Focus on: Brexit and Switzerland

Over the last few decades, we have been used to a relatively stable geopolitical environment in the Western world. Brexit has reminded all legal teams that anything can happen and that they must anticipate – as much as possible – profound changes to help firms adapt efficiently. If anything, Brexit has tested the European fortress and its ability to remain united around its core values and principles. Europe had to make conscious decisions and take a stance on topics such as the freedom of establishment and freedom to provide services, that had been taken as granted. We know now that all along the withdrawal negotiations Europe has not compromised any of its core values, making them even stronger. This had a direct effect on Switzerland, which has developed fruitful but quite complex relations with Europe since its refusal to join the single market in 1992. These relations are based on a web of bilateral agreements and in some rare instances equivalence or mutual recognition, a situation made possible because Europe was stable, did not have fundamental identity issues and could afford to accommodate the demands and specificities of a relatively small country such as Switzerland. UK’s EU membership referendum on 23 June 2016 has dramatically changed the landscape. With the EU effectively uniting, Switzerland could no longer be handled as a special case and had to be treated on par with all other third countries – including the UK. The fortress effect has been even accelerated by the fact that Brexit did not just cause Europe to simply let an island go, but also to lose a strong liberal voice at the legislative table. An example of this direct effect is the stock exchange recognition which, despite technical equivalence, was withdrawn by the EU due to unsatisfactory political discussions. What happens at political level can also be observed at industry level, where EU market participants fighting for new business are not keen to freely allow third country competitors into their market. In effect, obtaining market access into the EU has moved in just a few years from a technically targeted strategy to political wishful thinking, something that the Swiss Federal Council realised in 2021. From here, the future Swiss market is likely to separate itself into two extremes. On one side, banks and money managers will focus on the local market and, on the other side, power houses competing internationally through a global presence – the two banking giants being probably the only firms that can operate on both sides. It remains to be seen what effect this new paradigm will have on future regulatory developments in Switzerland, that always strived to stay close to the European environment in the hope of gaining market access.