So far, most Swiss laws concerning investments or transactions in Switzerland make no general distinction between foreign and domestic investments or transactions. Most of the above sectors (see question 2) are regulated industries and, thus, any (foreign and non-foreign) investment may be subject to a review and possibly an approval requirement. Given that there is no generally applicable Swiss act that prohibits or requires a specific screening or approval of foreign investments in Switzerland on the basis of national interest regardless of the industry sector, in question 3 we will describe the main scenarios in the above-mentioned industries (see question 2) where the national interest, in general, can decide whether or not a transaction or investment is approved by the competent authority.
The Lex Koller
The acquisition of real estate in Switzerland by foreign investors or foreign-controlled companies is subject to rather strict restrictions under the Lex Koller, in particular if residential or other non-commercial property is concerned. Hence, the qualification of real estate from a Lex Koller standpoint is important, since properties used for commercial purposes (such as offices, manufacturing facilities, warehouses and storage areas, shopping centres, shops, hotels or restaurants) can be acquired with few (or no) restrictions, while residential properties can only be acquired if an authorisation is issued. In practice, authorisations to foreign investors or foreign-controlled companies to acquire residential properties are granted on rather limited grounds. Restrictions affecting the acquisition of properties used for commercial purposes concern commercial premises that (i) contain residential parts or areas, (ii) contain land reserves on construction land, (iii) are empty, or (iv) are acquired in anticipation of a company’s expansion in the short or medium term (but with no concrete plans to build at the time of the acquisition).
The main goal of the Lex Koller is to prevent the acquisition of residential real estate by foreign or foreign-controlled companies. Both direct investments in real estate and the acquisition of even a single share in a residential real estate company are generally not allowed. Thus, the concept of an ‘acquisition’ under the Lex Koller is defined broadly and extends also to mortgage financings granted by foreign investors and banks (particularly, if certain loan to value thresholds are reached). However, in practice there still exist ways that investments in residential real estate can be achieved by foreign investors (eg, in collaboration with a Swiss partner in the context of a joint venture, who would retain effective control over the joint investment).
EU and EFTA nationals with residence in Switzerland or other third-country nationals with a valid residency authorisation (C permit) can acquire residential properties without any restriction.
Finally, the Swiss Federal Council is required to prohibit a transaction involving real property if such acquisition endangered the national policy interests. While no statistics regarding actual prohibition by the Swiss Federal Council are available (since this is very sensitive and confidential information), the Swiss Federal Council exerts its broad discretion judiciously in that respect and does not unreasonably reject a transaction.
If foreign nationals directly or indirectly hold more than half of the voting rights of, or have, otherwise, a controlling influence on, a bank incorporated under the laws of Switzerland, then the granting of the banking licence is subject to additional requirements. In particular, the corporate name of a foreign-controlled Swiss bank must not indicate or suggest that the bank is controlled by Swiss individuals or entities and the countries where the owners of a ‘qualified participation’ in a bank have their registered office or their domicile must grant ‘reciprocity’, that is:
- Swiss residents and Swiss entities must have the possibility to operate a bank in the respective country; and
- such banks operated by Swiss residents are not subject to more restrictive provisions compared to foreign banks in Switzerland.
The reciprocal requirement is subject to any obligations to the contrary in governmental treaties and it is thus, in particular, not applicable to the member states of the World Trade Organization (WTO). Furthermore, the Swiss Financial Market Supervisory Authority (FINMA) may request that the bank is subject to adequate consolidated supervision by a foreign supervisory authority if the bank forms part of a group active in the financial sector.
If a bank incorporated under the laws of Switzerland becomes foreign-controlled as described above or if, in the case of a foreign-controlled bank, the foreign holders of a direct or indirect qualified participation in the Swiss bank change, then a new special licence for foreign-controlled banks must be obtained prior to such event (see article 3(2) of the Federal Banking Act).
A participation is deemed to be a ‘qualified participation’ if it amounts to 10 per cent or more of the capital or voting rights of the bank or if the holder of the participation is otherwise in a position to significantly influence the business activities of the bank. In practice, FINMA often requires the disclosure of participations of 5 per cent or more for its assessment of whether or not the requirements of a banking licence are continuously met.
The Telecommunications Act
Subject to any international obligations to the contrary, the licensing authority may refuse to grant radio communication licences to companies incorporated under foreign law unless reciprocal rights are granted to Swiss citizens or Swiss companies by the respective foreign states (see article 23(2) of the Telecommunications Act).
The Nuclear Act
Similar to the situation under the Telecommunications Act, subject to any international obligations to the contrary, the licensing authority may refuse to grant general licences to companies incorporated under foreign law unless reciprocal rights are granted to Swiss citizens or Swiss companies by the respective foreign states (see article 13(2) of the Nuclear Act). In addition, a foreign company must have a registered subsidiary in Switzerland.
The Radio/TV Act
In the absence of any international obligations to the contrary, a legal person controlled from abroad, a domestic legal person with foreign participation or a natural person without Swiss citizenship may be refused the broadcasting licence if the corresponding foreign state does not guarantee reciprocal rights to a similar extent to Swiss natural persons and companies (see article 44(2) of the Radio/TV Act).
The Aviation Act
Similar to the situation under the Telecommunications Act, the licensing authority may refuse to grant licences for the professional transport of passengers or goods to companies incorporated under foreign law unless reciprocal rights are granted to Swiss citizens or Swiss companies by the respective foreign states (see article 29(3) of the Aviation Act).
Further, regarding the licence to operate an undertaking headquartered in Switzerland and engaged in the aviation business for the professional transportation of passengers and goods, the Swiss Federal Council may determine to what extent such undertaking needs to be under the control of Swiss citizens (see article 27(1) of the Aviation Act). Following article 103(1)b of the Swiss Aviation Ordinance - and subject to intergovernmental agreements pursuant to which Swiss and foreign individuals or companies are to be treated equally - it is required that a Swiss headquartered undertaking is under actual control of Swiss citizens and that a majority share of such undertaking is owned by Swiss citizens. Where an aviation undertaking organised in the form of a Swiss stock corporation is concerned, more than half of the share capital must exist in the form of registered shares of which the majority is owned by Swiss citizens or by other Swiss-controlled trading companies or cooperatives - again subject to intergovernmental agreements pursuant to which Swiss and foreign individuals or companies are to be treated equally (see article 103(1)c of the Swiss Aviation Ordinance).
While, as shown above, there are various industries in which the foreign ownership of an acquirer is to be taken into account when a particular transaction or investment is reviewed, in none of these industries or sectors is national interest the sole decisive criteria for the permissibility of such a transaction or investment (except under the Lex Koller where the main goal is actually to avoid the ‘selling off of the Swiss homeland’ and where the Swiss Federal Council may, in its discretion, take into account national policy interests). As it would go beyond the scope of this overview to answer the following questions with respect to all industries and sectors we focus on those industries and sectors (namely the banking and the real estate industry), which we believe are those where the most foreign investments occur.
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