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Twice the uncertainty? Legal consequences of Brexit for the relations between Norway and the UK

Ever since the UK’s referendum on Brexit, many commentators have pointed to the huge uncertainty that the withdrawal of the UK from the EU creates for citizens and businesses in the UK, the EU and also the EEA. A report published by the Norwegian foreign ministry now indicates that this uncertainty might be even greater as regards the relations between Norway (and other EFTA EEA States) and the UK going forward.

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For British businesses and citizens in Norway, and Norwegian citizens and businesses in the UK, this means that they ought to follow the developments pertaining to Brexit even more carefully, and consider making contingency plans.

Report by the Norwegian Institute for International Affairs identifies EEA specific challenges of Brexit

On June 29th, the Norwegian foreign ministry published a report by the Norwegian Institute for International Affairs. This report assesses the legal implications for Norway as party to the EEA Agreement that arise from the UK's withdrawal from the EU, provided that there is a withdrawal agreement between the EU and the UK (it does not describe what would happen in the cliff-edge scenario, i.e. where no deal is struck). It reveals an additional layer of legal complexities in a process which has been described as being of unprecedented scale and scope, and in which inevitably some issues will slip through the net and throw up illogicalities, gaps or ambiguities.

The UK's envisaged withdrawal from the EEA could cause some of these ambiguities. The foremost reason is that a potential EU-UK deal on future relations will not apply automatically to the EEA and thereby to Norway. Instead a bilateral agreement is most likely needed to ensure the homogeneity of the single market going forward. The crux is that such bilateral agreement cannot be concluded before the UK has withdrawn from the EU, which will almost inevitably exacerbate the general Brexit uncertainty for those businesses and citizens that so far have relied on the EEA Agreement to access and benefit from the Single Market.

Some complex legal questions pertaining to the UK's (indirect) EEA membership

The EEA Agreement extends membership of the Single Market to three EFTA States, including Norway. The UK, like all other EU member states, is a signatory of the agreement, meaning that the UK is a member of the European Union and the EEA. The report touches upon the disputed question as to whether the UK's withdrawal from the EU means automatic withdrawal from the EEA, or whether it needs to, in addition, trigger Article 127 of the EEA Agreement, which states that "each Contracting Party may withdraw from this Agreement provided it gives at least twelve months' notice in writing to the other Contracting Parties." The report does not conclude on this question, but suggests that the UK "would exclude itself from the operation" of the EEA Agreement without giving notice. While other commentators agree that the UK's membership to the EEA is "contingent upon and inherently linked to its EU membership" [In, out or in-between? The UK as a contracting party to the Agreement on the European Economic Area, Tynes/Haugsdal, E.L. Rev. 2016, 753-765], there is no definitive answer to this question yet.

Why does this matter? Because in the UK, a pro-single market group of lawyers argue that because the UK is a separate contracting party to the EEA Agreement in its own right, it will remain in the single market even after it leaves the EU, unless it also withdraws from the EEA Agreement, and has brought a judicial review application to a UK Court seeking to clarify that a separate withdrawal from the EEA Agreement was necessary to quit the single market. The Court denied the application, on the grounds that it was premature since the Government had not yet made a final decision on how it would want to withdraw from the EEA. But the case illustrates that there is significant uncertainty around this question. It may ultimately have to be resolved by a European Court, which would entail ongoing legal uncertainty beyond the UK's EU withdrawal for EFTA EEA Member States and their citizens, as well as for the UK and its rights and obligations under the EEA Agreement.

In any event, even leaving aside this complicated question of international law, the specific set up of the EEA – comprising the Member States of the EU and the EFTA EEA States – brings about some particular challenges and uncertainties for Norway (as well as Liechtenstein and Iceland) and the UK.

EU-UK deal on citizen rights, goods placed on the single market and governance of the withdrawal agreement will directly impact the EEA Agreement and Norway

As has been widely reported in the media, the Brexit negotiations have thus far focused on citizens' rights (including residence, social security, work, studies etc). Assuming a (reciprocal) deal is struck on rights of EU citizens in the UK and UK citizens in the EU, the question arises what this would mean for Norwegians in the UK and British in Norway. The crux here is that the EU cannot negotiate (or obtain legally binding guarantees) for the EFTA EEA States, and the EFTA EEA States cannot participate in the negotiations. Even if the British position paper on this matter makes some references to EEA citizens, an eventual EU-UK deal would seem unsuitable to guarantee these rights for EEA citizens in Britain, and even less for UK citizens in the EEA.

Similar issues arises for goods being lawfully placed on the single market before the UK's withdrawal, and for any other matter that is both regulated by the EEA Agreement and the future EU-UK withdrawal agreement.

Any withdrawal agreement will also have to contain provisions on its governance and enforcement. The report refers to the proposed dynamic nature of the agreement, allowing for example an updating of the citizens' rights guaranteed thereunder in line with the development of EU law. The question thus arises how a similar system could be incorporated in the EEA. Further, regarding enforcement, the report saliently queries how for example a breach of the EEA-derived right(s) of a Norwegian citizen located in the UK prior to withdrawal could be addressed post-withdrawal by a future EU-UK surveillance and enforcement system.

A separate bilateral agreement will be needed for EEA relevant parts of the withdrawal agreement

All of the foregoing suggests that the UK and Norway ought to start negotiating as a matter of priority. However, they are legally barred from doing so because the EU Treaties prevent Member States from engaging in trade negotiations by themselves and Norway is bound by the EEA agreement's duty of cooperation. Nonetheless, as the report correctly concludes, without specific arrangements for the EEA EFTA States matching the terms of the withdrawal as potentially agreed by the EU and the UK, there will be a tremendous amount of uncertainty, and the functioning of the EEA may be impaired.

The report concludes that existing mechanisms for such arrangements have important shortcomings: The specific EEA withdrawal procedure under Article 127 of the EEA Agreement provides for a diplomatic conference of the remaining contracting parties, which should make the necessary modifications to the EEA Agreement. However, the UK would not participate in such a conference and as such any outcome would therefore for example not guarantee the protection of EEA derived rights of Norwegians living or doing business in the UK. Similarly, while an EU-UK deal could be incorporated into EEA law through the EEA institutional framework, it would only have a binding effect on the UK if it were to unilaterally commit to extend the EU-UK deal to the EEA EFTA States. If the UK will be willing to do so without even the smallest of concessions (say on fishing) is anybody's guess.

Therefore it is probable that a bilateral agreement between the UK and Norway or between the UK and the EEA EFTA States will be necessary. As it is not possible to negotiate and conclude such agreement before the UK will have become a third country, a particularly uncertain period ought to be expected and planned for by all those that have or were expecting to benefit from the rights stemming from the EEA Agreement: Mainly Britons in Norway and Norwegians in Britain, but also businesses with strong links across the North Sea.

Detailed updates and insights on Brexit and in particular its consequences for Norway will be published regularly on this site in the next months.