The Swiss government’s “assessment of Swiss–EU relations” is missing the mark

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By Prof. Dr. iur. Dr. h.c. Carl Baudenbacher, former President of the EFTA Court (2003-2017), Partner at law firm Nobel Baudenbacher, Zurich/Brussels and Visiting Professor at LSE

One and a half years after the breakdown of the negotiations on an institutional agreement (“InstA”) with the EU, the Swiss Government, the “Federal Council”, has presented a 50 pages paper on how the stalemate is to be overcome. Formally, the document is a draft, because the Conference of Cantons and the two Foreign Affairs Committees of the Parliament are still to be consulted. But that won’t change anything in the direction it is taking.

On 26 May 2021, the Swiss Federal Council broke off negotiations with the EU on the conclusion of an institutional framework agreement (“InstA”), which had been ongoing since 2014. The official reasons for this step were divergences on three substantive side issues, wage protection in the case of working over the border, the relevance of the EU Citizenship Directive and a ban on state aid. However, the public was also under the impression that institutional unilateralism with the dynamic adoption of EU law by Switzerland, the de facto supervision by the European Commission and the de facto jurisdiction of the ECJ could jeopardise the agreement in a referendum. The Federal Council was reticent about these institutional aspects. In 2013, it had itself spoken out in favour of the aforementioned approach.

To anticipate: The government’s newest proposals are not convincing. Whether they would stand a chance in a referendum must be doubted.

Four supposed options

After a brief description of the existing legal situation, which naturally contains nothing new, the Swiss government’s  paper discusses four options for the future Switzerland-EU relations: a free trade model, the “bilateral path”, recently also called the “package solution”, EEA accession and EU accession. The authors’ pre-understanding that the “package solution” with the institutions of the EU and at most one or two substantive exceptions is superior to all other scenarios is not questioned at any point. Contrary to all promises, the “package solution” is nothing more than an InstA II with certain modifications. Instead of aiming for a horizontal institutional framework that would cover the most important bilateral agreement, as was the case with InstA I, Switzerland now wants to regulate the institutional issues in the individual bilateral agreements, i.e. vertically.

The aim is to achieve exceptions, particularly with regard to wage protection. In addition, the Federal Council wants to conclude new bilateral agreements with the EU. All in all, the “situation assessment” is a prime example of “TINA” politics. TINA stands for “There is no Alternative”. The strategy was famously developed in the UK by Margaret Thatcher, but reached its heyday in Germany under Angela Merkel.

To be sure, the paper contains pages and pages of statements that sound skillful, and at times (especially where nothing is at stake, as in the discussion of EU accession) one even gets the impression that a nuanced approach prevails. But on the crucial institutional issues – dynamic adoption of EU law, surveillance and dispute settlement – there is a degree of trickery that one would not let a student get away with. What is particularly striking is the fact that the paper remains silent on crucial problems.

Omissions on key points

In the three feasible scenarios of free trade, “package solution” and EEA, the issue of institutions is largely hushed up or presented in a distorted way. This alone must lead to the conclusion that the paper cannot do justice to its own claim to provide an analysis and evaluation of the existing models.

In the case of the free trade option, far too much emphasis is placed on the EU-United Kingdom Trade and Cooperation Agreement. Switzerland comes from a very different corner than the UK in winter 2020. The attempt to present the TCA as a cautionary tale is misplaced. Above all, however, the paper suppresses that a free trade model would allow the use of real arbitration tribunals.

In the case of the “package solution”, there is a lot of beating around the bush, but it is clear to anyone familiar with the matter that the Foreign Ministry is willing to accept de facto surveillance and dispute settlement by the institutions of the EU, the non-neutral European Commission and the non-neutral ECJ, as in the case of the defunct InstA. The intention is merely to seek one or the other exception. The fact that they have nothing against the ECJ was confirmed in the media by Foreign Minister Ignazio Cassis and chief negotiator Livia Leu.

Nevertheless – and this is particularly worrying – the “situation assessment” tries to obscure the reality by claiming that the main elements of dispute settlement are the role of the Joint Committee, the proportionality of compensatory measures and the control of proportionality by a (true) arbitral tribunal (p. 49). This is simply wrong. For these are merely secondary elements of dispute settlement. The main element is, of course, the non-neutral ECJ, which is only poorly disguised by a sham “arbitration panel”. It is the model developed by the EU for the successor states of the Soviet Union in Eastern Europe and the states of North Africa and accepted by the UK in the Withdrawal Agreement.

Completely inadequate presentation of the EEA option

In the EEA option, the neutral institutions of the EFTA pillar, the EFTA Surveillance Authority (“ESA” for short) and the EFTA Court, are not mentioned at all. Likewise, there is no reference to the model of “docking” with the ESA and the EFTA Court, which would allow Switzerland to maintain its sectoral approach while having a college member in the ESA and a judge in the EFTA Court. The EU proposed docking to Switzerland in 2013 and to Brexit-Great Britain in 2018.

The “situation assessment” also contains a problematic presentation regarding the position of the EFTA states in the creation of new, EEA-relevant EU law. According to Article 102 EEA, the EFTA States have to speak “with one voice” when participating in EEA relevant EU legislation. The paper states that a collective rejection of a legal act by all EFTA States would be the most probable option, but that in reality this will not happen. “Such far-reaching obligations might be outweighed if an EEA member (recte: an EEA/EFTA member) were to receive equally far-reaching rights of participation in the drafting, enactment, implementation and administration of the relevant legal acts. In fact, opportunities for the EFTA/EEA States to participate in the process are provided for in the sense of consultations, involvement in bodies of the European Commission and the like. However, there is no voting right. The EEA Agreement is thus characterised by a certain unequal treatment of the individual Contracting Parties.” (Unofficial translation, p. 44.)

There is hardly anything convincing about this assertion, especially when it is read against the background of the “package solution” preferred by the authors. Subordination to the institutions of the other side would be a transfer of sovereignty that would go far beyond any kind of “unequal treatment”.

Moreover, the “collective rejection of a legal act” does not mean that Switzerland could be forced to consent by the other three EFTA states. Collective consent only comes about when everyone has said yes.

Admittedly, there is pressure insofar as the EU can take compensatory measures if a legal act is not adopted. In practice, however, the Commission has shown itself to be flexible. Incidentally, this pressure would also exist with the “package solution”.

In any case, it is completely exaggerated to elevate the principle that the EFTA states must speak with one voice to the status of the EEA’s Gretchen question. The EFTA states belonging to the EEA have the same consultation and co-determination rights as Switzerland would have under the “package approach”. It is intellectually dishonest to celebrate the right to be consulted and to have a say in a “package approach” as a great success and to talk it down in the EEA context, especially since the EEA/EFTA states have their own supervisory authority and their own court of justice.

Bizarre pronouncements on the option of EU accession 

The statements in the “situation assessment” on the option of EU accession are perplexing. In view of the fact that such accession is not even under discussion in Switzerland, one is surprised that the Federal Council, as far as can be seen for the first time since 1991, explicitly points out the disadvantages of such a step.

Specifically, it mentions the loss of freedom of foreign trade, the compulsion to adopt EU agricultural policy, to raise the VAT rate, to introduce the euro and to participate in the Common Foreign and Security Policy (CFSP). Above all, however, despite the formal right of co-decision on legislation and participation in EU bodies, “it is foreseeable that the very fabric of Switzerland, its domestic structures, would be exposed to significant shifts”.

The federal executive would tend to be strengthened vis-à-vis parliament, the people and the cantons. “In view of the outstanding importance of federalism and direct democracy as Swiss state principles, it is imperative to pay critical attention to the potential internal shifts” (p. 46).

However, these remarks are superficial and could have been written ten years ago. That EU membership leads to a shift of power from other actors to the government in the states has always been known. The loss of sovereignty that comes with adopting “common policies” and the fact that a small state does not have an excessive amount of say are also nothing new.

However, one might have expected a European policy assessment to have covered the latest EU developments, especially the reduced support for free-trade and fiscal responsibility as a result of Brexit, the increase in centralisation and protectionism, the economic and political decline of  the EU’s paymaster, Germany, the politicisation of monetary policy by the European Central Bank, the gradual transition towards a transfer union and the fact that the German Federal Constitutional Court, which has previously countered these developments to a certain extent, has now been brought into line, with the political appointment of judges and especially of the president during the Merkel era.

The bottom theme is that the reader cannot shake off the suspicion that the comments on the (alleged) option of EU accession serve the purpose of making the “situation assessment” appear particularly differentiated. The rejection of EU membership is probably also intended to take the wind out of the sails of critics of the “package approach”.

Whether this is the case or not, the Federal Council’s willingness to let Switzerland sink to the level of the neighborhood states in Eastern Europe and North Africa in the institutional sphere is completely incomprehensible in view of the latest developments in the EU. One must bear in mind that such semi-colonisation would also have consequences for the attractiveness of Switzerland as a business hub.

There are really only two possible explanations for this: Either people in Bern underestimate what subordination to the organs of the other side would mean, or they want to set a “point of no return” on the road to EU accession despite the lip service paid above. I am of the opinion that the latter is the case. If the approach with the European Commission and the ECJ were to work, it would be easy for the Swiss EU aficionados to say, we’ve already come this far, let’s take the final step.

TINA is just as unconvincing on the European issue as it is in other policy areas. It is true that TATA (“There are Thousands of Alternatives”) does not apply here either. But one thing is clear: there are alternatives and a European policy that is not prepared to describe the existing options without prejudice and to put them up for discussion is doomed to failure.

Britzerland?

Recently, we can hear voices in British politics supporting the Swiss approach to European integration as an interesting path to follow for London. The problem however is that the Swiss model has become an uncertain proposition. Instead, it would be better for the UK and Switzerland to negotiate in tandem with the EU. Even if British politics has often made a confused impression in the last six years, the two nations share a belief in free trade and a liberal image of man, the absence of the Hegelian model of the state and a strong position of judges. Moreover, they both have outstanding universities.

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