External financing of class action cannot take place by deduction in awarded damages

An alarm customers’ association, Alarmkundeforeningen, whose purpose was to seek financial compensation for customers of two alarm companies that had been fined for illegal price collusion, brought a class action against the alarm companies under the withdrawal option, see section 35-7 of the Dispute Act. The action was trusted to be financed by a foreign fund, which would have costs and returns covered through deductions from any compensation awarded to the group members. The association had made it a condition for being a group representative that the court approved the scheme for financing of the action. The District Court and the Court of Appeal ruled the action inadmissible. The Supreme Court pointed out that the group members cannot be held liable for expenses in a withdrawal action, see section 35-14, and found that the class representative has no legal right to claim costs of external litigation funding covered through a deduction in possible damages to the class members. The Court of Appeal had then correctly assumed that the association was not willing to be a group representative, see section 35-9 subsection 2. The appeal against the Court of Appeal's ruling was dismissed.

Read the whole order (Norwegian only) 

Area of law: Civil procedure. Chapter 35 of the Dispute Act. 

Key paragraphs: 80-85

Justices: Øie, Falkanger, Kallerud, Arntzen, Steinsvik