Changing EEA pillar (EU to EFTA)

Jean-Claude Piris, formerly Legal Counsel of the European Council and of the EU Council, has claimed that if the UK were to leave the EU and join EFTA, we could not simply remain in the EEA, but would have to make a fresh application to join it according to Article 128 of the EEA Agreement. Article 128 reads:

1. Any European State becoming a member of the Community shall, or becoming a member of EFTA may, apply to become a Party to this Agreement. It shall address its application to the EEA Council.

2. The terms and conditions for such participation shall be the subject of an agreement between the Contracting Parties and the applicant State. That agreement shall be submitted for ratification or approval by all Contracting Parties in accordance with their own procedures.

The Contracting Parties of the EEA Agreement are the European Community, the 28 EU member states, and the three EEA-EFTA states, making a total of 32. So, if Piris is right, we would need the agreement of the other 31 parties to stay in the EEA. Accordingly, Piris writes (p. 7):

Finally, should the UK decide to join the EEA, it would need to sign an accession treaty which would have to be concluded and ratified, not only by the EU and the UK, as is the case for a withdrawal treaty, but also by each of the 30 EEA member-states (27 from the EU and three from EFTA).

But is he right? There is an interesting and closely parallel precedent in the accession of Austrian, Finland and Sweden to the European Union on 1 January 1995. Previously, and until the day of their accession, these three countries had been members of EFTA, and they had been party to the EEA Agreement as EFTA states since 1 January 1994. Although they were ‘European State[s] becoming … member[s] of the Community’, they did not make an Article 128 application to join the EEA. 1

Why was this? Article 128(1) begins:

Any European State becoming a member of the Community shall … apply to become a Party to this Agreement.

Austria, Finland and Sweden were already Contracting Parties to the EEA Agreement, and remained so in the EFTA pillar until the day they joined the EU. It seems to me that it could be argued that the expression ‘apply to become a Party’ cannot be used of a state that is already a Party to the agreement. If this argument is accepted, and I am advised that it is at least a possible interpretation of the text, then there would have been no need for an application to be made by Austria, Finland and Sweden.

So far as I understand it, there is no legal reason why the UK could not make an application to join EFTA while we are still in the EU, most likely during the 2 year Article 50 withdrawal period. If we were successful in our application to EFTA, it is conceivable that it could be agreed that we would accede to it on the day that we left the EU. In that case, we would continue as a Party to the EEA Agreement in the EU pillar, until we joined EFTA. The relevant part of Article 128(1) reads:

Any European State … becoming a member of EFTA may, apply to become a Party to this Agreement.

Then, as in the parallel circumstance of Austria, Finland and Sweden in 1994-5, it would seem possible and reasonable to argue that, although we were a ‘European State … becoming a member of EFTA’, we could not ‘apply to become a Party’ to the EEA Agreement, since we were already such a Party. And therefore that we were not required to make an Article 128 application, which would require ratification by all 30 other EEA states as well as the EU.

The 2004 EEA Agreement Amendment

At the time of the accession of the Czech Republic, Estonian and 8 other states to the European Union, the EEA Agreement was amended by the EEA Enlargement Agreement of 14 October 2003, made between all the existing EEA Contracting Parties. Although its main purpose was to make the newly acceding EU states party also to the EEA Agreement, the Enlargement Agreement also made at least one change that seems to be consequent to the earlier accession of Austria, Finland and Sweden to the EU. Specifically, in Article 2(1).f of the Enlargement Agreement, it is stated that Article 126(1) EEA, concerning the territories to which the Agreement applies, should be amended as follows:

the words ‘the Republic of Austria, the Republic of Finland, the Republic of Iceland, the Principality of Liechtenstein, the Kingdom of Norway and the Kingdom of Sweden’ shall be replaced by the words ‘the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway’;

Also, in Article 2(1).a of the Enlargement Agreement, there is a new list of Contracting Parties to the EEA Agreement, in which only Iceland, Liechtenstein and Norway appear on the EFTA side of the list. So far as I have been able to ascertain, and I stand to be corrected, it was only at this point in 2003, that Austria, Finland and Sweden were transferred to the EU side of the list.

So far as I can see, this is further evidence that there were no Amendments to the EEA Agreement at the time that Austria, Finland and Sweden acceded to the EU. And this suggests to me that it is by no means certain that an Amendment would be needed if the UK were to transfer in the opposite direction, to the EFTA pillar of the EEA.

[Addition, 10 May 2016:

Article 2(b) EEA Agreement reads:

the term “EFTA States” means the ( ) Iceland, the Principality of Liechtenstein and the Kingdom of Norway;

A footnote (no. 9) to Article 2(b) reads:

As replaced by the Adjusting Protocol and subsequently by the 2004 EEA Enlargement Agreement (OJ No L 130, 29.4.2004, p. 3 and EEA Supplement No 23, 29.4.2004, p. 1), provisionally applicable as of 1.5.2004, e.i.f. 6.12.2005.

The primary purpose of the Adjusting Protocol (17 March 1993) was to make a number of adjustments to the EEA Agreement after its non-ratification by Switzerland. Article 2(2) reads:

Article 2 (b) of the EEA Agreement shall be replaced by the following : ‘the term “EFTA States” means the Republic of Austria, the Republic of Finland, the Republic of Iceland, the Kingdom of Norway, the Kingdom of Sweden and, under the conditions laid down in Article 1 (2) of the Protocol adjusting the Agreement on the European Economic Area, the Principality of Liechtenstein ;’.

Article 2(1).b of the 2004 Enlargement Agreement, meanwhile, begins:

(b) Article 2

(i) The text of point (b) shall be replaced with the following:

‘the term “EFTA States” means the Republic of Iceland, the Principality of Liechtenstein and the Kingdom of Norway;’;

Apparently, therefore, Austrian, Finland and Sweden were not removed from the list of EFTA states in the EEA Agreement until 2004, despite having been members of the EU since 1995.]

EFTA state financial contributions

Articles 82 and Articles 115-117 stipulate that the EFTA states should make financial contributions, first to the EU budget to support their participation in EU programs (Article 82 and Protocol 32), and second, by a process known as the Financial Mechanism, to poorer EU states to ‘contribute to the reduction of economic and social disparities’ (Article 115-117, Protocols 31 and 38). 2

The details need not concern us here, but it is sufficient to know that the level of the EFTA states’ contribution under the Financial Mechanism is set by Agreements between the European Union and the EFTA states. As it happens the EEA Financial Mechanism for the period 2014-2021 was signed 6 days ago, on 3 May 2016, by the Ambassadors to the EU of the three EEA-EFTA states, and the Ambassador from the Presidency of the Council of the EU, on behalf of the EU. Negotiations between the European Commission and the three EEA-EFTA states had begun in January 2014 and were completed in July 2015. The Provisional Agreement, dated 12 April 2016, stipulates actual amounts to be paid annually under various Articles of the Agreement (see the Annex, Protocol 38c). In addition to the EEA Financial Mechanism, there is a separate Norwegian Financial Mechanism.

On the EU side, the Agreement will be ratified first by the European Parliament, and then by a Decision of The Council of the European Union. A Proposal for this Decision, which will be taken by QMV, can be found here.

The contribution through the two Financial Mechanisms by the EEA-EFTA states will amount to a total of  €2.8 bn for the period 2014-2021. 3 If the UK were to join EFTA and the EEA, we would have to make our own contribution, either through a renegotiation of the EEA Agreement, or perhaps more likely, through a separate UK Financial Mechanism. This would have to be negotiated with the Commission, agreed by the European Parliament, and ratified by a Decision of the Council of the EU by QMV.

Conclusion

I have taken issue with Piris’ opinion that if the UK were to leave the EU and join EFTA, we could not remain in the EEA without the agreement of all 32 Contracting Parties. He may be right, but I think it remains to be proved. On the other hand, I have also argued that our continuation in the EEA would not be automatic, but would require negotiations with the EU on the scale of our financial contribution. Any Agreement reached would have to be ratified by a majority in the European Parliament and then by a Qualified Majority in the Council of the EU.

Andrew

 

Notes:

  1. Email correspondence with EFTA Secretariat, Brussels, May 2016
  2. ‘Activities and Financial Contributions under the EEA Agreement’ (EFTA Bulletin 2 – 2002) p. 45. Link.
  3. ‘Proposal for a COUNCIL DECISION on the conclusion of the Agreement between the European Union, Iceland, the Principality of Liechtenstein and the Kingdom of Norway on an EEA Financial Mechanism 2014-2021, the Agreement between the Kingdom of Norway and the European Union on a Norwegian Financial Mechanism for the period 2014-2021…’  (Brussels, 23.2.2016) p. 2. Link.

2 thoughts on “Changing EEA pillar (EU to EFTA)

  1. Andrew, as I read the Recitals of the EEA Agreement, the United Kingdim is cleatly stated as an existibg contracting party to it, outwith of the European Community (as it is expressed therein). Therefore should Parliament trigger A.50, and revoke the Treaty of Rome, then are we not still a party to the EEA in any event? (irrespective of the potential to join EFTA)

  2. Hi John, the same point was made to me by an eminent Oxford professor of EU law, so it can’t be dismissed lightly. My problem with it is that it seems so contrary to common sense, the EEA Agreement having been negotiated between the European Commission and the EFTA states, for there to be a party to it which was in neither pillar. It is all about the relationship between the EC and EFTA (2nd recital of the Preamble). Would it not lead to absurdities? For example, in Article 28(1) EEA Agreement:

    ‘Freedom of movement for workers shall be secured among EC Member States and EFTA States.’

    could we then happily argue that since we were neither an EC nor an EFTA state, we did not have to accept freedom of movement? And similarly with many other articles which refer to EC states and EFTA states.

    Andrew

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