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The good news is Svalbard tourism companies have until the end of the month to apply for a portion of 65 million kroner in grants to help those hurt by the loss of tourism during the COVID-19 pandemic. The bad news is this latest and most generous of several assistance packages to date comes with strict nationality/residency requirement that some say discriminately – and illegally – shuts out companies that have operated here for many years.
Put simply, the disputed requirement states eligible companies must be at least 34 percent owned by a Norwegian citizen or be a registered company that pays taxes in Svalbard for at least 10 years (there are, of course, plenty of other requirements). Among the most vocal critics is Marcel Schütz, a Swiss national who has operated tourism companies in Svalbard since 2012 including one he has co-owned with German Christian Bruttel for the past five years, thus failing to meet the requirements.
“I think that this paragraph is based on false principles, and is financially and legally very dubious,” Schütz said in an interview this week. “Important values such as equality, social justice, trust and solidarity are forgotten, moreover.”
His company, Spitzbergen Reisen, has filed complaints with two central government ministries – Trade and Industry, and Justice – and requested formal statements about that section of the eligibility guidelines.
Longyearbyen’s municipal government, which will evaluate applicants and award funding after the May 30 deadline to apply for the second of two allocations making up the 65 million, says establishing eligibility was a complex process that started in late February – and it’s both legal and takes concerned raises by “relevant players in the business community” into account.
“The dialogue with relevant players has been crucial together with the guidance we have received from the ministry level,” City Manger Hege Fagertun said earlier this month when the criteria was announced.
It’s a variation of a dispute – Norway favoring its own citizens despite Svalbard’s unique “international” status – raised in many forms by foreign entities ranging from individual residents to multi-national bodies such as the European Union since the approval of the Svalbard Treaty a century ago. Norway has long justified its actions based on its sovereignty over Svalbard and, in many instances related to social/worker benefits, the fact the archipelago has drastically lower taxes that fund such programs compared to the mainland.
In this specific case, Longyearbyen Mayor Arild Olsen told Svalbardposten the eligibility clause being challenged is legal because Svalbard is not subject to the same provisions of an economic agreement with the European Union that the rest of Norway is.
“This is handled differently on the mainland because Norway, as an EFTA (European Free Trade Association) state, is bound by an agreement with the EU, but Svalbard is not,” he said. “Therefore, Svalbard can set its own criteria within the framework of the Svalbard Treaty.”
Schütz is basing his legal argument on removing the section he opposes – labeled “Paragraph 5a” in the official regulations – applies to the limited liability company itself, not the individual shareholders.
“We are a Norwegian corporation,” he told Svalbardposten earlier this month. “We speak and write in Norwegian, pay our taxes in Svalbard.”
If that argument fails to persuade ministry officials who thus far have not found the paragraph objectionable, another argument based on fairness has the support of both a large subset of Longyearbyen’s municipal council and Visit Svalbard Director Ronny Brunvoll. It would require companies to be registered for five years instead of ten – the same standard that applies on the mainland in such cases.
Visit Svalbard has 76 member companies, including Schütz’s, about half of dozen of which don’t fulfil the 10-year or Norwegian-owned requirement. Ronny Brunvoll, director of the tourism agency, told Svalbardposten modifying eligibility to five years of operation means all but one or two would be eligible.
Complaints about eligibility requirements for COVID-19 assistance in Svalbard have been plentiful throughout the pandemic – and while foreigners account for a large percentage they’re not the only ones saying they’re being treated as second-class citizens.
The primary reason besides Svalbard’s lower tax rate is the archipelago’s remoteness and lack of medical facilities has resulted in the government consistently imposing more extreme infection-control measures than for the rest of Norway, including a total ban on visitors and exiling all non-residents at the onset. While that means Svalbard is one of a half-dozen countries (as classified by the World Health Organization) on Earth with no diagnosed COVID-19 cases, the trade-off is Longyearbyen has suffered the worst economic impacts of any municipality in the country.
The most immediate protests occurred during the weeks after a global pandemic was declared March 11, when up to 90 percent of Longyearbyen’s tourism workers were laid off at one point and a majority of operators suspended operations (and a few shut down altogether). Most of the laid-off workers were foreigners who were ineligible for unemployment or insurance benefits, including extra funds approved because of the pandemic, although Norway’s government did agree weeks later to short-term funding to help such workers that lasted until the beginning of summer.
As for the affected businesses, most owned by Norwegians, many complained Norway’s government was overlooking the heightened impacts of the crisis for Svalbard as the travel ban lingered. Although the government did initiate efforts for aid specific to the archipelago during the summer, businesses and local leaders said an overly long process was leaving numerous companies days or weeks from bankruptcy.
When an initial 25-million-kroner aid package was approved during the fall (and subsequent aid in a series of later actions), Longyearbyen’s municipal council generally specified Norwegian-owned companies in the eligibility criteria, although in some instances the guidelines stated exceptions would be considered for exceptional circumstances.
Schütz said he is managing to keep his stable during the pandemic due largely to guests willing to roll over bookings a year – or two – until travel restrictions lessen. But while Schütz said his company isn’t in immediate danger of bankruptcy, omission from the current grants does pose an eventual existential threat to his company and others that are ineligible.
Norway has emphasized eligible Svalbard residents and businesses can apply for a multitude of national-level assistance funds, and indeed Schütz is the recipient of one such allocation from Innovasion Norge, a state-owned stimulus fund for entrepreneurs. But he said that funding must be used for “innovation and conversion” projects that his company must pay one-third of, differing it from the current local grants he is disputing.
Schütz said he is managing to keep his stable during the pandemic due largely to guests willing to roll over bookings a year – or two – until travel restrictions lessen. But while Schütz said his company isn’t in immediate danger of bankruptcy, omission from the current grants does pose an eventual existential threat to his company and others that are ineligible.
“A lot of resources are used and we have to build them up again,” he stated. “On top, who knows when borders open up at the end. We are very lucky that our clients are loyal. At the moment 85 percent of all our bookings for 2020 are on hold and postponed to 2021 or later. For us it is very important to get the funding as well in term that other companies with similar financial situation and size get it.”
Schütz said grant funding would be used to help implement major environmental upgrades – a foremost priority for future financial and regulatory reasons as well as marketing – such as all-electric vehicles and solar panels on the building where his company operates. He said the trend of increasing environmental restrictions in Svalbard is likely to continue and present challenges to companies, not to mention “we care about our workplace and want to leave as less footprints as possible within our operations.”
“All this costs a lot of money,” he stated. “Don’t forget, these funds are supporting, but the company needs to invest as well. We know about and are expecting more environmental regulations for tour operators in the near future, that’s why it is important always to be a step ahead.”
While the percentage of currently ineligible companies is small, Schütz said the impact on the community isn’t, especially in the future if a precedent is set.
“Because now it is hitting five to six companies, but there are employees behind (those) and when you compare the numbers of travel companies in Longyearbyen the number is big,” he said. “As well this could be taken as a precedence and in the future similar cases could appear which affects then even more people.”
Schütz asserts making the additional companies eligible shouldn’t affect the amount those who have already applied will receive since Olsen has stated the council will be considering what to do with leftover funds once grants to existing applicants have been determined.
