The EEA Agreement and the ‘Norway option’: integration without co-determination

Henrik Nordling Henrik Nordling[1]

The result of the UK’s EU referendum has thrown the EEA Agreement to the forefront as a potential template for the UK’s future relationship with the EU. The term ‘Norway option’, under its various guises, is steadily referenced to as a potential compromise. However, Norway’s relationship with the EU is relatively complex: Norway has adopted about ¾ of the EU legislation of that of an ‘ordinary’ EU Member State, but does not have any powers of determination in the EU legislative process. Norway benefits from the advantages of being part of the internal market, but does not get to decide on the rules which govern it – only adhere to them. Nonetheless, Norway is not bound by some of the EUs most hotly debated policy areas, such as agriculture, fisheries and home affairs.

An overview of Norway’s EU relationship

The UK and Norway share a common past when it comes to the EU. In 1960 Norway and the UK were part of the seven states that founded the EFTA as an alternative to what was then the European Economic Community (EEC). Then in 1962 Norway, along with the UK, Denmark and Ireland applied to join the EEC only to be met with a resound ‘non’ from Mr De Gaulle. Although the General’s veto was aimed squarely at the Anglo-Saxons across the channel, Norway suffered collateral damage. Still, the Norwegian government continued negotiations and that were completed in 1972. Parliament was overwhelmingly in favour of joining the EEC, but the question was put to a referendum – yes one of those – and the result was a quite clear ‘no’ which caused the prime minister to resign and Norway ended up with a trade agreement with the EEC instead. History has a tendency to repeat itself. Norway then had a second referendum on EU membership in 1994, but the answer was once again No. As an aside, it is worth noting that on a regional basis the Yes vote was the clear winner in Oslo and the surrounding regions whilst No blanketed the rest of the country in both referendums.

The EEA Agreement was entered into between five EFTA States (Sweden, Austria, Norway, Iceland and Finland) and the EU Member States in 1992 and entered into force in 1994. Lichtenstein became a full participant in the EEA Agreement in 1995, and in the same year Sweden, Finland and Austria left the EFTA and the EEA to join the EU. This leaves us with today’s three remaining EEA EFTA States: Norway, Iceland and Lichtenstein. Switzerland, the fourth remaining EFTA State, chose to enter into a bilateral agreement with the EU.

The EEA Agreement, at its most basic level, extends the EU’s internal market to the three EEA EFTA States, granting equal rights and obligations for citizens and economic operators in the EEA. The substantive scope of the EEA Agreement thus includes, at its core, the four freedoms (goods, services, persons and capital), competition rules and State aid. In order to ensure that the internal market functions well it was also imperative to include various ‘horizontal provisions’ related to the four freedoms (such as consumer protection and environmental regulation) that serve to strengthen and support the internal market. There are also provisions relating to cooperation outside the four freedoms. These are known as ‘flanking areas’ (such as research and development, culture and education) which further strengthen the cohesion of the EEA.

However, the EEA Agreement does not cover the following EU policies: Common Agriculture and Fisheries Policies, Customs Union, Common Trade Policy, Common Foreign and Security Policy, Justice and Home Affairs and Monetary Union. Although it should be noted that EU Member States have the ability to opt out of some of these policies to a certain extent.

An interesting reflection is that the relative proportion of EEA EFTA to EU Member States was 5:12 in 1992, which is considerably better than it is now at 3:28. Whether the same agreement would be reached under this constellation is not sure.

To put it simply the EEA EFTA States adopt some, but not all of the EUs rules and only within certain policy areas that are of ‘EEA Relevance’. But this divide is not as clear as it may seem when it comes to Norway, as cooperation can and does occur within policy fields that are outside the remit of the EEA Agreement. For instance, within the field of Justice and Home Affairs, Norway is a member of the Schengen area. Within the field of Foreign and Security Policy, Norway has entered into an agreement with the EU as regards EU civilian and military operations and has participated in EU-led operations in the Balkans and the Horn of Africa. Norway also participates in Europol, the European law enforcement organisation and has entered into an agreement based on the principles of the European Arrest Warrant. Norway has thus extended its cooperation with the EU to a number of areas where the two parties share common interests that are outside of the EEA Agreement.

Administration, legislation and the lack of co-determination

Administration of the EEA Agreement is shared between the EU and the EEA EFTA States. The European Commission carries out supervisory functions within the EU and the EFTA Surveillance Authority carries out the same role for the EEA EFTA States. This has led to the term ‘one agreement, two authorities’ which rings true insofar as it denotes the existence of separate supervisory organs. Nonetheless, both work together and must ensure uniform application of the EEA rules. The task of uniform interpretation within the EEA lies with the EFTA Court, which is responsible for interpreting the EEA Agreement with regard to the EEA EFTA States. Its role is similar to that fulfilled by the EU Court of Justice with regard to the EU Member States.

In terms of legislation, the EEA Agreement adopts the principle of ‘homogeneity’ which means that the same rules and conditions apply to all economic operators within the EEA. To this end, the EEA Agreement is continuously updated and amended to mirror the current EU internal market legislation. This importantly includes the incorporation of EU secondary legislation (notably Regulations, Directive and Decisions)

Under the EU legislative process all EU Member States will have several means to influence, shape and decide on the final text. But what about Norway – as an EEA EFTA State, would it be left without a ‘say’? Well, not exactly. Through a system known as ‘decision shaping’ Norway participates in expert groups and in the preparatory work of the Commission, providing comments on green papers that are sent to the European Parliament and Council. EEA EFTA States representatives also meet with their EU counterparts in the EEA Council to provide political oversight and guidance. An EEA Joint Parliamentary Committee provides a forum for MEPs and EEA EFTA national MPs to discuss matters of joint interest. These are all different forms of indirect influence, but a crucial detail of the EEA Agreement is that it does not give the EEA EFTA States any direct involvement in the EU legislative process or decisional powers. Essentially, although Norway may have a ‘say’ it does not have a vote.

EU legislation also does not have direct effect in Norway. Rather, EEA relevant legislation will have to be ‘incorporated’ into the EEA Agreement. The task of incorporation is performed by perhaps the most central of the ‘joint’ EU/EEA bodies: the EEA Joint Committee, which incorporates EU rules by way of decision (JCD).

The process of incorporation essentially involves a dialogue between the EEA EFTA States and EFTA institutions, on the one hand, and their EU counterparts and EU institutions on the other. Each ‘side’ of the EEA Agreement must give its consent to the contemplated JCD before it can be adopted by the EEA Joint Committee. Only once a piece of secondary legislation has been incorporated does it produce effects in Norway.

A distinguishing feature of the EEA Agreement is that the EEA EFTA States have not transferred legislative powers to the EEA Joint Committee. This implies that, on occasion, the EEA EFTA States may need to obtain the approval of their national parliament in order for the JCD to be binding. This is reflected in Article 103(1) EEA and known as a ‘constitutional requirement’ which allows for the direct involvement of the EEA EFTA States’ national parliament. Ultimately, the lack of transfer of legislative power provides the EEA EFTA States with something truly unique vis-à-vis their EU counterparts: a right of reservation. In effect, an EEA EFTA State can refuse to incorporate EU legislation that is EEA relevant. This is almost never used and the consequences are unclear. Norway has used this ability only once: in regards to the Third Postal Directive in 2011. This resulted in the EU threatening to exclude Norway from parts of the single market before the Directive was finally incorporated as part of the change of Government in Norway in 2013.

Cost of EEA membership

Through the EEA Agreement, Norway has access to the EU’s internal market and with this comes rights and responsibilities. There is also a cost. Norway does not technically ‘pay’ the EU directly to participate in the internal market in the manner of a customer and a service provider. The reality of Norway’s contribution is more subtle and takes the form of participation and financing of EU programmes and the attribution of EEA grants.

The EEA EFTA States all provide funding to reduce social and economic disparities in the EEA. Underpinning this is the persistence of gaps in economic development and living standards within the EEA. Funding through EEA grants aims to reduce these disparities. Beneficiaries are selected through closely monitored programmes and the grants are set up for 5 year periods. For the 2009-2014 period EUR 993 million was set aside, of which Norway provides 95.8%, Iceland 3.0% and Liechtenstein 1.2%. In addition, Norway has an additional programme dubbed ‘Norway grants’, to which only Norway contributes, and which amounted to EUR 805 million in the 2009-2014 period. The main beneficiary countries in this period were Poland, Romania, Bulgaria, Czech Republic and Portugal.[1] Norway’s total yearly contribution by means of grants is estimated to be EUR 391 million for the 2014-2021 period.[2]

Norway also participates in and funds the budget of several EU programmes, including Erasmus+, Galileo, Copernicus and Horizon 2020. Although the total amount varies each year, it is estimated that the yearly cost for participation in these programs amounts to EUR 447 million for the 2014-2021 period.[3]

So what do Norwegians think?

Due to the significant influence that the EU exerts on Norway, the prevalence and importance of Norway’s EU relationship is accordingly a recurring theme in Norwegian home affairs. In 2010, the Norwegian Government appointed a broad-based expert committee to review Norway’s experience with the EEA Agreement and its other agreements with the EU. The aim was to obtain the best possible body of knowledge for this subject. This was no small task and a monumental report of over 900 pages was delivered in 2012. It found that Norway is both inside and outside the EU and that it has adopted roughly ¾ of EU legislation compared to EU Member States that participate in everything.

The conclusion reached by the report was that the relationship as it currently stands is positive, if a little unusual. The ‘norm’ is that states are members of the organisations with whose rules they chose to conform. Indeed, what Norway has chosen is tellingly referred to as ‘an attempt to do the impossible – to simultaneously participate and to not participate’. Nonetheless the report finds that this form of association has ‘generally functioned as intended – and better than many thought it would’. Moreover, the report finds that Norway is in fact better at implementing EU legislation than many EU Member States. As a practitioner of EEA and EU Law I also agree with this: implementation is clear and the path is predictable and easy to follow on dedicated EEA portals.

The greatest concern expressed by the report was the fact that Norway is in practice bound to adopt EU policies without having voting rights on them. Several remedies were suggested with emphasis being placed on improved transparency and knowledge of the EEA Agreement in public administration.

The ‘democratic deficit’ that some say arises from the current situation is generally seen to be acceptable in light of the benefit Norway gains from the EEA Agreement. The Norwegian economy is dependent on the four freedoms in order to run efficiently and effectively. This point was underlined in 2015 position paper by Vidar Helgsen (as cabinet member with the EU/EEA brief) who emphasised the importance of the free movement of people, noting that Norway ‘cannot survive without skilled workers from Europe’ and that the EEA Agreement is Norway’s ‘lifeline’ to the single market.[4] A position which echoes Prime Minister Gro Harlem Brundtland position in 1995 who referred to the EEA Agreement as Norway’s ‘most important anchor’.[5]

I will refrain from any personal viewpoint as to the suitability of this model – whether for Norway or the UK. I hope that this post allows for a basic understanding of what Norway’s model actually is and what it implies so that it can inform the debate on the UK’s future in Europe.

*           *           *

[1] http://eeagrants.org/Who-we-are/EEA-Grants.

[2] https://www.regjeringen.no/no/tema/europapolitikk/tema-norge-eu/okonomiske-bidrag/id684932/.

[3] https://www.regjeringen.no/no/tema/europapolitikk/tema-norge-eu/okonomiske-bidrag/id684932/.

[4] Vidar Helgesen ‘Brexit: a Norwegian view’, https://www.regjeringen.no/no/aktuelt/brexit_norway/id2402031/.

[5] Prime Minister’s New Year’s speech, 1 January 1995 https://www.regjeringen.no/no/aktuelt/nyttarstale_nrk_oslo_1-1-95/id261469/

3 thoughts on “The EEA Agreement and the ‘Norway option’: integration without co-determination

  1. Thank you, that is a very helpful post that goes beyond the shallowness of media shorthand and the dogma of political platforms and those who viscerally adhere to them.
    (I smiled at your EFTA/EU country ratio: EFTA countries have tiny populations!)
    Quick questions: would it make sense for the UK (or the parts that voted for Brexit) to join EFTA?
    Or does the immigration topic fundamentally put the UK in a different category altogether?

  2. Pingback: Brexit: a turmoil both for the EU and the EEA? | CREO

  3. Pingback: Asser International Sports Law Blog | Brexit and EU law: Beyond the Premier League (Part 1). By Marine Montejo

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