PPRuNe Pop,
Iceland is a member of the JAA.
It is also a member of the UN, NATO, The Council of Europe (CE), The European Economic Area (EEA), and The European Free Trade Area (EFTA) amongst others.
EC Council Regulation 2907/92 on on licensing of air carriers requires that operating licences may only be issued to undertaking owned directly or through majority ownership by Member States and/or nationals of Member States. It also requires that it shall at all times be effectively controlled by such States or such nationals. This Regulation has been extended by the EEA Agreement. So if I understand the situation correctly a UK airline can be owned and controlled by nationals of any EC/EEA state which includes Iceland.
I vaugely remember AAI set up a UK company Air Atlanta Europe Limited and applied for a UK AOC to operate a couple of 767's out of the UK.