Writing exclusively for Brussels Report, Prof. Dr. Dr. h.c. Carl Baudenbacher, President of the EFTA Court between 2003 and 2017, where he served as a judge from 1995 to 2018, issues scathing criticism on the EFTA Court, a supranational judicial body responsible for the three EFTA member states that are also members of the European Economic Area (EEA): Iceland, Liechtenstein and Norway. Nowadays, he is an independent consultant and arbitrator as well as a senior partner in Baudenbacher Law, Zurich.
By Prof. Dr. Dr. h.c. Carl Baudenbacher
On 30 June 2021, the EFTA Court issued two advisory opinions in Cases E-15/20 Criminal proceedings against P and E-13/20 O v The Norwegian Government, represented by the Labour and Welfare Directorate. Both cases concerned the Norwegian welfare scandal (“NAV” disgrace). University of Oslo European Law Professor Tarjei Bekkedal has described this as Norway’s “worst legal scandal since World War II”. The first of the two rulings concerned a man sentenced by the Oslo District Court to five months in prison for staying in Denmark and Spain while receiving unemployment benefits. It was referred to the EFTA Court by the Borgarting Court of Appeal. The second one concerned a person who had to repay money after staying abroad. It was referred to the EFTA Court by the Norwegian National Insurance Court.
In previous NAV cases involving the export of sickness and work clearance benefits, the EFTA Court held in May 2021 that the fundamental freedoms of movement enshrined in the EEA Main Agreement applied. This was in line with the NAV landmark ruling of 20 March 2013 in Case E-3/12 Jonsson . However, in the two opinions of 30 June 2021, the EFTA Court found that the EEA Main Agreement was irrelevant when it came to unemployment benefits. In these cases, only the rules of the Social Security Regulation would apply, i.e. EEA secondary legislation. The Norwegian State was acquitted of the charge of having acted unlawfully in these cases. The Norwegian Government Attorney expressed satisfaction . On the other hand, leading Norwegian professor of international law Mads Andenæs criticized the rulings which flatly disregard established EFTA Court case law as “a bit of a dog’s breakfast”.
Protecting States at the expense of citizens and economic operators
The two rulings are the latest low point in a development that began in early 2018 when the Icelander Páll Hreinsson became President of the EFTA Court. Since then, the EFTA Court has taken an overly friendly stance towards the Norwegian State at the expense of citizens and economic operators.
In Case E-8/17 Henrik Kristoffersen, the Norwegian Ski Federation (NSF) had refused to allow one of its most prominent athletes to sign an individual sponsorship agreement with Red Bull that would have covered helmets and headgear. Instead, Mr. Kristoffersen was told that he would have to use the logo of the federation’s main sponsor, Telenor. The European Commission argued that, from a proportionality point of view, it should be considered whether the federation rules could be replaced by less restrictive but equally effective means. A system could be set up whereby each athlete would pay a contribution from their individual earnings into a solidarity pool of the federation. The EFTA Court remained silent on the issue of less restrictive means. In other words, it failed to conduct a proper necessity test, contrary to decades of established case law. As a result, Mr. Kristoffersen lost in the Oslo District Court. The Norwegian Ski Federation and the Norwegian State prevailed.
In the Fosen saga, the EFTA Court fixed a trial in a way that few people could have imagined in a Western, so-called rule of law jurisdiction. On 31 October 2017, the EFTA Court – with the participation of the current Icelandic Chief Justice Benedikt Bogason, who replaced the ailing Hreinsson ad hoc – ruled in Case E-16/16 Fosen-Linjen that a simple violation of European procurement law can in itself be sufficient to trigger a contracting authority’s liability for damages. I was President and Judge Rapporteur in this case. The decision was in line with the legal situation in Iceland, Germany, Denmark, Switzerland and other states, but not with the much more state-friendly case law of the Supreme Court of Norway. The referring Court of Appeal of Frostating was urged by two Norwegian professors not to follow the EFTA Court’s opinion. The Court of Appeal did so without any meaningful reasoning, thus violating not only its duty of sincere cooperation under the EEA Agreement, but also the Finanger jurisprudence of the Supreme Court of Norway, according to which EFTA Court opinions carry “substantial weight” (“vesentlig vekt”). In April 2018, I stepped down from the EFTA Court. Páll Hreinsson was the new President. Fosen-Linjen AS took the case to the Supreme Court of Norway, which was invited by Norwegian EFTA Court Judge Per Christiansen (who had already participated in the ruling of 31 October 2017) to refer the matter again to the newly composed EFTA Court. Mr. Christiansen flew to Oslo to personally deliver the message to the Norwegian Chief Justice Toril Marie Øie. The Supreme Court of Norway followed this wish, although none of the parties had filed a request for referral. President Hreinsson then indicated in a newsletter that he would vote against the first Fosen judgment and allow the Norwegian courts to revert to the legal situation which had existed in Norway before. He was clearly biased. Numerous other procedural rules and fundamental rights were violated in the course of the proceedings. The decision which acquitted Mr. Hreinsson from the accusation of bias lacks any reasoning and was kept secret by the EFTA Court. There was talk in the Norwegian press of a “Kangaroo Court”. Fosen-Linjen inter alia asked Mr. Hreinsson to step down from the case for bias. In the end, Mr. Hreinsson sat and the first Fosen verdict was overturned, so to speak, in an opinion that must be described as invalid. Unsurprisingly, the Norwegian State Attorney was “very pleased ” with this result and the Supreme Court of Norway was happy to uphold its state-friendly case law which privileges sloppy work of bureaucrats and thereby creates moral hazard.
The consequences of opening Pandora’s box quickly became clear. In Case E-8/16 Netfonds , the EFTA Court held on 16 May 2017, that Norwegian rules and practices governing the ownership of Norwegian market participants at the time of their application for authorization as a bank or insurance company were incompatible with the freedom of establishment guaranteed by the main EEA Agreement. Both the Oslo District Court and the Borgarting Court of Appeal in March 2021 ignored the EFTA Court’s opinion. The Norwegian State Attorney was delighted . To make matters worse, the competent Supreme Court panel decided not to allow an appeal rendering obsolete the “substantial weight” jurisprudence. This way of dealing with an EFTA Court opinion is incompatible with the duty of sincere cooperation laid down in Article 3 EEA. It opens the door for any national court to ignore the rulings of the EFTA Court as it wishes. This high-handed action by Norwegian courts was enabled by the loss of reputation of the EFTA Court caused in the Fosen debacle. And yet, the State Attorney was also overjoyed in this case. As in the other cases described here, the State Attorney had succeeded in enforcing its unlawful concept of the alleged “room for manoeuvre for Norway”.
There are more cases where the Hreinsson EFTA Court has done favours to the Norwegian State or state-owned enterprises at the expense of citizens and economic operators. In E-12/20 Telenor v EFTA Surveillance Authority, the largest competition law case in the history of the EFTA pillar, the leading Norwegian telecommunications operator Telenor, which is 54% state-owned, was fined €112 million by the EFTA Surveillance Authority (“ESA”) for abuse of a dominant position. Mr. Hreinsson sees no issue in the fact that one of Telenor’s legal representatives is at the same time a Norwegian ad hoc judge on the EFTA Court. He moreover appointed the Norwegian EFTA Court judge, long-time former Oslo bureaucrat Per Christiansen, as Judge Rapporteur in the matter. I am not saying that Mr. Christiansen is biased in the Telenor case. But a President of a European court should avoid any appearance of bias at all costs. The Liechtenstein Judge Bernd Hammermann would have been a natural choice.
One may assume that the Hreinsson EFTA Court would have rendered the same kind of favours to the Icelandic Government had the occasion occurred. However, the Icelandic courts, which in the past referred some of the most important cases to the EFTA Court and loyally implemented its rulings, practically stopped sending cases to Luxembourg since Mr. Hreinsson became President. Norwegian courts, on the other hand, are referring like hardly ever before. Unlike the Icelandic judiciary, Norwegian courts are sensitive to political signals and in critical cases tend to rule in favour of the State. From this perspective, their attitude is understandable.
Another unfortunate incident occurred in Case E-1/19 Andreas Gyrre. The EFTA Court delivered an unfinished “advisory opinion” on Saturday, 14 December 2019, at 6 pm. Parties and participants (who were residing in Norway and Brussels) were invited to the delivery of the opinion (on a Saturday night!) with 32 hours’ notice. For obvious reasons, they were unable to attend. On Sunday, 15 December 2019, EFTA Court legal secretaries added reasons to the unfinished draft and on Monday, 16 December 2019, the opinion was uploaded on the EFTA Court’s website. According to Article 32 of the Court’s Statute , judgments “shall state the reasons on which they are based”. Under Article 33, judgments “shall be read in open court”. The Andreas Gyrre ruling is this clearly invalid because when it was delivered in open court there were no reasons and when the reasons were there it was not delivered in open court. On 18 December 2019, the Christmas recess of the EFTA Court started. It appears that this carnivalesque intermezzo had the aim of ensuring that Mr. Hreinsson could leave Luxembourg early for the Christmas holidays.
A friendly helper of his Government
Finally, President Hreinsson is regularly working for the Icelandic Prime Minister’s Office, one would expect for a fee. In the fall of 2020 he wrote an expert opinion for this office on the legality of restrictions on fundamental rights in the COVID pandemic. The relevant fundamental rights are part of EEA law. The opinion is perfunctory, but it effectively gives the government carte blanche.
Mr. Hreinsson’s friends tend to be content with the implication that he would have to recuse himself in a future COVID-19 EFTA Court case. This conclusion is obviously incorrect. The favourable COVID-19 opinion commissioned by the Icelandic Prime Ministers Office is not an isolated incident. Mr. Hreinsson systematically works for the Icelandic head of government. In 2019 and 2021, he published two books, one with the title “Skýrsla um sjálfstæðar stjórnsýslunefndir” (Report on independent administrative committees) and another one with the title “Dómstólar og stjórnsýslunefndir ” (Courts and administrative committees, with Kristín Benediktsdóttir). Both books bear the official mark “Publisher: The Prime Minister’s Office; Layout and word processing: The Prime Minister’s Office” and are presented on the Government’s website.
One needs not to have gone to law school to understand that a judge acting as an expert for a Government which is regularly a party or participant before his court is in a continuous conflict of interest. The question poses itself how this impacts the judgments that Mr. Hreinsson has participated in.
Article 30(1) ESA/Court Agreement states:
“The Judges shall be chosen from persons whose independence is beyond doubt and who possess the qualifications required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognized competence. They shall be appointed by common accord of the Governments of the EFTA States for a term of six years.”
This provision was given interpretation in Case E-21/16 Nobile. The Norwegian EFTA Court Judge Per Christiansen had, after having completed his first six years term, been re-appointed by the EFTA Governments for an abridged term of office of three years, in violation of the mandatory provision according to which a Judges’ term must last six years. The EFTA Court concluded in a decision of 14 February 2017 that if such a Judge participated in a case, the Court would not be lawfully composed. Ironically, Mr. Hreinsson was Acting President in this case. A presidential order of 20 February 2017 was based on the same rationale.
Will the EFTA Surveillance Authority finally do something about it?
The lack of independence is a much more serious flaw than the fact that a Judge is appointed for only three years. Moreover, unlike Mr. Christansen in 2016, Mr. Hreinsson himself has chosen, of his own free will, to bring himself in a state of dependence and partiality. The validity of any ruling in which Mr. Hreinsson has participated can thus be challenged. Similar conclusions concerning the consequences of the unlawful composition of a court were drawn by the European Court of Human Rights in the Icelandic case Ástráðsson (application no. 26374/18) and in the Polish case of Xero Flor (application no. 4907/18). The same idea underlies the case law of the Court of Justice of the European Union.
When the three EFTA Governments re-appointed Mr. Christiansen for an abridged term of three years, ESA opened infringement proceedings against them. It appears that the three EFTA Governments were well aware of Mr. Hreinsson’s activities as the Icelandic Government’s favourite expert when they decided to re-appoint him for a further term of office in December 2020. The Icelandic Government in particular had not been unmindful of the Fosen scandal, and it appears to have been controversial within the Cabinet whether to re-nominate Mr. Hreinsson. Apparently, it was his willingness to work for the Prime Minister’s Office that tipped the scales. It is thus to be expected that ESA will a fortiori take action in this case. The initiation of infringement proceedings is all the more indicated as the top echelons of the Icelandic government have taken the position that EFTA Court President Hreinsson working for them is normal.
This is also of relevance to the EU and to the EEA as a whole. An EFTA Court that fails to function properly jeopardizes the two-pillar model of the EEA. The former Minister of Justice of Iceland Björn Bjarnason has rightly recognised this in the context of the Hreinsson case. One of the already existing examples is how the NAV scandal has deprived EU citizens of their rights.
The fact that President Hreinsson’s paid extensive extra-judicial activities in favour of a government which is on a regular basis a party to EFTA Court proceedings may also explain why the Court’s procedural duration has significantly increased in the last three and a half years. It may furthermore account for the fact that the EFTA Court, which is by no means overburdened, has effectively abolished the Report for the Hearing in advisory opinion proceedings—an important instrument for creating transparency and securing democratic control. On top of that, there’s the issue that the reasonings of the judgments are generally of poor quality.
Unusual circumstances require unusual actions. I am aware that it is exceptional for a former President of a European Court, now in private practice, to comment in such a way. But as the French existentialist philosopher Jean-Paul Sartre wrote: “Every word has consequences. Every silence, too.”