Iceland is unlikely to secure permanent EU policy exemptions

An article published by Morgunblaðið argues that Iceland’s status as an island would not provide a realistic basis for permanent exemptions from European Union rules or common policies.

Debate over possible accession talks has referred to Article 349 of the Treaty on the Functioning of the European Union, which concerns the EU’s outermost regions, as a possible basis for special arrangements for Iceland. The comparison is limited, however. The provision applies only to specific territories within France, Spain and Portugal, not to entire member states.

Article 349 is intended to allow targeted adjustments in response to particular geographical and economic conditions. It does not exempt the regions from EU law or common policies. Case law from the Court of Justice of the European Union confirms that EU law generally applies in full in these territories and that any exemptions must be necessary, proportionate and compatible with the internal market and common policies such as the Common Agricultural Policy.

Support measures linked to Article 349 are also subject to the state aid rules in Article 107 of the treaty. They are intended for regions with significantly weaker economic conditions than those generally found within the EU. The European Commission has, among other criteria, considered regions where gross domestic product per person is 75 per cent or less of the EU average. Iceland does not meet those conditions.

The provision is therefore mainly intended to permit specific measures within the framework of common EU policies, rather than grant member states permanent exemptions from them. It is not considered a realistic precedent for Iceland to remain outside the Common Agricultural Policy or other fundamental parts of EU law.

Island status does not lead to permanent exemptions

The experience of other island countries in the EU also does not indicate that islands receive permanent exemptions from the union’s common policies. Ireland joined the European Community in 1973 with a substantial agricultural sector but did not receive an exemption from the Common Agricultural Policy. Instead, it received support within the policy’s framework.

The same applies to Malta and Cyprus, which joined in 2004 and were fully included in the Common Agricultural Policy from the outset. Although island status, small markets and high transport costs have been recognised as challenges, the EU’s solutions have primarily involved financial support, regional development, cohesion funds, state aid and targeted measures within the Common Agricultural Policy, rather than permanent exemptions from common rules.

Neither Ireland, Malta nor Cyprus has received outermost-region status under Article 349 of the Treaty on the Functioning of the European Union or a special position outside the Common Agricultural Policy.

Support measures rather than exemptions

The EU’s cohesion policy is based on Article 174 of the treaty. Although the provision supports targeted assistance because of island status and other geographical disadvantages, the cohesion policy has in practice focused primarily on economically weaker regions. Most of the support continues to go to regions where gross domestic product per person is below 75 per cent of the EU average.

The European Commission’s new island policy follows the same approach. It recognises that islands face special costs because of their location and small size, but the proposed solutions mainly consist of increased investment, transport support, state aid and other support measures within the EU regulatory framework rather than exemptions from it.

Although the EU’s island policy and cohesion policy could create opportunities for increased support because Iceland is an island, it is unlikely that a significant share of such support would come from the EU cohesion funds.