A proudly neutral nation caught at the heart of the European marketplace is facing a historic political dilemma. Switzerland, long known for its direct democracy and delicate balancing act with Brussels, must now decide whether to deepen ties with the European Union by accepting a new agreement that echoes many of the thorny issues that defined Brexit.

As reported in a detailed piece by the Financial Times, Switzerland has finally reached a sweeping new agreement with the EU after more than a decade of complex negotiations. The nearly 1,000-page deal, signed in December and published last month, offers Bern improved and more stable access to the single market. But the concessions it demands — financial contributions, compliance with EU law, immigration policies, and judicial compromises — are drawing fierce domestic debate and comparisons with the UK’s fraught departure from the bloc.

Under the proposed agreement, Switzerland would be obliged to mirror EU regulations across six core areas: goods standards, electricity, food safety, air and land transport, and the free movement of people. Failure to do so could result in punitive measures. Although the Swiss would retain the right to lobby during the law-making process, they would have no vote in the final outcome.

As one Zurich-based financier explained, “The Swiss have always followed these updates anyway. But they want to have the ability to choose. That is the key difference for us.”

The EU expects Switzerland to contribute €375 million annually to the bloc’s budget. In return, Switzerland could regain access to key European initiatives such as Horizon Europe, Euratom, and the Erasmus student exchange programme. This offer of reintegration into the EU’s research and education networks, frozen during past disagreements, is seen as a valuable incentive for Bern to commit to the new framework.

However, sovereignty concerns remain at the heart of public debate. A compromise arbitration mechanism has been introduced to resolve disputes, with an independent panel instead of direct ECJ rulings. Still, when disputes involve EU law, the panel must seek binding interpretation from the European Court of Justice — a legal reality that critics say makes the ECJ the real arbiter behind the scenes.

“The arbitrators are legally obliged to ask the CJEU in the most important cases and the judgment is legally binding on the arbitration panel. It is essentially camouflage,” said Carl Baudenbacher, a lawyer and expert on international business law.

The requirement of “dynamic alignment” — automatic adoption of evolving EU legislation — is another lightning rod for Swiss Eurosceptics, mirroring the UK’s post-Brexit concerns. “The dynamic takeover of EU law and ECJ rulings ultimately changes the system of direct democracy in Switzerland. It downgrades our competitiveness,” argued Philip Erzinger, CEO of the anti-EU Kompass/Europa group, which is mobilizing public opposition.

While the Swiss People’s Party (SVP) has already declared its opposition to the deal, political consensus is elusive. Some on the left see merit in institutional stability, while centrist groups such as the Liberals have yet to form a position. The referendum process is expected to unfold slowly, with a public consultation open until autumn 2025, parliamentary debate starting in 2026, and a national vote expected by June 2027 — unless general elections push it into 2028.

The consequences of rejecting the agreement could be severe. When Switzerland abruptly ended talks in 2021, the EU retaliated by cutting its access to Horizon Europe. According to EU officials cited by the Financial Times, a second rejection could lead Brussels to permanently abandon the current bilateral model, ending Switzerland’s exceptional status. “If there is a No [vote], the EU feels this needs to be the end of the road for the bilateral way and the special treatment for Switzerland,” one Brussels-based source warned.

Yet others argue that it is time to move beyond piecemeal arrangements. “We have been living with this drama since the 90s. Europe is our biggest trading partner and we need to solve the problem institutionally as opposed to sector by sector,” said Jean Keller, CEO of Geneva-based fund manager Quaero Capital. “Yes, we need to make sure things like workers’ rights are protected, but finally finding a framework that is durable for us to do business in Europe is imperative.”

As Switzerland steps into what could be one of its most consequential referenda in recent history, its future relationship with the EU remains balanced on a knife edge — between cherished sovereignty and the economic pragmatism of European integration.

By Sabina Mammadli

Source: caliber.az