To support the attractiveness of its position and prevent distortions of competition .. Switzerland plans to regulate foreign acquisitions


Switzerland has announced plans to better regulate the acquisition of Swiss companies by funds from foreign countries or funds close to the state. Yesterday, the government set the main lines for controlling foreign investment in the country, and stressed the need to draw up a draft law for consultation at the end of March 2022.
This issue is not new, going back to March 2020, when, before the emergence of the Covid-19 epidemic, parliamentarians adopted a proposal to protect the Swiss economy. However, fearing the international trend and its laws related to investment, the government objected to the text, so it had to submit a counter-project. Yesterday she approved plans to do just that.
Despite the presentation of its project, the government argues that no further control and restrictions should be placed on foreign investments in the country, saying that the ratio of acquisition cost to interest is “low”.
It asserts that regulations on investment controls are in place and are “sufficient” to effectively counter any threats, that simple oversight is sufficient, and that a policy of openness to foreign investment is critical to Switzerland as a business location and to a thriving population.
The government continues, that limiting capital inflows into Switzerland would increase the administrative burden on the companies involved and uncertainty for investors, and would weaken the attractiveness of the Swiss economic centre. In turn, the investment provides Swiss companies with an adequate flow of capital and knowledge, which contributes to added value as well as to the maintenance and creation of new jobs. Switzerland’s openness and attractiveness to foreign investors must therefore be preserved.
However, the government is aware of the potential risks associated with direct investment. For this reason, she made points she sent to the House of Representatives asserting that the new regulations should make it easier to virtually eliminate any national security risks that arise when companies are acquired by hostile foreign actors, while ensuring that potential threats to order or security are controlled.
She also stressed that any purchase by foreign state investors or funds close to the state should be announced and approved regardless of the nature of the economic branch. She added in reassuring language that the Ministry of Economy will be responsible for implementing investment, purchase and acquisition controls.
The government explained that the fields to which the mandatory notification and licensing system will be applied in case of acquisition must be determined. One exciting issue for future legislation, however, is whether a Swiss subsidiary of a foreign conglomerate will be considered a domestic target company.
She stated that the new rules should also prevent major distortions of competition, in the event that foreign or close state investors acquire Swiss property where they are likely to enjoy a decisive advantage in terms of financing.
She said the vast majority of companies that provide critical infrastructure are also already state-owned, and this is the best protection against foreign influence. Only the legislator can lay the necessary basis for the sale of such works.
The government also indicated that it will place more emphasis on the issue of “reciprocity” and consider targeted measures to improve the resilience of information technology in critical infrastructures against abusive foreign activities.
With regard to banks, the process of acquiring banks of systemic importance and infrastructure is subject to strict conditions set by the financial markets under the supervision of the Federal Authority for Financial Market Supervision. Systemically important financial market infrastructures are also subject to the supervision of the Swiss National Bank.
Despite this, parliamentarians and senators expressed concern about “increasing investments in Switzerland by companies close to the Chinese state in particular”, and the resulting risks. They say: The acquisition sometimes allows foreign companies to confiscate industrial secrets, management and marketing methods, and others.
Legislature concerns in matters of procurement or acquisition that critical business infrastructure at risk of national security, for example, the failure of a company providing an essential service, the Swiss military’s dependence on suppliers of essential armaments parts, the reliance of state services on suppliers of computer security systems, or the leakage of Especially sensitive data. These concerns stem from the Chinese companies’ acquisition of Syngenta or Jettygroup.
In fact, Switzerland does not have comprehensive investment control legislation or barriers to foreign acquisitions, but there are widespread restrictions in many federal laws. That is why parliamentarians have called for the creation of a new management structure that includes a clear supervisory body related to the acquisition of Swiss companies by foreign capital.
Overall, Switzerland is one of the world’s leading destinations for direct investment. In 2017, FDI stocks amounted to $1208 billion. On the contrary, the shares of Swiss direct investment abroad amounted to 1364 billion dollars.


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