However, in response to pressure from parliament and international developments in the area of foreign direct investment, the Federal Council published a preliminary draft of an investment protection law in August 2021, which was subsequently submitted for consultation.
The dispatch has now been published on this basis. The main restriction compared to the preliminary draft concerns foreign investors: only state investors are now eligible; foreign private investors are not affected by the change in the law unless they are controlled by a foreign state or acting on its behalf.
The aim of the law is to prevent foreign investors from taking over domestic companies if such takeovers threaten public order or security in Switzerland. To this end, the new law stipulates that takeovers of companies must be authorised if they operate in system-critical sectors (e.g. health care, electricity and water supply, and transport) and meet certain thresholds in terms of turnover (CHF 10-100 million) and full-time equivalents (currently 50).
Depending on the case, the authorisation procedure consists of a non-binding preliminary application to the State Secretariat for Economic Affairs (SECO), followed by a formal application. SECO can then either approve the takeover directly or initiate a separate review procedure. In cases with significant political implications, the Federal Council decides. The legal validity of a takeover subject to authorisation is suspended until such authorisation has been granted.
If a takeover is carried out without authorisation, SECO may impose fines or order a divestiture.
If the law is passed by parliament, only a very small number of takeovers would need to be approved each year, and investments by foreign private investors would continue to be allowed. It is therefore questionable whether the new law will remain a so-called paper tiger or whether it will have any practical relevance. Either way, depending on the sector, foreign private investors would have to allow sufficient time for the takeover to be legally completed in Switzerland.
The new law is currently being negotiated in parliament and is not expected to come into force before 2025.
Originally published by 21 December, 2023
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