The second round of agreements, Bilateral Agreements II, considered further economic interests, such as the food industry, tourism, and the financial centre. It extended cooperation between Switzerland and the EU beyond economic affairs to important new political areas including internal security, asylum, the environment and cultural affairs.

Although the final acts of the first package of bilateral agreements of 1999 stated both parties’ intent to continue negotiations, the European Commission was at first sceptical about further negotiations of this kind. Two new matters of particular concern to the EU provided Brussels with the impetus for a new round of negotiations with Switzerland. The first was that the EU hoped to include Switzerland in a planned system of cross-border taxation of savings income. Secondly, Brussels wished to cooperate with Switzerland in stepped-up efforts to combat fraud in relation to indirect taxes, notably with regard to tobacco smuggling.

Switzerland agreed to negotiate on these issues under the condition that the negotiations would also include areas of special interest to Switzerland in addition to the two requested by Brussels. These included cooperation in the areas of security and asylum, with Swiss participation in Schengen/Dublin (cooperation in police and justice, asylum and migration matters), and areas mentioned in the joint declaration of intent in the Bilaterals I (processed agricultural products, statistics, the environment, the MEDIA programme, education, pensions and services).

Negotiations between Switzerland and the EU began in June 2002 in the ten dossiers that make up the Bilaterals II. In March 2003, both parties agreed to suspend negotiations on the liberalisation of services, due to a large number of questions that remained unresolved. Agreement at the political level in June 2003 on the taxation of savings income was a major milestone in the negotiations. On 19 May 2004 at a Switzerland-EU summit meeting, agreement was announced on the remaining politically sensitive areas concerned with the question of exchanging information on tax-related offences in the framework of judicial and administrative cooperation. 

• With regard to Schengen/Dublin, Switzerland received an open-ended opt-out for the event that a future Schengen regulation should give rise to an obligation on Switzerland to provide legal assistance also in cases of tax evasion.
• Insofar as efforts to combat fraud are concerned, Switzerland extended cooperation in the area of indirect taxes to tax evasion offences (national treatment).

Throughout the entire period of the negotiations, Switzerland observed the principle of parallelism: Bern considered that the package of agreements had to be accepted as a whole. Among other things, this approach ensured a balanced overall result that would take into account both the essential interests of Switzerland and the concerns of the EU. All of the agreements, including Schengen/Dublin, were approved as a package in accordance with Switzerland’s wishes. In return, Switzerland agreed to cooperate with the EU in the area of cross-border taxation of savings income and extended cooperation to efforts to combat fraud in relation to indirect taxes.

The Bilateral Agreements II were signed on 26 October 2004 and approved by the Swiss Parliament on 17 December 2004 in the form of individual federal decrees. Although seven of the agreements were subject to an optional referendum, only one was held – on the Schengen/Dublin Association Agreement. This was approved by 54.6% of the Swiss electorate on 5 June 2005. In contrast to the Bilateral Agreements I, the second package of agreements are not legally tied to each other; each can take effect independently in accordance with the relevant provisions. All but the Agreement on Combating Fraud are now in force. On 1 March 2008, the Schengen/Dublin Association Agreements formally came into effect. Participation at the operational level began on 12 December 2008 following completion of an evaluation process by teams of Schengen experts to ensure that Swiss standards met Schengen criteria in the areas of external border protection, connection with the Europe-wide electronic database (Schengen Information System, SIS), data protection, visas and police cooperation. The association process was completed on 29 March 2009, enabling Swiss airports to implement the Schengen regulations alongside the new summer timetable.