Following the financial crisis of 2008, the regulatory framework for financial services has undergone fundamental reform. Norwegian authorities have been eager to follow the reforms and have in many cases been early adapters of the new legislation. However, the establishment and functioning of the European Supervisory System, the four European supervisory authorities for financial services, proved to be a difficult technical and constitutional challenge for the EFTA parties in the EEA agreement. A constitutionally possible and technically feasible solution was only put into place in the autumn of 2016, six years after the regulations establishing the authorities were decided.
All regulations decided after the establishment of the ESAs refer to the powers of the ESAs. Thus, since the ESA regulations had not been incorporated into the EEA-agreement, none of the legal acts that referred to the ESA-regulations had been incorporated either. However, since 2016, several substantial parts of the pending regulation have been included into the EEA agreement, even if some crucial pieces of legislation still are pending.
During the past five years, the Norwegian financial sector have benefited from the goodwill of European FSAs. This goodwill has found pragmatic solutions where the legal basis for passporting of cross border activities has been missing. Even if there is a general perception that Norway is a part of the internal market for financial services and not a third country, this goodwill is not self-evident and cannot be taken for granted.
The back-log does entail some degree of legal uncertainty that really goes right to the heart of financial services. Intangible contractually bound services need a clear and certain legal framework to inspire trust and to lessen the amount of time used on diligence – often far beyond “due” – when it comes to a small country that prides itself of being different from others.
The cumbersome work of entering the remaining 150 or so regulatory measures into the EEA agreement in order for the EEA to be fully and also legally integrated into the internal market will undoubtedly take more time. Norwegian authorities express optimism with regard to an accelerated pace of inclusion going forward. This is not least important since the regulatory development in financial services in the EU continues, so the back-log of outstanding issues keeps filling up.
Inside without a say
The EEA agreement has been active for 22 years. The EEA states follow the development of the EU without being able to influence the development of the union, or indeed the individual legislative acts the agreement binds us to implement. As the story of the ESA-regulations has shown, the challenge lies in developing the agreement itself alongside the development of the EU. The risk going forward is dwindling multilateral interest and effort to do the work of developing the agreement. Without such development, the EEA/EFTA affiliation to the internal market becomes fraught with uncertainty.