Source: Dispatch of the Federal Council on Bilateral III, pp. 107--118
PDF of the dispatch
The dispute settlement mechanism is the institutional centrepiece of Bilateral III. It replaces the previous purely diplomatic dispute resolution with a structured three-stage procedure. The central element is a parity arbitration panel (AP) that decides on disputes concerning the interpretation or application of the agreements. The role of the CJEU is limited: it is consulted only on questions of EU law and never decides on the dispute itself.
Switzerland and the EU commit to submitting all disputes concerning the interpretation or application of the single market agreements exclusively to this mechanism. There is no parallel route to other international courts.
| Aspect | Detail |
|---|---|
| Level | Diplomatic-political |
| Deadline | 3 months to reach agreement |
| Character | Consensus-oriented, informal solution |
| Initiation | Either party may refer the matter to the JC |
| Outcome | Agreement or referral to the AP |
The JC is the first and preferred stage. The parties attempt to resolve the dispute diplomatically. If this does not succeed within three months, either party may refer the matter to the arbitration panel.
The arbitration panel is the key element of the mechanism:
Composition:
Procedure:
Role of the CJEU -- LIMITED:
The CJEU is consulted only under three cumulative conditions:
Decisive: The CJEU does not decide on the dispute itself. It merely answers the legal question on the interpretation of EU law. The arbitration panel always remains competent for the decision on the dispute. The CJEU furthermore cannot intervene on its own initiative.
If a party does not implement the AP's decision, the other party may take rebalancing measures:
| Aspect | Rule |
|---|---|
| Character | Proportionate, non-punitive |
| Scope | Only in the affected or another single market agreement |
| Exception | Not in the agricultural part of the Agriculture Agreement |
| Retroactivity | None |
| Penalties | No punitive payments envisaged |
| Suspensory effect | Automatic 3 months, extendable by the AP |
The rebalancing measures are subject to a strict proportionality review:
The dispute settlement mechanism provides for:
| Criterion | Bilateral III | EEA/EFTA | WTO |
|---|---|---|---|
| Tribunal | Parity AP | EFTA Court | WTO Panel/Appellate Body |
| Composition | Parity (CH + EU) | 3 EFTA judges | 3 panellists |
| CJEU role | Limited (legal questions only) | Not direct | None |
| Rebalancing measures | Proportionate | -- | Proportionate |
| Binding | Yes | Yes | Yes |