By Prof. Dr. Dr. h.c. Carl Baudenbacher, President of the EFTA Court between 2003 and 2017, where he served as a judge from 1995 to 2018, nowadays an independent consultant and arbitrator as well as a senior partner in a Zurich law firm.
Following the declaration by the Swiss government not to sign the so-called “framework agreement” covering the EU-Swiss relationship, something which the EU was hoping Switzerland would agree to, the former longtime President of the EFTA Court, Swiss legal expert Carl Baudenbacher discusses in an exclusive piece for BrusselsReport.eu the implications and the way forward:
After much agony, the seven-year long negotiations between the EU and Switzerland on the conclusion of a framework agreement have ended without result. To the extent that people in the EU member States have taken any notice at all, disappointment prevails. In line with Brussels’ spin, public opinion tends to put the blame on the Swiss. But the matter is not that simple.
The EU concluded two packages of bilateral agreements with Switzerland from 1999 onwards, including in the areas of technical barriers to trade, free movement of persons, air transport and land transport. The latter secures the EU access to Italy. With the exception of the air transport treaty, all these treaties are institution-free and new EU law is generally only adopted statically. Conflicts are settled in joint committees. Nevertheless, according to the understanding of both sides, Switzerland has become a partial member of the internal market.
If you want to understand the conclusion of the two packages, you have to look to 1992. Back then, a narrow majority of the people and a clear majority of the cantons said no to Switzerland’s accession to the EEA Agreement. The aim of this treaty is to extend the EU single market to the participating EFTA States. To this end, these states adopt EU law dynamically. They have a co-determination right in its development.
Importantly, the EFTA States have their own surveillance authority („ESA”) and their own court of justice. Experience shows that these institutions protect the sovereignty of the EFTA States to a considerable extent. In many cases, the EFTA Court has ruled as the first court in the EEA and the ECJ has frequently followed suit. However, the EFTA Court has sometimes gone its own way even where ECJ case law exists. The Federal Council, Switzerland’s seven-member directorate government, had supported the EEA proposal. However, under pressure from the Swiss Foreign Ministry („FDFA”), it submitted an application for EU membership six months before the EEA vote. It was thus was easy for the hardened opponents of integration to argue that the referendum was not about joining the economic EEA Agreement at all, but the EU, which sought political integration.
The Federal Council officially pursued the goal of EU accession after the rejection of the EEA. However, there was never a majority of voters and cantons in favour of this. When it became increasingly clear that Switzerland would not become an EU member state, the EU demanded a change to dynamic adoption of the law and the establishment of an institutional framework for the bilateral agreements from 2008 onwards.
As the Commission was aware of Switzerland’s thin-skinnedness in the matter of „foreign judges”, it made a generous offer: Switzerland should negotiate with the three EEA/EFTA States Iceland, Liechtenstein and Norway on the right to „dock” with the institutions of the EFTA pillar, ESA and the EFTA Court. This would have meant that the bilateral agreements between Switzerland and the EU would have been subject to these two bodies. Switzerland would have been able to provide one ESA college member and one judge in each of the cases concerning it. The EFTA Court would have been a party-neutral court for Switzerland. At the same time, the country could have maintained its sectoral approach; it would, unlike Iceland, Liechtenstein and Norway, not have had to adopt the entire internal market acquis. The traditional Swiss bilateralism would thus have mutated into a hybrid model with bilateral and multilateral elements.
“Bullshit” in the moral philosophical sense
In 2013, the FDFA, led by Foreign Minister Didier Burkhalter, rejected this proposal and went on to discuss a different model with the EU instead. According to this model, no special supervisory body should be set up. In the event of a conflict, however, the Commission should have the right to bring Switzerland unilaterally before the ECJ. The Commission would thus be Switzerland’s de facto surveillance authority. Of course, the intention behind this plan was to set a „point of no return” towards EU membership.
In order to disparage the idea of docking with the institutions of the EFTA pillar, the leadership of the FDFA launched a campaign putting out countless allegations, which were meant to convince regardless of their truthfulness.
It was a “bullshit campaign” as defined by the American moral philosopher Harry G. Frankfurt. The two biggest deceits were first that if the EFTA Court ruled in favour of Switzerland in an infringement case brought by ESA, the EU would not be bound by the ruling. The second major deceit was that the ECJ would, if required, merely issue „advisory opinions” for the attention of the Joint Committee. Surprisingly, this met with the approval of the foreign policy commissions of parliament, the cantons and the trade associations. Negotiations were conducted on this basis from 2014.
In the spring of 2017, however, it became clear that the non-party-neutral ECJ would not be able to command a majority in Switzerland. Foreign Minister Burkhalter resigned, something that only happens once in a blue moon in Switzerland. His successor Ignazio Cassis promised to „reset” the EU dossier. As things stood, this could only mean „docking” and thus the renunciation of the „point of no return” towards EU accession. Under the influence of his bureaucrats, however, the new foreign minister did not find the reset button.
How the Swiss government accepted the ECJ through the backdoor
Brussels, of course, was not unaware that the ECJ model was based on untenable assumptions, but when Bern indicated once again that it did not want docking, the European Commission put on the table a monitoring and judicial model it had developed for the former Soviet republics of Georgia, Moldova, Ukraine and Armenia and which is also foreseen for the former colonies of European powers in North Africa.
The „Ukraine model” provides that in the event of a conflict, the Commission was to be entitled to appeal to an „arbitration panel”, which, however, would have had to ask the ECJ for a binding ruling whenever EU law or treaty law with the same content was at stake. That basically means in every case.
The Federal Council accepted this in March 2018 and presented it as a great breakthrough. In July 2018, the UK Government under Theresa May also swallowed the Ukraine model. From then on, the FDFA claimed that the „arbitration panel” under the EU-Switzerland agreement would have considerable powers of its own because Bern had negotiated more successfully than London.
This was the prelude to other mendacity. Switzerland’s university professors, including some who in 2013 had rejected the ECJ in a letter to the Federal Council, sided with the majority of the Federal Council. Some of them repeated the fairy tale about the alleged independence of the „arbitral tribunal”. Others conceded that the ECJ would call the shots, but consoled themselves with the sentence that it was a respected court. The latter is undeniable, but it does not change the fact that the ECJ lacks neutrality.
Differences between the EU and Switzerland persisted
Then, in the course of 2018, it became clear that there were differences on three substantive issues that, at the EU’s insistence, were also to be addressed in the Framework Agreement: On wage protection in the case of working across the border, on whether the EU Citizenship Directive is part of the free movement of persons, and on the ban on state aid.
At the end of 2018, the EU declared the negotiation process complete and asked the Federal Council to sign. The latter published the draft text, took refuge in a „consultation” of key stakeholders and sent the chief negotiator on a PR tour with the mission to sell the Ukrainian mechanism to the Swiss public.
After the conclusion of the consultation, the Federal Council informed the European Commission in June 2019 that it saw a need for clarification on the three points mentioned. The Federal Council accepted the Ukraine mechanism despite considerable criticism. Given its questionable role in 2013/2014, this was probably an attempt to save face. However, the chief negotiator, who had praised the mechanism all over the country, was dismissed and his successor was instructed to conduct renegotiations on the three side issues.
The Brexit deal caused irritation
The Federal Council subsequently did nothing more to defend the model with the sham arbitration court. The fact that Boris Johnson’s Government was able to avoid the Ukraine model in the Christmas Eve 2020 Trade and Cooperation Agreement, despite pressure from the Commission, caused some irritation even among supporters of the Framework Agreement.
At a meeting between the President of the Swiss Confederation, Guy Parmelin, and the President of the Commission, Ursula von der Leyen, on 23 April 2021, it was found that a solution was not even possible with regards to the three side issues.
The major political parties in Switzerland are almost all divided on the framework agreement issue. The Social Democratic Party, which is pro-EU in itself, has its hands tied because of trade union resistance to a softening of wage protection. The conservative SVP is against any agreement. In the FDP, the party of Foreign Ministers Burkhalter and Cassis, there is a diametric contradiction between a resolution of the delegates rejecting the Ukraine model and a resolution of the parliamentary group that wanted to approve it „out of common sense”. The Centre Party is equally split, although its president rejects the treaty as „toxic” due to the role of the ECJ.
The big business associations have long pushed for the signing of the agreement, but in the course of the year 2020, the debate was dominated by new groupings of successful, globally active companies that rejected the Framework Agreement. The powerful Swiss trade association is also opposed to the treaty.
Now what?
The Swiss-EU Institutional Agreement treaty, also dubbed “InstA”, was built on feet of clay from the start. The FDFA’s attempt to bundle the country into the EU through the back door, so to speak, has failed. The Foreign Department overlooked the fact that questions of sovereignty have been part of every foreign policy debate in Switzerland since World War II. It overlooked that the separation between economic cooperation and political integration is deeply rooted in Swiss civil society – similar to the UK. To the haughty FDFA officials, the desire for the „point of no return” towards EU accession was more important than the sober analysis of how Switzerland’s relationship with its most important trading partner could be further developed while safeguarding its own interests.
The European Commission for its part could not resist the temptation to subject recalcitrant Switzerland to de facto supervision by itself and the jurisdiction of the ECJ. In doing so, it overestimated the assertiveness of the FDFA and underestimated the influence of Swiss civil society on European policy.
With regard to the Federal Council’s reluctance to sign the draft treaty, the European Commission has for some years practised a policy of punishment that is difficult to reconcile with good faith and out of place towards an old friend like Switzerland. Without claiming to be exhaustive, the following may be recalled:
- the discriminatory refusal of stock exchange equivalence from 1 July 2019;
- the exclusion of Switzerland from the European system of COVID apps;
- discrimination against Switzerland with regard to the control of trade in COVID-19 vaccines;
- the threat to exclude Switzerland from the Horizon 2020 research programme, expressed contrary to explicit commitments;
- the threat, issued contrary to explicit commitments, to no longer update the existing bilateral agreements, in particular the Agreement on Technical Barriers to Trade, if the Framework Agreement were not concluded.
- The refusal to agree to the UK’s accession to the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters is an unfriendly act towards the EFTA States of Switzerland, Iceland and Norway which all agreed to allow the UK in.
In all of these cases, the EU is also harming itself. In refusing to accept the Swiss COVID app, the EU even endangers the lives of its own citizens. But that doesn’t seem to bother the Brussels hardliners.
In my opinion, Switzerland should now go back to discuss the model to dock with the EFTA Court. But whether docking still is an option in 2021 is an open question. Should this not be possible, Switzerland would probably only be left with a path similar to that of Great Britain: leaving the Single Market with dynamic adoption of law, supranational surveillance and supranational judicial control, and retreating to a mere free trade model.
By sticking to their deficient negotiating strategy for years and years, the Federal Council and the Commission would then have failed to integrate Switzerland permanently into the single market. Even from such a „Swexit”, the world would not end, and nor would Switzerland. But it would not be good news for the further cohesion of the EU.
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