A. Background

On December 2, 2025, the Swiss Parliament reached an agreement on the content of a Swiss foreign direct investment (FDI) regime. By limiting its scope to takeovers by foreign state investors, the Swiss FDI regime will be relatively non-interventionist by international standards. This is in line with Switzerland’s traditionally open approach to foreign direct investment. The review of acquisitions by foreign state investors is intended to specifically address the security policy risks associated with foreign investment, while minimizing the negative impact on the welfare-enhancing effects attributed to foreign direct investment and limiting the burden on companies.

B. Key features of the regulation

1. Purpose

The Investment Screening Act (ISA) aims to protect public order and security in Switzerland.

Comment: The legislature has refrained from pursuing any objectives beyond the public order and security of Switzerland. In particular, it has refrained from enshrining the supply of essential goods and services as an explicit objective of the law, although it was pointed out in parliamentary debates that this objective is covered by the protection of public order and security. This is in line with the international standard for FDI regimes, which generally pursue primarily security policy objectives.

2. Notification obligation

2.1 Requirements

A transaction is subject to a notification requirement if the following conditions are cumulatively met:

1. A takeover;
2. of a domestic (Swiss) undertaking;
3. by a foreign state investor;
4. in a (security) critical sector;
5. where the relevant turnover thresholds are met.

2.1.1 Takeover

The concept of a takeover (Art. 2(a) ISA) is linked to the concept of the acquisition of control under merger control law as defined in Art. 4(3) of the Cartel Act (CartA). Control is acquired if the investor has the possibility of exercising a decisive influence on the activities of another undertaking by determining the essential questions of management and general business policy (ISA Dispatch, p. 36).

Comment: this requirement of control means that, unlike in Germany or France, notification is not required for the acquisition of a certain minority interest without the acquisition of (sole or joint) control. The link to established merger control practice seems appropriate and increases predictability for companies affected by a possible notification requirement, which must carry out a self-assessment . In practice, a uniform approach should be sought and deviations from investment control law (e.g., in the case of non-full-function joint ventures) should be prevented.

2.1.2 Domestic (Swiss) undertaking

The definition of an undertaking (Art. 2(b) ISA) is based on the functional approach taken under antitrust law (Art. 2(1^bis) CartA). The decisive factor for qualification as an undertaking is therefore whether it is a consumer or supplier of goods or services in the economic process. Any undertaking that is entered in the Swiss commercial register is considered domestic (Art. 2(c) ISA).

Comment: The formal criterion of entry in the commercial register is clear and practical, which is conducive to legal certainty. This means that branches can also qualify as domestic undertakings within the meaning of the ISA. Beyond that, there are no other requirements, such as the existence of assets in Switzerland.

2.1.3 Foreign state investor

Any of the following persons or entities intending to acquire a domestic undertaking is considered a foreign investor (Art. 2(d) ISA):

• foreign state bodies;
• undertakings with their head office outside Switzerland that are directly or indirectly controlled by a foreign state body;
• an undertaking with legal capacity that is directly or indirectly controlled by a foreign government agency; and
• a natural or legal person acting on behalf of a foreign state body.

However, the Federal Council may exempt takeovers by foreign state investors from certain countries from the notification obligation where there is sufficient cooperation between these countries and Switzerland to avert risks and threats to public order and security.

Comment: The distinction between foreign state and non-state (private) investors is central to the scope of the FDI regime. The most significant case in practice, where an investor undertaking is controlled by a foreign state body, will be assessed under a test that is based on the concept of control under merger control law. In this regard, it is appropriate to refer to the established practice of the European Commission for assessing control of state-owned enterprises, which applies the following criteria:[1]

• the autonomy of the state-owned enterprise from the state in determining its strategy, business plan and budget; and
• the state’s ability to coordinate business conduct by prescribing or facilitating coordination.

In practice, it may be challenging to identify foreign state investors who operate behind the scenes or covertly. By also covering persons acting on behalf of a foreign state body, circumvention through «straw man» structures should be prevented. Relevant information can be obtained, if necessary, through the exchange of information from entries in transparency registers that identify the beneficial owners.

It is expected that the Federal Council will exercise its authority and exempt at least foreign investors from EU and EFTA countries from the notification obligation. Exemptions for other countries are also conceivable, especially if they grant reciprocity (i.e., investments by Swiss investors in the countries concerned are exempt from the review requirement).

2.1.4 Security-critical sectors

Only takeovers in legally defined sectors by foreign state-owned enterprises will require notification. A distinction is made between (i) areas that are particularly critical for public order and security, with a lower turnover or de minimis threshold, and (ii) areas with a higher turnover threshold.

(i) The most sensitive areas with a lower turnover or de minimis threshold relate to companies (Art. 3(1) ISA):

• that manufacture goods or transfer intellectual property that are of crucial importance for the operational capability of the Swiss Armed Forces, federal security institutions, and space programs, provided that their export abroad is subject to authorization under the War Material Act (WMA; armaments) or the Goods Control Act (GKG; in particular dual-use goods);
• that operate or control the domestic transmission grid, certain distribution grids, large power plants, or high-pressure natural gas pipelines;
• that supply water to at least 100,000 inhabitants;
• that provide central security-related IT services.

The companies in security-critical areas with a higher turnover threshold are (Art. 3(2) ISA):

• hospitals;
• undertakings in the pharmaceutical, medical devices, vaccine, and personal protective equipment sectors;
• undertakings that operate or control important domestic hubs (ports, airports, transshipment facilities for combined transport);
• undertakings that operate or control railway infrastructure;
• undertakings that operate or control food distribution centers;
• undertakings that operate or control domestic telecommunications networks;
• undertakings that operate or control financial market infrastructures; and
• systemically important banks.

In addition, the Federal Council will be authorized to subject further categories of domestic companies to the notification requirement for a limited period of 12 months (with the possibility of extension for a further 12 months) if this is necessary to ensure public order and security (Art. 3(3) ISA).

Comment: Unlike certain investment control regimes in the international arena, critical key technologies such as artificial intelligence, robotics, semiconductors, cybersecurity, energy storage, quantum and nuclear technologies, and nano- and biotechnology will not be included among the areas covered. Extending the scope of investment control to these areas would require a formal amendment to the law – the conditions for the application of the Federal Council’s delegation norm are unlikely to be met on a regular basis. Anchoring all material requirements for notification at the legislative level also promotes legal certainty and predictability for companies.

2.1.5 Turnover thresholds

Lower turnover threshold («de minimis threshold»). The notification obligation will not apply to takeovers in the aforementioned particularly sensitive sectors if the de minimis threshold for the domestic undertaking (at least 50 full-time positions employees and turnover of CHF 10 million in the two previous financial years) is not reached (Art. 3(1) ISA).

Higher turnover threshold. A higher turnover threshold will apply to other takeovers in critical sectors. This threshold is reached as soon as the global turnover of the domestic undertaking (including the entities it controls) exceeds CHF 100 million.

Comment. The de minimis and higher turnover thresholds are justified for reasons of procedural efficiency. In individual cases, however, there is a risk that potentially security-relevant takeovers will remain exempt from the notification obligation. One example would be the acquisition of a domestic start-up in the security-relevant technology and industrial base (STIB) by a foreign state investor after it has developed a disruptive innovation in the defense sector.

3. Approval criteria

A notifiable takeover is approved if, on the basis of an ex ante assessment, «there is no reason to believe that […] public order or security is endangered or threatened» (Art. 4(1) ISA). According to the dispatch, a risk assessment must be carried out based on the probability of occurrence and the potential extent of damage (ISA dispatch, p. 46).

Based on the approval criteria, an assessment must be made in connection with the probability of occurrence as to whether the foreign state investor enjoys a good reputation and offers a guarantee of impeccable business conduct (in particular, no involvement in a criminal organization; no espionage, etc.; Art. 4(2)(a)-(d)). Another relevant criterion for the potential extent of damage is the lack of substitutability of the services, products, or infrastructure of the domestic undertaking (Art. 4(2)(e) ISA; ISA Dispatch, p. 48).

Comment: The approval criteria leave the authorities applying the law with a great deal of discretion due to the security policy objectives of the investment review. Security policy is a prerogative of the executive, which is why it must specify the undefined legal terms of public order and security on a case-by-case basis based on the actual threat situation.

4. Procedure

4.1 Preliminary decision

A domestic undertaking will be able to apply to the State Secretariat for Economic Affairs (SECO) for a binding preliminary decision on whether a takeover is subject to notification (Art. 5 ISA). SECO must decide within two months of receiving the complete application. A preliminary decision is valid for 12 months (with the possibility of a one-time extension for a further 12 months).

Comment: In practice, the preliminary decision is likely to be of little significance, as unlike the notification, it would have to be obtained from the domestic undertaking and not from the foreign state investor. The two-month deadline for the preliminary decision is also unattractive compared to the one-month deadline for Phase I of the notification. Instead of a preliminary decision on the notification obligation, an application for approval in the form of a notification could be submitted directly. In this case, an application for a determination that no notification is required could be submitted, together with a contingent application for approval of the takeover.

4.2 Approval procedure

The approval procedure is based on the merger control procedure. The foreign investor must notify SECO of the notifiable takeover prior to its completion (Art. 6(1) ISA). Until approval is granted, the effectiveness of the takeover is suspended under civil law (Art. 8(4) ISA). There is a standstill obligation, which is enforced by administrative measures (Art. 19 ISA) and can be sanctioned with administrative penalties of up to 10% of the domestic undertaking’s global annual turnover (cf. Art. 20 ISA).

There will be a two-stage review process (Art. 6 et seq. ISA):

• Phase I. Within one month of receiving the complete application, SECO, in agreement with the other administrative units concerned and after consulting the Federal Intelligence Service (FIS), decides whether the takeover can be approved directly or whether an examination procedure must be initiated (Art. 7(1) ISA). SECO and the administrative units concerned each have a right of veto: if no agreement can be reached between them, an examination procedure (Phase II) must be initiated (Art. 7(2) ISA).
• Phase II. As part of an in-depth review, SECO generally decides within three months of the initiation of the review procedure whether the takeover will be approved; the decision is made in agreement with the administrative units concerned and after consultation with the FIS (Art. 8(1) ISA). Even if the deadline expires, (deemed) approval is granted (Art. 9(1) ISA). If SECO or an administrative unit with an interest in the matter opposes the approval, or if the decision has significant political implications, the approval authority is transferred to the Federal Council (Art. 8(2) ISA). Only the Federal Council can decide not to approve a takeover (Art. 8(2)(a) ISA).

Decisions made as part of an approval procedure can be appealed to the Federal Administrative Court. The foreign investor and the domestic undertaking are entitled to appeal (Art. 18(2) ISA).

Comment: The two-stage procedure (process and deadlines) based on the tried-and-tested merger control law seems appropriate. As in merger control, Phase I only begins upon receipt of the complete application; SECO confirms that the application is complete (ISA Dispatch, p. 51). This suggests that a pre-notification procedure modeled on merger control practice should be possible. SECO has the option of extending the statutory deadlines, for example if information from a foreign authority is pending or if the Federal Council is deciding on approval. Since no maximum statutory deadlines are defined, this carries the risk of excessively long approval procedures, especially since information from foreign authorities can notoriously take a long time to obtain.

The sanctions that can be imposed in the event of a violation of the prohibition on implementation are much more severe than the corresponding provision in merger control, where a violation of the prohibition on implementation can be sanctioned with a maximum fine of CHF 1 million.

C. Practical significance and outlook

By limiting its FDI regime to foreign state investors, Switzerland has opted for a less interventionist regulatory approach. Private foreign investors are not subject to investment control. It is estimated that only a small single-digit number of acquisitions will be subject to approval each year. Switzerland thus remains open to foreign direct investment, as the existing differentiated framework of sector-specific regulations continues to apply to private foreign investors.

Swiss investment control is of practical significance for foreign state investors, who must be prepared for the possibility that they may require approval in future if they invest in one of the critical sectors. In the case of such potentially problematic takeovers, it is advisable to make contractual provisions for a possible longer review period or non-approval.

In order to limit the burden on reporting companies, it would be welcome to develop procedural simplifications for unproblematic cases, as is sometimes done in merger control. In particular, it would be disproportionate if further information on the companies› business activities and markets (such as customers and suppliers, competitors, and market shares) had to be provided in every case.

Following a final vote in the Swiss Parliament, the law will be subject to a facultative referendum. In addition, the Federal Council will issue an ordinance containing the implementing provisions for investment screening. For these reasons, the Swiss investment control regime is expected to come into force in 2027 at the earliest.

[1] COMP M.7850, EDF/CGN/NNB Group of Companies, paras. 29-50; COMP M.7643, CNRC/Pirelli, paras. 8-21; COMP M.7962, ChemChina/Syngenta, paras. 81-88.