The need to involve the Court of Justice in future agreements between the EU and Switzerland

After a Common Understanding, an approval of the Negotiating Mandate by the Swiss governmen (the ‘Mandate’), and a Decision of the Council of the EU authorising the opening of negotiations (the ‘Decision’), the table is set: the EU and Switzerland are looking at a slate of treaties to be concluded and amended, among them the current Agreement on the Free Movement of Persons (hereinafter, the ‘FMOPA’). As the FMOPA is by far the most important existing agreement between the EU and Switzerland, it is the main, though not the only, object of this analysis. One of the outstanding issues is the establishment of an arbitral tribunal – a Panel – with jurisdiction to settle disputes between the EU and Switzerland and possibly also the power to refer questions of EU law to the ECJ. This post remains agnostic on whether such a mechanism is desirable but argues that when such a Panel interprets EU law, the ECJ necessarily needs to be involved by reason of EU law (Articles 19(1) TEU, 267 and 344 TFEU) as interpreted by the ECJ itself in its case law on exclusive jurisdiction.

The ‘two-pillar model’ and the autonomy of EU law

Under the existing EU-Swiss agreements, a ‘two-pillar model’ governs the implementation of any person’s entitlement flowing from these treaties. A rightsholder alleging a violation of their privileges lodges an application with the court having territorial jurisdiction, namely, depending on the case, either the judicial authorities in Switzerland or one of the Member States of the EU. Even though Swiss courts cannot refer requests for preliminary rulings to the ECJ under the existing arrangement, the machinery of ‘parallel surveillance’ has so far safeguarded the unity in the interpretation of the FMOPA reasonably well. Sticking closely to the purpose of the second paragraph of Article 16 FMOPA, the case law of the Swiss Federal Supreme Court (‘FSC’) has maintained that CJEU judgments rendered after the signature of the FMOPA, to the extent that they interpret relevant concepts of the acquis de l’Union (hereinafter, ‘successive’ case law), ‘will be paid due account’, unless ‘compelling grounds’ suggest otherwise (BGE 147 II 1 consid. 2.3 p.7, Thürer and Burri, pp.13-14, Auer et al., Vol.I, p.155). On its part, the ECJ has refrained from fully extending its free movement case law to the interpretation of the FMOPA, ‘unless there are express provisions [...] laid down by [the FMOPA]’ to this effect (Picart, C-355/16, paras. 29-31; for further elaboration, see the Opinion of AG Mengozzi, paras. 49-93).

Evidently, a logic of reciprocity underpins the case laws of these two courts: the ECJ preserves the ‘virginity’ of the FMOPA, shielding it from internal market obligations to which the Swiss Confederation has not signed up, e.g., the general prohibition on restrictions on the freedom of establishment, which was, among others, at issue in Picart. At the same time, the FSC embraces Kirchberg’s relevant ‘successive’ case law, as long as this does not imply that the purely ‘internal’ hermeneutic dimension of EU case law creeps into the FMOPA. From the standpoint of the exclusive jurisdiction of the ECJ to interpret EU law (Articles 19(1) TEU and 344 TFEU), a system of parallel monitoring does not seem to raise basic concerns, as, even though the FMOPA (and its provisions that are modelled upon the acquis) is an ‘integral part of EU law’, any interpretation given by the FSC ‘concern[s] no less [that] non-Member [State] and [the new or reformed EU-Swiss conventions] may therefore also be interpreted by the courts and tribunals of [that State]’ (Opinion 1/17, paras. 116-117). Likewise, the diplomatic system of dispute settlement covering disagreements between the Contracting Parties currently in force (Articles 14 and 19 FMOPA) does not seem to jeopardise the ECJ’s ultimate authority to interpret and apply EU law, for it does not produce law that binds the Union institutions (Opinion 1/91, a contrario, para. 39).

Preserved and novel procedural elements in the future agreements

In the ongoing negotiations, Switzerland aims to retain the ‘two-pillar model’ (point 6.3 of the Mandate), thus excluding the possibility, for instance, to allow the Helvetic judiciary to lodge references for preliminary rulings with the CJEU. Opinion 1/91 (paras. 59-60) held such a dialogue compliant with the EU Treaties, upon the condition that the CJEU’s decision would be binding. Yet, both the Swiss Mandate and the Council of the EU’s Decision contemplate the creation of an arbitral entity – a Panel – whose jurisdiction could cover disputes between the negotiating parties arising out of the agreements, be they new or amended. The basis of such jurisdiction will likely be found in the individual treaties and not in an all-encompassing ‘institutional agreement’, which Switzerland aborted in 2021 (point 6.1 of the Mandate, recitals 10 and 11 of the Decision).

The conditions set by the case law of the CJEU for binding dispute settlement

Whether a power or duty of an arbitral panel to refer to the ECJ, whose decision must bind the former (Opinion 1/92, paras. 34-35), is inevitable when it interprets EU law, is the crucial question. With regard to Association Agreements with other third countries,1 scholarship has duly observed that the power of an arbitral panel to ask preliminary rulings is crucial to safeguard the role of the CJEU as the guardian of EU law (Opinion 1/09, para. 66; Paasivirta, pp.223-224). By dint of EU constitutional law, a preliminary reference procedure is required when an international agreement mirrors ‘fundamental’ rules of EU law and incorporates a significant number of provisions whose wording reproduces Union norms (Opinion 1/91, paras. 41-42). In such cases, the scenario whereby the Panel imposes an autonomous interpretation of the acquis on the EU and the Court by interpreting relevant Union law would potentially be quite frequent. Hence, the Panel would thereby de facto substitute the ECJ as the supreme interpreter of EU law. Since the extent of reproduction of Union law in international agreements is a crucial factor, the question arises which substantive provisions the negotiating parties appear to want to include in the reformed or new treaties.

The degree of take-up of substantive Union rules in the agreements

The negotiating directives on both sides seem to point towards a heavy integration of the acquis in the new (and amended) agreements. For instance, the Federal Council seems prepared to commit to EU State aid rules in the sector of air and land transport (point 14 of the Mandate, recital 12 of the Decision) and take part in the internal market of electricity (point 14 of the Mandate). Regarding the fundamental nature of the former group of provisions, ECJ case law has underscored that the aim of the State aid norms is to preserve undistorted competition in the internal market (European Food, C-638/19, para. 119), which is also one of the objectives of the Union (Article 3(3) TEU in conjunction with Protocol No 27 on internal market and competition).

The Swiss executive also seeks to align the FMOPA with Citizens’ Rights Directive 2004/38, which repealed the overwhelming majority of the secondary law cited in key provisions of that agreement (for instance, the second paragraphs of Articles 4 and 5 Annex I), subject to some exceptions (points 8.2 and following of the Mandate). Among others, the Swiss negotiating team aspire to keep out of the reformed FMOPA the protection against expulsion under Article 28 of Directive 2004/38 (point 8.2.1 of the Mandate). The Council of the EU seems ready to accept this and other carve-outs, provided that any revision would not result in a regression from the current FMOPA (recital 13 of the Decision). As for the importance of Directive 2004/38 within the EU context, it suffices to recall that the ECJ held that certain provisions of this piece of legislation give specific expression to Article 18 TFEU, on which any Union citizen may rely, if their claim is within the scope of EU law, as allowed by the nature of Union citizenship as a ‘fundamental status’ of the nationals of the Member States (Dano, C‑333/13, paras. 58-61).

In addition, the Federal Council aims to adapt the FMOPA to the consolidated version of Posted Workers Directive 96/71 (with the safeguards according to points 9.2 and following of the Mandate; see also recital 14 of the Decision). Finally, the novel and amended agreements would incorporate future acquis within their scope ratione materiae, save for explicit exceptions provided (recital 9 of the Decision, for the Swiss Confederation this obligation of ‘dynamic alignment’ is contingent upon the conditions under point 6.5 of the Mandate). Therefore, when an arbitral panel applies these norms, it will almost certainly render an award that autonomously dictates a binding interpretation (under Article 216(2) TFEU) not only of the norms of the agreements themselves, but also the numerous and ‘fundamental’ provisions of Union law that underpin them (Opinion 1/17, paras. 118-119; Opinion 1/91, para. 45).

Assessment of the the negotiating parties’ approach on dispute settlement

Consequently, the international agreements currently being discussed between the Union and the Swiss Confederation are set to reproduce Union law to a significant extent. Indeed, the ECJ greenlit the ‘two-pillar model’ in the context of previous cases – Opinion 1/91 and Opinion 1/17 – where the Court in Luxembourg also laid down the conditions for respecting its exclusive jurisdiction to interpret EU law. Yet, to the extent that the treaties between Switzerland and the EU provide a system of binding dispute resolution, they must also include the possibility that an arbitral panel may ‘dialogue’ with the ECJ when it applies Union norms. Otherwise, the system could be challenged under Article 218(11) TFEU, whereby one of the privileged applicants as per art.263(2) TFEU, presumably a Member State that would be unsatisfied with the outcome of the negotiations, may request the CJEU to render an ex ante opinion on whether the agreements to be concluded comply with the EU Treaties. In other words, if the agreements were not to include a possibility of preliminary referral of questions of EU law to the ECJ, they would be unlawful under EU law. The EU could not enter into such agreements; if it did, the CJEU would, sooner or later, strike the agreements down. If, in contrast, both parties stick to their negotiating criteria, the final agreements, if they see daylight, will, in all likelihood, be in accordance with the relevant case law of the ECJ (point 6.6 of the Mandate, recital 10 of the Decision).

Francesco Gravina is a PhD researcher at the University of St. Gallen.