European Scrutiny Committee Contents

14 Iceland's application for membership of the European Union



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Commission Communication: Commission Opinion on Iceland's application for membership of the European Union

Legal baseArticle 49 TEU; unanimity
DepartmentForeign and Commonwealth Office
Basis of considerationMinister's letter of 22 July 2010
Previous Committee ReportHC5-xv (2009-10), chapter 3 (24 March 2010); also see (31101) 15367/10: HC 5-xii (2009-10), chapter 2 (3 March 2010)
Discussed in Council26 July 2010 Foreign Affairs Council
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


14.1 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."

14.2 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."

14.3 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; and

—  the ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union.

14.4 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".

14.5 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

14.6 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.

14.7 The Opinion recommends opening accession negotiations.

14.8 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).

14.9 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

14.10 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.

14.11 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."

14.12 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

14.13 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[59] — 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; 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.

14.14 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.

14.15 The 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.[60]

The then Minister's letter of 31 March 2010

14.16 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

14.17 In his letter, the Minister for Europe (David Lidington) says that the EU Negotiating Framework for Iceland (which he encloses with his letter) is expected to be agreed at the General Affairs Council on 26 July, and that practical negotiations would then be launched at a first formal Ministerial level meeting with Iceland on 27 July. He recalls that the EU agrees 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 continues 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."[61]

"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."

14.18 The Minister concludes his letter by undertaking to keep the Committee informed of the progress of Iceland's accession negotiations.

14.19 The European Council Conclusions to which the Minister refers 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."

14.20 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."

14.21 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.


14.22 Quite a lot would appear to have 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 has been received until now. We should therefore be grateful if the Minister would explain what has transpired since the end of March that has persuaded the Government to agree to the Opinion being adopted and negotiations to begin.

14.23 Only time will tell whether the Minister's analysis of a linkage between the Icesave issue and progress in Iceland's accession negotiations comes to pass. For now, we note only that there is no mention of this or of obligations under the Deposit Guarantee Directive in the detailed statement issued after the Accession Conference, which otherwise specifies a number of areas in which Iceland will need to make serious efforts in order to meet the accession criteria.[62]

14.24 In the meantime we shall continue to retain the document under scrutiny.

59   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

60   See headnote: HC5-xv (2009-10), chapter 3 (24 March 2010). Back

61   The Minister's italics. Back

62   The full text of the statement issued after the meeting is at  Back

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