An analysis of the Institutional Agreement shows how Switzerland negotiated a radically different institutional setup to Iceland, Liechtenstein and Norway through the EEA Agreement. Instead of autonomous institutions common to these three countries (the “two-pillar system”), the Swiss–EU agreement foresees virtually no supranational or multilateral institutions. This comes however at a price, with a bigger role for EU institutions such as the Court of Justice of the EU (CJEU). foraus has deciphered the two agreements for you.
This contribution carries on the analysis started in the previous blogpost comparing the Agreement on the European Economic Area (EEA) with the draft CH–EU Institutional Agreement (InstA).
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.
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.
Image Credits: Oleksandr on Adobe Stock