One of the most important issues in the
post-referendum debate on Brexit is whether or not we should remain in the
Single Market to facilitate negotiations and ease our transition. The clear,
sensible and rational answer to this is "yes”. However, it is assumed
that we would have to accept freedom of movement as it is. Any number of
high-ranking Commission officials have warned us that this is
it must be known that the Commission officials (and the European politicians who
joined them), were not telling the truth about freedom of movement – or at
least the whole truth in respect of the EEA.
The EU has been quite willing to negotiate with one of the three EFTA/EEA
states on freedom of movement. Furthermore, they have come to an amicable
solution, which has allowed it to secure an amendment to the treaty giving it a
permanent opt-out to freedom of movement. The state concerned now operates a
quota system little different in principle to the Australian points
That the state is the principality of Liechtenstein need not worry us. It may
be a tiny micro-state with a population of 37,000 spread over an area of 61
square miles – less than half the area of the Isle of Wight – but it is a
fully-fledged Contracting Party to the EEA Agreement. It has assumed exactly
the same rights and responsibilities as any other EFTA state.
Furthermore, Iceland has used exactly the same provisions to suspend free
movement of capital following the 2008 financial crisis, demonstrating that
there is a real and effective option within the EEA Agreement which could be
available to the UK, and solve a lot of problems.
Liechtenstein joined the EEA on 1 May 1995. On the 10th March 1995 the EEA Council - part
of the formal consultation structure set up under the agreement – looked at the
situation dominating Liechtenstein's entry.
The Council recognised that Liechtenstein had "a very small inhabitable
area of rural character with an unusually high percentage of non-national
residents and employees". And it decided that
unrestricted free movement of workers would be detrimental to the country.
the UK, but at the opposite end of the scale, the country was not able to
absorb unlimited numbers.
Moreover, the Council acknowledged "the vital interest of Liechtenstein to
maintain its own national identity". It thus concluded that
the situation "might justify the taking of safeguard measures by
Liechtenstein as provided for in Article 112 of the EEA Agreement".
Article 112 is part of the "safeguard measures" – popularly known as
the "emergency brake". Where serious economic, societal or
environmental difficulties of a sectoral (sic) or regional nature arise, which
are liable to persist, it allows EFTA states (but not EU Member States)
unilaterally to take appropriate measures to resolve them. EU Member States
have to rely on the Commission to take action.
Back in 1995, with a massive immigration problem looming, the EEA Council asked
all members to "endeavour to find a solution which allowed Liechtenstein
to avoid having recourse to safeguard measures". However, no long-term
solution was found so a temporary expedient was arranged: transitional
arrangements which allowed the country to impose "quantitative
limitations" on immigration until 1 January 1998. These were incorporated
into Protocol 15,
appended to the Agreement.
The next move was towards the end of 1997, just before the end of the
transitional period. There had been no long-term solution found so
Liechtenstein unilaterally invoked the Article 112 safeguard measures. By this
means, it kept the existing immigration restrictions in place when the
transitional period ended.
There were further attempts to resolve the situation in
1998, which were unsuccessful. Then, on 17 December 1999 after a further
review, the EEA Joint Committee (another of the formal EEA bodies that
mysteriously have "no influence") decided that the "specific
geographical situation of Liechtenstein" still justified "the
maintenance of certain conditions on the right of taking up residence in that
This unstable situation, however, could not be allowed to last. In order to resolve
it, the Joint Committee came up with a proposal for a longer-term solution.
Liechtenstein was to be allowed to introduce a quota system controlling the
number of workers allowed to enter the country. This was given formal status by
an amendment to Annex VIII of the EEA Agreement, setting
out what were called "sectoral adaptations", cross-referred to Annex V on the free movement of
As a formal amendment to the EEA Agreement, the decision provided for a new
transitional period until 31 December 2006, and allowed for the new measures to
apply subject to a review "every five years, for the first time before May
After reviews in 2009 and in 2015, it was
concluded that there was no need to make any change to the current rules. The
provisions on the "sectoral adaptations" could remain unchanged.
Under the current arrangement, Liechtenstein issues 56 residence permits for
economically active and 16 permits to economically non-active persons each
year. Half of the totally available permits are decided by lottery, held twice
The numbers involved are, of course, very small, but Liechtenstein is a tiny
country. What matters is that a precedent
has been set. Within the framework of the EEA Agreement, an EFTA state has
suspended freedom of movement and replaced it with a quota system for what
amounts to an indefinite period.
This is where the situation currently stands. Thus, whatever the EU might
declare in terms of freedom of movement being "non-negotiable" for EU
Member States, it is undeniable that it is negotiable within the framework of
the EEA Agreement, as it applies to EFTA states.
Therefore, if the UK chooses to follow the EFTA/EEA
option as an interim
solution to expedite the Article 50 settlement, once the agreement is adopted
it can follow the procedural steps pioneered by Liechtenstein. And by this
means, it can impose limits on immigration from EEA states.
In terms of applying a quota system, it should be noted that, in the
Australian-style points system, only 23 percent of the migrants admitted come
under the points system. The overall limit is set by way of an arbitrary quota,
set annually – currently at 190,000. This is, by any measure, a quota system.
To that extent, the UK can have some of its cake and eat it. The
"Liechtenstein solution" potentially gives our negotiators far more
flexibility than at first imagined. We accept the EEA acquis as
it stands, but negotiate "sectoral adaptations" that bring the
Agreement into line with UK needs.
This should help us
reach an amicable settlement with the EU, while keeping us in the Single