I. Overall Policy Approach

The newly adopted Swiss Investment Screening Act (the "ISA") is intended to protect Switzerland's public order and security, while maintaining Switzerland’s general openness to foreign investments. The Swiss approach is deliberately narrow compared to the FDI regimes of most other OECD jurisdictions: only acquisitions of control by foreign state-controlled investors in security-critical sectors are subject to clearance. Private foreign investors remain outside the scope of the ISA. The new ISA will not replace pre-existing sector-specific change of control regimes or FDI regulations (e.g., regarding residential real estate or the banking and insurance industry). These sector-specific regulations will continue to apply in addition to the ISA.

II. Which Transactions Are Subject to Clearance?

Acquisitions of Swiss businesses active in specified critical sectors of the Swiss economy by state-controlled foreign investors are notifiable and subject to clearance prior to implementation.

State-controlled investors as sole addressees

The central feature of the ISA is that it only applies to foreign state-controlled investors. These include foreign state administrations and agencies, companies headquartered outside Switzerland under direct or indirect control of a foreign state, asset-holding entities under direct or indirect control of a foreign state, and individuals or entities acting on behalf of a foreign state.

By contrast, private foreign investors are not covered. While this limitation reflects a policy intended to maintain the openness of Switzerland to foreign investments, it can still raise interpretative questions in practice: for example, state-controlled investors sponsoring or anchoring private equity funds or joint ventures involving governmental entities may require close review.

As in other FDI regimes of OECD countries, the Federal Council may exempt investors from states where sufficient cooperation exists to avert security risks.

Target companies

The ISA applies to businesses registered in the Swiss commercial register, regardless of their legal form, organization, or the location of their assets. The concept of "Swiss business" includes Swiss subsidiaries of foreign groups.

Transaction types

The ISA adopts the competition law concept of "acquisition of control." It covers mergers, share acquisitions, and contractual arrangements establishing control. Accordingly, low-governance minority stakes without control rights will generally fall outside the scope of the ISA. Reliance on "control" makes governance rights and vetoes under shareholders' agreements potentially critical for the determination of whether a transaction is notifiable.

III. Which Sectors Are Covered?

The ISA specifies the covered security-critical sectors and establishes quantitative thresholds to determine which acquisitions are screened:

Highly sensitive sectors (threshold: 50 FTEs or CHF 10 million annual turnover):

• Manufacturers of defense and dual-use goods critical for the armed forces, security institutions, or space programs (subject to export controls);
• Operators of critical energy and water infrastructure (electricity transmission grids, power plants ≥100 MW, high-pressure gas pipelines, water suppliers serving >100,000 residents); and
• Providers of central security-relevant IT systems and services for public authorities.

Other critical sectors (threshold: CHF 100 million annual turnover):

• University hospitals and general hospitals providing tertiary care;
• Pharmaceutical companies (research, development, production, distribution);
• Operators of significant transportation infrastructure (mainly ports and airports) and railway infrastructure;
• Operators of significant food distribution centers;
• Telecommunications network operators; and
• Operators of systemically important financial market infrastructures and systemically important banks.

The Federal Council may subject additional categories of businesses to screening and clearance for up to 12 months (renewable once) if necessary to guarantee public order and security.

IV. Substantive Review

The ISA provides that the transaction will be cleared unless it threatens Swiss public order or security.

The ISA lists indicative factors that will be considered in the assessment:

• A foreign investor's security-relevant history;
• Espionage activities or attempts;
• Sanctions under Swiss embargo or trade legislation;
• Ease of substitutability of the target's services, products, or infrastructure; and
• Access to classified information or particularly sensitive personal data.

Clearance may be conditional.

The open-ended formulation of the substantive review is consistent with international standards and seeks to give authorities significant discretion.

V. Procedure

Jurisdiction and procedure

The State Secretariat for Economic Affairs ("SECO") conducts the review process in consultation with other federal administrative agencies and after hearing the Federal Intelligence Service.

The procedure adheres to a two-phase model:

• Phase I: Within one month of receiving a complete application, SECO decides whether to clear the transaction or initiate an in-depth review, acting in coordination with other involved administrative agencies.
• Phase II: If an in-depth review is initiated, SECO decides on whether to clear the transaction within three months. If SECO or another administrative agency opposes clearing the transaction or the matter is politically significant, the Federal Council will have the power to review the transaction. Only the Federal Council may prohibit a transaction.

Deadlines may be extended under certain circumstances. If no decision is issued within the applicable deadline, clearance is deemed to be granted.

Standstill obligation

Transactions subject to clearance may not be completed until cleared. Civil law effectiveness is suspended until then. Accordingly, parties should account for potential FDI review delays when planning the transaction closing.

Advance ruling

Target businesses may request a binding advance ruling from SECO on whether a transaction is notifiable (decision within two months, valid for 12 months, renewable once).

Legal remedies

Investors and the target business (but not competitors or other third parties) have standing to appeal SECO or Federal Council decisions to the Federal Administrative Court.

VI. Ex Officio Proceedings and Sanctions

SECO may initiate proceedings ex officio if non-compliance with notification requirements is suspected.

Completing a transaction without any required clearance, obtaining clearance on the basis of false information, or violating conditions may result in sanctions of up to 10% of the worldwide turnover of the target business. The Federal Council may order remedial measures, including divestment.

Violations of information duties may be sanctioned with fines up to CHF 100,000.

VII. Entry into Force and Outlook – What Should Businesses Do Now?

The ISA is realistically expected to enter into force no earlier than 2027, following the adoption of implementing regulations.

Due to its narrow scope, the impact of the ISA should be limited in practice. Significantly fewer transactions are expected to be covered by the ISA than by other European regimes or CFIUS. Nevertheless, deal complexity may increase for a cohort of transactions. For example, sovereign wealth funds have become a very active class of investors worldwide.

For businesses, dealmakers, and investors, key takeaways are:

• Assess early whether a foreign investor could qualify as "state‑controlled" and whether the Swiss target operates in one of the specified sectors.
• Factor in timing: align the ISA procedure with merger control and other regulatory clearances to avoid closing delays.
• Consider advance rulings where deal structures or sector classifications are unclear in an effort to obtain planning certainty.
• Stay informed: monitor implementing regulations and potential state exemptions which may narrow or broaden the practical scope of the regime.