The European Economic Area

Some have called for the UK to remain a member of the European Economic Area (EEA) after Brexit. Others regard this as keeping the UK in too close a relationship with the EU.

This briefing paper describes the main features of the EEA, its institutional structure, pros and cons of EEA membership, the arguments around the process of withdrawing from the EEA and suggestions for other bespoke future relations with the EEA.

The EEA includes the 28 EU Member States and three countries which are not in the EU: Norway, Iceland and Liechtenstein. The EEA essentially extends the EU Single Market to those three non-EU countries. Membership of the EEA has been suggested as a possible option for the UK after Brexit. The Government has ruled this out, however.

Those in favour of the EEA option argue that continued membership of the single market would bring economic benefits as a result of favourable access to the EU market. However, EEA membership also involves a range of obligations, including free movement of people, financial contributions to the EU and accepting EU rules with no direct say over them.

It is sometimes suggested that EEA states have greater scope to restrict free movement of persons than EU Member States. This is a reference to the general ‘safeguard clauses’ in the EEA Agreement. These enable the Contracting Parties to suspend parts of the Agreement in response to “serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist”. Such measures could potentially include temporary restrictions on immigration, although there is limited precedent for this. Liechtenstein has secured an amendment to the EEA Agreement which has enabled it to continue to apply certain restrictions on free movement of people.

Many commentators are sceptical of whether the UK would be able to use the safeguard clauses or secure a bespoke agreement similar to Liechtenstein’s, in the event that it joined the EEA after exiting the EU, in order to restrict free movement of people rights, or of what difference this would make in practice.

The EEA is structured in a two-pillar system where the European Free Trade Association (EFTA) recreates a mirror image of the EU institutions including, on the one side, the EFTA Supervisory Authority and the EFTA Court, and on the other the EU Commission and Court of Justice.

Article 127 of the EEA Agreement sets out a basic rule for withdrawing from the Agreement. It requires a ‘contracting party’ (of which the UK is one) to provide 12 months’ notification of withdrawal, in order to give the remaining parties time to modify the Agreement. However, the prevailing legal opinion and that of the UK Government is that when the UK leaves the EU, the whole EEA Agreement will automatically cease to apply to the UK; the UK is a member of the EEA only by virtue of its membership of the EU. The UK has given no explicit notice under Article 127 and the Government believes that sending the Article 50 letter on 29 March 2017 also amounted to implicit notice of leaving the EEA.

The European Union (Withdrawal) Act 2018 repealed the domestic effect of the EEA Agreement. Several amendments to the Bill were tabled relating to Article 127, but these were not passed.

In December the UK reached agreement with the three EEA EFTA States to address separation issues following Brexit, including protecting the rights of UK citizens living in these countries and citizens of these countries living in the UK, as well as an agreement with Switzerland (in EFTA but not EEA) covering citizens’ rights.

Variations on EFTA and EEA membership, such as associate, temporary, transition period only and partial membership, are among suggestions for future UK relations with the EEA.

The ‘Norway Plus’ model would involve EEA membership and a UK-EU customs union. A customs union requires all member states to implement the same import tariff and quota regime with third countries, as well as removing tariffs and quotas on trade between the members of the custom union. If the UK negotiated a customs union agreement with the EU, it would still be able to negotiate agreements covering other aspects of trade, including in services.