Iceland in Europe

Iceland is closely connected to other European countries in a historical, political, and a cultural sense. Although Iceland is not a member of the European Union (EU), its relation to the EU is mainly based on the EEA Agreement, which came into effect in 1994. The member states of the European Union (EU) are Iceland’s most important economic partners and the majority of Icelanders working and studying abroad, do so in Europe. The Agreement on the European Economic Area (EEA Agreement) is therefore a vital part of Iceland’s foreign policy.

In essence, the EEA Agreement unites the EU member states and the three EFTA EEA states (Iceland, Liechtenstein and Norway) into one single market governed by the same basic rules. These rules cover the so- called four freedoms free movement of goods, capital, services and persons, and competition rules.

The common market rules and regulations have a considerable impact on Iceland. Therefore, the Directorate for External Trade and Economic Affairs of the Ministry for Foreign Affairs and Iceland’s Embassy in Brussels have the objective to ensure the interests of Icelandic citizens, companies, and other organisations in relation to the execution of the EEA Agreement, in collaboration with the Icelandic Parliament, line ministries, and various other stakeholders.

In recent years there has been an effort to increase Iceland’s influence regarding EU legislation and to further improve the execution of the EEA Agreement. Icelandic authorities have among other things, prepared a list of pre-pipeline legislation that it will monitor closely.

Iceland has furthermore fully implemented the Schengen Agreement since 25 March 2001, which ended internal border checkpoints and controls. Citizens of countries implementing the Schengen Agreement can cross the internal borders of the implementing countries at any point without checks.

In May 2018 the Icelandic government adopted a list of issues in the legislative process in the European Union (EU) which are seen as priority issues when it comes to safeguarding Iceland’s interests under the framework of the EEA Agreement. Get an English summary of the original list.

In April 2018 the Icelandic Ministry for Foreign Affairs published a report introducing various steps being taken to improve the implementation of the EEA Agreement. The following summary contains the key points of the report in English. See the full report in Icelandic.

The Government’s charter affirms that one of Iceland’s most important interests lies in the diligent implementation of the EEA Agreement.

The European Economic Area (EEA) Agreement has had an extensive and largely beneficial impact on the Icelandic economy and legal framework. At the same time various challenges have hampered the smooth functioning of the EEA Agreement. The incorporation of EU legislation into the Agreement as well as its subsequent transposition into Icelandic law has lagged and the leeway to take part in shaping such legislation in its early phases has arguably decreased.

There are doubtless many reasons why the process of implementing the EEA Agreement has been subject to increasing delays. These include the nature of the legislation being incorporated into the EEA Agreement, internal developments within the European Union and its relationship with the EEA EFTA States, bottlenecks caused by an increased workload in the Ministries, as well as divided opinions in the political arena regarding the pros and cons of the EEA Agreement itself.

Given the importance of the EEA for public welfare and commerce alike, it is important to address these challenges. In recent years various proposals have been made in order to improve the functioning of the EEA Agreement. A steering group on the implementation of the EEA Agreement, led by the Prime Minister’s Office, issued its findings in 2015 and another report, including proposals on the same subject, was prepared by a steering group of the Ministry for Foreign Affairs in 2017, to mention only two examples. A number of improvements have already been introduced. For example, temporary funding was provided so that ministries could recruit additional staff to improve the implementation deficit. A new EEA database was also launched at the end of 2016 making the processing of legal acts more efficient.

This process of reform must be built on and taken forward. There is no need to reassess earlier proposals. However, a limited number of well-defined steps should be taken to reinforce the reform process and ensure that it produces the desired results. Most importantly, the lines of authority, extending from the political authorities down through the administrative system, need to be streamlined in an integrated, coherent and effective manner. To this end, the Government, at the initiative of the Minister for Foreign Affairs, approved the following measures at its meeting on 20 February 2018:

• The steering group on the implementation of the EEA Agreement will be given new terms of reference.
• The EEA unit of the Ministry for Foreign Affairs will be enabled to retain staff with expert knowledge and relevant experience in EEA matters for a longer duration.
• The Althingi and stakeholders will be given access to the EEA database, which has proved to be a crucial tool for the administration to work together jointly on EEA-implementation.
• The Government will propose to the Althingi special budget appropriations to fund increased participation of Icelandic officials in the EEA process in the coming years, thus ensuring that all Ministries, and the Althingi, if it so wishes, can have representatives in the Embassy of Iceland in Brussels. Additionally, the special support allocated to individual Ministries to assist them in their EEA-related work will be extended.
• A program will be made for informing the public at large about the long-term advantages of Iceland´s participation in the EEA.
• The Permanent Secretaries of the Prime Minister’s Office and the Ministry for Foreign Affairs will take on the role of supervising the process of implementing the EEA Agreement within the administrative system.

The Icelandic Embassy in Brussels serves as the mission to the EU. The majority of its activities evolve around issues related to the EEA Agreement and the Schengen Co-operation.