ZURICH, Jan 18 (Reuters) - The European Union has proposed letting a special arbitration court settle some disputes under a new treaty it is trying to strike with neutral Switzerland, sources involved in the discussion said.
The idea is to help address Swiss reluctance to let the European Court of Justice (ECJ) act as a referee, which is anathema to the far-right Swiss People's Party, parliament's largest. Many conservatives are wary of giving "foreign judges" such power.
Swiss officials were still considering the offer, the sources said.
European Commission President Jean-Claude Juncker said during a visit in November that Brussels wanted concrete progress on a new treaty by spring 2018, while Swiss officials have said they cannot accept an artificial deadline.
The issue is politically fraught ahead of elections in both Switzerland and the EU in 2019, effectively giving Juncker until the second half of this year to strike a deal that could cement ties now governed by a patchwork of 120 bilateral accords.
Relations soured last month when Bern promised retaliation over what it called unacceptable limitations on Swiss stock exchanges' access to the EU single market.
Brussels linked future bourse access to progress on the new treaty, which would have Switzerland automatically adopt EU law on the single market, a crucial outlet for Swiss exports.
The row threatened to set back ties that had been thawing after the Swiss parliament in late 2016 skirted voters' demand for immigration quotas for EU citizens.
As part of the EU's offer for settling disputes, the ECJ would still have to give an advisory opinion in rows over how to interpret EU laws governing the single market, but other areas could fall under the aegis of the arbitration court.
"You could maybe circumvent the trauma of foreign judges," one source said, referring to a traditional Swiss fear of erosion of sovereignty.
The Neue Zuercher Zeitung newspaper, citing unidentified sources, said the proposed new panel would have three members, with each side naming one judge and the third agreed by mutual consent.
These experts would rule on disputes that the existing joint commission in charge of monitoring bilateral ties could not settle amicably. Should one side remain dissatisfied by a ruling, it could unilaterally adopt countervailing measures that would again be subject to an arbitration ruling. (Reporting by Michael Shields; editing by Andrew Roche)