Are Norway’s residency requirements for board members unlawful?

Norwegian company law imposes restrictions on the amount of board members and leading employees residing outside the European Economic Area. Now, the surveillance authority of the European Free Trade Agreement is taking Norway to court, arguing that these requirements constitute a breach of the European Economic Area Agreement.

Norwegian company law contains several provisions designed to ensure representation of citizens from countries within the European Economic Area (“EEA”) in boards and leading positions. The most important provisions are:

• Public limited liability companies: The general manager, at least half of the board members and at least half of the members of the corporate assembly must reside in an EEA state.

• Private limited liability companies: The general manager and at least half of the board must reside in an EEA state.

• Financial institutions: The general manager, at least half of the founders and at least half of the board members must reside in an EEA state.

The EEA Agreement is entered into by three of the four countries partaking in the European Free Trade Agreement (“EFTA”): Norway, Liechtenstein and Iceland. The EEA Agreement grants access to the internal market of the European Union, and entails e.g. free flow of goods, services, people and capital between the partaking states.

Since 2014, the EFTA Surveillance Authority (“ESA”) has been in correspondence with Norway regarding the EEA residency requirements in boards and leading positions. ESA has argued that the requirements constitute a breach of the EEA Agreement. Companies in other states with more lenient requirements regarding board composition and leading employees will have to change the composition when establishing themselves in Norway. Thus, the Norwegian requirements impose restrictions on the establishment of subsidiary companies by companies established in another EEA state. ESA therefore argues that the freedoms of movement for workers and establishment are hindered.

Through the ongoing correspondence, Norway has expressed that there will continue to be certain residency requirements in Norwegian company law. On 11 December 2019, ESA decided to bring the matter before the EFTA Court.

In our experience, there is no doubt that the requirements have real and practical implications on the establishment of subsidiaries in Norway. Time will tell if the residency requirements in Norwegian company law constitutes a breach of the EEA Agreement.