Norwegian Supreme Court Rules on Jurisdiction over VAT-Related Damages Claims

In its decision of 17 June in HR-2026-1358-A, the Norwegian Supreme Court dismissed an appeal contesting the jurisdiction of the Norwegian courts under the forum delicti rule in the 2007 Lugano Convention. The underlying proceedings concerned a damages claim brought by the Norwegian tax authorities against a person domiciled in Cyprus following the non-payment of VAT by three liquidated UK companies of which the defendant had been the sole owner as well as director.

Background

Three companies incorporated in the United Kingdom provided online chat services paid for with virtual coins. Although the companies had no physical presence in Norway, the Norwegian tax authorities concluded that they had targeted the Norwegian market and were liable for more than NOK 15 million in VAT and penalties.

The assessments were not challenged, but the VAT and penalties remained unpaid and the Norwegian tax authorities’ requests for assistance from the UK authorities were unsuccessful. Soon after, the companies were liquidated and struck off the UK register.

The Norwegian tax authorities then brought a direct-liability damages claim against a Norwegian citizen who had been the sole owner as well as the director of all three companies.

As the defendant was residing in Cyprus, he contested the jurisdiction of the Norwegian courts. That issue was appealed all the way to the Norwegian Supreme Court who decided to rule on whether Norwegian courts should have jurisdiction under Article 5(3) of the Lugano Convention.

The Supreme Court’s Decision

The first question was whether the Lugano Convention applied at all. Under Article 1(1), the Convention applies to “civil and commercial matters”.

Noting that the Convention should be interpreted consistently with the Brussels I and Brussels I bis Regulations, the Supreme Court held that the damages claim was civil in nature. In pursuing the claim, the Norwegian authorities were not exercising public powers that placed in a legal position different from that of a private party.

Referring to paragraphs 37 and 41 of Sunico, C-49/12 and paragraphs 35–37 of Movic, C-73/19, the Supreme Court concluded that the claim fell within the scope of the Lugano Convention.

The Supreme Court also found that a claim against a director does not necessarily have to be adjudicated in the place where the company is incorporated, but that it can follow the general rules.

For Norwegian courts to have jurisdiction under the forum delicti rule in Article 5(3) of the Lugano Convention, which corresponds to Article 7(2) of the Brussels I bis Regulation, Norway must be either the place where the event giving rise to the damage occurred or the place where the damage itself occurred.

Because the alleged damages were purely financial, a decisive issue was how to localize where that occurred. Under established CJEU case law, jurisdiction cannot be founded merely in the place where the claimant experiences indirect financial concequences. Rather, the damages establishing jurisdiction must be direct. Central to the Supreme Court’s reasoning in this part was the CJEU’s recent judgment in Wunner, C-77/24 (discussed here on the EAPIL Blog).

In this part, it was noted that the English-language version of Article 5(3) refers to “the place where the harmful event occurred or may occur”. The Norwegian-language version, however, refers to the place where the damage “was caused or arose” (“ble voldt eller oppsto”). The Norwegian wording could therefore give the misleading impression that jurisdiction exists wherever damage or its consequences are experienced. The Supreme Court clarified that jurisdiction lies only in the place where the initial, direct damage occurred, and not wherever its subsequent indirect financial effects may be felt.

The defendant argued that the loss of Norwegian VAT revenue was merely an indirect consequence of damage sustained in England, where the tax claims had become unrecoverable. The Supreme Court rejected that characterization. Instead, it agreed with the court of appeal’s assessment that the relevant damage as the failure to pay VAT owed to the Norwegian authorities and held that this constituted direct damage occurring in Norway. Norwegian courts therefore had jurisdiction under Article 5(3) of the Lugano Convention.

Comment

The decision illustrates how a direct-liability claim against a company director may bring a dispute arising from unpaid taxes within the scope of the Lugano Convention. The characterization of the claim under national tort law may therefore determine where the direct damage occurred and, consequently, which courts have jurisdiction and what law that should be applied.