Local contract law as applied to liability limitation, etc – Part 9, Norway

Standard Club has noted that its members were regularly exploring new opportunities in diverse territories and thus frequently needed to ask how the law in a particular jurisdiction might impact the enforceability of key contractual provisions.

Standard Club has therefore produced a list of key offshore jurisdictions and how the various relevant laws apply.

The study specifically looks at:

  • the right to limit liability (specifically in respect of wreck removal)
  • the application and geographical reach of the CLC Convention, Wreck Removal Convention, Maritime Labour Convention or any related domestic legislation
  • the enforceability of knock-for-knock provisions in a contract and whether there are any gross negligence or wilful misconduct exceptions to this.

The jurisdictions covered are:

  • Angola
  • Australia
  • Brazil
  • India
  • Indonesia
  • Malaysia
  • Mexico
  • Nigeria
  • Norway
  • Qatar
  • Saudi Arabia
  • Singapore
  • Thailand
  • UK
  • USA

The full guide is available at:

http://www.standard-club.com/media/2767858/a-guide-to-key-offshore-jurisdictions.pdf

IMN is providing a daily country-by country summary. Tomorrow, Qatar.

9) Norway

Q: Is Norway signatory to an international convention relating to limitation of liability for maritime claims? If not, can shipowners limit their liability under local law?

A: The Norwegian rules on limitation of liability are based on the rules of the 1976 London Convention on Limitation of Liability on Maritime Claims, as amended by the 1996 Protocol (LLMC 96). Norway adopted the LLMC 96 in 2000 and it is transformed into Norwegian law by being implemented in the Norwegian Maritime Code of 1994 (NMC), chapter 9.

Q: What is the geographical application of the international convention or the local law under which shipowners can limit their liability?

A: Under Norwegian law, there are no geographic limits with respect to the application of the LLMC 96. Pursuant to the NMC, Section 182, the rules on limitation in chapter 9 apply in all cases where limitation is argued before Norwegian courts. Therefore the question is more a jurisdiction issue than a matter of geographic application.

Q: Are there any exclusions or exceptions in respect of offshore vessel types?

A: The NMC applies as a starting point to all ships, including offshore vessels, that are used in the exploration, exploitation, storage or transportation of subsea natural resources.

Q: Is it possible to limit for wreck removal in Norway?

A: Yes, in accordance with the NMC, section 172a, it is possible to limit liability for wreck removal in Norway. Under the LLMC 96 Protocol, countries may reserve the right to exclude limitation of liability for wreck removal and clean-up costs from the scope of the LLMC 96, which a number of states have done. Norway adopted this reservation in 2002 and, in 2006, more than doubled the amount of the limitation fund in the LLMC 96 for such costs. The right to limitation only applies to monetary claims. The Norwegian Supreme Court recently held that an administrative order to remove the wreck made in accordance to the Norwegian Pollution Act is not subject to the NMC’s rules on limitation.

Q: Is Norway signatory to the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunkers Convention)?

A: Yes, Norway adopted the Bunkers Convention in 2007 and it is incorporated into the NMC, chapter 10.I.

Q: What is the geographical application of the Bunkers Convention in respect of Norway?

A: The Bunkers Convention is applicable to damage which occurs within the Norwegian territory and the Exclusive Economic Zone (EEZ), and to the same zones of other member states. In addition, it applies to preventive measures taken anywhere in order to avoid damage within the abovementioned scope of the NMC, section 190.

Q: Are there any exclusions or exceptions in respect of offshore vessel types?

A: No, there are no particular exclusions or exceptions in respect of offshore vessel types.

Q: Is Norway signatory to the International Convention on Civil Liability for Oil Pollution Damage (CLC)?

A: Yes, Norway adopted the CLC in 1995 and the Convention is incorporated into the NMC, chapter 10.II.

Q: What is the geographical application of the CLC in respect of Norway?

A: The scope of applicability for the CLC is limited to damage which occurs within the Norwegian territory and the EEZ, and such zones of other member states. It also applies to preventive measures taken elsewhere in order to avoid such damage within the above mentioned scope of the NMC, section 206.

Q: Are there any exclusions or exceptions in respect of offshore vessel types?

A: No, there are no particular exclusions or exceptions in respect of offshore vessel types.

Q: Is Norway signatory to the Nairobi International Convention on the Removal of Wrecks (WRC)?

A: No, Norway has not ratified the Nairobi International Convention on the Removal of Wrecks. A white paper was issued by the Norwegian Ministry of Transport in 2016 with a proposal to adopt the Convention and implement its principles into national legislation. The proposal is still pending approval.

Q: Is Norway signatory to the Maritime Labour Convention (MLC)?

A: Norway adopted the MLC in 2009. The Convention is implemented into Norwegian law mainly through the Norwegian Ship Safety and Security Act of 2007 and the Ship Labour Act of 2013.

Q: Has the law of Norway determined whether offshore vessels such as mobile offshore drilling units, mobile offshore production units (e.g. floating production offloading units or floating storage offloading units), dredgers, cable/pipe layers, semi-submersible/ heavy-lift vessels, accommodation units or supply/ support vessels are ‘ships’ within the meaning of the MLC?

A: There is still no statutory definition in Norway which determines what constitutes a ‘ship’ within the meaning of the MLC, but the law allows the Ministry to make such definition at a later stage if necessary. This has not yet been done. The MLC is thus applicable to all types of Norwegian ships, as long as the relevant ship is registered in Norway or fulfils the nationality requirement without registration in accordance with the NMC, section 1 to 3. However, the Ministry has used the opportunity to restrict the MLC’s application for workers on board offshore units. The MLC only applies to workers on board such units insofar as they are under transfer or undertaking work on a foreign continental shelf.

Q: Do the 2014 Amendments to the MLC whereby shipowners must have financial security in place to cover the repatriation of seafarers in the event of abandonment (under Regulation 2.5) and contractual payments in the event of a seafarer’s death or long-term disability due to an occupational injury, illness or hazard (Regulation 4.2) apply under the laws of Norway?

A: Yes. The 2014 Amendments to the MLC 2006 entered into force in Norway in 2017 and were implemented in section 4 7 of the Norwegian Ship Labour Act of 2013.

Q: Is ‘gross negligence’ or ‘wilful misconduct’ recognized as a legal concept under Norwegian law?

A: In Norway, liability normally presupposes negligent conduct, both in tort and contract law. Simple negligence is normally sufficient, but in certain circumstances and under some rules, gross negligence is required to constitute liability. The legal concept of negligent conduct is also present in several Norwegian standard contracts, where for instance an exception to the right to limit liability often applies in the event of gross negligence or display of intent.

Gross negligence has no statutory definition and the legal concept is mostly developed and defined through case law. The Norwegian Supreme Court has stated that in order for an act to be grossly negligent, it must represent ‘a pronounced derogation from common proper behaviour’. To establish gross negligence, an act is required to be ‘seriously culpable, and the relevant person must be substantially more to blame than where an act would be considered as mere negligence’.

Under Norwegian law, wilful misconduct as a legal concept is mainly developed within criminal law. The concept presupposes conscious conduct or intention to cause harm. For torts, or claims in contract, the definition has limited importance as most standard contracts do not distinguish between the remedies for wilful misconduct and gross negligence.

Q: Is the knock for knock liability regime a recognized concept under Norwegian law?

A: Yes. The knock for knock liability regime was adopted as a contractual standard and is today a recognized concept under Norwegian law.

Q: If knock for knock is a recognized liability regime under Norwegian law, will it be upheld in the event of ‘gross negligence’ or ‘wilful misconduct’?

A: The Norwegian courts’ approach to the construction of contracts includes an application of the principle of reasonableness based on the parties’ intentions and a notion of ‘good business practice’. The contract will be interpreted as a whole, and considerations of the balance between the contracting parties and whether the wording of the clauses are generally accepted in the industry will play an important role in the construction exercise.

Other aspects the courts take into consideration are the parties’ ability to obtain insurance cover, the need for predictability and any applicable international regulations. Clauses which discharge a contracting party from liability caused by gross negligence or wilful misconduct have traditionally been held as unenforceable by Norwegian courts. More recent decisions show that this may no longer be an absolute rule in contracts between professional parties, and especially in respect of standard agreed contracts such as those used in the offshore sector.

However, in the case of the Njord Bravo from 2012, the Norwegian Appeal Court set aside the contractual exclusion for any indirect or consequential losses based on the fact that the acting party displayed grossly negligent behaviour. Knock for knock or other types of limitation clauses are more likely to be accepted where the gross negligence or wilful misconduct act is committed by employees not qualifying as the company’s ‘alter ego’.

Q: Will industry standard contracts such as BIMCO’s TOWCON, TOWHIRE, SUPPLYTIME, WRECKHIRE, WRECKSTAGE, WRECKFIXED and HEAVYCON be upheld under Norwegian law?

A: Yes, standard contracts will in general be upheld under Norwegian law. However, each contract will be assessed individually and the balance between the parties as well as the reasonableness of the contract terms will be taken into consideration.

For further information, contact

Hannah Griffiths

Deputy Underwriter, Offshore

+44 20 3320 8846

hannah.griffiths@ctplc.com

Gaute Gjelsten

Partner, Wikborg Rein Advokatfirma AS

+47 22 82 76 31

ggj@wr.no