EEA Briefing

British Influence believes that Britain may be able to keep the best of both worlds by staying in the single market by way of the European Economic Area (EEA). We believe – and many lawyers agree – that we are already independently in the EEA and therefore cannot be forced out by the EU. But we also believe that even if we had to leave the EEA and re-apply, it would be the best transitional – or even long-term – option for Britain after Brexit.

EEA: what is it – and what is it not?

The EEA comprises the 28 EU member states plus three of the four European Free Trade Association (EFTA) states: Norway, Iceland and Liechtenstein. The fourth EFTA state, Switzerland, is not party to the EEA and enjoys less access to the single market through a series of bilateral agreements with the EU.

The EEA is equivalent to the single market, which means tariff and quota-free trade, the absence of non-tariff barriers, and mutual recognition. Unlike free trade agreements, it guarantees free trade in nearly all goods and services. The single market was, of course, invented and pushed through by Margaret Thatcher, and is genuinely regarded as the most precious element of EU membership.

The EEA does not include:

  • the Common Agricultural Policy or Common Fisheries Policy
  • the Common Foreign and Security Policy or Common Security and Defence Policy

the customs union – which means that non-EU EEA members can and do negotiate their own free trade agreements, either bilaterally or as part of EFTA

The legal case for continued membership

Currently the Government, along with the EU Commission, is arguing that we leave the EEA at the same time as we leave the EU. They use Article 126 of the EEA Agreement to support this case: Article 126 states that contracting parties must be part either of the EU or EFTA.

There are many legal arguments which appear to counter this view. The first key argument is Article 127 of the EEA Agreement, which requires contracting parties (of which the UK is one) to give ‘at least twelve months’ notice’ before leaving – which suggests a separate departure process from Article 50.

The second is the existence of the European Economic Area Act 1993, a British Act of Parliament which enshrines the EEA in UK domestic law. What parliament has enacted, parliament will have to repeal in the normal way.

The political ramifications of the legal case

If it can be proven that the UK is a contracting party to the EEA in its own right, and not as part of the EU, then the EU will not be able to force us out of the single market. That gives Britain a cast-iron negotiating tool which would previously not have been available.

It may also mean that the Government will not be able to force us out of the single market without Parliamentary approval. Not only could Article 127 be subject to a vote much as Article 50 may be (subject to the Supreme Court’s ruling), but MPs would have to vote to repeal the European Economic Area Act 1993.

We stress that the single market was the brainchild of Margaret Thatcher and is supported by those on the right and left of the political spectrum. We also note that the Conservative Party general election manifesto of 2015 commits to keeping Britain in the single market. Just as the Conservative Party promised to hold a referendum and honour the result, then, it also effectively promised to keep us in the single market. Leaving the EU is compatible with remaining in the single market.

What about free movement of people?

The EEA Agreement commits all 31 contracting parties (the 28 EU member states plus Norway, Iceland and Liechtenstein) to uphold the ‘four freedoms’ of the EU: free movement of goods, services, capital and people. But unlike in the EU, the non-EU EEA states have more leeway when it comes to implementing the freedoms.

Liechtenstein has, under Protocol 15 of the EEA Agreement, a quota on how many people can work and settle in the principality.

Under Article 112 of the EEA Agreement, contracting parties can act unilaterally to stop implementing any of the freedoms if they can prove ‘serious economic, societal or environmental difficulties’ in doing so. In other words, if the UK can prove that it is being materially or socially harmed by free movement, then it can act to curb it. This cannot be open-ended, and it may incur retaliation, but it allows for more control than currently exists.

Does it include other things people don’t like about the EU?

Legal sovereignty: The EEA gives Britain full legal sovereignty by taking it out from the umbrella of the European Court of Justice (ECJ). The EFTA Court, which also rules on EEA matters, only deals with single market violations and has less legal clout than the ECJ.

Budget contributions: Norway, Iceland and Liechtenstein are not required to pay any money into the EU budget, and only pay for what they access from the single market.

Can we improve the EEA?

We think that, with Britain’s clout, the EEA can become an important organisation in its own right. At the moment, only 1% of its population lives outside the EU, but with Britain’s membership after Brexit, this will become almost 14%.

This gives impetus to improve the democratic input of non-EU countries into the rules of the single market. It might even be possible to revisit the idea of the former President of the European Commission, Jacques Delors, to give non-EU members a Commissioner on single market issues – in addition to non-voting observers in the EU Council and Parliament. If the goodwill is there, Britain can secure a deal which will benefit itself and the EU.

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