Enforcement against foreign state owned assets in Norway

Instigating enforcement ­proceedings is the last resort to obtain payment from a debtor unwilling or unable to honour its obligations. If the obligation is affirmed in a so-called basis for enforcement (typically a judgment or an arbitral award), enforcement starts with a request to the Enforcement Authority who, if the ­conditions are met, will attach ­assets belonging to the debtor as security for the claim. All assets of economic value belonging to the debtor may be attached, unless exempted by law. Ultimately, if payment is not received, the attached assets may be realised through forced sale. Determining whether an asset is eligible for attachment seldom raises complex legal issues. This, however, does not hold true when the debtor is a foreign state.

Identifying foreign state owned assets eligible for attachment

The Norwegian Enforcement Act applies with the limitations recognised under public international law. The principle of state ­sovereignty is particularly relevant when the debtor is a foreign state, raising two main questions when considering whether an asset may be attached:

1. does the asset belong to the state or a third party; and
2. is the asset shielded from attachment by state immunity? 

The Norwegian Enforcement Authority’s power ceases where Norwegian jurisdiction ends, and assets abroad cannot be attached. Identifying assets held by the foreign state in Norway is therefore essential. Schematically and ­roughly simplified, foreign state assets in Norway may be divided into state-owned properties and state-owned companies. 

Foreign state-owned companies and their assets

If the foreign state’s ownership is direct and the company is ­registered in Norway, its corporate form will determine whether ­attachment is limited to the company itself (e.g. joint stock companies) or extends to assets held by the ­company. The issue becomes more ­challenging for foreign state-owned companies operating in Norway through ­subsidiaries registered as a Norwegian branch of a foreign company, a so-called NUF. Whether assets held by the NUF in Norway may be attached will depend on the legal status of the parent company in its home jurisdiction. If organised as a legal entity separate from the state (e.g. a joint stock company), the company’s assets in Norway would constitute third-party assets, and hence not belong to the state. If, however, the company operates as a branch of the state, the state’s direct ownership would extend to the assets held by the NUF in Norway. Consequently, the NUF’s assets would be eligible for ­attachment. 

However, this only applies ­insofar as state immunity does not apply. 

Assets exempted due to state ­immunity

Historically, there was a general assumption that foreign states and their assets enjoyed absolute ­immunity from enforcement by other states. However, this is not the case today, and state immunity – in simple terms – only protects assets from attachment to the 
extent required by their purpose and use. 

If the purpose is of a ­diplomatic nature, immunity will ­normally apply, as seen in the ­Vienna ­Convention on Diplomatic ­Relations which grants ­immunity over assets and premises used for the diplomatic mission. ­According to a recent ruling from a ­Norwegian Court of Appeal, the decisive ­criterion is the activity itself, and not the diplomatic status of the individuals performing the ­activity. Furthermore, a property used to promote bilateral trade and ­culture exchange may also be subject to ­immunity. The same applies to ­cultural heritage objects, as ­illustrated by a recent District Court judgment denying attachment of properties thought to belong to the foreign state’s cultural heritage.

Apart from diplomatic activities, immunity will also apply to assets used exclusively for governmental purposes of a public law nature, as recognised in the (not yet in force) United Nations Convention on Jurisdictional Immunity of States and Their Property, and – with regards to state owned ships and aircraft – in the Norwegian Enforcement Act. Governmental purposes may be contrasted with commercial activities and the rule paraphrased as follows: if a foreign state engages in commercial activities in Norway, it will be treated as its commercial peers, and immunity will not shield the assets involved from attachment. 

For certain assets, their use for exclusively governmental purposes of a public law nature is clear, such as a friendly warship visiting Norway. The distinction is, however, not always so straightforward.

Assessing the purpose of the activity

Whether or not immunity applies must be determined on a case-by-case basis, considering the facts, save for when the foreign state has waived the right to invoke immunity.

A not uncommon example are state-owned apartment buildings the state rents to individuals working in or in connection with its embassy. On its face, this activity and its purpose do not differ from what a private party may do, as company housing is not uncommon. However, if the apartments are exclusively rented out to individuals performing diplomatic activities or facilitate such activities, they would most likely be considered subject to immunity, as the Swedish Supreme Court reasoned in the famous Sedelmayer decision.

Another example is assets that used to serve a governmental purpose of a public law nature, but where this activity has ceased, or where the use and purpose are yet to be manifested. The starting point is then that immunity applies, unless it is established that the intended use and purpose is not exclusively for and in the nature of govern­mental purposes. As seen in a Court of Appeal ruling, this applies even if the asset stems from a commercial activity, e.g. a not yet due claim for payment. 

Enforcement is possible

Although challenging, the attachment, and ultimately the forced sale, of foreign state-owned assets in Norway is possible. Identifying assets belonging to the foreign state in Norway will seldom pose issues. If a commercial use and purpose of the asset is then established, state immunity may not shield the asset.