The “EU Foreign Subsidies Regulation” and Swiss-EU relations

The EU is in the process of setting additional limits to subsidy competition by non-EU states. With the new Foreign Subsidies Regulation, the EU is creating the conditions to take action against subsidies that are granted by non-EU countries to internationally active companies and that are likely to unfairly improve the competitive position of the companies concerned in the EU. The implementation of this Regulation by the EU will further complicate the discussions currently underway between the EU and Switzerland, designed to revive the bilateral relationship.

As is well known, the EU is making the stabilisation and deepening of bilateral relations dependent, among other things, on Switzerland introducing controls on subsidies and other state aid in the electricity sector and other economic sectors affected by market access agreements. From the EU’s perspective, this is necessary to ensure a level playing field. The EU has a simple idea of how Switzerland should meet this requirement. This is that Switzerland should incorporate EU state aid law into its own law with one or the other adjustment and entrust an independent surveillance authority with the enforcement of the adopted rules and regulations. The EU also wants to be able to monitor Switzerland’s implementation of these provisions, to trigger a dispute settlement procedure in the event of disagreements and to submit any questions of interpretation to the ECJ, and furthermore it would like to be able to take compensatory measures if necessary.

If Switzerland were to be accommodating, as current indications suggest will be the case, Switzerland would be manoeuvring itself into a situation where the EU would be able to control Swiss subsidies at two levels, namely via

  • the mechanisms available to it under the future electricity agreement and other bilateral market access agreements, and
  • the Foreign Subsidies Regulation, as far as subsidies are concerned that have the effect of strengthening the competitive position of an undertaking in the EU.

In addition, under certain circumstances described in the Foreign Subsidies Regulation, the EU can have recourse to the general trade defence instruments with which Switzerland has become familiar in connection with the EU’s safeguard measures against imports of certain steel products and other EU trade defence measures.

It is hard to see why Switzerland should facilitate such dual control by the EU, especially since the EU does not exercise this control free of self-interest, while it increasingly takes liberties for itself in subsidy competition. Switzerland would therefore be well advised to regulate the relationship between the provisions of state aid law and the Foreign Subsidies Regulation before possibly concluding new market access agreements.

Switzerland should also not make it unduly easy for the EU to direct the Regulation against Swiss subsidies. It would do well to keep the EU at arm’s length, it should not allow the EU to retrieve information from Switzerland at will, and in particular, it should not grant the European Commission a direct line to the future Swiss surveillance authority in state aid matters, even though this seems to be on the EU’s shopping list.