Nordisk Skibsrederforening

Landmark Norwegian Supreme Court judgment on port fees

Flaws in the new Norwegian Act relating to Ports and Fairways (Port Act) exposed as lack of competition between Norwegian ports puts shipowners in a difficult position.

1  Introduction
Norway’s new Port Act 2009 (havne- og farvannsloven) became effective on 1 January 2012. The Act deals with most aspects of ports, including rights of access to ports and a port’s right to charge fees for the use of its facilities.

A key premise for the ports’ rights to charge fees under the new Port Act is that competition is assumed to exist both between ports and between different suppliers of quays and services within each port.

Nordisk has since 2012 represented its member Hurtigruten AS in a landmark case which has exposed how such competition often does not exist between or within Norwegian ports. Among the variety of reasons are that Norwegian ports (i) are normally owned by the local municipality, (b) that the municipality often is the sole provider of quays in each port, and (c) that each port is often the only port serving its local area, island or fjord due to Norway’s challenging geography. Additionally it is quite common for several municipalities to establish a joint port authority that determines prices and terms for all ports in an area.

Many owners, including Hurtigruten, have little or no choice about what ports to call, and often they have little or no choice of suppliers of quays and other facilities within each port.

2  “Stranda case”
One of the ports in question is Geiranger port in Stranda municipality. The port increased the fees for Hurtigruten’s vessels fivefold overnight when the new Act took effect in 2012. Objections against the price hike were rejected and Hurtigruten therefore elected to suspend payments.

Stranda subsequently sued Hurtigruten, demanding (i) an approach fee (“anløpsavgift”) and (ii) payment for the use of the quay and other facilities, which Stranda called a “passenger fee”. Other ports call it a “quay fee”.

The port lost the case with costs in the District Court, the Court of Appeal and the Norwegian Supreme Court, where it was heard in June 2015. The approach fee can only be charged to cover certain specific costs incurred by the municipality, on a non-profit basis. During the case preparation and hearing before the District Court, Nordisk’s litigation team discovered that Stranda had knowingly based the fee on incorrect and grossly inflated numbers. After this came to light, this part of the matter was resolved after the port reduced the fee by almost 80 percent.

The claim for a passenger fee, which Stranda also lost in the District Court, went on appeal and was heard by both the Court of Appeal and the Supreme Court. The passengers from the vessels in question are brought ashore by a boat that has rented a quay. The Supreme Court therefore held that Hurtigruten’s vessels did not “use” the port’s facilities, meaning the municipality had no legal basis to charge Hurtigruten a fee. The Supreme Court was divided into a majority of three judges and a minority of two.

One of the judges in the majority also added that the claim for a passenger fee was in any event invalid because it constituted abuse of power by public authorities in handling public infrastructure. The law in this area is a complex mix of public law and contract law principles. The key consideration was unfair treatment of Hurtigruten because they were charged very high prices compared to all other users of the port. The Court of Appeal had unanimously invalidated the claim on this basis.

The result is that the total fees payable by Hurtigruten in Geiranger port are now only a fraction of what the port had claimed, and significantly less than they were under the previous Port Act.

3  Applying the lessons from the Stranda case to other Norwegian ports
As the Stranda case progressed through the court system Nordisk has also worked with Hurtigruten and others in dealing with similar challenges in several other ports. The following comments are limited by the fact that this work is still ongoing.

The work has shown that there seem to be inherent problems with the way Norwegian ports are organized and the port fee system in Norwegian ports. A large number of ports have been unable to show that the approach fee is really cost-based, and expert reports from auditors engaged by the shipowners’ side suggest the fees in several ports are based on an incorrect understanding of the Port Act and are significantly too high. Some ports have taken steps to correct this. Formal complaints against a dozen other ports have been filed with the Norwegian Coastal Directorate (Kystverket), which has so far (September 2015) initiated government audits at two port authorities.

With regard to passenger fees and quay fees, key concerns for shipowners include lack of transparency into what the shipowners are asked to pay for and lack of competition between and within ports. The problem is reinforced by the ports’ interest group, the Norwegian Ports Association, having taken the unfortunate and in our view legally untenable position that a port at its sole discretion may decide the terms and prices for use of the public infrastructure it administers, without discussion or negotiation with the users.

Curiously, the Act does not authorize any particular authority to hear complaints over prices and terms in Norwegian municipally owned ports. This means shipowners must in effect bring their complaints before the courts. Court cases are inherently expensive and time consuming and therefore may not be a feasible tool for many shipowners and other port users. The ports also risk little by forcing such cases to court, as no matter what the outcome is the port’s legal fees can be charged back to the shipowners through the approach fee and other fees. This is what happened in the Stranda case.

4  Revision of the Port Act
Norwegian authorities have initiated a process to review whether the Act works as intended. Hopefully this work will lead to changes to mitigate the problems discussed above, and other problems with the current Act. A good starting point would be to realize that many shipowners – perhaps the majority – have little or no choice when deciding which port to use, and that the Act must be adjusted to take this into account.