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Brexit: The EU has a ‘certain’ view

Thursday, March 23, 2017

Anyone thinking that Brexit will be anything but hard should ask the Swiss – they understand the EU has a ‘certain’ view.

The British were not the first to hold a referendum motivated in large part by questions of immigration and EU relationships.

In 2014, the Swiss People’s Party led the ‘Stop Mass Immigration’ initiative which focused on issues of overcrowding, increased pressure on Swiss jobs and salaries and loss of cultural identity. Supporters of the initiative argued that Switzerland could not cope with a further increase in the numbers of immigrants, including asylum seekers who were putting a serious strain on the country’s welfare systems, housing and infrastructure. This pressure resulted in a referendum held on 9 February 2014 with 50.3% voting in favour of introducing quantitative limits on immigration into Switzerland.

The Swiss of course are not members of the EU, however it has a complex series of arrangements with the EU (there are some 120 bilateral agreements) which date back to a free trade agreement in 1972.

For the purpose of focusing on Brexit, it is worth briefly looking at 7 agreements which were reached with the Swiss Confederation in 1999 relating to:

  1. Free movement of persons
  2. Air transport
  3. Carriage of goods and passengers by road and rail
  4. Trade in agricultural products
  5. Mutual recognition in relation to conformity assessment
  6. Certain aspects of government procurement
  7. Scientific and technological cooperation.

These agreements were ultimately ratified in the form of a Decision of the Council and Commission in 2002 (the “Decision”).

It is clear to see at a glance that the 7 agreements addressed many aspects of the 4 freedoms which centrally underpin the entire essence of the EU. Arising from this central importance, all 7 of the agreements were linked by a ‘guillotine clause’ contained in the Decision:

“According to their terms, the seven agreements shall come into force at the same time and shall cease to apply at the same time, six months after the receipt of a non-renewal or denunciation notice concerning any one of them”

The clause is very simple and instructive of clear EU thinking – you undertake core legal relationships with EU on the basis of an unconditional recognition of all of the 4 freedoms – opt out of one and you opt out of them all.

So how did the EU react to the 2014 referendum in Switzerland?

To put it mildly, the referendum did not go down well and drew angry reactions from the Council, Commission and Parliament.

The President of the European Parliament, Martin Schulz, stated that “one cannot simply take all the advantages of the European Single Market while opting out of other aspects.” Hannes Swoboda, a member of the European Parliament stated that “For us, EU-Swiss relations come as a package…. If Switzerland suspends immigration from the EU, it will not be able to count on all the economic and trade benefits it is currently enjoying. We will not allow … cherry-picking.”

The Commission in a series of statements by Commissioner László Andor stated that “….this core principle of the free movement of persons is a cornerstone of our relationship. It is a fundamental right. It is not simply negotiable, as some tend to believe.” Furthermore, immigration quotas could not be made compatible with the free movement of people “…quotas are contrary to the principle free movement, and the principle of free movement is not only an essential part of the internal market, which cannot be decoupled from the other freedoms, but also at the heart of our overall relations with Switzerland. A package is a package! One can’t have the cake and eat it.”

Consequences of the Referendum

The EU leveraged significant pressure on the Swiss and ultimately the Commission suspended Switzerland’s participation in EU research and student programmes by putting Horizon 2020 and Erasmus+ on hold. Commissioner László Andor stated that this was “… not a punishment or sanction for the expression of the Swiss electorate, but a logical consequence of the choice Switzerland itself has made, a consequence which was very well-known before.” He also stressed that “nobody on our side has an interest in terminating the Freedom of Movement of People Agreement and invoking the guillotine clause linking the package of agreements concluded in 1999. Not even the proponents of the initiative are aiming for this. I therefore trust that the Swiss authorities will make serious and significant efforts to try and square the circle, and that we will be able to say in a year from now that relations with Switzerland are as close and friendly as they were before 9 February.”

In short, the EU did not buckle in its stance and the ultimatum was in essence put to the Swiss, either do something to alter the 2014 referendum or prepare for the entire bilateral treaty network to come crashing down.

Unsurprisingly, in December 2016, the Swiss Parliament passed a law that would limit the effect of the 2014 referendum. The law would give priority to Swiss workers but would not introduce quotas on EU citizens. The legislation adopted by the Swiss will ensure the preservation of contractual commitments between the EU and Switzerland. However, the Commission has made clear that the implementing order will have to provide certain clarifications and guarantees on key points. There remain some challenges to iron out, but in short the 2014 referendum has been side stepped and Swiss access to the free markets preserved.

So how does this impact Brexit?

Sadly, the approach of the Swiss Parliament shows no sign (yet) of being followed in Westminster where the results of a non-binding referendum are being followed in monotone and seemingly without opposition.

The approach of the EU to the Swiss in relation to the 2014 referendum was consistent across the institutions of the EU. When one considers how these same institutions will now engage with a member state that has voted to leave the EU (as opposed to challenge one aspect of EU law), it is impossible to contemplate that whatever deal (if any) is placed on the table by the EU can be anything other than the so called ‘hard Brexit’. Brexit is the absolute rejection of the 4 freedoms of the EU. Quite how anyone contemplates that a deal will be reached to allow the UK access to the free market whilst rejecting the 4 freedoms simply does not compute.

Businesses from SMEs to PLCs should stop wasting time trying to predict how the UK / EU negotiations will proceed. All attention should be diverted to restructuring their business to ensure they are hedged for a hard Brexit. In this regard, Ireland offers a certain view – for further information on the certainties of Ireland as a hedge to Brexit see here.

Brexit will be hard – how can it be anything else? Ask the Swiss.


Andreas McConnell