Disputes frequently arise in commercial contracts entered into with the Ministry of Defence or any of its subordinate agencies. Such contracts often involve complex issues, significant amounts of money, and long-lasting relationships. Litigating against the Norwegian state presents some unique challenges compared to disputes between private parties. This article examines some common features of such situations.
When a dispute arises in court, the Ministry of Defence typically handles the case, even if the contract was entered into by one of its subordinate agencies. Arbitration is usually not an option, so ordinary courts handle the dispute. Highly competent lawyers from the Office of the Attorney General are usually appointed to represent the Ministry of Defence. While court-led mediation may occur, the Ministry of Defence may be less flexible than private parties expect.
Common features of disputes with the Ministry of Defence
Commercial contracts are often negotiated, entered into, and managed by either of two subordinate agencies of the Ministry of Defence: the Norwegian Defence Material Agency (NDMA), responsible for equipping the Norwegian Armed Forces, or the Norwegian Defence Estates Agency (NDEA), which handles development, construction, operation and divestment of real estate for the defense sector. Procurement may also be handled by the Norwegian Defence Logistics Organization (NDLO), subordinated to the Chief of Defence, tasked with ensuring the Armed Forces' equipment is up-to-date and functional. The end-user, i.e. the Air Force, Navy or Army, may also be involved, on a formal or informal basis.
If a dispute ends up in court, the state, represented by the Ministry of Defence, will be formally involved, potentially taking over or becoming highly involved in the case's further handling. Dealing with different parties in court than in the underlying project can be challenging but may not necessarily be a disadvantage. Understanding the division of roles is crucial throughout the project.
Litigation – not arbitration
Like other Norwegian governmental entities, the Ministry of Defence typically does not accept arbitration as a dispute resolution method. Disputes are settled in the ordinary court system in Norway. In our experience, foreign parties may be skeptical of this arrangement, as they often prefer arbitration and question Norwegian judges' impartiality in state-run courts. In our opinion, the is little basis for such concerns. However, the state does rely on its general credibility in court, which must be navigated carefully.
Resourceful opponent
The Office of the Attorney General normally litigates civil lawsuits for the Norwegian state. They employ and are renowned for having highly competent lawyers who can dedicate ample time and resources to preparing the case without having to pay attention to time and costs in preparation. Furthermore, they are supported and assisted by the full resources of the Ministry of Defence and NDMA, NDEA or NDLO, respectively. Private parties should therefore engage equally qualified and experienced lawyers to level the playing field.
Lack of commercial approach
Court-led mediation is common in Norwegian courts, even for cases involving governmental entities. The Ministry of Defence's approach to mediation may differ from private parties', focusing more on pure process risk assessment without a pragmatic perspective than commercial considerations. Furthermore, the willingness to seek out and reach an amicable solution will often be influenced by political considerations. Private parties should be prepared for this approach as it may represent a challenge, but also an opportunity if handled properly.