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 www.GettingTheDealThrough.com.

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Denmark
Henrik Puggaard, Lene Lange and Kristian Skovgård Larsen
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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.
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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.

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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,
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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
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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;
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• 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).

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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.
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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.
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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.
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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
hpu@lett.dk
len@lett.dk
ksl@lett.dk
Tel: 45 33 34 00 00
Fax: 45 33 34 00 01
www.lett.dk
Getting the Deal Through – Construction 2014

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.
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