Information directed towards Financial Institutions

We refer to the Local Government Act § 60 ”State review and approval of financial obligations,” which came into force on 01.01.2001.

The purpose of this document is to describe the consequences of the new legislation for financial institutions.

This document is organized as follows:

• General information about the new legislation
• The changes in the legislation
• The reliability of the register

General information about the new legislation

The Local Government Act § 60 nr.1:

Any resolution to raise a loan or any resolution to enter into a long-term contract for the renting of  buildings, installations and permanent operating equipment that may cause the municipality or the county municipality to incur expenses extending beyond the next four budget years is not valid until it has been approved by the Ministry, if:

a. the municipal council or the county council has resolved to adopt an annual budget where the budget does not provide cover for all expenses,

b. the municipal council or the county council has resolved to adopt a finance plan where the finance plan does not provide cover for all expenses,

c. the municipal council or the county council has in pursuance of § 48(4) second sentence resolved that an accounting deficit shall be distributed over the following budget year after the accounts have been presented, or

d. the municipality or the county municipality does not follow the adopted plan for the covering of any deficit.

Municipalities and county municipalities that satisfy any of the conditions described above will become registered in a register established by the Ministry of Local Government and Regional Development. 

The changes in the legislation

Before 2001 any resolution to raise a loan was not valid until approved by the Ministry of Local Government and Regional Development (resolutions made by county municipalities) or by the County Governor (resolutions made by municipalities). According to the current regulations, the following resolutions are only subject to approval if the municipality or county municipality is registered in the Register for State Review and Approval of Financial Obligations:

• A resolution to raise a loan and financial leasing
• A resolution to enter a long-term contract for the renting of
  - buildings,
  - installations, or
  - permanent operating equipment that may cause the municipality or county municipality to incur expenses beyond the next four budget years.

Provided that the municipality or the county municipality is registered, these resolutions are not valid until approved by the County Governor or the Ministry of Local Government and Regional Development.

If the municipality or the county municipality is not registered, these resolutions will not be subject to approval, and they will therefore be valid when made by the municipal council or the county council.

The Credibility of the Register

If a municipality or a county municipality is registered in the Register for State Review and Approval of Financial Obligations, resolutions to raise loans or to enter long-term renting contracts are not valid until approved by the County Governor or the Ministry. Thus, municipalities and county municipalities must inform their co-contractors that they have been made subject to approval. Information concerning which municipalities and county municipalities that are registered, is available to any individual requesting such information. Information may be obtained at http://robek.dep.no.

Information available at http://robek.dep.no must be considered to be known by any co-contractor. A co-contractor cannot plead ignorance based on being in good faith. Regarding the register’s legal credibility, meaning to which extent a co-contractor may rely on the information provided, the register will both have positive and negative credibility. This means that information provided will be accurate (positive credibility) and complete (negative credibility).