Disqualification as a result of merger

by Sigurd Holter Torp and Trond Sollund


People in different floors

There is extensive case law relating to what can disqualify a judge under Section 108 of the Norwegian Courts of Justice Act. The topic is also thoroughly discussed in legal theory. Nevertheless, until recently, it has not been discussed or considered whether an upcoming merger may create such connection between a judge and the parties in a case that it might lead to disqualification. However, Borgarting Court of Appeal ruled in a ruling of 8 March 2023 (LB-2023-4745) that such an upcoming merger disqualified an expert lay judge, so that the District Court's judgment was annulled. The case has been appealed and is therefore not yet legally binding. We assisted the party that won in the Court of Appeal.

The underlying dispute relates to the claimant demanding the transfer of a patent because it is submitted to have been granted to someone other than the one entitled to it. When assessing the claim, one had to, inter alia, compare the claimant's product against the concept that was patented, in order to determine whether the similarities were so great that it is in reality the same concept.

There was agreement to appoint expert lay judges. The assumption was that the lay judges had no connection to the parties or the witnesses. Each of the parties had also engaged their own expert witnesses to submit reports and explain the technical aspects of the case. The claimant proposed a candidate from the industry, while the defendant proposed a patent engineer from a patent agency. Both candidates were decided appointed by the District Court.

The District Court did not allow the claim, and decided the case on grounds that had hardly been submitted during the four-day main hearing (TOSL-2022-21432).

The case was appealed, and it was primarily argued that the judgment should be annulled because there was a procedural error in that the lay judge proposed by the opposite party had to be considered disqualified according to Section 108 of the Courts of Justice Act. The background was that the patent agency where the lay judge was an employee and shareholder had decided to merge with the patent agency where the opposite party's expert witness was an employee and shareholder. If such a connection had been known, the claimant would have raised a disqualification objection.

The special circumstances which were asserted to disqualify the judge only became known after the case had been submitted for judgment. Two weeks after the case had been submitted for judgment, the two patent agencies issued a joint press release stating that the companies would merge with effect from a later date.

The fact was that the expert lay judge that the opposite party had chosen would, after the merger, work in the same company as the opposite party's expert witness. Both would also be shareholders in the merged company. The new company would also have two of the defendants as clients, given their connection to the expert witness and the patent agency he worked for. The fact that the merger took effect from a later date could not be decisive, it was argued, since the merger, and thus the future connection, were known to the lay judge and the expert witness before the judgment was handed down.

On behalf of our client, we submitted on this background that there were such special circumstances that are capable of undermining confidence in the lay judge's impartiality, see the Courts of Justice Act, Section 108, first sentence. Borgarting Court of Appeal unanimously agreed with this.

The Court of Appeal assumed that Section 108 of the Courts of Justice Act must be applied in accordance with the requirements of Section 95, first paragraph of the Norwegian Constitution and Article 6, no. 1 of the ECHR, see the plenary decision HR-2022-2360, paragraph 10. The Court of Appeal then referred to how the disqualification assessment was summarized in Rt-2013-1570, paragraph 20 (office translation):

Section 108 of the Courts of Justice Act stipulates that a person cannot be a judge in a case if "special circumstances exist that are capable of undermining confidence in his impartiality". This means, firstly, that there cannot be circumstances which mean that the judge is unable to make an impartial decision without having an eye to irrelevant considerations from a subjective perspective. Secondly, there cannot be any circumstances which link the judge to a party in such a way that the parties and the public can question the judge's impartiality. This objective approach – how the connection is viewed from the outside – has gained increasing weight in case law in recent years, see Rt-2011-1348, paragraph 46. This has led to stricter rules on disqualification and means that older practice will not always be a guide as to what is current law today.

The Court of Appeal assumed that it was the objective side of the disqualification assessment that was central, as the Supreme Court has given instructions for.

In the specific assessment, the Court of Appeal emphasized that the lay judge in question had been proposed by the opposite party and that this meant that the review of impartiality had to be somewhat different than if the person in question had been appointed by the court without such a direct proposal from a party, see Rt-2008 -129, paragraph 33. The fact that the parties can influence the choice of judges means that disqualification can occur more easily than when the appointment takes place on a free basis.

The Court of Appeal was of the opinion that the upcoming connection between the lay judge and the expert witness was not in itself sufficient to establish disqualification. Nevertheless, the Court of Appeal pointed out that a judge's connection to witnesses or experts may, depending on the circumstances, lead to disqualification, see Rt-1985-108. It was also pointed out that a judge's connection to an expert witness will more easily lead to disqualification than if the connection is to an ordinary witness, since the expert shall advise the court, see HR-2016-800-A, paragraph 35. Based on the same decision, the Court of Appeal also assumed that when the expert witness is engaged by a party, this makes it particularly problematic that a judge connected to the expert shall review the expert's assessments.

The Court of Appeal did not attach any weight to the fact that the District Court decided the case on a basis other than what the expert witness had given a statement and explained himself about. Although the expert's statement was not central to the District Court's result, it aimed at the same assessment that the District Court would have had to make if the case had been decided on the basis that the parties and their experts prepared for.

The Court of Appeal assumed that both the judge and the expert witness were aware of the merger plans before the formal merger decision was adopted, i.e., before and during the main hearing. It was also assumed that the expert witness had a relatively central role in the matter.

When the Court of Appeal nevertheless did not conclude that the connection between the judge and the expert witness in itself led to disqualification, it was because it is in particular the risk of informal information flow which in previous cases has constituted a disqualifying element of peer connection. As the peer connection here would only take effect after the judgment had been handed down, the Court of Appeal was of the opinion that this risk would normally be far less than if the connection had already been established when the expert gave his advice to the court.

Nevertheless, the Court of Appeal held that the lay judge was disqualified, because the upcoming merger did not only provide a connection to the expert witness, but also to two of the parties. The Court of Appeal pointed out that the two parties would become clients in the merged company, and that this created a connection between the lay judge and the two parties who proposed his appointment. Although, according to the Court of Appeal, the connection was upcoming and went through several stages, it was assumed that less is needed to establish disqualification when the connection is to a party than to others who have been involved in the case. Furthermore, the Court of Appeal pointed out that this shall particularly apply when the connection is in the form of a client relationship, which means that the judge himself may have a financial interest of a certain extent in the outcome of the case.

If the ruling is upheld, it shows that a judge who is aware of the existence of merger plans between the company where he works and/or is a shareholder, and a company that has a connection to the parties or witnesses in the case, should disclose this. Not least does this apply if the merger has been approved before the judgment has been handed down, as was the case in this case. In such a situation, the parties shall be given the opportunity to consider whether a disqualification objection should be raised. In the opposite case, it will often be a serious procedural error which causes the judgment to be annulled, with the consequence that the parties move back to square one.

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