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Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through – Construction 2014, (published in August, 2013; contributing editor: Robert S Peckar of Peckar & Abramson, PC). For further information please visit

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  1. 1. Lett Law Firm denmark Denmark Henrik Puggaard, Lene Lange and Kristian Skovgård Larsen Lett Law Firm 1 Foreign pursuit of the local market If a foreign designer or contractor wanted to set up an operation to pursue the local market what are the key concerns they should consider before they took such a step? The bureaucratic and legal hurdles faced by foreign contractors or designers wishing to set up an operation to pursue the local market are few. Denmark is considered to be among the world’s best locations for doing business. The primary concerns facing foreign contractors are more of a practical nature. These include obtaining sufficient bonding capacity with a qualified surety, finding qualified domestic executives and labour, locating qualified legal counsel and becoming familiar with important legal, considerations that affect contractors and establishing relationships with local trade subcontractors. Depending on the individual situation, a main concern would be Danish labour law. For instance, foreign contractors must register employees with workmen’s insurance. Employees must be insured against industrial accidents and occupational illnesses. A foreign contractor may conduct business through a joint venture or company or the contractor may set up a branch in Denmark. If the contractor wishes to incorporate and register a new firm in Denmark, it should obtain the Danish bank internet log-in (NemID) signature, deposit start-up capital at a bank and register the company with the Danish Business Authority (DBA) Webreg system. From the beginning of 2014 it is expected that the Danish Companies Act will provide the possibility for establishing a private limited company with a share capital of only 1 Danish kroner. The liability of the contractor is limited to the amount of shares subscribed or alternatively the price of the shares acquired. 2 Licensing procedures Must foreign designers and contractors be licensed locally to work and, if so, what are the consequences for working without a licence? Neither Danish nor foreign companies (legal persons) are required to have a licence to perform construction work in Denmark, however, it should be noted that some types of work, including crane driving and asbestos removal, may only be conducted by persons having an authorisation. Foreign companies performing services in Denmark are obliged to be registered with the DBA. Under certain circumstances physical foreign persons are required to have in place a work permit to perform work as contractors in Denmark. The specific requirements in connection with living and working in Denmark depend, first and foremost, on the nationality and qualifications of the person in question. It is the person’s own responsibility to obtain a work permit if it is required. 3 Competition Do local laws provide any advantage to domestic contractors in competition with foreign contractors? With the implementation of the Danish Competition Act in 1997, Danish competition law was aligned with the EU competition rules. There are no Danish laws that provide any advantage to domestic contractors, indeed, such conditions would also violate the Treaty on European Union (TEU). Often Danish projects are tendered using only tender documents in the Danish language, which will often in practice be perceived as disadvantageous by foreign contractors. 4 Bribery If a contractor has illegally obtained the award of a contract, for example by bribery, will the contract be enforceable? Are bribe-givers and bribe-takers prosecuted and, if so, what are the penalties they face? Are facilitation payments allowable under local law? Together with most of the other Scandinavian countries, Denmark is one of the least corrupt countries in the world. Any person who unduly grants, promises or offers some other person exercising a Danish, foreign or international public office or function a gift or other privilege in order to induce him or her to do or fail to do anything in relation to his or her official duties, shall be liable to a fine or imprisonment for any term not exceeding three years. Criminal offences also include facilitation payments. Any person who in his or her capacity as trustee of any property of another person accepts, claims or accepts the promise of a third party, for the benefit of him or herself or of others, a pecuniary advantage, the receipt of which is concealed from the person whose interests he or she is protecting, as well as any person who grants, promises or offers such advantage, shall be liable to a fine or imprisonment for any term not exceeding one year and six months. Criminal responsibility can be imposed on legal persons (companies, etc) for bribery conducted by its employees. If a contractor has illegally obtained the award of a contract, for example, by bribery, the contract will typically not be enforceable. 5 Political contributions Is the making of political contributions part of doing business? If so, are there laws that restrict the ability of contractors or design professionals to work for public agencies because of their financial support for political candidates or parties? Danish law does not restrict the ability of contractors or design professionals to work for public agencies because of their financial support for political candidates or parties, but Danish public authorities are under a strict obligation to choose their suppliers in compliance with the principle of objectivity. If a political party has received one or more grants that exceed 20,000 Danish kroner from the same private benefactor in a calendar year, the benefactor’s name and address must appear in the political party’s accounts.
  2. 2. denmark The records must also contain information about the total size of any anonymous contributions and the amount of each anonymous contribution of more than 20,000 Danish kroner. 6 Other international legal considerations Are there any other important legal issues that may present obstacles to a foreign contractor attempting to do business in your jurisdiction? Denmark is generally considered to be among the world’s best locations for doing business. The World Bank ranks Denmark as the easiest place in Europe to do business. Setting up a business in Denmark is characterised by the following key factors: • quick, informal and cost-efficient establishment procedures; • online registration of new companies means one is ready to do business within a few hours; • resident requirements for management, including members no of the executive board (CEO), board of directors or supervisory board shareholders and board meetings can be held electronically; • no notarial deeds; • flexible language requirements: registration of corporate documents of limited liability companies, A/S (Ltd) and ApS (LLC) in the Swedish or Norwegian language is possible as an alternative to Danish and some documents may be registered in English; • dividends can be distributed on an interim basis; • Danish company law is in conformity with current EU legislation; • is tax efficient to establish your business in Denmark compared it to other Nordic countries; and • Denmark has some of the most flexible hiring and firing rules in the world, reducing costs of scaling business operations up or down. 7 Construction contracts What standard-contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution? Almost all Danish construction and design contracts are entered into with the General Conditions for the Provision of Work and Supplies within Building and Engineering (AB 92) contract form, or ABT 93, which is a similar form used for turn-key projects, as the contractual basis. AB 92 is an ‘agreed document’ dating back to 1915 and has been revised a number of times, the latest revision dating back to 1992. These provisions are generally considered suitable for the purpose of entering into construction contracts, regardless of the concerned party’s position as either a contractor or an employer. It is noteworthy that almost all Danish construction contracts are based on AB 92 with or without amendments whether the assignment concerns major construction works or small private construction works. There are no restrictions on the choice of language of the contract, however, AB 92 presupposes that Danish is the contract language. In respect of the applicable law and the venue for dispute resolution, parties to a contract are free to agree upon the choice of law that governs their contract and the venue for their dispute. As an exception, consumers, however, are not bound by arbitration agreements entered into before the dispute has materialised according to the Danish Act on Arbitration, section 7 and can, as a consequence, elect the ordinary courts. 8 Payment methods How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments? Contractors, subcontractors, vendors and workers typically pay using electronic payments. Today, an ever increasing number of payments are made using electronic payment instruments, for example, Lett Law Firm payment cards and wire transfers. This development is supported by the expansion of trading via the internet and by mobile phone. If no agreement has been made at the time of payment, payment may be demanded as provided by AB 92, section 22, subsections 1 if this standard form has been agreed, and, as mentioned, this is quite common. Subsection 1 states that the contractor shall be entitled to receive payment once a month for work performed upon written request to the employer. Instead of payment under subsection 1, the parties may agree on payment being affected in accordance with a payment schedule that follows the time schedule and stipulates at which times the contract sum or parts thereof are to be paid. 9 Contractual matrix of international projects What is the typical contractual matrix for a major project in your jurisdiction in terms of the contractual relationships among the various construction project participants? Construction contracts can be designed in different ways. The most common contractual structure in Denmark is where the employer contracts directly with either trade contractors and architect and engineer or a turn-key contractor. However, the design of the construction contract often varies depending upon the needs or desires of the owner, the project and relevant laws. 10 PPP and PFI Is there a formal statutory and regulatory framework for PPP and PFI contracts? No specific statutory rules apply only on PPP and PFI contracts. The most important rules influencing the said contracts are the EU Procurement Rules, which apply to public procurement, and which are strictly adhered to in Denmark. In March 2013, the Danish government launched a set of standard documents for use in the procurement of building projects such as PPPs. The documents include a script for the procurement process as a ‘competitive dialogue’ and the required contract forms. It should be noted that when preparing the standard documents, the experience gained with private PPP players has been used to make the terms balanced. In general, account has been taken of the private party and the financier’s legitimate interests and a fair-risk distribution. In other words, the documents must be considered ‘bankable’ in a Danish context. The standard contract is dynamic in the sense that it is a framework agreement specifying what to do in general and how to adjust in the event of changed conditions during the term of contract. The standard contract is also based on Danish contract tradition (not common law) and thus it is, in an international context, very short, which may give rise to thought among foreign investors. However, there is no cause for concern and in our opinion, investors can safely use the Danish model. 11 Joint ventures Are all members of consortia jointly liable for the entire project or may they allocate liability and responsibility among them? The liability of the members of a consortium depends on the consortium agreement and the agreement between the consortium and the contracting party of the consortium. When contractors choose to operate as a consortium in Denmark, the consortium is treated as one of the legal types of business entities in Denmark. These include, for example, a sole proprietor, a partnership, a limited partnership or a public limited partnership. Each type of business entity dictates the liability and responsibility of the members. Choosing the partnership entails that each member of the consortium is jointly and severally liable to the owner (or any other party with claims against the partnership) for the full amount of the damages claimed. If a consortium member pays more than its allocated share of a claim against the consortium, that member can then seek indemnification from the other consortium members Getting the Deal Through – Construction 2014
  3. 3. Lett Law Firm denmark for either the full amount in excess or according to the percentage of shares held by the other members according to the consortium agreement. 12 Tort claims and indemnity Do local laws permit a contracting party to be indemnified against all acts, errors and omissions arising from the work of the other party, even when the first party is negligent? According to Danish law, and if nothing to the contrary has been agreed upon, a contracting party is typically only under an obligation to indemnify the other party against acts, errors and omissions of his or her work, if and to the extent he or she has either provided warranty to the other party in respect of the act, error or omission in question or if he or she has disregarded his or her loyalty obligations or is liable according to the laws on product liability. However, it should of course be noted that irrespective of the fact that there may be no basis for indemnification, a contractor handing over deficient work is obliged to remedy the defects by either repair or replacement or to pay a proportionate reduction in the purchase price as compensation. Generally, an indemnification provision in a construction contract is valid and fully enforceable. Such clauses, when properly drafted, may require a contracting party to indemnify the other party not only against the contracting party’s negligent acts, errors and omissions, but against the other party’s own negligence as well. Typically, such clauses are based on the knock-for-knock principle, namely, a mutual provision in construction contracts, where both parties accept that each party is only responsible for its own losses regardless of cause, and that each party indemnifies the other for liabilities arising out of its own losses. 13 Liability to third parties Where a contractor constructs a building that will be sold or leased to a third party, does the contractor bear any potential responsibility to the third party? May the third party pursue a claim against the contractor despite the lack of contractual privity? Typically, in a commercial context, absent privity of contract, a thirdparty purchaser or lessee does not have any direct recourse against a contractor for claims of defective work, delays in turnover of the work and the like. However, there are some circumstances where the contractor still may be liable to the third party. The most obvious example is product liability resulting from improperly performed work that results in personal injuries, death or property damage (excluding warranty-related claims). In addition hereto, Danish case law contains few examples of direct third party liability, such examples comprising cases where the contractor has been guilty of gross negligence or where the contractor is acting under professional liability. 14 Insurance To what extent do available insurance products afford a contractor coverage for: damage to the property of third parties; injury to workers or third parties; delay damages; and damages due to environmental hazards. Does the local law limit contractors’ liability for damages? There are many different insurance products available to contractors and subcontractors in Denmark. However, it should be noted that except for professional liability insurance, contractual risks are typically not insured in Denmark, that is, risks related to delivery of non-defective work and delays. The insurance will cover most types of third-party liability exposure for personal injuries, property damage, environmental damage and in some cases economic losses. The most common insurance procured by contractors and design professionals include: • all-risk insurance of construction works • all-risk insurance of builder’s existing buildings and building installations; • general liability insurance; • pollution liability insurance; • property insurance; and • worker’s compensation insurance. There is no statutory limit on the contractor’s liability to a third party, but there may be limits on the amount of coverage that an insurer is willing to provide in respect of a particular risk, such that the contractor is exposed to personal liability for damages sustained by a party in excess of the policy limits. The parties are also free to agree certain limits on the liability. 15 Labour requirements Are there any laws requiring a minimum amount of local labour to be employed on a particular construction project? Danish law does not require a minimum amount of local labour to be employed on a particular construction project, and, therefore, generally, contractors are free to determine the staffing on all components of their projects. For public works projects, however, the contracting entity may require contractors to comply with so-called social clauses, implying that the contractor should ensure that a certain amount of the employees used to fulfil the contract should be from specific groups, for example, workers who have been unemployed for more than a certain number of months during a certain period and who have difficulties in obtaining employment with normal pay and working conditions and those that have limited capacity for work or the like. According to the TEU, however, Danish employers are not allowed to discriminate foreign labour from the EU member states on behalf of Danish labour. It should be noted that though contractors are free to determine the staffing, foreign employees may only obtain and uphold a work permit, if they can prove that their employment is regulated by a collective agreement, or if this is not the case, that the wages and conditions of employment are usual in Denmark within the business area in question. 16 Local labour law If a contractor directly hires local labour (at any level) for a project, are there any legal obligations towards the employees that cannot be terminated upon completion of the employment? Typically, foreign employees may only obtain and retain a work permit if they can prove that their employment is either regulated by a collective agreement or that the wages and conditions of employment are usual in Denmark within the business area in question. According to Danish employment law, employees who are entitled to a termination notice of more than 30 days accrue a right of holiday with pay during their employment. If such employment ends without the accrued holiday being taken in full, the employee is entitled to a holiday allowance. Employees who are entitled to less than 30 days termination notice period are entitled to holiday allowance but not to holiday with pay. Danish law does not require the employer to have a pension scheme for their employees, but most employers have one in place. Danish employer pension schemes are based upon monthly contributions from the employer to a pension company and, therefore, typically, there is no pension obligation towards the employees upon completion of the employment. As a general rule, employees are entitled to severance pay, if the employer cannot prove that the employee was dismissed for fair reasons. Moreover, salaried employees and some employee groups covered by collective agreements are entitled to a seniority-based severance payment if they are dismissed after having been with the company for more than a certain amount of years (the Salaried Employees’ Act allows for such a severance payment when the employee has been with the company for more than 12 years).
  4. 4. denmark 17 Close of operations If a foreign contractor that has been legally operating decides to close its operations, what are the legal obstacles to closing up and leaving? There are no particular legal obstacles to closing down operations. However, when a contractor decides to close its operations, there may be some laws and other considerations that are implicated in that decision. The primary statutes affecting such decisions are the ones concerning labour issues. If employees are employed by individual contracts each contract must be taken into consideration before the company ceases its operations. If the company has unionised employees, additional considerations have to be made regarding that issue. If the employees are unionised, the company may have to bargain with the union before closing its operations. The Mass Dismissal Act contains certain formal requirements that must be fulfilled by the employer in the event of mass dismissal, defined as dismissal of at least 10 per cent of the employees in a company. Depending on the contract conditions, the contractor might also have to pay termination payments to its own employees as well as subcontractors, but in the latter case only if the sub-contracts have been terminated in an untimeous fashion by the employer or subcontractors. 18 Payment rights How may a contractor secure the right to payment of its costs and fees from an owner? May the contractor place liens on the property? There are several options available to contractors to ensure payment from owners. The simplest way for the contractor to satisfy itself is to make sure that the owner has made adequate financial arrangements to fulfil its contractual obligations. AB 92, section 7 provides that the owner under a private contract must provide a performance bond for the due performance of his or her pecuniary obligations towards the contractor within eight days of demand, if the contractor so requires. The bond shall be provided in the form of an adequate guarantee from a bank or a savings bank or other adequate types of security. If no agreement has been made on the payment rights and the AB 92 is not part of the contract, there will be no obligations on the owner to secure the payment of contract. Contractors may only be able to file liens on the improved real estate, but not on the material to be permanently installed or built in (Land Registration Act, section 38 and Land Registration Act, section 1). In order to file a lien on the property the contractor will have to obtain a court judgment confirming his or her claim against the employer. According to the principles of AB 92, section 23 contractors may also have the right to suspend work in the event payment is not made within the prescribed time. 19 Contracting with government entities Can a government agency assert sovereign immunity as a defence to a contractor’s claim for payment? Danish government entities cannot assert sovereign immunity as a defence to a contractor’s claim for payment. Government entities act as private owners when entering into construction contracts. 20 Insolvency and bankruptcy Where major projects have been interrupted or cancelled, do the local laws provide any protection for unpaid contractors who have performed work? If a project is cancelled or interrupted, a contractor having performed work is entitled to payment of the work performed until termination, as well as his or her lost profits inter alia related to unjustifiable termination. Lett Law Firm If AB 92 is a part of the construction contract, each party may terminate the contract immediately in the event of bankruptcy of the other party (AB 92, section 42). Apart from any contractual remedies that may be available to a contractor for the suspension or cancellation of a project, Danish law has a number of remedies available to unpaid contractors. Contractors may possess the powers of detention and the termination of the contract when owners are adjudicated bankrupt. 21 Force majeure and acts of God Under local law are contractors excused from performing contractual obligations owing to events beyond their control? The keystone in Danish law applicable to construction contracts is that a contractor is bound to perform its contract, even if doing so will be more burdensome or less profitable than anticipated. If the contract provides a required date of performance, that date generally must be met regardless of whether events occurring during the performance of the contractor’s obligations are beyond his or her control. If parties want to protect themselves against hardships due to circumstances beyond their control, they must incorporate specific protective provisions into their contract. If AB 92 is a part of the construction contract, AB 92, section 24 grants the contractor the right to extension of time limits in the event of delay of work caused by circumstances for which the contractor cannot be blamed and that are out of his or her control, for example, war, unusual natural events, fire, strikes, lockouts or vandalism. If no provisions have been made, Danish law provides that contractors are excused from performing contractual obligations because of unforeseen occurrences that were unavoidable and extraordinary and would result in insurmountable delay, expense or other material breach of the contract. 22 Courts and tribunals Are there any specialised tribunals that are dedicated to resolving construction disputes? If AB 92 is part of the construction contract, AB 92, sections 45 to 47 provide that in the case of disputes between the parties or in order to establish proof of a matter, a request thereon shall be submitted to the Building and Construction Arbitration Board in Copenhagen. This court of arbitration has developed a particular specialisation in such disputes. The normal arbitral tribunal consists of a legal judge who will normally be a judge from either one of the three High Courts or the Supreme Court of Denmark and two technical judges who normally will be either architects or engineers with special knowledge and exceptional experience and track records regarding the subjects in the matter at hand. If no agreement has been made, the ordinary courts will deal with the disputed matter regarding dispute resolution. 23 Dispute review boards Are dispute review boards (DRBs) used? Are their decisions treated as mandatory, advisory, final or interim? The parties are free to agree on dispute review boards and to agree whether their decisions are mandatory, advisory, final or interim. Dispute review boards, meaning panels of experienced, respected and impartial reviewers that take in all the facts of a dispute and make recommendations on the basis of those facts and the boards own expertise, are commonly used on large scale construction projects and in PPP/PFI projects. Getting the Deal Through – Construction 2014
  5. 5. Lett Law Firm denmark 24 Mediation Has the practice of voluntary participation in professionally organised mediation gained acceptance and, if so, how prevalent is the practice and where are the mediators coming from? If not, why not? In recent years, mediation has gained increasing acceptance in Denmark. The Administration of Justice Act, chapter 27 provides specific rules concerning mediation. However, the majority of construction conflicts will still be a matter for the ordinary courts and arbitration. Mediation is at the very least suggested by the court in many disputes. 25 Confidentiality in mediation Are statements made in mediation confidential? If no agreement has been made on confidentiality of the process, the Administration of Justice Act, section 277, subsection 1 provides that statements made in mediation are confidential. Mediation is a confidential process, since it encourages parties to be candid with each other and disclose information that the other party might not otherwise have found out. The Administration of Justice Act, section 277, subsection 4 entails an exception to subsection 1. A party may testify in court about a disclosure made in the mediation. 26 Arbitration of private disputes What is the prevailing attitude towards arbitration of construction disputes? Is it preferred over litigation in the local courts? Arbitration is the most common way of settling disputes in construction law. Almost all Danish construction and design contracts are being entered into with the AB 92 contract form as a contractual basis and AB 92, section 47 provides that in case of disputes between the parties, a request thereon shall be submitted to the Construction Arbitration Board in Copenhagen. There is a prevailing attitude towards arbitration of construction disputes instead of litigation at local courts. The Danish Arbitration Act 2005 adjusts matters concerning the arbitration courts. 27 Governing law and arbitration providers If a foreign contractor wanted to pursue work and insisted by contract upon international arbitration as the dispute resolution mechanism, which of the customary international arbitration providers is preferred and why? There have been a number of ICC arbitration sittings in Denmark. It is, however, a fact that in major construction projects in recent years, such as Storebælt and the Copenhagen Metro project, where even though the question of ICC arbitration was discussed between the parties, they did, in fact, agree upon an AB 92 arbitration clause and, even though the foreign elements in these contracts have been considerable, the foreign parties have accepted the AB 92 arbitration mostly in the Danish language. If the AB 92 is not part of the construction contract and thus the Danish Arbitration Court for Building and Construction has not been agreed as an arbitration court, the ICC will be the most favoured provider for resolutions for international construction contract disputes. 28 Dispute resolution with government entities May government agencies participate in private arbitration and be bound by the arbitrators’ award? 29 Arbitral award Is there any basis upon which an arbitral award issued by a foreign or international tribunal may be rejected by your local courts? The New York Convention requires courts of the contracting states to enforce both arbitration agreements and arbitration awards. Denmark is a signatory to the New York Convention, which has been incorporated into the notice of the Recognition and Enforcement of Foreign Arbitral Awards, (the Danish Arbitration Act, section 10). Denmark is obligated to honour and enforce foreign arbitration awards to the same degree, and in the same way, as other signatory states. However, if the arbitration award does not meet the standards set forth in article V of New York Convention, for example, lack of capacity to arbitrate and lack of notice to a party, a Danish court will not enforce the arbitration ward issued by a foreign tribunal upon a party’s assertion. 30 Limitation periods Are there any statutory limitation periods within which lawsuits must be commenced for construction work or design services and are there any statutory preconditions for commencing or maintaining such proceedings? There is generally no specific limitation period applicable only to construction disputes. Which period applies depends on various factors such as the nature of the legal claim and the party being sued. On 1 January 2008, a new Danish Limitations Act came into force. Under this Act, the standard limitation period is three years from the due date of the claim. The creditor’s unawareness of the debt or the debtor may postpone the date at which time begins to run but the period is a maximum of 10 years from the date due no matter of unawareness on the part of the creditor. The Act is mandatory in the sense that it cannot be derogated from to the disadvantage of the debtor whether the debtor is a trader or a consumer. If the creditor is a consumer, the Act also cannot be derogated from to the disadvantage of the creditor. However, this rule only applies to agreements made or in force after 1 January 2008. The fact that the Act is mandatory may be relevant to the legal effect of the limitation rules in standard terms and conditions such as AB 92, section 36 that provides a limitation period of five years from the handing over of the work. If the creditor is a consumer, the AB 92, section 36 will in some cases be considered unenforceable. 31 International environmental law Is your jurisdiction party to the Stockholm Declaration of 1972? What are the local laws that provide for preservation of the environment and wildlife while advancing infrastructure and building projects? The Stockholm Declaration was adopted by the UN General Assembly on 15 December 1972, and Denmark is a signatory to the Declaration. Important Danish environmental laws include the Environmental Protection Act, the Marine Environmental Protection Act and the Planning Act. The municipal councils are responsible for comprehensive landuse regulation at municipal and local levels with legally binding guidelines for property owners. The regional councils prepare a strategic plan for spatial development in each region. The minister for the environment is responsible for upholding national interests through national planning. The municipalities have a monopoly with regard to planning and zoning. The decision-making process can take time, and people affected by the decision often hold the right to appeal. Government entities may participate in private arbitration and be bound by the arbitrators’ award, including being subject to enforcement.
  6. 6. denmark Lett Law Firm Update and trends The Danish government published a report in October 2012 in which the first 13 Danish PPP projects were thoroughly evaluated. The conclusion of the report was that all projects were handed over on or before the agreed timetable, that PPPs have significantly added value in regard to the innovation of the projects, that the public budgets were not exceeded and that the quality of the building works was very high. Investors, represented by large Danish pension funds, have shown an increased interest in Danish PPP projects in recent years. In particular, it is often mentioned that large infrastructure projects will be well suited for PPP projects with private financing. Up to now we have had one large PPP infrastructure project, namely, a motorway in southern Denmark close to the German border. The motorway project was characterised by the private financing being limited to the construction phase of a good two years, as the Danish Road Directorate paid the entire capital sum and is the owner of the assets during the period of operation, but in such a manner that the owner’s risks under the contract to a substantial degree are placed with the 32 Local environmental responsibility What duties and liability do local laws impose on developers and contractors for the creation of environmental hazards or violation of local environmental laws and regulations? Denmark has a long tradition of environmental protection. There are several environmental laws affecting construction projects. Breach of an environmental law can give rise to both criminal liability and liability under civil and public law. Civil liability is liability in relation to third parties. Public-law liability is the liability entailed by the power of Danish authorities to order, for example, an investigation and remediation of contamination. In Denmark the ‘polluter pays principle’ operates to impose liability for contamination solely on the polluter and not, for example, on a landowner, etc. That interpretation of the ‘polluter pays principle’ means that the operator of the activities that causes the contamination will be the responsible party. The responsible parties under the Nature Protection Regulation are the owner and the user of the land. However, a developer or contractor who is not operating the activity that caused the contamination or owning or using the land under the Nature Protection Regulation may be liable under civil law to the third parties raising a claim, provided the environmental private party, which is true to the PPP spirit. This adaptation of the PPP model was, however, primarily caused by the fact that at the time it was not possible, or was very expensive, to borrow money over such a long period of time due to the international financial crisis. In recent years, ‘long’ financing has become possible again. The most recent trends in the Danish PPP arena come from the health sector where there is an incipient interest in involving provision of care services as part of the total solution, which is assigned to the private party for a number of years. This applies to, for example, construction of housing for the elderly where care of the residents is an important part of the aggregate services to be provided by the private party. That way the private party is allowed to integrate good care in a constructional and operational context. The Danish hospital service is also growing and developing, for example, into larger units, and in some of these projects there are plans to involve costly medical equipment as part of the structural solution when new state-of-the-art hospital buildings are to be constructed as PPPs. hazard was caused by fault or negligence to be determined based on the conduct generally considered to be responsible at the time of the damage and provided a loss can be proven. The responsibility to act in the event of environmental hazard or the risk of environmental hazard can be taken voluntarily or can be ordered by the municipality or any governmental authority. Violation on environmental laws or local regulations can, depending on the severity of the violation of law and which law that has been violated, result in bans, fines or a criminal penalty. 33 International treaties Is your jurisdiction a signatory to any investment agreements for the protection of investments of a foreign entity in construction and infrastructure projects? If so, how does your model agreement define ‘investment’? There is no specific statutory or regulatory scheme with regard to the protection of foreign investments directly related to construction projects. Denmark is a signatory of the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention). Following this, a significant number of investment agreements have been signed. Henrik Puggaard Lene Lange Kristian Skovgård Larsen Rådhusgården Vester Allé 4 8000 Aarhus C Denmark Tel: 45 33 34 00 00 Fax: 45 33 34 00 01 Getting the Deal Through – Construction 2014
  7. 7. Lett Law Firm denmark 34 Tax treaties Has your jurisdiction entered into double taxation treaties pursuant to which a contractor is prevented from being taxed in various jurisdictions? If contractors are liable to pay full tax in Denmark, contractors will, in principle, be taxed on all income, regardless of whether it was earned in this country or elsewhere. The global income concept entails that foreign income will not be given special treatment but will be treated in accordance with Danish tax rules even if the income has already been taxed in another country. In order to avoid such double taxation, Denmark has engaged in agreements with a considerable number of countries that specify who has the right of taxation and in which areas. In addition to this, Danish tax law lays down rules about tax reductions. These rules may be applied in cases where no double taxation agreement exists or where it is more favourable to apply these rules rather than the rules of the double taxation agreement. 36 Removal of profits and investment Are there any controls or laws that restrict removal of profits and investments from your jurisdiction? There are generally no restrictions on the removal of profits and investments from Denmark. Articles 63 to 66 of the TEU, supplemented by articles 75 and 215, TEU for sanctions provide the legal basis for the free movement of capital in the EU. However, the Money Laundering Act provides some restrictions on the removal of money and other assets. The purpose of this law is to halt money laundering and the funding of terrorist groups and activities. In general, with full disclosure of reporting, as required by the relevant financial institutions and governmental entities, and payment of taxes, the overseas transfer of profits earned on a construction project would not present a problem. 35 Currency controls Are there currency controls that make it difficult or impossible to change operating funds or profits from one currency to another? There are no currency controls that make it difficult to change operating funds or profits from one currency to another. As a member of the EU, Denmark respects the freedom of movement of capital stipulated in the TEU. In contrast to many other EU member states using the euro, Denmark has kept its own currency, the Danish kroner, termed DKK.