Symposium on economic freedom

Read about a symposium focused on the fundamental right to economic freedom and its implications for market regulation.

On 13 November 2024, the New Zealand Centre of International Economic Law (NZCIEL) hosted a symposium featuring Professor Nicholas Diebold from the University of Lucerne and the NZCIEL Visiting Scholar in 2024–2025. The event brought together academics, legal practitioners, and students interested in international economic law and market regulation.

The symposium focused on the fundamental right to economic freedom as enshrined in the Swiss Constitution and its implications for market regulation. Professor Diebold’s presentation was followed by insightful commentary from Senior Lecturer Paul Scott, a specialist in law and economics, and specifically competition law, at the Faculty of Law at Te Herenga Waka. The event concluded with remarks from Professor Susy Frankel FRSNZ, the co-founder and lead of the NZCIEL.

The Fundamental Right to Economic Freedom in Switzerland: Presentation by Professor Nicholas Diebold

Professor Diebold discussed the fundamental right to economic freedom in the Swiss Constitution and its impact on market regulation. He began by examining taxi regulations and the challenges posed by ride-sharing services like Uber, highlighting how outdated regulations could negatively affect innovation and protect domestic businesses. He questioned whether domestic legal frameworks, such as constitutional rights, could prevent governments from imposing restrictive measures on new market entrants.

Historical context

Professor Diebold introduced the Swiss constitutional provision that guarantees economic freedom, which includes free market access and free economic conduct. Over nearly two centuries, Swiss courts had interpreted this right to encompass:

• free access to professional activities;
• non-discrimination;
• freedom of internal and external trade;
• protection of a free market economy from excessive state intervention.

Despite this guarantee, the Swiss government did intervene in markets, but any limitations on economic freedom had to be justified under specific conditions.

Professor Diebold placed the right to economic freedom in historical context, explaining how Switzerland transitioned from a confederation of sovereign cantons with their own currencies and trade barriers to a federal state after a brief civil war in 1847. The economic freedom provision was introduced to eliminate internal trade barriers and had since evolved to cover broader economic activities.

He illustrated this with the 1937 case of Ferdinand Traveletti, where the Swiss Federal Tribunal struck down a cantonal law prohibiting mechanical diggers to protect jobs, affirming the right to employ new technologies.

Legal framework

Professor Diebold outlined the legal framework for assessing limitations on economic freedom, noting that any state measure had to:

• have legal basis;
• pursue a public purpose (such as police, social, environmental, or structural policies);
• be proportionate.

Structural policies aimed at preserving jobs or self-sufficiency were permissible only if they had a basis in the constitution, which required a popular vote for any amendment. Professor Diebold provided examples of constitutionally justified structural policies, including:

• state monopolies on salt and postal services;
• agricultural protections;
• subsidies for public transportation.

Judicial review and proportionality test

Courts would strike down structural policies not justified by the constitution, especially those enacted by cantons. Examples included:

• quotas for hairdressers and restaurants;
• minimum price requirements for taxi drivers;
• general rent controls.

Professor Diebold discussed the proportionality test used by courts to assess whether state measures appropriately balanced public interests with individual economic freedoms. While courts often gave deference to legislative discretion, they ensured that any restrictions were necessary and suitable for achieving their intended public purpose.

Conclusion

In conclusion, Professor Diebold emphasised that the fundamental right to economic freedom in Switzerland imposed a disciplinary effect on policymakers. It required them to justify regulations that limited economic activities, fostering a legal framework that promoted careful consideration of regulatory measures. Despite not always resulting in liberal regulatory policies, this constitutional right played a crucial role in shaping market regulation and protecting the principles of a free market economy in Switzerland.

Commentary by Paul Scott

Following the presentation, Senior Lecturer Paul Scott provided commentary that linked the Swiss constitutional guarantee of economic freedom to broader themes in economic and constitutional theory.

Historical and theoretical perspectives

Paul Scott referenced historical perspectives, including Milton Friedman’s views on the relationship between economic and political freedom, and compared the Swiss experience with the United States’ history of judicial intervention in economic regulation, notably the Lochner era. He discussed how the Swiss courts striking down cantonal laws appeared similar to US Supreme Court actions that limited state economic regulations.

Critiques and comparisons

Paul Scott also examined the challenges and criticisms of judicial activism in economic matters. He questioned why economic freedoms might receive less judicial protection compared to other rights and highlighted contemporary issues such as:

• rent control, noting that while it has perpetual political support, it is widely criticised by economists;
• occupational licensing, praising the Swiss approach for requiring justifications for restricting economic freedoms and highlighting how such regulations can serve as barriers to entry and protect current professionals.

Conclusion

Paul Scott concluded by acknowledging the value of the Swiss system in promoting competition and limiting protectionist measures that could hinder market efficiency and consumer welfare. He suggested that New Zealand could learn from the Swiss approach in balancing government intervention and market freedom.

Q&A session

A participant asked about the role and competencies of the courts in Switzerland regarding economic freedom. Specifically, they inquired about how the courts are staffed, whether they have inquisitorial powers, and the extent of their influence over economic issues.

Professor Diebold explained that the Swiss courts are structured in a federal system with cantonal courts. Cases challenging cantonal laws are brought before cantonal administrative courts, which are staffed by judges who are lawyers by training. There is little expertise in economic theories within the courts, and they rely heavily on arguments provided by the administration. This reliance leads to a low standard of review, granting significant discretion to the legislative and executive branches. He also mentioned ongoing discussions about incorporating economists into the courts, especially in competition law cases, to enhance independent review.

Another participant asked about the impact of direct democracy in Switzerland on economic policies, particularly whether referendums lead to more protectionist measures or liberal intentions in legislation.

Professor Diebold responded that direct democracy serves as an additional check and balance in Switzerland. If a federal law is passed, citizens can launch a referendum by collecting sufficient signatures, prompting a popular vote. This mechanism pressures political parties to find compromises acceptable to a broad base to avoid triggering a referendum. Regarding values influencing votes, he noted that societal concerns have shifted from competition protection in the 1990s to social justice and environmental protection today. He provided an example of Airbnb regulations in Lucerne, where the public voted in favour of more restrictive measures, reflecting a tendency towards increased regulation in recent times.

Closing remarks by Professor Susy Frankel FRSNZ

Connection to international trade law

Professor Susy Frankel concluded the symposium by connecting the discussion to international trade law. She observed that while Switzerland’s regulations on Airbnb and plastic products are not driven by concerns about international trade compliance, similar regulations in New Zealand would likely be crafted with World Trade Organization (WTO) law in mind. She highlighted that international trade law employs proportionality tests and different standards of review, which might lead to different legal outcomes compared to domestic courts.

Implications for the WTO

Professor Frankel further suggested that many of the Swiss regulatory examples could potentially comply with WTO law. However, she noted that this possibility might contribute to the challenges faced by the WTO, particularly criticism from economists who may view such regulations as problematic. She implied that the tension between domestic regulatory autonomy and international trade obligations is a significant issue in contemporary trade discussions.

Historical parallels and intellectual property

Professor Frankel also reflected on the historical context provided by Professor Diebold regarding craftsmen and the meat and dairy industries in Swiss cantons. Drawing parallels to the development of trade mark law in the United Kingdom, she cited the example of Sheffield Knives. The economic motivations behind branding and trade mark protection demonstrate how economic solutions can take various forms across different legal and historical contexts.

Summary

The symposium on the fundamental right to economic freedom in Switzerland provided a comprehensive examination of the legal framework, historical context, and practical impli cations of this constitutional guarantee. The presentations and commentary highlighted the disciplinary effect of economic freedom on policymakers, the role of courts in balancing public interests with individual freedoms, and the potential lessons for other jurisdictions, including New Zealand. The event underscored the importance of understanding the interplay between constitutional rights, market regulation, and international trade law in shaping contemporary legal and economic landscapes.

About the speakers

Nicolas Diebold

Professor Nicolas Diebold is a Professor of Law at the University of Lucerne, Switzerland, where he has served on the faculty management since 2019, including a term as Dean from 2022 to 2024. Currently, he is a visiting scholar at the NZCIEL. Nicolas specialises in public economic law, focusing on competition law, regulated industries, procurement and state aid law, WTO law, investment protection agreements, and Switzerland’s bilateral relations with the EU. His research examines legal frameworks designed to protect competition and the balance between free market principles and public interests.

Susy Frankel

Professor Susy Frankel FRSNZ is a Professor of Law and Chair in Intellectual Property and International Trade at Te Herenga Waka—Victoria University of Wellington. She is an international authority on international intellectual property law and the relationship between Indigenous peoples’ knowledge and intellectual property. Professor Frankel is the Deputy Chair of the Academy Executive Committee of the Royal Society Te Apārangi and a member of the Society’s Council. In 2020, she was appointed a member of the Waitangi Tribunal.

Paul Scott

Paul Scott is a Senior Lecturer at Te Herenga Waka—Victoria University of Wellington and a research affiliate of the NZCIEL. His primary area of interest is competition law. Paul has written and contributed to numerous articles, chapters, and books on competition law and regulated industries.