The main aim of the Switzerland’s foreign policy was to maintain its neutrality when the process of European integration was taking place after World War II. This policy of preservation predates the formation of the European Coal and Steel Community (ECSC) in the early 1950s, the then EU. The original position of the Swiss Federal Council can be traced back to 1947, under the principles of Swiss accession to the Organisation for European Economic Cooperation (OEEC, now OECD).
The main aim of the OEEC, was to create a joint European programme, and supervise the distribution of aid, emerged from the Marshall Plan, with Switzerland as one of the founding members. The result from this is the complete refusal of surrendering of any sovereignty that could damage the credibility of the policy of neutrality.
According to Art. 3(3) Treaty on the European Union, the European Union “shall establish an internal market” which, according to Art. 26(2) Treaty on the Functioning of the European Union, “shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties”. Switzerland is the fifth most important trading partner for the Swiss.
The European Union
The European Union (EU) is a confederation of nations. It is a multinational alliance of currently 28 sovereign countries.
The EU’s mission in the 21st century is to:
maintain peace between its member states;
bring European countries together in practical cooperation;
ensure that European citizens can live in security;
promote economic and social solidarity;
preserve European identity and diversity in a globalised world, and
promote the values that Europeans share.
A Brief History
Until shortly after the end of the Second World War our concept of the state and our political life had developed almost entirely on the basis of national constitutions and laws. It was on this basis that the rules of conduct binding not only on citizens and parties in our democratic states but also on the state and its organs were created. It took the complete collapse of Europe and its political and economic decline to create the conditions for a new beginning and give a fresh impetus to the idea of a new European order. The EU evolved from the idea of ensuring peace in Europe and prevent future conflicts. This was to be achieved by economic integration and cooperation.
There were several attempts and moves towards the integration in Europe after World War II. This variety of organisations can be divided in three main categories.
The Euro- Atlantic Organisations
The Euro- Atlantic organisations came into establishment from the alliance between the United States of America and Europe after World War II. The first European organisation after World War II, i.e., the Organisation for European Economic Cooperation (OEEC), 1948, was created at the initiative of the United States. This arose from the Marshall Plan and the Conference of Sixteen (Conference for European Economic Co-operation), which sought to establish a permanent organisation to continue work on a joint recovery programme. The main objective of the OEEC was to liberalise trade between countries. In September 196, the OEEC was superseded by the Organisation for Economic Co-operation and Development (OECD). In 1961, the OECD consisted of the European founder countries of the OEEC plus the United States and Canada. With this a new aim was also added, that is to promote economic progress in the Third World through development aid.
In 1954, the Western European Union (WEU) was established as a military alliance between the European countries to enter into a mutual commitment of mutual defence. WEU was created by the Treaty on Economic, Social and Cultural Collaboration and Collective Self-Defence signed at Brussels, also call the Brussels Treaty, on 17 March 1948. However, its role has not developed further, since the majority of its powers have been transferred to other international institutions. It has retained the role of collective defence but has not been transferred to the EU. On 30 June 2011, the WEU was officially declared invalid.
Council of Europe and OSCE
These organisations include the Council of Europe established on 5 May 1949. Though Article 1(a) of its Statute states that “The aim of the Council of Europe is to achieve a greater unity between its members for the purpose of safeguarding and realizing the ideals and principles which are their common heritage and facilitating their economic and social progress”, it does not make any reference to moves towards a federation or union, nor does it provide for the transfer or merging of sovereign rights. Its setup is similar to that of the United Nations Security Council. Among the countless conventions concluded by the Council of Europe, in the fields of economics, culture, social policy and law, the Council of Europe’s most famous achievement is the European Convention on Human Rights, which was adopted in 1950 following a report by the Council of Europe’s Parliamentary Assembly.
This group of organisations also consists of the Organisation for Security and Cooperation in Europe (OSCE), created in 1994.
From this we can understand that the common feature in this group of organisations is that these organisations will not go beyond customary international cooperation. There is lack of talking about actual integration among the countries.
This group of the European organisations consist of the EU. The characteristic that is completely different and new in the case of the EU, and that which separates it from the abovementioned two groups of organisations, is that the Member States have given up some of their sovereign rights to the EU and have conferred on the Union powers to act independently.
The EU was founded in 1957, with the objective of creating a union between the countries of Europe. It was founded by six countries, France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. Currently, it is a supranational alliance of 28 sovereign states with a population of 507 million. The idea of a EU was laid down by the then Foreign Minister Robert Schuman, on 9 May 1950, where he laid down the plan to establish a European Coal and Steel Community, to bring together the coal and steel industries in Europe. He believed that if the countries were to share resources and become interdependent, there is less chance of conflict between them. The day of his declaration is now celebrated as Europe Day. Treaty of European Coal and Steel Community was concluded by the six abovementioned nations, on 18 April 1951.
The EU was created by the conclusion of the Treaty of Maastricht, on 7 February 1992. This treaty, apart from creating an economic and monetary union, it also brought about closer coordination and cooperation among the European nations. This was the first step leading ultimately to the European constitutional system.
There were further revisions of the EU treaties with treaties like the Treaty of Amsterdam, 1997 and Treaty of Nice, 2001. The former absorbed the Schengen Convention into EU law, increased the influence of the Commission in home affairs and changed the decision making procedure in the Council by extending Qualified Majority Voting (QVM), while the latter further extended QVM in the Council and removed national vetoes from 39 areas. The Constitutional Treaty of Europe was also rejected.
The Treaty of Lisbon merges the European Union and the European Community into a single European Union. The word ‘Community’ is replaced throughout by the word ‘Union’. The Union replaces and succeeds the European Community. The EU acquired a legal personality with this treaty This treaty retained the important aspects of the Constitutional Treaty. However, Union law is still shaped by the following three Treaties.
Treaty on European Union
Treaty on the Functioning of the European Union
Treaty establishing the European Atomic Energy Community
Relations between Switzerland and the EU
Switzerland is located in the heart of Europe. As a nation that is smack in the middle of the EU and its member states, it is of particular importance. Switzerland has close relations with all these countries at a political, economic and social level. It also shares its values with these countries, in the fields of equity and freedom. In any foreign policy, once main objective is to create the best possible basis for a permanent, mutual, thriving relationship with what is its most important economic partner. This is exactly what Switzerland and the EU works towards to achieve.
With a population of more that 507 million, the EU is Switzerland’s most important trading partner, where more than three quarters of Swiss imports come from the EU and the more than half of its exports go to the EU. Switzerland occupies fourth place after US, China and Russia as an important trading partner for the EU.
Switzerland and the EU laid down the framework for the for this economic exchange in 1972 with the conclusion of the Free Trade Agreement with the then European Economic Community (EEC).
European Free Trade Agreement 1972
This agreement was entered into between the European Economic Community (EEC) and the Swiss Confederation. This was the cornerstone of EU- Swiss relations. The aim of this agreement is:
To promote through the expansion of reciprocal trade the harmonious development of economic relations between the European Economic Community and the Swiss Confederation and thus to foster in the Community and Switzerland the advance of economic activity, the improvement of living and employment conditions, and increased productivity and financial stability,
To provide fair conditions of competition for trade between the contracting parties,
To contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade.
This agreement exempts industrial goods originating in Switzerland and the EEC from customs duties and similar measures and prohibits quantitative trade restrictions on trade. In addition, the Agreement prohibits the setting of limits on the volume of goods that can be traded (quotas) as well as measures with the same effects. It created a free trade zone for industrial products originating in the territory of the two parties. It also governs the trade in processed agricultural products. This makes Switzerland an EFTA State but not an EU member.
Post Free Trade Agreement 1972
During the mid-1980s and early 1990s was a crucial period for the EU- Swiss relations. One of the main aims of the European Free Trade Agreement 1972, was to regulate relations between the EU and the Free Trade Agreement States. An important step was taken in 1972, when the EFTA States concluded individual Free Trade Agreements with the EEC. As of mid- 1980s, the level of economic integration increased within the EU. To facilitate the involvement of the EFTA States in the EU’s internal market, the EFTA States and the EU negotiated the Agreement on the European Economic Area (EEA).
On May 2nd, 1992, the agreement was signed and with this the Swiss government applied for accession to the European Communities. The Swiss Government submitted a request to Brussels to begin the negotiations on the accession of Switzerland to the EU. All the EFTA States ratified the EEA Agreement except Switzerland.
In accordance with the Swiss Constitution, the EEA Treaty was submitted to a referendum on 6 December 1992. On December 6, 1992, the move towards further negotiation came to a standstill by a “no vote”. A majority of the Swiss populace and regions rejected the membership of the European Economic Area (EEA). This agreement would have initiated full economic integration between the EU and Switzerland. It would give Switzerland equal access to the European internal market having its four freedoms of movement of goods, services, people, and capital. However this is with its restriction in participation in the legislation.
This rejection eliminated the need for negotiations for the EU membership for Switzerland. This led to Swiss Government deciding to continue its relations with the EU through bilateral agreements and arrangements. The EU accepted to this once the EEA was established without Switzerland’s participation. However, the EU insisted on a balanced approach and the agreements to be subject to a guillotine clause. Agreements were made on matters like the free movement of persons, land transport and technical barriers to trade.
The 1999 negotiations came to a close and a agreements were signed on seven matters. This collective set of agreements is called the Bilateral I. The guillotine clause is the important element that binds these set of agreements together. The guillotine clause is a termination clause, in which all the agreements come into force at once and where the termination of one agreement, nullifies or terminates all the agreements at once. This elements puts a pressure on Switzerland to implement continuously the agreements agreed upon.
Then in between 2001 and 2004, a new set of bilateral agreements came up for discussions. This resulted in nine agreements and one declaration of intent called as Bilateral II. The areas discussed were Schengen acquis, the Dublin Declaration, pensions, educations, agreements on taxations of savings, the Environment Agency, processed agricultural products etc. the Bilateral II was signed in 2004, improving the integration and cooperation between the Swiss and the EU.
Till today these bilateral agreements between Switzerland and the EU are binding and strong. The request for EU membership negotiations have faded over time and have become irrelevant.
Bilateral Agreements between the EU and Switzerland
The relationship that Switzerland and the EU has is peculiar. Though it opted from being a member of the EU, close economic integration between them is very apparent. Despite this level of integration established by these bilateral agreements with the EU, it can be understood that the Swiss value their independence and sovereignty. Since World War II ended, Switzerland worked hard to preserve its neutrality. It did all it could to support in the integration of the EU while maintaining its neutrality status. Today this framework of mutual understanding comprises of around 120 agreements; 20 main and 100 subsidiary agreements. No third country has entered into as many agreements with the EU as has Switzerland.
The bilateral agreements are based on intergovernmental cooperation.
In 1999 negotiations came to an end and agreements were signed in seven different areas. In order to reduce the negative impact of the Swiss refusal to join the EEA, bilateral negotiations between the European Commission and Switzerland have taken place from late 1994 until late 1998.
The Government of Switzerland negotiated with the EU a set of agreements known as the Bilaterals I that were enforced in 2002. However, countless Swiss nationals and politicians protested against this arrangement of agreements and hence, launched a referendum to put a stop to it. In May 2000, Swiss were asked to vote for or against these agreements. 67.2% voted in affirmation to the agreements and the Bilaterals I rules went into force on January 1, 2002. The first set of bilateral agreements negotiated between 1994 and 1998 consists of seven agreements. They cover namely:
Free movement of persons
Technical barriers to trade
Free Movement of Persons
This is seen as the most important agreement in the Bilateral I set of agreements. This agreement sets out a progressive opening of the labour market for the free movement of the persons between Switzerland and the EU. Swiss and EU citizens will be entitled to the same working and living conditions in Switzerland and the EU.
Switzerland and the EU, signed the bilateral agreement on the Free Movement of Persons (AMFP), on 21 June, 1999. This was one of the agreements included in the Bilateral I of 1999 between Switzerland and the EU.
This agreement entitles the Swiss and the EU citizens, under certain conditions, to choose their place of employment and residence freely within the national territories of the parties. This leads to mutual, gradual and controlled opening up of labour markets through transitional arrangements.
This agreement lifts restrictions on EU citizens wishing to live or work in Switzerland. This right is also accompanied with mutual recognition of professional qualifications, the right to buy property and also with the coordination of social insurance systems.
This agreement lays down its aims for the benefits for the nationals of the Member States of the European Community and Switzerland, as is:
To accord a right of entry, residence, access to work as employed persons, establishment on a self- employed basis and the right to stay in the territory of the contracting parties;
To facilitate the provision of services in the territory of the contracting parties, and in particular to liberalise the provision of services of brief duration;
To accord a right of entry into, and residence in, the territory of the contracting parties to persons without an economic activity in the host country;
To accord the same living, employment and working conditions as those accorded to nationals.
It covers natural persons in their capacity of workers, and the self- employed as well as family members of these persons, and also persons not exercising an economic activity. Legal persons are not covered by this agreement. This is a major shortcoming in the agreement.
A process similar to this was to be carried to prepare for Croatia’s entry to the EU by mid- 2013. However, due to the vote in favour of the initiative against mass immigration (mentioned below) on 9 February, 2014, the corresponding protocol could not be signed.
On 9 February, 2014, the people of Switzerland voted in favour of the initiative “Against mass immigration”. From this new policy, the Swiss Government and the Parliament were to introduce within the next three years a new system for an autonomous management in regard to immigration and to safeguard the country’s economic interests. On February 11, 2015, the Swiss Government adopted a negotiating directive to adapt the AFMP with the EU. The Swiss Government provided the draft legislation to the Parliament to manage immigration on March 4, 2016. The European Commission and the Swiss Government held a series of discussions to find a common ground.
Technical barriers to trade
Then the Bilaterals II were signed in 2004. The focus, this time was on coordinating the asylum procedures and doing away with immigration controls between Switzerland and other EU Schengen nations. This set of agreements also included policies on taxation of savings, fight against fraud, processed agricultural products, media, environment, statistics, pensions, and lastly education, vocational training and youth.
The Schengen/ Dublin Regulation is formatted to improve the processing of the asylum applications, prevent an applicant from submitting applications in multiple member states and reduce the number of shuffling asylum seekers who are moved from one state to another.
Once again in February 2014, 50.3% of Swiss citizens voted against the unrestricted migration between Switzerland and the EU. From this vote, the Swiss government decided not to sign a deal opening its labour market to Croatia who had just joined the EU. In response to this, on 14, February 2014, the EU cut Swiss universities out of the Horizon 2020 and Eramus deals on research and education (also a part of the bilateral agreements).
Institutional Framework of the Bilateral Agreements
Each bilateral agreement is managed by a Joint or Mixed Committee which consist of representatives from the EU and Switzerland to make decisions by way of consensus. The committee provides a platform for the consultation, advice and discussion.
There are certain exceptions to the abovementioned. For example, these committees were only established to manage some of the older agreements. In addition to the seven committee established to manage the Bilateral I, there are currently ten such committees. Furthermore, there is a committee for all agreements under Bilateral II, except in the agreement regarding pensions and savings tax agreements, as these agreements are static.
The Schengen/ Dublin joint committee is a different case. The difference here is that Switzerland is involved in the decision making process but cannot vote.
These committees meet usually once or twice a year, a minimum which is often laid down in the agreement. In case of the agreement on environment, the Joint Committee will only meet upon the request of either parties. Each committee sets its own rules of procedure. The chairmanship of the committee shifts between the EU and the Swiss side.
Composition of the bilateral committees
The members of the Swiss delegation are elected by the Federal Council. The standing members of the Swiss delegations consist of officials of the Federal Offices involved. For example in the joint committee for the agreement on the free movement of persons: Federal Migration Office, Federal Office for Education and Technology, Federal Office for Social Security and Federal Secretariat of Economy (Seco). etc. The cantons have a representative in the five committees governing agreements in which cantonal policy competences are relevant. The Swiss delegation also includes a representative of the Swiss Integration Bureau and the Mission to the EU in Brussels. In most delegations there is also a representative of the Directorate of International Law of the Foreign Affairs Office.
Most EU agreements with third countries are managed by the Directorate General (DG) for External Relations of the European Commission. On EU- Swiss agreements, the management of the joint committees is divided among the relevant sectoral DGs.
Functions of the Joint Committee
The main function of the bilateral committees is to ensure the proper implementation of the agreements, providing a forum for dialogue aimed at resolving misunderstandings and differences in interpretation of the provisions of the agreement. This includes the important task of integrating new legal provisions by adapting the agreements, as well as being the arena for the settlement of disputes between the two sides.
Interpretation of Bilateral Agreements
Interpretation of Bilateral Agreements by the Court of Justice of the European Union
The Court of Justice of the European Union either excludes the relevance of parallel interpretation of the EU law due to the limited scope of obligations contained in the Agreement on Free Movement of Persons which all cases are about or relies in a somewhat peculiar way on the specificity of Swiss- EU relations based on the fact that Switzerland is not willing to be a part of the EU or the EEA.
In the case of Anneliese Hauser and Erich Stamm, the issue brought to the CJEU was on the compatibility of a rule that gave preference to German farmers for the lease of agricultural land as per the Agreement on the Free Movement of Persons and was to the disadvantage of Swiss farmers. The CJEU had to determine whether prohibition of discrimination as under Article 15 of Annex I of the Agreement applied to self- employment as well as employed frontier employees. It was held that the prohibition applies in both cases.
In the case of Fokus Invest, the issue raised was whether or not legal persons could rely on the freedom of establishment as provided under the Free Movement of Persons Agreement. The Court held, that the interpretation of the EU norms that are parallel to this cannot automatically be read along with the Agreement. However, it also did not clearly state when there could indeed be such parallel interpretation. It directly answered the issue, finding that the wording of the Agreement did not give scope to extend the freedom of establishment to legal persons.
Interpretation of Bilateral Agreements by Swiss Courts
The interpretation of the Court of Justice of the European Union has only shifted in the recent time from reserved interpretation to a more cooperative mode of interpretation. The Swiss Courts generally rely on the interpretation of the notions in the EU law as
The Swiss Federal Supreme Court
Legal Framework of the Bilateral Agreements
Insurance Agreement 1989
The Free Trade Agreement of 1972 was followed by the Insurance Agreement of 1989. This agreement opens up areas of the insurance market between Switzerland and the EU. It grants mutual and equal freedom of establishment to companies in field of direct insurance for damage. In the non- life sector, the Swiss insurers are entitled to set up and acquire agencies branches freely in the EU. The Agreement also reduce regulatory requirements. The same applies for EU insurers in Switzerland. The Agreement thus contributes to improvement of the international positioning of Swiss insurers. This is crucial for the internationally operating insurance companies.
Current Key Issues
Swiss Referendum On Mass Immigration- 9 February 2014
On February 9th, Swiss voters narrowly accepted the referendum “against mass immigration”. This referendum aims to cap immigration into Switzerland, to re-introduce quotas for foreigners and calls for the renegotiation of the agreement on the free movement of people with the EU.
The referendum was introduced by the Swiss Peoples Party (SVP). In 2011, the SVP, a national conservative party, introduced a popular initiative, to reduce immigration. This was the ” Stop Mass Immigration Initiative.”
“A popular initiative is a constitutional instrument in Switzerland and represents a cornerstone of Switzerland’s direct democracy. It allows the people to suggest law in Switzerland on a federal, cantonal and municipal level. On a federal and cantonal level, accepting a popular initiative amends the text of the initiative to the respective constitution. On the national level, the signatures of 100,000 voters must be collected within 18 months for such an initiative to be organized. Popular initiatives do not originate from the Parliament or Government but from the citizens themselves.”
This initiative provides for the reintroduction of the annual cap on total immigration in Switzerland. This limit should apply to all permits covered by legislation on foreign nationals. It also lays down that businesses should give Swiss nationals priority over foreign nationals during hiring process. It aims at creating a new admission system based on quantitative limits and quotas on immigration. The vote on the popular initiative took place on 9 February 2014. 50.3 percent of voters accepted the constitutional amendment as given by the initiative.
This referendum created a controversy in the EU- Swiss bilateral relations, and goes against the very foundation of integration and cooperation as provided by the bilateral agreements.
The Agreement on the Free Movement of Persons is one of seven agreements relating to the internal market – a package called ‘Bilateral I’. The other six concern the following fields:
carriage of passengers and goods by road and rail,
trade in agricultural products,
mutual recognition of conformity assessment,
certain aspects of government procurement,
scientific and technological cooperation.
These seven agreements together create a unified agreement, and is safeguarded by a guillotine clause , ensuring that the seven agreements were concluded simultaneously, and terminating of one of the agreements would cease the application of all seven agreements together.
Currently, as per the agreement, the foreign nationals have the right of entry and short stay in Switzerland with no conditions except proper identification. The current bilateral agreement also provides the right to work or be self-employed and also reside in Switzerland. The bilateral agreement covers two sets of rights i.e., border- control-free access to the territory i.e., Schengen border- control-free area and EU free movement rights which includes the right to stay, reside and exercise economic activities. The initiative With the adoption of this referendum, the Swiss authorities now have three years to come up with a solution or renegotiate the bilateral agreement on the Free Movement of Persons.
Institutional and horizontal questions
Free movement of workers and right to supply services freely
Research cooperation/Horizon 2020
Swiss participation in Erasmus+
Lessons for India