreigners. For NIS vessels it is possible, and has so far been easy, to obtain an exemption from the nationality requirement for the Master. No work-permit or immigration-permit requirements apply.

Likewise, it is not a requirement under Norwegian law that there is a certain percentage of local seafarers on board vessels engaged in cabotage trade.

Under Norwegian law, there is no minimum wage required by law. The pay level and the calculation method for wages are left to the employees' individual employment agreements, which are usually governed by collective bargaining agreements.

According to section 23 of the Ship Safety and Security Act of 16 February 2007 No 9 (Ship Safety and Security Act), which applies to Norwegian and foreign vessels, the regular working hours shall be eight hours a day, with one day of rest per week and rest on holidays.

Pursuant to chapter 5 of the Ship Labour Act, which applies to employees working on board Norwegian vessels, the causes for justified dismissal are as follows:

  • fair dismissal objectively justified by circumstances related to the company, the employer or the employee;
  • dismissal based on curtailed operations or rationalisation measures may be regarded as a justified dismissal, if the employer has no other suitable work to offer the employee. When deciding whether such a dismissal is legal, the needs of the undertaking shall be weighed against the disadvantage caused by the dismissal for the individual employee. Registration of a ship in the Norwegian International Ship Register (NIS) will always constitute a due ground for dismissal if the employer has no other suitable work to offer the employee;
  • the employee has reached the age of 70. A lower age limit may apply if it is objectively justified and is not seen as a disproportionate intervention;
  • the employee is found guilty of a gross breach of duty or other serious breach(es) of the contract of employment;
  • the employer may, subject to the employee's consent, engage an employee for a given trial period lasting up to six months. During the trial period, the causes for justified dismissal will be extended to some degree;

Furthermore, the employee has special protection against dismissal in the event of illness or injury, pregnancy and following the birth or adoption of a child.

According to section 3 of the Norwegian Act relating to Industrial Injury Insurance of 16 June 1989 No 65 (Act relating to Industrial Injury Insurance), employers are obliged to provide occupational injury insurance for the employees. The insurance shall cover full compensation for the employee, regardless of whether any person is to blame for the injury. The Act applies to Norwegian employees working on board ships, oil rigs and other mobile units registered in either the Norwegian Ordinary Ship Register (NOR) or the Norwegian International Ship Register (NIS), with a few exceptions.

The calculation of compensation for occupation injuries is to a large extent standardised. The more detailed provisions regarding calculation of compensation are set out in the administrative regulation on standardised compensation under the Act in relation to Industrial Injury Insurance of 21 December 1990 No 1027 (Regulation 1027/1990). Expenses and loss of income suffered until the settlement date are calculated on an individual basis, and according to a table on standardised calculation of compensation in respect of one-time compensation of future average yearly expenses.

Compensation for future loss of income resulting from an occupational injury is standardised and shall be calculated on the basis of the pensionable income of the employee the year before the injury or disease was sustained, cf section 3-1 of the Regulation 1027/1990. The calculation of compensation shall then be made according to the table set out in section 3-2, providing for a scheme where the employee's income is converted to the National Insurance scheme basic amount (Norw.: Grunnbeløp (G)), which as of January 2020 amounts to NOK99,858.

According to the table set out in section 3-2 of the Regulation 1027/1990, compensation for future loss of income shall be calculated as follows:

  • a pensionable income equivalent to seven G gives a compensation for loss of income that equals 22 G;
  • a pensionable income equivalent to more than seven G and up to eight G gives a compensation for loss of income that equals 24 G;
  • a pensionable income equivalent to more than eight G and up to nine G gives a compensation for loss of income that equals 26 G;
  • a pensionable income equivalent to more than nine G and up to ten G gives a compensation for loss of income that equals 28 G;
  • a pensionable income exceeding ten G gives a compensation for loss of income that equals 30 G.

The age of the employer may affect the final calculation of the compensation amount, cf section 3-3 of the Regulation 1027/1990.

Norwegian law also provides for a standardised compensation for permanent injury, which shall be calculated on the basis of the percentage of medical disability according to the table set out in section 4-1 of the Regulation 1027/1990.

Moreover, employees may be entitled to other social security payments under Norwegian law, cf inter alia chapter 13 of the Norwegian National Insurance Act of 28 February 1997 No 19 (National Insurance Act) and section 4-4 of the Ship Labour Act. As these provisions do not apply to all employers working on board vessels registered in the Norwegian ship registries, section 4-7 (1) of the Norwegian Ship Labour Act obliges the ship-owner to furnish a guarantee for specific compensations for employees who are not covered by Norwegian or EEA social security schemes and who work on board a ship registered in the Norwegian International Ship Register (NIS).

Maritime labour disputes are mainly solved by the ordinary court system, unless the parties have agreed upon solving the dispute through mediation or arbitration. Norwegian law also provides for a special court in labour matters (The Labour Court of Norway), with limited competency to settle disputes between labour unions and employers or employers' associations concerning the validity of a collective bargaining agreement, its existence or application, or to determine claims based on a collective bargaining agreement. The Labour Court of Norway does also have authority to determine whether a labour conflict is in breach of the labour peace guarantee set out by a collective bargaining agreement or the Norwegian Act on Labour Disputes of 27 January 2012 No 9 (Act on Labour Disputes), including any question of damages in relation thereto. Qualifying maritime labour disputes may also be solved by the Labour Court of Norway.

Section 4-6 of the Ship Labour Act states that the employer shall arrange for repatriation of the employee, as well as cover necessary expenses related thereto, in the following situations:

  • upon termination of the employment, when the termination is initiated by the employer;
  • if the employee has been employed continuously for six months in foreign trade by the same employer or on the same ship;
  • if temporary employment pursuant to section 3-4 of the Ship Labour Act ceases;
  • if a pregnant employee has been granted leave pursuant to section 7-2 or section 7-4 of the Ship Labour Act;
  • if the employee is entitled to terminate his or her service on board pursuant to section 9-5 of the Ship Labour Act;
  • if the ship is lost due to a an accident at sea or is unable to be repaired; 
  • if the employee is no longer capable of performing his or her duties due to illness, injury or other medical reasons;
  • if the employer is insolvent or for other reasons is incapable of fulfilling his or her obligations towards the employee; or
  • if the employee has been suspended.

For ships registered in the Norwegian International Ship Register (NIS), the company is also required to provide a guarantee of wages for and repatriation of employees who are not covered by Norwegian or EEA social security schemes pursuant to the administrative regulation on guarantee of remuneration for work and of passage home for employees on ships registered in the Norwegian International Ship Register of 18 February 2005 No 146 (Regulation 146/2005). This guarantee is only applicable in cases of bankruptcy.

Collective bargaining agreements are frequently used in Norway. The Norwegian Seafarers' Union, which is a member of the International Bargaining forum (ITF), negotiates and signs collective bargaining agreements on behalf of seafarers in Norway and/or Norwegian registered vessels.

Norwegian law does not provide for specific courts designed to handle maritime disputes.

Norwegian law does not provide for a definition of what constitutes a maritime dispute. The legal procedure available for maritime disputes is the regular court system. Maritime proceedings are in personam as Norwegian law does not provide for proceedings in rem.

Both arbitration and mediation can be used as alternative sources of conflict resolution, if agreed by the parties.

Norwegian courts will supervise a judicial sale of a vessel very closely. Under Norwegian law, judicial sales of vessels are handled by a first-instance court and a court-appointed assistant. A judicial sale of a vessel can follow two different procedures. One is a regular auction sale and the other is a more "informal" sale carried out by the court with the assistance of a court-appointed assistant. It is the court that decides which procedure to follow. The main consideration is to follow the procedure that is expected to give the highest sale proceeds, which usually will be a sale through an assistant. The court assistant will be a person that is considered experienced and qualified to handle the sale, such as a ship-broker or a maritime lawyer. Most of the governing rules are the same for both procedures, and the court will be closely involved in both procedures.

No bonds/guarantees are required under Norwegian law in respect of a judicial sale. However, if a bank guarantee or cash is provided and accepted by the court, (cf sections 3-4 and 32-12 of the Norwegian Enforcement Act of 26 June 1992 No 86 (the Enforcement Act)), an arrest may be avoided, or more commonly, be lifted if the vessel is already arrested. The provision of a guarantee may also stay an ongoing judicial sale proceeding.

The starting point under Norwegian law is that foreign judgments and other foreign rulings and resolutions (including in-court settlement) do not have legal effect or executory force in Norway, cf section 19-16 of the Norwegian Dispute Act of 17 June 2005 No 90 (the Dispute Act) and section 4-1 of the Norwegian Enforcement Act.

However, this starting point is modified by section 19-16 of the Dispute Act, which states that foreign judgments and resolutions shall be legally enforceable in Norway to the extent provided by statute, agreement with that state, or if the legal venue has been agreed for a particular proceeding. The most important rules and agreements are briefly described below.

Section 4-8 of the Dispute Act states that the Lugano Convention 2007 applies as law, cf section 4. According to Article 33 of the Lugano Convention, a judgment given in a state bound by the Lugano Convention shall be recognised in other Lugano states without any special procedure being required. A few exceptions follow from Articles 34 and 35. The scope of the Lugano Convention is limited to civil and commercial matters, cf Article 1.

Furthermore, Article 38 of the Lugano Convention states that a judgment given in a state bound by the Lugano Convention and enforceable in that state shall be enforced in another Lugano State when, on the application of any interested party, it has been declared enforceable there. The same exceptions apply to enforceability as to recognition, cf Article 45, cf Articles 34 and 35.

Moreover, the Norwegian Arbitration Act of 14 May 2004 No 25 (the 'Arbitration Act') implements the 1958 New York Convention into Norwegian law and provides for several provisions regarding recognition and enforceability of foreign arbitration awards. According to section 45 of the Arbitration Act, a foreign arbitration award shall be recognised and enforceable in Norway, regardless of which country the award was delivered in. There is no requirement that the state in which the award was delivered recognise and enforce Norwegian arbitration awards or that the state be a party to the 1958 New York Convention. A few exceptions, inter alia if the arbitration award is considered void, if the composition of the arbitration tribunal is not in accordance with the applicable provisions, or if recognition of the award would be contrary to mandatory laws or be offensive to the legal order (ordre public), are set out in section 43 of the Norwegian Arbitration Act.

According to the Act on recognition and enforcement of Nordic judgments regarding private-law matters of 10 June 1977 No 71, judgments delivered by Danish, Finnish, Icelandic or Swedish courts shall be recognised and enforceable in Norway (with a few exceptions), cf section 1.

There is also Norwegian legislation explicitly governing recognition and enforcement of judgments regarding bunker-oil pollution and oil pollution. Section 189 of the Norwegian Maritime Code concerns bunker-oil pollution and states that a final judgment against the ship-owner or the ship-owner's insurer has legal effect in Norway and may be enforced in Norway once it becomes enforceable, provided that the judgment has been delivered in a state party to the 2001 Bunkers Convention by a court that is competent to hear the case pursuant to Article 9 of the 2001 Bunkers Convention. The same regime applies in respect of judgments regarding oil pollution under the 1992 Civil Liability Convention, cf section 205 of the Norwegian Maritime Code.

Norway has also entered into bilateral agreements with, inter alia, the United Kingdom regarding recognition and enforcement of foreign judgments.

If a dispute concerning the order of priority of maritime claims is raised before the Norwegian courts, the law of the state where the vessel is registered will govern the priority between a registered encumbrance in relation to other registered encumbrances and the effect it may otherwise have in relation to third parties, save as to its priority in relation to maritime liens and rights of retention, cf section 75, second paragraph of the Norwegian Maritime Code. The law of the state where the vessel is registered will also govern questions concerning any statutory encumbrances upon the ship ranking in priority after registered encumbrances, cf section 75, second paragraph of the Norwegian Maritime Code.

In matters where a mortgage or maritime lien or right of retention is relied upon in a Norwegian Court, the provisions of section 45, sections 51 to 55 and sections 71 to 73 shall apply, cf section 75, first paragraph of the Norwegian Maritime Code.

Ship mortgages registered in Norway will rank according to the priority each of them has. Priority will be given on the basis of the time the mortgage has been registered in the vessel's registry. This will follow from a transcript provided by the relevant register. However, claims with special priority and maritime liens recognised by Norwegian law may prevail over a registered ship mortgage.

As a general rule, the maritime claim must be related to a particular ship in order to arrest that vessel. Nevertheless, if the owner of the vessel to which the maritime claim is related is personally liable for the claim, then other vessels owned by that owner at the time the claim arose may be arrested, cf section 93 (1)(b) of the Norwegian Maritime Code. Vessels are regarded as having the same owner when all parts or shares are owned by the same person or persons, cf section 93 (2) of the Norwegian Maritime Code. In addition to the above, if someone other than the owner is personally liable for the claim, the other vessels owned by the person liable may be arrested, cf section 93(1)(c) of the Norwegian Maritime Code.

Except as set out above, Norwegian law does not allow for the arrest of sister ships or vessels owned by affiliates.

According to section 172 of the Norwegian Maritime Code, claims subject to limitation of liability include:

  • claims in respect of loss of life, personal injury, or loss of or damage to property occurring on board or in direct connection with the operation of the ship or salvage operations;
  • claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
  • claims in respect of other loss resulting from infringement of rights other than contractual rights occurring in direct connection with the operation of the ship or salvage operations; and
  • claims in respect of measures taken in order to avert or minimise the above-mentioned losses or damages.

Furthermore, pursuant to section 172 (a) of the Norwegian Maritime Code, other claims subject to limitation of liability include:

  • claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board that ship;
  • claims in respect of the removal, destruction or the rendering harmless or the cargo of the ship; and
  • claims in respect of measures taken in order to avert or minimise the above-mentioned losses or damages.

The claims encompassed by section 172 (a) are subject to increased limitation amounts, which will be described in further detail below.

Special limitation rules apply to convention-based liability for oil pollution damage and HNS [hazardous and noxious substances] Convention claims.

According to section 173 of the Norwegian Maritime Code, claims excepted from limitation of liability under Norwegian law are:

  • claims for salvage, including any claim for special compensation provided by the law in situations where the operation posed a risk of environmental damage (as set out in Article No 14 of the Salvage Convention to which Norway is a party);
  • contribution in general average; and
  • contractual claims for wreck-removal and agreed compensation for measures taken in order to avert or minimise loss or damage as set out by sections 172 and 172a of the Norwegian Maritime Code.

Other claims excluded from limitation of liability are:

  • claims for oil-pollution damage if they are related to the rules in § 191 or § 207 (as these claims are regulated elsewhere and subject to different limitation amounts);
  • claims subject to any international convention or national legislation governing or prohibiting limitation of liability for nuclear damage;
  • claims for nuclear damage caused by a nuclear ship; and
  • claims in respect of personal injury caused to employees whose duties are connected with the ship or the salvage operations, as well as claims in respect of interest and legal costs.

Pursuant to section 175 of the Norwegian Maritime Code, the limitation amounts for liability subject to section 172 of the Norwegian Maritime Code shall be calculated as follows:

  • for claims in respect of personal injury suffered by the ship’s own passengers, the limitation amount is 250,000 Special Drawing Rights (SDR) multiplied by the number of passengers the ship is allowed to carry, according to its certificate;
  • for other personal injury claims, the limitation amount is:

(a) SDR3.02 million for ships with a gross tonnage not exceeding 2,000 tons;

(b) for ships with a gross tonnage exceeding 2,000 tons, the limitation amount is increased by:

(i) SDR1,208 for each ton from 2,001 tons to 30,000 tons; plus

(ii) SDR906 for each ton from 30,001 tons to 70,000 tons; and

(iii) SDR604 for each ton exceeding 70,000 tons;

  • for all other claims, the limitation amount is:

(a) SDR1.51 million for ships with a gross tonnage not exceeding 2,000 tons;

(b) for ships with a gross tonnage exceeding 2,000 tons, the limit is increased by:

(i) SDR604 for each ton from 2,001 to 30,000 tons; plus

(ii) SDR453 for each ton from 30,001 to 70,000 tons; and

(iii) SDR302 for each ton exceeding 70,000 tons;

(c) for claims subject to section 172 (a) of the Norwegian Maritime Code, which applies to ships with a gross tonnage exceeding 300 tons, section 175 (a) of the Norwegian Maritime Code sets out that the limitation amount is:

(i) SDR2 million for ships with a gross tonnage not exceeding 1,000 tons;

  • for ships with a gross tonnage exceeding 1,000 tons, the limit is increased by:

(a) SDR2,000 for each ton from 1,001 tons to 2,000 tons; plus

(b) SDR5,000 for each ton from 2,001 tons to 10,000 tons; and

(c) SDR1,000 for each ton exceeding 10,000 tons.

Moreover, the ship-owner's liability for oil pollution damage, as set out by section 191 of the Norwegian Maritime Code (incorporating the 1992 CLC Convention and the 1992 Fund Convention), is limited to:

  • SDR4.51 million for ships with a gross tonnage not exceeding 5,000 tons, cf section 194 of the Norwegian Maritime Code; and
  • for ships with a gross tonnage exceeding 5,000 tons the limitation amounts are increased by SDR631 SDR per extra ton.

When the enacted legislation by the Norwegian Parliament concerning the implementation of the HNS Convention enters into force (governing liability for the carriage of hazardous and noxious substances by sea), ship-owners’ liability for damage caused by HNS in bulk shall be limited to:

  • SDR10 million for ships with a gross tonnage not exceeding 2,000 tons; plus
  • for ships with a gross tonnage exceeding 2,000 tons, the limitation amount is increased by:

(a) SDR1,500 per ton from 2,001 tons to 50,000 tons; and

(b) SDR360 per ton exceeding 50,000 tons;

  • the limitation amount shall in no circumstances exceed SDR100 million.

For damage caused by HNS "in packages" or caused by HNS in both bulk and package form, or where it is not possible to determine whether the damage was caused by HNS in bulk or in packages, the ship-owner’s liability shall be limited to:

  • SDR11.5 million for ships with a gross tonnage not exceeding 2,000 tons; plus
  • for ships with a gross tonnage exceeding 2,000 tons, the limitation amount shall be increased by:

(a) SDR1,725 per ton from 2,001 tons to 50,000 tons; and

(b) SDR414 per ton exceeding 50,000 tons;

  • the limitation amount shall in no circumstances exceed SDR115 million.

Under Norwegian law, exceptional actions for ending a maritime claim may, similarly to other civil claims pending for a Norwegian court, be one of the following circumstances:

  • if the parties settle the claim, either as a result of mediation or the parties having entered into a settlement agreement following successful negotiations;
  • if the claimant withdraws the claim without any settlement having taken place;
  • if the court or arbitration tribunal finds that it does not have jurisdiction to hear the claim; or
  • in respect of a vessel arrest or judicial sale proceedings, if a guarantee is provided and the arrest is lifted or the proceeding concerning the judicial sale stayed.

In addition, other provisions may be relevant, depending on the court proceedings initiated and the facts of the relevant case.

There is no new Norwegian legislation on payments of income tax on internationally registered vessels.

There is no new Norwegian legislation concerning accounting requirements.

Norwegian law does not allow the issuance of bearer shares, meaning that only nominative shares are allowed in Norway.

There is no new legislation on liquidation of assets outside Norway. The receiver/bankruptcy administrator of the domestic insolvency proceedings is authorised to initiate insolvency/enforcement proceedings in foreign jurisdictions in a manner consistent with the laws of that foreign jurisdiction.

There is no statutory timeframe for the liquidation of assets outside Norway. However, the time requirement in the liquidation of assets in a foreign jurisdiction will be governed by the laws of the country where the assets can be liquidated.

Norway has a universal income tax system, whereby tax-resident individuals and companies pay tax on their global income. The standard corporate income tax rate is 22%. However, Norway also has a tonnage tax system which basically exempts qualifying shipping income from corporate income tax. Instead, qualifying companies pays a tonnage fee and corporate income tax on financial income (dividends are exempt from corporate income tax).

Ship-owning companies are not subject to any different rules from other companies. Once a private limited company ceases to exist, it will normally lose its capacity to sue and be sued (Norw.: partsevne), and will therefore not be able to file suits or defend from suits. However, according to Norwegian case law and legal theory, there may be a limited access for companies that have ceased to exist, to file suits and/or defend from suits in certain circumstances.

A company is considered to have ceased when it is deleted form the Norwegian Register of Business Enterprises or has merged with another company. If a private limited company is dissolved, the general meeting must decide to delete the company when the dissolution period is over (the time between the decision and approval of the deletion). The dissolution period cannot be less than six weeks and should normally be no longer than 12 months. The board of directors is responsible for the dissolution of the company and the company's assets must be converted into cash. Any remaining equity must be distributed amongst the shareholders. This can be done no earlier than six weeks after the dissolution is announced.

If the company is bankrupt, the bankruptcy estate will come into being at the time an order to commence bankruptcy proceedings has been handed down, cf section 74 of the Norwegian Bankruptcy Act of 8 June 1984 No 58 (Bankruptcy Act). The bankruptcy estate is capable of filing and defending from suits on behalf of the company, as well as entering into the company's existing contracts.

Norway has a substantial tax treaty network, which includes an article on shipping income. In general, shipping income earned by non-resident companies will not be taxed in Norway under such treaties. Norway also has substantial exemptions from income tax on shipping income earned by non-resident entities, so normally non-Norwegian residents will not pay corporate income tax on shipping income in Norway. Of course, the application of any such exemptions must be considered on a case-by-case basis.

Advokatfirmaet Thommessen AS

Haakon VIIs gate 10
Postboks 1484 Vika
NO-0116 Oslo

+47 23 11 11 11

heh@thommessen.no www.thommessen.no
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Trends and Developments


Authors



SANDS Advokatfirma is one of Norway’s largest law firms with a nationwide presence in Oslo and all the major shipping and offshore hubs along the Norwegian coast. The shipping and offshore department consists of four partners, all highly recognised and with significant international experience. The department covers the central practice areas of law within shipping and offshore areas, including sale and purchase of ships, sale leasebacks, financing, restructuring, litigation and contractual works contracts. SANDS has achieved a successful repositioning during a four-year project and now provides specialist legal services to the high-end business market. SANDS has shown strong growth in this period, driven by an increased market share in transactions, finance, major litigation, shipping and a stronger international focus. SANDS is working increasingly for international clients, where cross-border projects, transactions and litigations are core elements of the firm's service.

Shipping Trends 2020

After a boom with historically high markets in most shipping segments up to 2007, the shipping industry suddenly found itself in the centre of a global financial crisis in 2008. Since then, most of the shipping segments have been burdened by surplus capacity for much of the past decade. Freight rates and ship prices have come down to low levels for most segments, although some markets have seen volatility and experienced periods of recovery in freight rates and secondhand prices.

While the market for tankers reached historically high levels towards the end of 2019, the rates and markets for offshore service vessels are still rather depressed. Two years ago, the offshore service market was widely expected by analysts to recover by 2021, but it is now expected that recovery will be delayed. The year 2024 is often mentioned as the year when rates and values are expected to return to sustainable levels. Most of the sectors within the offshore service segment are still struggling with a considerable over-supply of tonnage. As such, a considerable amount of tonnage must be scrapped or otherwise phased out in order to create market balance. The challenge is that the scrap value of offshore service vessels is generally low, and the vessels are typically encumbered with mortgages far above their current market value.

So far, in the restructurings banks have been reluctant to take losses and have been more inclined to “kick the can” and approve restructuring schemes with implied extended maturity dates, instead of a result providing sound balance sheets.

In the first round of restructurings, unsecured bond-holders made up a considerable creditor group. These creditors, however, were to a large extent wiped out and in this second phase of restructurings, most of the creditors are banks with secured debts. Another trend in the current round of restructurings is that there seems to be very little new equity available in the market.

Thus, to summarise, the offshore service sector will still be characterised by several years of restructurings. It is also assumed that further consolidations and even bankruptcies will be seen in this market.

Another trend is an increasingly “green” and environmentally friendly focus within all sectors of the shipping industry. New regulatory requirements, both internationally and nationally, push the industry towards a greener environment which is also impacting shipping market dynamics in most sectors.

On 1 January 2020, the IMO MARPOL Annex VI (IMO 2020), which requires reductions in the sulphur content in fuels from 3.5% to 0.5 %, came into effect. There has been considerable focus during the last few years on technical and commercial aspects of being compliant. Some ship-owners have installed scrubber units on board the ships, which clean the exhaust, reduce sulphur emissions into the air and enable ship-owners to continue to use heavy fuels. The contractual aspects as well as the allocation of risks and costs relating to compliance need to be regulated in charterparties. This is in particularly relevant in time charterparties, where vessels are operated by the ship-owners, whilst the charterers are responsible for supplying and paying for the fuel. BIMCO (the Baltic and International Maritime Council) has introduced a standard clause attempting to address several of the main contractual issues relating to compliance with IMO 2020.

In summary, the BIMCO clause stipulates that charterers will be under an obligation to supply fuel which at all times complies with any applicable sulphur-content requirements. Although the clause mainly imposes compliance obligations upon the charterers, the owners nevertheless have to warrant that the vessel is capable of complying with the sulphur-content requirements. The clause makes reference to "MARPOL Annex VI (as amended from time to time) and/or by any other applicable lawful authority" and therefore automatically requires compliance with the regulations in force as they are updated from time to time, including the current global cap of 3.5%, the new global cap of 0.5% (once applicable), the 0.1% limit in emission control areas (ECAs), particular regulations in port states, and any amendments to the foregoing.

Using LNG rather than fuel oil is one of the options available to owners seeking to comply with IMO 2020. Given that ship-brokers have long predicted the emergence of a two-tier shipping market with "greener" ships commanding a premium over older, less eco-friendly vessels, what is the future for LNG?

The shipping trade press initially took a somewhat pessimistic view of LNG bunkering as a solution to the IMO 2020 problem, with forecasts suggesting that high costs and technical difficulties would present a commercial barrier to LNG bunkering being adopted across the industry. Despite the forecasts, however, in the past year there has been an interesting series of "world firsts" for new-build and retro-fitted LNG-powered vessels in different sectors, including cruise ships, ferries and more general commercial carriers. For example, Maritime Executive reported in March of this year on the retrofitting of the "SAJIR", which will be the first mega-container vessel to be converted to a dual-fuel system. Various innovations are also underway, including Cryo Shipping's conversion of platform supply vessels into LNG tankers for STS supplies, which may help ease congestion at LNG bunker ports or provide supplies in areas not serviced by such ports. These reports, together with commitments from large owners such as CMA CGM and MSC, suggest that owners may be more receptive to LNG bunkering than was initially expected. The world fleet of LNG-powered vessels has jumped in size since 2017 from 118 vessels to 143 vessels, with around 135 LNG-powered vessels also on order (Source: Maritime Executive as previously).

It is not only public regulations that push the shipping market in a ’greener’ direction, but other factors such as expectations or requirements from stakeholders; for instance, banks also have an impact. Some banks charge higher margins for ships which are considered less "green" than for ships which are more environmentally friendly. In 2020, the Poseidon Principles, which is a framework for integrating climate considerations into lending decisions, were introduced. The principles were developed by global shipping banks in collaboration with leading industry players and advisers. Signatories to the Poseidon Principles will inter alia undertake to assess annually the climate alignment of their portfolios.

As part of the green focus in shipping, there is a stricter regime and focus in respect of the recycling of ships and rigs. There are currently three sets of rules governing the recycling of ships. The regulation with the widest application is the Basel Convention which regulates the movement and disposal of hazardous waste. However, these rules are not specifically tailored for the purpose of regulating ship-recycling, as it is unclear whether they apply to the sale of fully operational ships. The more recent rules from the International Maritime Organisation (IMO) and the EU take a more aggressive approach.

The “Harrier” matter has attracted much attention in the Norwegian media during 2019. In 2017 an attempt was made to export illegally the Harrier, previously named the Tide Carrier, from Norway in order to scrap the ship on a beach in Gadani, Pakistan. The illegal export was revealed when the ship suffered an engine failure and started to drift outside the Norwegian coast. Inspectors from the Norwegian Maritime Authority (NMA) detained the ship due to its condition. Moreover, an invalid certificate of nationality from the Comoros was presented, along with false class certificates from the Union Marine Class Society.

The company deliberately deceived Norwegian authorities by presenting false documentation proving that the vessel complied with all requirements of the international conventions included in the Regulations on Port State Control. A fine amounting to NOK7 million was imposed on the ship-owner for violation of the Pollution Control Act and the General Civil Code due to the attempt to export the Harrier for scrapping illegally. 

Another trend is the technological development towards autonomous ships. Norway is a world leader in maritime autonomy technology, which allows vessels to sail by themselves, independently of human interaction. The world’s first fully electric and autonomous containership, the “Yara Birkeland”, is currently being constructed in Norway by Yara International as the ship-owner.

The introduction of autonomous ships will dramatically change the risk picture at sea. While the risk of human errors causing accidents will be reduced, new risks may emerge, such as the potential of technical and programming failures, data transmission problems and the risk of cyber threats or hacker attacks. The liability regime for vessels is based on principles of liability for negligent acts and omissions and a requirement to observe "good seamanship" which is a basic principle of the Rules of the Sea. The question is thus whether a fully autonomous vessel as such can be considered to act negligently or to violate the rules of good seamanship? Clarifications are needed in regulations, both nationally and internationally.

In Norway it is possible to conduct autonomous trials in test areas set up by the Norwegian maritime authority. For international trade, regulation is required on a transnational level and both the EU and the IMO (International Maritime Organization) will need to undertake a significant role in development of new rules and regulations. The work required is expected to take years.

SANDS Advokatfirma

Cort Adelers gate 33
0254 Oslo
Norway

+47 22 81 45 00

post@sands.no www.sands.no/en-US
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Law and Practice

Authors



Advokatfirmaet Thommessen AS has offices in Oslo, Bergen, Stavanger and London and is the only Norwegian firm in the Lex Mundi global network of law firms. The shipping and offshore department consists of seven partners and ten associates, and covers the entire spectrum from shipping and offshore, including marine insurance, to oil services and oil and gas. It co-operates closely with the firm's banking and finance, restructuring and corporate departments, and has been involved in all major restructurings and corporate transactions (including IPOs) within the shipping and offshore sector in the past five years. Thommessen's key areas of expertise are corporate and commercial (including project finance), litigation, marine insurance, shipbuilding and offshore construction.

Trends and Development

Authors



SANDS Advokatfirma is one of Norway’s largest law firms with a nationwide presence in Oslo and all the major shipping and offshore hubs along the Norwegian coast. The shipping and offshore department consists of four partners, all highly recognised and with significant international experience. The department covers the central practice areas of law within shipping and offshore areas, including sale and purchase of ships, sale leasebacks, financing, restructuring, litigation and contractual works contracts. SANDS has achieved a successful repositioning during a four-year project and now provides specialist legal services to the high-end business market. SANDS has shown strong growth in this period, driven by an increased market share in transactions, finance, major litigation, shipping and a stronger international focus. SANDS is working increasingly for international clients, where cross-border projects, transactions and litigations are core elements of the firm's service.

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