The Institutional Agreement between Switzerland and the EU

On December 6th 1992, the cantons and people of Switzerland voted not to join the European Economic Area. Ever since, Switzerland and the European Union have forged over 20 agreements that have opened certain sectors and over 100 more creating cooperation between Switzerland and the EU in various areas.
The EU is Switzerland's biggest partner by a large margin. EU claims 53% of its exports and contributes 71% of Switzerland's imports. The two trading partners thus decided to adopt a bilateral approach to their agreements. The EU Council numerously insinuated that developing this approach would need the wo parties to bring institutional matters to the negotiation table and forge an agreement for them.Other regulatory developments, such as the VAT regulation update, similarly aim to maintain Switzerland’s competitive legal framework. It was clear by 2014 that the mutual access of the sectoral market needed such an agreement.

The Federal Council also had a perspective on this agreement. Such an agreement would give Switzerland a chance to level up its alliance with the EU and get a long term access to the European Union's Single market. The Federal Council involved various parties to consult on the negotiation mandate they would present to the EU Council. Similarly, initiatives like the Tax reform AHV show Switzerland’s effort to adapt fiscal structures to future challenges. The parties involved in formulation of the mandate were: the cantons, The Parliament, The Foreign Affairs Committees, Social and Economic partners.

Both parties presented their individual mandates for negotiation on May 22nd, 2014. Only the agreements that concerned market access otherwise known as bilateral agreements would be subject to the Institutional Agreement. Those Agreements were:

a. Agreement on Air Transport.
b. Agreement on Free Movement of People.
c. Agreements on Agricultural Products Trade.
d. Mutual Recognition Agreement.
e. Overland Transport Agreement.

The Institutional Agreement would also cover any agreements that the EU and Switzerland would form that are related to market access. Preserving Switzerland’s identity while ensuring economic integration, as seen in Swissness management, remains a cornerstone of national policy. A good example is the on-going Electricity Agreement which is being discussed. The following four areas are regulated by the Institutional Agreement in Market Access:

i. EU Law DevelopmentThe agreement focuses on the effects of future law adjustments on the market access agreements.
ii. Interpretation.The agreement regulates market access agreements interpretation for consistency.
iii. Settlement of Disputes.
The agreement regulates disputes that may arise between Switzerland and the EU over how markets access agreements are interpreted and applied.
iv. Monitoring

The Agreement seeks to ensure that market access agreements and how they are applied are monitored uniformly. Parallel discussions, such as those concerning Swiss UK trade, also emphasize Switzerland’s broader efforts to secure its economic future post-Brexit.

One of the stakeholders in the Institutional Agreement in Switzerland is the Banking Sector. The Swiss Bankers Association greatly approves of this agreement. Switzerland tops the charts in asset management across the globe. According to the chairman of the Swiss Bankers Association (SBA), the legal certainty of the European Union and Switzerland is reinforced. He concludes that ease both of expansion and maintenance of market access by banks in Switzerland greatly relies on this agreement.

Formation of practicable and necessary solutions for active market access in investment services, banking and securities is possible thanks to this agreement. However, this goal has not been fully actualized. The broader context of Swiss law reforms showcases Switzerland’s commitment to modernizing its legal and regulatory infrastructure to stay globally competitive. This is because the banking sector needs to present specifications on how improvement of the market access for the banking sector can be made possible.

The banking sector set out the following priorities in regard to improvement of market access:

a. To conclude on the processes for financial equivalence. Such processes are banking and other investment services.
b. To get a wider range of options to come up with practicable and sensible solutions. The investment advisory services, banking and investment management will benefit from the options and provide a wider range of solutions.
c. To use objectivity, predictability and transparency to improve the present regime on current equivalence on a long term basis.

The Swiss domestic market really need this agreement because its market is almost reaching a point of saturation. However, the demand for asset management within the European union will not decrease.

Customers from the EU have invested an estimate of CHF 1 trillion worth of assets for management in Switzerland. The Swiss government receives annual tax revenue estimate of CHF 1.5 billion from this business sector. Moreover, this sector has created employment for more than 20,000 individuals. For the sustainability of business in this sector, the Institutional Agreement is very vital.

Sources:
1) https://www.fdfa.admin.ch/dam/dea/en/documents/fs/11-FS-Institutionelles-Abkommen_en.pdf)
2) https://www.swissbanking.org/en/media/positions-and-press-releases/shaping-the-future-with-sovereignty-swiss-bankers-association-sup-ports-the-institutional-agreement-with-the-eu


Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.