Energy and EU-law | New ruling from the EFTA Court confirms that the EEA Agreement applies to the Norwegian continental shelf

On 19 February, the EFTA Court issued an advisory opinion to the Norwegian Supreme Court (Case E-6/25, Saga Subsea), in which it ruled that Norway's position that the EEA Agreement does not apply to the continental shelf is untenable. This has been a controversial political issue, and it is well known that both the European Commission and the EFTA Surveillance Authority (“ESA”) have disagreed with Norway's position. The EFTA Court's ruling may have major consequences for Norwegian authorities and operators engaged in economic activity related to the Norwegian continental shelf.

At the heart of the matter is Article 126(1) of the EEA Agreement, which states that the Agreement applies to the “territory” of the EEA EFTA countries. Norway has argued that this term does not include the continental shelf beyond the territorial limits. However, following a political assessment, Norway has nevertheless agreed to incorporate acts relating to the continental shelf into the EEA Agreement in certain cases (e.g. Directive 94/22/EC on petroleum licences), while other rules have not been incorporated into the EEA Agreement (e.g. Directive 2013/30/EU on safety standards for offshore petroleum activities).

It remains to be seen how the Supreme Court and Norwegian politicians will respond to the EFTA Court’s advisory opinion, but in light of its clarity, it may have significant practical consequences:

Rules incorporated into the EEA Agreement and implemented in Norwegian law may apply to activities on the continental shelf to which Norway has exclusive rights under the Convention on the Law of the Sea. This means that it is not only petroleum activities on the continental shelf that are covered. Other activities, such as activities related to offshore wind farms and the exploitation of mineral resources, etc., may also be covered.
It is arguable that private parties who, due to conditions in Norwegian legislation, are denied rights they should have under EEA law, are entitled to damages from the state. This issue may arise in the Saga Subsea case, as the Supreme Court indicated in its request to the EFTA Court that it may not be possible to interpret the concerned provision of Norwegian law as applying to the continental shelf.
It must be anticipated that new EU rules governing activities on the continental shelf can no longer be excluded from the EEA Agreement on the ground that the Agreement does not apply to the continental shelf. Similarly, existing EU rules that have not yet been incorporated into the EEA Agreement on this basis should now be incorporated into the EEA Agreement and implemented in Norwegian law.
ESA supervises Norway’s compliance with its EEA obligations. In light of the EFTA Court’s clear advisory opinion, there is a real possibility that ESA will prioritise surveillance related to the continental shelf in order to correct laws and practices in Norway.

The EFTA Court’s advisory opinion

The case concerned an advisory opinion to the Supreme Court on whether the Temporary Agency Work Directive (Directive 2008/104/EC) applies to employees of a temporary-work agency in connection with work related to petroleum activities on the continental shelf. The background was a dispute between the Norwegian temporary-work agency Saga Subsea and two employees. These employees had been assigned to work offshore for various companies and were paid less for the same work than those companies’ own employees. The plaintiffs therefore claimed additional pay from Saga Subsea pursuant to Section 14-12a (1) (f) of the Working Environment Act, which stipulates that temporary-work agencies must ensure that temporary agency workers are guaranteed at least the same pay conditions as they would have had if they had been employed by the user undertaking. The provision is intended to implement Article 5(1) of the Temporary Agency Work Directive into Norwegian law.

The first key issue that the EFTA Court had to consider was whether the Temporary Agency Work Directive applies to seafarers. Norway had taken the view that EEA labour law rules applicable to seafarers specify this explicitly. If it is not specified that such rules apply to seafarers, they do not apply (paragraph 52). The Commission and ESA, on the other hand, argued that the starting point must be that seafarers are covered unless they are exempted (paragraphs 53-54).

The EFTA Court took the view that the interpretation of the Temporary Agency Work Directive must be based on its wording, context and purpose. None of these factors of interpretation supported the view that the Directive excludes seafarers, and Norway’s view was therefore rejected (paragraphs 58-59).

The second key issue in the case was the fundamental question of whether economic activity on the continental shelf of an EEA EFTA State falls within the scope of the EEA Agreement.

In this regard, the Norwegian authorities argued that Article 126(1) of the EEA Agreement limits the scope of the Agreement to the territory of the EEA EFTA States, and that this concept must be understood in accordance with international law. Norway further argued that previous practice by the EFTA Court, where it has concluded that the procurement rules may apply to procurements for Norwegian embassies in third countries outside the EEA, is incorrect (paragraph 63).

The EFTA Court took as its starting point that the EEA Agreement’s objective of a homogenous European Economic Area must mean that the EEA Agreement applies in principle when the contracting parties exercise jurisdiction within the material scope of the EEA Agreement (paragraph 74). With reference to previous case-law on situations occurring in third countries, the EFTA Court further held that EEA law may apply provided that there is a sufficiently close link to the EEA (paragraph 76).

It follows from Article 77 of the Convention on the Law of the Sea that the coastal state exercises sovereign rights over the continental shelf with regard to the exploration and exploitation of natural resources, and further from Article 80, cf. Article 60, that the coastal state has exclusive rights to construct artificial islands, installations and structures. Work carried out on installations or vessels located on the continental shelf in connection with the exploration and/or exploitation of natural resources must therefore be regarded as work carried out on the territory of the State concerned and covered by EEA law (paragraphs 80-82).

The reference to Norway’s “territory” in Article 126(1) of the EEA Agreement is not based on external concepts of international law but formulated differently in different language versions. An interpretation whereby the EEA Agreement has a narrower scope for the EEA EFTA countries than for the EU Member States is fundamentally contrary to the objectives of the EEA Agreement (paragraphs 84-94).

The EFTA Court emphasized, however, that this does not imply any extension of the sectoral scope of the EEA Agreement, which includes restrictions relating to fisheries and agriculture (paragraph 95).

On this basis, the EFTA Court concluded that Article 126(1) of the EEA Agreement does not exclude petroleum activities on the continental shelf of an EEA EFTA State from the scope of the EEA Agreement (paragraph 96).

BAHR’s assessment of the consequences

The EEA Agreement applies to activities on the continental shelf over which Norway has jurisdiction under the Convention on the Law of the Sea

The question of Norway’s sovereignty over natural resources was an important issue prior to Norway’s accession to the EEA Agreement, and is reflected in the fact that fisheries and agriculture are excluded from the scope of the Agreement. Although Norway accepted at the time that Directive 94/22/EC on petroleum licences was incorporated into the EEA Agreement on the basis that Norwegian laws already met the requirements of the Directive, Norway’s position has been that the EEA Agreement does not cover the continental shelf beyond the territorial limits.

It follows from the key premises of the EFTA Court’s advisory opinion that, in the EFTA Court’s view, the EEA Agreement applies to activities on the continental shelf to which Norway has exclusive rights under the Convention on the Law of the Sea and which are not excluded from the sectoral scope of the EEA Agreement.

This means that, according to the EFTA Court, it is not only petroleum activities on the continental shelf that are covered. Other activities, such as activities related to offshore wind farms and the exploitation of mineral resources, etc., may also be covered. With regard to support for offshore wind farms on the Norwegian continental shelf, ESA has in its practice applied the state aid rules of the EEA Agreement and assessed the measures on this basis (see, for example, Decision 194/23/COL on aid to Sørlige Nordsjø II, Decision 067/25/COL on aid to Utsira Nord, and Decision 195/25/COL on Enova’s scheme for floating offshore wind power).

At the same time, Norway’s legal obligations under the EEA Agreement are not directly binding on private parties. A distinction must also be made between the consequences for acts that have been incorporated into the EEA Agreement and the consequences for acts that have (incorrectly) not been incorporated into the EEA Agreement.

Consequences for acts incorporated into the EEA Agreement

EEA rules that are to apply to the continental shelf must be applied there as far as possible under Norwegian law

The main part of the EEA Agreement has been incorporated into Norwegian law. The EFTA Court’s conclusion will mean that private parties can base rights on these rules in relation to activities on the continental shelf to which Norway has exclusive rights under the Convention on the Law of the Sea and which are not excluded from the sectoral scope of the EEA Agreement.

With regard to directives and regulations incorporated into the EEA Agreement and intended to give rise to rights or obligations for private parties, the legal effects on the continental shelf will depend, among other things, on the content of the legal acts, their implementation into Norwegian law and Norwegian law in general. If, under EEA law, the legal act in question is to apply to the continental shelf and it has been implemented without there being any Norwegian conditions that preclude such application, the EFTA Court’s conclusion will mean that the Norwegian rules implementing the legal act apply to the continental shelf.

If, on the other hand, Norwegian law contains restrictions on activities on the continental shelf or similar, it must be determined on a case-by-case basis whether it is possible to interpret Norwegian law in accordance with EEA law. If this is not possible, there may, depending on the circumstances, be a so-called contra legem situation where EEA law does not require the EEA rule to be applied even though this would result in a breach of the EEA Agreement. This is not an impractical issue, and there are several recent examples in which the European Court of Justice ruled in a manner suggesting the existence of a contra legem situation that prevented EU law from being applied (Case C-261/20, Thelen Technopark, and Joined Cases C-38/21, C-47/21 and C-232/21, BMW Bank).

If the Supreme Court follows the EFTA Court’s advisory opinion, this issue may arise during the Supreme Court’s upcoming consideration of the underlying dispute before the Norwegian courts. It appears from paragraph 60 of the EFTA Court’s decision that Norway had indicated in its written submission that, since the Temporary Agency Work Directive has been implemented in Norwegian law through the Working Environment Act and not through the Ship Labour Act, employees cannot invoke the protection afforded by the Directive. This wording refers back to the Supreme Court’s request to the EFTA Court, which states that the wording of Section 4(3) of the Working Environment Act indicates that the vessels on which the plaintiffs worked are exempt from the Working Environment Act. The consequence of this interpretation would be that the provision in Section 14-12a (1) (f) of the Working Environment Act, which is intended to ensure at least as good pay conditions as in the user undertaking, does not apply to the work of the employees in question on the continental shelf.

In cases of conflict between laws, the question may also arise as to whether the EEA rule can take priority pursuant to Section 2 of the Norwegian EEA Act.

The clarity of the EFTA Court’s statements suggests that there may be grounds for state liability

The EFTA Court’s statements are very clear and provide no support for the Norwegian authorities’ view that the EEA Agreement excludes activities on the continental shelf. On this basis, it is arguable that to the extent that Norwegian law prevents private parties from exercising rights to which they are entitled under rules incorporated into the EEA Agreement, this would constitute grounds for claims for damages against the state (so-called state liability). The conditions for state liability for breaches of EEA law are that the rule in question is intended to confer rights on private parties, that there is a direct causal link between the breach of EEA law and the economic loss, and that the breach is sufficiently serious.

If the Supreme Court in the Saga Subsea case were to conclude that the provision in Section 14-12a (1) (f) of the Working Environment Act does not apply to the employees in question, it is therefore possible that they will be entitled to compensation from the state corresponding to the additional pay they would have been entitled to if the Temporary Agency Work Directive had been implemented correctly.

In this context, it is important to emphasise that the EFTA Court’s advisory opinion establishes how the legal situation is and has been in the EFTA Court’s view, and does not change the legal situation going forward. Private parties may therefore also be entitled to compensation for losses they have incurred in the period prior to the EFTA Court’s advisory opinion.

Consequences for ESA’s surveillance activities

Now that the EFTA Court has unequivocally stated that the EEA Agreement applies to activities on the continental shelf, it is not unlikely that ESA will prioritise this issue and expect the Norwegian authorities to take immediate steps to ensure that EEA rules applicable to the continental shelf are applied there. This will necessitate a review of national legislation with a view to identifying and removing any conflicting provisions.

Consequences for rules that are not included in the EEA Agreement

Referring to its position that the EEA Agreement does not apply to activities on the continental shelf, Norway has refused to incorporate rules into the EEA Agreement that the Commission has considered to be covered. In light of the EFTA Court’s clear statements, Norway will have to reassess its position on these legal acts. This work may prove controversial and politically sensitive.

The most sensitive issue may well be Regulation (EU) 2024/1735 establishing a framework of measures for strengthening Europe’s net-zero technology manufacturing ecosystem and amending Regulation (EU) 2018/1724. Article 23 of this Regulation establishes an obligation for holders of authorisations under the Petroleum Licensing Directive (Directive 94/22/EC) Article 1(3) to contribute to the EU’s carbon injection capacity target based on their share of EU oil and gas production between 1 January 2020 and 31 December 2023.

The fundamental question in this regard will be how to deal with the fact that the regulation refers to the EU’s targets and production, and how a possible distribution key could then be drawn up for licensees on the Norwegian continental shelf.

There are also several other legal acts which may now be relevant to include in the EEA Agreement, some of which are also politically sensitive. These include:

The Marine Strategy Directive (Directive 2008/56/EC)
Directive 2013/30/EU of 12 June 2013 on the safety of offshore oil and gas operations
Commission Regulation (EU) 2016/1199 of 22 July 2016 (Offshore Helicopter Regulation)
Regulation (EU) 2024/1787 of the European Parliament and of the Council of 13 June 2024 on the reduction of methane emissions from the energy sector and amending Regulation (EU) 2019/942

One factor that may influence the Norwegian authorities’ priorities going forward is that the EU High Representative for Foreign Affairs and Security Policy recently expressed frustration with Norway’s delay in incorporating EEA-relevant legal acts into the EEA Agreement, emphasising that Norway cannot expect special treatment with such a backlog. The EFTA Court’s conclusions imply that the backlog is longer than the Norwegian authorities have assumed so far. In a situation where it is crucial for Norwegian interests that Norway’s special status as an EEA EFTA state is taken into account in the design of EU trade policy instruments, it is conceivable that the Norwegian authorities will be willing to make greater compromises than they would have been in a different political context.