The fundamental idea and objective of the EEA Agreement is to extend the internal market of the EU to the participating EFTA States, by ‘creating a homogenous European Economic Area’. This chapter describes how legislative homogeneity in areas of relevance to the internal market is a condition for the achievement of this objective. It gives an overview of the decision-making procedures established to realise legislative homogeneity by incorporating relevant EU legislation into the Agreement, and points out that the particular features of these procedures reflect the political and legal needs for the Parties to preserve, on the one hand, the decision-making autonomy of the EU, whilst on the other hand respecting the constitutional principles of sovereignty of the EFTA States. As a case in point and an example of how new challenges linked to meeting these different concerns were overcome, it describes the agreement that was reached on how to extend the EU’s system of Financial Supervisory Authorities to the EEA. The chapter also discusses whether legislative homogeneity is actually achieved. Finally, it is argued that, in spite of criticism that the EEA Agreement undermines the sovereignty of the EEA EFTA States by not offering sufficient participation in the decision-making processes, the political reality is that these States consider their overall interests to be well served by the Agreement, and that their decision to enter into the Agreement and remain part of it is obviously a way of exercising their full sovereignty.
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