Danish Supreme Court Decides on Security for Costs and Registration in the EEA

The author of this post is Johan Tufte-Kristensen who is an Associate Professor of Private and Procedural Law at the University of Copenhagen.

In a decision of 12 June 2026, the Danish Supreme Court ordered a Cypriot-registered company to provide security for costs in appeal proceedings in Denmark.

The decision concerned a question of interest in cross-border litigation, namely whether registration in a state within the European Economic Area (“EEA”) is sufficient for a company to be regarded as domiciled there under the Danish rules on security for costs.

The legal framework

Under Section 321 of the Danish Administration of Justice Act, a claimant without residence or a corporate seat in the EEA must, at the defendant’s request, provide security for any costs that the claimant may be ordered to pay to the defendant. The request must normally be made in the statement of defense, and the court may refrain from ordering security if this is justified by special reasons. If the required security is not provided, the action is dismissed.

The provision also applies, with the necessary modifications, in appeal proceedings. This follows from the preparatory works and has been confirmed by the Danish Supreme Court in an order of 31 August 2017 (U 2017.3504 H).

The proceedings

In February 2020, the claimant, who is anonymized in the accessible decision, brought proceedings against the defendants, who are also anonymized. The dispute arose from the sale of a Danish company and a French company to the claimant.

During the first-instance proceedings, the defendants requested security for costs. The district court refused the request in November 2022 on the ground that the claimant was registered and had its stated address in Cyprus, which is an EU member state. That decision was not appealed.

In February 2024, the district court dismissed the claimant’s substantive claim. The claimant appealed the decision to the High Court of Western Denmark. In their response to the appeal, the defendants requested a summary dismissal and expressly reserved the right to request security for costs if the appeal was allowed to proceed.

After the high court refused to dismiss the appeal at this preliminary stage, the defendants formally requested security in their rejoinder. The high court granted the request and ordered the claimant to provide security of DKK 150,000. The high court stated that the earlier refusal of security during the first-instance proceedings did not prevent a new request relating to the costs of the appeal.

The claimant did not provide the security within the time limit. The high court therefore dismissed the appeal in August 2025. The claimant subsequently obtained permission to appeal the decision on security to the Supreme Court.

The Supreme Court’s decision

The Supreme Court first considered whether the request had been made in time. Section 321 of the Danish Administration of Justice Act requires the request to be made in the response to the appeal, and the defendants had not made an unconditional request in that response but had merely reserved their right to request security if their preliminary request for dismissal was unsuccessful. Once the high court had decided that the appeal was to proceed, the defendants made the formal request in their rejoinder and referred to the reservation in their response.

The Supreme Court considered these statements sufficient, and the statutory time requirement was therefore satisfied.

The second question was whether the claimant had its corporate seat in the EEA, as this would prevent a requirement for security under Section 321 of the Danish Administration of Justice Act. The Supreme Court noted that the company was registered in Cyprus, but the company had been inactive for several years and had significant negative equity according to its latest available accounts from 2020. Its three owners and its director lived in Monaco. The director was also a director of a company with the same name registered in England, and the three owners had previously held shares in that English company. The claimant had not produced evidence that its management exercised its powers in Cyprus or elsewhere in the EEA, and the claimant had also declined to explain how the litigation was financed.

On that basis, the Supreme Court held that, for the purpose of deciding the security issue under Section 321 of the Danish Administration of Justice Act, the claimant did not have its corporate seat in the EEA. The Supreme Court therefore upheld the decision requiring security of DKK 150,000.

The Supreme Court did not confirm the high court’s more specific conclusion that the company’s real seat was in England. The Supreme Court merely held that, based on the available evidence, the company did not have its seat within the EEA.

Accordingly, the Supreme Court considered registration in Cyprus relevant but not decisive, as it was merely one of several connecting factors for the purposes of Section 321 of the Danish Administration of Justice Act. The claimant’s failure to provide further information also appears to have been taken into account, although adverse inference was not explicitly attributed to it.

The principle of non-discrimination

The claimant argued that treating the company as not having its corporate seat in the EEA, despite its incorporation and registration in Cyprus, would be contrary to the prohibition of discrimination on grounds of nationality in Article 18 of the TFEU. The Court of Justice has previously held that national rules on security for costs are subject to the principle of non-discrimination as set out in e.g. Case C-323/95 (Hayes v Kronenberger).

The Supreme Court did not address the argument in its reasoning.

Conclusion

The decision is narrow and specific but shows that registration in an EEA state may not, by itself, establish a corporate seat within the EEA for the purpose of Section 321 of the Danish Administration of Justice Act concerning security for costs. If the available information points to a country outside the EEA, the company may need to document, inter alia, where its management is exercised.