Internal Market Barriers: Switzerland

1. Internal Market Barriers: Switzerland Matthias Oesch University of Berne Toronto, 1 February 2010

2. Contents 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons learned

3. 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons learned

4. Foundation of the Swiss Confederation (1848) => elimination of tariffs instead of 25 customs offices from North to South • Marked efforts to gradually reducing inter-cantonal barriers to trade (19th century) => freedom of establishment (1848) and of commerce (1874) => active role of the Federal Council (majority of liberals) • Period of relative neglect (large parts of 20th century) => “dual economy” • Paramount influence of EC law in completing the Swiss internal market (from mid-1990) => “autonomer Nachvollzug”

5. 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons learned

6. Federal Law • Constitution (1999) • freedom of establishment (Art 24) and of commerce (Art 27) • mandate “to create a unified Swiss economic area” (Art 95) => elimination of unjustifiable inter-cantonal barriers to trade | no unification | no comprehensive power to regulate government procurement • Federal legislation • Internal Market Act (1996) • Act on Technical Barriers to Trade (1996) • Act on Cartels and other Restraints of Competition (Competition Act, 1996) • Government Procurement Act (1996)

7. Administration of federal law • implementation | application of federal (framework) legislation by Cantonal authorities => differences between Cantons (little incentives to combat privileges granted to local constituencies) • Cantonal courts as adjudicatory bodies of first instance => weak judicial supervision => additional layer of regulatory competition in areas essentially harmonized by federal law

8. Inter-Cantonal and Cantonal Law • Competences vested with the Cantons • professional qualifications (unless centralized, e.g., medical professions) • education, health care, direct taxes • Inter-cantonal law (concordats) • Accord inter-cantonal sur les marchés publics (1994|2001) • Accord inter-cantonal sur l’harmonisation de la scolarité obligatoire (“HarmoS”, 2007) => Strategy to avoid granting powers to the federal government => Coordination likely to remain “piece-meal”

9. 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons learned

10. Federal Branches of Government • Executive • power to adjudicate cases on freedom of commerce until 1912 => prime motor against inter-cantonal barriers to trade • Judiciary • power to adjudicate cases on freedom of commerce since 1912 • analysis of case law: favoring federalism over market integration • Legislative • Internal Market Act (1996) => Legislation has taken the lead (legislative response: revision of the Internal Market Act 2004) => Paramount impact from without (EC, GATT|WTO)

11. Special Case: Competition Authority • Powers of the Competition Authority • mandate to monitor the enforcement of the Internal Market Act => "Competence Centre for the Internal Market" • right to file law suits before Cantonal courts and the Federal Supreme Court (complainant or intervener) => role as “public prosecutor”

12. 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons learned

13. Market Access Restrictions • Barriers restricting inter-cantonal market in the field of services, in particular professional qualifications => removal based on the Internal Market Act • Examples • no necessity for an attorney-at-law to have more than five years of work experience in the Canton of Vaud in order to employ trainees (BGE 134 II 329) • right of a psychotherapist admitted in the Canton of Grisons to offer services in Zurich (BGE 135 II 12)

14. Uneven Playing Fields • Governmental measures which result in uneven playing fields => legislative action needed • Example • tax competition between Cantons and communes with respect to direct taxes (tax scales, tax rates, tax allowances) • popular initiative submitted by the Socialist Party to restrict tax competition: “For fair taxes. Stop to the abuse of tax competition” (salaries > SFR 250’000 to be taxed at least 22%) => general vote in 2011

15. Other Barriers • Barriers not directly concerning market freedoms as such => traditional market access instruments fail to work • Example • 26 school systems => efforts to harmonize curricula (entry age, duration, objectives) • Accord inter-cantonal sur l’harmonisation de la scolarité obligatoire (“HarmoS”, 2007), based on Art 62 of the Constitution • joined by 11 Cantons => put in force in August 2009 • rejected by 6 Cantons • eventually: intervention by the federal government necessary?

16. 1. Historical background 2. Legal framework 3. Actors 4. Current Developments 5. Lessons Learned

17. Long and deeply rooted traditions of federalism and decentralized governance => does not necessarily prevent economic prosperity => persistent existence of non-traditional barriers (labor mobility) => necessity to assess economic costs • Paramount impact from without (EC law, GATT|WTO) • Deferential role of the judiciary => necessity to set up the Competition Authority as “public prosecutor”

18. Thanks for your attention!