When the Althing convened in July 1912 the party was formally registered as a parliamentary group comprising 32 of the 40 members and Hannes Hafstein was appointed Minister for Iceland.
[2] The purpose of the party was to solve the issue of a union treaty between Iceland and Denmark,[2] which had proven extremely difficult to solve after the Althing refused a draft proposal from the Danish-Icelandic constitutional commission in 1908.
A compromise proposal presented by Hannes in spring 1913 was heavily criticized in the Icelandic press, and the Union Party split into three factions, a group that continued to support Hannes, a restored Home Rule Party under the leadership of Lárus H. Bjarnason and a Farmers' Party.
[2] Hannes succeeded in getting most of the party's MPs members reunited, apart from four MPs that continued as the Farmers' Party, and a constitutional proposal was finally approved in the fall of 1913.
The constitutional proposal was approved for a second time by the Althing in 1914 and formed the basis for the union treaty of 1918.