4.2 Rt. 2010 s. 402 (Attachment Order)
Norinvest Ltd. challenged the petition, contending that the Nordic Trustee was not entitled to sue in its own name. Both the District Court(1) TOBYF-2009-44929 (n 28) and the Court of Appeal(2) LB-2009-96441 (n 29) held that the Nordic Trustee did not have title to sue on behalf of the bondholders and dismissed the petition. These rulings were however overturned by the Supreme Court in its ruling of 7April 2010.(3) Rt. 2010 s. 402 [16]
First, the Supreme Court noted that the right to sue, according to section 1-3 of the Civil Procedure Act, depends on the actual need of the claimant to sue and its connection to the claim.(4) ibid [17]-[20] Section 1-3 of the Civil Procedure Act reads:(5) The quotation is from the University of Oslo’s unofficial translation of the Civil Procedure Act of 2005 available at <app.uio.no/ub/ujur/oversatte-lover/data/lov-20050617-090-eng.pdf> accessed 20 March 2017
An action may be brought before the courts for legal claims.
The claimant must show a genuine need to have the claim determined against the defendant. This shall be determined based on a total assessment of the relevance of the claim and the parties’ connection to the claim.
This provision sets out the main procedural requirements in order to bring a case to court. First, the claimant must have a legal claim, or at least an alleged one. Secondly, the claimant’s connection to the claim must make him or her a natural claimant. Furthermore, the claimant must have a genuine need for clarification at that time, since one cannot sue to have hypothesises established.(6) Tore Schei et al, Tvisteloven kommentarutgave vol 1 (2nd edn, Universitetsforlaget 2013) 14
The court then observed that the preparatory works(7) The main preparatory works to section 1-3 of the Civil Procedure Act are NOU 2001:32 ‘Rett på sak. Lov om tvisteløsning (tvisteloven)’ 186-207, 652, Ot.prp.nr.51 (2004-2005) ‘Om lov om mekling og rettergang i sivile tvister (tvisteloven)’ 137-156, 363-366 and Innst.O.nr.110 ‘Innstilling fra justiskomiteen om lov om mekling og rettergang i sivile tvister (tvisteloven)’ 28-31. Note that preparatory works have substantial authority in the Norwegian judicial system; thus, frequently relied upon by the courts, see Knut Bergo, Høyesteretts forarbeidsbruk (Cappelen Akademisk Forlag, 2000) ch 6, 327. to the Civil Procedure Act state that the right to sue is to be determined and developed by case law.(8) Rt. 2010 s. 402 [19]-[20] The main rule concerning a representative’s title to sue in its own name was set out in Rt. 2006 s. 238 (American Receiver).(9) Following the legal principle set out in Rt. 1989 s. 338. However, a reservation was made in the event the circumstances were such that there were no other alternative than to allow an action by the representative.(10) Rt. 2006 s. 238 [21] In the present case, the Supreme Court stressed that the question of title to sue has to be assessed in light of the practical need, and is not to be based on whether the claimant is rightly characterised as a representative.(11) Rt. 2010 s. 402 [21] Thus, the court demonstrates a more pragmatic approach than that found in the case of the American Receiver.(12) Rt. 2006 s. 238This line of reasoning is still within the spirit of section 1-3 of the Civil Procedure Act, whereby the right of action is to be determined based on the genuine need of the claimant in each specific case.
Next, the court turned to consideration of the Norwegian bond market and the contractual regime governing it.(13) ibid [23]-[28] Each bondholder has, by virtue of the no-action clause, waived its right of action against the issuer. It was emphasised that the mechanism adopted by the bond terms aims to ensure both the equal treatment of bondholders and a fair allocation of costs when legal action to protect the bondholders’ interests is initiated.(14) ibid [27] If the Nordic Trustee were to be denied a right of action, the court noted that the no-action clause would be deemed invalid, thus re-vesting the individual bondholders with title to sue.(15) ibid [30] This view stems from the main rule that one cannot make agreements on title to sue, since this right is determined by peremptory procedural rules.
Nonetheless, the alternative of invalidating the no-action clause did not sit well with the Supreme Court, which then addressed the arguments supporting the Nordic Trustee’s right to sue in its own name.(16) ibid [44] As a starting point, it would be irrational to allow separate debt recovery proceedings from individual bondholders.(17) ibid [40] In the absence of authority requiring the bondholders to join forces, the only alternative, in the court’s view, was to vest the Nordic Trustee with title to sue.(18) ibid There are rules for consolidation of suits and stay of proceedings awaiting the outcome of a pending case, but these are not tailored to cater for the interests of the class of bondholders; especially not when it comes to an equal share of the proceeds, litigation risk and costs.(19) See sections 15-6 and 16-18 of the Civil Procedure Act. Note that a class action is not available for interlocutory orders.
As mentioned, a severe level of insecurity arose in the Norwegian bond market following the decisions of the lower courts, resulting in the main stakeholders petitioning for a bill securing the Nordic Trustee’s right of action. One feared that the international market would lose its trust in the Norwegian market, if the Nordic Trustee were denied a right of action.(20) Letter from the Nordic Trustee to Ministry of Finance dated 27 October 2009 (n 12) The Supreme Court took note of this and even quoted letters from financial institutions supporting the bill. (21) Rt. 2010 s. 402 [29], [32]-[36]. The bill was supported by, amongst others, the Central Bank of Norway, the National Insurance Fund, the VPS and Finance Norway. It further assumed that the no-action clause would be respected in other jurisdictions, allowing the Nordic Trustee to take legal action and to enforce security abroad.(22) ibid As section 6 explains, the no-action clause is, for instance, strictly applied and enforced by both the English and US courts. According to the Supreme Court, the concerns of the international bond market had to be taken into account when interpreting section 1‑3 of the Civil Procedure Act.(23) ibid
The Supreme Court bluntly rejected the guarantor’s counter-arguments, noting that the fact that one cannot foresee all practical consequences should not have the result of denying the Nordic Trustee a right of action.(24) ibid [39]-[42] Any uncertainty regarding the binding effect of a judgment upon the bondholders was partly remedied by the no-action clause and section 19-15 of the Civil Procedure Act. Section 19-15 provides for the extension of a judgment’s binding effect upon third parties not party to the court proceedings in certain circumstances.(25) ibid [39]. Pursuant to section 19-15 of the Civil Procedure Act, a judgment may have a binding effect upon third parties not party to the court proceedings provided that the third party “would be bound by a corresponding agreement on the subject matter of the action due to their relationship with the party” (University of Oslo’s unofficial translation (n 52)). Even if section 19-15 did not make the judgment legally binding upon the class of bondholders, the Supreme Court still seemed inclined to allow the suit in the name of the Nordic Trustee.
Equally, the court did not approve any arguments concerning responsibility for case costs and damages for wrongful arrest; stating that only the Nordic Trustee would be directly responsible for the costs, while it was for the enforcement office to require adequate counter-security before attaching or arresting property.(26) ibid [40] However, the court failed to take into account the fact that the potential liability following a wrongful arrest in an oil rig or supply vessel under construction may exceed the counter-security. Thus, these counter-arguments will be discussed further in subsections 5.1 and 5.2 below.
Norinvest Ltd’s objection concerning loss of any set-off rights was dismissed as already prohibited by the bond terms.(27) ibid. In this case, the provision prohibiting set off in the standard bond terms (cl. 8.6) was probably expressly set out in the guarantee or incorporated by reference to the bond terms. Nor did the court accept any arguments to the effect that the bondholders’ anonymity could affect the court’s impartiality. Any underlying private interests, if known, would have to be disclosed by the judge.(28) ibid [42] If the judge or someone close to him or her has a financial interest in the case, then the judge will have to excuse him- or herself - from the case. Should such interest not be known to the judge due to the bondholder’s anonymity, then there is no reason to question the court’s impartiality.
Despite the fact that one – as a main rule – cannot contractually waive one’s right of action and confer that right to a representative, the Supreme Court put great emphasis on the no-action clause.(29) ibid [44] The contractual framework developed by the market itself did professedly appear to cater for the best alternative when bearing in mind the interest of all parties concerned. Consequently, the Supreme Court held that there were no compelling reasons against vesting the Nordic Trustee with title to sue.(30) ibid