EFTA and the EEA: What are they?

Emily MacKenzie

Both before and since the referendum, one option for post-Brexit Britain that has made the headlines is the possibility of the UK becoming a member of EFTA or the EEA (see, for example, this article in The Telegraph’s business section “Safe harbour: why the Norway option could take the risk out of Brexit”).

It is important to be clear about what EFTA and the EEA both are and how they are different.

What is EFTA?

EFTA is the European Free Trade Association. It currently has four Member States: Iceland, Liechtenstein, Norway and Switzerland. The UK was a founding member of EFTA in 1960, but left in 1973 to join the then EC. The EFTA Convention governs intra-EFTA trade (a full list of EFTA legal texts is available here). The EFTA States also enter EFTA Free Trade Agreements with third countries.

As regards trade between EFTA and the EU, this was originally provided for in a Free Trade Agreement (see an account of the Luxembourg declaration that followed it here) but has not been developed in some time, given that — as described below — all of the EFTA members have pursued further integration with the EU through separate agreements. The EFTA–EU Free Trade Agreement only covers tariff-free trade in relation to some products (such as agriculture and fish), but does not cover services or “non-tariff barriers” (eg divergences in regulatory standards).

What is the EEA?

Three of the four EFTA Member States (all but Switzerland, which instead has a series of bilateral agreements with the EU) are also members of the EEA (the European Economic Area). The EEA Agreement, which came into being in 1994, is a treaty between the EU on the one hand and Iceland, Liechtenstein and Norway on the other. It effectively allows those EFTA states to participate in the EU’s Internal Market, whilst in turn contributing to the EU. EEA States are given the opportunity to express their views on EU legislation, but cannot vote on it.

Under the EEA Agreement, EU law relevant to the EFTA policy areas applies in the EEA. This includes the four freedoms (the free movement of goods, services, persons and capital), as well as competition and state aid rules. It also includes so-called “horizontal policies”, such as consumer protection, company law, environment, gender equality, health and safety and labour law.

The EEA Agreement does not cover common agriculture and fisheries policies (although it does contain provisions on trade in agricultural and fish products), customs union, common trade policy, common foreign and security policy, justice and home affairs, direct and indirect taxation and monetary union.

When an EU law is passed, it will be marked “text with EEA relevance” if it also applies in the EEA. A full directory of legal instruments relevant to the EEA is available here.

Policing adherence to the EEA Agreement is the role of the EFTA Surveillance Authority, which is based in Brussels, and the EFTA Court, which is based in Luxembourg.

EFTA without the EEA?

To join the EEA it is necessary first to join EFTA. However, the reverse is not true. The UK could, like Switzerland, be a member of EFTA without being a member of the EEA. If the UK did that (but did not negotiate a bilateral agreement with the EU as Switzerland has done) it would only be bound by the Free Trade Agreement between the EU and EFTA, which has a limited remit, as set out above.

There are also diverging views as to whether membership of EFTA would give the UK access to the EFTA Free Trade Agreements with third countries (the Centre for European Reform assumes not in this article, whereas Ruth Lea argues in this post on LSE’s BrexitVote blog that it would).

Of course, in order to join either EFTA or the EEA, the UK would have to conclude a treaty between the Member States of those organisations. Precisely what obligations and rights the UK would have would therefore depend upon the outcome of negotiations.

Relevance of EEA/EFTA obligations in the UK courts

All of the discussion above addresses only the UK’s obligations on the international plane. When the UK signs and ratifies an international treaty it is bound by it in international law. However, because the UK is a dualist country, international law does not become part of English law unless and until it is specifically incorporated. The European Communities Act 1972 transposed the UK’s international law obligations under the EU treaties into domestic law and a statute would be required to do likewise in relation to any subsequent arrangement.

The precise contours of the rights and duties arising under an EFTA/EEA-style arrangement for the UK and their relevance to litigants in English courts would therefore depend upon the form of the implementing legislation.

One thought on “EFTA and the EEA: What are they?

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