[TE:] Review these documents from Alþingi and assess whether these legislative amendments comply with the provisions of the Constitution.

 

[Question 1]

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[The documents attached to the inquiry were as follows:

 

434 Government bill, Minister of Food, Agriculture and Fisheries, Hanna Katrín Friðriksson
723 Committee report with amendments, majority of the Committee on Food, Agriculture and Fisheries, Sigurjón Þórðarson
736 Committee report with dissenting opinion, 1st minority of the Committee on Food, Agriculture and Fisheries, Jón Gunnarsson
738 Committee report with reasoning, 2nd minority of the Committee on Food, Agriculture and Fisheries, Bergþór Ólason
859 Proposed amendment, Sigurður Ingi Jóhannsson
864 Bill after the second reading
865 Proposed amendment, Eiríkur Björn Björgvinsson
866 Proposed amendment, Bergþór Ólason
870 Act in full]

 

[LV:] I have received your parliamentary documents and conducted a broad search for the key legal sources relevant to a constitutional assessment of the proposed amendments to the Fisheries Fee Act (Act No. 145/2018). Based on the materials in Lagaviti’s database, a very large amount of content was found (over 80 items). To ensure a focused processing, I suggest that for this preliminary review we limit ourselves to the following core list of key sources, which specifically concern:

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• the taxing power and delegation of authority (Articles 40 and 77 of the Constitution),

• equality (Article 65),

• protection of property rights and resource rent (Article 72),

• freedom of occupation (Article 75),

• and the main principles distinguishing service fees from taxes.

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Would you like me to proceed and conduct a preliminary review of the following sources?

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• The Constitution of the Republic of Iceland, No. 33/1944 — core provisions on Articles 40/77, 65, 72 and 75

• Act No. 145/2018 on the fisheries fee — the current statutory basis for the fisheries fee

• Supreme Court case 213/2016 — fisheries fee held to be a tax; Articles 40 and 77; equality/property rights

• Supreme Court case 461/2015 — fisheries fee for species outside the total allowable catch; constitutional considerations

• Supreme Court case 44/2022 — mackerel; equality, property rights, and freedom of occupation in allocation

• Supreme Court case 12/2000 — fisheries management; equality and freedom of occupation (landmark precedent)

• Supreme Court case 473/2002 — confirms application of Supreme Court case 12/2000 in fisheries matters

• Supreme Court case 64/1999 — delegation of taxing power; requirements for statutory authority

• Supreme Court case 22/2021 — charges for tariff quotas; delegation/statutory basis; Articles 40 and 77

• Supreme Court case 318/2015 — tariff quotas and regulatory authorization; limits on administrative discretion

• Supreme Court case 705/2010 — service fees vs. taxes; cost-linkage and legality principle

• Supreme Court case 161/2014 — supervisory fee; what must be stated in enabling legislation

• Supreme Court case 726/2013 — broad legislative discretion in tax policy with regard to Articles 65 and 72

• Opinion of the Parliamentary Ombudsman No. 12291/2023 (Hvalur hf.) — legality and proportionality in general restrictions on business activity

 

Note:

 

Upon your confirmation, I will carry out a preliminary analysis of the above materials and align them with the documents you submitted (the bill and proposed amendments) to support a constitutional review.

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If you want to narrow the scope further, we could, for example, limit the preliminary review to:
 

a) Supreme Court judgments only, or
b) only the issues under Articles 40/77 (taxing power and delegation), or
c) the issues under Articles 65/72/75 (equality, property rights, freedom of occupation).

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Do you confirm that I should proceed with a preliminary review of these 14 sources, or would you like to adjust the list first?

 

[TE:] yes, proceed

 

[LV:] Assessing the constitutional compatibility of the bill amending the Fishing Fee Act, No. 145/2018, involves a complex interplay of fundamental constitutional principles, legislative authority, and economic considerations. The materials at hand, including the bill amending Act No. 145/2018 on Fishing Fees, proposed amendments, and committee reports, call for a detailed examination of their compatibility with the legality principle in taxation, the equality principle, and the constitutional protection of property rights under the Constitution of the Republic of Iceland No. 33/1944. On the basis of the materials available in Lagaviti’s database, including relevant Supreme Court judgments, the following assessment is provided.

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The legality principle in taxation and the prohibition on delegating taxing power (Articles 40 and 77 of the Constitution)

 

The core of the legality principle in tax law, protected by Articles 40 and 77 of the Constitution, is that no tax may be imposed, amended, or abolished except by statute. The power to tax rests entirely with the legislature. This also entails a prohibition on delegating to the executive the determination of fundamental elements of taxation, such as who is liable to pay, what the tax is based on (the tax base), and the amount of the tax.

 

The main change proposed in the bill is an amendment to Article 5 of the current Fishing Fee Act. Instead of calculating the tax base exclusively on the basis of fishing companies’ own reports of revenue and costs, it is proposed that the catch value of certain fish stocks (herring, blue whiting, mackerel, cod, and haddock) be determined by objective, external criteria: on the one hand, average prices based on data from the Norwegian Directorate of Fisheries, and on the other hand, average prices on domestic fish markets. The role of the authorities, primarily the Directorate of Fisheries and the Directorate of Internal Revenue, will be to obtain these data and calculate the fee in accordance with the methodology prescribed by statute.

 

In Supreme Court Case No. 64/1999, the Court placed strong emphasis on the fact that, following the 1995 constitutional amendments, it is categorically prohibited to delegate to administrative authorities the power to decide whether a tax should be imposed. The Court stated: “From the wording of the above provision of the Constitution, as it stood following Article 15 of Constitutional Act No. 97/1995, and with reference to the above remarks in the explanatory notes to that provision, it may be inferred that the intention of the constitutional legislator was to prohibit categorically that the ordinary legislator authorize administrative authorities to decide whether a tax shall be imposed, amended or abolished.” In the present bill, however, the executive is not being empowered to decide whether a tax is imposed; rather, the legislature is prescribing by statute a new, objective method for determining the tax base. Case law has recognized such arrangements. In Supreme Court Case No. 22/2021 concerning fees for tariff quotas, the Court held that where the statute provided for mandatory auctions, the minister did not have the discretion that would be constitutionally relevant to determine the amount of the fee. The Court stated: “In assessing whether statutory provisions contain a valid authorization for taxation, the Supreme Court has placed primary emphasis in its judgments […] on ensuring that the decision whether a tax is imposed, the amount of the tax, who is liable at any given time, and other fundamental elements of tax collection is not in the hands of administrative authorities.” Similarly, it can be argued that by tying the tax base to specified, publicly available market prices, the statute establishes a method that excludes arbitrary administrative assessment. These considerations are further supported by Supreme Court Case No. 161/2014, in which the Court found that the statute “set out all the main elements required for the provision to constitute a valid authorization for taxation pursuant to Articles 40 and 77 of the Constitution.” The criticism expressed in the 1st Minority Committee Report—that Norwegian market prices do not necessarily reflect Icelandic realities—is primarily political and economic rather than legal, and concerns the suitability of the method rather than whether it amounts to an unlawful delegation of power. It is therefore likely that the proposed amendments to the calculation of the tax base satisfy the requirements of Articles 40 and 77 of the Constitution.

The equality principle (Article 65 of the Constitution)Article 65 of the Constitution provides that all persons shall be equal before the law. The legislature may differentiate between parties, but such differentiation must be based on objective and reasonable grounds. The bill differentiates between taxpayers in several ways. First, the tax base is determined differently for five specified species than for others. Second, it proposes a tiered and differentiated tax-free threshold for cod and haddock on the one hand, and other stocks on the other.

 

The explanatory memorandum to the bill justifies this differentiation by reference to the view that price formation in direct transactions for these specific stocks does not reflect true market value, and therefore does not reflect the resource rent generated. The aim is to correct that distortion. This is generally an objective and reasonable consideration. Case law supports the view that the legislature enjoys considerable discretion to adopt rules that affect groups differently, provided the reasons are objective. In Supreme Court Case No. 726/2013 concerning the wealth tax, the Court stated: “Provided these fundamental considerations are respected, the courts have recognized that the legislature enjoys considerable discretion in deciding how taxation is arranged in particular respects.” Similarly, in Supreme Court Case No. 44/2022, the Court accepted that the legislature had discretion to adopt different rules on the transfer of fishing quotas for different vessel categories on the basis of regional policy considerations.

 

A key precedent on the equality principle in the context of fishing fees is Supreme Court Case No. 461/2015. There, the Court found that the position of ITQ vessels and hook-and-line quota vessels was generally dissimilar and therefore different taxation was permissible. However, in relation to lumpfish fisheries, where all were subject to the same rules, the Court concluded that the differentiation was unjustified and therefore contrary to equality. In the present bill, the differentiation concerns stocks where a market failure is considered to exist, regardless of which type of operator catches them. This supports the conclusion that the differentiation is objectively justified. It is also generally objective to introduce a tiered tax-free threshold to support smaller and medium-sized operators. It is therefore likely that the proposed amendments comply with the equality principle in Article 65 of the Constitution.

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Property rights and resource rent (Article 72 of the Constitution)

 

The inviolability of property rights under Article 72 of the Constitution is a fundamental principle of Icelandic constitutional law. The Supreme Court has, however, repeatedly held—most notably in the so-called Vatneyri judgment (Supreme Court Case No. 12/2000)—that fish stocks in Icelandic waters are the common property of the nation and that allocation of fishing rights does not create ownership rights or irrevocable control. Supreme Court Case No. 473/2002 confirmed this precedent unequivocally. It follows that Parliament has broad authority to regulate the use of the resource and to levy a charge for such use, i.e. resource rent. In the Vatneyri judgment, the Court stated: “Within the scope of its powers, Parliament may therefore further determine the right to fisheries, make it subject to conditions, or collect for it additional payment beyond what is currently provided…” This was reiterated in Supreme Court Case No. 213/2016, where the Court added that the fact that the charge concerns payment for the use of a limited natural resource gives “the legislature broader authority than otherwise to tax profits from such use.”

 

Despite this broad discretion, taxation is limited by the principle of proportionality. If the fishing fee were to become so burdensome that it systematically deprives the industry of its economic basis, it could amount to de facto expropriation of the assets tied up in the business, which are protected by Article 72. In Opinion of the Parliamentary Ombudsman No. 12291/2023, it is noted that so-called occupational rights may be protected under the property rights provision. Nevertheless, in light of the economic data in the explanatory memorandum to the bill, comparing the profitability of the fishing industry to other sectors, it must be considered that the proposed increase—while significant—would not be regarded as so disproportionate as to amount to expropriation. In the wealth tax case (Supreme Court Case No. 726/2013), a temporary wealth tax was upheld even though it reduced assets, partly with reference to the state’s pressing need for revenue. The objective of the fishing fee—ensuring the nation receives a share in the profits from a common resource—likewise constitutes a legitimate aim capable of justifying a burdensome charge.

 

Conclusion

 

In light of the above considerations and relevant case law, it is likely that the proposed amendments to the Fishing Fee Act, No. 145/2018, would withstand constitutional scrutiny. Codifying objective criteria for calculating the tax base is more robust than relying entirely on taxpayers’ own reports and is consistent with the legality principle. The differentiation between stocks and the tiered tax-free threshold appears to be based on objective and reasonable grounds and is therefore likely to comply with the equality principle. Finally, given that the matter concerns the exploitation of a shared natural resource and the broad discretion traditionally afforded to the legislature in this field, the proposed increase is unlikely to be considered contrary to the constitutional protection of property rights, provided it is not manifestly disproportionate and does not lead to systematic losses in the industry. The key issues for the courts would therefore relate to the assessment of objective justification and proportionality, areas in which the legislature generally enjoys considerable discretion.

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[TE:] Go deeper into the weaknesses you mention in your analysis: Despite the strengths of the response, certain aspects may be identified as weaknesses. The response places primary emphasis on a formal and interpretive assessment of whether the legal authorities comply with the Constitution, but discusses to a lesser extent potential substantive or practical effects that could matter in proportionality review. Although it is mentioned that excessive charges could amount to expropriation, the analysis does not delve deeply into where those limits lie, for example whether a systematic mismatch over time between the calculated tax base and the actual profitability of individual companies could be considered a disproportionate interference. Another weakness may be that less emphasis is placed on the considerations raised in the minority committee report as legal arguments. Although it is noted that the criticism is more economic and political, stronger legal arguments could be made that an obviously unsuitable or incorrect benchmark for determining the tax base could be deemed unreasonable and therefore a violation of the equality principle under Article 65 of the Constitution. [Question 2]

[LV:] Although the earlier analysis of the constitutional compatibility of the bill amending the Fishing Fee Act indicated that the arrangement is likely to satisfy the formal requirements of the Constitution of the Republic of Iceland No. 33/1944, it is appropriate to deepen the analysis of the substantive weaknesses that may be present in the bill. Such an analysis primarily concerns two interrelated aspects: on the one hand, the limits of the taxing power in light of the protection of property rights and the principle of proportionality, and on the other hand, the requirement under the equality principle that the criteria for taxation be objectively justified. On the basis of the materials available in Lagaviti’s database, including more detailed case law and the considerations set out in the 1st Minority Committee Report, the following section examines these issues in greater depth.

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Disproportionate burden and the limits of property-rights protection (Article 72 of the Constitution)

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The broad discretion of the legislature in matters of taxation is recognized in Icelandic law, particularly where the charge concerns the use of a shared natural resource of the nation. The Supreme Court has held that this context gives “the legislature broader authority than otherwise to tax profits from such use,” cf. Supreme Court Case No. 213/2016. That discretion is not unlimited, however. It is bounded by Article 72 of the Constitution and the unwritten principle of proportionality, which prohibits burdensome measures that go beyond what is necessary to achieve a legitimate aim. Taxation that becomes so burdensome as to amount to expropriation without compensation may be unconstitutional.

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The question of precisely where these limits lie is the crux of the matter. In Supreme Court Case No. 391/2016 concerning the wealth tax, the Court addressed circumstances in which an individual’s total tax payments exceeded their income in a given year. The Supreme Court did not consider the taxation disproportionate, but reached that conclusion on the basis of an overall assessment. Key factors were that the tax was a temporary measure responding to unprecedented public-finance difficulties, and that the taxpayer’s total assets did not diminish during the period but instead increased. The Court stated: “In light of R’s asset position and income […] it cannot […] be considered that the assessment of the additional wealth tax during the relevant years had such effects on R’s financial situation that the taxation should be regarded as disproportionate […]. This conclusion is not altered by the fact that her total taxes for one year amounted to a slightly higher sum than her total income, as the taxation authority was temporary.”

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Those considerations do not apply in the same way to the proposed amendments to the fishing fee. This is a permanent change to the tax system, not a temporary emergency measure. The weakness therefore lies in the possibility that if the new method for calculating the tax base leads to a systematic and significant mismatch between the calculated base and the actual profitability of individual companies, the burden could become enduring. A situation in which, year after year, a company is required to pay a fishing fee constituting a substantial portion of—or even exceeding—its actual profit could, over time, result in erosion of assets and constitute a disproportionate interference amounting to de facto expropriation. Financial interests tied to business operations—so-called occupational rights—may be protected by Article 72, as noted in Opinion of the Parliamentary Ombudsman No. 12291/2023. This argument is particularly compelling in light of the 1st Minority Committee Report’s assertion that the real increase is significantly higher than the Ministry initially estimated—ISK 12.6 billion rather than ISK 7–8 billion. This increases the likelihood that the burden could be deemed disproportionate for certain groups within the sector.

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An unreasonable tax base and the equality principle (Article 65 of the Constitution)

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The equality principle in Article 65 requires that taxation be based on objective and reasonable criteria. The 1st Minority Committee’s criticism of the bill’s methodology must be assessed in this legal context. The question is not only whether referencing Norwegian market prices is economically sound, but whether it is so obviously unsuitable or incorrect that it becomes unreasonable and therefore contrary to the equality principle.

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The 1st Minority Committee Report notes that it is “difficult to conclude that ‘market prices exist’ in Norway” and that price formation there may be distorted. It also points to differences in the nature of catches across fishing seasons (e.g., mackerel), making direct comparison unrealistic. If those assertions are correct, a strong legal argument can be made that the proposed tax base rests on arbitrary or even incorrect assumptions. Case law has emphasized that the basis for charges must be sound. In Opinion of the Parliamentary Ombudsman No. 1517/1995, it was criticized that a tariff had not been based on a sufficiently sound foundation. Although that case concerned a service fee, the requirement of an objectively justified foundation is also central to the equality principle.

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A key precedent on the substantive application of equality is Supreme Court Case No. 461/2015. There, the Court concluded that although different fishing systems could justify differential treatment, such differentiation was impermissible where parties were in comparable circumstances, as in lumpfish fisheries. This approach requires careful analysis of actual circumstances. If it can be demonstrated that the pricing and profitability of Icelandic operators systematically differs from what is reflected in Norwegian average prices, it may be argued that the same yardstick is being applied to non-comparable groups, which can amount to a violation of equality. While the legislature may use general benchmarks, as the Supreme Court accepted in Case No. 64/1999, this was justified by difficulties in obtaining information. In the present case, however, the legislature is deliberately choosing foreign benchmarks over domestic data that is available. Such a choice requires stronger objective justification to withstand constitutional review.

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Finally, Supreme Court Case No. 220/2005 concerning tobacco control illustrates that courts can review the legislature’s assessment of necessity and suitability. In that case, a total display ban on tobacco was found disproportionate. Similarly, courts could find that the chosen method for determining resource rent is so inaccurate and detached from reality that it is disproportionate or unreasonable, even if the aim itself—collecting a fair charge—is legitimate.

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In summary, the principal constitutional weaknesses of the bill lie in the risk of an excessive and enduring burden that could amount to de facto expropriation, and in the legal uncertainty as to whether the calculation base rests on sufficiently objective and reasonable grounds to satisfy the requirements of the equality principle. The arguments set out in the 1st Minority Committee Report, supported by the above case law, reveal the risk that the proposed legislation could be found contrary to the Constitution of the Republic of Iceland No. 33/1944 by the courts.

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[TE:] My client is very dissatisfied with these amendments and believes they violate all of the constitutional provisions you mention. How should the pleadings be structured in order to have the laws struck down? [Question 3]

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[LV:] Having legislation struck down by the courts on the basis of constitutional infringement requires careful and well-reasoned pleadings. Based on the materials you have provided and the legal sources available in Lagaviti’s database, the following outlines a structure for pleadings aimed at overturning the amendments to Act No. 145/2018 on Fishing Fees. The pleadings are premised on the view that the amendments violate the equality principle in Article 65, the property-rights provision in Article 72, and the legality principle in taxation under Articles 40 and 77 of the Constitution of the Republic of Iceland No. 33/1944.

 

I. Primary claim and alternative claim

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The primary claim would be for a declaration that the Icelandic State is not permitted to levy a fishing fee on your client on the basis of the new statutory provisions, as they conflict with the Constitution. In the alternative, it would be requested that the Icelandic State be ordered to refund to your client the fishing fee paid under the unconstitutional provisions, together with default interest.

 

II. Legal argumentation

 

The pleadings could be structured around three main pillars that mutually reinforce one another.

 

1. Violation of the equality principle in Article 65 of the Constitution: an unreasonable and arbitrary tax base

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Although the legislature enjoys considerable discretion in adopting tax laws, Article 65 requires that differentiation between taxpayers be based on objective and reasonable criteria. The central argument here is that the statutory method for determining the fishing fee tax base—by reference to average prices on Norwegian fish markets—is so detached from Icelandic realities that it is unreasonable and results in arbitrary unequal treatment.

In this context, it is possible to rely heavily on the criticism set out in the 1st Minority Committee Report, which maintains that the bill’s underlying assumptions are fundamentally incorrect. It notes that “prices for a product in one country cannot be transferred to a comparable product in another country” because different variables determine market prices. It is specifically stated that there is “a considerable difference in quality between mackerel caught off Iceland and that caught in Norwegian waters.” These arguments, indicating that the tax base rests on a systematic distortion, can be framed as legal arguments concerning an unreasonable methodology.

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This argument is supported by precedents. In Supreme Court Case No. 461/2015, the Court held that while different fisheries regimes could justify different treatment, such differentiation was unlawful where parties were in comparable circumstances (as in lumpfish fisheries). Here, it may be argued that applying one standardized price to all operators treats parties in different positions (those selling at higher prices and those selling at lower prices) in the same manner, which is the opposite of equality. The tax base does not reflect the actual profitability of each operator, even though ensuring a share in resource rent is a stated objective. Reference may also be made to Opinion of the Parliamentary Ombudsman No. 1517/1995, which required that the basis for levying charges be “sufficiently sound.” The fact—described in the minority report—that the Ministry had previously warned against using Norwegian price benchmarks supports the assertion that the foundation is not sound.

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2. Violation of Article 72 of the Constitution: a disproportionate burden amounting to expropriation

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Although fish stocks are common property of the nation (Supreme Court Case No. 12/2000), the assets and occupational rights tied to the operation of fishing companies enjoy protection under Article 72. Taxation may not be so burdensome as to amount to expropriation without compensation. The assessment turns on proportionality.

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The key argument concerns flawed assumptions underlying the legislation. As stated in the 1st Minority Committee Report, the Ministry estimated that the increase would be ISK 7–8 billion, but calculations by the tax authority indicated that the realistic increase would be ISK 12.6 billion. Parliament’s proportionality assessment was therefore based on incorrect and materially underestimated figures. This means the legislation was adopted without full knowledge of its real effects on the sector and on communities. Such legislative decision-making does not meet the standards of careful law-making where highly burdensome measures are concerned. Reference may be made to Supreme Court Case No. 220/2005, where the Court reviewed the legislature’s proportionality assessment because it had not been demonstrated that relevant research supported an intrusive measure.

Second, it is important to refer to Supreme Court Case No. 391/2016. There, the Supreme Court did not find the wealth tax disproportionate, but placed decisive weight on the fact that it was temporary. The fishing fee amendments, by contrast, are permanent. If your client can demonstrate that the levy—due to the distorted tax base—causes enduring asset erosion or a loss of economic viability, the situation is materially different and more serious than in the wealth tax case. The minority report’s assertion that the tax burden could exceed 100% of actual profits in the pelagic sector strongly supports arguments of a disproportionate burden bordering on expropriation.

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3. Violation of Articles 40 and 77 of the Constitution: unpredictability and lack of legal certainty

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Although the statute sets out a calculation method, it may be argued that it fails to satisfy the substantive requirements of the legality principle concerning clarity and foreseeability. The argument is that the tax base is in practice unclear and dependent on external factors that the taxpayer cannot control and can scarcely foresee.

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The 1st Minority Committee Report cites an internal memorandum by Ministry specialists warning against Norwegian price benchmarks because it is “difficult to conclude that ‘market prices exist’ in Norway” due to the influence of sales organizations owned by operators. If the tax base depends on prices that lack transparency and may be distorted, foreseeability is inadequate. The taxpayer cannot plan operations normally when the tax burden depends on unclear and potentially skewed foreign market conditions. This undermines the legal certainty that the legality principle is intended to ensure. Reference may also be made to Opinion of the Parliamentary Ombudsman No. 5035/2007, which emphasized that the legislature must set a clear framework for charges intended to raise revenue beyond cost coverage. Referring to an unclear “market price” in another country arguably does not meet that requirement.

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Summary and conclusion

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To maximize the likelihood of success, it would be appropriate to build the pleadings on the interaction of these three factors. The focus should be on substantive defects rather than procedural flaws. It will be necessary to demonstrate—through detailed evidence, such as expert opinions on economic impacts and comparisons of price formation—how the new methodology is in practice unreasonable and arbitrary (violation of Article 65). Next, it must be shown how this unreasonable method results in an excessive and burdensome levy for your client, amounting to de facto expropriation (violation of Article 72). Finally, these arguments can be reinforced by asserting that the cumulative uncertainty and defects in the legislation violate the fundamental requirements of legal certainty and foreseeability inherent in the legality principle in tax law (Articles 40 and 77). The core of the case must be to demonstrate, with evidence, that the legislature’s assumptions were incorrect and that the consequences conflict with the constitutional principles of equality and proportionality.

 

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Reference material – Lagaviti’s assessment of the response to Question 1

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Strengths of the response
 

The response demonstrates comprehensive knowledge of the subject matter and bases its analysis on a solid foundation of legal sources. Its primary strength lies in a detailed and structured discussion of each constitutional issue in turn—the legality principle in taxation, the equality principle, and the constitutional protection of property rights. For each issue, appropriate legal methodology is applied: first outlining the substance and meaning of the constitutional provision and then applying it to the proposed amendments with direct, reasoned references to key Supreme Court judgments and other materials, such as opinions of the Parliamentary Ombudsman. The response summarizes the main principles developed by the Supreme Court on these issues, particularly the broad discretion afforded to the legislature in taxation and in regulating the use of common natural resources. Care is also taken to maintain a neutral and cautious tone, presenting the conclusion as a likely outcome rather than an absolute certainty, consistent with the nature of constitutional assessment.

 

Weaknesses of the response

Despite its strengths, certain aspects may be identified as weaknesses. The response focuses primarily on a formal and interpretive assessment of whether the legal authorities comply with the Constitution, while discussing to a lesser extent potential substantive or practical effects that could matter in proportionality review. Although it is mentioned that excessive levies could amount to expropriation, the analysis does not delve deeply into where those limits lie, such as whether a systematic mismatch over time between the calculated tax base and the actual profitability of individual companies could be considered a disproportionate interference. Another weakness may be that less emphasis is placed on the considerations raised in the minority committee report as legal arguments. Although it is noted that the criticism is more economic and political, stronger legal arguments could be made that an obviously unsuitable or incorrect benchmark for determining the tax base could be deemed unreasonable and thus a violation of the equality principle in Article 65 of the Constitution.

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Arguments supporting the conclusion

The conclusion - that the proposed amendments are likely to withstand constitutional scrutiny - is supported by strong arguments grounded in long-standing case law. The main arguments are that the Supreme Court has repeatedly affirmed the legislature’s broad discretion to shape tax legislation and rules on the exploitation of natural resources, cf. the key judgments in Supreme Court Cases No. 12/2000 and 213/2016. In particular, the conclusion that fishing rights do not enjoy property-rights protection under Article 72 supports the State’s authority to levy resource rent. As to the legality principle, the conclusion is supported by precedents such as Supreme Court Case No. 22/2021, showing that so long as the statute itself sets out a clear and objective methodology for determining the tax base, there is no unlawful delegation of power. Finally, the equality conclusion rests on the established rule that objectively justified differentiation is permissible, and the legislature’s reasoning - preventing avoidance and ensuring more accurate price formation - is generally an objective aim.

 

Arguments against the conclusion

Despite strong support in case law, weighty counterarguments can be made. The main counterarguments concern the fact that the proposed tax base is insufficiently connected to the actual profitability and ability to pay of Icelandic operators. It may be argued that referencing Norwegian market prices is unreasonable and arbitrary, because costs, market conditions, and other assumptions are not comparable. This could amount to a violation of Article 65, as taxpayers would be burdened based on a benchmark not grounded in their operational reality. Furthermore, while fishing rights may not be protected as property, the business itself and investments in it may be protected under Article 72. If the new arrangement leads to a levy that is so burdensome and unpredictable that it undermines the economic basis of the industry, it could violate proportionality and amount to de facto expropriation. A court could therefore conclude that, even if the objectives are legitimate, the chosen means are inconsistent with constitutional fundamentals.

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Whether more than one legally sustainable conclusion is possible, with reasoning based on all relevant legal sources

Yes, more than one legally sustainable conclusion is possible. Although the conclusion that the amendments comply with the Constitution is strongly supported by precedents on legislative discretion, constitutional assessment is never a mechanical application of prior judgments. Courts must always assess each case in light of its specific circumstances. Another sustainable conclusion could be to accept the general principles of the bill but find a particular implementation unconstitutional. This might, for example, involve recognizing that using “market price” can be legitimate while rejecting the use of Norwegian market price as a benchmark for certain pelagic species as unreasonable. In that way, a court—much like in Supreme Court Case No. 461/2015—might strike down a specific, delimited component while leaving other aspects intact. A third, less likely but theoretically possible, conclusion would be to invalidate the amendments in their entirety on the basis that their cumulative impact on the industry is so burdensome that it violates proportionality and the protection of occupational rights. That outcome would, however, require the courts to take a more definitive stance on substantive limits on taxing power than has generally been the case to date. The choice between these outcomes would depend on how the courts weigh, at the relevant time, the legislature’s broad discretion against their duty to protect fundamental rights against excessive and unreasonable public measures.