Currently foreign direct investment (FDI) in Switzerland amounts to about CHF 750 billion, which translates into some 450,000 jobs. However, in light of the recent purchases of major domestic companies (e.g. Sygenta, Gategroup, Swissport) by Chinese state funds, foreign investors have also given rise to concerns. Some lawmakers believe that the uncontrolled acquisition of Swiss companies by foreigners poses a threat to the local economy, public order and security. Earlier this year, following a 2018 motion by Beat Rieder MP, the government submitted a draft bill for consultation. This article will briefly discuss two main aspects of the proposed legislation, namely its scope of application and the approval procedure.
SCOPE OF APPLICATION
The notion of “control” is the main criterion for determining whether an acquisition falls within the scope of the law and thus requires governmental approval. To satisfy the benchmark, the investor must seek to directly or indirectly gain control of a sizable portion of a business in Switzerland.
The evaluation involves two consecutive controls. The first aims to ascertain whether the investor is linked to a foreign state body, in which case further verifications become necessary. The second assessment relates to the target companies in Switzerland. These fall into two categories: (i) companies that are active in security-relevant sectors (e.g. military equipment, IT systems for authorities, energy); and (ii) other companies that present certain risks and that generate an annual turnover of at least CHF 100 million. The draft bill exempts from its scope small companies that have fewer than 50 employees and a worldwide annual turnover of under CHF 10 million in the last two financial years. Yet, some questions as to the law’s applicability have remained unanswered, such as the acquisition of national subsidiaries.
APPROVAL PROCEDURE
According to the draft bill, the approval procedure lies with the State Secretariat for Economic Affairs (SECO). A potential investor needs to file an initial application, whereupon SECO decides within one month whether an approval procedure is necessary. If that is the case, the authority has three months to render a decision. Should SECO oppose the investment, the government must decide on the approval. Both SECO and government have large discretionary power as to what they understand by “threat to the public order”. They approve acquisitions on a case-by-case basis.
LEGISLATION NOT BEFORE 2024
The consultation procedure ends in early September. It forms the basis of future parliamentary deliberations that will result in a new draft bill subject to the vote of both chambers of the legislative branch. By adopting the law, Switzerland would follow a general trend in Western countries (e.g. France, Germany, Finland) to impose restrictions on foreign investments.
THE GOVERNANCE LAW FIRM
