The Fundamental Principles of EEA Law

The fundamental idea and objective of the EEA Agreement is to extend the internal market of the EU to the participating EFTA States, by ‘creating a homogenous European Economic Area’. This chapter describes how legislative homogeneity in areas of relevance to the internal market is a condition for the achievement of this objective. It gives an overview of the decision-making procedures established to realise legislative homogeneity by incorporating relevant EU legislation into the Agreement, and points out that the particular features of these procedures reflect the political and legal needs for the Parties to preserve, on the one hand, the decision-making autonomy of the EU, whilst on the other hand respecting the constitutional principles of sovereignty of the EFTA States. As a case in point and an example of how new challenges linked to meeting these different concerns were overcome, it describes the agreement that was reached on how to extend the EU’s system of Financial Supervisory Authorities to the EEA. The chapter also discusses whether legislative homogeneity is actually achieved. Finally, it is argued that, in spite of criticism that the EEA Agreement undermines the sovereignty of the EEA EFTA States by not offering sufficient participation in the decision-making processes, the political reality is that these States consider their overall interests to be well served by the Agreement, and that their decision to enter into the Agreement and remain part of it is obviously a way of exercising their full sovereignty.

Homogeneity is a concept often used in sciences, statistics and the law. In chemistry, for example, a homogeneous suspension of material means that, when dividing the volume in half, the same amount of material is suspended in both halves of the substance. However, it might be possible to see the particles under a microscope. In the EEA, the principle of homogeneity guarantees a level playing field for individuals and economic operators (One may have expected that the equally important principle of reciprocity had played a similar preeminent role as the homogeneity principle. However, the notion of that principle is only gradually emerging into homogeneity’s twin sister or brother (see further the chapter by Carl Baudenbacher, Reciprocity)). Without homogeneous interpretation of the common rules the playing field would, in the long run, develop into two separated internal markets. The homogeneity principle therefore simply has to work. The understanding of homogeneity, however, is not as homogeneous as one may expect (see Fredriksen, Judicial protection in the European economic area, pp. 188 et seq., 2012; Magnússon, Nord J International Law 80(4):507–534, 2011; Baudenbacher, The Handbook of EEA law, 2016; Hreinsson, The handbook of EEA law, 2016), in particular with respect to judicial homogeneity. It is undoubtedly a special challenge in the EEA’s system with two independent courts, each with full jurisdiction about the interpretation of the EEA agreement in their pillar, to achieve homogeneity. Against this background that branch of the principle and how it has been (pragmatically) approached in Luxembourg shall be (re-)assessed.

The principle of reciprocity is the twin maxim to the principle of homogeneity. In EEA law, the principle of reciprocity goes beyond the trade law concept of requiring both ‘sides’ of the agreement to grant economic operators and citizens the same rights to do business. Reciprocity as a matter of EEA law gives citizens and economic operators rights which can be enforced in court. This chapter considers the principle as it has been understood over time by reference to direct effect and primacy, State liability and conform interpretation, obligation of the courts of last resort to refer, and the legal nature of the Court’s preliminary rulings (judgments in the form of “advisory opinions”). The chapter goes on to consider the Court’s relationship with the national supreme courts and criticises the Norwegian ‘room for manoeuvre’ doctrine.

The principle of “sincere cooperation” is stated in the EEA Agreement in the same terms as in the Treaty on the European Union, but the principle has developed in the case law of the EFTA Court so as to be even more important than in the EU. This is because the principle has been used to resolve some important ambiguities in the EEA Agreement.

The main point made in this article concerns arguments about applying international law method in the EFTA pillar of the EEA. General international law does not support any reading down of treaty obligations and EU secondary legislation in the EFTA States of the EEA or the institutions of the EEA. Preserving national sovereignty in the fields covered by the EEA Agreement is not the object and purpose of the EEA Agreement. There is no institutional balance of the kind developed in the EU institutions and between them and the member states. Under international law, EEA obligations may go further for the EFTA States of the EEA, to the extent EEA principles of homogeneity and reciprocity or principles of EU law do not ameliorate this. Under the EEA judicial constitution, the EFTA Court bears the burden of maintaining the EEA principles of homogeneity and reciprocity in treaty interpretation.

The EEA Agreement has worked well for the EEA/EFTA States and their citizens for more than 24 years, providing stability, peace and prosperity. The European internal market is underpinned by a belief that keeping markets fair, level and open is good for our economies and societies and allows people to prosper. The concept of prosperity must be seen as covering more than economic growth and development; it also includes efforts to ensure the constant improvement of the living and working conditions of the peoples living within the EEA. Prosperity should thus be measured not only in purely financial terms, but also in the social welfare of its citizens, including the protection of its workers and the environment. Particularly in times of political, social and technological change, the EEA Agreement will need to keep up with the times through a dynamic and flexible application to be capable of safeguarding and further promoting our prosperity also for future generations.

The EFTA pillar has at its disposal powerful tools for shaping the single market shared with the EU States. Seen as an opportunity to be seized rather than a threat to be defended against, the EEA Agreement provides many ways of infusing the single market with ideas, values and experiences of EEA/EFTA States, which will ultimately secure its benefits for and relevance to future generations. In order to seize these opportunities, they firstly have to be identified as such and, secondly, priorities have to be set. Setting priorities is in particular important where EEA/EFTA States help shape secondary legislation to be incorporated into the EEA Agreement, where EEA law is developed through the positions adopted with regard to the application of the law in new settings, and where ESA identifies enforcement priorities.

The EFTA Court gives binding decisions on direct actions brought by ESA, or another EEA/EFTA State, but also has a role in securing the uniform interpretation of EEA law in the EEA/EFTA States by issuing advisory opinions at the request of their national courts. This, together with its function as an international court of law, argues for powers to create authoritative judge-made law, in a way comparable to the ECJ. However, the situation of the EFTA Court is more complex regarding several factors. This Chapter discusses the authority of EFTA Court rulings and case-law, in particular in relation to the preliminary reference procedure provided for by Article 34 SCA, while also touching up the standing of the Court in its relation with the EEA/EFTA States and the EU.

The principle of proportionality bridges legal thinking all around the world. From its German origins, it has expanded to national and international jurisdictions alike. At present, the principle forms an indispensable part of the judicial review conducted by the Court, the Court of Justice of the European Union and the European Court of Human Rights. Despite its apparent omnipresence, a closer look at the principle’s usage reveals many different forms of application and varying degrees of intensity of judicial review.

This chapter sets out the specifics of this “uberprinciple” of law in the EEA legal order and its application beyond. It takes into account not only the Court’s case law, but also developments in other jurisdictions. In particular, the chapter discusses the application of proportionality by the courts of Iceland, Liechtenstein and Norway, both in dealing with domestic law and the application of EEA law. Particular emphasis is placed on the operation of the preliminary reference procedure in this regard.

This chapter explores the principle of equality in EEA law. The principle of equality is established in 4th recital of the EEA Agreement. According to this recital, the objective of the EEA is to establish a dynamic and homogeneous EEA, based on common rules and equal conditions of competition and providing for the adequate means of enforcement including at the judicial level, achieved on the basis of equality and reciprocity and of an overall balance of benefits, rights and obligations for the Contracting Parties. This presumption of equality is explored through three examples, which show the importance of the presumption of equality between the two pillars of the EEA as well as for the actors within the two pillars.

In Sveinbjörnsdóttir v. Government of Iceland, the EFTA Court extended the principle of state liability from EU law to the European Economic Area. Consequently, EFTA States are obliged to compensate individuals for damage caused by breaches of EEA law for which they are responsible. The EFTA Court has affirmed that the same three conditions apply to state liability claims as in EU law, but with some possible modifications. Section 2 addresses the justifications for state liability in the EEA and Sect. 3 explores the criteria for establishing state liability. Section 4 looks at a contentious example of the lack of state liability—the Icesave I case before the EFTA Court.

In this landmark judgment, the EFTA Court affirmed that the State of Iceland was not liable for deposits in failed credit institutions, provided the state established a deposit insurance scheme in accordance with EU Law. Iceland was under no obligation to use taxpayer funds to recapitalise the Icelandic deposit insurance scheme that the collapse of the Icelandic banking system in October 2008 overwhelmed. Deposit insurance was a liability of the Icelandic banks, and not of the State of Iceland. Even though the Court affirmed the lack of Iceland’s liability under EEA law in the instant case, its obiter dictum does not detract from the principle of state liability in EEA law.