On 28 November 2016, British Influence, a pro-Single Market think tank, announced that it is seeking clarification from the UK Government on its position on the UK’s membership of the European Economic Area (“EEA”) post-Brexit. Depending on the response, British Influence may seek to launch a judicial review action of the UK Government’s stated position that “As the UK is party to the EEA Agreement only in its capacity as an EU Member State, once we leave the European Union we will automatically cease to be a member of the EEA.”1
What is the EEA?
The EEA is an area composed of all of the EU Member States, as well as Iceland, Liechtenstein and Norway, which are three of the four States2 in the European Free Trade Association (“EFTA”). The EEA was created and is governed by the EEA Agreement, a trade agreement which was signed on 2 May 1992 and entered into force on 1 January 1994. Each of the EU Member States (including the UK) are parties to the EEA Agreement in their own right, as well as through the EU.
The EEA Agreement enables Iceland, Liechtenstein and Norway to be part of the EU’s Single Market. As with the EU Treaties, the substantive scope of the EEA Agreement includes, at its core, the four freedoms (goods, services, people and capital). It does not, however, cover certain EU policies including the Common Agricultural Policy, the Common Fisheries Policy, the Customs Union or Common Trade Policy. Remaining in the EEA would, therefore, enable the UK to continue trading goods and services freely within the EEA (to the extent covered by the EEA Agreement) but, in return, it would continue to have to pay into some EU budgets (but to a lesser extent than it currently does), accept the free movement of workers and abide by EU law in the areas covered by the EEA Agreement. As the EEA States are not in the EU’s Common Trade Policy, the UK could enter into its own free trade agreements.
The UK Government is of the view that once the UK leaves the EU, it will automatically leave the EEA. British Influence, however, disagrees with this contention.
There are two key legal issues: whether the UK is only a member of the EEA through its membership of the EU and whether the UK will automatically leave the EEA once it leaves the EU.
Does the UK have to leave the EEA once it leaves the EU?
Article 126 of the EEA Agreement provides that the EEA Agreement shall apply to the territories establishing the European Economic Community (now the EU) and to Iceland, Liechtenstein and Norway. The UK Government, therefore, seems to be relying on this provision to argue that once the UK leaves the EU, the EEA Agreement will no longer apply in the UK. This is not, however, explicitly stated in the EEA Agreement and will be a matter that will need to be decided through the legal process. British Influence claims that EU membership is a “gateway to join the EEA, but is not a pre-condition of continued membership of the EEA.”
In a talk given by Judge Baudenbacher, the President of the EFTA Court, to the Centre of European Law at King’s College London on 13 October 20163, he stated that his view was that a State can only be a party to the EEA Agreement either through membership of the EU or through membership of EFTA4. Judge Baudenbacher relied on Article 128(1) of the EEA Agreement which states:
“Any European State becoming a member of the Community (now Union) shall, and the Swiss Confederation or any European State becoming a member of EFTA may, apply to become a party to this Agreement. It shall address its application to the EEA Council.”
Consequently, Judge Baudenbacher is of the view that once the UK leaves the EU, it will lose its EEA membership, as the UK is only a member of the EEA though its EU membership. This position is not, however, clearly covered in the EEA Agreement. Furthermore, there is no expressed provision in the EEA Agreement to ask an EEA State to leave the EEA if they cease to be a member of the EU or of EFTA.
Will the UK automatically leave the EEA once it leaves the EU?
If the UK Government is correct and the UK will leave the EEA once it leaves the EU, will this happen automatically? According to Article 127 of the EEA Agreement, each contracting party “may” withdraw from the EEA Agreement “provided it gives at least twelve months’ notice in writing” to the other contracting parties. The UK will not, therefore, “automatically” leave the EEA once it leaves the EU and separate notice will need to be given.
The decision to leave the EEA is a voluntary act and the UK will need to give at least twelve months’ notice to the EEA States of its decision to leave. Some, however, view this as a tick box exercise, as notice could be given during the course of the Article 50 negotiations with the EU so that the UK leaves the EEA once it leaves the EU.
With the UK Government already facing court action on whether it can trigger Article 50 of the Treaty on European Union, a fresh action by British Influence is likely to cause further disruption for the UK Government. British Influence, however, considers the possibility of the UK remaining in the EEA as a “solution to Brexit” and a “golden opportunity to try to keep the UK in the Single Market whether the EU likes it or not.”
Even if the end-game is for the UK to leave the EEA, as the EU’s position is that it cannot negotiate a trade agreement with the UK before it leaves the EU, the possibility of the UK remaining in the EEA whilst the trade negotiations take place could provide relief for some businesses, as it could enable them to have undisrupted access to the Single Market.