BATTLE FOR BILLIONS OF NORWEGIAN KRONER – DRAMATIC SCENES IN THE NORWEGIAN SUPREME COURT
Schjødt wins a historical victory over the State of Norway! On 12 February 2010 the Supreme Court in plenary session pronounced a sentence in what the Norwegian press and several experts consider the most important civil court tried in the Supreme Court since World War II. The Court pronounced a sentence in favour of Schjødt’s clients, with a vote of 6 in favour and 5 against (!), in the so-called Shipowners’ Taxation case.
The team of lawyers from Schjødt, consisting of litigation specialists Ingvald Falch, Dagfinn Clemetsen, Thomas Horn and the leader of Schjødt’s Taxation Practice Area, Cecilie Amdahl, were beaming with satisfaction after the sentence had been passed. TV reporters and journalists fought their way forward to get the best comments and interviews from the legal team from Schjødt, the Shipowners Association and shipowners’ representatives in the court.
This court case is, in monetary, legal and political terms the largest, most important and most fundamental legal dispute between the state and business that Norway has seen for many decades. Tensions have been high among the Norwegian Shipowners and shipping companies following the Minister of Finance, Kristin Halvorsen’s decision, in 2007 to make the Shipowners pay approximately NOK 14 billion (USD 2.4 billion) as a supplementary tax to the State of Norway. One shipping company, represented by a different law firm, went to the city courts but lost their case; two other companies sought advice from Schjødt and we were successful in an equivalent city court case. Following this all the plaintiffs from the two cases chose Schjødt to represent them when both cases were appealed.
Legally the case has been about whether the decision by the government, ratified by a majority in the Norwegian parliament (Storting) is considered to be an illegal back-dating of the effect of legislation, which is a breach of Section 97 of the Norwegian Constitution or whether it is merely a “justified” demand for payment of taxes previously deferred. Since the key question is whether the state had breached the Constitution, it was decided that the appeal should go directly to the Supreme Court, a decision taken very rarely. Further, the Supreme Court decided to hear the case in plenary session, i.e. with all the judges taking part. Such a decision is also extremely rare.
The Shipping industry had previously, in 1997 been exempted from paying taxes amounting to NOK 21 billion (USD 3.5 billion). It was in connection with the government’s decision to introduce a new taxation regime, resulting in almost complete exemption from taxes in future years that they decided that the previously deferred or exempted taxes should be paid. Now that the Supreme Court, with the narrowest possible margin, has concluded that the decision was an illegal retrospective legislation, the judgement will be of great importance in the future, in matters relating to the extent of the legislative powers of government and parliament. The judgement is also hugely significant as regards the relationship between the Norwegian Courts and the Norwegian Parliament in such matters.
Ingvald Falch and Cecilie Amdahl emphasize the importance of this ruling, not just when it comes to tax matters, but also when it comes to other areas of legislation, setting out very clear limitations on the Norwegian State when an amendment to an act results in material consequences for individuals, companies or industries. “The business community, including investors and foreign corporations have to be given a stable and predictable environment when dealing with existing laws and regulations,” said Ingvald Falch to the press after the ruling. “Lately, the issue of shipowners flagging-out or considering a return to Norway has been a topic of great importance for the government”, Amdahl added. “It is obvious that the taxation regime and the need for regulatory stability are of great importance to Shipowners when they make a decision regarding which country to establish their business in and where they are to be taxpayers.”
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