The foundation of the EEA and Norway Grants lies in the European Economic Area (EEA) agreement. The EEA Agreement brings Iceland, Liechtenstein, Norway and the EU together in a single market – often referred to as the Internal market.

There is a need to reduce economic and social disparities between the regions in the EEA in order to strengthen the internal market. This is reflected in Article 115 of the EEA Agreement. Article 116 and 117 furthermore state that Iceland, Liechtenstein and Norway should establish a financial mechanism to contribute to the efforts made by the EU in that matter – this forms the basis for the EEA and Norway Grants.