Anyone structuring a Swiss transaction today who still lists the Investment Screening Act as a footnote between merger clearance and conditions precedent is miscalculating. The Federal Council dispatch of 15 December 2023 was marketed as a “light touch” measure — a state-controlled investor perimeter, a narrow sector catalogue, SECO as a restrained regulator, no broad approval requirement for private buyers. Parliamentary deliberations have produced something rather different, and a look at EU Regulation 2019/452 and the German AWG/AWV regime shows what M&A teams have long since built into European term sheets since October 2020: bringing screening risk into the purchase price mechanics, not the annexes.

The mechanism that grew out of the Rieder motion

The origins lie in Motion Rieder 18.3021, which the Federal Council initially opposed before the Council of States referred it in June 2019 and the National Council followed in March 2020. After a preliminary draft was circulated for public consultation in 2022, the Federal Council published a bill in December 2023 that was deliberately narrower in scope than Germany’s foreign economic law: an approval requirement only where a foreign state-controlled investor acquires control over a Swiss target company in a defined critical sector. The dispatch explicitly argued that existing sector-specific rules were sufficient and that broad private-investor screening along German or French lines would be counterproductive for Switzerland as a business location — the Federal Council submitted the bill under parliamentary pressure but openly opposed an autonomous investment screening act. That institutional posture matters for future interpretation: an agency whose parent institution opposed the instrument has a built-in incentive toward narrow construction.

Parliament shifted the sector perimeter and the threshold logic during detailed deliberations. What had been designed as a narrow filter against state-directed investment in Swiss military technology evolved, through committee review and plenary votes, into a broader change-of-control mechanism with notification obligations — extending to private foreign investors as well, once a designated critical sector and the control threshold are engaged (see Parliamentary Deliberations on the Investment Screening Act, committee reports of WAK-N and WAK-S). The competent authority remains SECO; the Act provides for consultation rights of the Federal Intelligence Service (NDB) and the Competition Commission (WEKO) in cases with national security or competition law dimensions.

What the Act provides, what the implementing ordinance will determine

The Investment Screening Act has been passed by parliament (Federal Council dispatch of 15 December 2023; entry into force pending, implementing ordinance outstanding; the precise article numbers will be fixed upon publication in the Federal Gazette). The architecture as it emerges from the dispatch and parliamentary proceedings is clear: pre-closing notification by the acquirer, a standstill obligation during the review period, an approval decision with power to attach conditions, and sanctions for closing without clearance.

What the implementing ordinance will clarify are the two variables that matter to every deal: first, the precise list of critical sectors, with the decisive interpretive question of what “critical infrastructure” in the healthcare and energy sectors actually covers; second, the revenue or total-assets thresholds at which the notification obligation is triggered.

Until ordinance practice has settled, SPA drafters must work with a band of assumptions. An unduly narrow threshold assumption in the term sheet will be overturned by a broader administrative reading; an unduly wide assumption generates avoidable review work and delays closing. SECO’s investment-screening notices will be where transitional practice crystallises — until then, any clause that writes “if applicable” is an open risk position whose price nobody can quote.

What the EU has built into term sheets since October 2020

EU Regulation 2019/452 established a cooperation mechanism among member states for screening foreign direct investments on 11 October 2020. It created no uniform EU regime but accelerated the convergence of national filters. Germany has tightened the Außenwirtschaftsverordnung repeatedly since 2020: the sector catalogue in §§ 55a, 56 AWV has grown, the notification threshold has dropped to 10 percent of voting rights in particularly security-sensitive cases, and the prohibition-on-closing practice of the Federal Ministry for Economic Affairs has become plainly visible. France, Italy, Spain, and the Netherlands have built out their regimes in parallel.

The practical effect in German and French SPAs is now established market practice: long-stop dates allow for four to six months of regulatory review, MAC clauses expressly carve out regulatory conditions imposed by authorities from the buyer’s risk sphere, reverse break fees for regulatory failure unconnected to merger control are widespread, and the allocation of risk between signing and closing is negotiated as a dedicated cluster of provisions rather than as a catch-all conditions precedent list. Anyone structuring a Swiss transaction in Bern where the target touches a critical sector now faces exactly this set of negotiating issues — but without the five years of practical experience that German and French practitioners have already accumulated.

What the term sheet should look like

Three adjustments, each small in isolation but material in aggregate.

First, the conditions precedent list should treat the Investment Screening Act as a standalone condition, not an appendage to merger clearance. The review objectives differ (security and sector logic versus competition law), the authorities differ (SECO with NDB consultation versus WEKO), and the sanctions differ. A single “regulatory approvals” clause swallows the distinction and invites later disputes over the long-stop date.

Second, risk allocation for conditions attached to approval needs to be addressed explicitly. SECO may — following the German model — grant approvals with conditions: for example, divestiture obligations for particular business lines, access restrictions to sensitive technologies, or approval requirements for future transactions. Who bears that? If the condition strikes at the business rationale, it is a material adverse change in the strict sense; if it merely compels value adjustments, it is an indemnification question. Both options carry a price; silence buys an arbitration later.

Third, the representations and warranties should include a sector-classification representation by the seller — an express statement as to whether the business falls within a sector covered by the Investment Screening Act, with clear allocation of consequences if the classification shifts under the ordinance’s administrative practice. Experience with the parallel EU regimes shows that a business’s classification as a critical sector can change over the years. A classification representation at signing pushes the classification risk back to the seller, where knowledge of the business actually resides.

What is known, what remains open, what will determine the outcome

Known: the Act has been passed by parliament; entry into force and implementing ordinance are pending. Known also: Swiss administrative practice will not develop in isolation — the German and French models provide an interpretive template that SECO will likely consult when parallel proceedings are running in EU member states.

Open: the precise sector catalogue, the thresholds, the date of entry into force, and whether SECO will align itself with the Federal Council’s restrained position or with the broader parliamentary mandate. The implementing ordinance and the first approval decisions will answer that question — not before. Also open: whether transactions currently under way can be completed under the old legal framework.

Anyone acquiring a Swiss target company in a sector that is even arguably critical should bring the Investment Screening Act corridor into the term sheet negotiations — as a matter of risk allocation, not as a closing footnote.