Turning the European Commission into Switzerland’s surveillance authority is unacceptable

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By Prof. Dr. Dr. h.c. Carl Baudenbacher, former President of the EFTA Court (2003-2017) 

I. In the view of the European Union, granting preferential access to the single market has so far required, institutionally, in particular two things: a state must submit to surveillance by a supranational authority and to the jurisdiction of a supranational court. There are currently two models for this: (1) The 27 member states of the EU after Brexit are subject to the European Commission and the ECJ. (2) The three EEA/EFTA states Iceland, Liechtenstein and Norway are subject to the EFTA Surveillance Authority and the EFTA Court.

The above institutions are joint institutions of the EU and the EEA/EFTA. The participating states are present in them by members. Commission, CJEU, EFTA Surveillance Authority and EFTA Court are therefore neutral institutions for the respective states. In the event that the competent supervisory body finds a violation of the law, the monitoring can lead to infringement proceedings. If one of the two courts finds such a violation, the state concerned is convicted and must implement the judgment.

II. In a ‘Common Understanding’ of 15 December 2023, the Swiss Federal Council (Government) and the European Commission have agreed to a third conflict resolution model which should form the institutional basis of a “Framework Agreement” (“FA”). This mechanism is said to be the condition for Swiss industry (but not the banks and insurers) for being granted preferential access to the single market.

In the event of a dispute, either party may at any time decide to appeal to the CJEU through a pro forma arbitration tribunal. The prerequisite is that the dispute concerns EU law or treaty law that is identical in substance to EU law. However, this would practically always be the case. The CJEU’s ruling would be binding on the pro forma arbitral tribunal. This would make the European Commission, the institution of the counterparty, the Swiss supervisory authority. There is no need to explain why the Commission lacks all neutrality.

The model with the monitoring by the European Commission, the pro forma arbitration tribunal and the monopoly on interpretation of the European Court of Justice comes from the EU’s association agreements with the former Soviet republics of Armenia, Georgia, Moldova and Ukraine. Georgia, Moldova and Ukraine are officially candidates for EU membership, but it is unclear how realistic this prospect is. Armenia has expressed its interest to join the EU.

The aim with these states is to gradually introduce them to the ideas of market economy, democracy and the rule of law. Importantly, the EU is also providing substantial financial assistance to them. This context explains the willingness of these states to accept such a far-reaching cession of their sovereignty. Their semi-colonial status would, at least in theory, be limited in time.

However, the Swiss Federal Council explicitly ruled out EU accession of Switzerland in a ‘situation assessment’ of June 2023. There are two possible explanations for the plans to conclude a FA with the EU: (1) The Federal Council is willing to accept the loss of sovereignty ad kalendas graecas. (2) Or the statement in the ‘situation assessment’ is untrue. Then the conclusion of a FA would be a (hidden) ‘point of no return’ on the way to EU accession. In view of the mood in the country, this cannot be openly sought.

III. In fact, the Federal Council is pursuing the line adopted in 2013 of operating with untruths and half-truths also in other respects. Even pure sottises are not shunned in Bern. Quote:

‘The interpretation and monitoring of the single market agreement should be carried out in the so-called two-pillar model: Switzerland and the EU independently carry out the corresponding tasks on their territory. Accordingly, Swiss law continues to be interpreted by Swiss courts, EU law continues to be interpreted by EU courts, usually the CJEU (Court of Justice of the European Union).’ (Institutional elements, unofficial translation)

Firstly, there can be no question of Switzerland monitoring itself. As already mentioned, its supervisory body is the European Commission. The Commission would never have proposed the model with the pro forma arbitration panel and the CJEU if it were not convinced that it would remain in control. Secondly, the sentence that the existence of a two-pillar model is manifested by Swiss law being interpreted by Swiss courts is nonsense. After all, Swiss law is not at issue.

A two-pillar model was created by the EEA Agreement. In the EU pillar, the Commission and the CJEU are responsible in the EFTA pillar, the EFTA Surveillance Authority and the EFTA Court. This means that the Commission and the CJEU have no powers in the EFTA pillar. Using the term ‘two-pillar model’ for a system in which the Commission and the ECJ have competences in both the EU and Switzerland is misleading. Non-EU states can only form a pillar with their own institutions if there are at least three of them. The idea of a single state such as Switzerland forming a pillar is out of the question because no one can monitor themselves. At the end of 2012, the EU rejected in writing a proposal by the then Swiss President Eveline Widmer-Schlumpf to create a Swiss surveillance authority and a special chamber at the Federal Supreme Court.

IV. But if the Commission is Switzerland’s de facto surveillance authority, then it must be dealt with. This has hardly happened in the entire Swiss debate so far.

  1. The European Commission has many faces; it cannot be grasped by the classical doctrine of the separation of powers. The Basel chemical industry became acquainted with the Commission over fifty years ago in the dyestuff cases for violations of EEC competition law. After the discovery of the vitamin cartels, the ringleader Hoffmann-La Roche had to pay a fine of 462 million euros of the total of 855 million euros to Brussels in 2001. This list could be continued. As the European competition authority, the Commission has pursued a clear line, which was directed not only towards the protection of competition, but also towards combating market partitioning.

Furthermore, the Commission plays a decisive role in EU legislation, and it monitors the proper and timely implementation of EU law. Finally, the Commission negotiates international agreements that the EU wishes to conclude. It also appears in proceedings before the ECJ and the EFTA Court.

  1. In its monitoring function, the Commission is traditionally referred to as the ‘guardian of the treaties’. EU leaders regularly emphasise that the overriding principle of EU law is the rule of law. However, since the presidency of Luxembourg’s Jean-Claude Juncker (November 2014 to November 2019), there has been an increasing politicisation of the Commission. This tendency has continued during Ursula von der Leyen’s first term of office as Commission President.
  2. The politicisation of the Commission is to the detriment of the rule of law and predictability. The law is not enforced equally against all member states. It is worth recalling an event from 2016, when France came under public scrutiny after playing for time in complying with the requirements of the Stability and Growth Pact. When asked why France, with its ailing finances, was being treated so leniently by Brussels, Juncker replied at the end of May 2016: ‘Parce que c’est la France.’ (‘Because it’s France.’) Brussels journalist Gabriel Grésillon commented: ‘This joke, which is typical of the levity Jean-Claude Juncker allows himself, was very badly received by all those in Brussels who believe that restoring the balance of public finances is an absolute priority and that French laxity is at the heart of the European problem.’ The feeling that France is being given preferential treatment was, incidentally, also one of the reasons for Brexit.

From the corona year 2022, the EU’s budget rules were suspended until the end of 2023. After that, expectations were expressed here and there that the Commission would take a more aggressive approach against offenders based on the reformed rules. On 19 June 2024, the Brussels authority did in fact initiate deficit proceedings against France, Italy, Belgium, Slovakia and Malta, as well as Poland and Hungary, the latter two of which do not belong to the Eurozone. Last year, the national deficits of these seven countries were above the Maastricht reference value of 3 per cent of economic output. However, in an article in the FAZ on 19 June 2024, Werner Mussler warned against unrealistic expectations, stating: ‘If it seems politically opportune, the Commission has even greater discretionary leeway than before in its assessment of individual states. And the excessive deficit procedures in the narrower sense remain as useless as ever.’ (Unofficial translation.)

  1. Business circles are also concerned that the Commission is only selectively fulfilling its central task of ensuring the proper functioning of the single market. In May 2023, the Financial Times reported that proceedings for breaches of single market rules had fallen by 80% between 2020 and 2022. Business associations and some member states believe that the single market project is at risk. Restrictions are in place in particular in France, Hungary, Germany, Belgium, Poland and Italy. Services are affected most, but also goods. For example, a doctor’s prescription from another member state is not recognised in Italy. The Commission is not taking action on complaints.

V. Conversely, the Commission recently brought an infringement action against small Malta that can only be described as frivolous. Maltese law provides for the possibility for non-EU citizens to obtain citizenship of the country (and thus an EU passport) through investment. The Commission claimed out of the blue that EU law requires the existence of a ‘genuine link’ between a person and a Member State. Only then may citizenship be granted. The Irish Advocate General Michael Collins has recommended that the ECJ dismiss the case. It is for the Member States to determine who is entitled to be one of their nationals and thus an EU citizen. The exclusive competences of the Member States in this area should not be undermined.

VI. It seems that even competition law has recently been politicised. US President Barack Obama already raised the accusation years ago that because the EU digital companies could not compete with the giants from Silicon Valley, the EU Commission was using antitrust law as a weapon. In the Illumina Grail case, the Commission even created the possibility for itself to examine company mergers even if they are not subject to merger control either in Brussels or in a member state. It then blocked the completed acquisition of Grail by Illumina, claiming that the merger would have restricted choice in the emerging market for blood-based cancer screening tests. The GC upheld the Commission’s decision, but the CJEU ruled it unlawful on 3 September 2024. Finally, the fact that the competition policy portfolio is to be in the hands of a Spanish climate activist in the future should also give pause for thought.

VII. The fact that the European Commission is increasingly failing to fulfil its role as guardian of the treaties and is sometimes generous with the ‘rule of law’ is not a good omen for Switzerland. The more political an institution is, the more it tends to judge things according to opportunity. This is the opposite of the principle of legal certainty invoked by the proponents of FA2.0. Under the EEA Agreement, the Commission leaves the three EEA/EFTA states largely alone. They are supervised by their own surveillance authority and are considered to be ‘part of the club’ in the broader sense. Switzerland, on the other hand, is not allowed to get away with almost anything. It is highly questionable whether this would change if FA2.0 were to be implemented, because the country would be subject to the control of a European Commission that has been politicised in the manner described.

* Prof. Dr. iur. Dr. rer. pol. h.c., partner in a Swiss-Norwegian law firm, Visiting Professor LSE, President of the EFTA Court 2003-2017. A first version of this article was originally published in Swiss magazine Nebelspalter.

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