Emerging Post-Brexit Relations of Switzerland with the EU and the UK: New Year, New Treaties?
Charlotte Sieber-Gasser (University of Lucerne)
In its relations with Europe, Switzerland relies on more than 120 treaties regulating partial integration and sectoral market access in the EU and in the EFTA. The centrepiece of market access and partial integration treaties, the so-called Bilaterals, were negotiated in the late 1990s and early 2000s as a reaction to Switzerland’s decision to remain outside of the EEA and the EU. Together with the Free Trade Agreement negotiated in 1972, they define the scope of market integration to date between the EU and Switzerland.
Increasing Legal Uncertainty in EU-Swiss Relations
In large part, the Bilaterals and the Free Trade Agreement are static treaties, determining a set of binding rules and commitments that were relevant at the time of negotiation. With regard to market access provisions, these static rules and commitments have been partially overtaken by market realities and regulatory dynamism within the EU in the meantime. For instance, provisions in the bilateral agreement on the free movement of persons between Switzerland and EU did, for a while, refer to and incorporate EU legislation which was no longer in place. With time, regulatory inconsistencies in previously static agreements therefore rendered regular revision of the existing bilateral obligations necessary.
The treaties between Switzerland and the EU did, however, also incorporate dynamic, regulatory harmonisation from the start. Dynamic elements in the Bilaterals come in the form of an obligation of Switzerland to incorporate relevant EU legislation, including any of its revisions, in order to maintain regulatory equivalence. Given that the two parties do not always agree on the scope of “relevant EU legislation” and of “regulatory equivalence”, even the dynamic elements of the Bilaterals were not always able to prevent regulatory inconsistencies from emerging.
The End of the Consensus-Rule in EU-Swiss Dispute Resolution
Supervision is currently predominantly in the hands of mixed committees established by the various treaties between Switzerland and the EU. Decision-making in these mixed committees is based on consensus, and additional options to initiate dispute settlement proceedings do not exist. Given unresolved disagreement on various regulatory issues between Switzerland and the EU, legal uncertainty in EU-Swiss relations increases continuously. Hence, in 2013 both parties entered into negotiations over a new treaty, which would provide the necessary institutional framework for the supervision, enforcement and dispute settlement for the bilateral relationship between Switzerland and the EU. The main goal was to re-establish legal certainty in EU-Swiss relations.
A New Institutional Framework Treaty
The draft treaty published in January 2019 on a new institutional framework for EU-Swiss relations is limited in its scope to future market access agreements and to five of the existing bilateral agreements on: 1) free movement of persons, 2) civil aviation, 3) overland transport, 4) agriculture and 5) technical barriers to trade (Art. 2). References made to EU law in bilateral treaties will be interpreted and enforced in line with the judicial practice of the ECJ (Art. 4). The draft framework treaty introduces a new approach to the supervision of state aid, an issue that continues to be a cause for disagreement between the EU and Switzerland (Chapter 2). Relevant provisions would only apply to civil aviation and any future market access agreements.
Chapter 3 complements the existing market access treaties between Switzerland and the EU with a new dispute settlement mechanism, including the option to request the establishment of an arbitration panel. Arbitration proceedings in the draft framework agreement are similar, if not identical, to dispute resolution in EU association agreements and in the proposed Brexit withdrawal agreement. Chapter 4 requires the EU to consult with Switzerland in any legislative process falling within the scope of the EU-Swiss market access agreements. Switzerland is given two years (three in the case of a referendum) to implement any changes to the agreements. The draft framework treaty establishes two new committees: the horizontal mixed committee (Art. 15) charged with the overall supervision of EU-Swiss relations, and the mixed parliamentary committee (Art. 16), which may issue reports and resolutions regarding aspects falling within the scope of existing EU-Swiss agreements.
At an Impasse, Again
The Swiss government has not yet signed the draft framework treaty, but has initiated public consultations instead. The fate of the draft framework treaty in Switzerland is therefore rather uncertain: with heavy opposition from both ends of the political spectrum and a lack of commitment from the government, those supporting the treaty are currently in the minority.
Much like the British in the case of the Brexit withdrawal agreement, the Swiss are concerned over the role of the ECJ in the supervision of the bilateral relations. However, given sectoral integration of third states in the common market, the EU has a legitimate regulatory interest in securing uniform interpretation of applicable EU law. Needless to say that given the history of bilateral relations between Switzerland and the EU, some sort of dispute settlement mechanism is also in the interest of third states. Thus, those in support of the draft framework agreement focus on the fact that the suggested dispute resolution is likely to increase legal certainty and is therewith an improvement of the current situation.
Linked with this is the fact that sectoral integration is bound to collide with sectors not currently integrated in the bilateral agreements, which are most prominently services, state aid and competition. All of these are covered by EU law but remain outside of the scope of the treaties between Switzerland and the EU. Not having to play by EU-rules gives Swiss industries a sectoral competitive advantage in the common market and enables Switzerland to protect its internal market to a certain extent against EU competition. For example, trade in services is closely linked with free movement of persons. Regulating one but not the other may therefore likely result in regulatory incoherence. State aid and competition, on the other hand, are linked with all of the sectoral integration agreements: playing by the same rules can be considered a necessary prerequisite for the abolition of all barriers to trade between Switzerland and the EU in any given sector. The EU therefore insists on at least partial regulatory alignment in services, state aid and competition as a pre-condition to negotiate new market access agreements. Partial regulatory alignment, however, is considered a red line in Switzerland, given that it would bring Switzerland ever closer to being a de factomember of the EEA.
Squaring the Circle
The draft framework treaty, while resolving the issue of dispute resolution, fails to address the underlying regulatory discrepancies following the partial market integration of third states. As long as the EU is not prepared to further pursue the idea of a multi-speed Europe, partial market integration of third states is likely to continue to come at the price of constant renegotiation, power politics and a considerable level of legal uncertainty. Abandoning the idea of sectoral market integration of third states, on the other hand, will come at an economic price – for both sides.
Post-Brexit Relations between Switzerland and the UK
In parallel with negotiations over the draft framework treaty with the EU, Switzerland and the UK have been busy negotiating their post-Brexit relationship. The draft agreements have been made public this week. In essence, current agreements will continue to apply during the transition period in the case of an orderly Brexit. Switzerland and the UK will have time to negotiate further their relationship during that period. However, in the case of a no-deal Brexit, the following would apply:
- Free Trade Agreement: with the exception of rules of origin, the rights and obligations established in the free trade agreement between the EU and Switzerland will be maintained bilaterally between the UK and Switzerland
- Rules of origin: both parties agree to maintain, as far as possible, existing rules of origin. With the EU as a third state, cumulation rules will need to be revised and direct transport will become more important.
- Customs facilitation and security: third state treatment will apply.
- Fight against fraud: existing rights and obligations will be maintained.
- Mutual recognition: existing rights and obligations with regard to motor vehicles, good laboratory practice, and GMP inspection and batch certification will be maintained. Additional mutual recognition will have to be negotiated.
- Agriculture: existing rights and obligations independent from regulatory harmonisation will be maintained (tariffs, cheese, geographical indications, wine and liquors, fresh fruits and vegetables). Rights and obligations related to non-tariff barriers to trade will cease to apply (plant protection/pesticides, animal feed, seeds and organic food and production).
- Veterinary agreement: third state treatment will apply.
- Public procurement: rights and obligations of the plurilateral WTO-Agreement on Public Procurement (GPA) will apply as soon as the UK becomes an independent member to the GPA.
- Free movement of persons: with the exception of the treatment of criminal offences, reunification of spouses and person-related service provisions, rights acquired before no-deal Brexit are protected. Third state treatment applies to immigration after both a no-deal Brexit and an orderly Brexit, unless otherwise agreed in a future treaty between the UK and Switzerland.
Despite the fact that a no-deal Brexit would thus burden economic ties between Switzerland and the UK with technical barriers and legal uncertainty, the post-Brexit draft agreements have not been met by opposition in Switzerland. Moving beyond the transitional status of post-Brexit relations between Switzerland and the UK will require clarification of the nature of UK’s relationship with the EU.
Dr. iur. Charlotte Sieber-Gasser, MA, is lecturer at the University of Lucerne, non-residential fellow of the World Trade Institute, University of Bern and lecturer at the MAS European and Global Governance of the University of St. Gallen. Charlotte Sieber-Gasser’s research focus lies on Constitutional Law, EU Law and International Economic Law. She is (Co-)Author of a number of studies dealing with various aspects of foreign trade policy in Switzerland.