A proposal by the Federation of the Swiss Watch Industry (FH) to toughen Switzerland’s “Swiss made” watch ordinance has been pulled. It must be revised to comply with European trade treaties and a major Swiss government plan to protect the viability of “Swiss” and Swiss flag trademarks, the Swiss Federal Council says. Switzerland exports 25 million watches annually, worth $11 billion. The United States is its top market.

The proposal to strengthen requirements allowing use of “Swiss Made” on watches was approved in June by the FH membership and sent to the Federal Council for review and approval. Changes include more use of Swiss-made components (80 percent for mechanical watches, 50 percent for quartz module watches), instead of non-Swiss ones.

However, the Council said Nov. 23 that the FH must withdraw, review, and revise its proposal. It cited its own pending proposed legislation to strengthen and protect “Swiss” trademarks for all products. It also called FH’s proposal “problematic,” because of a 1972 pact with the European Union on watches, which prohibits unilateral changes.

Instead, it urged the FH to bring its proposal into compliance with the pending “Swiss” legislation and international agreements, and re-submit it next year.

The Federal Council will present its proposed “Swiss” trademark legislation by year’s end, and give all economic and political sectors—including the Swiss watch industry—opportunity to comment until the end of March 2008.

At least one Swiss newspaper said the Council’s action means FH’s proposal is “dead.” Some opponents suggest revision could remove what they consider its objectionable sections.

However, Jean-Daniel Pasche, FH president, told JCK the Council’s action “wasn’t a rejection” of FH’s proposal, only a directive to “review and revise it where necessary. The Federal Council looks on it favorably,” he said. “It’s only concerned with its details.”

Swiss trademark law applies to all products, including watches, and is the basis for a 1972 “Swiss-made” watch ordinance. “It’s logical that if they revise the law, we’ll revise our proposal,” said Pasche. “So, this wasn’t a surprise, but it’s very important to know the contents of the draft law [and] how it could affect our proposal.”

Once the FH board knows that, a revised FH proposal could be submitted as early as April 2008 to the Council, said Pasche. He added that the FH has begun discussions with the EU and its fellow European associations.

FH’s proposal is endorsed by major Swiss watchmakers, including the Swatch Group, the world’s largest watchmaker and a major watch components supplier; Rolex; and the Richemont Group, parent firm of Cartier. It’s opposed by a number of other, smaller watchmakers—who claim it favors large watchmakers and that higher-priced Swiss components could force them to raise prices or close. And it was criticized by the EU and European watch associations for being allegedly unilateral and “protectionist.”

While most opponents decline to speak publicly, some endorse the Council’s directive. Ronnie Bernheim, president of the popular upscale Swiss brand Mondaine, said he is pleased the Swiss Federal Council has “clearly seen that the FH proposal was not good and protectionist,” he told JCK. Hopefully, he said, the Swiss government will enact “a future new law and a new ordinance [that] will be in the interest of the whole Swiss watch industry and will respect international treaties.”

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