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Are Britain and Switzerland moving in opposite directions?

The European Court of Justice in Luxembourg (Copyright: By Luxofluxo - Own work, CC BY-SA 4.0, https://en.wikipedia.org/w/index.php?curid=76261515)

Prof. Dr. iur. Dr. rer. pol. h.c. Carl Baudenbacher, former President of the EFTA Court (2003-2017), Partner Baudenbacher Kvernberg, Zurich/Oslo/Stavanger/Brussels, Visiting Professor at the LSE, discusses the latest developments surrounding the relationship between the EU and Switzerland.


When Boris Johnson visited Zurich in his capacity as Mayor of London in December 2012, he expressed the hope that the UK and Switzerland would become members of a new outer circle of the EU committed to free trade and coined the name “Britzerland”. Didier Burkhalter, Swiss Foreign Minister at the time, felt compelled to publicly reject the idea, as it was not compatible with his plan to lead Switzerland into the EU through the back door via a “Framework Agreement”.

The ECJ’s retained jurisdiction

After the Brexit vote in June 2016, German journalist Ruth Ciesinger wrote that the people then acting as Presidents of the European Commission and the European Parliament, Jean-Claude Juncker and Martin Schulz, were behaving like cuckolded husbands. Since then, it has been the EU’s policy to show the world that Brexit was a serious mistake. The ECJ, for its part, has now taken the opportunity to take a swipe at the UK. On 14 March 2024, it found the former member state in breach of its duty of loyalty under European law and other EU law. Even after Brexit, the UK had to accept the jurisdiction of the ECJ for a certain period of time in the withdrawal agreement with the EU. (In the much more important trade and cooperation agreement, however, any jurisdiction of the ECJ is excluded). In the case concerning the UK, the ECJ has downright slapped the proud British Supreme Court in the face, something that will not soon be forgotten across the Channel.

The judgment against the UK

In 2005, under pressure from the EU Commission, Romania cancelled a state aid scheme as a precondition for its accession to the EU. As a result, the Swedish-Romanian investors Ioan and Viorel Micula initiated ICSID arbitration proceedings under a bilateral investment protection agreement concluded between Romania and Sweden in 2003. ICSID is the English abbreviation for the “International Centre for Settlement of Investment Disputes” based in Washington, D.C., which is part of the World Bank Group. In 2013, the arbitration tribunal ordered Romania to compensate the claimants because they had not benefited from the investment agreement to the extent contractually agreed.

In 2015, the EU Commission decided that any compensation paid by Romania under the arbitration award was in breach of EU state aid rules and ordered Romania to recover the money paid to the beneficiaries of the award.

On 19 February 2020, the British Supreme Court allowed the arbitration award to be enforced, according to which Romania had to compensate the investors. In doing so, it placed general international law above EU law. The Supreme Court considered that the EU Commission could take legal action against the UK, but described the likelihood of this happening as low. In July 2022, the Commission filed an infringement action against the UK with the ECJ. The ECJ has now ruled in favour of the Commission across the board.

Consequences for Switzerland

The judgement is extremely important for Switzerland, whose government is seeking to conclude a Framework Agreement 2.0 with the EU. In a “Common Understanding” of the European Commission and the Swiss Federal Council (Government) of 15 December 2023, both sides agreed to a dispute resolution mechanism under which the ECJ would have a monopoly on the interpretation of EU law and treaty law with the same content as EU law. The fact that an “arbitration tribunal” would formally be responsible for the decision would not change this. This is because the “arbitration tribunal” would be obliged to appeal to the CJEU and follow the judgement of the CJEU if EU law is “implicated”. The “court of arbitration” would therefore merely serve to camouflage the enormous transfer of sovereignty to the EU. It is the mechanism which is part of the EU’s Association Agreements with the former Soviet Republics Armenia, Georgia, Moldova and Ukraine.

However, supporters of the Framework Agreement 2.0 (“RA 2.0”) claim that Switzerland has nothing to fear from the ECJ. The case law to date on the bilateral agreements, in particular the Agreement on the Free Movement of Persons, shows that the CJEU rules fairly and appropriately. Of course, this is confusing apples and oranges. The judgments to which the RA 2.0 friends refer have all been handed down in cases concerning the rights and obligations of individuals and companies (from the EU or Switzerland). It is nothing special that the ECJ generally makes neutral judgments here. Conversely, the Swiss Federal Supreme Court does the same when EU citizens and economic operators are involved in a case.

It is a completely different question whether the ECJ would also be neutral in international law disputes between the EU and Switzerland. The mandate for RA 2.0 provides for a dispute resolution mechanism with the EU and Switzerland as parties as the only type of procedure. So far, there has only been one precedent here, the Zurich aircraft noise case, which Switzerland is known to have lost outright. The ECJ ruled that the people in Switzerland, Hesse and Upper Bavaria are less in need of protection against aircraft noise than the people in the southern Black Forest (Case C-547/10 P). The Air Transport Agreement is the only existing bilateral agreement EU-Switzerland that grants the European Commission and the ECJ the decisive competences.

The ECJ has the EU’s DNA

The Zurich aircraft noise judgment is not a good omen for the planned dispute resolution model of RA 2.0. With the UK judgment, we now have a second case that clearly shows where the heart of the ECJ beats when the EU and a third country are confronted as parties in a dispute. I am not saying that the ruling of 14 March 2024 is wrong, but the case could have been decided differently. Judging is not an exact science. Judicial preunderstanding can play an important role, especially in politically sensitive cases. Preunderstanding is not the same as prejudice. Every person who deals with a matter and therefore every judge has a preunderstanding. It is influenced by the biography and convictions of the person concerned.

The ECJ has the DNA of the EU. Article 13 TEU describes it as an institution, which must pursue its objectives and serve its interests, those of its citizens and those of the Member States. The Commission v UK case was politically sensitive, and the cases that would reach the ECJ under an RA 2.0 EU-Switzerland would be sensitive too. The fact that London had to continue to recognise the ECJ’s jurisdiction for a certain period after Brexit was a consequence of Theresa May’s government’s sub-optimal negotiating strategy. However, the matter is temporary. RA 2.0, on the other hand, would only be the beginning of Switzerland’s progressive integration into the EU as a passive member. The “disloyal” British have been shown once again. For the Swiss, who have always sat on their high horse from an EU perspective, this one-sidedness could become the rule.

Britzerland 2.0?

When Boris Johnson launched his idea of “Britzerland”, the UK was an EU member state toying with the idea of Brexit. The Swiss Federal Council was preparing to set a “point of no return” towards EU membership with a “Framework Agreement”. Twelve years later, the situation in “Britzerland” has changed. The British left the EU on 31 January 2020, while Burkhalter’s successor is preparing to make his plan to join the EU through the back door a reality. It would therefore appear that the British and Swiss are moving in opposite directions. A remnant of 47 years of British EU membership has now led to a judgment by the ECJ that will hopefully open the eyes of the Swiss. Perhaps “Britzerland” will then become a reality after all – in one form or another.

Source: ECJ C-516/22 Commission ./. United Kingdom, judgment of 14 March 2024, CURIA – Dokumente (europa.eu)

Originally published in German, by Inside Paradeplatz.

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