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European Economic Area

The Swiss-EU Institutional Agreement: An EEA Light?

On a cold Sunday of December 1992, the Swiss citizens took part in one of the most polarizing and tightest votes in the history of Swiss direct democracy. Asked whether their country should join the European Economic Area (EEA), Swiss citizens decided by a tiny margin to stay out of it.

Today, the debates surrounding the controversial Swiss–EU institutional agreement echo those on the EEA in the 1990s. But is this agreement comparable to the EEA? If it were accepted, would our relations with the EU become more similar to those of Iceland, Liechtenstein and Norway? If yes, how and to what extent?

Why a comparison with the EEA?

In 1992, Switzerland decided not to join the Agreement on the European Economic Area (hereafter EEA). Almost 80% of Swiss citizens participated in the vote (twice as many as usual), which was won by a tiny margin of 23’836 votes (50.3% vs. 49.7%).

This ‘Black Sunday’ in the history of Swiss–EU relations marked the beginning of the ‘Bilateral way’. Following the rejection of the EEA, the Swiss government negotiated bilateral agreements with the EU as a basis for its cooperation with the EU.

Over time, the EU has increasingly supported an ‘EEA approach’ for its relationship with Switzerland. But considering the persisting unpopularity of the EEA in Switzerland, the EU has agreed to continue with a bilateral solution instead. The result, the draft institutional agreement (hereafter InstA), is currently under consultation in Switzerland. The agreement foresees similar mechanisms to the EEA, such as a judicial institution for dispute resolution as well as dynamic take over of EU law in the sectors of the Internal Market in which Switzerland participates.

Today, Switzerland is at a crossroads with respect to its European policy. A comparison between the agreement on the table and the EEA is much needed. Firstly, because of the similar purpose of both agreements (i.e. the economic integration of Western European non-EU countries with the EU). Secondly, because of the enduring taboo in Switzerland surrounding the EEA, despite the fact its rejection has been the very foundation upon which the bilateral way has been built. This blogpost methodically compares six dimensions of the two agreements.

Material scope – What economic sectors are concerned?

The InstA would establish a common framework for five economic sectors: free movement of persons (including the right of establishment and the posting of workers), industrial goods (elimination of technical barriers to trade), some agricultural goods as well as land and air transport. Several sectors of importance, such as energy or financial services, are not included.

On the other hand, the EEA wholly covers the EU’s four freedoms (goods, services, capital and persons), meaning that Iceland, Liechtenstein and Norway (hereafter the EEA EFTA States) are fully participating in the EU’s Internal Market. Only two sectors, fisheries and agriculture, are (partially) outside the scope of the EEA due to their political sensitivity in EEA EFTA States.

Both agreements have an evolutionary component and allow their Parties to extend the scope to new economic sectors. While such an extension is rather theoretical in the case of the EEA, future market access agreements between Switzerland and the EU are very likely to be concluded and integrated into the InstA framework (such as electricity).

Overall, whereas the InstA builds upon the Swiss sectoral approach to European integration (initiated with the bilateral agreements) with limited market integration, the EEA offers a comprehensive approach and full market integration.

comparative insta eea table

Take over of EU law – What processes are foreseen? 

With the InstA, Swiss mechanisms for the take over of EU law are significantly « EEA-ised ». The engine at the core of both agreements is, indeed, strikingly similar. Comparable procedures are foreseen when new pieces of legislation falling in the areas covered by the agreements are prepared and adopted by the EU. This includes in particular policy shaping mechanisms (i.e. providing inputs to the negotiations on EU legislation), adaptation procedures of the relevant agreement and special procedures for legal acts whose entry into force require beforehand domestic legislative changes.

From an institutional perspective, both agreements establish a joint overarching body, known as the Joint Committee, in charge of the take over of relevant EU rules. Both also foresee democratic oversight in the form of joint parliamentary committees providing recommendations to ensure the good implementation of the agreements. The EEA goes further than the InstA in this regard with two additional joint bodies: the EEA Council at ministerial level for political impetus as well as the EEA Consultative Committee for the consultation of social partners. The lack of such institution for the InstA may come as a surprise considering the hostility of Swiss labour unions towards the social dimension of European integration.

Two-pillar system – How is cooperation with the EU concretely organised?

In practice, both agreements foresee two distinct groups of contracting parties. The first group includes the EU and its 28 Member States (all parties to the Agreement) while the second group includes Switzerland for the InstA and Iceland, Liechtenstein and Norway for the EEA. In the EEA, each group must « speak with one voice » in EFTA–EU joint institutions, meaning that the three EEA EFTA States must negotiate a common position before engaging with the EU (and the other way round for the Twenty-Eight). In that sense, the InstA offers more flexibility to Switzerland, which does not have to harmonise its position with other parties.

In the context of the EEA, these membership groups are known as « pillars ». The concept of a « two-pillar » system further refers to the existence of separate institutions for EEA EFTA States that are distinct from EU institutions. The next blogpost will detail how Switzerland, which is « alone » in its pillar, negotiated a radically different institutional setup for the InstA than the one in place in the EEA.

Surveillance – Who ensures rules are complied with?

In the EU constitutional order, the Commission oversees the respect of EU/EEA rules in the 28 Member States. Iceland, Liechtenstein and Norway (hereafter EEA EFTA States) established their own supranational institution, the EFTA Surveillance Authority (ESA), which is tasked with monitoring their compliance with all EEA rules.

In the case of InstA, a surveillance mechanism is only foreseen in the field of competition. Enforcement of competition rules in relevant Swiss-EU agreements would be exercised by a Swiss authority, independent from political power and with autonomous decision-making capacities (similar in a way to the Swiss financial regulator FINMA). Both the EEA and the InstA thus foresee a non-EU, independent institution. Whereas the EEA monitoring regime is supranational and has a comprehensive scope, the InstA regime is national and has a scope restricted to competition policy.

Vertical dispute settlement – How are rules enforced?

Vertical dispute settlement refers to disputes between the surveillance/enforcement body on the one hand and states, their nationals or their economic operators, on the other one.

In the EU, the Commission can bring any Member State to the Court of Justice of the European Union (CJEU) in case of infringement. When a Commission decision is challenged, it is also the CJEU that is responsible for examining the case. Similarly, in the EEA, infringement procedures or legal challenges are dealt with by the EFTA Court, a supranational court created by the EEA EFTA States and made of three judges, one for each EEA EFTA State. The EFTA Court is bound by the relevant case law of the CJEU.

The InstA does not foresee any supranational system. Swiss courts themselves would apply national and international law as they already do. This includes the application of provisions transposed from EU law, for which Swiss courts would then be bound by the relevant CJEU case law. In all likelihood, they would also rule on individual challenges to decisions issued by the Swiss competition authority (brought for instance by an economic operator or a Swiss canton).

It goes without saying that national courts of EEA EFTA States are also bound by the relevant case law of the EFTA Court and the CJEU. An additional instrument available to them is to ask an advisory opinion to the EFTA Court when interpretation on EEA matters is needed (for readers familiar with the EU system, this advisory opinion is a softer version of the CJEU’s preliminary ruling). The InstA, on the other hand, does not foresee any similar mechanism.

Horizontal dispute settlement – What happens if parties to the Agreement disagree?

Horizontal dispute settlement refers to disputes between the two groups of parties to the EEA or the InstA.

As the EFTA Surveillance Authority and the EFTA Court ensure enforcement of EEA law in the three EEA EFTA states, horizontal dispute settlement is limited to very specific issues in the EEA, such as the interpretation of the EEA Agreement itself, whether a EU act must be taken over in the EEA or not, as well as the proportionality of safeguard and rebalancing measures. They are resolved through arbitration, except disputes involving EU law, which are referred to the CJEU on both sides request. In 25 years, this procedure has never been used.

In the Swiss case, the absence of a dedicated surveillance and enforcement mechanism therefore leaves it to the European Commission to bring up any compliance issue it may have regarding Switzerland. In that respect, the InstA foresees an arbitration procedure in case the dispute cannot be solved at the political level between Switzerland and the EU. All unresolved disputes are referred to the arbitration court on one of the parties request. In disputes involving EU law, the arbitration court is bound to refer the case to the CJEU, whose ruling is binding on the arbitration court.

Without a vertical dispute settlement body such as the EFTA Court, the CJEU will have a much bigger role in disputes concerning EU law under the InstA. Whether this difference is significant or not is open to debate. One could argue that the EFTA Court is just the CJEU’s henchman; in 25 years, the EFTA Court has diverged only twice from EU case law (ironically, twice about the much-disputed Citizenship Directive, with a ruling even more pro-free movement than the CJEU). Politically, the difference may look more decisive, in particular in light of the « foreign judges » controversy.

Finally, the InstA does not foresee the possibility for national jurisdictions to ask the opinion of a supranational court on European law, in contrast to the advisory opinions in the EEA. This lack of autonomy for national courts is crucial, considering the key role played in the past by national judicial systems in the EU and the EEA to advance supranational integration.

Conclusion

In many respects, the draft InstA can be considered an « EEA light ». Its core component, a mechanism for the dynamic take over of EU law and homogenous market rules, is broadly similar. However, it comes with a minimal number of institutions, with an overall structure closer to a classic intergovernmental treaty. Even more importantly, virtually all multilateral and supranational aspects present in the EEA are either watered down or scrapped altogether in the InstA.

This outcome is however a double-edged sword. On the one hand, it provides more autonomy and formal sovereignty than the EEA framework. On the other hand, the InstA is likely to lead to more politicization as the EU’s direct role will arguably be more important and, crucially, more visible than in the EEA with its two-pillar system. If the InstA were to enter into force as such, the Swiss government would have a much more proactive role to play than today. « Misfits » or politically sensitive issues would need to be tackled early on at the political level, before the judicial mechanism involving the Commission and the CJEU would come into play, with potentially delicate clashes between the Swiss bottom-up direct democracy and the complex European top-down legal order.

Source de l’image – EFTA.

Cet article a également été publié sous la forme de deux billets de blog sur le forausBlog, en date du 26 février 2019. – Source 

Darius Farman

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