At present, legal relations between Switzerland and the UK are largely based on bilateral agreements between Switzerland and the EU. Following the withdrawal of the United Kingdom (UK), these treaties will no longer apply to the UK. Currently, there is no final date defined for this withdrawal.
Switzerland and the UK sign trade agreement
This is why Federal Councillor Guy Parmelin and the British Secretary of State for International Trade, Liam Fox, have signed a bilateral trade agreement in Bern on 11 February. The agreement ensures the continuation of the economic and commercial rights and obligations arising from the agreements between Switzerland and the European Union (EU). It lays the foundations for the two parties to continue their sound economic and trade relations once the United Kingdom has left the EU.
The new agreement was concluded as part of the Federal Council’s ‘Mind the Gap’ strategy. It replicates the vast majority of the trade agreements with the EU that currently govern relations between Switzerland and the United Kingdom: the 1972 Free Trade Agreement, the Agreement on Public Procurement, the Agreement on the Fight against Fraud, part of the Agreement on Mutual Recognition in Relation to Conformity Assessment and the 1999 Agreement on Agriculture. These various agreements have the effect of reducing or even eliminating trade barriers and discrimination in bilateral economic exchange.
Some agreements between Switzerland and the EU are based on harmonization or recognition of the equivalence of rules between the two parties (2009 Agreement on Customs Facilitation, some sections of the Agreement on Agriculture including the annex known as the ‘veterinary agreement’ and some sections of the Agreement on Mutual Recognition in Relation to Conformity Assessment) and cannot be replicated in their entirety at this stage.
As part of its ‘Mind the Gap’ strategy, the Federal Council wishes to ensure that the existing mutual rights and obligations in its relationship with the UK will continue to apply as far as possible after the UK leaves the EU, and to expand them in certain areas. With this in mind Switzerland and the UK have already signed agreements on road transport, air transport and insurance. In December 2018 the Federal Council adopted an agreement on citizens’ rights with the United Kingdom.
Agreement covers Liechtenstein as well
An additional agreement between Switzerland, the United Kingdom and the Principality of Liechtenstein to extend the relevant provisions of the trade agreement to the territory of Liechtenstein under the Swiss-Liechtenstein Customs Union was also signed today.
Scenario Deal and No Deal Brexit
The signed agreement will come into force as soon as the Swiss/EU agreements cease to apply to relations between Switzerland and the UK. If the Brexit transition period begins as planned after the UK's withdrawal, the Swiss/EU agreements will continue to apply between Switzerland and the UK. In this scenario, the agreement will serve as a basis for economic and trade relations between the two parties after the end of the transition period.
Should the United Kingdom leave the EU without a deal, the agreement will come into effect on a provisional basis from the date with the withdrawal. See also the "Zirkular" and the "Information letter" published by the Federal Customs Administration (available in German and French).
Current status of EU and UK negotiations
In mid-November 2018, the EU and the United Kingdom agreed on a draft of a withdrawal agreement and issued a brief declaration on future relations. The deal defines a 21-month transition period before the withdrawal becomes effective.
The British Cabinet approved the draft on November 14. An EU Council summit was held at the end of the same month where the EU members states also approved the contract. In the meantime, the British House of Commons rejected the withdrawal agreement. The EU member states and the UK have now agreed on postponing the withdrawal date to October 31. Should the British parliament go ahead and adopt the agreement in the meantime, the UK could leave the EU by the beginning of each month.
We will inform you here as soon as any developments become known.
Uncertainty about indirect consequences for exporters
Depending on how the UK's withdrawal from the EU is structured, there could be indirect consequences for international companies based in Switzerland and Liechtenstein. It remains uncertain how the economic situation will develop in these two markets, how demand for Swiss goods will be affected and whether value chains will need to be reorganized.
Would you like to clarify your individual risks and opportunities in the British market? Our export consultant NADJA KOLB is at your disposal at all times.