2.3 Section 2-1 of the Torts Act as a basis for government liability
Section 2-1 paragraph 1 of the Norwegian Tort Act reads as follows (our translation):
“An employer is liable for damages caused wilfully or negligently by an employee during the carrying out of work or tasks for the employer, having regard to whether the claimant’s reasonable expectations of the activity or service have been neglected. The liability does not comprise damages arising as a result of employee conduct beyond what may reasonably be expected on the basis of the nature of the enterprise or field of responsibility and the work or tasks.”
The provision also comprises liability for public authorities. This is specifically mentioned in Section 2-1 (2) and follows from a number of Supreme Court decisions. It is clear that the provision also comprises so-called anonymous and cumulative mistakes by employees, meaning that it is not necessary to identify which specific employee(s) has caused a loss through negligence. The conduct of several employees may also be considered jointly under the negligence assessment.(1) See, as one example of cumulative mistakes, Rt. 2012 p. 146 (mobbedom III). A more controversial question has been that of how the level of negligence should be determined for different forms of public activities.
The preparatory works to Section 2-1 emphasise that the wording of the provision - “whether the claimant’s reasonable expectations of the activity or service have been neglected” - signifies that certain categories of public control, service and aid activities and consultation practice should be made subject to a more lenient assessment of negligence, i.e. a higher threshold than would apply normally for imposing liability.(2) Ot.prp. nr. 48 (1965-66), see inter alia p. 79. The question of which categories of public institutions should be subject to such assessment has been discussed in a number of Supreme Court decisions, where the Court has applied a standard assessment of negligence in some cases, while applying a more lenient approach in others.(3) See, inter alia, Rt. 1970 p. 1154 (Tirranna), Rt. 1991 p. 954 (reisegaranti), Rt. 2011 p. 991 (ulmebrann), which can be seen as examples of where a lenient negligence assessment applied, and Rt. 1992 p. 453 (furunkulose), Rt. 1999 p. 1517 (Selbusjøen) and Rt. 2000 p. 253 (asfaltkant), where a regular norm was applied. Several of the Supreme Court decisions seem to indicate that the question of assessment must be made on the basis of the specific situation in each case.(4) See, for example, Rt. 2000 p. 253 (asfaltkant), at p. 265. This approach also complies well with the wording of Section 2-1.
In Rt 2009 p. 1237 (dykkerdommen) para 89, the Supreme Court summarized the state of law as follows (our translation):
“It is assumed in the preparatory works to the Tort Act and in case law that a more lenient norm of negligence shall apply to certain categories of public control, aid and service activities than what which follows from the ordinary rules of employer liability. Such lenient norm was, inter alia, not applied in the mentioned judgment in Rt. 1992 p. 453. As emphasized in Rt. 2000 p. 253 and Rt. 2002 p. 654, it must be determined specifically which requirements may reasonably be expected from the enterprise. Relevant aspects of significance are, inter alia, the general risk of harm within the area at issue, what economic resources are available to the authorities, the nature of the harmed interests and what possibilities the claimant had for insuring against loss. In addition, a distinction must be made between the public entity’s failure to act and its active steps taken, see Rt. 2000 p- 253.”
The above paragraph was also quoted by the Supreme Court in Rt. 2011 p. 991 (ulmebrann), para 30. The question of whether a specific norm applies at all for certain categories of public actors, or if it is instead merely a matter of determining the specific threshold of negligence in each individual matter, whether a public or private tort feasor is involved - has been discussed in legal literature. The Supreme Court has not taken a clear stand on the issue.(5) See Rt. 2011 p. 991, para 32
For the purposes of our present topic, the question of negligence by State employees arises in relation to the exercise of public authority, through the process of amending infrastructure tariffs. It is clear that an invalid public decision by a public authority may and often will lead to liability for the State. The answer is less clear in cases of valid administrative decisions that nonetheless disappoint reasonable expectations.
Rt 1992 p. 453 (furunkulose) concerned a case where several salmon farmers were awarded damages from the State for economic loss arising from imported salmon smolt being infected with the furunculosis disease. The Ministry of Agriculture had permitted the imports pursuant to the Fish Disease Act, and this was considered negligent by a majority of 3 out of 5 judges in the Supreme Court case. The majority held, inter alia, that the unlawful use of public authority, including whether the requirements for a proper proceeding and lawful exercise of discretion have been met, will normally be a condition for concluding that loss caused by exercise of public authority shall lead to liability.(6) Rt. 1992 p. 453, at p. 476. Nevertheless, he Court found in that case that there was a basis for State liability despite that the public permit as such was not invalid.
Graver holds that a fundamental requirement for imposing liability on public authorities in connection with the exercise of public authority is that the action or act by the authority in question is unlawful (“urettmessig”).(7) Hans Petter Graver, Alminnelig forvaltningsrett (Universitetsforlaget, 2015 (4th ed.)), pp. 546-547. His point of departure is thus that the State has the right to inflict an economic loss on other entities or individuals without incurring liability, unless the action inflicting the loss is unlawful. One example could be where the State prohibits an economic activity, without acting in breach of the Constitution Sections 97 and 105, with the effect that certain market players involved in the sector incur a loss. In this respect, Graver also emphasises that invalidity of a public decision is not a prerequisite for liability, but rather that unlawfulness in principle may lead to both invalidity as well as liability, where assessment of one of the questions is not necessarily decisive for the other.(8) Op.cit., p. 547. Consequently, invalidity is not a prerequisite for concluding that an action or decision is unlawful.(9) Op.cit., p. 547.Hagstrøm and Stenvik offers a similar view, stating that procedural faults can lead to economic loss, even if the mistake does not lead to invalidity; for example in cases of inexcusable delay on the part of the public administration.(10) Viggo Hagstrøm and Are Stenvik, Erstatningsrett (Universitetsforlaget, 2015), p. 259, with reference to Rt. 2006 p. 1519, commented upon in further detail below.
Hagstrøm also emphasises, with further references to case law, as a point of departure, that the State cannot be liable for loss on the basis of negligence, when the action at issue is lawful.(11) Viggo Hagstrøm, Offentligrettslig erstatningsansvar (TANO, 1987), p. 246. He does then hold, however, that the State will incur liability even if it has a legal basis for inflicting a loss, if the loss could have been avoided or reduced through the exercise of sufficient duty of care. According to Hagstrøm (referring here to English law), the appropriate view must be that statutory powers must be exercised with due care and skill. Hagstrøm holds that such a view is applied in Rt. 1973 p. 4,60 and is taken as an assumption in several other cases referred to.(12) Op.cit., pp. 251-252. He argues that the latter decision establishes a proportionality principle. A public decision will, however, not lead to liability solely because it can be characterized as unfortunate or unsuitable. A decision must instead, according to Hagstrøm, be clearly unreasonable or disproportionate, based on the situation at issue.(13) Op.cit., pp. 256-257. The public administration will have a rather wide margin of discretion, although a limit must be drawn where the intervention is disproportionate, given the loss incurred by the sufferer and the objectives behind the exercise of public authority.(14) Op.cit., p. 255.
The Supreme Court decision in Rt 2006 p. 1519 confirms that the State may also incur liability due to negligence in cases where the exercise of public authority has not been unlawful. The case concerned a diver who suffered from disabilities after being involved in diving operations in the petroleum sector on the Norwegian Continental Shelf. The diver would qualify for financial support from a specific scheme established by Statoil, if he could substantiate his lasting disability. In order to qualify for support, the diver needed to provide evidence of the decision by the National Health Insurance Office of his right to public disability pension. This decision had to be presented to the Statoil support scheme committee prior to the final meeting of the committee, which took place on 26 May 2002. The National Health Insurance Office was informed several times about the importance of adopting a disability decision prior to the final Statoil committee meeting. Despite assurances from the office that the decision process would be handled rapidly, a decision was not made before the deadline, due to the negligent behaviour of an office employee. The processing time did not contradict public law requirements, but the five Supreme Court judges nevertheless found that the State was liable pursuant to Section 2-1 of the Tort Act for the diver’s economic loss, due to the late decision and subsequent loss of Statoil support. The Court based liability on the failure to fulfil the diver’s particular expectations on priority and rapid processing time.(15) Rt. 2006 p. 1519, para 37. In this respect, the Court held that the conduct of the National Health Insurance Office employee represented a serious breach of the diver’s legitimate expectations as to the handling of the case.(16) Rt. 2006 p. 1519, para 47. The Court criticised the State employee in strong terms, holding that the employee’s conduct was indefensible in several respects.(17) Rt. 2006 p. 1519, para 47. On this basis, the Court found that the employee had exercised clear negligence and had acted manifestly in breach of what the claimant reasonably could expect from the office. It was therefore not necessary to consider further which level of negligence should be required in order to incur liability for the public activities in question.(18) Rt. 2006 p. 1519, para 48.
Rt. 2006 p. 1519 illustrates that the State may incur liability for negligent behaviour under the exercise of public authority, despite the public decision in question not being invalid and the State not having acted in breach of distinct public law requirements. However, the Court also emphasised the graveness of the negligence involved in this particular case. This conduct, combined with the fact that the case concerned the financial situation of a person with disabilities, distinguishes it as a rather special case. Consequently, the threshold for imposing State liability, in cases where the public body has not acted unlawfully in the exercise of its public authority, is likely to remain high.
In conclusion, as a clear point of departure, a pre-requisite for imposing State liability for the exercise of public authority is that the action or act of authority is unlawful. Rt. 2006 p. 1519 illustrates, however, that it is not necessary for a decision to be invalid, or to breach distinct public law requirements, in order to incur liability. Case law and literature would seem to suggest that an otherwise valid decision, which is clearly disproportionate or manifestly fails to show due care for private interests and expectations, may also give rise to liability. Below we discuss further the extent to which breach of reasonable expectations, created or facilitated by the government in some manner, may provide a more distinct basis of liability along such lines. First, however, we shall discuss some special considerations, standards and criteria that apply to tariff regulation in the energy sector.