Iceland’s EEA obligations centre on Protocol 35

Debate over proposed changes to Iceland’s European Economic Area Act has overlooked Protocol 35, the provision at the heart of the issue, writes Baldur Guðlaugsson in an opinion article published by Morgunblaðið.

During negotiations on the EEA Agreement, the European Community pressed the EFTA states, including Iceland, to give EEA rules automatic priority in domestic law. It argued that otherwise, individuals and legal entities in EFTA countries would not have the same legal protection as those in EU states if national courts applied domestic law that conflicted with EEA rules. In EU states, EU rules take precedence over national legislation.

The EFTA states could not accept that position, Guðlaugsson writes, because it would have involved transferring legislative powers to EU or EEA institutions. In Iceland, such a transfer was considered incompatible with the Constitution unless it was amended.

Protocol 35 was a compromise. Its preamble says the EEA aims to create a homogeneous economic area based on common rules, without requiring states to transfer legislative powers to EEA institutions. The protocol then commits EFTA states, where necessary, to adopt national provisions stipulating that implemented EEA rules take precedence in cases of conflict with other laws.

Iceland sought to meet that commitment through Article 3 of Act No. 2/1993 on the European Economic Area. It states that laws and regulations should, where applicable, be interpreted in line with the EEA Agreement and rules based on it.

Explanatory notes to the bill said that domestic laws based on the EEA Agreement would generally be treated as special rules in relation to later laws that conflicted with them. Later laws would not override them unless the legislature expressly said so, the notes said, describing this approach as necessary to ensure consistency across the EEA.

But the Supreme Court’s judgment in case No. 24/2023 said that, apart from one ruling in 2003, the court had not treated legislation implementing an EEA rule as taking precedence over other laws. The court had regarded Article 3 as a rule for interpreting legislation in accordance with the EEA Agreement, rather than as a general priority rule under Protocol 35, Guðlaugsson writes.

He also says Icelandic courts have in several cases held the state liable for damages to individuals and legal entities who suffered losses because an EEA rule they relied on was not considered to take precedence over conflicting domestic law.