EU’s Swiss proposal could serve as Brexit blueprint

Brussels has proposed giving the European Court of Justice a big role in settling EU trade disputes with Switzerland in a move that could serve as a blueprint for a Brexit deal, despite many UK politicians' mistrust of the tribunal.

According to two EU diplomatic sources, the commission set out a new approach this month to trade relations with Switzerland. It would set up a three-person arbitration panel to resolve disputes on condition that issues relating to EU law were referred to the ECJ. That would give the EU’s highest court the final say in interpreting large parts of the trade partnership.

The EU initiative seeks to resolve a deadlock with Switzerland over efforts to agree a new “institutional framework” for the two economies’ trading relationship, which is governed by over 100 bilateral accords. The EU has long been irritated by the lack of enforcement mechanisms to ensure that Switzerland, a non-member, abides by parts of EU law that are replicated in the bilateral agreements.

The commission’s initiative - which has not yet been accepted by the Swiss - is also being watched by London. Switzerland, like the UK, is resistant to any deal that would give ECJ judges broad powers to settle disputes.

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While Brussels has long sought to convince Bern to sign up to arrangements that give the ECJ a bigger say in policing agreements between the two sides, its latest proposal shows its willingness to turn to creative solutions to entrench the role of the Luxembourg-based court.

The proposal’s emphasis on a two-tier system, in which the first port of call is an arbitration panel rather than the ECJ itself, could serve as a template for Brexit. Senior Brexit negotiators see the complicated current arrangements with the Swiss as the kind of outcome they are determined to avoid with Britain.

The panel, which would include one Swiss national, one EU national and a jointly appointed third member, would enforce compliance with the bilateral accords.

The European Commission’s approach was floated during a visit of Jean-Claude Juncker, the commission president, to the Swiss capital in November, and further details were presented to national officials at a meeting in Brussels on January 9th.

Commission pressure on Bern to agree to a new framework has ramped up since Britain voted in 2016 to leave the EU, with Brussels insisting that despite the Swiss precedent, no bespoke deal is on offer for Brexit.

The EU also wants Swiss rules to evolve in line with changes to relevant EU laws. Brussels has said a new agreement is needed “to provide legal certainty” to relations “and to reach new agreements to expand our ties”.

Bern reacted angrily in December when Brussels granted market-access rights for Swiss equities traders that will expire in only 12 months. The decision was widely seen as an indirect message to Britain.

The European Commission refused to "confirm or deny issues discussed" in the EU-Swiss talks, adding that "nothing is formalised."

“There are many ideas on the table because, after all, we want to find workable solutions,” she said.

– Copyright The Financial Times Limited 2018