Iceland WT/TPR/S/273 
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  II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) GENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  
1. Iceland is a parliamentary democracy.  The authority of the President, the head of State, is 
entrusted to the ministers who are responsible for executive acts.  Legislative authority is shared 
between the parliament and the President.  B ills become law only after being passed by the 
unicameral parliament (the Althing) and signed by the President.  In early 2010 and again in early 2011, the President decided not to sign two separat e bills concerning the reimbursement of payments 
by the UK and Dutch authorities for banking depositors.   In both cases the President referred the bills 
to referenda and they were rejected by popular vote. 
2. Amendments to the current Constitution must be  presented to the Althing for approval.  If 
approved, the Althing is dissolved and a general election held.  The amendments must then be 
adopted by the new parliament and they take affect when signed by the President.  A proposal for new 
Constitution, prepared by a Constitutional Council , was presented to the Althing in July 2011.
1  
A national referendum on its adopti on is set for 20 October 2012. 
3. As a civil law country, statutory law is supreme to the extent that it does not conflict with the 
Constitution.  All legal acts must be published in Section A of the Icelandic Law and Ministerial  
Gazette  (Stjórnartíðindi ).2  These laws may give the administration the authority to issue 
implementing regulations, which ar e published in Section B of the Gazette .  Other sources of law that 
the courts may take into account include customary law, tradition of culture ( eðli máls ), and 
statements and decisions by administrative aut horities (such as the Parliamentary Ombudsman and the 
Directorate of Customs).3 
4. The judiciary is independent of the executive and legislative authorities.  There are two levels 
of general courts:  eight district courts ( Héraðsdómur ) with jurisdiction in most civil and criminal 
cases; and the Supreme Court ( Hæstaréttar ), which hears appeals from the district courts.  In addition, 
there are two special courts:  the Court of Impeachment ( Landsdómur ), which deals with cases where 
members of the executive are accused of criminal behaviour;  and the Labour Court ( Félagsdómur).  
There are no specialized commercial courts or f ast-track processes for commercial cases, although the 
average time required for civil cases is less than a y ear (341 days in 2011) and less for criminal cases 
(73 days in 2011). 
5. Under Iceland's membership of the EEA, its laws  are required to be in conformity with the 
acquis communautaire  to the extent that the EEA Joint Committee decides to incorporate EU 
legislation into the EEA Agreement (see section (3 )(ii)(b) below).  In many cases, this has been 
through Icelandic law giving the relevant minister th e power to make regulations that give effect to 
the relevant EU legislation or by di rect reference in the Icelandic law to the relevant EU legislation.  
In cases concerning EEA-related matters, a district court or the Supreme Court may ask the EFTA Court for an advisory opinion on the interpretation of the relevant EEA law. 
6. Authority to conclude international treaties r ests with the executive.  Parliamentary approval 
is required for treaties that entail amendments to dom estic legislation.  Under Iceland's legal system, 
                                                      
1 For the bill on the new Constitution, see Constituti onal Council online information.  Viewed at:  
http://stjornlagarad.is/english/ [July 2012]. 
2 Since 2005, the Icelandic Law and Ministerial Gazette has been an online publication.  Viewed at: 
http://www.stjornartidindi.is/ [July 2012]. 
3 Tryggvadóttir and Ingadóttir (2007).  WT/TPR/S/273 Trade Policy Review 
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  the terms of an international treaty are not consid ered domestic law unless expressly incorporated into 
the domestic legal order.  However, customary law re quires courts to seek to interpret internal law in 
accordance with international agreemen ts to which Iceland is a party.  Upon ratification, international 
agreements to which Iceland is a pa rty are published in Section C of the  Law and Ministerial Gazette . 
(2) TRADE POLICY DEVELOPMENT AND OBJECTIVES  
(i) Agencies involved in trade policy implementation 
7. The Ministry for Foreign Affairs is responsible  for foreign trade policy and represents Iceland 
in negotiations in the WTO, with the EU, the EEA, and EFTA.  Other government agencies involved 
in formulating trade policy include: 
 the Ministry of Finance, which is responsib le for taxes, including tariffs, and government 
procurement.  Under the Ministry, the Direct orate of Customs is responsible for customs 
administration, including assessing and collecti ng tariffs and other duties on imports, the 
Directorate of Tax Investigation and the Inte rnal Revenue Directorate are responsible for 
direct and indirect taxation, and the Co mmittee on Anti-Dumping and Countervailing Duties 
is responsible for contingency measures; 
 the Ministry of Industry, Energy and Tourism,  which has responsibility for domestic trade, 
and for policy on standardization implementati on, primarily the responsibility of Icelandic 
Standards;   
 the Ministry of Economic Affairs, which monito rs the Central Bank, Statistics Iceland, and 
the Financial Supervisory Authority.  Unde r the Minister, the Patent Office receives 
applications for and grants patents, and th e Competition Authority implements competition 
policy; 
 the Ministry of Fisheries and Agriculture, whic h is responsible for fisheries and agriculture 
policy, including trade policy and domestic support.  The Icelandic Food and Veterinary 
Authority is the inspection and administrativ e body with responsibilities that include:  food 
safety;  plant and livestock quality and health -related matters;  feed, seed, and fertilizer 
services;  administration of organic production; and monitoring of animal welfare;  and 
 the Ministry of Transport and Communications, wh ich is responsible for policy formulation in 
transport, and telecommunications. 
8. According to a Parliamentary Resolution of  11 May 2012, the responsibilities of some 
ministries are to change from 4 September 2012:  the Ministry of Industry, Energy and Tourism and 
the Ministry of Fisheries and Agriculture are to  merge to form the Ministry of Industries and 
Innovation;  the tasks of the Ministry of Economic A ffairs are to be transfer red to the Ministry of 
Finance and the Ministry of Industries and Innovati on;  and the Ministry of the Environment will 
become the Ministry of the Environment and Natural Resources. 
9. Through regular consultations, the private sector's  views are taken into account in formulating 
trade policy.  The Confederation of Icelandic Employers represents several professional industry 
associations, including the Federation of Icelandi c Industries and the Federation of Fish-processing 
Plants.  The Trade Council of Iceland and the Icelandic Chamber of Commerce represent businesses Iceland WT/TPR/S/273 
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  in Iceland.  The fishery sector is represented by  the Fisheries Association and the Aquaculture 
Association, while farmers are represented by the Farmers' Association of Iceland.   
(ii) Trade policy objectives 
10. Iceland is a small open economy and international trade is cen tral to its economic policy, 
which is focused on its application to become a me mber of the EU, and its membership of the EEA, 
EFTA, and the WTO.   
11. In July 2009, Iceland applied for membership of the EU and negotiati ons started later that 
month.  Negotiations are ongoing, based on 35 Chapters covering all areas under the acquis 
communautaire.  Of these, 10 chapters are fully covered by the EEA already4, 11 are partially 
covered5, and 14 are not covered.6, 7  
(3) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) World Trade Organization 
12. Iceland is an original Member of the WTO.  The Icelandic authorities indicate that there was 
no need to implement the Marrakesh Agreement thr ough a single legislative instrument, and that care 
was taken to ensure that domestic laws were in accordance with Iceland's WTO commitments.  
Iceland participated in the post-Uruguay Round ne gotiations on telecommuni cations and financial 
services;  its commitments in these areas were annexed to the Fourth and Fifth Protocols to the GATS.   Iceland is a party to the Agreement on Government Procurement and a participant in the Information 
Technology Agreement. 
13. Iceland has been neither a complainant nor res pondent in any WTO dispute.  It has been a 
third party in eight cases:  three cases taken by  Canada, Peru, and Chile against the European 
Communities on the trade description of scallops
8;  a case taken by the United States against Australia 
on measures affecting the importation of salmonids9;  two cases by New Zealand and Australia 
against the United States on safeguard measures on imports of fresh, chilled or frozen lamb10;  and 
                                                      
4 The chapters fully covered by the EEA are:  (1) Free movement of goods;  (2) Freedom of movement 
for workers;  (3) Right of establishment and freedom to  provide services;  (4) Free movement of capital;  
(5) Public procurement;  (6) Company law;  (7) Intellectual property law;  (8) Competition;  (9) Financial 
services;  (10) Informati on society and media.   
5 The chapters partially covered by the EEA are:  (12) Food safety, veterinary and phytosanitary policy;  
(14) Transport policy;  (15) Energy;  (18) Statistics;  (19) Social policy and empl oyment;  (20) Enterprise and 
industrial policy;  (21) Trans-European networks;  (25) Research and development;  (26) Education and culture;  
(27) Environment;  (28) Consumer and health protection. 
6 The chapters not covered by the EEA are:  (11) Agriculture and rural development;  (13) Fisheries; 
(16) Taxation;  (17) Economic and monetary policy;  (22) Regional and coordination of structural instruments; 
(23) Judiciary and fundamental rights;  (24) Justice, freedom and security ;  (29) Customs union;  (30) External 
relations;  (31) Foreign, security and defence policy;  (32) Financial control;  (33) Financial and budgetary 
provisions;  (34) Institutions;  and (35) Other. 
7 For more information on Iceland's application for membership of the EU, see:  Ministry of Foreign 
Affairs online information.  Viewed at:  http://eur ope.mfa.is/phase1/;  and European Commission online 
information.  Viewed at:  http ://ec.europa.eu/enlargement/candidate -countries/iceland/index_en.htm 
[March 2012]. 
8 WTO Documents DS7, DS12, and DS14. 
9 WTO Document DS21. 
10 WTO Documents DS177 and DS178. WT/TPR/S/273 Trade Policy Review 
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  two cases taken by Canada and Norway against the European Communities on measures prohibiting 
the importation and marketing of seal products.11 
14. Although a number of notifications have b een submitted to the WTO, particularly on 
agriculture and regional trade agre ements (Table II.1), as of end-July 2012 a considerable number of 
regular notifications remained outstanding (Table II.2). 
Table II.1 
Selected notifications to the WTO, January 2006-December 2012 
WTO Agreement Description of 
requirement Most recent 
notification Date Period covered by 
notification 
Agreement on Agriculture 
Article 4 Market Access G/AG/N/ISL/30 13 January 2011 1 July 2008-30 June 2010 
  G/AG/N/ISL/29 30 July 2009 1 July 2005-30 June 2008 
Article 5  G/AG/N/ISL/27 27 July 2009 1 July 2003-30 June 2009 
Article 10 and 18.2  Export subsidy  G/AG/N/ISL/28/Add.1 31 July 2009 2003-2008 
  G/AG/N/ISL/28 27 July 2009 2003-2008 
Regional Trade Agreements  
GATT Article 
XXIV:7(a) Regional trade agreements WT/REG295/N/2 21 September 2011  
  WT/REG292/N/3 16 September 2011  
  WT/REG290/N/3 6 September 2011  
  WT/REG256/N/1 3 November 2011  
  WT/REG86/N/1 14 October 2008  
  WT/REG243/N/1 18 July 2008  
Services  
Article V:7(a)  S/C/N/465 18 July 2008  
Source: WTO Secretariat. 
Table II.2 
Selected outstanding notifications to the WTO, as of January 2011 
WTO Agreement Description of requirement Period 
Agreement on Agriculture 
Article 4 and 18.2 Imports under tariff quotas Annual 
Article 5 Special safeguard Annual 
Article 18.2 Domestic support Annual 
Article 10 and 18.2 Export subsidies Annual 
Agreement on Government Procurement 
Article XIX.5 Statistic s on procurement Annual 
 Procurement thresholds Biennial 
Agreement on Import Licensing Procedures 
Article 7.3  Annual 
 Procedures for quantitative restrictions Biennial 
Market Access 
 Integrated database - tariffs Annual 
 Integrated database - imports Annual 
Agreement on Subsidies a nd Countervailing Measures 
Article 25.1 New and full subsidy notification Annual 
Table II.2 (cont'd) 
                                                      
11 WTO Documents DS400 and DS401. Iceland WT/TPR/S/273 
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  WTO Agreement Description of requirement Period 
Understanding on the interpretation of Article XVII 
 New and full notification Biennial 
Agreement on Implementation of Article VI 
Article 16.4  Semi-annual 
Source: WTO Secretariat. 
(ii) Regional agreements 
(a) European Free Trade Association 
15. Iceland joined the European Free Trade Association (EFTA) in 1970.  The other members are 
Liechtenstein, Norway, and Switzerland.  
16. The EFTA Convention establishes a free-trade area  among its members in industrial products 
and in fish and other marine products.  It also contains disciplines on state aid, practices of public undertakings, competition rules, intellectual propert y rights, free movement of persons (including 
coordination of social security systems and mu tual recognition of professional qualifications), 
investment, trade in services, and government procurement. 
(b) European Economic Area 
17. Iceland is a founding member of the European Economic Area (EEA), which also includes 
Liechtenstein, Norway, and the 27 member states of the EU.  The EEA Agreement aims to establish an internal market for the free movement of goo ds, services, capital, and persons but it does not 
establish a common external tariff.  The EEA Agre ement does not cover a number of EU policy areas 
including:  a common agriculture or fisheries polic y;  a customs union;  a common trade policy;  a 
common foreign and security policy;  justi ce and home affairs;  and monetary union. 
18. The EEA Agreement provides for the adoption of EU laws concerning the free movement of 
goods, services, capital, and pers ons, and cooperation in areas such as research and development, 
education, social policy, the environment, consum er protection, tourism, and culture.  Iceland has 
some derogations from EEA legislation, such as on veterinary issues (Chapter III(3)(iv)(b)), airport 
security, house heating, electricity, and waste disposal.
12 
19. The EEA Joint Committee, which is made up of  representatives from Iceland, Liechtenstein, 
Norway, the EU Commission, and the EU member st ates, is responsible for taking decisions on 
incorporating EU legislation into the EEA Agr eement.  Decisions are taken by consensus and 
published on the EFTA website.13  Iceland and the other EFTA countries in the EEA are required to 
notify the EFTA Surveillance Authority of the tran sposition of EEA provisions into domestic law.  
20. The EFTA Surveillance Authority is responsible for ensuring that Iceland and the other EFTA 
countries in the EEA comply with the requirements of the EEA Agreement.  The Authority may initiate investigations on its ow n behalf or accept complaints from individuals on enterprises that a 
State is not in compliance with its obligations under the EEA Agreement.  After considering the 
matter the Authority issues a reasoned opinion.  Depending on the country's reaction to the opinion, the Surveillance Authority may then move to co mmence proceedings against the countries in the 
                                                      
12 Bergmann (2011). 
13 EFTA online information.  Viewed a t:  http://www.efta.int/ [March 2012]. WT/TPR/S/273 Trade Policy Review 
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  EFTA Court.  The Court is also responsible for inv estigating claims that companies are acting against 
EEA competition rules. 
21. In November 2011, Iceland had a "transposition deficit" (the num ber of directives that had not 
been transposed into national law) of 0.5% for directives relating to the internal market, but on 
average transposition took nearly 13 months.  As of February 2012, the Surveillance Authority was 
formally pursuing 41 infringement cases against Iceland (Table II.3).14 
Table II.3 
EFTA Surveillance Authority case s concerning Iceland, 2006-10 
 2006 2007 2008 2009 2010 
Pending casesa 156 252 223 272 189 
of which complaints .. .. 19 28 33 
Opened 95 237 181 138 160 
of which complaints .. .. 9 21 25 
Closed 119 141 210 187 148 
of which complaints .. .. 5 12 20 
.. Not available. 
a Not all pending cases reach a conclusion as some are withdrawn. 
Source: EFTA Surveillance Authority, Annual Report , various issues. 
22. Since the start of 2005, the EFTA Surveilla nce Authority has referred 11 cases to the EFTA 
Court, one of which concerns state guarantees for banking depositors where a judgement is pending 
(as of end-June 2012).15  In addition, several cases have been referred to the EFTA Court by Icelandic 
courts for advisory opinions, including two cases on labelling of alcoholic products.16  Details of all 
pending and decided cases are available online.17 
(c) Free-trade agreements 
23. Iceland has a number of bilateral trade agreem ents including two with Denmark on trade with 
the Faroe Islands18 and Greenland, and two with the EU (an agreement from 1972, which is mostly 
superseded by the EEA, and an agreement on trade in  basic agricultural products based on Article 19 
of the EEA).19  It is also in negotiations on  a trade agreement with China. 
24. Through EFTA, Iceland has been actively e xpanding its network of trade agreements;  
13 have been signed since 2005 and negotiations under  way with several other countries or groups of 
countries.  At present, through EFTA, Iceland is a party to 24 free-trade agreements covering trade 
with 33 countries/territories (Table II.4)20. 
                                                      
14 EFTA Surveillance Authority (2012). 
15 Case E-16/11 - EFTA Surveillance Authority v Iceland.   
16 Case E-19/11 - Vín Tríó ehf. v Íslenska ríkinu, and Case 2/12 - HOB-vín ehf. v Áfengis- og 
tóbaksverslun ríkisins. 
17 EFTA Court online information.  Viewed at:  http://www.eftacourt.int/ [March 2012]. 
18 WTO document WT/REG23/1, 23 January 1996. 
19 European Commission (2011), , Chapter 30 - External Relations , p. 4. 
20 WTO online information.  Viewed at:  http ://rtais.wto.org/UI/PublicMaintainRTAHome.aspx 
[March 2012]. Iceland WT/TPR/S/273 
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  Table II.4 
EFTA free-trade agreements 
Country/Territory Type Date of  entry into force for Iceland 
Agreements signed   
Albania GATT Article XXIV 1 October 2011 
Canada GATT Article XXIV 1 July 2009 
Chile GATT Article XXIV, GATS Article V 1 December 2004 
Colombia GATT Article XXIV, GAT S Article V After ratification 
Croatia GATT Article XXIV 1 January 2002 
Egypt GATT Article XXIV 1 August 2007 
Former Yugoslav Republic of 
Macedonia GATT Article XXIV 1 January 2001 
Gulf Co-operation Council (Bahrain, 
Kuwait, Oman, Saudi Arabia, UAE) Not notified Pending (signed 22 June 2009) 
Hong Kong, China Not notified Pe nding (signed 21 June 2011) 
Israel GATT Article XXIV 1 January 1993 
Jordan GATT Article XXIV 1 January 2002 
Korea GATT Article XXIV, GATS Article V 1 September 2006 
Lebanon GATT Article XXIV 1 January 2007 
Mexico GATT Article XXIV, GATS Article V 1 July 2001 
Montenegro Not notified Pending (signed 14 November 2011) 
Morocco GATT Article XXIV 1 December 1999 
Peru GATT Article XXIV 1 October 2011 
SACU (Botswana, Lesotho, Namibia, 
South Africa, Swaziland) GATT Article XXIV 1 May 2008 
Serbia GATT Article XXIV 1 October 2011 
Singapore GATT Article XXIV, GATS Article V 1 January 2003 
Tunisia GATT Article XXIV 1 June 2005 
Turkey GATT Article XXIV 1 April 1992 
Ukraine Not notif ied 1 June 2012 
Palestinian Authority GATT Article XXIV 1 July 1999 
Under negotiation   
Bosnia and Herzegovina   
Costa Rica, Guatemala, Honduras, 
and Panama   
India   
Indonesia   
Russian Federation, Belarus, and 
Kazakhstan   
Source: WTO RTA Database:  http://rtais.wto.org/UI/PublicMa intainRTAHome.aspx [March 2012];  and EFTA online 
 information:  http://www.efta.int/free-trad e/free-trade-agreements .aspx [March 2012]. 
(d) Non-reciprocal arrangements 
25. Under Regulation 119/2002, Iceland provides du ty-free and quota-free access for imports of 
practically all products originating in most least developed countries.21 
(4) FOREIGN INVESTMENT REGIME  
26. Policy on investment is shared between a number of different agencies22 including: 
                                                      
21 WTO documents WT/COMTD/N/17, 10 October 2003 and WT/COMTD/N/17/Corr.1, 
20 January 2004.  Senegal and Timor-Leste ar e not included in Regulation No. 119/2002. WT/TPR/S/273 Trade Policy Review 
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   the Ministry of Finance, which is responsible  for setting tax rates and negotiating double tax 
agreements, and the Ministry of Economic Affair s, which is responsible for policy on foreign 
investment as well as competition law and comp any law and which monitors the Competition 
Authority and the Financial Supervisory Authority.  From September 2012, the Ministry of Finance will assume some of the responsibilities of the Ministry of Economic Affairs 
(section (2)(i)); 
 the Ministry of Industry, Energy and Touris m, which is responsible for legislation on 
investment, and the Ministry of Fisheries and Ag riculture, which is responsible for legislation 
and investment in fisheries and agriculture.  From September 2012, the two ministries will be 
merged into the Ministry of Industries and Innovation (section (2)(i)); 
 the Ministry for Foreign Affairs, which is res ponsible for external trade and negotiating trade 
agreements (through EFTA);  and 
 promote Iceland agency, which has overall responsibility for pr omoting Iceland's image and 
reputation abroad, including by supporting I celandic industries and products in foreign 
markets, as a tourist destination, and an investment  centre.  Invest in Iceland, which is part of 
Promote Iceland, is an information centre for fo reign investors and runs the Film in Iceland 
Agency project.  Invest in Iceland does not charge for its services. 
27. In general, the main objective of Iceland's investment policy is to provide a favourable 
climate for investment, through Iceland's access to th e EEA market, low tax rates, liberal investment 
policies, and a stable business environment with fe w restrictions on foreign ownership.  The main 
legislation on foreign investment is Act No. 34/199 1 (as amended) on Investment by Non-residents in 
Business Enterprises
23, and Act No. 99/2010 on Incentives fo r Initial Investment in Iceland 
(Chapter III(3)(iii)). 
28. Restrictions on foreign ownership have not been changed since the last Review of Iceland.  
With exceptions, foreigners must obtain a permit from the Ministry of the Interior to own real estate 
in Iceland.  These exceptions include foreigners re sident in Iceland, citizens of other EFTA or EU 
countries, and enterprises resident in or with thei r headquarters or main operations in other EFTA or 
EU countries. 
29. Iceland maintains various sector-specific inv estment restrictions, including in fishing 
(Chapter IV(2)), energy (Chapter IV(3)),  and air transport (Chapter IV(4)(iii)). 
30. Iceland has bilateral investment treaties with Ch ile, China, Egypt, India, Latvia, Lithuania, 
Lebanon, Mexico, Uganda, and Viet Nam.  In a ddition, along with Liechtenstein and Switzerland 
within the EFTA framework, Iceland has signed a multilateral investment agreement with the 
Republic of Korea.  The EFTA-Singapore free-trad e agreement includes a chapter on investment. 
Seven of the bilateral agreements  have entered into force and two agreements, with Egypt and 
Lebanon, are in the process of ratification.  The ag reement with Uganda has been initialled, but not 
signed.  Iceland is in contact with the authorities in Turkey and Ukraine regarding talks on a bilateral 
investment treaty. 
                                                                                                                                                                     
22 The number of ministries is to be reduced from te n to eight in September 2 012 (see section (2)(i)). 
23 Act No. 34/1991 (in English).  Viewed at:  http://eng.idnadarraduneyti.is/laws-and-
regulations/nr/1129 [March 2012]. Iceland WT/TPR/S/273 
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  31. Iceland made 32 agreements on double taxation, some awaiting ratification.  It has been a 
party to the Agreement between the Council of  Europe and OECD on Mutual Administrative 
Assistance in tax matters since 1995;  and it signe d the Protocol on Exchange of Banking Information 
in 2010 (entered into force in 2011).  Through the Nordic Council of Minist ers, Iceland has several 
agreements on information exchange  in tax matters with states with low taxes and bank secrecy.  It 
aims to have signed agreements with all such stat es (as specified by OECD) before the end of 2012.