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  • III.Landmark Cases

    In the following section, two key cases which demonstrate Switzerland’s involvement and interaction with the international community will be discussed. One case, which came before the Federal Supreme Court, clarified the position of Swiss law with respect to the Agreement on the Free Movement of Persons between the EU and Switzerland (1.). The second case demonstrates Switzerland’s participation in an international dispute settlement procedure, through its membership of the WTO (2.).

    1. SUPREMACY OF THE AGREEMENT ON THE FREE MOVEMENT OF PERSONS

    AA, a citizen of the Dominican Republic, had been residing in Switzerland since 2002. In the same year, she gave birth to a boy, BA. The father of BA was C, a German citizen who also lived in Switzerland. Based on these relationships, AA and BA were granted a residence permit in Switzerland, derived from C’s right of residence under the Agreement on the Free Movement of Persons. In 2013, however, the competent authority in the Canton of Zurich refused to prolong AA’s residence permit, on the grounds that she had been dependent on social security payments for several years. They did, however, grant her son, BA, a residence permit, derived from his father’s right of residence. The authority argued that the existence of BA did not require that AA received a residence permit; AA could take her son with her upon leaving the country or alternatively he could remain in Switzerland under his father’s care. AA challenged this refusal. She argued that she had a right to reside in Switzerland based on the Agreement on the Free Movement of Persons.

    The substantive outcome of the case was that the Federal Supreme Court confirmed the decision of the cantonal authority upon appeal.25 However, the most interesting points of the judgement were discussed by the Court by way of introduction to the case, where two issues which had been hotly debated in the aftermath of the approval of the popular initiative “against mass immigration” (“Gegen Masseneinwanderung”, 2014) were clarified. First, the Federal Supreme Court confirmed that the Agreement on the Free Movement of Persons is to be interpreted in light of the case law that has been developed by the European Court of Justice in interpreting EU law provisions on the free movement of persons. A parallel interpretation of the Agreement on the Free Movement of Persons – i.e. an interpretation which follows that of the European Court of Justice – is supported by the Preamble of the Agreement on the Free Movement of Persons’ objective, which is “to bring about the free movement of persons between [Switzerland and the EU] on the basis of the rules applying in the European Community”. As such, a parallel interpretation is also in line with the teleological method of interpretation, as provided for in Article 31 of the Vienna Convention on the Law of Treaties. There is no explicit obligation on Switzerland to follow European Court of Justice judgements, except in the case of those judgements rendered before June 1999 (Article 16 Agreement on the Free Movement of Persons). However, an autonomous interpretation shall only be followed if there are cogent reasons to do so. In this case, the Federal Supreme Court made it clear that the new Articles 121a and 197 No 11 Constitution do not constitute such cogent reasons. Thus, they interpreted the Agreement on the Free Movement of Persons’ provisions in light of the pertinent case law of the EU and, upon this basis, confirmed the decision of the cantonal authority to refuse to reissue AA with a residence permit.

    Second, the Federal Supreme Court clarified the relationship which exists between the Agreement on the Free Movement of Persons and federal acts. In the case of a conflict, the former takes precedence over the latter. This remains the case even when the Federal Assembly intentionally violates the Agreement on the Free Movement of Persons in full knowledge of the legal and/or political consequences of such an action. Thus, it can be seen that the Schubert exception does not apply within the scope of the Agreement on the Free Movement of Persons.26 The Federal Supreme Court based this finding on the observation that the Agreement on the Free Movement of Persons leads to a harmonisation of the legal order (sectoral participation in the common market) through the realisation of a basic freedom, as well as on the fact that EU law is directly applicable in EU member states and claims supremacy over national laws. With respect to the case at hand, however, it was not apparent whether these considerations were relevant in order to decide the case (thus forming part of its ratio decidendi) or whether they were obiter dicta.

    The message sent out by the Federal Supreme Court is clear: legislation implementing Articles 121a and 197 No 11 Constitution which violates the Agreement on the Free Movement of Persons would have no practical effect. EU citizens could still directly rely on the Agreement on the Free Movement of Persons; the Federal Supreme Court would continue to uphold these rights. In fact, since this ruling the Federal Assembly has implemented the new provisions in an Agreement on the Free Movement of Persons-consistent way.27 Unsurprisingly, the judgment of the Federal Supreme Court has been received controversially. Some see it as the Federal Supreme Court ignoring the voice of the people, who voted in favour of Articles 121a and 197 No 11 Constitution but have found that there continues to be no real practical enforcement of these new articles. One key positive aspect of the judgement is that it enhances legal security and contributes to the reliability of Switzerland in the realm of external relations.

    2. US SAFEGUARD MEASURES ON STEEL PRODUCTS

    In 2002, the then President of the United States, GEORGE W. BUSH, imposed definitive safeguard measures on various steel products. The measures consisted of additional tariffs ranging from 8 % to 30 % and were intended “to facilitate positive adjustment to competition from imports of certain steel products”.28 Consequently, some products of foreign steel producers were kept out of the US market; the prices of others were artificially increased. Swiss companies were amongst the affected producers. As a direct response to the US measures, the EU adopted its own safeguard measures on steel products: it imposed a tariff quota system in order to limit trade diversion resulting from US protectionism. The EU measures were even more problematic for the Swiss steel industry than the original US ones.

    Eight WTO members – the EU, Japan, Korea, China, Switzerland, Norway, New Zealand and Brazil – challenged the US safeguard measures before the WTO Dispute Settlement Body (DSB), arguing that the measures were inconsistent with Article XIX General Agreement on Tariffs and Trade 1994 and the Agreement on Safeguards. According to long-standing case law, these rules permit WTO members to apply safeguard measures only when, as a result of unforeseen developments, a product is being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to the domestic industry producing like or directly competitive products. After unfruitful consultations, a panel was established to examine the matter. The panel determined that the conditions for the imposition of safeguard measures were not met in the case of the United States for any steel product at issue. On appeal, the Appellate Body confirmed the ruling.29

    After the Appellate Body had issued its report, President BUSH terminated the safeguard measures. A combination of some of the following four reasons might have been decisive in making him do so:

    -First, the Appellate Body determined unequivocally that the measures violated WTO law. From a legal perspective, the United States were hence obliged to withdraw the measures; respect for the rule of law demanded this.

    -Second, President BUSH was anxious to please constituencies in the States which had traditionally been home to many steel-industry jobs, such as Pennsylvania, Ohio and West Virginia. From a political perspective, he had already accomplished what he had intended through the initial imposition of the measures.

    -Third, it had become increasingly apparent that the measures were having a negative effect on the US industry as a whole. The safeguard measures did more harm to the steel-using industries than good to the steel-producing industry. Thus, from an economic viewpoint, the termination of the measures was somewhat logical.

    -Fourth, WTO law permits members affected by WTO law-incompatible safeguard measures to apply re-balancing measures.30 As such, various co-complainants who participated in the WTO dispute settlement proceedings were planning to impose re-balancing measures against the United States. The EU, the complainant by far the most affected by the safeguard measures, had already adopted a regulation setting out potentially targeted products, such as fruits and vegetables, textile products and Harley Davidson motorcycles.31 Japan, China, Norway and Switzerland followed suit and threatened to adopt similar re-balancing measures. By terminating the US safeguard measures, President BUSH could avoid the adoption of potentially very harmful re-balancing measures against the US.

    This has been the only WTO case in which Switzerland has actively participated, as a complaining or defending party, to date. In the end, the Swiss delegation was content with the final outcome: it successfully relied on WTO law and prevailed over the United States, resulting in the termination of the harmful safeguard measures. However, at the same time, their satisfaction was not absolute. Although the US measures were declared unlawful eventually, in the meantime, Swiss steel producers suffered real damage due to the trade-restrictive measures imposed by both the US and the EU and the loss of market shares, which they then had to regain tediously. In this context, it is problematic that the WTO dispute settlement mechanism does not provide for compensation for damages suffered due to unlawful actions.


    25BGE 142 II 35.

    26See pp. 179.

    27See pp. 170.

    28US Presidential Proclamation No. 7529 of 5 March 2002.

    29US – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS253/AB, issued 10 November 2003 (complaint of Switzerland).

    30Under the Agreement on Safeguards, an affected member is permitted to apply re-balancing measures, whereas the Dispute Settlement Understanding (DSU) allows a complaining party to suspend obligations vis-à-vis the defending party if the latter does not comply with a panel or Appellate Body ruling.

    31Council Regulation (EC) No 1031/2002 of 13 June 2002 establishing additional customs duties on imports of certain products originating in the United States of America; see also WTO Document G/C/10, G/SG/43 of 15 May 2002.