As head of Norges Bank Investment Management (Nbim), the Petroleum Fund’s manager, Nicolai Tangen will always be in potential incapacity situations in contracts with external managers. An amended employment contract cannot regulate it. The disqualification rules will apply upon termination, conclusion and renewal of contracts with external managers. Each agreement will require a thorough examination of the facts and legal assessments of incapacity.
During the hearing in the Finance Committee in the Storting on 10 August, Julie Brodtkorb, chair of the Supervisory Board, described examples of conflicts of interest that will arise with Tangen as director of the Petroleum Fund. When asked by Hadia Tajik, Brodtkorb answered the following:
«Julie Brodtkorb: Yes, there can be conflicts of interest, for example, if there is a question of whether Tangen as head of Nbim can enter into agreements with suppliers who are also suppliers to the AKO system. Can Nbim buy shareholdings of the AKO system? For example, can Tangen be involved in choosing external managers? Nbim uses between 70 and 80 external managers who are direct competitors of Ako. So there are some examples. “
At the end of 2018, external managers managed NOK 389 billion, or 3.9 per cent of the Petroleum Fund’s assets.
Brodtkorb describes several situations that are particularly relevant: selection of external managers and entering into agreements with providers of financial services. These problems that Brodtkorb and the Supervisory Board point to raise administrative law problems.
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One is incompetent “when there are other peculiar circumstances which are suitable for weakening confidence in his impartiality” (Public Administration Act § 6 second paragraph). Disqualification is not about distrusting Tangen. The assessment is whether the relationship between Tangen and an external trustee is suitable for the public to shake confidence in that impartial decisions are made. Although Tangen is 100 percent strict himself, his friendship or previous competitive relationship may be apt to weaken confidence in impartiality.
Knowledge, friendship and rivalry between Tangen and others will be difficult to get a full overview of. Every time Nbim is to assess an external manager, actual and legal assessments will have to be made as to whether there are “special circumstances”. In principle, incapacity will have to be assessed every time the fund enters into, amend, terminate or extend an agreement on external management, and all his decisions will be in danger of being covered by incapacity.
Morten Walløe Tvedt (Photo: Private)
Some may think that someone else in the Petroleum Fund can choose external managers. The system in the Public Administration Act § 6 is that if the head of a body is incompetent, everyone in the body is also incompetent. This means that when Tangen is incompetent, no subordinate in Nbim can take over the decision.
These are other incapacity problems than those concerning the management of Tangen’s own investments in Ako or his own assets. Julie Brodtkorb referred to precisely this type of administrative law problem in the hearing in the Storting. These conflicts cannot be resolved by a change in his ownership structures or in the employment contract.
So far, we have not seen any statement from either Tangen or Norges Bank on how these incapacity problems are intended to be solved. In the existing agreement structure that is in place between Tangen and Norges Bank, there are declarations and agreements that are not public. With this backdrop, it is difficult to imagine how full transparency will be created about any relationship Tangen has with possible external managers. From a legal point of view, these assessments will be difficult since there are no exhaustive “customer lists” between acquaintances in the financial environment. How should Norges Bank, the Ministry of Finance or the Storting ensure that the Petroleum Fund does not violate Norwegian law with Tangen as director?(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases using a link, which leads directly to our pages. Copying or other form of use of all or part of the content, can only take place with written permission or as permitted by law. For additional terms look here.
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