NORWEGIAN LEGISLATION CONCERNING OWNERSHIP IN FINANCIAL INSTITUTIONS

1.Introductory comments

Reference is made to your letter of formal notice of 20 December 2000 concerning Norwegian legislation on ownership in financial institutions. The EFTA Surveillance Authority (ESA) argues that the Norwegian legislation on ownership in financial institutions is contrary to the provisions of the EEA-agreement article 40 and the EEA-rules corresponding to Council Directive 88/361/EEC (Capital Movements Directive). Secondly, ESA argues that Norway has failed to implement the EEA-rules corresponding to Council Directive 89/646/EEC (Second Banking Directive) article 11.

The Norwegian Government maintains, as also stated in the letter from the Ministry of Finance of 13 October 1999, that the Norwegian legislation on ownership in financial institutions is in conformity with applicable EEA-law. The Norwegian legislation does in our view not qualify as a "restriction" as this concept has been interpreted by the relevant courts. Even if the legislation should be deemed to constitute a restriction, it should in any case be justified under the doctrine of mandatory requirements.

In the following, the Norwegian legislation on ownership in financial institutions will be presented (section 2). Section 3 contains a presentation of previous assessments of the relationship between EEA-law and the Norwegian ownership limitations made by Norwegian authorities and the European Commission. The question whether the ownership limitations amount to a "restriction" on capital movements will be discussed in section 4, whilst section 5 considers (in the alternative) whether the limitations can be justified under the doctrine of mandatory requirements. The implementation of the EEA-rules corresponding to the Second Banking Directive article 11 will be discussed in section 6.

2.Relevant national legislation on ownership in financial institutions

Act of 10 June 1988 no. 40 on Financial Activities and Financial Institutions (Financial Activities Act) section 2-2 paragraph 1, provides as a main rule that no one may hold more than 10 per cent of the share capital in a Norwegian financial institution. This rule was based on ownership rules in the Act on commercial banks of 1961, which in turn were based on similar rules in the Act on Banks organised as Limited Companies of 4 April 1924. Thus, it can be noted that provisions governing ownership have a long history in Norwegian financial legislation.

The ownership limitations are non-discriminatory, i.e. they apply equally, or at least not more favourable, to domestic investors compared to foreign investors. This has not always been the case. Previously, it followed from the Financial Activities Act that foreigners as a group could not own more than 15 per cent of the share capital in a Norwegian financial institution. This limit was later raised to 33 1/3 per cent. This differentiated treatment of Norwegian and foreign investors was considered to be incompatible with the EEA-agreement, see St.prp.nr.100 (1991-92) page 202. Norway was given until 1 January 1995 to repeal the relevant provisions, see Annex XII of the Agreement. This was done accordingly in Act of 23 December 1994.

The legislative considerations behind the main rule (i.e. the 10 per cent limit) are primarily based on competition policy, prudential concerns and concerns for credit allocation.

First, limitations on financial institutions’ ownership in other financial institutions have been considered necessary to ensure a structure inducive of effective competition between financial institutions. In the 1988 report by the Finance Committee of the Storting on the proposal for the Financial Activities Act, it is emphasised that (Innst.O.nr.58 (1987-88) page 32):

"…the proposed ownership restrictions will counter interwoven ownership interests and stimulate increased competition. Without such a restriction, established institutions might exercise market power and restrict the establishment of new institutions." (unofficial translation)

Second, limitations on private individuals’ (i.e. other than financial institutions) ownership in financial institutions have been considered necessary to create a structure in which conflicts of interest between the role as an owner and the role as a debtor of the bank (borrower, recipient of guarantees etc) are reduced. The same applies with regard to the relationship between the bank and other debtors of the bank that have close relations (professionally or personally) with the owner. This was i.a. emphasised in the preparatory works of the Financing Activity Act (NOU 1986:5 page 134):

"Considerable private ownership might create a relationship between the financial institution and the share owner that leads to a positive discrimination of the latter in relation to other customers. The owner might i.a. be submitted to a mitigated credit appraisal. Unfortunate dispositions based on such appraisals would have negative consequences for the confidence to the financial system in general. Further, macroeconomic interests could be damaged, i.a. if deposits are lost and if capital is not allocated to the best projects." (unofficial translation)

This view was supported by the Norwegian Government in Ot.prp.nr.41 (1986-87) page 62 and in the relevant report by the Finance Committee of the Storting, see Innst.O.nr.58 (1987-88) page 32.

Third, ownership limitations on private individuals have been considered necessary to avoid a concentration of economic power. This was particularly emphasised in the preparatory works for the Insurance Activity Act in relation to insurance companies, since insurance companies as accumulators of funds may acquire large holdings of shares, real estate and other assets. In NOU 1983:52 page 53, it is stated i.a.:

"Considering the social function of the insurance companies and the capital being managed, there should be a dispersion of ownership interests." (unofficial translation)

The Storting has on several occasions confirmed their view that the ownership limitations are considered to be an important element of the Norwegian financial legislation, see i.a. Innst.O.nr. 75 (1992-93) and Innst.S.nr.287 (1996-97).

A presentation of the Norwegian ownership limitations is not complete without considering the extensive derogations in the Financial Activities Act section 2-2 paragraph 2 no. 1 to 11, which mitigate possible restrictive effects of the main rule.

The first group of exceptions (section 2-2 paragraph 2 no. 1 to 5) allows Norwegian financial institutions to hold 100 per cent of the share capital in other Norwegian financial institutions. The introduction of these exceptions was necessary to allow Norwegian institutions to form mixed financial conglomerates, i.e. groups that include both banks and insurance companies. The 10 per cent rule will in such instances apply to the owners of the holding company (whether operative or not).

A separate exception from the ownership rules is granted to foreign financial institutions, which may acquire or establish Norwegian financial institutions as subsidiaries (section 2-2 paragraph 2 no. 6). Thus, a foreign financial institution may hold between 50 and 100 per cent of a Norwegian financial institution, whilst a Norwegian financial institution is required to hold 100 per cent of a Norwegian subsidiary. The owners of foreign financial institutions with Norwegian subsidiaries are not required to fulfil the ownership limitations. One consequence of these provisions is that foreign investors have more flexibility than domestic investors in financial institutions.

In this context, it should be noted that the acquisition of a majority share holding in a Norwegian financial institution triggers separate authorisation requirements in the legislation concerning the institution or conglomerate in question. Reference is made to the Insurance Activities Act section 3-6 (insurance companies), Act on Commercial Banks section 4 (commercial banks), Financial Activities Act section 3-6 (finance companies) and Financial Activities Act section 2a-3 paragraph 2 (establishment of a Norwegian conglomerate). These provisions in the "institutional" legislation form the legal basis for the competent authorities to assess competition implications of the acquisition and whether the new owners are fit and proper. These provisions apply in principle independent of the ownership limitations. However, the ownership limitations have implications on the structures that might be given approval under the institutional legislation.

"Statens Bankinvesteringsfond" and "Statens Banksikringsfond" are two state-controlled institutions that are granted an exception from the ownership rules, see section 2-2 paragraph 2 no. 7. The exception was introduced following the establishment of these two funds as instruments for dealing with the Norwegian banking crisis. These funds became major share holders of the three largest commercial banks in 1991. The exception is further described in the letter of 13 October 1999 from the Ministry of Finance.

The exceptions in section 2-2 paragraph 2 no. 8 and 9 are of minor practical importance. The exception in no. 10 was introduced in 1999. It provides that a Norwegian or a foreign financial institution may hold up to 25 per cent of the share capital in a Norwegian financial institution, provided the ownership is part of a strategic co-operation agreement between the owner and the owned institution. Thus, the provision is a derogation from the main rule that a Norwegian institution must own either 100 per cent or 10 per cent or less of the share capital of another Norwegian institution. It is also a derogation from the rule that foreign institutions must own more than 50 per cent or 10 per cent or less of the share capital of a Norwegian institution.

According to section 2-2 paragraph 2 no. 11 the King may, in special cases, make exceptions from the 10 per cent rule. This competence of the King is delegated to the Ministry of Finance. The discretion contained in this provision is exercised on a strict basis. Exceptions are, as a main rule, only granted for a limited period of time (e.g. when an acquirer needs some time to fulfil the 100 per cent requirement). The Storting has endorsed this strict approach. In Innst. S. nr. 287 (1996-97) on the application of the rules on ownership limitation, the majority of the Finance Committee in the Storting stated i.a.:

"The majority…notes that the aim of the ownership provision in the Financial Activities Act is to secure power- and ownership dispersion in financial institutions. The majority emphasises that a consistent application of the main rule is important to attain this aim" (unofficial translation)

The Storting endorsed this statement in its resolution on the matter of 20 June 1997, where it is stated:

"The Storting presuppose a strict and consistent application of the ownership provisions in the legislation on financial institutions, in line with the comments made in Innst. S. nr. 287 (1996-97)" (unofficial translation)

It should be noted that the Norwegian Banking Law Commission, in its fourth report (NOU 1998:14) on legislative reforms for Norwegian financial institutions, did not suggest any amendments to the main structure of the Norwegian system on ownership limitations. The Commission consists of representatives of i.a. investors, customers, financial institutions and competent authorities.

3. Previous assessments of the Norwegian ownership limitations’ compatibility with the EEA-agreement

The non-discriminatory 10 per cent rule was thoroughly assessed in the EEA-negotiations. Indeed, the rule was considered of such importance that it was the subject of an explicit question from the EFTA-side in a letter of 23 October 1990 to the Commission. The question (no. 22) was as follows:

"As regards companies of a certain nature, inter alia, financial institutions, may a non-discriminatory upper limit on individual ownership be fixed, e.g. 10 per cent ?"

In the reply dated 7 March 1991, the Commission stated the following:

"Prudential considerations, for example, could be advanced for non-discriminatory upper limits on individual ownership in the financial sector. We would presume that these measures would be applied to all holdings and not just new holdings".

On the background of this clear answer, the Norwegian Government did not ask for specific derogations in the EEA-agreement to maintain the 10 per cent rule, and it concluded in St.prp.nr.100 (1991-92) that the 10 per cent rule could be maintained within the EEA.

Please find enclosed copies of the abovementioned letters.

The non-discriminatory 10 per cent rule was also assessed in St.prp.nr.100 (1991-92). On page 202 it is stated:

"Moreover, it is laid down by law that no single shareholder or group can own more than 10 per cent of the shares in a Norwegian financial institution, unless an authorisation to establish a daughter is given. This ownership restriction can be upheld within the EEA." (unofficial translation)

When assessing the consequences of repealing the discriminatory measures towards foreigners, the Norwegian Government explicitly emphasised the general 10 per cent rule when it stated (St.prp.nr.100 (1991-92) page 203):

"Against this background, the Government regards the existing legislative framework for financial institutions to give sufficient possibilities to maintain the relevant motives for regulation. The Government considers the 10 per cent ownership restriction to be of great importance". (unofficial translation)

It should be noted that St.prp.nr.100 (1991-92) was the report from the Norwegian Government to the Storting on the implication of the EEA-agreement on Norwegian legislation, and it was the document on which the Storting based its ratification of the EEA-agreement.

4. Are the Norwegian provisions a "restriction" on the free movement of capital ?
5. The concept of a capital movement

One might ask whether the concept of a "capital movement" in the EEA-agreement article 40 and the EEA-rules corresponding to the Capital Movements Directive, connotes both the transfer of funds and the underlying transaction necessitating the transfer of funds. It is presupposed in the nomenclature of the Capital Movements Directive that acquisition of shares is a capital movement. The Norwegian provisions on ownership in financial institutions regulate the acquisition of shares in such institutions. Thus, it is accepted that the EEA-rules on capital movements are relevant when assessing the Norwegian provisions on ownership in financial institutions.

The relevant EEA-rules only regulate capital movements between EEA-states, i.e. cross border movements. Thus, the relevant capital movements in the following are the acquisition of shares in Norwegian financial institutions by investors established in other EEA-states.

2. Legal assessment of whether the Norwegian provisions constitute a restriction on the free movement of capital

It is submitted that the prohibition on restrictive measures only connotes discriminatory measures. Neither the wording of the relevant EEA-provisions nor the caselaw of the European Court of Justice supports a wide interpretation of the concept of a "restriction" on capital movements. The Norwegian rules on ownership in financial institutions are non-discriminatory. Thus, the rules cannot be considered to amount to a restriction on capital movements.

Even if recent caselaw of the European Court of Justice were considered to endorse a somewhat wider concept of a restriction on capital movements, it is submitted that such caselaw in any case carries limited weight in an EEA-context. It follows from Article 31 of the Vienna Convention on the Law of Treaties, that a treaty shall be interpreted in accordance with the context in which the treaty was signed, and special weight shall be accorded to the intention of the parties. At the time of signing the EEA-agreement, it was the very clear understanding of both the EU and the EFTA-side that a non-discriminatory 10 per cent rule would be in accordance with the obligations arising from the agreement, see above. Thus, the EEA-agreement should be interpreted to allow non-discriminatory ownership limitations. This approach is considered consistent with the EEA-agreement article 6 and the Surveillance and Court Agreement article 3 (2).

In the alternative (i.a. if non-discriminatory measures were considered to be included in the concept of a "restriction" in an EEA-context), it remains to be proven that the Norwegian measures amount to a restriction. According to the caselaw of the European Court of Justice, the relevant legal test seems to be whether the Norwegian measures are "liable to dissuade" foreign investors from acquiring shares in Norwegian financial institutions, see e.g. C-484/93 (Svensson and Gustavsson), C-222/97 (Trummer) and C-439/97 (Sandoz).

When considering whether the Norwegian measures are liable to dissuade foreign investors, one must ask whether the current Norwegian system of controlling ownership in financial institutions is more liable to dissuade incoming capital movements than the alternative system that would have to be implemented in place of the current system. One cannot simply compare the current system with not having a system at all, and thus conclude that the current system is restrictive. In this context it is important to note the requirements for national provisions that follows from the EEA-rules corresponding to Article 11 of the Second Banking Directive. This article requires national legislation to require any person who plans to acquire a qualified holding (normally 10 per cent, see art. 1 no. 10) in a credit institution to inform the competent authorities of the plans in advance. The legislation shall allow Member States 3 months to assess i.a. the suitability of the person acquiring a qualified holding. National legislation shall require the same exercise to be conducted each time a person’s qualifying holding of the capital or voting rights reach or exceeds 20, 33 or 50 per cent. Further, the holder of a qualified holding must inform the competent authorities in advance each time he dispose of a qualified holding or his holding fall below 20, 33 or 50 per cent.

An identical system is laid down in relation to insurance companies in EEA-rules corresponding to Council directive 92/96/EEC (Third life assurance directive) article 14 and Council Directive 92/49/EEC (Third non-life insurance directive) article 15.

The system envisaged in the EEA-rules corresponding to the aforementioned directives presupposes a concrete assessment by the competent authorities of the suitability of the owners each time the relevant thresholds are passed. Such a system will inherently imply a large degree of discretion and corresponding uncertainty for the investors involved. Further, the investors might incur considerable costs due to the 3-month assessment period the authorities shall have at their disposal. In comparison, the Norwegian rules are based on transparent limitations, coupled with derogations to accommodate the actual need of investors. The derogations are themselves transparent. And, as outlined above, foreign investors are treated more favourably than domestic investors, as foreign financial institutions may own between 50-100 per cent.

Thus, it is submitted that the current Norwegian system is no more liable to dissuade incoming investors, than a system based on a strict application of the specified thresholds. Further, the assessment of whether a national measure is liable to dissuade foreign investors, must take account of the legal, factual and economic context in which the investor takes his decision. There are no factual or economic indications that foreign investors are dissuaded by the Norwegian ownership limitations. Indeed, foreign investors already control a number of Norwegian financial institutions. A large insurance group (Vesta) and several large banking groups (as Kreditkassen, Fokus Bank and Bergensbanken) are controlled by foreign institutions. It seems reasonable to assume that assessments of i.a. risk, future earnings and strategy were considered much more relevant than ownership limitations when these investment decisions were made, if ownership limitations were considered relevant at all.

Consequently, the Norwegian ownership limitations cannot be regarded as a restriction on capital movements.

5. Can the Norwegian measures be justified under the Treaty or under the doctrine of mandatory requirements ?
6. General

In the alternative, it is submitted that the Norwegian measures are justified even if they should be considered restrictive. Non-discriminatory restrictions on fundamental freedoms may be justified under explicit Treaty-provisions, or under the doctrine of mandatory requirements.

As it is generally recognised that the doctrine of mandatory requirements provides a wider set of available justifications than the explicit Treaty-provisions, the discussion in the following is restricted to the former.

2. The applicable legal norms

Before assessing whether or not the Norwegian provisions are justified under EEA-law, it is first necessary to identify the legal norms that provide the yardstick against which the Norwegian provisions should be assessed.

The European Court of Justice has consistently held that (as in C-55/94 Gebhard):

"National measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it".

The Norwegian measures in question are not discriminating against foreigners in law or in fact. Further, the measures are suitable for "securing the attainment of the objective which they pursue". The measures are considered important to create a structure that prevents conflicts of interest between owners and financial institutions. The prevention of such conflicts is imperative to preserve the good reputation of the Norwegian financial sector. This objective was explicitly recognised to be in the "general interest" by the European Court of Justice in C-384/93 Alpine Investments BV. In addition, it is important to avoid such conflicts of obvious prudential reasons. Further, the measures create a transparent structure in which competition concerns can be addressed. These objectives must also be considered to be in the general interest. The same applies to the objective to reduce the potential economic power of a single private investor.

In its letter of formal notice, ESA seems to question whether the Norwegian measures are proportionate, i.e. whether they go beyond what is necessary to achieve the objective pursued. Two general comments can be made on the proportionality test. First, it is irrelevant to look at what other EEA-states have found necessary to attain similar objectives. The European Court of Justice has held that "…the fact that one Member State imposes less strict rules than another Member State does not mean that the latter’s rules are disproportionate and hence incompatible with Coummunity law." (C-384/93 Alpine Investments). Second, the proportionality test is relative in relation to the freedom being exercised. ESA seems to advocate a "strict" proportionality test. However, it should be noted that the European Court of Justice has recognised that a restriction is more likely to be found proportionate when applied against an undertaking working permanently within a territory (under the freedom of establishment), than a restriction applied against undertakings working only temporarily within the territory (under the freedom to provide services), see C-76/90 Sager. This is in conformity with the Commission’s Interpretative Communication on the freedom to provide services and the interest of the general good in the second banking directive (SEC (97) 1193 Final page 24-25. It is considered more burdensome for an occasional service provider abroad to comply with different national regulations, than for an established undertaking. The same underlying reasoning applies in relation to capital movements. The "pure" capital movements (e.g. acquisitions of minor posts) are more easily dissuaded than capital movements also involving an establishment. In the latter situation, other considerations than the non-discriminatory measure in question will decide whether or not the acquisition will be made. In C-251/98 (Baars), the European Court of Justice found that a shareholder is "established" in the sense of article 43 EC (article 31 EEA) when the holding "gives him definite influence over the company’s decisions and allows him to determine its activities". The Norwegian provisions in question regulate the holding of 10 to 100 per cent of the shares in a financial institution. A shareholding in this interval might give "definite influence" over a financial institution under Norwegian law. Thus, it is submitted that the EEA-rules on establishment are relevant when assessing the Norwegian provisions on ownership in financial institutions, in addition to the EEA-rules on the free movement of capital. Such parallel application of the two freedoms have been recognised by the European Court of Justice (in C-302/97, Konle) and presupposed by the European Commission in its Communication of 19 July 1997 on intra-EU investments. This is also consistent with the pre letter of formal notice of 26 August 1999, where ESA maintained that the provisions were liable to restrict both the free movement of capital and the freedom of establishment. Thus, to the degree the Norwegian measures constitute a restriction on capital movements, they will also constitute a restriction on the freedom of establishment. Consequently, a less strict proportionality test should apply compared to a situation where only capital movements are dissuaded. This approach is also consistent with art. 58 (2) EC, under which restrictions on capital movements are allowed if they are justified under the freedom of establishment.

The "strict" approach favoured by ESA is sought justified by reference to European Court of Justice in C-54/99 (Eglise de scientologie). However, the restriction in that case applied only towards foreigners investing in France. It is settled case law that discriminatory measures are submitted to a much stricter assessment than non-discriminatory measures when is comes to justification under Community law. The same should apply in an EEA-context. Thus, it is submitted that the case referred to by ESA is irrelevant when assessing the justification of non-discriminatory measures.

The next step is to apply the relevant proportionality test on the Norwegian provisions on ownership in financial institutions.

3. Concrete assessments of proportionality

As for the objective to avoid conflicts of interest between private owners (i.e. other than financial institutions) and the financial institution in question, one could argue that a system based on the EEA-rules corresponding to the Second Banking Directive art. 11 (see above) would be a less restrictive measure to ensure the attainment of the same objective. The competent authorities could scrutinise the transactions between owners and the financial institutions on an individual basis to avoid the granting of loans or guarantees on unjustified terms. However, such an approach would fail to take account of the main purpose of the Norwegian system, i.e. to create a certain structure in the Norwegian financial markets. To maintain a requirement of dispersed ownership as a main rule has led to a structure that is inducive to creating transparency in the market, and confidence among depositors and other creditors that no single owner may use their influence to be treated favourably by the institution. Further, it has led to a sound prudential regime in which the integrity of the institutions might be maintained. A system built upon individual assessments would presuppose the use of discretionary powers in each case, which to a lesser extent would be inducive to creating the abovementioned structure. Further, it would be difficult to regulate in an exhaustive manner the numerous situations in which the owners might misuse their position vis-a-vis the institution. The personal scope of such rules might also be difficult to determine. In addition to regulating the relationship between the institution and the owner, it would be necessary to regulate the relationship between the institution and persons that to a smaller or larger extent would have a certain relationship with the owner.

Another aim of the ownership rules applicable to investors which are not financial institutions is to avoid undue concentration of economic power in private hands. Control over financial intermediaries as banks and insurance companies gives indirect control over a large amount of assets as shares and real estate. Traditionally, it has been considered unfortunate that a single private investor is given control over these assets. This has been considered especially important in a small economy as the Norwegian one. Thus, the system of ownership limitations is designed to avoid a structure in which a single foreign or domestic private investor is given control over Norwegian financial institutions.

The limitations on a financial institution to own another financial institution address i.a. competition concerns. As a general rule, financial institutions will operate in the same or neighbouring product markets. According to the Commission’s practice on merger control, the acquisition of down to 20 per cent of the shares in a potential competitor might be considered to give a "decisive influence" as defined in Regulation 4064/89 article 3 (3), and thus raise competition concerns. However, this conclusion depends on a concrete assessment in law and in fact, where i.a. the rate of participation in previous general assemblies is relevant. The Norwegian system allows foreign financial institutions as a main rule to acquire up to 10 per cent, or more than 50 per cent, of the shares in a Norwegian financial institution. Obviously, competition concerns that might occur below 50 per cent might be addressed on an individual basis by the relevant competition authorities, by assessing whether the acquirer is given decisive influence of the target company. Thus, one might argue that ownership limitations go further than necessary to address competition concerns in such cases. However, the main purpose of the Norwegian system is to create a structure in which competition concerns are addressed in a clear and transparent way. This objective would not be achieved through a system based on individual assessments of all acquisitions that might give the acquirer decisive influence. It can only be reached in a system where the acquisition either is too small to give decisive influence (i.a. 10 per cent or less), or large enough to always give such influence.

4. Conclusion

The Norwegian measures fulfil the requirements of the doctrine on mandatory requirements, as laid down by the European Court of Justice. Considering the marginal restrictive effect (if any) the ownership limitations have on incoming capital movements and considering that the capital movements in question normally amount to an establishment, it is submitted that the Norwegian ownership limitations are proportionate and do not go further than necessary to attain a sound and transparent ownership structure in the Norwegian financial markets. Further, they are non-discriminatory and suitable to attain the objective they pursue.

6. Implementation of EEA-rules corresponding to Second Banking Directive Article 11

In its letter of formal notice, ESA maintains that the Norway has failed to implement EEA-rules corresponding to Article 11 of the Second Banking Directive. It is accepted that the EEA-rules corresponding to Article 11 of the Second Banking Directive needs explicit implementation in Norwegian legislation if the ownership limitations should be considered incompatible with the free movement of capital. However, the assumption of incompatibility is rejected.

One might ask whether the EEA-rules corresponding to Article 11 of the Second Banking Directive needs explicit implementation, even if the ownership limitations are considered compatible with the free movement of capital. As a general proposition, Norway has maintained that the explicit implementation of Article 11 is unnecessary. The thresholds in Article 11 will in principle not be passed, unless the transaction is explicitly authorised by the competent authorities according to the derogations provided for in the Financing Activity Act section 2-2 paragraph 2 no. 1 to 11. It is presupposed in the preamble of the Directive (recital 9) that Member States may establish stricter rules than those laid down in i.a. Article 11. The Norwegian position is further explained in the Ministry of Finance’s letter of 20 March 2000.

7. Conclusions

On the basis of the above, the Norwegian Government respectfully submits that Norway has not failed to fulfil its obligations under the EEA-agreement article 40 and the EEA-rules corresponding to Council Directive 88/361/EEC, by maintaining the non-discriminatory ownership limitation in section 2-2 of the Financing Activity Act. Further, Norway has not failed to implement the EEA-rules corresponding to article 11 of Council Directive 89/646/EEC.

Yours sincerely,

Jan Bjørland
Director General