The free movement of persons between Switzerland and the European Union

Acknowledgements

This volume collects the lectures delivered by some of the colleagues involved in the teaching activities of the Jean Monnet module on the “The Free Movement of Workers in the European Union and in the Regio Insubrica”, held at the University of Insubria, Varese, Italy. The publication of this book has been made possible by funds granted by the European Union to the University of Insubria, Varese (Italy) in the framework of the Erasmus+ Programme (reference n. 553370-EPP-1-2014-1-1T-EPPJMO-MODULE).

Special thanks are given to Cecilia Sanna for coordinating the Jean Monnet module and to Alice Pisapia for her most valuable support in liaising with individual authors and supervising editorial revision of their contributions.

Articles by Cecilia Sanna, Giulio Peroni, Maria Grazia Buonanno, Chiara Giussani, Gaetano Ragucci and Maria Pierro were originally submitted in Italian and have been subsequently translated from Italian into English by Viola Nicodano, to whom I am extremely grateful for the timely and accurate work done.

Responsibility for imprecisions and errors remains with each individual author. ← VII | VIII → ← VIII | IX →

Introduction

Switzerland is, geographically, politically and culturally a very close neighbour to the European Union. All the Swiss borders are shared with EU (Austria, France, Germany and Italy) or with EEA (Liechtenstein) countries. This makes Switzerland the third most important EU trading partner (behind US and China), whilst the EU is Switzerland’s main trading partner.

With regard to individuals, according to the latest statistics¹, over 1 million EU citizens live in Switzerland and some 430.000 Swiss citizens live in the EU.

On top of that, approximately 230.000 cross-border workers commute daily to Switzerland to go to work.

This phenomenon is particularly relevant in Canton Ticino, where nearly 1 in 4 workers (around 23%) is a frontier worker.

It is than crucial for Switzerland to strengthen its relationship both with the EU and with neighbour countries and this has been done over the years by bilateral treaties, although further negotiations with the EU have been recently suspended and put at stake further to the outcome of the Swiss popular initiative against mass immigration.

This book outlines and analyses the legal framework governing free movement of persons between Switzerland and the EU, looking at it from an Italian perspective.

The intention is to provide students and economic operators with an accessible tool of basic documents and information concerning the rules governing cross-frontier relationship between Switzerland and Italy.

Actually, the contributions collected in this volume relate to individual lectures delivered at the University of Insubria, Varese (Italy), within a teaching module funded by the European Union within the Erasmus+ program (Jean Monnet). They tackle different aspects of the free movement of persons, with a focus on the mobility of cross-border workers and its main legal implications. I am fully aware that, due to their individual origin, subjects addressed by different authors may present some repetitions and overlapping. Nonetheless, when it occurs, I am inclined to consider it as an added value rather than a pitfall as it may offer the reader a different analysis perspective. ← IX | X →

The first two chapters aim at offering some introductory remarks on the relationship between Switzerland and the EU, considering its origin and its evolution, and on the Swiss-EU 1999 bilateral agreement on the free movement of persons (FMP). Most of the information and data contained therein are retrieved from European Union’s institutional websites and from the Directorate for European Affairs (DEA) of the Swiss Federal Department of Foreign Affairs (FDFA), which represent a unique updated and unpaired repository of information whose sources are hereby acknowledged.

The following chapters offer a thorough and more in-depth legal analysis on selected topics such as the outcome of the 9 February 2014 referendum on the popular initiative against mass immigration and its impact on the FMP agreement; the comparison between the Economic and Monetary Union and Switzerland in the light of the economic crisis; the relationship between Switzerland and the EU on antitrust; the judicial cooperation between Switzerland and the EU; the impact of the agreement on the taxation of savings between the EU and Switzerland and the multilateral convention on common Reporting Standard on the bank secrecy, the tax treatment of cross-border workers and the effects of the FMP agreement; and the administrative cooperation between Switzerland and the EU financial authorities.

It goes without saying that without the most valuable contributions of all the individual authors, this book could not have been written and for that reason I express my deepest and sincere gratitude to each and all of them.

Varese, 31 March 2016

Vincenzo Salvatore

← X | 1 →

1      Source: European Union External Action Service, www.eeas.europa.eu, accessed on 19 March 2016.

Vincenzo Salvatore*

The relationship between Switzerland and the European Union: Historical Evolution and Current Legal Framework

Abstract: The author analyses the evolution of the legal framework governing the relationship between Switzerland and the European Union, being Switzerland a member of the European Free Trade Association but not adhering to the European Economic Area. Specific attention is devoted to the content of the Switzerland-EU bilateral agreements “packages” and to sectoral agreements between Switzerland and Italy.

1     Introductory remarks

Not being part of the European Union (EU), the relationship between the Swiss Confederation (hereinafter referred to as Switzerland), the EU and the latter’s member States are governed by a series of multilateral and bilateral international agreements. Two basic principles have to be borne in mind when looking at the concerned relationships: since the European Economic Community (EEC) was established pursuant to the Treaty of Rome signed on 25 March 1957, the treaty making power with regard to commercial policy has been identified as an exclusive responsibility of the EEC¹; on the other hand, when with regard to (other) policies falling within the shared responsibilities of the EU and its member States agreement have not (yet) been negotiated nor finalized between the EU and a third State (saying Switzerland as far as we are concerned), the EU member States retain the bilateral treaty making power to the extent that the content of the agreement at stake does not clash with EU law and until EU jus superveniens repeals the bilateral relationship.

The above implies as a consequence that EU member States are prevented from entering negotiations and agreements affecting trade or, more in general commercial policy, between themselves and Switzerland as all commercial agreements between the EU and third States, whether bilateral between the ← 1 | 2 → EU and another State or multilateral in the framework of an international organization fall within the exclusive remit of the EU. Conversely, there are still several bilateral agreements in force between Switzerland and EU member States either because entered before establishment or accession of the concerned member State to the EU, or because subsequent multilateral agreements between Switzerland and the EU contain provisions stating that the concerned agreement does not affect existing conventions to which EU member States are or will be parties in relation to the subject matter.

Another element to consider when looking at the relationship between the EU and Switzerland or between the latter and the EU member States is that Switzerland if a federal State, meaning that the treaty making power in Switzerland lies with the federal government in Bern whilst Swiss cantons do not enjoy foreign powers. This has not prevented frontier cantons (like Ticino, Grisons or Valais) to enter preferential arrangements with local authorities (such as regions or provinces in Italy) to further promote and strengthen their trans-frontier relationship2. A valid model of this approach is represented by the work community Regio Insubrica³, which fosters cooperation between local Swiss and Italian authorities in the Alps Lakes Region to facilitate exchange of information and joint programs and support trans-frontier movement of people for work or tourism purposes. Nonetheless it has to be noted that spontaneous organisations like the Regio Insubrica or other kind of memorandum of understandings or protocols of intents between Swiss cantons and local authorities of neighbouring countries (such as Regione Lombardia or Tyrol⁴) cannot generate nor be source of legal obligations according to general principles of public international law, as the treaty making power remains with the central government of the contracting parties. ← 2 | 3 →

2     Relationship between Switzerland and the European Union, being Switzerland a member of the European Free Trade Association but not adhering to the European Economic Area

On 4 January 1960, Switzerland together with six other European countries (Austria, Denmark, Norway, Portugal, Sweden and the United Kingdom) signed in Stockholm the convention establishing the European Free Trade Association (EFTA) as a framework for the liberalisation of trade in goods amongst its member States and an economic counterbalance to the EEC. Iceland, Finland and Liechtenstein subsequently acceded the association in 1970, 1986 and 1991, whilst Denmark, the United Kingdom Portugal, Austria, Finland and Sweden left upon their accession to the EEC/European Community (EC) in 1973, 1986 and 1995 respectively. The current remaining four EFTA countries (Switzerland, Norway, Iceland and Liechtenstein) States undertook the obligation to remove customs duties on industrial products in trade among its members, thus creating a free trade area. The free trade area implies that goods originated in any of the contracting countries can freely circulate and be marketed in any other EFTA country without facing any restriction or discrimination and without being subject to any custom duties or measure of equivalent effect5.

As Switzerland did not enjoy the benefit of the Community internal market, in order to promote trade between Switzerland and EEC member States, on 22 July 1972 the European Economic Community and the Swiss Confederation entered a bilateral free trade agreement (FTA), aiming at progressively eliminate the obstacles to trade in industrial goods, as well as on certain processed agricultural products, between the Community and Switzerland, by banning the introduction of new customs duties or charges having an equivalent effect on imports and the progressive abolition of the existing ones⁶.

Further to the free trade umbrella agreement which entered into force on 1 January 1973 all industrial products have been traded free of duties between the parties. As it was sharply noted, the 1972 free trade agreement, “although rather limited and unspectacular, … helped to introduce an era of ← 3 | 4 → trade stability during the 1970s and the 1980s, a period otherwise marked by great economic tension”7.

When, some twenty years later, in 1985, the EU launched its project to complete the European internal market, Switzerland was involved in an intensive discussion on how to best frame its future role and position in Europe.

In 1989, it then occurred that the EU proposed to establish a European Economic Area (EEA) aimed at offering to the EFTA countries that did not wish to join the EU a tool intended to promote a closer relationship with the EU member States through an extensive access to the European internal market. Switzerland was then provided with a viable alternative to the accession to the EU, having the opportunity to strengthen its relationship with the EU without any political affiliation. Actually, the Swiss government moved even further, as it both signed the EEA agreement⁸ and simultaneously lodged a request in Brussels to begin negotiations for membership of the EU. Nevertheless, as a consequence of the outcome of the referendum held on 6 December 1992, Switzerland accession to the EEA was rejected by 50,3% to 49,7% of the Swiss electorate and 18 of the 26 Cantons⁹.

Hence, Switzerland is the only EFTA country not being part of the EEA agreement, which currently groups the 28 European Union member States and the other three EFTA countries: Norway, Iceland and Liechtenstein. By adhering to the EEA, Norway, Iceland and Liechtenstein committed to comply with EU legislation irrespective of not being EU member States. The latter does not apply to Switzerland, which shares negative integration (i.e., removal of barriers in trade between EFTA countries) but not positive integration stemming from European Union secondary legislation (Regulations and Directives), not being obliged, as EEA countries are, to mirror European Union rules in their domestic legislation¹⁰. This leaves room to and a need for ← 4 | 5 → ad hoc negotiations between Switzerland and EU to agree on common rules applicable to selected matters only11.

It is nevertheless worth mentioning that in its 2012 conclusions on the relationship between the EU and EFTA countries, the Council of the European Union, despite describing the relations between Switzerland and the EU as close and intensive, noted, however, that the system of bilateral agreements in effect to that point had reached its limits and that cooperation between Switzerland and the EU was in need of a new institutional framework.

The legal context outlined above has driven the Swiss Federal Council, to adopt, on 18 December 2013, a negotiating mandate concerning institutional issues. On the EU side, the Council of Ministers adopted a negotiating mandate for an EU-Switzerland framework agreement on 6 May 2014. The negotiations then started on 22 May 2014. Once concluded, the agreement is expected to be submitted to the Swiss Parliament for approval and, most likely, to the Swiss electorate in the event of a referendum.

Nonetheless, the running of the concerned negotiations and the launch of any further negotiations concerning additional agreements, aimed at establishing closer cooperation, has currently been suspended and remains subject to a more comprehensive assessment of the relations between Switzerland and the EU, further to the popular initiative “Stop mass immigration” and the follow up to the Swiss referendum held on 9 February 2014¹².

3     The Switzerland-EU bilateral agreements “packages”

In order to fill the gap generated by the Swiss electorate vote rejecting the perspective of an EEA membership, Switzerland and the EU then opted for a “bilateral path” to strengthen their economic and political relationship, through negotiations and adoption of several bilateral sectoral agreements, to extent the scope of the 1972 FTA on industrial goods by addressing additional selected matters¹³.

A first set of seven agreements, commonly referred to as the “Bilateral Agreements I” package, were concluded on 1 June 1999 and subsequently ← 5 | 6 → approved by 67,2% of the Swiss electorate through a referendum held on 21 May 200014.

A couple of years later, in June 2001, Switzerland and the EU agreed to launch a second round of bilateral negotiations. These resulted in eight further agreements, which formed the “Bilateral Agreements II” package, covering various policy areas in addition to the predominantly traditional market liberalisation agreements contained in the first set of agreements. The second set of bilateral agreements was signed on 26 October 2004. So far, Switzerland and the EU have concluded more than 120 sector-specific agreements, covering a wide range of EU policies including Swiss participation in many areas of the EU’s internal market¹⁵.