Members of the Swiss parliament are worried they are becoming a collateral victim of the UK’s exit from the European Union. Brussels has stated Switzerland’s practice of trading EU company shares on the stock exchanges in Zurich and Bern will only be acceptable to the EU for a further 12 months.
The Swiss believe their regulatory oversight of their bourses is equivalent to rules laid down by EU directives. Brussels rejects this position, and has said that EU-Swiss bilateral agreements will come under threat unless Switzerland agrees to follow the same rules as its EU neighbours.
At the annual new-year gathering of Swiss and UK members of parliament Christa Markwalder, the former president of the Swiss parliament, told British MPs that Switzerland was suffering ‘collateral damage from Brexit’.
‘It is clear Brussels does not want to see any concessions made to Bern that can be cited as a precedent as the UK tries to start talks in the hope that the City can keep current access to European capitals on the basis that London regulatory structures are the equivalent of those mandated under EU law,’ said one senior Swiss MP involved in decisions over the Swiss-EU relationship.
In 1992 Switzerland voted in a referendum against joining the European Economic Area, which allows Norway, Iceland and Liechtenstein to benefit from single market access in exchange for adopting EU directives.
Negotiations between Bern and Brussels began in 1993 on a series of bilateral sectoral agreements on trade, university co-operation, freedom of movement and Schengen border policy. But Swiss banks, insurance companies and investment funds were unable to trade in Europe without opening major subsidiaries in an EU capital, principally London.
The negotiations dragged on to 2002, but the deals were threatened in February 2014 when the Swiss voted in a referendum to ban freedom of movement for EU citizens – a violation of one of the agreed bilateral agreements. In effect, the EU responded, ‘Fine, we respect your sovereign decision. But if you won’t respect agreements which you entered into freely with the EU, then ending one of them ends them all.’
After long debate the Swiss parliament formulated a policy to promote jobs for Swiss citizens but still allow freedom of movement for Europeans. The referendum result was quietly filed away.
This typically Swiss pragmatism helped the country maintain relations with the EU, but Brussels made clear it was no longer going to spend endless negotiating time and energy on every small detail of trade, travel, financial services, aviation and other areas where Switzerland and Europe might be slightly at odds. If the Swiss wanted to access the EU market, then it had to accept EU rules. Michel Barnier, the European Commission’s chief Brexit negotiator, is sending the same message to the British government.
The Commission’s refusal to accept Swiss regulatory equivalence on stock market transactions is the latest example of Brussels winding down special arrangements it has offered a European neighbour.
The message for London is clear. If the UK wants to keep anything like current levels of access to EU markets, especially in financial services, it will have to play by common rules. Hopes for sectoral, bilateral agreements based on regulatory equivalence are forlorn.
Denis Macshane is a former UK Minister for Europe, a Senior Adviser at Avisa Partners, and a Member of the OMFIF Advisory Board.