12 Iceland's application for membership
of the European Union
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6956/10
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COM(10) 62
| Commission Communication: Commission Opinion on Iceland's application for membership of the European Union
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| Legal base | Article 49 TEU; unanimity
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| Department | Foreign and Commonwealth Office
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| Basis of consideration | Minister's letter of 18 October 2010
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| Previous Committee Report | HC 428-i (2010-11), chapter 14 (8 September 2010) and HC 5-xv (2009-10), chapter 3 (24 March 2010); also see (31101) 15367/10: HC 5-xii (2009-10), chapter 2 (3 March 2010)
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| Discussed in Council | 26 July 2010 Foreign Affairs Council
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
12.1 Article 49 TEU states that:
"Any European State which respects the values referred to
in Article 2 and is committed to promoting them may apply to become
a member of the Union. The European Parliament and national Parliaments
shall be notified of this application. The applicant State shall
address its application to the Council, which shall act unanimously
after consulting the Commission and after receiving the consent
of the European Parliament, which shall act by a majority of its
component members. The conditions of eligibility agreed upon by
the European Council shall be taken into account."
12.2 Article 2 states that:
"The Union is founded on the values of respect for human
dignity, freedom, democracy, equality, the rule of law and respect
for human rights, including the rights of persons belonging to
minorities. These values are common to the Member States in a
society in which pluralism, non-discrimination, tolerance, justice,
solidarity and equality between women and men prevail."
12.3 In Copenhagen, in June 1993, the European Council concluded
that accession will take place as soon as a country is able to
assume the obligations of membership by satisfying the economic
and political conditions required. The "Copenhagen criteria"
require:
— that
the candidate country has achieved stability of institutions guaranteeing
democracy, the rule of law, human rights and respect for and protection
of minorities;
— the
existence of a functioning market economy, as well as the capacity
to cope with competitive pressure and market forces within the
Union;
— the
ability to take on the obligations of membership including adherence
to the aims of political, economic and monetary union.
12.4 In December 2006, the European Council agreed
that "the enlargement strategy based on consolidation, conditionality
and communication, combined with the EU's capacity to integrate
new members, forms the basis for a renewed consensus on enlargement".
12.5 The Commission also notes that "the Union's
capacity to absorb new members, while maintaining the momentum
of European integration, is also an important consideration in
the general interest of both the Union and the candidate countries."
The Commission Opinion
12.6 Iceland addressed its application to the Council
on 16 July 2009. On 27 July 2009 the Council referred the application
to the Commission, seeking its Opinion. The Commission's Opinion
is its formal response to the Council. It is also communicated
to the European Parliament.
12.7 The Opinion recommends opening accession negotiations.
12.8 The Commission analysed Iceland's application
on the basis of the country's capacity to meet the Copenhagen
criteria. The method followed in preparing this Opinion, the Commission
said, is the same as used in previous opinions, mutatis mutandis.
The Commission had thus analysed both the present situation and
the medium-term prospects (medium-term being defined as a period
of three years).
12.9 In line with the renewed consensus on enlargement,
the Opinion also identified key policy areas likely to require
particular attention in the event of Iceland's accession and provided
initial impact estimates with regard to key policies and sectors.
The Commission said that it would provide more detailed impact
assessments for these key policy areas at later stages of the
pre-accession process. The report containing the detailed analysis
on which the opinion was based was made public as a separate document
(Analytical Report for the Opinion on the application from Iceland
for EU membership).
The previous Government's view
12.10 In his Explanatory Memorandum of 18 March 2010,
the then Minister for Europe (Chris Bryant) noted that, as Iceland
was already a member of the EEA, the Opinion had been split into
three sections: Chapters covered by the EEA, Chapters partially
covered by the EEA, and Chapters not covered by the EEA.
12.11 He said that the then Government welcomed the
Commission's Opinion of Iceland and fully supported Iceland's
EU membership application. His comments on the Opinion are set
out in the previous Committee's Report of 24 March 2010. He noted
that certain chapters covered areas of the acquis which
were of significance to UK policy, and/or which he felt might
require particular attention in accession negotiations. In particular,
he noted:
"Chapter 9 — Financial services is covered
by the European Economic Area (EEA) Agreement. Iceland is already
a member of the EEA. The Commission assesses that Iceland generally
applies the acquis on financial services but that some
improvements are necessary in order to fully implement the acquis,
in particular. Iceland must address the weaknesses in its financial
supervisory system and the deposit guarantee scheme at an early
stage. The Government has made clear that it is essential for
Iceland to meet its international obligations, including those
under the Deposit Guarantee Directive which is part of its obligations
under the EEA agreement.
"As the Committee will be aware, on 6 March
Icelanders voted 'No' in the referendum on the Icesave loan bill
agreed by the Icelandic government in December 2009. We hope further
talks with Iceland on this issue will resume soon. A satisfactory
resolution of the Icesave issue is necessary to rebuild the confidence
of the international financial community, aid the recovery of
the Icelandic economy and enable Iceland to meet the criteria
and obligations for EU membership."
12.12 The then Minister concluded his Explanatory
Memorandum by noting that: at the time of writing, EU Member States
were considering the Opinion; the issue was not on the agenda
for the Spring European Council; and it was not yet clear when
the Presidency would bring this issue to the Council for a decision.
The previous Committee's assessment
12.13 The previous Committee noted that the then
Minister had made no mention in his Explanatory Memorandum of
the European Parliament, and thus of the meeting on 8 March 2010
— the day after the referendum[66]
— between its Foreign Affairs Committee and Štefan
Füle, Commissioner for Enlargement and European Neighbourhood
policy, on the Commission Opinion. At that meeting, the Commissioner
had said that the outcome of the referendum should not hinder
the accession process as this was a bilateral matter between Iceland,
the Netherlands and the UK; and the European Parliament's rapporteur
and others, including the chair of the Parliament's delegation
to Switzerland, Iceland and Norway and the EEA, agreed that Iceland,
the Netherlands and the UK needed to resolve it by themselves
and that it should not affect the accession process.
12.14 The previous Committee made it clear that it
mentioned this, not to take issue with the then Government's position,
but rather to illustrate that there were different, important
views about the relevance of the Icesave issue in this context.
12.15 The then Minister having said that there was
no imminent prospect of the Opinion being put to the Council or
European Council, the previous Committee retained the Communication
under scrutiny until the then Minister was in a position to write
with a clear timetable and an explanation of what had changed
in the interim, to include what he knew of the then views of the
Commissioner and of the European Parliament.[67]
The then Minister's letter of 31 March 2010
12.16 The then Minister's immediate response added
nothing to what he had said in his Explanatory Memorandum , other
than to say that "at the time of writing the UK is waiting
for a new proposal from Iceland for the finalisation of the Icesave
loan agreement". He concluded by undertaking, "as requested
[to] keep the Committee informed of the progress of Iceland's
membership application".
The Minister for Europe's letter of 22 July 2010
12.17 In his letter, the Minister for Europe (David
Lidington) said that the EU Negotiating Framework for Iceland
(which he enclosed with his letter) was expected to be agreed
at the 26 July General Affairs Council, and that practical negotiations
would then be launched at a first formal Ministerial level meeting
with Iceland on 27 July. He recalled that the EU agreed a Negotiating
Framework for each country aspiring to join the EU, establishing
the general guidelines for the accession negotiations and identifying
in broad terms the reforms and adaptations that the candidate
country must undertake to join the EU. He continued as follows:
"The Negotiating Framework for Iceland is similar
to those drafted for previous EU candidate countries. Of particular
note is that the UK has successfully lobbied to include language
building on the European Council Conclusions of 17 June that makes
clear that the pace of the negotiations will depend on Iceland
fulfilling its obligations under the European Economic Area Agreement.
This includes fulfilling its obligations under the Deposit Guarantee
Directive. In its letter of 26 May, the EFTA Surveillance Authority
made clear that in order to bring itself into compliance with
this EU Directive Iceland would need to reach agreement with the
UK and Netherlands on repayment of the Icesave loan (worth £2.3bn).
"The relevant extract of the Negotiating Framework
reads:
"The advancement of the negotiations will
be guided by Iceland's progress in preparing for accession, within
a framework of economic and social convergence. This progress
will be measured in particular against the following requirements:
"The fulfilment of Iceland's obligations
under the European Economic Area Agreement, taking full account,
inter alia, of the European Council conclusions of 17 June 2010,
the Agreement associating Iceland with the implementation, application,
and development of the Schengen acquis, as well as Iceland's progress
in addressing other areas of weakness identified in the Commission's
Opinion."[68]
"This language should enable the UK to negotiate
more detailed criteria requiring Iceland to address its breach
of the EU Deposit Guarantee Directive at an early stage."
12.18 The Minister concluded his letter by undertaking
to keep the Committee informed of the progress of Iceland's accession
negotiations.
12.19 The European Council Conclusions to which the
Minister referred say:
"The European Council welcomes the Commission
opinion on Iceland's application for membership of the EU and
the recommendation that accession negotiations should be opened.
Having considered the application on the basis of the opinion
and its December 2006 conclusions on the renewed consensus for
enlargement, it notes that Iceland meets the political criteria
set by the Copenhagen European Council in 1993 and decides that
accession negotiations should be opened."
12.20 The 26 July 2010 General Affairs Council Conclusions
say:
"Referring to the conclusions adopted by the
European Council on 17 June 2010, the Council adopted the general
EU position, including the negotiating framework, with a view
to the opening of accession negotiations with Iceland. The Council
is accordingly looking forward to the opening session of the Intergovernmental
Conference on 27 July 2010."
12.21 On the basis of the positions of the Parties,
the first meeting, on 27 July 2010, of the Accession Conference
with Iceland at Ministerial level decided the opening of the Intergovernmental
Conference (IGC) on the Accession of Iceland to the European Union,
following the decision of the European Council of 17 June that
accession negotiations should be opened.
The Committee's assessment
12.22 It seemed that quite a lot appeared had changed
since the then Minister for Europe's 18 March Explanatory Memorandum
and 31 March letter to the previous Committee, when he said that
it was not yet clear when the Presidency would bring this issue
to the Council for a decision, and that the then Government was
waiting for a new proposal from Iceland for the finalisation of
the Icesave loan agreement. Despite assurances that the Committee
would be kept informed of the progress of Iceland's membership
application, nothing had been received until now. We therefore
asked the Minister to explain what had transpired since the end
of March that had persuaded the Government to agree to the Opinion
being adopted and negotiations to begin.
12.23 Though only time would tell whether the Minister's
analysis of a linkage between the Icesave issue and progress in
Iceland's accession negotiations came to pass, for now we noted
only that there was no mention of this or of obligations under
the Deposit Guarantee Directive in the detailed statement issued
after the Accession Conference, which otherwise specified a number
of areas in which Iceland would need to make serious efforts in
order to meet the accession criteria.[69]
12.24 In the meantime we continued to retain the
document under scrutiny.
The Minister's further letter of 18 October 2010
12.25 The Minister has responded as follows (the
italicised passages being his):
"Iceland is a member of the EEA and as such
is bound to implement the majority of EU single market legislation
including the Deposit Guarantee Directive. Iceland has not fulfilled
its obligations under this Directive. In its letter of 26 May,
the EFTA Surveillance Authority made clear that, in order to bring
itself into compliance with the Directive, Iceland would need
to reach agreement with the UK and the Netherlands on the repayment
of the £2.3bn Icesave loan.
"Iceland is obliged to ensure payment of
the minimum compensation to Icesave depositors in the United Kingdom
and the Netherlands, according to the Deposit Guarantee Directive.
[…]While Dutch and British authorities stepped in to compensate
most deposit holders in Icesave's Dutch and UK branches, the Directive
designates Iceland as being under the obligation to provide the
minimum compensation of EUR 20.000 per depositor. [Extract of
EFTA Surveillance Authority 26 May press release]"
"The Commission also wrote to the Icelandic
Government to confirm that it shares the legal analysis of the
EFTA Surveillance Authority that Iceland was in breach of its
obligations under the EU Deposit Guarantee Directive.
"Therefore, the 17 June European Council highlighted
the importance of Iceland meeting these obligations and that progress
of the accession negotiations would depend on them doing so.
"The European Council invites the Council
to adopt a general Negotiating Framework. It recalls that negotiations
will be aimed at Iceland integrally adopting the EU acquis and
ensuring its full implementation and enforcement, addressing
existing obligations such as those identified by the EFTA Surveillance
Authority under the EEA Agreement, and other areas
of weakness identified in the Commission's Opinion, including
in the area of financial services. The European Council welcomes
Iceland's commitment to address these issues and expresses its
confidence that Iceland will actively pursue its efforts to resolve
all outstanding issues. The European Council confirms that the
negotiations will be based on Iceland's own merits and that the
pace will depend on Iceland's progress in meeting the requirements
set out in the negotiating framework, which will address i.a.
the above requirements. [Extract of 17 June European Council conclusions
— underlining added]"
"On this basis, we secured language in the Negotiating
Framework to reflect our concerns.
"The advancement of the negotiations will
be guided by Iceland's progress in preparing for accession, within
a framework of economic and social convergence. This progress
will be measured in particular against the following requirements:
"The fulfilment of Iceland's obligations
under the European Economic Area Agreement, taking full
account, inter alia, of the European Council conclusions of 17
June 2010, the Agreement associating Iceland with the
implementation, application, and development of the Schengen acquis,
as well as Iceland's progress in addressing other areas of weakness
identified by the Commission's Opinion.
"[Extract of Negotiating Framework —
underlining added]"
"The EU also reinforced its position in a statement
at the Inter-Governmental Conference on 27 July when accession
negotiations were formally opened with Iceland:
"Furthermore, the European Council invited
the Council to adopt a general Negotiating Framework, and recalled
that negotiations would be aimed at Iceland integrally adopting
the EU acquis and ensuring its full implementation and enforcement,
addressing existing obligations such as those identified
by the EFTA Surveillance Authority under the EEA Agreement,
and other areas of weakness identified in the Commission's Opinion,
including in the area of financial services. [Extract of EU Opening
Statement for Accession Negotiations — underlining added]"
"It is therefore clear that conditionality has
been agreed. The next stage in the process is for the Commission
to produce screening reports for each chapter for the EU acquis.
These reports examine any discrepancies between Icelandic and
EU law. Implementation of the Deposit Guarantee Directive will
be dealt with under Chapter 9 (Financial Services) of the accession
negotiations. We have asked the Commission to discuss Chapter
9 at an early stage. Once the screening report has been published,
Member States will decide whether Iceland requires opening benchmarks
for this Chapter. We anticipate that this discussion will take
place early 2011.
"Progress of the accession negotiations is dependent
on consensus among Member States at a large number of decision
points including agreement to screening reports, and setting and
meeting opening and closing benchmarks for each chapter.
"As you will know, we are separately pursuing
negotiations with Iceland which aim to resolve the Icesave issue
as soon as possible. UK, Dutch and Icelandic delegates last met
in early September, and since then having been working together
closely to resolve outstanding issues. I remain optimistic that
we will be able to reach a negotiated Icesave solution. The Government
will keep the Committee informed of the progress of Iceland's
accession negotiations."
Conclusion
12.26 We are grateful to the Minister for his
comprehensive reply, which we are reporting to the House because
of the importance of both Iceland's application and the Icesave
issue.
12.27 We now clear the document.
66 Law 1/2010, known as the Icesave Bill, was rejected,
with 93% voting no, less than 2% yes and 5% spoiling their ballot
papers, within an overall turnout of 63%. Back
67
See headnote: HC5-xv (2009-10), chapter 3 (24 March 2010). Back
68
The Minister's italics. Back
69
The full text of the statement issued after the meeting is at
http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/er/116009.pdf.
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