Kimek considers new lawsuit against ESA.

In 2015, the EFTA Court ruled that companies based in Southern Norway may not benefit from the regionally differentiated social security contributions scheme when renting out labor force in Northern Norway. ESA ignores that.

ESA has recently established new rules for the regionally differentiated social security contributions, simply ignoring the ruling from the EFTA Court less than two years ago.

Won two rounds in court

Kimek Offshore, a company based in Kirkenes Norway, brought the case up before the EFTA Court. Through two rounds, the company was supported by the Court in fighting both Norwegian authorities as well as the many lawyers of ESA. (Norwegian only.)

As High North News wrote in September 2015, the case was about the Norwegian scheme for a regionally differentiated social security contribution scheme, which was approved by ESA in the summer of 2014. The scheme is meant to secure settlement in rural districts and regions throughout the country, in particular in Northern Norway.

Ruled against ESA’s regulations

While the scheme was approved, a set of rules were also established providing companies that provide ambulant operations and rental of labor force with the same differentiated social security contribution scheme, even though the companies were based in areas not covered by the scheme.

The EFTA Court did not approve of this regulation, which benefits companies located outside the relevant geographical areas, and thus ruled against ESA’s rules.

Re-introduced

In May/June this year, companies and political leaders in Northern Norway hailed the re-introduction of the regionally differentiated social security contribution scheme in the energy and transportation sectors.  (Norwegian only.)

Yet at the same time, the regulations for hired labor force were changed – to something quite contrary to what the EFTA Court ruled.

- Not how to build society

For employers conducting more than 50 percent of their work in the zero-contribution zone, the companies are exempt from such fee, regardless of where the company is located.

- This is not how to build society in rural Norway, this is how you raise buildings, says Greger Mannsverk, Managing Director of Kimek Offshore in Kirkenes, Norway, to High North News.

He is very disappointed with ESA’s new regulations; however, he is not surprised.

- We did not win the war

Companies in southern and western Norway that move labor force into the reduced-contribution zone on a rotating basis receive more than 200 million Norwegian kroner (NOK) each year, according to figures from the Norwegian Ministry of Finance. These resources, according to Mannsverk, should rather benefit the reduced-contribution zone.

- We won the battles in 2015, however, we did not win the war yet, Mannsverk says.

- We see that EFTA’s Surveillance Agency (ESA) has reconsidered the matter again and landed on the same conclusion as they did last time. This despite the EFTA Court agreeing with our (Kimek Offshore’s) view that this kind of support will not contribute to permanent jobs in the areas in question.

Mannsverk points out that support in the form of reduced or zero social security scheme contributions under these regulations benefits companies that do not face the same challenges as e.g. Kimek Offshore in operating in the High North on a permanent basis.

Meant to counter disadvantages

He emphasizes that the arguments for the differentiated contribution scheme is to build society in Northern Norway, and how the scheme contributes to countering the disadvantages that may arise from operating in challenging areas with few and dispersed settlements.

- As it is now, companies further south in the country can fly in labor force on a rotating basis and use state subsidies to financially outperform those of us who try to survive in the north year-round. That is not how this scheme was meant to work, according to Greger Mannsverk.

Considers new court case

Kimek Offshore currently considers whether or not to try and raise the matter with the EFTA Court once again, or whether there are other ways in which they can fight the regulations.

When the case appeared in 2015, Kimek received full support from NHO Finnmark, the local branch of the Confederation of Norwegian Enterprise. Chairman of the Board of NHO Finnmark, Tore Wæraas said, when asked by High North News about the organisation’s view on the new regulations from ESA:

“The Board of NHO Finnmark has not discussed the new ESA decision yet. However, based on former decisions in the Board, NHO Finnmark continues to support Kimek.

I have great understanding for Kimek’s needing some time to consider how to proceed with the matter. Should they wish to raise it with the EFTA Court once again, I will support that.

The purpose is undermined

This is a case that concerns the need to secure one of the main goals of the scheme zone, which is to contribute to strengthened business and population development in Northern Troms and Finnmark Counties.

From my point of view, the new decision from ESA will, sadly, in practice contribute to undermining this goal and will rather lead to increased opportunities for southern-based companies to acquire contracts in the High North without securing local business development and population.”

The ball is thus in Kimek Offshore’s court. So far, Managing Director Greger Mannsverk cannot say what their conclusion will be.

Read also: ESA: We do not make the rules