Openness to Foreign Investment

The Swiss welcome foreign investment and accord it national treatment. Foreign investment is being more aggressively courted, and is not hampered by any significant barriers. The federal government adopts a relaxed attitude of benevolent noninterference towards foreign investment, allowing the 26 cantons to set major policy, confining itself to creating and maintaining the general conditions that are favorable both to Swiss and foreign investors. Such factors include economic and political stability, a transparent and fair legal system, reliable and extensive infrastructure, and efficient capital markets. Some of the cantons have programs to encourage foreign investment (this is described below). Many U.S. firms including Dow, Philip Morris, General Motors, Gillette, and Procter & Gamble, Baxterbase their European or regional headquarters in Switzerland, drawn to the country's low corporate tax rates, exceptional infrastructure, and productive and multilingual work force.

Many of Switzerland's 26 cantons make significant use of fiscal and other incentives to attract companies to establish operations and invest in their jurisdictions. Some of the more aggressive cantons will even waive taxes for new firms for up to ten years. Individual income tax rates vary widely from the 12% national average rate, from about 7% in Zug, to about 15% in Jura. Corporate taxes vary depending upon the many different tax incentives. Zurich, which is sometimes used as the basis for corporate location tax calculations, has a rate of around 25%, which includes council, cantonal, and federal tax.

The major laws governing foreign investment in Switzerland are the Swiss Code of Obligations, the Lex Friedrich/Koller, the Securities Law, and the Cartel Law. There is no screening of foreign investment, nor are there any sectors or geographical preferences or restrictions except as described below in the section on performance requirements or incentives.

With the exception of areas considered essential to national security, such as hydroelectric and nuclear power, operation of oil pipelines, transportation of explosive materials, and operation marine navigation, national treatment is granted to foreign investors.

Telecoms:

The 1998 Telecommunications Act brought liberalization and privatization to the Swiss telecommunications sector, opening the market to investment and competition from foreign firms. More than fifty Swiss and foreign companies now offer fixed line services. Three different operators, Swisscom, Sunrise (TeleDanmark), and Orange (France Telecom) share the mobile telephone market, and each company also owns third generation mobile telephony licenses (UMTS). Until September 2005, Southern Bell Corporation’s 9.5 percent stake in Sunrise’s parent company represented the only significant U.S. presence in the Swiss telecommunications market. But later in the month, the US Liberty Global purchased 100% of the shares of Cablecom, the largest cable operator, and second largest operator behind Swisscom. A stiff competition between the two operators has already led to a sharp drop in fixed line rates. The incumbent state monopoly – Swisscom – continuously uses the courts to block the Swiss government’s efforts to open up the market to competition. But in May 2006, the Federal Court successfully forced Swisscom, after years of legal wrangle, to drop its interconnection prices by 30 percent and pay Sfr.35’000 in damages to Verizon . In July, Swisscom was fined by the Communication Commission (ComCom) to pay back Sfr1 million to Cablecom for excessive interconnection fees on its fixed line network.

In March 2006, the parliament amended the Telecom Act in order to force Swisscom unbundled its local loop. Unfortunately, the forced unbundling of Swisscom’s last mile will only last four years, in order to give enough time for other telecom providers to invest in the local infrastructure. The reform will however not extend to other technologies, such as Mobile and WiFi. The bill also requires that broadband access be offered to Swisscom competitors at cost-oriented prices over a period of six years, after which all operators are expected to afford the broadband investment themselves. Swisscom already lowered its 2005 interconnection prices by 7 percent and announced a further 5% drop for 2006. Estimates value Swisscom’s annual earnings deriving from interconnection facilities to SFr120-150 million ($92-115 million) or 2.7% of total sales.

In December 2007, ComCom blamed Swisscom for levying excessive interconnection charges for the fixed line network between 2004 and 2006. In 2004, two competitors - Colt Telecom SA and Verizon Switzerland - had complained that Swisscom's charges were 15-20% too high, and the firms will now be able to reclaim 300 million francs in excess charges.

In October 2004, ComCom had opened another investigation against Swisscom’s broadband access pricing on the ground it might give preferential rates to its internet subsidiary “Bluewin” against its competitors. Because of the last mile monopoly, these companies have no choice but to deal with Swisscom. ADSL technology uses normal telephone lines for broadband access. This is not the first time the competition watchdog has investigated Swisscom's broadband practices. In 2003, it ordered Switzerland's biggest telecommunications company to stop giving preferential discounts to Bluewin.

Swiss government agencies use competitive bids for procurement and comply with international rules on procurement. According to the July 2002 revised ordinance on public procurement, all private or state-owned companies such as utilities, transportation, communications, defense, and construction that submit tenders for government procurement must make their bids public if the contract exceeds $211,381 (SFr 250,000).. Total procurement expenses are valued at approximately SFr. 31 billion ($23 billion) and are split between the federal government (19%), the cantons (38%) and the local communities (43%). Cantonal and communal governments carry out many public projects. Their procurement is 2-3 times that of the federal government. In September 2004, The Swiss government initiated a series of informal consultations to amend the Swiss Federal Law on Public Procurements. This process should ultimately simplify the many different cantonal tender procedures. Contrary to cantonal and communal practice, federal authorities are not required to inform unsuccessful bidders of the tender accepted or reasons for the choice. In general, quality and technical criteria are as important as price. Cantons and communes usually prefer local suppliers because they can recover part of their outlays through income tax. Foreign firms may be required to guarantee technical support and after-sale service if they have no local office or representation. Access to public tenders by foreign bidders may also be prevented because of obscure bidding conditions applied across the cantons.

Under the WTO Public Procurement Agreement, Swiss cantons are allowed to implement the agreement independently from federal intervention, which sometimes leads to disparities across cantons. Under the current Federal Law on Public Procurement, public tender procedures apply when the size of the contract exceeds Sfr248,950 ($200,766), whereas WTO obligations set the tender threshold at Sfr383,000 ($308,870).

Notices of Swiss government tenders are published in the Swiss Official Gazette of Commerce (www.shab-online.admin.ch) and on the on-line Swiss Public procurement website SIMAP.CH www.simap.ch (French, German, and Italian versions only). Tender documents can be obtained free from the gazette's website. While there is no requirement to have a local agent to bid, it is advantageous when equipment tenders include training, service or parts.

Conversion and Transfer Policies

There is complete freedom of transfer of investment income, royalties, and repatriation of capital. There are no Swiss government policies or laws, which would regulate or limit the inflow or outflow of capital. Foreign exchange markets are free, and access to foreign exchange is uncontrolled. Swiss foreign exchange markets are highly developed and efficient. There is no need for a parallel system for the repatriation of capital or profit.

Expropriation and Compensation

Property rights are assured by the Swiss constitution. Within the framework of their constitutional powers, the federal and cantonal governments can, through a legal process, expropriate or restrict property for reasons of public interest. In the event of expropriation or property restriction, full compensation must be made. An independent court, as required by the European Human Rights Convention, settles disputes. As a general rule, recourse to expropriation is taken only in cases involving major public construction projects, such as highways, railroads or airports. The Embassy is unaware of any major expropriations or restrictions in the recent past involving foreign investments.

Dispute Settlement

The Embassy is not aware of any significant investment disputes that have occurred in recent years. Swiss legal provisions, which include the Code of Commercial Obligations and the 1994 revised bankruptcy law, provide sufficient protection of secured interests in property.

Where American citizens are involved in disputes (with private individuals or business enterprises) and the controversy cannot be settled amicably, the normal recourse is to seek remedy provided by the law of the appropriate cantonal jurisdiction. Foreign lawyers may not act as "attorneys at law" unless they are admitted to a Swiss bar. There are, however, no restrictions to practicing as a "legal consultant." A U.S. attorney who is not admitted to a Swiss bar may also join a Swiss law firm as an "of counsel" member. American diplomatic or consular officers may not act as attorney, agent, or representative in a fiduciary capacity in such matters. If legal action is to be undertaken in Switzerland, a local lawyer should be involved (either directly or via an American attorney). There are differences in the legal systems in Switzerland and America, and ignorance of those differences could jeopardize a case almost before it begins. As one example, in the United States a lawyer can serve papers on another person directly, but not in Switzerland. Lawyers must first file a complaint with the court and the court then decides whether to serve or not. The Martindale-Hubbell Law Directory contains an extensive list of lawyers licensed to practice in Switzerland. The Embassy's Consular Section, American Citizens’ Services, also maintains a list of local English-speaking lawyers. The phone number is (41-31-) 357-7234 fax number is (41-31) 357-7280. Please specify the canton for which the list is required when calling.

The only methods for a non-Swiss court or lawyer to obtain testimony or to serve process in civil matters in Switzerland are through the Hague Convention on taking of Evidence Abroad in Civil or Commercial Matters, the Hague Convention on the Service Abroad of Judicial and Extra judicial Documents in Civil and Commercial Matter, and through a letter interrogatory. For information on this rather cumbersome legal process, contact either the Embassy Bern Consular Section or the Office of Citizens Consular Services in the Department of State (202) 647-5226. Switzerland has been a member of the International Center for the Settlement of Investment Disputes (ICSID) from its inception in 1966.

The effects of bankruptcy on creditors' rights are set out in articles 208 to 220 of the Swiss Federal Debt Prosecution and Bankruptcy Statute. The opening of bankruptcy proceedings has the consequence that all obligations of the debtor become due against the bankrupt estate with the exception of those which are secured by mortgages on real estate. The creditor can claim the amount of the debt and interest up until the date of the opening of bankruptcy proceedings, and the costs of enforcement (article 208 paragraph 1). Claims that do not have as their object a sum of money are converted into a monetary claim of corresponding value (article 211 paragraph 1). The order of distribution to the creditors is prescribed by article 219. Enforcement is handled by the canton with jurisdiction. Under the revised the Code of Commercial Obligations now in Parliament, shareholders will have the right to sue board members or managers if they fail to publish adequate information of the financial situation of the company, or for any undue benefits they may have perceived.

An English brochure on the Swiss Federal Debt Prosecution and Bankruptcy Statute can be downloaded at www.wenger-plattner.ch/documents/wp_nachlass_e.pdf The full Federal Debt Prosecution and Bankruptcy Statute (in German, French and Italian) can otherwise be downloaded from the Swiss government's website at www.admin.ch/ch/d/sr/c281_1.html

All monetary judgements are made in Swiss Francs.

Performance Requirements and Incentives

The government offers few large-scale incentives to prospective investors, and those that exist are open to foreign and domestic investors alike. The principal incentives provided by the federal government consist of low-interest loans to promote the hotel and catering/restaurant industry in remote mountain regions.

A federal incentive program designed to attract investment to "economically fragile" regions of Switzerland (generally in the Italian and French linguistic regions) expired in June 1996 and was not renewed. A more decentralized system entered into force in 1998, with federal loan guarantees to economically troubled cantons while devolving much of the authority to administer the funds and create incentive programs to the cantonal governments. Such incentives may include loan guarantees, tax incentives and interest subsidies. The cantonal government must match federal government commitments for each project. Interest subsidies are granted for a maximum of five years and cannot exceed one quarter of the usual commercial interest payments. Another federal program encourages entrepreneurship by granting tax breaks and incentives to both venture capital funds and individuals that invest in start-ups. During 1996 and 2003, the Federal Government supported 297 projects in 17 cantons; the areas covered represented slightly more than one quarter of the Swiss population. These projects generated total investments worth $2.3 billion (Sfr2,8 billion) and created approximately 11,900 jobs. While loans guaranties played a minor role in the program, fiscal subsidies have been largely successful when attracting foreign companies. In total, the annual cost for each work unit created amounted to Sfr23,000 ($18,548), an amount equivalent to the programs in place in neighboring countries.

Some cantons offer investment incentive programs for domestic as well as foreign investment, in particular in rural areas. Indeed, priority is often given to foreign businesses, which bring new high technology product lines. The most common incentives are: subsidies or loans by cantons for the development of industrial sites; cantonal guarantees on bank loans; capital loans at below-market interest rates; grants for facilities conducting research and development projects; subsidies to defray certain investment costs and to finance staff training; exemptions from taxes on profits and capital gains for specific periods; and liberal depreciation allowances.

Performance requirements, whether linked to incentives or other investment-related conditions, do not exist. There are no requirements to source locally, export production, or derive foreign exchange from production. There is no requirement that nationals own equity in foreign investments, that the share of foreign equity be reduced over time, or that technology be transferred on certain terms.

There are no conditions on permission to invest related to geographical area (with the exception of investment incentives noted above), percentage of local content or equity, import substitution, export requirements or targets, employment of nationals, technology transfer, or local financing.

Government financed or subsidized research and development programs are open to foreign companies with operations in Switzerland. Major U.S. companies have regularly participated in research projects funded by the Swiss government.

Visas and residence and work permits are strictly controlled in Switzerland. The country recently changed from a three-tier system for issuing work permits to a two-tier system. Under the previous system, citizens of EU countries were in the first tier and enjoyed liberal access to work permits. The second tier was comprised of the U.S., Canada, Australia and New Zealand and citizens of these countries generally received favorable consideration for work permits. The "rest of the world" made up the third tier and these nationalities generally had the most difficulty obtaining work permits except in cases of very highly qualified applicants. Under the new system, the second and third tiers are combined. While on the surface this would appear to be a negative development for U.S. work permit applicants, Swiss officials are adamant that the impact on U.S. work permit applicants should be negligible as these applicants are generally among the most highly qualified of all national groups.

In the past, foreigners who did not have a residence permit for Switzerland, or companies based outside of the country, could find it difficult to acquire property for the purpose of establishing a business (or for purchase of a residence) due to the so-called "Lex Friedrich." This situation has eased considerably with the recent enactment of the "Lex Koller" which now means that special permits are generally not required for foreign entities wishing to acquire property for the purpose of operating an economic activity. Following the implementation of the Swiss-EU bilateral agreement on the free movement of persons on June 1, 2002, all restrictions on EU and EFTA citizens have been removed. Cantons have also been granted extensive decision making powers when allowing foreigners to buy a property. On November 2, 2005, the Swiss government once again supported a Parliamentary call aimed at abolishing the Lex Koller by 2009-2010. Since 2005, foreigners are allowed to buy stocks of Swiss listed real estate companies. As a result of foreign investors, real estate prices on business premises and hotels have increased by 10-25%.

There are no discriminatory export and import policies which seriously affect foreign investors. Products must be labeled in all three official languages (German, French, and Italian). All drugs (prescription and over-the-counter) must be approved and registered by Swissmedic, the Swiss Agency for Therapeutic Products.

Import duties are generally low; fewer than 3% for most raw materials and industrial products and preferential duties are offered to a large number of developing countries.

Right to Private Ownership and Establishment

Foreign and domestic enterprises may engage in all forms of remunerative activities and may freely establish, acquire and dispose of interests in business enterprises. However, the following legal restrictions apply:

Corporate boards - - There are no laws authorizing private firms to limit or prohibit foreign investment or participation. The board of directors of a company registered in Switzerland must consist of a majority of Swiss citizens residing in Switzerland. At least one member of the board of directors authorized to represent the company (i.e., sign legal documents) must be domiciled in Switzerland. If the board of directors consists of a single person, this person must have Swiss citizenship and be domiciled in Switzerland. Foreign controlled companies usually meet these requirements by nominating Swiss directors who hold shares and perform functions on a fiduciary basis. Mitigating these requirements is the fact that the manager of a company need not be a Swiss citizen and company shares can be overwhelmingly held by foreigners (except for banks). The establishment of commercial presence by persons or enterprises without legal personality under Swiss law requires an establishment authorization according to cantonal law. The aforementioned requirements to not appear to pose any hardship or impediment for U.S. investors.

Hostile takeovers - - Swiss corporate shares can be issued both as registered shares (in the name of the holder) or bearer shares. Provided their shares are not quoted on the stock exchange, Swiss companies may in their articles of incorporation impose certain restrictions on the transfer of registered shares to prevent unfriendly takeovers by domestic or foreign companies (article 685a of the Code of Obligations). Unwelcome takeovers can also be warded off by public companies, but legislation introduced in 1992 has made this practice more difficult. Public companies must now cite in their statutes significant reasons, relevant for the survival, conduct and purpose of their business, to prevent or hinder a takeover by an outsider. As a further measure, public corporations may limit the number of registered shares that can be held by any one shareholder to a certain percentage of the issued registered stock. As practice has shown, most corporations limit the number of shares to 2-5% of the relevant stock. Under the public takeover provisions of the Stock Exchange and Securities Law (for which the implementing decree entered into effect in 1997), a formal notification is required for public takeover offers for Swiss companies on the Swiss exchange. Additionally, an "opt out" clause is available for firms which do not want to be taken over by a hostile bidder, but such opt outs must be approved by a super-majority of shareholders and well in advance of any takeover attempt (i.e., not to thwart such an attempt which has already been launched).

Banking - - Those wishing to establish banking operations in Switzerland must obtain prior approval from the Swiss Banking Commission. This is granted if the following conditions are met: reciprocity on the part of the foreign state; the foreign bank's name must not give the impression that the bank is a Swiss one; the bank must adhere to Swiss monetary and credit policy; a majority of the bank's management must have their permanent residence in Switzerland. Otherwise, foreign banks are subject to the same regulatory requirements as domestic banks. Banks organized under Swiss law have to inform the Banking Commission before they open up a branch, subsidiary or representation abroad. Foreign or domestic investors have to inform the Banking Commission before acquiring or disposing of a qualified majority of shares of a bank organized under Swiss law. In case of exceptional temporary capital outflows threatening Swiss monetary policy, banks can be obliged to seek approval from the Swiss national bank to issue foreign bonds or other financial instruments that would cause capital outflow.

Insurance - - A federal ordinance requires the placement of all risks physically situated in Switzerland with companies located in the country. Therefore, it is necessary for foreign insurers wishing to provide liability coverage in Switzerland to establish a subsidiary or branch there.

With the exception of those few sectors in which Swiss-owned enterprises have been granted a legally established monopoly (i.e., railways, fire insurance, and utilities), non-discriminatory competition between foreign and domestic commercial entities prevails.

Cartels and Monopolies - - Foreign investments are subject to review by the Competition Commission if the value of the investing firm's sales reaches certain worldwide or Swiss-market thresholds. An investment or joint venture by a foreign firm could be disapproved on grounds of competition policy, although there is no evidence that this possibility will have a discriminatory effect.

Protection of Property Rights

Secured interests in property are recognized and enforced, and mortgages are widely used. The legal system effectively protects and facilitates the acquisition and disposition of all property rights. Switzerland is a member of all major international intellectual property rights conventions and was an active supporter of a strong IPR text in the GATT Uruguay round negotiations. Switzerland has one of the best regimes in the world for the protection of intellectual property, and protection is afforded equally to foreign and domestic rights holders.

Patent protection is very broad, and Swiss law provides rights to inventors that are comparable to those available in the United States. Switzerland is a member of both the European Patent Convention and the Patent Cooperation Treaty, making it possible for inventors to file a single patent application in the United States (or other PCT country, or any member of the European Patent Convention) and receive protection in Switzerland. If filed in Switzerland, a patent application must be made in one of the country's three official languages (German, French, Italian) and must be accompanied by detailed specifications and if necessary, by technical drawings. The duration of a patent is 20 years. Patents are not renewable beyond the original 20-year term, but patent term restoration is possible for products, such as pharmaceuticals, that require an extensive testing period prior to marketing. According to the Swiss Patent Law of 1954, as amended, the following items cannot be covered by patent protection: surgical, therapy and diagnostic processes for application on humans and animals; and inventions liable to disturb law and order and offend "good morals." Nor are patents granted for species of plants and animals and biological processes for their breeding. In virtually all other areas, coverage is identical to that in the United States. Should an American firm have concerns about possible patent infringement in Switzerland, access to the courts is readily available and there is a well-established and highly regarded patent bar. In December 2006, the National Council (lower chamber of parliament) adopted a revision of the Swiss patent law that provides for the protection of patents on bio-technologies and is EU compatible. But many environmental groups remain opposed to the project. The bill will be passed over to the council of States (upper chamber of parliament) next year.

Parallel imports of products covered by copyright and trademark protection are subject to international exhaustion treatment. Parallel imports of generics drugs are legal under specific registration and safety guidelines. Discussions over the possible extension of international or regional exhaustion rights to patented products have so far encountered a lukewarm response from conservative political parties, the pharmaceutical industry and the government. After a first setback in 2004 when the government had concluded that the benefits of a regional exhaustion would be marginal to the Swiss economy, the government accepted in November 2006 to reconsider the unilateral adoption of the EU “Cassis-de-Dijon” principle. If adopted, all EU products could be imported in Switzerland without having to go through the burdensome Swiss certifications and Swiss languages requirement process. Retail prices are on average 20-40% higher than in the EU and could drop by 10%. Possible exceptions have been already reduced from 129 to 40, but hurdles remain on the labeling of alcohol contained in Alcopops, the Swiss ban of phosphates in washing machine powders, the real origin of “EU meat”, and on the stringent Swiss generic food production requirements. The consultation process will expire on March 16, 2007, after which a draft revision of Federal Law on Technical Barriers to Trade will be sent to parliament for approval. In the meantime, the National Council (Lower Chamber of Parliament) adopted in December to allow international parallel imports for fertilizers and tractors. If confirmed by the Council of States (Upper Chamber of Parliament) next year, Swiss farmers will be allowed to import tractors produced in China or India and save up to $41 million (Sfr50 million). German fertilizer could save another $20 million (Sfr25 million). A more general bill on parallel imports will be presented by the Justice Ministry to Parliament by end 2007.

The Swiss copyright law explicitly recognizes computer software as literary works and establishes a remuneration scheme for private copying of audio and video works, which distributes proceeds on the basis of national treatment. Owners of television programming are fully protected and remunerated for rebroadcast and satellite retransmission of their works, and rights holders have exclusive rental rights. Collecting societies are well established. Infringement is considered a criminal offense. The term of protection is life plus 70 years. In order to comply with the WCT and WPPT WIPO treaties it has already signed, the government is currently drafting new amendments to the existing copyright law, which if adopted by parliament could be enforced by January 2007. The audiovisual industry has recently used this opportunity to express its strong reserves against the scope of the exception for private copying, and the possibility of circumvention of technological measures without committing an infringement. Under Swiss law, anyone found guilty of infringing the copyright laws can be fined up to several thousand francs and, in some cases, may end up in prison. Carrying out an illegal copy with the aim of selling or sharing it without authorization is illegal, and as a result is being automatically prosecuted. Internet providers or joint patent holders can also be considered as accomplices if they fail to carry out the required measures to prevent such illegal sales. But experts believe it is not easy to trace offenders. In general, Swiss legislation applies only to illegal acts committed within our national boundaries, which means that a Swiss user knowingly purchasing or downloading pirated audiovisual work from a foreign website cannot be prosecuted by the authorities. Also, the downloading or copying a file from the internet for purely private purposes is allowed, and these files may be passed over to friends and family members. The industry is particularly concerned that there is little willingness among consumer groups and the government to narrow the scope of personal use to avoid blatant abuses.

The primary concerns of the industry are that the revision widen the scope for exemptions, thus depriving the copyright owners of their rights; that the collection of royalties through the collecting societies is inadequate because they pays back only 60% of the royalties to the producers who also use these funds to subsidize Swiss artist who would have little chance otherwise to survive in a free market; and also because the revision offers little protection to the industry digital encryption programs (DRMs) as a result of the wide Swiss definition of “private copying”. Public broadcasters will be also allowed to keep industry performances in their archives and charge individual users for their access, thus bypassing the industry’s online sales.

According to the Business Software Alliance (BSA), software piracy continues to be a problem. This appears to be largely due to illegal copying by individuals and some small and medium-sized establishments. However, software piracy appears to have decreased in recent years. While the rate of software piracy in Switzerland for 2005 continued its downward trend to 27%, CD/DVD piracy is still high with 35% .In monetary terms, this represents an estimated loss of $372 million and $27.6 million respectively. The Swiss audiovisual industry lobby SAFE started a campaign aimed at suing individual users in order to increase the awareness the legal risks and potential lawsuits associated with piracy. Because internet providers often refuse to provide the identity of the copyright violators, citing data protection concerns, the industry was forced to lodge 70 criminal lawsuits during the year 2005 to enforce their rights. In November 2006, the European Commission made public that 5% of the pirated goods entering the EU were transiting through Switzerland. In details, the EU estimated that 19% of CDs/DVDs, 8% of toys and games, 5% of electrical devises and 2% of food stuffs were illegally imported from Switzerland.

Trademarks are also well protected. Switzerland recognizes well-known trademarks and has established simple procedures to register and renew all marks. The initial period of protection is 20 years. Service marks also enjoy full protection. Trademark infringement is very rare in Switzerland -- street vendors are relatively scarce, and even they tend to shy away from illegitimate or gray market products.

The Swiss also protect layout designs of semiconductor integrated circuits, trade secrets, and industrial designs. Protection for integrated circuits and trade secrets is very similar to that available in the United States, and protection for designs is somewhat broader. Because of the complexities involved in ensuring protection in each of these areas, individuals and corporations seeking protection are advised to engage the services of a lawyer specialized in these fields.

To bring Switzerland into conformity with its TRIPS commitment dating from the WTO Uruguay Round, Swiss authorities have established a 10-year protection period for test data submitted as part of the pharmaceutical approval process.

Protected Designation of Origin - Switzerland and the EU both recognize Protected Designation of Origin (PDO labels) as an "essential element" in the liberalization of Agricultural products, and are currently negotiating a bilateral recognition agreement on designations of origin. Currently, labels awarded to wines and spirits are recognized under WTO rules. To date, 21 products already benefit from the PDO label.

Transparency of Regulatory System

Regulations affecting both local and foreign investors in Switzerland are transparent and evenly applied in a nondiscriminatory manner.

In the past, cartels were endemic to the Swiss economy. Companies in a number of industrial and service branches had organized themselves, through trade and industry associations, into horizontal and vertical cartels. Such arrangements existed in the market for prescribed medicines, sanitary ware, kitchen equipment, optical products, books, beverages, food retailing, dietary products, and many other sectors of the economy.

The Swiss cartel law specifically allows cartels unless the government concludes that they are harmful to society or the economy. On June 12, 2003, the Swiss Parliament adopted a revised competition bill, which later entered into force on April 1, 2004. The most significant improvements in the revised law include the authority to sanction anticompetitive behavior without prior warning, with a maximum fine of ten percent of a firm's total combined revenue for the past three years. Whistle blower companies that cooperate with regulators are eligible for a reduced fine (leniency program). The transition period for adapting to the new law ended on April 1, 2005, after which companies faced fines. According to IMF and OECD reports, Switzerland's gross domestic product could grow by an extra 0.5-0.8 % a year if cartels were eliminated.

In general, the Competition Commission considers vertical agreements with less than 20% of market share as insignificant, whereas others potentially face a fine. Cartels with over 50% of market share will most definitely be fined. Restrictions on the sale of components or spare parts are also considered as such and generally are already unlawful.

A number of administrative requirements restrict retail operations in the domestic market. Some of these are planning regulations, local building codes, advertising restrictions, standards for equipment, approval procedures, and opening hours for shops, to name but a few. Such measures are non-discriminatory, although their effect can be to limit possibilities for large discount retailers. Bureaucratic procedures are numerous but efficient, transparent, and nondiscriminatory.

A recent independent study nevertheless highlighted the wide discrepancies in efficiency that exist between the country's many cantonal administrations. While Zurich, Basel, Bern, Jura, Valais, and Neuchatel get full marks for their cost-efficient services, including public access to government services on the internet, other cantons such as Geneva and Vaud are criticized for being too bureaucratic, unfriendly and for taking twice as much time and money to deliver the same set of services. For example, a work permit costs 200 francs in Lausanne and is delivered after 41 days, whereas Zurich charges 65 francs, and delivers it in 12 days.

Switzerland is number one in the 2006 Global Competitiveness Report for the first time, reflecting the country’s sound institutional environment, excellent infrastructure, efficient markets and high levels of technological innovation. The country has a well developed infrastructure for scientific research, companies spend generously on R&D, intellectual property protection is strong and the country’s public institutions are transparent and stable.

The top ranking of Switzerland shows that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation, are a successful strategy for boosting competitiveness in an increasingly complex global economy. Business activity benefits from a well-developed institutional framework, characterized by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions. Excellent infrastructure is an additional positive feature of the business environment. The indicators also point to the rapidly growing importance of higher education and training as engines of productivity growth.

Efficient Capital Markets and Portfolio Investment

The efficiency of the Swiss capital market is well demonstrated by the role of Switzerland as one of the leading financial centers in the world. The Swiss franc denominated foreign bond market is one of the largest markets for foreign borrowers, and Zurich is one of the largest gold trading centers in the world. There are no restrictions on the purchase or sale of foreign currencies and equities. Residents and non-residents may conclude foreign exchange contracts, whether of a commercial or financial nature, in all currencies. Foreigners and Swiss nationals can make any "forward transactions" at prevailing market rates. Payments for imports from all sources may be made freely, and exporters can freely transfer their proceeds. No legal impediments apply to payments for, or receipts from, invisibles. The repatriation of invested capital is unrestricted. The Swiss credit market is open to foreign investors without any restrictions, and at the same terms and conditions as for Swiss investors. A variety of credit instruments are available to the private sector.

To prevent the misuse of its very liberal market framework, provisions to regulate certain aspects of portfolio investment are continuously updated. One important firewall established by the Swiss banking industry is the 1997 Due Diligence Convention, under which banks must identify the beneficial owner of the invested funds. The Federal Banking Commission (EBK) updates the 1997 Due Diligence Guidelines every five years. The latest set of EBK amendments, which entered into force July 1, 2003, ordered Swiss banks to abandon anonymous numbered bank accounts, keep banking records ten years after the closing of an account, and to refrain from actively assisting customers to evade tax.

Nevertheless, widely used investment techniques still permit customers to hedge their investments against tax exposure. The EBK guidelines also increased the banks' awareness of Personally Exposed Persons (PEPs), such as well-known foreign political figures. In addition, the guidelines are expected to deter corruption through several risk assessment criteria (name of the customer, nationality, country of residence, and business activity). The EBK guidelines apply to domestic and foreign banks based in Switzerland and to Swiss banks' subsidiaries abroad. TThe Swiss penal code explicitly recognizes money laundering as a criminal offense, as is membership in, or support of a criminal organization. The change in the law facilitates confiscation of illicitly acquired assets without having to establish an exact linkage between a given asset and a specific crime. Money laundering regulations extend to non-banking financial institutions and require reporting suspicious transactions. The Swiss Parliament has ratified two U.N. Conventions against Terrorism Financing and Terrorist Bombing.

Foreign investment is not restricted by "cross-shareholding" or "stable shareholder" arrangements. There is no discrimination against foreign investors, except for those limitations cited under the section "right to private ownership and establishment." Special measures available to Swiss firms to defend against hostile takeovers are covered under the above section as well.

There are no private or government efforts to restrict foreign participation in industry standards setting. There are no other practices by private firms to restrict foreign investment, participation, or control in or of domestic enterprises.

Political Violence

Switzerland has long been characterized by political and social stability and there are no indications that this will change.

Corruption

Switzerland has an effective legal and policy framework to combat domestic corruption. Laws are enforced effectively. U.S. firms investing in Switzerland have not complained of corruption. Corruption is not pervasive in any area or sector of the Swiss economy. Switzerland maintains effective investigative and enforcement procedures to combat domestic corruption. Giving or accepting bribes within Switzerland is a crime subject to criminal and civil penalties, including imprisonment up to five years.

Switzerland signed the OECD Anti-Bribery Convention in 1997 and it entered into force in the country on May 1, 2000. In February 2001, Switzerland signed the Council of Europe's Criminal Law Convention on Corruption and it signed the UN Convention against Corruption in December 2003. In order to implement the Convention, the Parliament amended the Penal Code to make bribery of foreign public officials an offense (Title Nineteen "Bribery", Articles). The amendments entered into force on May 1, 2000. In accordance with the revised 1997 recommendation, Parliament amended the legislation on direct taxes of the Confederation, cantons and townships so as to prohibit the tax deductibility of bribes. The amendment of the Tax Code became effective on January 1, 2001.

As part of the Council of Europe's Criminal Law Convention on Corruption and its additional protocol, the Swiss Justice Ministry announced in August 2003 that the Swiss penal code would be amended so that foreign diplomatic staff and members of international organizations could be brought to court if they accepted bribes. A draft legal amendment is now circulating for consultations among civil society representatives and will be submitted to Parliament for adoption.

In 2003, the Swiss cabinet issued concrete guidelines to combat corruption among government officials. Under the recommendations, gifts should generally be declined, but those worth less than SF 100 may be accepted. Staff is also being urged not to accept anything that would "challenge their independence and capacity to act." The guidelines also call for better internal control systems and include recommendations on how to protect whistleblowers.

On March 31, 2006, Switzerland ratified the Council of Europe's Convention on Corruption. While Swiss legislation conforms to many aspects of the convention, it does not comply with them all. The latest amendments apply to the private sector, where so-called passive corruption – the accepting of bribes - and accepting money from foreign public officials would become criminal offences. Prosecutions will however not be automatic, and complaints will have to be filed before legal action can be taken. The justice minister, Christoph Blocher, said that joining the convention would enable Switzerland to pursue cross-border investigations into those suspected of corruption. He said that while Switzerland was one of the least corrupt countries, isolated cases of bribery still occurred.

On March 31, 2006, Switzerland ratified the Council of Europe's Convention on Corruption. While Swiss legislation conforms to many aspects of the convention, it does not comply with them all. The latest amendments apply to the private sector, where so-called passive corruption – the accepting of bribes - and accepting money from foreign public officials would become criminal offences. Prosecutions will however, not be automatic, and complaints will have to be filed before legal action can be taken. The justice minister said that joining the convention would enable Switzerland to pursue cross-border investigations into those suspected of corruption. He said that while Switzerland was one of the least corrupt countries, isolated cases of bribery still occur.

On September 21, 2007, the Federal Council also approved the 2003 UN Convention against Corruption. The parliament will have to approve it in 2008 but no significant changes will take place since the passive and active corruption of public servants is already considered as a crime under the Swiss Criminal Code (Art. 322)

In November 2007, Transparency International (TI) Switzerland said Switzerland was the export nation most effective at preventing bribery in its companies. Switzerland is ranked seventh globally with a score of 9.1 out of ten. TI also regretted that Switzerland had no transparency laws on political party financing. According to the organization's anti-corruption report, Switzerland did well when it came to illegal political donations and the fight against money laundering. But the country fell down when it came to "policy consequences of legal political donations", achieving only an average score. Transparency International also reports that the problem lies mainly with minor incidents of corruption, especially in the area of public procurement. While TI believes it is a positive sign that Switzerland had ratified in 2000 the OECD anti-bribery convention and had adapted its legislation, it regretted that Swiss courts had convicted only one person since 2000 in connection with the bribing a foreign public official. During 2005, Swiss official statistics reported a total of 11 convictions for bribery. Total corruption cases for 2006 were down to five, but some cases are still under appeal in court.

The Global Corruption Barometer, based on a 69-nation survey, shows that the Swiss public has the least confidence in politics, business and the media. Just one per cent of the Swiss respondents admitted they had paid a bribe over the last 12 months. However, there have been very few criminal convictions for corruption since the law was tightened in 2000. Political parties were perceived as by far the most corrupt institutions in society in 45 of the 69 countries surveyed, including Switzerland. The private sector and the media are next in line for lack of Swiss public trust. However, sectors such as the police, customs, the legal system and tax authorities are considered trustworthy in Switzerland, unlike in many other countries.

A number of federal administrative authorities are involved in combating bribery. The State Secretariat for Economic Affairs deals particularly with issues relating to the OECD Convention, the Federal Office of Justice with those relating to the Council of Europe Convention, and the Department of Foreign Affairs with the UN Convention. The power to prosecute and judge corruption offences is shared between the cantons and the Confederation. For the Confederation, the competent authorities are the Office of the Attorney General, the Federal Criminal Court and the Federal Police (“Fedpol”); in the cantons, they are the cantonal judicial authorities and the cantonal police forces. A third of Swiss workers come across illicit dealings during their career and around 12 per cent of economic crime concerning Swiss companies involves corruption. One study by financial analysts KPMG into economic crimes in Swiss companies put corruption in second place, behind fraud. Former Suva workers have been caught up in a bribery scandal concerning the sale of property for tens of millions of francs below the market price. Seven people have already been arrested. Since 2000 we have seen a tightening of criminal law regarding corruption. Since then bribes paid abroad have no longer been deductible from taxes.

Corruption has gone down considerably in the public sector. Swiss civil servants who accept money or unwarranted benefits risk up to five years' imprisonment. The problem is that the upper-limit value of presents such as bottles of champagne and watches is a grey area. It varies according to department and canton. Transparency International believes that it would be necessary to fix a maximum sum, which is valid at the federal level. The multinationals are so far aware of the danger. ABB, Novartis and Nestlé have set up an internal hotline to enable staff to report problems anonymously. But Small- and medium-sized businesses on the other hand believe they're unaffected and that they don't have the means to deal with the problem.

After several visa abuses in Swiss embassies abroad, a government audit highlighted that has 33 embassies and consulates all over the world face potential problems of corruption. The cases occurred notably in Marocco, Turkey, Peru, Russia, Oman, Nigeria, Serbia and the Democratic Republic of Congo The Swiss Federal Foreign Affairs Department also confirmed around 100 cases of visa fraud at the Swiss Embassy in Pakistan.

Bilateral Investment Agreements

To date, Switzerland has concluded many investment protection treaties with developing new market economies. Of these, 109 are in force. Six treaties have been signed, but not yet ratified, with: Columbia, Kenya, Serbia-Montenegro, Brazil, Lesotho and Sudan.

OPIC and Other Investment Insurance Programs

OPIC is not active in Switzerland. However, Switzerland is a member of the Multilateral Investment Guarantee Agency.

Labor

The Swiss labor force is highly educated and skilled. Many low-skilled, low-wage jobs are filled by foreigners, who account for roughly 26% of the official labor force estimate of approximately 4.7 million people. Many with foreign passports are long-time Swiss residents who have not applied for or been granted Swiss citizenship. Only 5.1% of the workforce is in agriculture, where foreign "seasonal workers" take many low-wage jobs. Almost all of the remainder are engaged in services or industrial manufacturing, much of which involves high technology.

Swiss workers expect high wages. Because wages in Switzerland are among the highest in the world, the Swiss economy is capital intensive and geared toward high value-added products and services.

Switzerland is in full compliance with ILO conventions. Government regulations cover maximum work hours, minimum length of holidays, sick leave and compulsory military service, contract termination, and other requirements. However, there is no minimum wage law. Employees in the retail sector and in restaurants, bars, and the like, in cooperation with other interests, have been successful in slowing reform of the restrictive federal and cantonal laws governing opening hours. Restrictions on shop hours are nevertheless loosening gradually in economic centers such as Zurich, Geneva, and Bern.

Swiss voters narrowly accepted on November 27, 2005, the revision of the Swiss Federal labor law in order to provide for flexible working hours, such as Sunday openings, in major railway stations and airports. Sunday shopping was already possible in some railway stations but offered a limited range of products mainly for tourists. As a result of the vote, the new regulation entered into force on April 1, 2006. However, shopping hours outside the airports and railway stations remain regulated by the cantonal laws.

One-fourth of the country's full-time workers are unionized. In general, labor/management relations are good, mostly characterized by a willingness on both sides to settle disputes by negotiations rather than by labor action. About 592 collective agreements exist today in Switzerland (Agriculture is about 5.2% unionized; manufacturing - 10.6%; construction - 77%; services - 26%) and are regularly renewed without major problems. However, the mood is changing, and trade unions have complained that too little of the Swiss labor force is covered by collective agreements. The massive layoffs that resulted from both the global economic slowdown and major management scandals have put the traditional Swiss "labor peace" under severe pressure. Although days lost to strikes in Switzerland are among the lowest in the OECD, Swiss trade unions have encouraged workers to go on strike on several occasions. Several thousands workers in the construction sector went on strike in October and November 2006 to complain about the unilateral termination of the industry labor agreement by the Swiss Building Association. Members struck on the ground that member companies were not satisfied with the current wage agreement because it did not provide enough necessary flexibility for the employers to change wage hours and to adjust salaries according to performance. But trade unions revealed that out of 5,000 checks of companies made between January 2006 and June this year, one in four firms was guilty of not paying the minimum wage to its employees. In order to break the deadlock, the economic ministry appointed a former public servant who managed to reach a consensus with the trade unions in December. But in January 2008, industry members of the Swiss Building Association rejected the deal because it was difficult to implement. This failure to reach a consensus may impact negatively on the current political debate over the extension of the Swiss-EU agreement on the free movement of persons to Bulgaria and Romania in 2009. Trade unions have warned they will not support the extension unless a deal is found in the construction sector.

At a general level, trade unions expressed satisfaction over the significant salary increases across major Swiss industries. While salary increased on average by 0.7% in 2007, salaries could increase by a further 2.5-3% in 2008.

The prohibition on strikes by federal public servants was repealed in 2000. The Federal council may only restrict or prohibit the right to strike where it affects the security of the state, external relations or the supply of vital goods to the country. Civil servants in a few cantons and communes are still denied the right to strike.

Foreign-Trade Zones/Free Ports

Swiss international airports have stores offering duty free shopping. In addition, private companies can utilize duty- free warehouses to import goods into Switzerland tax and duty-free as long as the goods are subsequently re-exported to third countries. In each of these examples, foreign-owned companies receive the same treatment as domestic ones.

Foreign Direct Investment Statistics

For each year below, Swiss Francs have been converted to dollars at the average annual exchange rate (2003: 1$=SF1.35; 2004: 1$=1.24; 2005: 1$=1.24); FDI stocks are accounted for at Book Value.

FDI inflows to Switzerland (in USD millions)	2004	2005	2006
Total FDI inflows to Switzerland in percentage of current GDP	13.25 0.3	-1.550 -0.4	26.356 6.7

Capital stocks next week: http://www.snb.ch/e/publikationen/zahlung/zahlung.html

FDI stocks in Switzerland (in USD millions)	2004	2005	2006
Total foreign stocks in percentage of current GDP largest investors - USA - Netherlands - Germany - France Industry Sectors - Chemical and plastic - Metals and Machines - Electronics, energy, optic, watches - Other industries and construction - Trade in services - Finance and holding companies - Banks - Insurance companies - Transports & Communications	148,265 49.7 72,040 38,820 14,381 12,912 14,814 4,342 8,054 5,025 22,855 87,522 21,994 4,454 4,620	182,134 40.0 49,793 45,888 16,728 14,000 13,593 4,890 9,016 5,217 26,047 83,453 23,666 4,888 5,653	212,836 54.0 48,536 52,784 18,264 24,276 18,357 5,472 9,973 4,372 28,058 96,456 25,647 13,347 5,797
Swiss FDI stocks from Switzerland (in USD millions)	2003	2004	2005
Total FDI stocks from Switzerland in percentage of GDP Country of destination - USA - United Kingdom - Germany - Luxembourg - France - Caribbean offshore financial centers Industry Sectors - Textile Clothing - Chemical and plastic - Metals and machines - Electronics, energy, optic, watches - Other industries and construction - Trade in services - Swiss finance and holding companies - Banks - Insurance companies - Transport & communications - Other services Total FDI outflows from Switzerland in percentage of current GDP	313,856 98 60,446 27,967 19,280 15,967 15,001 17,524 41,786 6.995 46,067 14,923 9,206 28,605 8,014 19,147 44,004 60,041 2,849 7,085 26,343 7.2	361,785 100.6 68,216 37,703 19,370 17,230 18,217 19,991 54,295 7,954 58,985 17,236 9,960 34,184 11,123 24,368 44,412 69,826 2,529 8,312 51,680 13.8	505,744 105.8 105,952 46,650 34,180 20,126 24,524 18,383 74,673 12,733 96,366 28,572 16,208 50,792 17,570 26,050 71,464 77,435 4,550 10,050 65,867 16.9

Source: Online Swiss National Bank statistics (www.snb.ch)

A list of the largest U.S. investors by number of employees follows (data on the size of the firms' investments were not available):

Company 1. McDonald's Corporation 2. IBM 3. Altria Group, Inc. (Philip Morris) 4. Johnson & Johnson Intl. 5. Procter & Gamble 5. Synthes 6. Hewlett-Packard incl. Compaq) 7. Texas Pacific 7. Liberty Global 8. Medtronic 8. General Electric Company 9. Mettler-Toledo 10. Sun Microsystems 11. Johnson Controls 12. Caterpilar 13. EDS 13. Zimmer Holdings 13. Dow 14. Cargill 15. Rockwel 16. Tyco Int’l 17. CSC

FY 2006 7,200 3,430 3,000 2,514 2,000 2,000 1,849 1,600 1,600 1,300 1,300 1,250 1,020 921 867 800 800 800 790 760 750 700

FY 2005 7,200 3,300 3,000 2,096 1,500 2,000 1,958 1,600 n.a. 1,300 1,250 1,200 n.a. 900 869 965 700 770 840 840 750 700

Source: Swiss-American Chamber of Commerce (Yearbook 2005-2006,p 85).
It is estimated that 60,000 employees work for U.S. companies in Switzerland.

Web Resources

Swiss National Bank (SNB)
State Secretariat for Economic Affairs (SECO)
Swissinfo (news information for Switzerland)
Osec Business Network Switzerland
Swiss Federal Administration
Swiss Cantons Online
Swiss Public procurement website (only in French, German or Italian)