Legal Briefing

Considerations for arbitration in Denmark

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Disputes | 15 October 2019

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With its population of just over 5.8 million, Denmark is home to powerhouses such as Mærsk, Carlsberg, Vestas and Novo Nordisk, and provides a welcome environment for arbitration – legislation and judgments are supportive, its legal approach bridges common and civil law, and the Danish Institute of Arbitration delivers a succinct and cost-effective means of resolving disputes. Additionally, Denmark tops global rankings regarding the rule of law, sustainability and lack of corruption.

Denmark is a New York and UNCITRAL jurisdiction

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards came into force in 1973 in Denmark and, in common with 110 other jurisdictions, Denmark’s Arbitration Act is based on the UNCITRAL Model Law on International Commercial Arbitration. The Danish Arbitration Act was adopted a year before the 2006 UNCITRAL amendments, and so these are not applied. However, the Act highlights Nordic efficiency by, for example, removing the option for an interpretation of the award – only requests for correcting errors or for an additional award can be made under s33 of the Danish Act.

There has been discussion on updating the law. In 2017 there was a report that suggested changes to the Act, such as:

  • granting only one court jurisdiction regarding arbitration cases (namely the Maritime and Commercial High Court);
  • limiting the parties’ ability to appeal arbitral decisions made by the courts; and
  • allowing interim measures issued by the tribunal to be enforceable.

The suggestions are yet to be implemented. This may be because the Danish courts’ pro-arbitration judgments can be seen to counter any urgent need for a legislative change.

Pro-arbitration judgments

Danish court judgments demonstrate a clear understanding and support of arbitration. For instance, the Danish courts have confirmed that prior appointments by one party or published general opinions may not in themselves restrict an individual from acting as arbitrator. Similarly, the courts have affirmed that a subrogated insurer is bound by arbitration agreements that apply to the insured. In addition, the Supreme Court has ruled that s37 of the Danish Arbitration Act is an exhaustive list of reasons for which an award may be set aside. Specifically, the Supreme Court stated that a tribunal’s incorrect use of legal rules or incorrect factual assessment are not enough to set aside an award, unless manifestly contrary to public policy.

Nonetheless, the Danish courts are not indulgent. The Supreme Court highlighted that parties’ agreement is the foundation of arbitration, by finding that a claim could not be arbitrated because the relevant arbitration clause had excluded such a claim.

The Danish legal system is a mixture of common and civil legal traditions

Common law lawyers are known for their oral advocacy skills, which can be advantageous during arbitral hearings. Owing to the Danish principle that court proceedings should be oral to the widest extent possible, Danish lawyers are also generally practised in advocacy, such as when pleading their cases and examining witnesses.

However, the Danish courts follow a more civil law approach when it comes to document production. Disclosure is not automatic and the courts have refused fishing expeditions as well as document requests where the facts, which the requested documents were intended to prove, had not been specified.

With the consequences of Brexit uncertain at the time of writing, Denmark could benefit owing to this mix of common and civil law, alongside its pro-arbitration stance.

The DIA is efficient and cost-effective

The Danish Institute of Arbitration (DIA) was established in 1981 and has a dedicated secretariat to administer disputes. Its rules reflect the ICC’s, for example both scrutinise awards. However, the DIA differences allow for a shorter and more flexible procedure, with the statement of claim being the first submission (not the request) and there is no need for terms of reference. The DIA also aids enforceability by making it mandatory to provide minutes of meetings and for the chair/sole arbitrator to have a law degree. Moreover, the DIA is more cost-effective than larger institutes, often coming in at less than 70% for arbitration costs.

Innovative and top ranking

Lastly, Denmark is innovative when it comes to what businesses look for. Its Maritime Law Association contributed to the establishment of the Nordic Offshore and Maritime Arbitration Association (www.nordicarbitration.org), which streamlines the UNCITRAL Arbitration Rules and provides guidance on how to manage proceedings. Being open to innovation is also a factor that allows Denmark to lead globally when it comes to the rule of law, sustainability and lack of corruption. It ranks first in the World Justice Project’s Rule of Law Index, Sustainable Development Report’s SDG Index and Transparency International’s Corruption Perceptions Index.

Conclusion

Denmark provides opportunities and services for disputes of any size, including those of an international nature, not least because of its experienced and supportive legal system, its common/civil law approach and the Danish Institute of Arbitration’s provision of efficient and cost-effective proceedings. Its number-one rankings in the rule of law, sustainability and lack of corruption are also reassuring for businesses.

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