Federal Council sends “Lex China” to Parliament against its will
Published: Friday, Dec 15th 2023, 14:00
Updated At: Friday, Dec 15th 2023, 14:00
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The introduction of an investment review is intended to prevent takeovers of Swiss companies by foreign investors. The Federal Council adopted the dispatch on the corresponding bill on Friday. It continues to reject the instrument itself.
La Ley de Revisión de Inversiones es el resultado de una moción de Beat Rieder, miembro del Consejo de los Estados por el cantón de Valais. Uno de los motivos fue la adquisición del gigante agroquímico suizo Syngenta por la empresa estatal china Chem por 43.000 millones de dólares.
In contrast to Parliament, the Federal Council is of the opinion that there is no need for an investment review. It considers the existing rules to be sufficient. In addition, the cost-benefit ratio of an investment review is unfavorable. To date, there have been no known takeovers that have endangered public order or security in Switzerland in the past.
The draft of the so-called "Lex China" failed the consultation process. Various groups were fundamentally opposed to an investment review. They argued that restricting investment would be harmful to the economy. The encroachment on economic freedom would be significant.
Clear criteria
The Federal Department of Economic Affairs EAER then fundamentally revised the bill. The Federal Council writes that the investment review is now "targeted, effective and administratively streamlined". The new law is also compatible with Switzerland's existing obligations under international law.
According to the Federal Council, the bill should only apply if foreign investors are "state-controlled" and take over Swiss companies that are "active in a particularly critical area". Specifically mentioned are armaments, dual-use goods, power grids and power production, water supply as well as healthcare, telecommunications and transportation infrastructure.
In such cases, it should be possible to prevent takeovers "if they endanger or threaten public order or security in Switzerland". To this end, the draft law provides for takeovers of domestic companies to be subject to approval.
According to the Federal Council, the focus on state-controlled investors is justified by the fact that such investors are likely to pose potential risks or threats. The criterion of state control also includes private investors, provided they are directly or indirectly controlled by a state. Small companies are excluded.
Close parliamentary decision
According to the dispatch, responsibility for conducting the investment review is to be transferred to the State Secretariat for Economic Affairs (Seco). A decision should be made within one month as to whether the takeover can be approved or whether a review procedure should be initiated. A review procedure would therefore take a maximum of a further three months.
If there is disagreement between the administrative units involved in a review procedure or agreement that the takeover should be prohibited, the Federal Council must decide whether to approve the takeover in accordance with current plans.
Now the ball is back in Parliament's court. It issued the mandate to the Federal Council in March 2020. The proposal was narrowly approved in the National Council by 96 votes to 82 with 15 abstentions, and in the Council of States by 22 votes to 18 with 2 abstentions.
According to the Federal Council's dispatch, Switzerland is both one of the world's largest recipients of foreign investment and one of the world's largest investors abroad. The policy of openness towards foreign investment is of central importance for Switzerland as a business location and thus also for the prosperity of the Swiss population.
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