I have installed the game recently and started to play with my brother in a local server. The issue is that the xp is not shared and there is unwanted friendly fire, despite the fact that the game is set to no-pvp. Is this how it should be or is there anything that I can do to solce this problem?

This is the classic diablo experience. No XP sharing and friendly fire for all ranged attacks.

Basically you need to both damage a same monster for the XP to be shared.
There are a few more specifics which you can find in Jarulf's guide, but that's mostly it..