On Thursday morning 21 December, the European Commission adopted a decision recognising the equivalency of Swiss share trading platforms with those of the European Union for the period of one year, renewable, on the condition that sufficient progress is made in the framework of the institutional agreement currently being negotiated between Switzerland and the EU. The decision was immediately slammed by the Swiss government.
The member states had a silent procedure open until 5.00pm on Wednesday, to be deemed consent to the Commission’s proposal (see EUROPE 11929). According to one European source, 27 member states supported the proposal and only the UK abstained.
This equivalency decision comes in the new MiFIR/MiFID II framework governing the financial instrument markets, which will apply from 3 January 2018. While the Commission adopted equivalency decisions last week for the United States, Hong Kong and Australia with no time limit (see EUROPE 11925), the expiry of this decision for Switzerland on 31 December 2018 has made waves.
A political decision. The “technical” justification invoked by the Commission is the higher volume of share transactions between the EU and Switzerland. In reality, the reasoning is more of a political order and the Commission is, moreover, not hiding this: it wants progress in the negotiations on the institutional agreement aiming to facilitate the bilateral relationship based on a series of sectoral agreements. Discussions are stalling in certain areas, such as the competence of the Court of Justice of the EU or rules on state aid.
The Commission, which is hiding behind the conclusions of the justice ministers in 2014, which draw a link between the institutional agreement and market access, considers that this decision also coincides with the Swiss Federal government’s own planning, whereby the institutional agreement is expected to be concluded by the end of 2018. The decision therefore comes as no surprise, a second European source said this morning.
However, in November, a draft decision without a deadline was approved unanimously by the member states. The discussions leading to this change are reported to have taken place on the sidelines of the European summit bringing together the heads of state last week.
“If there had been enough progress, none of this would have happened”, the same source said, adding: “We must not forget that it is still a positive equivalency decision”.
Switzerland feels discriminated against and slams decision as unfounded. This enthusiasm is by no means shared by Switzerland. Switzerland meets the conditions for the recognition of stock-exchange equivalency in the same way as the other third countries which have been granted unlimited recognition, President of the Swiss Confederation Doris Leuthard said in a statement published a few minutes after the Commission’s announcement. She considers that this limited recognition constitutes discrimination against Switzerland.
For the remainder, Leuthard said that she considered it unjustified and unacceptable to link this technical dossier to the institutional one.
This decision, which has failed to have the hoped-for effect – i.e. speeding up the negotiations – may end up blocking them further. The decision the EU has made today also harms bilateral relations on important dossiers, she added.
The General Council announced that it would take steps to reinforce the competitiveness of the Swiss stock exchange and financial market, which may include the removal of stamp duty, and that it would revisit its promise, made on 23 November this year, to pay Fr.1 billion to the EU for the European cohesion policy.
As well as bringing tensions between Switzerland and the EU back to the surface, this political link, brought into an equivalency decision for pretty much the first time ever, sets a precedent and raises questions in the framework of Brexit. Some observers see the decision as an implicit message to the United Kingdom in its future relationship with the EU. (Original version in French by Marion Fontana)