I finally figured it out. The user control had a a drop shadow effect on one of its controls.
<ScrollViewer.Effect>
<DropShadowEffect/>
</ScrollViewer.Effect>
Because this xbap Browser app was running in partial trust mode. When the control went to get the authorisation to do the drop shadow effect the error was raised.
Running the browser app in full trust or just commenting out the drop shadow effect, fixes the problem.
If someone can explain it better. Please go ahead.