WT/TPR/S/65 Trade Policy Review
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) INTRODUCTION
1. Iceland's institutional framework has remained largely unchanged since its last Trade Policy
Review in 1994.  The Ministry of Foreign Affairs and Foreign Trade remains responsible for trade
negotiations and, together with other ministries, particularly Finance, Industry and Commerce, and
Agriculture, formulates trade policy.  Iceland has reformed its legislation to comply with itscommitments and obligations under the European Economic Area (EEA) and the WTO.  In this
respect, a number of Acts has been passed by Parliament, as Icelandic law requires that international
agreements be incorporated in domestic legislation before they may be invoked in domestic courts.
2. Iceland is a founding member of the WTO, and participated in the WTO Negotiations on
Financial Services and submitted an offer in the Negotiations on Basic Telecommunications.  Both ofthese agreements have been ratified by Parliament.  Iceland has not been involved as plaintiff or
defendant in any dispute in the WTO.
3. Iceland participates in the EEA and is a member of the European Free Trade Association
(EFTA).  As a member of the EEA, Iceland grants  largely unrestricted movement of goods, workers,
services, and capital to other members, and participates in the EEA's cumulation system to conferorigin.  In the context of its participation in EFTA, Iceland has a large and growing network of
free-trade agreements with central and eastern European countries and some countries in the Middle
East.  All such agreements provide for free trade in all goods except sensitive unprocessed agricultural
products;  they also contain provisions in areas such as technical regulations, public procurement, and
intellectual property.  Free-trade agreements with Canada and Cyprus are under negotiation;  the
Icelandic authorities expect these to be completed during the first half of 2000.
4. National treatment is granted to foreign invest ors except in some key sensitive areas such as
fisheries, energy, and airline operations, where fore ign ownership is restricted or simply not allowed.
Other restrictions to investment, regarding residency, establishment, and real estate ownership, apply
only to non-EEA or non-OECD nationals and companies.
(2) G
ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK
5. Iceland is a Republic with a parliamentary government.  The current Constitution, which
dates from 1944, was amended in 1959, 1968, 1984, 1991, 1995 and 1999.  The President of the
Republic is the Head of the State, and is elected by popular vote.  The President is not responsible for
executive acts, which, under the Constitution, are the responsibility of the Cabinet.  Under the
Constitution and other laws, the President and various government authorities are vested with the
executive authority;  however, other constitutional statutes declare that such authority must beexercised through cabinet ministers, leaving the fu nctions ascribed to the President mostly nominal.
Although elected to serve a four-year term, the President may be removed from office by a majority
vote in a plebiscite called by three fourths of the Members of Parliament (AlÞingi).  The number and
assignment of ministers are formally determined by the President under the auspices of the Prime
Minister, or the Prime-Minister-elect when a new Cabinet is in the making.  The President has thepower to remove the ministers from office.
6. The Prime Minister, appointed by the President together with the rest of the Cabinet, is the
Head of Government and as such presides over the Cabinet, of which all ministers are members.
Ministers are responsible for the administration of their respective ministries and are responsible for
issuing regulations and decrees.  Ministers are respons ible to the AlÞingi, where they are entitled to a
seat and may participate in debates;  however, they have the right to vote there only if they are at theIceland WT/TPR/S/65
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same time members of the AlÞingi.  Ministers may be impeached by the AlÞingi on account of their
official acts.  There are currently 14 Ministries, headed by a Minister and with a Secretary General or
Permanent Under Secretary presiding over the administration within each Ministry.1  The number of
Ministries is determined by law, while the subjects handled by them are decreed by Regulations
issued by the Prime Minister and confirmed by the President.
7. Under the Constitution, legislative authority is jointly vested on the AlÞingi and the President,
who entrusts this authority to the Ministers and without exception acts upon their advice.  The AlÞingi
is made up of 63 members, elected by secret ballot on the basis of proportional representation for
four-year periods;  it is headed by a President, elected by the AlÞingi to lead it meetings.  Bills passed
by the AlÞingi must be submitted to the President for confirmation not later than two weeks after they
have been passed;  confirmation gives bills the force of law.  If the President were to reject a bill,which the authorities noted has never been the case, it would still become valid but would have to be
submitted to popular vote for approval or rejection.  If rejected, the law would become void;  if
approved, it remains in force.  The President may i ssue provisional acts of laws (except if related to
the Budget) in case of urgency and on the initiative of a Minister, when the AlÞingi is not in session.
These acts must be submitted to the AlÞingi as soon as it convenes;  they become void if the AlÞingidoes not complete their consideration within six weeks after convening.
8. Parliamentary issues may be addressed by the AlÞingi through legislation, or by adopting a
parliamentary resolution without producing legislati on.  The Budget must be approved by the AlÞingi,
which holds power to amend the draft budget at will.  Other tasks include supervision of the
Government and its administration, notably through the right of each of Member of the AlÞingi to
request information from a Minister regarding a public matter by tabling a question or requesting a
report. The AlÞingi controls national finances, i.e. taxation and financial allocations, and appointsMembers of committees and executive bodies  The AlÞingi has a system of twelve permanent
committees, the jurisdiction of which corresponds closely to the functions of government ministries.
Each committee is composed of nine members, except for the Budget Committee, which is composed
of eleven members, reflecting the proportional strength of the political parties represented in the
AlÞingi.  The committees meet in closed sessions to examine matters referred to them, inviting peoplein relevant positions to present their views.
9. Legislative bills are either submitted to the AlÞingi by Ministers, by sanction of the President,
or by individual members of the AlÞingi.  No matter may be admitted for consideration unless
introduced by one of these parties.  Proposed legislation is generally drafted by committees set up by
a minister;  the majority of the bills passed are proposed by the government ministers.  All proposedlegislation is to be submitted within six months of the commencement of the session, i.e. before
1 April;  however, a majority decision of the AlÞingi can admit a bill submitted after this deadline.
No bill may be passed until it has received three readings.  At the first plenary reading the bill is
introduced and discussed in general terms, after whic h it is usually referred to the relevant committee.
When a committee has finished its study of a bill, it is either shelved or the committee submits areport.  At the second reading, the separate articles of the bill are discussed in detail in relation to the
committee report.  At the third reading the bill is discussed in its entirety, following which a vote is
called.  Draft resolutions are given two readings, between which they are referred to the relevant
committee.  Under the Constitution, all laws must be published before implementation.
                                                     
1 According to the authorities, in addition to the Office of the Prime Minister, other Ministries are:
Foreign Affairs and External Trade;  Science, Education and Culture;  Agriculture;  Fisheries;  Justice and
Ecclesiastical Affairs;  Social Affairs;  Health and Social Security;  Finance;  Transport and Communications;
Industry and Commerce;  Environment;  and Statistics Iceland .WT/TPR/S/65 Trade Policy Review
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10. The judicial power is autonomous and independent of the executive and legislative
authorities.  There are two levels of courts, consisting of eight district courts with jurisdiction in most
civil and criminal cases, and the Supreme Court which hears appeals from the district courts.  In
addition, there are two special courts with limited jurisdiction:  the Labour Court, and the High Courtof State.
11. Trade agreements are negotiated under the responsibility of the Minister of Foreign Affairs
and External Trade and are signed by the Minister or his/her representative.  They must be ratified by
the President.  Parliament's approval is required for the ratification of  trade agreements that requireamendment of the national legislation.
(3) D
EVELOPMENT AND ADMINISTRATION OF TRADE POLICY
(i) Main trade laws
12. International law must be incorporated by an Act of Parliament into domestic legislation.
Only when incorporated in domestic legislation can the provisions of trade agreements be invoked in
domestic courts.  In this respect, Iceland has amended several pieces of legislation to comply with itsobligations under the WTO Agreements.
13. The main laws regarding tariffs and customs administration are the Customs Act No. 55/1987,
as amended, and Regulation No. 374/1995, as amended by Regulation No. 457/1995 on customs
value and customs valuation.  Anti-dumping and countervailing duty legislation is contained in
Articles 115-119 of Iceland's Cu stoms Law No. 55/1987, as amended by Law No. 66/1994, and in
Regulation No. 351/1994.  Other trade-related regulations and laws are shown in Table II.1.
Table II.1
Main trade laws and regulations
1. Tariffs, anti-dumping and countervailing measures; and enforcement of TRIPS
Customs Act No. 55/1987.
2. Customs valuation
Regulation No. 374/1995 on Customs Value and the Determination of Customs Value, as amended by regulation No. 457/1995.
3. Parallel imports of medicine
Regulation on the Registration of Parallel Imported Medicinal Products and the Issuing of Marketing Authorization No. 582/1995.
4. Licensing
Act No. 65/1974 on Narcotic Drugs;  Regulation No. 656/1997 implementing the Montreal Protocol on substances that deplete the
ozone layer;  Regulation No. 656/1997 on the overall amount of allowable HCFC;  Act  No. 16/1998 on Weapons;  Regulation
No. 265/1997 on weapons and ammunition;  the Firearms, Explosives and Fireworks Act No. 46/1977;  Act No. 143/1996 on
Telecommunications,  Regulation No. 322/1985 on subscriber equipment;  Regulation No. 589/1994 on Communication Equipmentmarking;  Regulation No. 479/1995 which contains a list of prohibited imports.
5. Government procurement
The Government Procurement Act of 30 March 1987 (Act No. 52/1987).
6. Agriculture
Act No. 99/1993 on Production, Pricing and Sales of Agricultural Products.
7. Sanitary and phytosanitary measures
Act No. 51/1981 on protection against plant diseases and pests;  Act No. 77/1981 on veterinary services;  Regulation No. 189/19 90
on import and export of plants and Notice No. 117/1990;  Act No. 54/1990 regulating the importation of animals;  Act No. 87/199 7;  Act
No. 93/1993 regarding licences on fish products and Notices from the Ministry of Agriculture of 3/11 1977 and 28/10 1986, regar ding
licensing of imports of fresh water fish;  Act no. 22/1994 on import control measures on feeds, fertilizers and seeds;  Regulat ions
Nos. 650/1994 on control of feed, 301/1995 on control of seeds and 398/1995 on fertilizers;  Regulation No. 479/1995 and Notice s
Nos. 483/1995, 262/1996, 525/1996, 665/1997 on importation of animal products from countries which have been sanctioned by the
Chief Veterinary Officer.
8. Competition policy
Law No. 8/1993 (Competition Act).
9. Intellectual property protection
Patents Act, No. 17/1991, as amended by Act No. 67/1993;  Act No. 36/1996, amending the Patents Act, No. 17/1991, as amended;
Act No. 91/1996, amending the Patents Act;  Copyright Act of 1972, as amended in 1984, 1991 and 1992.
Source : Information provided by the Icelandic authorities.Iceland WT/TPR/S/65
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(ii) Agencies involved in trade policy implementation
14. The ministries directly responsible for matters related to trade and trade policy formulation
are the Ministries of Finance;  Foreign Affa irs and External Trade;  Industry and Commerce;
Fisheries;  and  Agriculture.  Other ministries dealing with issues linked to trade policy issues include
the Ministries of the Environment;  Education, Science and Culture (copyrights);  and  Transport and
Communications (telecommunications policy).
15. The Ministry of Foreign Affairs and External Trade is responsible for all external trade, for
the formulation and implementation of trade policy, and Iceland's relations with international
organizations and trade negotiations.  The Ministry of Industry and Commerce has responsibility over
domestic trade, and over the financial service sector.  The Patent and Registration Office, within the
Ministry of Industry and Commerce receives applications for and grants patents.  The Minister ofFinance is responsible for tariff policy and other taxation issues.  Customs administration and duty
collection is the responsibility of the Directorate of Customs under the direction of the Department of
Revenue and Legal Affairs of the Ministry of Finance.  The Directorate of Tax Investigation and the
Internal Revenue Directorate, also under the dir ection of the Department of Revenue and Legal
Affairs, are responsible for direct and indirect taxation.  The Ministry of Fisheries oversees allactivities in the fisheries sector, including those related to fish exports, the administration of fishing
quotas, and imports.  The Ministry of Agriculture has the responsibility for Iceland's agricultural
policy, including trade and the administration of government support to the sector.  The Ministry of
Transport and Communications is responsible for policy formulation in transport, tourism, and
telecommunications.  The Competition and Fair Trade Authority, under the Ministry of Industry and
Commerce is charged with overseeing competition.
16. Other bodies involved in trade policy formulation or implementation include the Trade
Council of Iceland and the Invest in Iceland Bureau (Chapter III(3)(iv)), as well as the Icelandic
International Development Agency (ICEIDA). The latter is an official institution under the Ministry
of Foreign Affairs founded in 1981.  ICEIDA has the mandate of promoting cooperation between
Iceland and the developing countries, by supporting their governments in improving their economies.
The authorities indicated that Iceland's support to developing countries accounts for approximately0.1% of GDP.
17. Of the AlÞingi's twelve permanent committees, two generally play a role concerning trade
policy issues:  trade bills are normally considered in the Economic and Trade Committee;  some are
also examined by the Foreign Affairs Committee.
(4) T
RADE AGREEMENTS AND ARRANGEMENTS
18. At a regional level, Iceland is a member of the European Free Trade Association (EFTA), the
European Economic Area (EEA), the Nordic Counc il, and the Nordic Investment Bank.  In the
framework of EFTA, a number of bilateral trade agreements have been subscribed with third
countries:  these agreements generally cover the whole of manufacturing, but their coverage of
agricultural goods varies and is in most cases quite limited.  At the multilateral level, Iceland is amember of a number of international organizations (Table II.2).
(i) World Trade Organization
19. Iceland is a founding Member of the WTO, and its membership was effective as of
1 January 1995 after the WTO Agreement was ratified by Parliament and signed by the President.
The Icelandic authorities noted that Iceland's objectives during the Uruguay Round negotiations were
mainly:  (a) that the WTO Agreement Framework contributed to trade globalization and incrementallyWT/TPR/S/65 Trade Policy Review
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eliminated trade distorting measures;  (b) that fish and fish products were treated as any industrial
good;  and (c) that industrial tariffs were reduced or eliminated altogether.  The authorities are of the
opinion that these objectives have been generally reached, although Iceland would have liked to see
further reductions in tariffs on industrial goods.  In the case of fish products, average tariffs were
reduced by over 20%;  this reduction was less than for industrial products.  Iceland participated in the
WTO Negotiations on Financial Services and presented an offer in the Negotiations on BasicTelecommunications (Chapter IV(6)(ii) and (iii)).
Table II.2
Iceland's membership in international organizations
Year of association
International Monetary Fund (IMF) 1945
International Bank for Reconstruction and Development (World Bank) 1945
United Nations (UN) 1946
North Atlantic Treaty Organization (NATO) 1949
Organization for Economic Cooperation and Development (OECD) 1949
Council of Europe 1950
Nordic Council 1952
International Finance Corporation (IFC) 1956
International Development Association (IDA) 1961
General Agreement on Tariffs and Trade (GATT) 1964 (provisional), 1968
European Free Trade Association (EFTA) 1970
Conference on Security and Cooperation in Europe (CSCE) 1975
Western European Union (WEU) 1992
European Economic Area (EEA) 1994
World Trade Organization 1995
Source: Information provided by the Icelandic authorities.
20. As a result of discussions in the WTO Committee on Trade and Environment on the
relationship between fisheries, subsidies, and trade, Iceland proposed that the elimination of subsidies
on fisheries be part of any upcoming WTO negotiations.2  The proposal considers that government
subsidies contribute to the overcapacity of the global fishing fleet, distort trade and prices, seriously
undermine sustainable utilization of fish stocks, and hamper sustainable development.
21. A number of notifications have been made by Iceland to the WTO between 1995 and
mid-1999 (Table AII.1).
22. Iceland has not been involved to date in any dispute in the WTO.
(ii) Regional arrangements
23. Iceland joined the European Free Trade Association (EFTA) in 1970.  EFTA, currently
composed of Iceland, Liechtenstein, Norway and Switzerland, provides for free trade in industrial
products, since 31 December 1966, and fish and other marine products since 1990.  Trade in
agricultural products is covered under separate bilateral agreements.  The EFTA agreement containsprovisions for safeguard, anti-dumping and countervailing actions in intra-EFTA trade and for internal
dispute settlement.  Other issues covered by the EFTA agreement include labour, intellectual
property, government procurement, environm ent, competition policy, and investment.
24. EFTA has a large network of bilateral free-trade agreements (Chapter III(2)(iii) and
Table II.3).  These agreements provide for free trade in industrial products, fish and other marine
                                                     
2 WTO document WT/GC/W/229, 6 July 1999.Iceland WT/TPR/S/65
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products, as well as in processed agricultural goods.  Trade in unprocessed agricultural products is
subject to bilateral protocols between individual EFTA countries and each free-trade agreement
partner.  The agreements include evolutionary clauses in the area of services and investment, and
contain provisions on payments and transfers, state aid, state monopolies, technical regulations, public
procurement, intellectual property, competition, and other horizontal measures.  The agreements are
asymmetric:  while the EFTA States eliminate all duties and other restrictions for products covered bythe agreements upon entry into force, their partners abolish their duties only gradually.  Transition
periods are, in most cases, less than eight years.  Bilateral free-trade agreements have been notified to
the GATT/WTO as interim agreements for the formation of a free-trade area.
Table II.3
Iceland's participation in free-trade agreements
Date Entered into force Notified to GATT/WTO Name% of Icelandic
exports
1998
04.01.1960 01.03.1970 Yes   L/3328 Convention establishing the European Free Trade
Association (applies to Iceland, Switzerland, Norway
and Liechtenstein)10.4
31.01.1985 01.02.1985 NoaTrade Agreement between Iceland and Greenland 0.1
10.12.1991 13.07.1992 Yes   L/6989/Add.1 Agreement between the EFTA States and Turkey 0.1
04.03.1992 01.01.1993 Yes   L/7041/Add.1 Agreement between the EFTA States and the Czech
and Slovak Republic0.1/0.0
02.05.1992 01.01.1994 YesbAgreement on the European Economic Area (applies
to: Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Italy,
Liechtenstein, Luxemburg, the Netherlands, Norway,
Portugal, Spain, Sweden, and the United Kingdom)66.1
06.08.1992 01.07.1993 NoaFree Trade Agreement with the Faroe Islands 0.4
17.09.1992 01.08.1993 Yes   L/7129/Add.1 Agreement between the EFTA States and Israel 0.1
10.12.1992 01.09.1994 Yes   L/7372/Add.1 Agreement between the EFTA States and Poland 0.2
10.12.1992 01.06.1994 Yes   L/7215/Add.1 Agreement between the EFTA States and Romania 0.0
29.03.1993 01.06.1994 Yes   L/7257/Add.1 Agreement between the EFTA States and Bulgaria 0.0
29.03.1993 01.06.1994 Yes   L/7360/Add.1 Agreement between the EFTA States and Hungary 0.0
13.06.1995 01.09.1998 Yes   WT/REG20/N/1 Agreement between the EFTA States and Slovenia 0.1
07.12.1995 01.06.1996 Yes   WT/REG29/N/1 Agreement between the EFTA States and Latvia 0.0
30.08.1995 01.01.1997 Yes   WT/REG30/N/1 Agreement between the EFTA States and Lithuania 0.1
07.12.1995 01.10.1997 Yes   WT/REG28/N/1 Agreement between the EFTA States and Estonia 0.0
19.06.1997 Not yet ratified No Agreement between the EFTA States and Morocco 0.0
30.11.1998 Not yet ratified No Agreement between the EFTA States and the PLO for
the benefit of the Palestinian Authority0.0
a Greenland and the Faroe Islands are not covered by Article XXIV of the GATT of 1994:  they are not WTO Members and were
not GATT contracting parties.
b Covered by individual free-trade agreements between the EU and EFTA members, as notified to the GATT.  In the case of
Iceland, this was notified in document L/3780/Add.1.
Source : WTO documents;  and information provided by the Icelandic authorities.
25. Declarations on cooperation, usually the first step towards the conclusion of free-trade
agreements have been signed with Albania, Macedonia, Egypt, Jordan, Lebanon, and Tunisia.
Furthermore, Iceland has a bilateral free-trade agreement with the European Union  in addition to
membership in the EEA, and with the Faroe Islands and Greenland.  Free-trade agreements with
Canada and Cyprus were under negotiation in late 1999.
26. With the exception of trade with the members of the EEA, which accounts for two thirds of
Iceland's total trade, trade covered by bilateral agreements is almost negligible, amounting to just overWT/TPR/S/65 Trade Policy Review
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3% of total Icelandic exports in 1998.  If Switzerland is excluded, exports covered by bilateral
agreements amount to a mere 1.2% of total exports, with a similar figure for imports.
27. Iceland subscribed to a free-trade agreement with the European Economic Community (EEC)
in 1972.  The agreement is identical to those sign ed between the EC and other EFTA countries when
the United Kingdom and Denmark joined the EEC in 1972.  The free-trade agreement between
Iceland and the EEC provides for the gradual reduction of tariffs on industrial products and a numberof processed agricultural goods.  In the case of the EEC, there was a transition period of four years
and three months;  tariffs were eliminated on 1 January 1977.  Iceland had a longer transition period,
which extended until 1980.  Iceland was granted concessions with respect to some fishery products;
these took the form of tariff reductions, and were of major importance to Iceland, due to its
dependency on fish exports.  The concessions did not come into effect until 1976, after the settlementof a fisheries limit dispute with the United Kingdom and West Germany.  In addition, the agreement
between Iceland and the EEC contains provisions with respect to rules of origin and competition
rules, and included evolutionary clauses.
28. Iceland became a member of the European Economic Area (EEA) from its inception on
1 January 1994.  EEA membership implies unrestricted movement of goods, workers, services andcapital between Iceland and other members.  These principles as well as European Union competition
rules apply automatically in the entire EEA.  The EEA Agreement also provides for cooperation in
such areas as research and development, education, environment, social policy, culture, and health.  A
cumulation system to confer origin, introduced at the EEA level in January 1997, allows for the use of
materials originating in other partner countries upon production of originating products within the
EEA (without losing free-trade status - Chapte r III(2)(vii)).  The rules cover approximately
80 separate agreements and link some 30 countri es:  all EEA members, Switzerland, Turkey, and
ten countries in central and eastern Europe, the Mediterranean, and the Baltic area.
29. Within the framework of regional agreements, Iceland has been involved in only one dispute:
a case concerning government procurement (Chapter III(2)(x)).
(5) F
OREIGN INVESTMENT REGIME
30. The formulation of investment policies is the responsibility of the Ministry of Industry and
Commerce.  The Invest in Iceland Agency, establ ished by the Ministry of Industry and Commerce,
the National Power Company, and the Trade Council, is charged with attracting foreign investment to
Iceland and facilitating investment procedures.  The agency provides information and services related
to investment and the business environment.
31. In the 1990s, the Icelandic Government has adopted an active pro-investment policy, mainly
by creating an investment-friendly environment, since no direct subsidies are offered.  Foreign
investors may establish limited liability companies, partnerships, and cooperative societies.  Investors
are also permitted to establish a branch, a subsidiary in Iceland or buy stocks in Icelandic companies,
except in fisheries and primary fish processing activities.  Specific licences are required for operating
in some sectors, as well as environmental licences.  Foreign exchange controls have been fullyabolished since 1995, although the Central Bank is authorized to impose temporary restrictions on
capital outflows in exceptional circumstances.  Acco rding to the authorities, this has never occurred.
Industrial disputes are governed by an Arbitration Act.
32. Investment legislation follows EU provisions;  most barriers to investment for other EEA
countries were eliminated when Iceland joined the EEA.  A company domiciled in any other EEA
member has the same rights to operate in Iceland as an Icelandic registered company;  companiesIceland WT/TPR/S/65
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registered in Iceland are permitted to operate in all the countries of the EEA without any special
permit or legislation.  The same rules apply to movement of labour.  Citizens of the EEA countries do
not need a work permit in Iceland.
33. Act No. 34/1991 on Investment by Non-Reside nts in Business Enterprises as amended,
contains the basic principles of Icelandic investment legislation.  In general terms, Iceland grants
national treatment to foreign investors except in areas  considered strategic, such as fisheries, energy,
and airline operations.  In fishing operations and primary fish processing, foreign direct ownership is
not permitted, and indirect ownership is permitted only up to 25% (33% in certain circumstances).
This interdiction is extended also to EEA residents.  Seafood canning or other secondary fish
processing operations are open to foreign investment .  Only Icelandic and EEA residents are entitled
to own energy exploitation rights as regards waterfalls and geothermal energy for other than domesticuse, or to produce or distribute energy.  With respect to airline operations, foreign ownership in
Icelandic airline companies is limited to 49%, except for residents of other EEA countries.
34. In addition, other investment restrictions and requirements apply to non-EEA residents,
namely:  (a) the requirement to obtain special perm ission from the Minister of Commerce in the case
of investment in Icelandic enterprises by foreign states, foreign municipalities or other foreignauthorities involved in enterprises;  (b) for indivi duals not domiciled within the OECD wishing to run
a business or take part in a business enterprise with unlimited liability in Iceland, the requirement to
apply for permission from the Minister of Commerce or another appropriate authority;  (c) the
requirement for limited liability companies and ot her legal entities with domicile outside the OECD
and wishing to operate a branch in Iceland, that this  be permitted in an international treaty to which
Iceland is a party or by the Minister of Commerce;   (d) board membership of Icelandic companies by
individuals resident outside the OECD is subject to restrictions, but the Ministry of Commerce may
grant exemptions;  (e) new foreign enterprises operating in Iceland that set up a branch or subsidiary
are required to register with the Register of Limited Companies, and, except for residents of OECD
countries, certain requirements apply regarding a minimum number of board directors resident in
Iceland;  (f) to own real estate in Iceland, the propr ietor is required to be an EEA citizen or must have
had legal residence in Iceland for five consecutive years.  Non-residents (excluding EEA residents)must obtain a special permit from the Minister of Justice.
35. As part of Iceland's investment policy, the Icelandic Investment Bank Ltd (FBA or
Fjárfestingarbanki Atvinnulífsins ) was created in 1998 to encourage innovation-oriented investment
projects and support for development and marketing projects (Chapter IV(6)(ii)).  The FBA provides
start-up capital and invests in early stage and expa nding companies in exchange for shares (generally
20-25%); a representative from the fund generally sits on the board of directors of borrowing
companies. In 1998, the FBA invested in some 20 companies, with an average investment of
US$500,000 per company.