Regulating Foreign Investments in Switzerland: A Strategic Approach

The Swiss Parliament is debating new foreign investment controls.

Switzerland Advances Foreign Investment Controls Amidst National Security Concerns

Bern, Switzerland – September 24, 2025 – Switzerland is poised to establish a new system for scrutinizing foreign investment in strategically significant domestic companies. The Council of States approved a government proposal on Wednesday with a vote of 27 to 11, despite reservations from its own committee. This decision marks a significant step towards greater oversight of foreign ownership in key sectors.

Protecting Critical Infrastructure and Industries

The proposed legislation focuses on reviewing acquisitions of Swiss firms operating in crucial areas such as military equipment, power generation, and healthcare. officials cite the need to safeguard national security and economic resilience. According to data from the World Investment Report 2024, approximately 80% of European Union and Organisation for Economic co-operation and Advancement (OECD) nations already have similar mechanisms in place to regulate foreign investment.

The impetus for this legislation originated with the Swiss Parliament, which initially requested the federal Council to develop a plan.While the National Council initially proposed a broader scope for the controls, encompassing both state-owned and privately held foreign entities, the Council of States ultimately limited the scope to state-backed foreign companies.

What’s Next for the Legislation?

The bill will now return to the National Council for further consideration. Disagreements between the two chambers regarding the breadth of the investment controls suggest potential revisions before a final version is enacted.This back-and-forth underscores the sensitivity surrounding the balance between attracting foreign capital and protecting national interests.

Did You No? Switzerland’s unique political system, characterized by direct democracy and federalism, often leads to lengthy legislative processes as different interests are negotiated.

Feature	Current Situation	Proposed Change
Foreign Investment Control	limited	Expanded to include review of acquisitions in critical sectors
Scope of Control	None	Initially proposed for both state and private foreign entities; currently limited to state-backed entities.
EU/OECD Comparison	Below Average	Moving towards alignment with the 80% of EU/OECD nations with similar systems

The Global Trend of Investment Screening

The move by Switzerland reflects a growing global trend towards increased scrutiny of foreign investment. Several factors are driving this phenomenon, including concerns about national security, critical infrastructure protection, and the potential for technology transfer to adversaries. In recent years, countries like the United States, Canada, and Australia have significantly strengthened their investment screening mechanisms. This heightened awareness is largely influenced by geopolitical tensions and the evolving nature of economic warfare.

As an example, the United States’ Committee on Foreign Investment in the United States (CFIUS) has seen a ample increase in its caseload over the past decade. The European Union has also established a framework for coordinating investment screening among member states. The trend shows no sign of abating, with many countries expected to further refine their investment control regimes in the coming years.

Pro Tip: Businesses considering investing in or acquiring companies in Switzerland should be prepared for increased due diligence and potential delays as the new investment control system is implemented.

Frequently Asked Questions About Swiss Foreign Investment Control

• What is the primary goal of the new investment control system? To safeguard Switzerland’s national security and economic interests by reviewing foreign acquisitions in critical sectors.
• Which sectors will be subject to the review? Military equipment, electricity production, and hospitals are specifically mentioned as key areas of focus.
• How does Switzerland’s approach compare to other nations? Approximately 80% of EU and OECD countries already have similar systems in place.
• What happens if a foreign investment is blocked? The acquiring company might potentially be required to modify the investment proposal or abandon the acquisition altogether.
• What is the current status of the legislation? The Council of States has approved the proposal, but it now returns to the National Council for further debate.

what impact do you think these new regulations will have on foreign investment in Switzerland? Do you believe the current scope of the controls is sufficient, or should it be broader?

Share your thoughts in the comments below, and be sure to share this article with your network.

What are the key differences between Switzerland’s approach to FDI screening and that of countries with a comprehensive, overarching FDI statute?

The Swiss Framework for Foreign Direct Investment (FDI)

Switzerland, renowned for it’s political stability, robust legal system, and skilled workforce, consistently ranks as a top destination for foreign investment. However, unlike many nations, Switzerland doesn’t have a comprehensive, overarching statute specifically governing FDI screening. Instead, regulation operates through a layered approach, balancing economic openness with national security and public policy concerns. this approach is currently under review, with potential changes on the horizon, especially influenced by EU regulations and evolving geopolitical landscapes. Understanding this framework is crucial for investors and businesses considering investing in Switzerland.

Key Regulatory Areas & Legislation

The regulation of foreign investment in Switzerland isn’t centralized. Several laws and regulations come into play, depending on the sector and nature of the investment.

* Federal Act on Cartels and Other Restraints of Trade (Cartel Act): This is arguably the most significant piece of legislation. It focuses on maintaining competition and preventing monopolies. The Competition Commission (WEKO) reviews mergers and acquisitions, including those involving foreign investors, to ensure they don’t unduly restrict competition. thresholds for mandatory notification are based on turnover and the value of the transaction.

* Federal Act on Foreign Trade (FTA): While primarily focused on trade agreements, this act provides a legal basis for implementing sanctions and export controls, which can indirectly impact foreign investment in specific sectors.

* Financial Market Infrastructure Act (FMIA) & Banking Law: These laws govern investments in the Swiss financial sector, imposing strict requirements on acquiring significant stakes in banks and other financial institutions. The Swiss financial Market Supervisory Authority (FINMA) plays a key role in reviewing and approving such investments.

* Real Estate Acquisition by Foreigners Act (Lex Koller): This law regulates the acquisition of real estate in Switzerland by foreign nationals. it aims to protect Switzerland’s limited land resources and prevent speculation. Restrictions vary depending on the investor’s nationality and the type of property.

* Sector-Specific Regulations: Certain sectors, like defense, telecommunications, and critical infrastructure, are subject to additional scrutiny and may require government approval for foreign ownership.

The Ongoing Debate: Towards a More Formal FDI Screening Mechanism

For years, Switzerland has resisted calls for a general FDI screening mechanism, arguing that its existing regulatory framework is sufficient. However, increasing pressure from the EU, concerns about strategic assets falling into the hands of state-backed entities, and geopolitical risks have prompted a re-evaluation.

EU Influence and Alignment

The EU has implemented a framework for screening foreign direct investments that could affect security or public order. Switzerland, despite not being an EU member, maintains close economic ties with the bloc. The EU’s regulations have spurred debate within Switzerland about the need for a more formalized system to ensure reciprocity and protect strategic interests. The Swiss government is currently evaluating options for aligning its approach with EU standards.

National Security Concerns

The rise of state-backed investments and concerns about technology transfer have heightened national security anxieties. There’s growing recognition that a more proactive screening mechanism could help identify and mitigate risks associated with investments in critical infrastructure, sensitive technologies, and data.

Proposed changes & Potential impacts

Discussions are centered around several potential changes:

1. Broadening the Scope of Review: Expanding the scope of review beyond mergers and acquisitions to include greenfield investments and acquisitions of minority stakes.
2. Introducing a National Security Test: Implementing a specific test to assess whether an investment poses a threat to national security.
3. Strengthening coordination: Improving coordination between different government agencies involved in reviewing foreign investments.
4. Lowering Notification Thresholds: reducing the thresholds for mandatory notification to capture a wider range of transactions.

Navigating the Swiss Investment Landscape: Practical Considerations

Successfully navigating the Swiss regulatory environment requires careful planning and due diligence.

* Early Legal Counsel: Engage experienced legal counsel specializing in Swiss investment law early in the process.They can provide guidance on applicable regulations, notification requirements, and potential risks.

* Thorough Due Diligence: Conduct comprehensive due diligence on the target company, including its ownership structure, financial performance, and compliance history.

* Anticipate Regulatory Scrutiny: Be prepared for potential scrutiny from regulatory authorities, particularly in sensitive sectors.

* Openness and cooperation: Maintain transparency and cooperate fully with regulatory authorities throughout the review process.

* Understand Sector-Specific Rules: Familiarize yourself with any sector-specific regulations that may apply to your investment.For example,investments in Swiss banking are subject to stringent FINMA oversight.

Case study: The ChemChina-Syngenta Acquisition (2017)

The 2017 acquisition of Syngenta, a Swiss agrochemical company, by ChemChina, a Chinese state-owned enterprise, highlighted the complexities of foreign investment in Switzerland. While the deal was ultimately approved, it