Swiss Ambassador to India hopeful that EFTA-India free trade agreement will be signed in 2023

By Diego Luis Alonso Massa, 12 January 2023

According to Swiss Ambassador to India, Ralf Heckner, negotiations with India on the EFTA-India Free Trade Agreement (FTA) will resume in February this year when the Swiss Trade Secretary visits New Delhi. The President of the Swiss confederation also plans to visit India in the summer. 

The Swiss Ambassador said that he will work on getting the agreement sealed in 2023.

European Free Trade Association (EFTA) Members, which include Iceland, Liechtenstein, Norway and Switzerland, are apparently keen to push the negotiations forward in view of India’s speedy conclusion of trade deals with Australia and the UAE.

At their meeting in Davos on 26 January 2008, Commerce/Trade Ministers from India and the EFTA agreed to launch negotiations on a comprehensive Trade and Investment Agreement as per the recommendations of the Joint EFTA-India Study Group established on 1 December 2006.

Thirteen rounds of negotiations were held until autumn 2013 before negotiations were put on hold. After talks were resumed in October 2016, four more rounds took place. The two sides held their last round of negotiations in New Delhi in September 2017.

Negotiations, however, gained new momentum again in August 2022, when Switzerland’s Federal Councillor Ueli Maurer pitched for expeditious completion of negotiations for an EFTA-India FTA after a meeting in New Delhi with Indian Finance Minister, Nirmala Sitharaman. 

Furthermore, on a visit to India in October 2022, Swiss Minister of Economic Affairs, Guy Parmelin encouraged parties to “rapidly complete” negotiations for an FTA and a new investment protection agreement with Minister of Commerce and Industry of India, Piyush Goyal.

According to India’s Department of Commerce,  current negotiations are focused on Trade in Goods & Services, Sanitary and Phyto-Sanitary measures, Technical Barriers to Trade, Customs and Tariff Facilitation, Investment, Intellectual Property Rights as well as Competition, Government Procurement, Dispute Settlement, Trade Defence, Rules of Origin, Sustainable Development and Legal & Horizontal matters. 

Some organisations, including Public Eye, argue that the negotiations do not take into account the glaring developmental inequalities between India and the EFTA nations. Moreover, EFTA demands the opening of Indian financial markets. However, liberalisation of the banking sector threatens the supply of credit in rural areas.

It should also be mentioned that Switzerland is calling for further strengthening of intellectual property (the so-called TRIPS+ provisions), which would greatly hamper access to affordable medicines by delaying or even preventing cheaper generics from entering the market.

Given that India is the world’s leading producer of generic drugs, supplying many developing countries with cheap drugs, Norway, another member of EFTA, decided in 2009 to withdraw from the disputed patent rights negotiations, which are part of the trade agreement currently being negotiated between EFTA and India.

Patent rights are very important for Switzerland, which has an extensive pharmaceutical industry. The Swiss pharmaceutical manufacturer Novartis has already tried to change India’s patent law, and went to court against the Indian authorities in 2005. Although Novartis claimed that India’s legislation was not in line with WTO rules, it lost the case.

Therefore, Switzerland has today an interest in pushing through patent legislation in India which gives less room for the production of generic medicines. Differences between India and Switzerland on this issue seem to be one of the fundamental reasons negotiations have stalled on a free trade agreement. According to Swiss media, observers speak of intense lobbying carried out recently by the Swiss firms.

Switzerland’s Ambassador, however, believes that once the trade deal is sealed Swiss investments in India can grow triple-fold.

According to EFTA’s webpage, trade between EFTA and India during 2021 amounted to Eur 5.145 million.

According to the Embassy of India to Switzerland and The Principality of Liechtenstein, the bilateral trade between India & Switzerland was around $25 billion during fiscal year 2021-2022.

According to India’s Ministry of External Affairs, Switzerland invested Foreign Direct Investment (FDI) equity worth approximately $4.781 billion in India from April 2000 to September 2019 thus becoming the 12th largest investor and accounting for about 1,07% of total FDI in India during this period.

Switzerland continues to attract investment from Indian companies looking for a gateway to Europe. There are about 100 Indian companies in Switzerland.

On 4 April 1997, the Republic of India and the Swiss Confederation signed an Agreement for the Promotion and Protection of Investments, which entered into force on 15 February 2000. This is a typical BIT from the 1990s, in which each State party guarantees to investors from the other State the benefits of National Treatment and Most Favoured Nation Treatment; No expropriation except for a public purpose, in accordance with law, on a non-discriminatory basis and against compensation; Compensation for losses; and Repatriation of Investment and Returns.

As for the settlement of disputes between an investor and a Contracting Party, Article 9 of the agreement provided that, if both parties agreed, disputes may be submitted the competent judicial or administrative bodies of the Contracting Party which has admitted the investment or to international conciliation under the Conciliation Rules of the United Nations Commission on International Trade Law (UNCITRAL). When parties failed to agree on one of those dispute settlement procedures, or if the conciliation failed, the dispute could be referred to arbitration.

The 1997 BIT was unilaterally denounced by India and ended on 6 Apr 2017, although the “sunset clause” is to last for an additional 15-year period.

While there is no information available on the dispute settlement mechanisms that are being negotiated with respect to disputes arising from investments of investors of one party in the territory of the other in EFTA-India Free Trade Agreement, according to the latest agreements signed by India it is presumed that parties will not establish any mechanism for this purpose.

Last year, India concluded free trade agreements with Australia and the United Arab Emirates (UAE).

As reported by TAO [see here], on 2 April 2022, after 11 years of negotiations, Indian Minister for Commerce and Industry Piyush Goyal and Australian Trade, Tourism and Investment Minister Dan Tehan signed an interim trade agreement called the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA).

The ECTA does not establish any mechanism to settle disputes arising with respect to investments of nationals of one party in the other State.  The Agreement only provides for the establishment of a three-member panel to examine disputes arising between the parties regarding the implementation, interpretation or application of its terms. Investors who are nationals of the contracting parties are excluded from that mechanism to settle disputes arising with respect to their investments in the other state. 

India is also on the verge of finalising a similar deal with the United Kingdom.

Furthermore, on 27 March 2022, India and the UAE signed a Comprehensive Economic Partnership Agreement (CEPA). In Chapter 12 of the CEPA, on Investment and Trade, parties agreed to finalise a new Bilateral Investment Agreement by June 2022, thus replacing the Agreement Between the Government of the United Arab Emirates and the Government of the Republic of lndia on the Promotion and Protection of lnvestments, signed at New Delhi on 12 December 2013 (UAE-lndia Bilateral Investment Agreement). Chapter 12 further states that its provisions will not be subject to any Dispute Settlement mechanism.

New Delhi is currently negotiating FTAs with Canada and the European Union.