WT/REG243/2  
 
24 February 2017 
(17-1115) Page: 1/3 
Committee on Regional Trade Agreements  Original: English  
 
FREE TRADE AGREEMENT  BETWEEN ICELAND AND THE FARO E ISLANDS  
(GOODS AND SERVICES)  
QUESTIONS AND REPLIE S 
 The following communication, dated  23 February  2017, is being circulated at the request of 
the delegations of Iceland and the Faroe Islands . 
 
__________ _____  
 
 
Question s from the delegation of the European Union  
 
Provisions on trade in goods  
Sector -specific provisions on trade in goods  
Fisheries  
 
1.1.  According to the Factual Presentation, the Parties undertook to facilitate fish 
processing and bilateral trad e in fish, and to eliminate any barriers without delay.  
a. Could Iceland submit information on the measures undertaken to find a 
solution with respect to the 10% surcharge on quotas, i.e. when vessels fishing 
in Icelandic waters land their catch in the Faroe  Islands?  
b. Could Iceland present what the current situation is?  
Response from the delegation of Iceland  
 
 The principal rule in the Icelandic legislation is that all fish caught by Icelandic vessels, of 
stocks that wholly or partially dwell in the Iceland ic Exclusive Economic Zone, shall be landed and 
weighed in Iceland. The Minister can grant exemption from this rule.  
 
 The Act on Fisheries Management No. 116/2006 provides for the authorization to apply a 
surcharge on quotas when fish is exported without having been weighed in Iceland  and has not 
been changed. Paragraph 7, Article 11 of the Act states that the Minister can decide to apply a 
surcharge of up to 20% on cod and haddock and up to 15% on other species when the fish is 
exported unprocessed.  
 
 In 2007 it was decided not to apply any surcharge, however that decision was reviewed in 
2009. Since then a 5% surcharge is applied on demersal fish that is e xported un -weighed, the 
reason being that the fish lo ses weight through water drip during the transpo rt and handling time. 
In practice, nearly all fish that is exported unprocessed is weighed before export and thus no 
surcharge is applied. Landings of demersal fish by Icelandic vessels in foreign harbours are 
uneconomical and almost non -existent.  
  
 The Fisheries Directorate can authorize Icelandic vessels to land pelagic fish of shared stocks 
in foreign harbours in which case no surcharge is applied.  
 
 
 WT/REG243/2  
 
- 2 - 
 
  c. Could the Faroe Islands submit information on the measures undertaken to find 
a solution with respect to the 30% surcharge of days -at-sea, i.e. when Faroese 
vessels fishing in their territorial waters have landed more than 25% of their 
catch outside the Faroe Islands' territory and land their catch in Iceland?  
d. Could the Faroe Islands present what the curr ent situation is?  
Response from the Faroe Islands  
 
 In a joint declaration, dated 31 August 2005 the parties to the Hoyvík agreement decided 
that it is not the purpose of the agreement to restrict in any way the management or exploitation 
by the parties of  their respective living marine resources.  
 
 Without prejudice to the need for effective management of their fisheries resources, both 
parties agreed to identify ways to facilitate fish processing and trade in fish between the 
Faroe  Islands and Iceland, w ith a view to removing any nuisances without delay.  
 
 Faroese authorities should address this by finding a solution in the near future to the 30% 
surcharge of days -at-sea, when Faroese vessels fishing in Faroese waters have landed more than 
25% of their c atch outside the Faroe Islands and land their catch in Iceland.  
 
 The provisions mentioned in the joint declaration are still in force. This also applies for 
landings in Iceland.  
 
Trade in Services  
 
1.2.  The objective of the Agreement is to create a single ec onomic area where, among 
others, the movement of services and capital provided by natural persons or legal 
persons domiciled in any of the Parties' territories, is granted on a non -discriminatory 
basis (see Article on National Treatment Art 5 (1) A, B and Art 5 (2) B,C, E). The 
Agreement also includes a far going obligation to recognize diplomas and other 
professional qualifications acquired in the other country.  
 The EU would like to ask the Parties to clarify to what extent cross border services 
are cover ed by this A greement.  
 
Response from the delegation of Iceland  
 
 The Agreement covers all modes of supply of services, including cross border services. No 
limitations are made for the provision of cross -border services between the p arties.  Article 5(1)(B) 
states that "any discrimination between legal persons domiciled within the territorial scope of the 
Agreement, on the basis of their place of establishment, is prohibited ". This makes it clear that the 
parties are not permitted to discriminate against a se rvices provider of the o ther p arty wh o is 
established in that other p arty and provides services cross -border. It follows from Article 5(1)(A) 
that a ban on discrimination also applies for natural persons p roviding services in the other p arty 
(Mode 4).  
 
Response from the Faroe Islands  
 
 Article 5(2)(B)(i.) lays down the principle of non -discrimination in the field of services and 
provides that it is prohibited to discriminate a service provider of one Contracting Party operating 
in the territory of the othe r Contracting Party.  
 
 However and according to Article 5(2)(B)(ii.), "… natural or legal persons of one Contracting 
Party operating in the territory of the other Contracting Party shall fulfil the same requirements as 
natural or legal persons of the latt er Contracting Party, under the latter Contracting Party 's 
national law. " This entails, that an undertaking which is providing a service may be required to 
fulfil national criteria of the other country where the service is to be carried out which are diffe rent 
from those of the country where the service provider is established.  
 WT/REG243/2  
 
- 3 - 
 
   One example of the far reaching obligation to recognize diplomas and other professional 
qualifications acquired in the other country in Article 5(2)(c)(iii.) is, that a special reg ulation was 
put into force regarding the right of Icelandic lawyers to practice law in the Faroe Islands.  
 
1.3.  The Agreement  guarantees non -discrimination for all service providers "operating" 
in the other country.  
a. Does this include cross border provision of a service, or does "operating" mean 
you have to be established?  
Response from the Faroe Islands  
 
 The Freedom to provide services according to Article 5(2)(B)(i.) generally involves retaining 
an establishment in the territory of one Contracting Party whil e effecting the service in the 
territory of the other Contracting Party. The right of establishment permits movement to the State 
where the service or activity is to be carried out. You do not have to be established.  
 
 In some cases the provision in Articl e 5(2)(B)(ii.) may entail that individuals or economic 
operators must establish themselves temporarily in the territory of the other Contracting Party in 
order to fulfil the same requirements as natural or legal persons of the latter Contracting Party, 
under the latter Contracting Party 's national law.  
 
Response from the delegation of Iceland  
 
No, one does not have to be established. As mentioned above, it follows from Article 5(1)(B)  
that the p arties to the Agreement are not permitted to discriminate again st a service provider of 
the other party who is established in that other party and providing services cross -border. The 
reference in Article 5(2)(B)(i) to services providers "operating " in the other party does not limit the 
obligation in 5(1)(B).  
 
b. Is the re a kind of "passport" so that services that can be legally provided in one 
country, can also be provided (according to the home rules) in the other 
territory?  
Response from the Faroe Islands  
 
 There is no such passport.   
 
Response from the delegation of Iceland  
 
 No, service provided in one party are subjec t to the rules and law of that p arty.  
 
Question from the delegation of Japan  
 
1.4.  Regarding paragraph 4.8 , page 18  (Section 4.3.3 Movement of natural pe rsons) , 
does this mean that the natural persons stayi ng temporarily will be able to have a voting 
right and eligibility for election without the permanent residency?  
Response from the delegation of Iceland  
 
 Article 5(2)(C)(iv.) provides that Faroese natural persons who have had a legal residence in 
Iceland  for a period of three consecutive years before the date of elections, have the right to stand 
for municipal election and to cast a vote in municipal elections. This right has been duly 
implemented into Icelandic national legislation on municipal elections .  
 
Response from the Faroe Islands  
 
 According to Article 5(2)( C)(iv.) three years of residence by Icelandic natural persons in the 
Faroe Islands entail the  right to stand for municipal election and cast a vote in municipal elections . 
The Faroese Act on municipal elections  provides that  foreign citizens have the right to cast a vote 
in municipal elections with a 3 years residence condition.   
__________