200 years of law and value creation

We have a lot to thank lawyer Jens Evensen for. Together with his team in the Legal Department at the Ministry of Foreign Affairs, he formulated the sentence “The right to subsea natural resources lies with the state.”

(Ill.: Hanne Utigard)

This is the key provision in the Act relating to Scientific Research into and Exploration and Exploitation of Subsea Natural Deposits other than Petroleum Resources.

Evensen thereby secured Norway’s position as one of the richest countries in the world.

Judicially innovative

The sheer brilliance of this lay not in the formulation of the words themselves; it lay in the ability to realise the necessity to formulate them at a point in time what no-one knew what riches lay below the seabed along the Norwegian coastline.

It was also judicially innovative to realise that it was even possible to formulate an act along these lines in an international law regime where multinational oil companies were helping themselves to resources all over the world, regardless of national boundaries.

This is not the only example of judicial innovation that has secured assets and growth for Norwegian society. As the University of Oslo celebrates its 200th centenary, there is every reason to look back at the contributions the university has made in this area.

Right of reversion

A hundred years ago, Norway was about to enter its first energy fairy-tale era. The Norwegian waterfalls were to be exploited to lift the country out of poverty. Foreign investors lined up with much-needed capital for harvesting the fruits of Norwegian hydroelectric power.

Visionary lawyers and politicians established a licensing act giving the right of reversion to the state. According to established judicial practice, the state could not do this without paying compensation. However, given economic position of the state a hundred years ago, this would have meant that either Norway’s  rate of development would have been much slower or that vast amounts of public resources would have been transferred to a small group of owners of the reversion rights.

In a famous case in 1918, the Supreme Court found a solution that secured reversion rights in the way that the Storting (Norwegian parliament) had adopted them. Investors could thus make returns on their investments, but the resources remained in public ownership.

Strict liability

Industrialisation and the technological developments that paved the way for it created new dangers and risk factors in Norwegian society. Chemical companies exploded, railway lines cut through the countryside spewing out sparks, and cars drove into plate glass windows and ran people over.

Under established law there was no compensation to be had unless the party responsible was found to be at fault. But who was at fault in the case of technical deficiency or failure?

Lawyers at the university and in the Supreme Court established the principle of strict liability, thereby laying the basis for a social placement of financial risk and for the development of our insurance and social welfare schemes.

Control of competition

The first half of the 20th century witnessed the emergence of a new trend of trusts, monopolies and dominant large-scale enterprises at both local and regional level.

This was also a period characterised by frequent, and in some cases serious, financial crises. It was under these circumstances that the lawyer Wilhelm Thagaard developed what would later form the basis for 60 years of competition policy and market control.

The obligation to report was introduced to control concentrations in the market and to regulate prices in order to counteract bankruptcies and high-cost periods.

The historian Harald E Espeli writes that this comprehensive reporting obligation for restrictive competition practices was a regulatory innovation that helped to lend a distinctive character to Norwegian competition policy and competition management for many decades. Price and competition regulation formed the basis for the Norwegian welfare state as we know it today.

Banking Law Commission

We do not need to go so very far back in time. Due to the increasing significance which the supply of capital acquired in the latter half of the previous century, our mortgage and debt legislation became hopelessly obsolete.

In order to obtain credit, businesses had to pledge their means of production and goods to the bank, and consequently derived little benefit from them. New forms of credit such as reservation of ownership, leasing and factoring, which made it possible to raise capital on the basis of accounts receivable, became necessary, but were hindered by outdated laws.

In a series of arbitration decisions, lectures and legal articles and books, law professor Sjur Brækhus eyed the possibilities and outlined the solutions. Companies could thus utilise assets which would otherwise be tied up as ‟dead” capital in new and productive business. In recent decades, law professor Erling Selvig, as head of the Banking Law Commission, lay the foundations for our modern capital and credit markets.

National legal expertise is needed for making the Norwegian regulatory system one of the best in the world and for seeing and exploiting the possibilities that exist in an increasing globalised world.

Indigenous rights

One of the biggest issues in recent history has been the distribution of rights in the northern counties and acknowledgement of the rights of the Sami people as an indigenous population. The problem of indigenous populations poses a challenge to established states in most parts of the world, and securing the rights of indigenous populations is a key issue in both the development and exploitation of natural resources.

In Norway, lawyers such as Carsten Smith and Kirsti Strøm Bull have played a key role. Strøm Bull’s legal history of rights in Finnmark has been fundamental to both the work on the Finnmark Act and to the work that is carried out by the Finnmark Commission on examining existing usage and ownership rights which people in Finnmark have acquired on the basis of prolonged use.

Lawyers from UiO

In the examples mentioned above – and in many others – lawyers who have studied and worked at UiO’s Faculty of Law have contributed to development, value creation and the securing of assets for Norwegian society.

In many cases it is the politicians who drive issues forward and see to it that the necessary decisions are made. But politicians, business people and civil servants are all dependent on skilled lawyers who are able to see when judicial innovation is needed, what is possible to achieve, and outline alternative solutions.

Technical innovations and development are vital to the welfare of a population, but they become infinitely more valuable in a society that has control of its resources and that has well-functioning markets and administrative systems. UiO has educated the country’s talented and innovative lawyers for 200 years, and will continue to do so for the next 200 years.

By Professor Hans Petter Graver, University of Oslo, Dean, Faculty of Law
Published Oct. 27, 2011 12:46 PM