4 The Ministry’s assessment

4.1 Establishment of the new state body

The Ministry subscribes to the recommendation of the interim board that the new state body should be established as a company, and agrees that the lending activities should be administered in accordance with commercial principles.

The Ministry has considered which of the forms of company (state-owned limited liability company, state-owned enterprise and state-owned company established through special statute) is most appropriate for the body. In the view of the Ministry, this would be the limited liability company form (see below). It is therefore proposed that a new state-owned limited liability company called Eksportkreditt Norge AS be established, and that the company shall be responsible for managing a state scheme for financial services in connection with Norwegian export of capital goods and services.

When the new state body is established as a limited liability company, it will follow from the form of the company that the statutory liability for the company’s activities will in principle lie with the company and not with the state as owner. However, the Ministry proposes that the state, shall be liable for the obligations incurred by the company in connection with the lending activities, but not obligations incurred in association with operation of the company. The state will not otherwise be liable for the company’s obligations beyond the subscribed equity. The liability of the state, is further explained in 4.5, below.

Following the statutory amendments concerning state-owned enterprises in 2003, there are no longer any differences between state-owned enterprises and state-owned limited liability companies. However, the limited liability company form is more well known both in Norway and in other countries. In the case of the new company, this may be advantageous, since the company will to a large extent operate internationally, where its business associates may need to clarify the company’s legal status.

The advantages associated with the well known limited liability company form also contraindicate establishing the company as a state-owned company through a special statute. The Ministry refers to the white paper, Report No. 19 (2008–2009) to the Storting, where it is stated that state-owned companies should only be established through special statutes when there are special grounds for doing so.

Owing to the company’s organisation as a separate limited liability company, the minister responsible for administering the ownership will only have authority to issue instructions via the general meeting. This authority to issue instructions will not be used to issue directions on individual matters associated with specific loans.

4.2 The need for separate statutory regulation of the company

It is proposed that the company be established as a limited liability company, cf. 4.1, above. This means that the general provisions of the Limited Liability Companies Act will in principle apply to the company in addition to the special provisions of sections 20-4 to 20-7 of the Limited Liability Companies Act, which apply to limited liability companies where all the shares are owned by the state (state-owned limited liability companies) and with the exceptions provided by statute.

In the view of the Ministry, the purpose of the establishment of the company and further rules concerning the company’s activities should be provided by statute or by regulations issued pursuant to statute. A proposal is therefore submitted for a separate Act relating to Eksportkreditt Norge AS. Establishment of the company by law will also be necessary out of regard for the rules concerning public procurements (see section 3 of the Bill and the comments to this section).

On this basis, it is the Ministry’s view that it would be most appropriate for the Act, with one exception, to include exceptions from other legislation that shall apply to the company (see below).

The company is to be established by the state and be wholly owned by the state and its purpose is to be the management of a state scheme for financial services to Norwegian export of capital goods and services based on funds provided by the state. It may therefore be questioned whether the company must be deemed a public enterprise, and therefore subject to statutes regulating such activities. In order to avoid any doubts concerning this, the Ministry proposes that it be provided in the Act that a number of public law statutes regulating public activities shall not apply to the activities of the company. This concerns the Public Administration Act, the Civil Service Act, the Civil Service Disputes Act and the Archives Act, cf. section 8 of the Bill and the comments to this section below. The Ministry further proposes that the Freedom of Information Act shall not apply to the company since the company’s activities will to a great extent be associated with commercial activities. The Government will submit a Bill proposing amendments to the regulations issued pursuant to the Freedom of Information Act providing that the Freedom of Information Act shall not apply to the company, and this exception is therefore not regulated in the Act relating to Eksportkreditt Norge AS.

It is also proposed that it be made clear that the Financial Institutions Act will not apply to the company’s activities, cf. section 8 of the Bill and the comments to this section. Since it is the state, that is to finance the lending and since the loans will be recorded in its balance sheet, it is the Ministry’s view that the Financial Institutions Act should not apply to the company’s activities.

4.3 Regulation of the company and of the activities of the company

In connection with the establishment of Eksportkreditt Norge AS, the state has several roles. By means of the Act, the state as legislator provides the overall public law framework for the company’s activities. This is done partly by means of specific provisions of the Act concerning the company’s activities and partly by means of exceptions from other Acts.

Besides its legislative function, the state also has the role of public administrative authority in connection with the implementation of the OECD “Arrangement on Officially Supported Export Credits” in Norway. Not all aspects of the implementation must necessarily be provided by statute, and a number of provisions concerning detailed aspects may in particular be more appropriately provided in other ways.

By means of the bylaws laid down by the general meeting, the state (Ministry of Trade and Industry) as owner of the company establishes the overall private law framework for the company’s activities. The present provisions must lie within the framework of public law. Pursuant to statutes and bylaws, further company-internal guidelines, procedures and instructions are provided by the executive bodies of the company. The activities of the company will be specialised and complex, and it is aimed to appoint a board with a high level of expertise within the company’s sphere of action, which will be able to establish detailed provisions for sound and efficient operation of the undertaking.

The state is the source of financing for operation of the company by means of an annual National Budget allocation. The company is to have no income from commissions or interest on loans.

Finally, the state, as owner of the funds to be used for lending, has the power to provide further provisions concerning the use of the funds. This will occur in the normal manner through letters of assignment and annual Budget Propositions, etc.

4.4 Budgeting, accountancy and audit

Eksportkreditt Norge AS will manage the state export financing scheme on behalf of the state. This will normally be effectuated by entering into agreements in its own name at the expense of the state, concerning officially supported export credits in accordance with international agreements or alternatively by providing loans on market terms. The company will take responsibility for the whole process associated with sale and promotion, processing of applications, and granting, disbursing and following up loans.

It is planned that the company’s operating costs will be covered through annual budget allocations. The operational support is to reflect the level of activity, so that the company has an adequate administrative budget to enable it to serve its customers in a swift and professional manner.

Loans are to be recorded in the government balance sheet. The state will thus bear all risk associated with lending activities. All loans are to be guaranteed either by state export guarantee institutions or by financial institutions, pursuant to established rules. The state will bear any loss resulting from failure of guarantors to meet their obligations and the inability to realise sufficient value from any securities that may have been furnished. In its management of the scheme, the company shall seek to limit the risk of the state. The Ministry will provide guidelines for management of the scheme, including risk management.

All loan applicants who meet the requirements will be offered loans. It is planned that the company will be authorised to draw on the state’s account at Norges Bank (the Norwegian Central Bank), and loans will be disbursed via the consolidated accounts scheme of the central government. Payment of instalments, interest and other income by customers will also be made directly to the public treasury by means of the consolidated accounts scheme. Further specifications concerning the accounts of the loan scheme and concerning reporting to the central government accounts will be laid down by the Ministry in consultation with the Ministry of Finance.

The company is to operate market-based pricing of the market loans. When offering loans, the interest must minimally reflect the state’s borrowing rate with the addition of a margin so that the final level of interest corresponds to the market rate of the private market concerned.

The company is not to carry out hedging transactions in the market on behalf of the state beyond the guarantee of loans, and shall not practise asset management. The company will be required to provide loans in different currencies and with different interest-rate structures and maturities. For practical reasons, there may be a need for liquidity in foreign exchange accounts associated with lending activities in the most used currencies (first and foremost, USD and Euro). Deposits are to be kept to the minimum necessary to ensure the purchase of currency without affecting the rate of Norwegian kroner.

In compliance with normal practice for state-owned limited liability companies, the general meeting is to nominate an external auditor to audit the accounts.

The Office of the Auditor General will in the usual way audit the minister’s administration of the ownership interest in the company, Cf. section 75 (k) of the Norwegian Constitution and section 20-7 of the Limited Liability Companies Act.

Pursuant to section 9, first paragraph, of the Act relating to the Office of the Auditor General, the Office of the Auditor General will also have responsibility for audit of the loan account, including items of the appropriation account and the capital account.

4.5 Equity and the liability of the state

The company’s capacity to meet its obligations, including any responsibility for financial loss in connection with the company’s operations beyond its lending activities, is dependent on the company’s equity at any given time. Requirements regarding the amount of equity must be decided on the basis of an assessment of the risk run by the company.

The lending activities are organised in such a way that the state bears all risk associated with lending activities, and the equity of the company shall thus not reflect the extent of the lending activities managed by the company. The company will however enter into binding agreements associated with its operations and thereby be exposed to a certain risk. The equity is to function as a buffer against unforeseen events and losses associated with the company’s operations, and is a prerequisite for inspiring the confidence of the company’s contractual partners.

4.6 The relationship to state aid rules

Eksportkreditt Norge AS is to manage the state export financing provision in a manner that ensures that state aid is not provided in contravention of the EEA Agreement’s prohibition of unlawful state aid. In order to establish legal security for this, the company’s provision of market loans will be notified to the EFTA Surveillance Authority (ESA).

The Ministry cooperates with Eksportfinans ASA and external financial advisers, and conducts a dialogue with ESA, on development of a pricing strategy. This strategy involves constant market-based pricing to ensure compliance with the state aid rules.