Dispute Resolution Insight
Opening statement
Dear friends and colleagues,
A highlight at the beginning of each fall semester is the much-anticipated annual arbitration conference, held in collaboration with our colleagues at Wikborg Rein. This conference has become a popular event, gathering leading academics and practitioners to provide a dynamic platform for discussing pertinent issues in arbitration and fostering professional connections.
This year’s conference concerned and sparked robust debates on the role of institutional arbitration in the Nordics and mediation as part of arbitration processes. Prior to the conference, BAHR and Wikborg Rein conducted a survey amongst arbitrators and counsel relating to the two topics that provided some context for the panel discussions.
Norway has traditionally been behind our Nordic neighbours in the use of institutional arbitration, and this year’s discussion related to the benefits of a common Nordic arbitration institute. Moreover, mediation is on the rise. How should arbitral tribunals approach the possibility of reaching an amicable solution through mediation rather than through an arbitral award. For a detailed exploration of the topics discussed, we invite you to read our first article, which delves into the key takeaways and insights from the seminar.
Whether litigating a case in court or arbitrating a dispute, both clients and their counsel have a fundamental expectation that their case will be heard and decided by unbiased judges or arbitrators. Indeed, one could argue that the principles of independence and impartiality are the very bedrock of fair judicial and arbitration proceedings.
The independence of judges and arbitrators ensures that decisions are made based on the merits of the case, free from any undue influence or bias. This principle is universally recognised, yet the requirements and practices for ensuring independence and impartiality can vary between judges and arbitrators under Norwegian law. Our second article provides an analysis on the requirement for impartiality and independence for arbitrators and the similar requirement for judges.
In today’s competitive business environment, companies are highly protective of their trade and business secrets, which often provide a crucial edge over competitors. However, when such sensitive information becomes relevant to a dispute, the opposing party may request access to it. This scenario creates a clear tension between the need for disclosure to achieve a factually correct decision or award, and the imperative to protect such information from unwarranted probing by competitors.
Our third article examines the rules governing the disclosure of evidence containing trade secrets and evaluates whether arbitration or litigation offers better protection under Norwegian law. We explore practical measures that can be implemented to safeguard confidential information while ensuring that the arbitration process remains transparent and fair.
I hope this (ninth) edition of our Dispute Resolution Insight provides an interesting read.
Atle Skaldebø-Rød Partner / Head of Dispute Resolution
E: atska@bahr.no, M: +47 922 87 727
Shaping the modern Norwegian arbitration landscape:
The role of arbitral institutions
The purpose of the annual BAHR and Wikborg Rein Arbitration Conference is to provide a platform for leading arbitration practitioners to gather on a regular basis for an evening of informative discussion and friendly socialising. This year, the first panel discussion concerned the current and future role of institutional arbitration in the Nordics. The second panel discussion addressed mediation in arbitration. A common theme for both discussions was the role arbitration institutions usually play in the development of arbitration tools and processes.
Cultivating harmony: Arbitral institutions and the promotion of mediation
While ad hoc arbitration is, as the name suggests, conducted on a case-by-case basis with parties in a specific dispute establishing the arbitral tribunal and procedures on their own initiative, in institutional arbitration the parties agree that arbitration will proceed in accordance with the rules of a specific arbitral institution that are applied in generally the same manner to all arbitrations conducted
under those rules. In several ways, therefore, institutional arbitration presents a greater opportunity for the consolidation of efforts to refine arbitral processes, to make arbitration more fit for purpose, and to more readily respond to the needs and demands of the market and users of the arbitral system.
In this article, we will discuss the role arbitration institutions have in the development of modern and flexible dispute resolution tools,
explored especially through the lens of arbitral institutions’ role in promoting and facilitating mediation. Although arbitration and mediation seem at odds with one another as two distinct forms of dispute resolution mechanisms, there exists a harmony between both processes that arbitral institutions are uniquely placed to cultivate.
A hub for the development of problem-solving tools
Institutional arbitration is the norm in Nordic countries with the exception of Norway. Although we believe, as reported previously, that institutional arbitration will eventually become the predominant form of arbitration in Norway over time,1 ad hoc arbitration is still the standard in Norway. For disputes between Norwegian parties, ad hoc arbitration offers a cost-effective, flexible, and reliable process. Norwegian ad hoc arbitration has also generally functioned well in terms of arbitrator appointment, often through joint appointments of the entire tribunal.2 Ad hoc arbitration has historically been effective in Norway due to a high level of trust between Norwegian users of arbitration. However, the discussion at the Arbitration Conference made clear that, as disputes seated in Norway between international parties become more commonplace, further development of a modern arbitration process solely through ad hoc arbitration will be challenging. Several practitioners in the Norwegian arbitration community also recognise that institutionalisation may be required to attract more international arbitration users to Norway.
Institutional arbitration enjoys several advantages over ad hoc arbitration. The fundamental advantage is that institutions operate as administrators and thinktanks focused on managing arbitration cases and exploring ways to improve the arbitral experience. They execute these functions by, for example, identifying and connecting professionals in the arbitration community, building up a pool of arbitrator candidates, and streamlining administrative processes, while simultaneously acting as a hub for the development of new ideas, tools, and mechanisms. Examples of tools
and mechanisms introduced by arbitral institutions in recent history include:
• Expedited procedures, allowing parties to resolve disputes in arbitration on an expedited basis in a relatively short period of time.
• Rules that give tribunals the power to grant provisional and interim measures, as well as guidance in the rules clarifying the scope of such powers.
• Emergency arbitration, allowing a party to apply for provisional and interim measures prior to the constitution of the arbitral tribunal in the main proceeding.
• Consolidation of arbitrations arising out of separate but related contracts, allowing parties to have related disputes heard together in a single proceeding.
• Early determination of claims and defences, allowing parties to apply to the tribunal to dismiss manifestly erroneous claims and defences early in the proceedings.
Institutional rules set a clear framework for case management and arbitrators’ and arbitral institutions’ powers to a greater extent than their ad hoc cousin. They provide arbitral tribunals with the comfort and security required to control arbitrations in an efficient, effective, and fair manner that enhances and highlights the benefits of arbitration as a dispute resolution mechanism. Without such specification in arbitral rules, the confidence to steer arbitral proceedings in an assertive manner might be reserved only for reputable arbitrators with decades of experience. Less experienced arbitrators are thus greatly assisted by the guidance provided by institutions and their rules, to the benefit of commercial parties.
The role of institutions in the promotion and incorporation of mediation serves as another example of the positive role modern institutional arbitration play in dispute resolution.
Defining the relationship between arbitration and mediation
The benefits of mediation are plentiful, as we explored in a previous edition of BAHR Dispute Resolution Insight. 3 One main benefit is mediation’s potential to resolve disputes amicably while preserving business relationships, thus avoiding the animosity often associated with contentious procedures such as litigation and arbitration. However, as noted by the panellists at this year’s Arbitration Conference and surveys conducted in connection with the conference, users of Nordic arbitration experience that tribunals (whether in ad hoc or institutional arbitration) generally refrain from encouraging or facilitating mediation, while the same users responded that they wished tribunals would take more initiative to facilitate mediation.
Typically, tribunals conservatively focus on their specific and limited mandate to determine the issues referred to arbitration and to render an enforceable award. However, as noted by the panellists, the question today should no longer be whether arbitration has a role to play in facilitating mediation, but how and to what extent arbitrators should do so.
The panellists presented three possibilities available to tribunals when it comes to promoting mediation other than refraining entirely from raising or addressing mediation:
The panellists noted that simply informing the parties that mediation is a possibility is uncontroversial but might be unhelpful in terms of aiding the parties with mediation, given that parties are generally already aware that mediation is an option. On the other end of the spectrum, actively involving itself in mediating a dispute is inappropriate for a tribunal for a host of reasons, particularly because it goes beyond the tribunal’s mandate and exposes any process or award to invalidity and setting-aside challenges. A tribunal mediating a dispute also does not engender the openness from parties that a successful mediation requires.
The more interesting discussion is thus centred on the extent to which a tribunal should and can encourage or facilitate mediation (and feels comfortable in doing so), which depends to a great degree on the rules governing the arbitral process.
A sliding scale of possible involvement Norwegian courts are mandated to consider the possibility of a full or partial amicable settlement to the legal dispute, at each stage of the case. In practice, judges will inform and encourage mediation in most cases. Mediation can take place at a court hearing or through other contact between the parties also without the court’s presence. While the latter situation is, of course, also an option in the arbitration context, the ordinary courts in Norway are
• Inform and remind the parties about the possibility of resolving the dispute through mediation.
• Encourage or facilitate mediation by allocating time in the timetable for mediation to take place or through other procedural means.
• Involvement in the mediation process by actively mediating the dispute.
more likely to encourage parties to mediate (whether in court or out of court). In addition, the court can initiate so-called judicial mediation, a more in depth and strictly confidential conciliation process, with a separate judge acting as a mediator between the parties.
On the other end of the spectrum, we find ad hoc arbitration in Norway under the Norwegian Arbitration Act, which provides no guidance on mediation in the context of arbitration and thus no comfort to tribunals conducting such arbitrations in terms of facilitating mediation.
Between these two extremes, we discover a multitude of different approaches regarding mediation in institutional arbitral rules, with a varying range of frameworks detailing how and when mediation should be initiated, encouraged, and/or conducted. Examples of this include:
• AAA4 Commercial Rules 2022: Pursuant to R-10 of these rules, for claims or counterclaims exceeding USD 100,000, parties are by default required to mediate their dispute pursuant to the AAA’s Commercial Mediation Procedures (or as otherwise agreed), unless a party opts out.
• SIAC-SIMC5 Arb-Med-Arb Protocol: Parties can agree to adopt the SIAC-SIMC protocol found in Schedule 1 of the SIAC
rules, a hybrid dispute resolution mechanism under which parties commence arbitration, pause proceedings to mediate, and return to arbitration following the mediation. If no settlement is reached during the mediation, the arbitration continues as normal. If a settlement is reached, it can be recorded in the form of a consent award, which thus enjoys the benefit of enforceability under the New York Convention in over 170 jurisdictions.
• NOMA6 Arbitration Rules 2024 & Best Practice Guidelines: Under Art.15(1) of these rules, tribunals are directed to take assistance from the NOMA Best Practice Guidelines when conducting the arbitration, which encourage the tribunal to discuss possible allocation of time during case preparation for mediation and/or settlement discussions.
• ICC7 Arbitration Rules 2021: Pursuant to Art. 22 and Appendix IV(h) of these rules, tribunals are directed to encourage parties to consider settlement either through negotiation or mediation under, for example, the ICC Mediation Rules.
The degree of guidance afforded by the above representative rules and procedures can be roughly illustrated by the figure below.
With greater guidance and procedures around the integration and promotion of mediation in the arbitral proceedings, tribunals will, to a greater extent, feel emboldened to facilitate and promote mediation in the arbitration context. Without a framework for mediation, most arbitrators will adhere to their limited mandate and leave it to the parties to take the initiative to conduct mediation.
In our experience, commercial parties are seldom sufficiently aware of the differences between institutions’ rules and procedures when it comes to mediation. Parties should take specific advice on how to incorporate these mechanisms into their arbitration agreements and processes.
Conclusion: Modernisation of Norwegian arbitration may require increased institutionalisation
It is evident that arbitration institutions are important contributors to the systematic development of modern dispute resolution tools and best practices. Even though ad hoc arbitration has traditionally held a significant stronghold in Norwegian practice, we believe institutional arbitration will play a central role in modernising the field in Norway, with the integration of mediation into arbitration serving as a thought-provoking example of this potential evolution.
1 “Picking up the pace — Institutional arbitration in Norway”, BAHR Dispute Resolution Insight 3/23 (19 Nov. 2023) (available at https://bahr.no/publication/bahr-dispute-resolutioninsight-no-03-23).
2 See e.g., Norwegian Arbitration Act § 13 second paragraph.
3 “Mediation in commercial disputes — is it worth it?”, BAHR Dispute Resolution Insight 1/24 (14 Mar. 2024) (available at https://bahr.no/publication/bahr-dispute-resolutioninsight-no-01-24).
4 American Arbitration Association.
5 Singapore International Arbitration Centre-Singapore International Mediation Centre.
6 Nordic Offshore & Maritime Arbitration Association.
7 International Chamber of Commerce.
Photos: Sten E. Eriksen/Wikborg Rein
About the authors
Atle Skaldebø-Rød Partner
E: atska@bahr.no
M: +47 922 87 727
Atle is admitted to the Supreme Court and has extensive experience across a broad range of complex commercial disputes. His practice includes post-M&A, directors’ liability, shareholder disputes, company law, financial reporting and marine insurance as well as special forms of judicial proceedings, such as enforcement proceedings, preliminary injunctions and securing of evidence.
Daniel Steel Managing Associate
E: daste@bahr.no
M: +47 930 487 34
Daniel is part of BAHR’s Dispute Resolution team. His practice focuses on international arbitration, cross-border litigation, and investigations & compliance. Daniel has over ten years of experience advising clients in arbitration matters under the ICC, LCIA, AAA/ICDR, SIAC, HKIAC, CIETAC, and UNCITRAL rules. His experience in contentious matters comprises a wide range of industries and areas, including oil & gas, renewable energy, pharmaceuticals, telecommunications, intellectual property, real estate, arbitration-related litigation, and shareholder disputes.
Fredrik Andreas Stenstadvold Senior Associate
E: frste@bahr.no
M: +47 932 85 216
Fredrik is part of BAHR’s dispute resolution team and acts as counsel in a wide range of commercial disputes, inter alia, property law, tax litigation, post-M&A, corporate law, and liability. In addition, Fredrik has previous experience working in BAHR’s finance and capital markets team.
Arbitrator independence and impartiality:
Ensuring fairness and integrity in arbitration proceedings
The fundamental principle of independent and impartial courts is deeply rooted in nearly all developed legal systems. This principle also extends to widely used alternative dispute resolution mechanisms such as arbitration. However, are there any key differences one should know about between the application of these principles in arbitration compared to the public courts? And if so, what is the standard of independence and impartiality for arbitrators?
Party-led Appointment Process
Contrary to litigation in public courts, arbitration offers the parties significant autonomy in deciding the framework for resolving a dispute. Everything from the appointment of arbitrators and the format of the proceedings (written or oral), to deadlines
and rules regarding arbitrator bias and their qualifications, can be tailored to suit the specific dispute at hand.
However, in the absence of an agreement on applicable procedural rules, there is a need for default statutory provisions that ensure the arbitral process promotes the rule of law. In
Norway, such provisions are provided by the Norwegian Arbitration Act (“NAA”), which is based on the UNCITRAL Model Law and apply to all arbitrations in Norway unless otherwise agreed. 1 The legislator’s reasoning for basing the NAA on the Model Law was to make the rules and arbitration in Norway more accessible, especially in arbitrations involving international parties with limited knowledge about and access to Norwegian procedural law. 2
Traditionally, most arbitrations in Norway are conducted as ad hoc arbitrations without the use of specific procedural rules, such as those provided by NOMA or IBA. Consequently, the procedural rules and appointment of arbitrators are usually governed by the NAA, where the default solution is for the parties to jointly identify and appoint the arbitral tribunal. 3 The NAA further stipulates that the arbitrators appointed must be “impartial and independent of the parties” 4
The standard of arbitrator impartiality and independence is not merely a formality; it is essential to maintaining the integrity and fairness of the arbitral process. Failure to comply with these rules may result in an appointed arbitrator being challenged and re-moved from the tribunal, 5 or even in a final arbitral award being set aside. 6 In this article, we examine whether these standards differ from the rules regulating the independence and impartiality of public courts. We also explore how these principles are applied by courts and arbitrators in practice.
Arbitrator Bias in Norwegian Case Law
Historically, there has been limited case law addressing the independence and impartiality of arbitrators in Norwegian courts. A recent survey conducted by BAHR and Wikborg Rein revealed only two instances in the past ten years where an arbitral award had been challenged due to potential arbitrator bias.7 The survey revealed that the same parties were involved in both cases and that the underlying arbitral awards were connected to a related series of disputes. As such, these
cases cannot be regarded as indicating any significant shift within Norwegian arbitration practice. Rather, they appear to be exceptions to the norm.
However, these cases are interesting because they highlight similar issues and offer a rare glimpse into how courts evaluate arbitrator independence and impartiality. In both cases, the Court of Appeal had to consider whether an arbitral award was invalid due to a client relationship between the arbitrator’s law firm and one of the parties involved.
In the first case, the arbitrator’s law firm had represented the party in the recent past. In the second case, the client relationship was ongoing. In both instances, the arbitrators themselves had not represented or advised these parties, nor were their law firms involved in the dispute at hand. Ultimately, in both instances, the Court of Appeal rejected the setting aside application on the basis that the arbitrator was not impartial and independent. 8, 9
The Standard of Arbitrator Independence and Impartiality in Norwegian Arbitration
As mentioned above, the NAA states that each arbitrator shall be “impartial and independent of the parties”. 10 The rule is broadly formulated, and the terms ‘impartial’ and ‘independent’ are not defined within the NAA. Furthermore, unlike the rules governing the impartiality of public judges, 11 the NAA does not list specific situations and relationships that would automatically disqualify an arbitrator. The legislator has asserted that the difference is intentional. 12
The rationale behind this difference is multifaceted. First, the rules regulating arbitrators’ independence and impartiality in the NAA mirror those in the Model Law. 13 Second, the potential for and variety of potential connections between arbitrators and parties is naturally much greater than for public judges. The legislator found that listing specific situations and connections could give rise to more questions and doubts regarding the interpretation of the law than not including such a
list. 14 Finally, we consider that the need for flexibility in arbitration differs significantly from that in public courts.
The NAA aims to strike a balance between ensuring fairness and integrity in arbitration proceedings and accommodating a diverse range of contracts, disputes, and arbitrators. Some arbitrations require judges or lawyers as arbitrators, other require investment professionals or other experts in fields such as construction, valuation or engineering.
To balance these factors, the legislator has opted for a solution where the assessment of an arbitrator’s impartiality and independence shall be made on a case-by-case basis. The relevant judicial standard is to assess whether there are circumstances that give rise to “justifiable doubts” about the arbitrator’s impartiality or independence. 15 If such circumstances exist, there may be grounds for challenging the appointment of an arbitrator or the validity of an award. 16
As with public judges, the assessment of arbitrator independence and impartiality includes both subjective and objective elements. 17 These distinct aspects of the standard can be inferred from the wording of the NAA, which requires that arbitrators be both “impartial” and “independent”. 18 At first glance, the concepts of independence and impartiality might appear intertwined. However, impartiality generally pertains to subjective factors, such as the arbitrator’s behaviour or state of mind, whereas independence is grounded in more objective circumstances, such as an existing connection between the arbitrator and one of the parties. This has also been affirmed by the Court of Appeal. 19
To satisfy the independence and impartiality standards, the arbitrators must not be deemed to be “controlled, paid, or otherwise dependent on any of the parties, whether in a personal, social, or economic capacity” 20 To set an award aside due to lack of independence, the court
must find it plausible that the arbitrator had a current and concrete interest in the outcome of the case. A theoretical possibility is insufficient; certain qualified self-interest must be established. 21
Arbitrators have a ‘Duty to Disclose’
To enable the parties to uncover disqualifying circumstances early in an arbitration, the NAA imposes a duty on potential arbitrator candidates to “disclose any circumstances likely to give rise to justifiable doubts about their impartiality or independence”. 22 Should any new circumstances arise during the arbitration, these must be disclosed immediately. 23
An arbitrator’s duty to disclose is extensive. 24 According to the preparatory works for the NAA, the duty requires arbitrators to disclose all circumstances that might lead to “a discussion about impartiality, even if it is doubtful whether the circumstance would lead to disqualification” 25 However, if the arbitrator is in doubt, the arbitrator should err on the side of disclosure. 26
The NAA does not impose sanctions for breaches of the duty to disclose. However, a failure to disclose may be considered by the court in its assessment of whether there are circumstances that give rise to justifiable doubts about the arbitrator’s independence and impartiality, and whether an arbitral award should be set aside as a consequence. 27 While a breach of the duty to disclose does not automatically lead to the conclusion that the arbitrator was biased, it can serve as a decisive element in close cases where the court is otherwise uncertain about the result. As with the assessment of arbitrator independence and impartiality, this determination must be made on a case-by-case basis.
Client Relationships Between an Arbitrator’s Law Firm and one of the Disputing Parties
Unlike public judges, arbitrators in ad hoc arbitrations are appointed on a case-by-case basis and usually hold other positions in
addition to their occasional role as an arbitrator. As a result, there is a greater likelihood of an arbitrator being linked to the same business segment or otherwise having some connection to the parties involved in the arbitration. Such links and connections are natural, as arbitrators are often nominated for their expertise. This may also apply to lawyers accepting arbitrator appointments, particularly prior or ongoing connections between the arbitrator’s law firm and one of the parties.
The NAA does not explicitly address whether or when indirect connections through an arbitrator’s law firm will affect the arbitrator’s independence or impartiality. Any fixed rules in this regard would also contradict the Norwegian legislator’s intention of case-by-case assessments. 28
This principle was also the basis for the two recent Court of Appeal decisions mentioned above, where none of the challenges to the arbitral awards based on bias were successful. Both cases involved large law firms, and the value of the casework was modest. Additionally, the cases were handled by different lawyers within the firms, not the arbitrators themselves.
Guidance on the question of arbitrator independence and impartiality can be found in international best practice standards for commercial arbitration.
The IBA Guidelines on Conflict of Interests is one example of such standards. Additionally, numerous commentators shed light on the different nuances that must be balanced when assessing independence and impartiality in the context of law firm connections. Nonetheless, the starting point remains a comprehensive assessment of the relevant circumstances in each case.
When reviewing the recent decisions from the Court of Appeal in light of the rules governing the independence and impartiality of public judges, it is far from obvious that the result
would have been the same. Unlike arbitration, public courts tend to enforce a firm three-year ban on former attorneys turned public judges from presiding over cases involving former colleagues, firms, or clients. Moreover, case law regarding interim judges in public courts has prohibited them from deciding matters involving parties connected to their prior professional sector, based on the reasoning that the interim judge may yet return to private practice. 29
Conclusions
The differing rules and requirements for arbitrators compared to public judges highlight the key differences between arbitration and litigation. The legislation aims to strike a balance based on the unique characteristics of each dispute resolution method.
In the public court system, public trust is fundamental. In contrast, for arbitral tribunals, and ad hoc tribunals in particular, the trust of the parties is paramount. As a mechanism intended to provide a partydriven, quick, and highly specialised method of resolving disputes between professional parties, the procedural rules regulating arbitration must be highly effective and flexible.
What about public trust in arbitration as an alternative dispute resolution mechanism? For arbitration, this trust is upheld by a statutory framework that supplements the arbitration agreement and, for some fundamental principles, overrides it. To ensure trust in the tribunal and their award, and absent agreement to the contrary, these rules require arbitrators to meet standards of independence and impartiality and to disclose any potentially disqualifying circumstances. If these standards are not upheld, the arbitral award may be challenged.
1 The NAA Section 2
2 NOU 2001:33 page 66
3 The NAA Section 13 (2)
4 The NAA Section 13 (1)
5 The NAA Section 14 and 15
6 The NAA Section 42 and 43
7 Shetelig and Skaldebø-Rød Lov og Rett no 1/2024
8 LB-2023-62913 and LH-2024-1638
9 Please note that the ruling in the second case is not legally binding as it has been appealed to the Supreme Court of Norway
10 The NAA Section 13 (2)
11 Courts of Justice Act Section 106-108
12 NOU 2001:33 page 66
13 NOU 2001:33 page 66
14 NOU 2001:33 page 66
15 The NAA Section 14 (2)
16 The NAA Section 42, cf. 43 (1) d
17 HR-2022-1799, LB-2023-62913
18 The NAA Section 13
19 LB-2023-62913 and LH-2024-1638
20 Ristvedt og Falch, Alternative Dispute Resolution (2015) page
308 (office translation) and LB-2023-62913
21 Ristvedt og Falch, Alternative Dispute Resolution (2015) page
312 and LB-2023-62913
22 The NAA Section 14 (1)
23 The NAA Section 14 (1)
24 LB-2023-62913
25 Ot.prp.nr.27 (2003–2004) page 93 (office translation)
26 Kolrud et al., The Arbitration Act: Commentary Edition section 14 note 1 and IBA Guidelines on Conflicts of Interest in International Arbitration
27 Ot.prp.nr.27 (2003-2004) page 94 and Woxholth, Arbitration (2013) page 409
28 NOU 2001:33 page 66
29 HR-2022-1799-U
About the authors
Simen Skjold Søgaard Partner
E: sss@bahr.no
M: +47 900 21 287
Simen is admitted to the Supreme Court and rejoined BAHR as partner after six years at the Office of the Attorney General (Civil Affairs) in April 2022. Simen represents clients in all forms of commercial disputes with a particular focus on tax and VAT litigation and matters involving public authorities.
Andreas Busch Managing Associate
E: anbus@bahr.no
M: +47 469 10 858
Andreas is a commercial litigator with significant experience from both public court proceedings and arbitration. His practice includes corporate litigation and complex contractual disputes e.g. within the energy sector, IT and telecom, as well as directors’ and professional liability cases. Andreas also has extensive experience with special forms of judicial proceedings such as securing of evidence and injunction proceedings.
Maria Elisabeth Angell Senior Associate
E: melisa@bahr.no
M: +47 482 72 240
Maria is a part of BAHR’s Dispute Resolution team and represents clients in a wide range of commercial disputes both in arbitration and before the public courts and in arbitration. In addition, Maria has experience within company law, M&A and capital markets. Maria’s recent cases include an investor arbitration and a comprehensive shareholder dispute. Maria was involved in the cases discussed in this article.
Trade secrets in legal proceedings:
Maintaining secrecy
Most businesses have trade secrets in some form. These are likely to be amongst the business’ most valuable assets and of high importance to their positioning against competitors. It is therefore vital to safeguard the confidentiality of those trade secrets. But how can this be done when the business is involved in legal proceedings before the ordinary courts or in arbitration, where information constituting or containing trade secrets may be subject to a duty of disclosure or considered necessary to substantiate or refute the claim?
Background: The legal framework for the protection of trade secrets
In Norwegian law, the main legal framework regulating trade secrets, including the protection thereof, is the Trade Secrets Act. The Act entered into force on 1 January 2021 and implements the EU Directive 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure (the “Trade Secrets Directive”). Prior to the passing of the Act, the Marketing Act provided the legal basis for the protection of trade secrets. Although there are some distinctions between the two regulations, their effects by and large remain the same.
The main reason for having laws that safeguard trade secrets is to protect a business’s confidential information. An important objective is to encourage innovation and development. More specifically, the rules are meant to preserve the competitive advantage a business gains from its trade secrets, to ensure that businesses compete fairly, and to protect against the breach of relationships of trust.
At the same time, Norwegian law contains a general duty of disclosure for both parties and witnesses in connection with legal proceedings. This may comprise information that contains or constitutes trade secrets. And regardless of this duty, the parties may consider trade secrets necessary to substantiate their claims or refute the opposing party’s claim. Therefore, the procedural rules for both ordinary court proceedings and arbitration are also relevant for the protection of trade secrets.
What are trade secrets?
At its core, the term ‘trade secrets’ refers to competitively sensitive and secret information that has commercial value due to being secret. 1 The term is defined in the Trade Secrets Act Section 2, as well as the Trade Secrets Directive Article 2, and entails three requirements. The information must:
(1) be secret, meaning that it cannot, as a body or in the precise configuration and assembly of its components, generally be known among or readily accessible to persons within the circles that normally deal with the kind of information in question,
(2) have commercial value because it is secret, and
(3) be subject to reasonable steps under the circumstances by the person lawfully in control of the information to keep it secret.
All ‘information’ that satisfies these requirements are considered trade secrets. There are no limitations related to the nature of the information, provided that it to a certain degree can be concretised and transferred between persons or saved to an external medium. Correspondingly, general knowledge and experiences obtained by an employee in the course of employment are exempted and are not considered trade secrets.
Trade secrets, often called ‘knowhow’, comprise information about a company’s products and production methods. A patentable invention has commercial value, and is thus a trade secret, if it is secret and reasonable steps are taken to keep it secret. However, the term ‘ trade secrets’ does not require there to be a secret recipe or an inventive merit. It includes various information about the business’s economy, and factors of importance to the business’s revenue and operations, such as customers, suppliers, employees, market conditions, and the business’s analyses, strategies and prognoses. For example, a business’s security routines have been deemed trade secrets by the Norwegian Supreme Court. 2
Appropriate steps to keep the information secret are considered taken if it is explicitly stated that the information must be kept confidential, or it is clear from the circum-
stances that such an obligation applies. This includes confidentiality clauses in employment contracts limiting access to the information on a need-to-know basis and confidentiality marking of documents.
Can you protect your business’s trade secrets in legal proceedings before the ordinary courts?
Under Norwegian law, all parties to legal proceedings have a general duty to ensure that the factual basis of the case is correctly and completely explained before it is decided on. This is referred to as the ‘duty of truth and disclosure’, see Section 21-4 of the Dispute Act. Consequently, the parties to a dispute have a duty to provide access to all evidence which is deemed necessary to ensure that the case is correctly and completely explained, provided that no exemptions apply. 3
One such exemption is parties’ and witnesses’ right to refuse to provide access to evidence or otherwise disclose information that cannot be made available without revealing trade secrets, see Section 22-10 of the Dispute Act. The reason behind the exemption is, naturally, to safeguard such information.
Nevertheless, the court may order both parties and witnesses to make evidence containing trade secrets available if, after balancing the relevant interests, the court finds it necessary to fully and correctly explain the case, see Section 22-10 in fine of the Dispute Act. This entails that disclosure must be “strongly reasoned” 4 In its assessment, the court shall consider possible consequences if the evidence is disclosed 5 , and must balance the need for secrecy against the need for correctly and completely explaining the factual basis of the case. 6
The court should take into account whether it is possible and sufficient to disclose an anonymised version of the information constituting or containing trade secrets, i.e., by redacting particularly sensitive information.7 The court may also request that a document is submitted
to the court directly, without the opposing party having access to it, before deciding on the extent of redactions. 8 By proposing redactions, the owner could consequently maintain a level of control over its trade secrets, even if the court orders that evidence is disclosed. To increase the chance of the court agreeing to proposed redactions, efforts should be made to redact only particularly sensitive information in the evidence.
The threshold for the court to order that evidence constituting or containing trade secrets is disclosed is higher when the other party is a competitor.9 This was the case in Rt 2009 1103 between the airlines Norwegian and SAS. In its ruling, the Supreme Court balanced Norwegian’s need for maintaining secrecy against SAS’s interest in information relevant for its damages claim and ordered submission of Norwegian’s accounting information but not their strategy documents.
Practicalities: Submission of evidence containing trade secrets following a court order
The Dispute Act Section 22-12 governs the procedure for the submission of evidence constituting or containing trade secrets following a court order.
First, the court shall impose a duty of confidentiality and a prohibition against the use of the trade secrets inferred by the evidence on the opposing party and all others who will gain access to the trade secrets in connection with the presentation of the evidence in the legal proceedings, see Section 22-12 (2) of the Dispute Act. This shall apply until it is stated in a binding court decision that the information is not protected as trade secrets or the information does not constitute or contain trade secrets anymore because it has become publicly known or easily available, see Section 22-12 (4) of the Dispute Act. A breach of such duty or prohibition can be sanctioned. The most common sanction would be an administrative fine, see Section 199 the Courts of Justice Act, although a criminal fine could
also be applicable, see the Criminal Act Section 209. A breach would normally also entail an infringement of trade secrets, see Section 3 of the Trade Secrets Act, which gives the owner of the trade secret a right to compensation, see Section 8 of the Trade Secrets Act. If a duty of confidentiality on information is repeated in the reasons for the court’s judgment, these parts shall be left out of public transcriptions of the judgment. 10
Further, the court may decide that the oral hearing of the evidence shall be held in camera , see Section 22-12 (3) of the Dispute Act, as opposed to publicly, which is the main rule. This is generally the most efficient way to secure that the imposed duty of confidentiality is upheld. To ensure that as much of the hearings as possible can be held publicly and to limit the practical hurdles of closing the doors to the courtroom (physically and virtually), the court and the parties should strive to allocate separate parts of the proceedings to present evidence containing or constituting trade secrets.
Section 22-12 (3) and (4) of the Dispute Act implement Article 9 of the Trade Secrets Directive. Pursuant to this provision, at least “one natural person from each party” shall have access to a submitted document containing trade secrets. This means that the court may not exclude the other party from the hearing of such evidence in camera, see EFTA Court case E-11/23, para 41. 11
What are the pros and cons of arbitration in terms of protecting your business’s trade secrets?
Due to inter alia its private and confidential nature, arbitration is often thought to be the preferred solution for trade secrets disputes. Another reason is the possibility of selecting specialised arbitrators with relevant competence in a field of law that demands a certain level of legal and/or technical expertise. However, while the confidential and private nature of arbitration safeguards against third parties’ and the general public’s access to
information about the case, the opposing party in the dispute may be the exact business - or at least one of the businesses – against which you most want to protect your trade secrets. Accordingly, the applicable rules regulating production of evidence are highly relevant as well.
In the Norwegian legal tradition, most arbitrations are conducted on an ad hoc basis (as opposed to under institutional arbitral rules). These proceedings are most commonly subject to the procedural rules in the Norwegian Arbitration Act (the “NAA”), although the parties may choose to apply other sets of rules, such as the rules of an arbitral institution.
Pursuant to the NAA Section 28, the parties are responsible for substantiating their case and are entitled to present such evidence as they wish. While the NAA does not contain a provision that is directly equivalent to Section 21-4 of the Dispute Act, most Norwegian ad hoc arbitral tribunals have traditionally assumed that the ‘duty of truth and disclosure’ applies to arbitral proceedings as well. However, the NAA does not contain any specific rules on the disclosure of trade secrets as evidence, or the possibility to exempt such evidence.
As in ordinary court proceedings, the parties to a Norwegian ad hoc arbitration may request disclosure of evidence from the opposing party. The Norwegian arbitral tribunal can order submission of evidence if it finds the request substantiated. The tribunal does not, however, have the same authority as the ordinary courts in Norway to enforce such order. Nevertheless, an unfounded refusal to disclose evidence will affect the tribunal’s assessment of the evidence and, accordingly, the merits of the case. Consequently, the lack of authority to effectuate the tribunal’s order is generally not a problem, as the parties will normally voluntarily comply.
If, on the other hand, a party refuses and claims that the refusal is due to the evidence
containing trade secrets, a Norwegian ad hoc arbitral tribunal will likely look to the relevant rules in both the Trade Secrets Act and the Dispute Act to consider whether the evidence actually constitutes trade secrets and, accordingly, could be exempt before it decides whether to order submission. This conclusion will obviously be relevant to the tribunal’s assessment of the facts of the case, including the consequences of the evidence not being produced.
The NAA does not grant a Norwegian ad hoc arbitral tribunal any formal authority to impose a duty of confidentiality on the parties if evidence containing or constituting trade secrets, is disclosed. However, as we will explain further, it is generally accepted in arbitration that the arbitral tribunal can dictate the terms of disclosure of evidence, including imposing a duty of confidentiality, when an order is issued.
According to institutional arbitration rules, the arbitral tribunal will generally have the authority to order disclosure of evidence. Whether such order can be enforced, depends on the seat. Nevertheless, the parties will, as a general rule, adhere to the order due to the consequences a failure to comply with the request will have on the arbitral tribunal’s assessment of the facts, and potentially merit, of the case.
The IBA Rules on the Taking of Evidence (the “IBA Evidence Rules”) are not institutional arbitration rules. However, parties to international arbitrations frequently agree that they should be applied, and there is a broad consensus that the arbitral tribunal may apply them as guidelines even where the parties have not explicitly agreed on their application. The IBA Evidence Rules Article 9(2)(e) opens for the exclusion of trade secrets as evidence:
The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from evidence or production any Document, statement, oral testimony or inspection, in whole or in part, for any of the following reasons:
(e) grounds of commercial or technical confidentiality that the Arbitral Tribunal determines to be compelling.
There will normally be reason to exempt trade secrets from disclosure on the grounds of “commercial or technical confidentiality”, insofar as these are “compelling”. At least if the parties are European, the arbitral tribunal will likely look to the Trade Secrets Directive in its assessment of whether the evidence in question does in fact constitute or contain trade secrets, and thus should be exempt. The tribunal must then assess whether the grounds for excluding the relevant evidence are “compelling”, which means that it must balance the relevant interests and find that exclusion is “necessary”. Accordingly, the IBA Evidence Rules appear to grant the tribunal the same right that Norwegian courts have pursuant to Section 22 10 of the Dispute Act.
If an arbitral tribunal issues an order to disclose evidence related to trade secrets , it nearly always involves a protective order setting out the terms under which the information is to be shared. This will normally include some level of confidentiality.
For example, the ICC Rules 2021 Art. 22(3) states that:
Upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confi dential information.
The protective orders from the arbitral tribunal often include implementing a ‘confidential club’ or an ‘attorneys’ eyes only’ limitation (“AEO Order”). An AEO Order entails disclosure of documents to a limited group of individuals, typically the opposing party’s group of counsel litigation the matter, but not the opposing party itself or its representatives. An AEO Order will solve many of the issues that disclosure of evidence containing or constituting trade secrets otherwise may cause, as the opposing party itself will not have access to the information. Protective orders are important tools for preserving trade secrets in international arbitration.
Unlike a breach of a duty of confidentiality or
prohibition of use ordered by the ordinary courts, a breach of such duties or prohibitions ordered by an arbitral tribunal may not be sanctioned with fines pursuant to Section 199 the Courts of Justice Act. However, the breach would normally entail an infringement of trade secrets, see Section 3 of the Trade Secrets Act, which gives the owner of the trade secret a right to compensation, see Section 8 of the Trade Secrets Act.
BAHR’s view
Accordingly, we believe that the framework for handling trade secrets as evidence in both traditional Norwegian ad hoc arbitration proceedings and in international and institutional arbitration will be quite similar to the framework for handling trade secrets in legal proceedings before the ordinary Norwegian courts. There seem to be few disadvantages in arbitration, given that arbitral tribunals in some jurisdictions, including Norway, do not have formal authority to enforce orders.
However, arbitration in most jurisdictions will have the advantage that case documents, hearings, the award, and even the existence of the case, are kept confidential. 12 Accordingly, the case may fly under the radar for all others than the parties, including, importantly, business competitors of the parties in the arbitration. This increases the likelihood of maintaining secrecy.
1 HR-2023-2281-U para 23 with reference to Rt-2009-1103 para 35 and Rt-2003-1215 para 30.
2 See Rt-1998-1624.
3 See Sections 21-3 and 21-5 of the Dispute Act.
4 See Rt-2009-1480 para 28 and Rt-2003-1215
5 See Rt-1998-1624 on page 1626.
6 See Schei and others, Commentary to the Dispute Act Section 22-10, Juridika 2024 – with reference to Rt 2000 1391 and Rt 1987 420. See also Section 21-4 of the Dispute Act.
7 Schei and others, Commentary to the Dispute Act Section 22-10, Juridika 2024.
8 HR-2023-185- U para 17.
9 Schei and others, Commentary to the Dispute Act Section 22-10, Juridika 2024 – with reference to Rt-2009-1103 para 35 and Rt-2003-1215 para 31.
10 Schei and others, Commentary to the Dispute Act Section 22-12, Juridika 2024.
11 Judgment of 9 August 2024.
12 Note that, pursuant to the NAA Section 5, parties to arbitrations seated in Norway can only agree to confidentiality for each individual arbitration as and when it arises, rather than incorporating a standing agreement on confidentiality in, for example, their arbitration agreement.
About the authors
Sam E. Harris Partner
E: seh@bahr.no
M: +47 928 81 426
Sam is widely recognized as one of Norway’s most experienced dispute resolution lawyers, having served as leading counsel on several hundred legal disputes. He is admitted to the Supreme Court and specializes in construction law (both onshore and offshore) and property law. In addition, Sam has a wealth of experience in post-M&A issues, as well as disputes related to allegations of unfair business practices and broker’s fees.
Mathilde Lund Meltvedt Managing Associate
E: mamel@bahr.no
M: +47 480 01 229
Mathilde has worked in BAHR for a decade and is part of the Dispute Resolution team. Additionally, she has more than three years of experience as a deputy judge in Oslo District Court. Mathilde litigates cases before both the ordinary courts and in arbitration, and her portfolio consists of a broad range of cases within the fields of contract law, company law and liability. Recently, she conducted a complex and comprehensive trade secrets case before the Court of Appeal, where the proceedings lasted for two weeks. The judgment has been appealed to the Supreme Court by the opposing party.
Emily Firing-Toften Senior Associate
E: emifi@bahr.no
M: +47 918 30 215
Emily specializes in dispute resolution and intellectual property and litigates cases before both the ordinary courts and in arbitration. Her portfolio consists of a broad range of cases within the fields of, inter alia, contract law and intellectual property and she has practical experience with protection of trade secrets in the ordinary courts. In 2023, Emily litigated in one of Norway’s largest recent cases, where BAHR represented a pharmaceutical company in a multi-billion international arbitration under the SCC rules relating to an earn-out dispute.
Contact us
Jan B. Jansen Partner
E: jbj@bahr.no
M: +47 934 94 306
Atle Skaldebø-Rød Partner / Head of Dispute Resolution
E: atska@bahr.no M: +47 922 87 727
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