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The Swiss expert on European law, Dr Carl Baudenbacher, and his daughter, Dr Laura M. Baudenbacher, also an expert on European law, have written a short book, Iceland Before the Referendum of 29 August 2026, on the question Icelanders will then answer: membership of the European Union. The authors point out that this is not a choice between Europe and isolation. Iceland is already deeply integrated into Europe through its membership of the European Economic Area (EEA) with Norway, Liechtenstein, and, for most practical purposes, Switzerland. Thus, Iceland is a member of the Single Market, whereas fisheries, agriculture, foreign trade, monetary affairs, and foreign policy remain under Icelandic control. EU membership would transfer control of these sectors to Brussels. But the EU has changed much in the last few years, the authors note, not only because Germany, France, and Italy are debt-ridden and uncompetitive, but also because Great Britain—an important common-law counterweight to continental dirigisme—has left. A Europe determined by French centralism and implemented with German thoroughness is, Czech politician Karel Schwarzenberg once observed, not an attractive prospect. Therefore the choice is between EU membership with uncertain influence and the EEA, which combines deep market integration with institutional independence.
More Influence and Control in the EEA
The authors explain that Iceland is a special case: European, but not continental; Atlantic, but not American. They warn against reacting to particular political events, such as Donald Trump’s statements about Greenland, and instead advocate a sober comparison of institutions, competences and guarantees over the long term. Admittedly, EU membership would give Iceland a role in shaping EU rules rather than simply accepting them under the EEA agreement. But for her tiny population, this would be a minimal role, whereas in the EEA Iceland retains various rights and institutions, such as the EFTA Court, control over fisheries and agriculture, an independent trade policy, monetary flexibility, and an electricity system that remains separate from European price volatility. The real EEA deficit of non-participation in important decisions would be replaced by a no less real EU deficit, as power migrates from national parliaments to unaccountable Brussels institutions such as the European Commission and the Court of Justice of the EU (CJEU). The authors quote Iceland’s long-serving prime minister Davíd Oddsson, who saw the EEA not as a waiting room for EU membership but as a deliberate choice: access to the Single Market without political absorption. Iceland would have much less say as a member of the EU of 27 states than in the EEA/EFTA forum of Iceland, Norway, Liechtenstein, and Switzerland, not least in the EFTA Court, where Dr Carl Baudenbacher served as President for many years.
The Icesave Case
An example is the Icesave case, which arose after the British and Dutch governments hastened to compensate British and Dutch depositors in an Icelandic bank during the 2008 Icelandic bank collapse, and then demanded that the Icelandic state assume liability for their outlays, which were enormous by Icelandic standards, amounting to four billion euros, one-half of Iceland’s Gross Domestic Product at the time. Their argument was that Iceland had failed to ensure that the Icelandic Depositors’ Guarantee Fund was large enough to compensate those depositors. When the case was brought before the EFTA Court, the EU intervened to support Great Britain and the Netherlands, a step it had never taken before. The EFTA Court, presided over by Dr Baudenbacher, found for Iceland on various legal grounds. But it is likely that the CJEU would have decided differently. Here, the EFTA pillar of the EEA/EFTA forum protected a small country in an existential crisis.
Yes: a Journey of Uncertainty and Dependency
Formally, the referendum on 29 August concerns only the renewal of the application process begun in 2009 and halted in 2013. A second referendum on membership would be held at the end of the process. However, the authors warn that a Yes would be interpreted as a mandate to advance accession negotiations. The risk would not be the vote’s formal legal effect, but the political path dependency it could create.