Policies Towards Foreign Direct Investment

The Netherlands is the seventeenth-largest economy in the world and the fifth largest in the European Union, with a gross domestic product (GDP) of over $910 billion (€812 billion).  According to the International Monetary Fund (IMF), the Netherlands is consistently among the three largest source and recipient economies for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment.  The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant guidelines.

The Netherlands is the recipient of eight percent of all FDI inflow into the EU.  Of all EU member states, it is the top recipient of U.S. FDI, at over 16 percent of all U.S. FDI abroad as of 2017.  The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms.  Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them going to other EU members.

In 2014, foreign-owned companies made inward direct investment worth $15.8 billion (14.2 billion euros) – just over 30 percent of total corporate investment in durable goods in the Netherlands.  Foreign investors provide 19 percent of Dutch employment in the private sector (860,200 jobs).  U.S. firms contribute the most among foreign firms to employment, responsible for 214,000 jobs.  In its 2017 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fifth largest destination of global FDI inflows and the third largest source of FDI outflows.

Although policy makers fear that Brexit will be detrimental for the Dutch economy, so far the Netherlands is benefitting from companies exiting the United Kingdom (UK).  According to the Netherlands Foreign Investment Agency (NFIA), 140 companies have made the move from the UK to the Netherlands since the Brexit referendum and another 420 internationally operating firms that have their European base in the UK are discussing possible plans to move to the Netherlands.  The companies are coming mainly from the health, creative industry, financial services, and logistics sectors.  The 2019 move of the European Medicines Agency (EMA) from London to Amsterdam is proving to be a major attraction for health and life sciences, as nineteen pharmaceutical-related companies have since followed the EMA to the Netherlands.  The Dutch Authority for the Financial Markets (AFM) has predicted Amsterdam will emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, allowing these companies to keep their European trading within the confines of the EU after Brexit.

Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable.  Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or Greenfield investment.  Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across members states.  A more detailed description of Dutch tax policy for foreign investors can be found at http://investinholland.com/incentives-and-taxes/  and http://investinholland.com/incentives-and-taxes/fiscal-climate/ .

Dutch corporations and branches of foreign corporations are currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors.  Profits up to $240,000 (200,000 euros) are taxed at a rate of 19 percent.  In October 2018, the Dutch government announced it would lower its corporate tax rate to 20.5 percent in 2021, with profits up to $240,000 taxed at a 15 percent rate from 2021 onwards.

Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary.  Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average.  Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as ATAs and/or APAs.  The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.

Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) (https://investinholland.com/ ).  Historically, over a third of all Greenfield FDI projects that NFI attracts to the Netherlands originate from U.S. companies.  Additionally, the Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands.

The NFIA maintains six regional offices in the United States (Washington, DC; Atlanta; Boston; Chicago; New York City; and San Francisco).  The American Chamber of Commerce in the Netherlands (https://www.amcham.nl/ ) also promotes U.S. and Dutch business interests in the Netherlands.

Limits on Foreign Control and Right to Private Ownership and Establishment

With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies.  The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment – including foreign investment – may be subject to limitations or conditions.  These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.

Air transport is governed by EU regulation and subject to the U.S.-EU Air Transport Agreement.  U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states.  Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis that the United States allows for foreign nationals in U.S. carriers.

In concert with the European Union, the Dutch government is considering how to best protect its economic security but also continue as one of the world’s most open economies.  The government’s interagency Economic Security Task Force is heading up an effort to establish a domestic investment review system that will consist of existing investment review regulations that are part of sectoral legislation and a new, broad investment review mechanism for investments that are not already covered in sector-specific legislation.  The government is in the process of finalizing legislation that will establish investment screening mechanisms in the first of its critical sectors: telecommunications.  The Netherlands has certain limitations on foreign ownership in sectors that are deemed of critical national interest (transportation, energy, defense and security, finance, postal services, public broadcasting, and the media).  There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.

Other Investment Policy Reviews

The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.

Business Facilitation

All companies must register with the Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees:  https://www.kvk.nl/english/ordering-products-from-the-commercial-register/ .

The World Bank’s 2020 Ease of Doing Business Index ranks the Netherlands as number 24 in starting a business.  The reports ranks the Netherlands first in terms of trading across borders, with zero costs and a small number of hours associated with border and documentary compliance, respectively.   The report ranks the Netherlands better than the OECD average on registration time, the number of procedures, and required minimum capital.

The Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands:  https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/general-checklist-for-starting-a-business-in-the-netherlands/ .  The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy.  U.S. entrepreneurs applying under the DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product.  U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros.  DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.

Transparency of the Regulatory System

Dutch commercial laws and regulations accord with international legal practices and standards; they apply equally to foreign and Dutch companies.  The rules on acquisition, mergers, takeovers, and reinvestment are nondiscriminatory.  The Social Economic Council (SER) – an official advisory body consisting of employers’ representatives, labor representatives, and government appointed independent experts – administers Dutch mergers and acquisitions rules.  The SER’s rules serve to protect the interests of stakeholders and employees.  They include requirements for the timely announcement of mergers and acquisitions (M&A) and for discussions with trade unions.

As an EU member and Eurozone country, the Netherlands is firmly integrated in the European regulatory system, with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.

Financial markets are regulated in an interconnected EU and national system of prudential and behavioral oversight.  The domestic regulators are the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Market (AFM).  Their EU counterparts are the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA).

Traditionally, public consultation in drafting new laws is by invitation of various civil society bodies, trade associations, and organizations of stakeholders.  In addition, the SER has a formal mandate to provide the government with advice, both solicited and of its own accord.  New laws and regulations are subject to legal review by the Council of State and must be approved by the Second and First Chambers of Parliament.

International Regulatory Considerations

The Netherlands is a member of the WTO and does not maintain any measures that are inconsistent with obligations under Trade Related Investment Measures (TRIMs).

Legal System and Judicial Independence

Dutch contract law is based on the principle of party autonomy and full freedom of contract.  Signing parties are free to draft an agreement in any form and any language, based on the legal system of their choice.

Dutch corporate law provides for a legal and fiscal framework that is designed to be flexible.  This element of the investment climate makes the Netherlands especially attractive to foreign investors.

The Dutch civil court system has a chamber dedicated to business disputes, called the Enterprise Chamber.  The Enterprise Chamber includes judges who are experts in various commercial fields.  They resolve a wide range of corporate disputes, from corporate governance disputes to high-profile shareholder conflicts over mergers or hostile take-overs.  In 2017, as part of its takeover bid of AkzoNobel, U.S. paint manufacturer PPG appealed the AkzoNobel Board’s decision to reject PPG’s takeover offer in the Commercial Court but was unsuccessful.

On January 1, 2019, the Enterprise Chamber established an English-language commercial court.  The Netherlands Commercial Court (NCC) and its appellate chamber (NCCA) offer parties the opportunity to litigate in English and will provide judgments in English.  Both the NCC and NCCA will focus primarily on major international commercial cases.  See also:  https://www.rechtspraak.nl/English/NCC/Pages/default.aspx 

Laws and Regulations on Foreign Direct Investment

The Dutch government has demonstrated a growing concern with the protection of its open, market-based economy against foreign state malign activity and currently the Netherlands is in the process of finalizing legislation that will establish a formal domestic investment screening mechanism.  In March 2019, the Ministry of Economic Affairs and Climate Policy submitted to Parliament its long-awaited proposal for an investment screening law in the telecommunications sector.  The law is currently in the final stages of legislation and will be the first Dutch “critical” sector to have an investor-screening mechanism aimed at protecting Dutch national security.

Competition and Anti-Trust Laws

Structural and regulatory reforms are an integral part of Dutch economic policy.  Laws are routinely developed for stimulating market forces, liberalization, deregulation, and tightening competition policy.

As an EU and Eurozone member, the Netherlands is firmly integrated in the European regulatory system with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.

The Authority for Consumers and Markets (ACM) provides regulatory oversight in three key areas:  consumer protection, post and telecommunications, and market competition.

Expropriation and Compensation

The Netherlands maintains strong protection on all types of property, including private and intellectual property rights, and the right of citizens to own and use property.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament, as demonstrated in the nationalization of ABN AMRO during the 2008 financial crisis (the government returned it to public shareholding through a 2016 IPO).  In the event of expropriation, the Dutch government follows customary international law, providing prompt, adequate, and effective compensation, as well as ample process for legal recourse.  The U.S. Mission to the Netherlands is unaware of any recent expropriation claims involving the Dutch government and a U.S. or other foreign-owned company.

Dispute Settlement

ICSID Convention and New York Convention

As a member of the International Center for the Settlement of Investment Disputes (ICSID), the Netherlands accepts binding arbitration between foreign investors and the state.  The Netherlands is one of the initial signatories of the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (UNCITRAL) and permits local enforcement of arbitration judgments decided in other signatory countries.

The Hague is the seat of the Permanent Court of Arbitration (PCA), an intergovernmental organization that is not a court, but like the ICSID, is a facilitator of independent arbitral tribunals to resolve conflicts between PCA member states, including the United States.

International Commercial Arbitration and Foreign Courts

The Netherlands has maintained a Treaty of Friendship, Commerce, and Navigation with the United States since 1957 that provides for national treatment and free entry for foreign investors, with certain exceptions.  The Embassy is not aware of any American company raising an investment dispute with the Netherlands over the last 10 years.

Bankruptcy Regulations

Dutch bankruptcy law is governed by the Dutch Bankruptcy Code, which applies both to individuals and to companies.  The code covers three separate legal proceedings:  1) bankruptcy, which has a goal of liquidating the company’s assets; 2) receivership, aimed at reaching an agreement between the creditors and the company; and 3) debt restructuring, which is only available to individuals.

The World Bank’s 2020 Ease of Doing Business Index ranks the Netherlands as number seven in resolving insolvency.  The Netherlands ranks better than the OECD average on bankruptcy time, cost, and recovery rate.

Investment Incentives

General requirements to qualify for investment subsidy schemes apply equally to domestic and foreign investors.  Industry-specific, targeted investment incentives have long been a tool of Dutch economic policy to facilitate economic restructuring and to promote economic priorities.  Such subsidies and incentives are spelled out in detailed regulations.  Subsidies are in the form of tax credits disbursed through corporate tax rebates or direct cash payments if there is no tax liability.  For an overview of government subsidies and investment programs, see:  http://english.rvo.nl/subsidies-programmes .

FDI tends to be concentrated in growth sectors including information and communications technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment.  Investment projects are predominantly in value-added logistics, machinery and equipment, and food.

Since 2010, the government has shifted from traditional industrial support policies to a comprehensive approach to public/private financing agreements in areas where investment is deemed of strategic value.  Government, academia, and industry work together to determine recipient sectors for co-financed (public and private) R&D.  The government’s industrial policy focuses on nine “Top Sectors”:  creative industries, logistics, horticulture, agriculture and food, life sciences, energy, water, chemical industry, and high tech.  (For more information, see https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation .)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Netherlands has no free trade zones (FTZs) or free ports where commodities can be processed or reprocessed tax-free.  However, FTZs exist for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  This reflects the key role that transport, transit, logistics, and distribution play in the Dutch economy.  Dutch Customs oversee a large number of customs warehouses, free warehouses, and free zones along many of the Netherlands trade routes and entry points.

Schiphol Airport handles nearly 1.75 million tons of goods per year for distribution, making it the third largest cargo airport in Europe.  Specific parts of Schiphol are designated customs-free zones.  The Port of Rotterdam is Europe’s largest seaport by volume, handling over 37 percent of all cargo shipping on Europe’s Le Havre-Hamburg coastline and processing nearly 470 million tons of goods in 2018.  Many agents operate customs warehouses under varying customs regimes on the premises of the Port of Rotterdam.

Performance and Data Localization Requirements

There are no trade-related investment performance requirements in the Netherlands and no requirements for employment of local capital or managerial personnel.

The Dutch government does not follow a “forced localization” policy and does not require foreign information technology (IT) providers to turn over source code or provide access to surveillance.  The Dutch Data Protection Authority (DPA) monitors and enforces Dutch legislation on the protection of personal data (https://autoriteitpersoonsgegevens.nl/en ).  The Dutch DPA is active in the EU’s Article 29 Working Party, the collective of EU national DPAs.  The primary law on protection of personal data in the Netherlands is the Dutch law implementing EU directive 95/46/EC.  The new European General Data Protection Regulation (GDPR), which is directly applicable in member states, entered into force May 25, 2018, as part of the EU’s comprehensive reform on data protection.

The Dutch DPA recognized U.S. firms that registered and self-certified with the U.S.-EU Safe Harbor program that began in 2000 and focused on safe transfer of personal data between the European Union and the United States.  On July 12, 2016, the European Commission issued an adequacy decision on the EU-U.S. Privacy Shield framework (https://www.privacyshield.gov/welcome ), which replaced the Safe Harbor program, providing a legal mechanism for companies to transfer personal data from the EU to the United States.  In an October 2019 report, the European Commission confirmed that the EU-US Privacy Shield framework continues to ensure an adequate level of protection for personal data transferred from the EU to companies participating in the Privacy Shield program in the United States.  The Dutch government strongly supports Privacy Shield.

Real Property

The Netherlands fully complies with international standards on protection of real property.  The World Bank’s 2020 Ease of Doing Business Index ranked the Netherlands 30 out of 190 countries in terms of property registration.  The number of procedures involved is at the OECD average, while the processing time of 2.5 days is nearly ten times faster than the OECD average.

The Netherlands’ Cadaster, Land Registry, and Mapping Agency (Cadaster) was established in 1832 to collect and register administrative and spatial data on real property.  The Cadaster is publicly available and can be accessed online (https://www.kadaster.com/ ).

Intellectual Property Rights

The Netherlands is a member of the World Intellectual Property Organization (WIPO) and party to many of its treaties, including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty (WCT), and the WIPO Performances and Phonograms Treaty (WPPT).  The Netherlands generally conforms to accepted international practice for the protection of intellectual property rights (IPR),including the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Despite participating in negotiations on the Anti-Counterfeiting Trade Agreement (ACTA) treaty, the Netherlands, like other EU member states, has stated it will not sign the treaty in its current form.  The EU has requested the European Court of Justice to advise on the compatibility of ACTA with existing European treaties, in particular with the EU Charter of Fundamental Rights of the European Union.

The Netherlands is a signatory to the European Patent Convention and so is a contracting state of the European Patent Organization.  In the Netherlands, patents for foreign investors are granted retroactively to the date of the original filing in the home country, provided the application is made through a Dutch patent lawyer within one year of the original filing date.  Dutch patents are valid for 20 years, in line with EU regulations.  Because the Netherlands and the United States are both party to the PCT, U.S. inventors may file for rights in the Netherlands using the PCT application.  Legal procedures exist for compulsory licensing if the patent is inadequately used after a period of three years, but these procedures have rarely been invoked.

With the implementation of EU Directive 2004/48 on the enforcement of IPR, rights holders have a number of instruments at their disposal to enforce their rights in civil court.  In addition to possible civil remedies, all IPR laws contain penal bylaws and reference to the Criminal Code.  In 2012, the Dutch Parliament passed legislation that strengthened oversight and coordination of seven different collective institutions that oversee control, administration, and remuneration for commercial use of IPR.  Policymakers agree on the need to raise public awareness of IPR rules and regulations and to strengthen enforcement.  The Dutch government has recognized the need to protect IPR, and law enforcement personnel have worked with industry associations to find and seize pirated software.  Current Dutch IPR legislation explicitly includes computer software under copyright statutes.

The Netherlands has resisted criminalizing online copyright infringement for personal use, instead placing a surcharge on the sales of blank media, such as CDs, DVDs, and USB storage devices, to remunerate rights holders for the downloading of material from legal and illegal sources alike.  A 2014 ruling by the EU Court of Justice requires the government to change this policy and ban online infringement, but since this ruling the Dutch Supreme Court has determined that the original Dutch law can stand albeit that the surcharge does not cover downloading from illegal sources. Thus, the Dutch law remains in place without alteration and is considered by the government to conform to the EU Court ruling.  No specific measures have since been taken by the government to actively pursue persons in violation of the law because the government considers enforcement of this law to be largely a matter for the civil courts.  Dutch associations for rights holders, such as Stichting Brein, focus their efforts on reducing the supply of illegal downloads rather than pursuing consumers who acquire illegal downloads.

The Netherlands is not included in the USTR Special 301 Report but is mentioned as hosting infringing websites in the 2019 Notorious Markets List, which also notes that Dutch law enforcement has assisted in seizing some domain names, thereby shutting down those infringing sites.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=NL .

Resources for Rights Holders

Contact at American Embassy The Hague:
Alex Mayer – Economic Officer
John Adams Park 1
2244 BZ Wassenaar
Telephone:  +31 (0)70 310 2270
E-mail:  MayerA@state.gov

Country-Specific Resource:
BREIN Foundation
https://stichtingbrein.nl/ 
P.O. Box 133
2130 AC Hoofddorp
The Netherlands
Telephone:  +31 (0)85 011 0150

American Chamber of Commerce in the Netherlands:
P.O. Box 15783
1001 NG Amsterdam
Telephone:  +31 (0)20 795 1840
Email:  office@amcham.nl

Local lawyers list:  https://nl.usembassy.gov/u-s-citizen-services/attorneys/?_ga=2.237170691.2093708730.1527074319-1722725267.1486978519

Capital Markets and Portfolio Investment

The Netherlands is home to the world’s oldest stock exchange – established four centuries ago – and Europe’s first options exchange, both located in Amsterdam.  The Amsterdam financial exchanges are part of the Euronext group that operates stock exchanges and derivatives markets in Amsterdam, Brussels, Lisbon, and Paris.

Dutch financial markets are fully developed and operate at market rates, facilitating the free flow of financial resources.  The Netherlands is an international financial center for the foreign exchange market, Eurobonds, and bullion trade.

The flexibility that foreign companies enjoy in conducting business in the Netherlands extends into the area of currency and foreign exchange.  There are no restrictions on foreign investors’ access to sources of local finance.

Money and Banking System

The Dutch banking sector is firmly embedded in the European System of Central Banks, of which the Dutch Central Bank (DNB) is the national prudential banking supervisor.  AFM, the Dutch securities and exchange supervisor, supervises financial institutions and the proper functioning of financial markets and falls under the EU-wide European Securities and Markets Authority (ESMA).

The highly concentrated Dutch banking sector is over three times as large as the rest of the Dutch economy, making it one of Europe’s largest banking sectors in relation to GDP.  Three banks, ING, ABN AMRO, and Rabobank, hold nearly 85 percent of the banking sector’s total assets.  The largest bank, ING, has a balance sheet of around $1 trillion (€887 billion).

The DNB does not consider Bitcoin and similar cryptocurrencies to be legitimate currency, as they do not fulfill the traditional purpose of money as stable means of exchange or saving, and their value is not supported via central bank guarantee mechanisms.  DNB considers current cryptocurrencies to be risky investments that are especially vulnerable to criminal abuse and has begun requiring that providers of financial services related to exchange and deposit of cryptocurrencies register with the DNB, per anti-money laundering (AML) legislation.

The DNB acknowledges however that in the future, cash transactions will likely be replaced with digital transactions that require central bank-issued and -guaranteed cryptocurrencies.  Dutch society has already embraced cash-less commerce to a high degree – seventy percent of over-the-counter shopping is via PIN transactions and contactless payment – and DNB is participating with central banks from Canada, Japan, England, Sweden, Switzerland and the Bank for International Settlements in research about a possible central bank-issued cryptocurrency.

Foreign Exchange and Remittances

Foreign Exchange

The Netherlands is a founding member of the EU and one of the first members of the Eurozone.  The European Central Bank supervises monetary policy, and the president of the Dutch Central Bank (DNB) sits on the European Central Bank’s Governing Council.

There are no restrictions on the conversion or repatriation of capital and earnings (including branch profits, dividends, interest, royalties), or management and technical service fees, with the exception of the nominal exchange-license requirements for nonresident firms.

Remittance Policies

The Netherlands does not impose waiting periods or other measures on foreign exchange for remittances.  Similarly, there are no limitations on the inflow or outflow of funds for remittance of profits or revenue.  The Netherlands, as a Eurozone member, does not engage in currency manipulation tactics.

The Netherlands has been a member of the FATF since 1990 and – because of the membership of its Caribbean territories in the Caribbean FATF (C-FATF) – strongly supports C-FATF.

With the promulgation of additional, preventative anti-money laundering and counterfeiting legislation, the Netherlands has remedied many of the deficiencies revealed in a 2011 Mutual Evaluation Report.  As a result, FATF removed the Netherlands from its “regular follow-up process” in February 2014.  The State Department’s Bureau of International Narcotics and Law Enforcement’s International Narcotics Control Strategy Report (INCSR) has listed the Netherlands as a “country of primary concern,” largely because the country is a major global financial center and consequently an attractive venue for laundering funds generated by illicit activities.  More information can be found at https://www.state.gov/wp-content/uploads/2020/03/Tab-2-INCSR-Vol-2-508.pdf [2 MB].

Sovereign Wealth Funds

The Netherlands has no sovereign wealth funds.

The Dutch government maintains an equity stake in a small number of enterprises and some ownership in companies that play an important role in strategic sectors.  In particular, government-controlled entities retain dominant positions in gas and electricity distribution, rail transport, and the water management sector.  The Netherlands has an extensive public broadcasting network, which generates its own income through advertising revenues but also receives government subsidies.

For a complete list of all 32 government-owned entities, please see:  https://www.rijksoverheid.nl/onderwerpen/staatsdeelnemingen/vraag-en-antwoord/in-welke-ondernemingen-heeft-de-overheid-aandelen .

Private enterprises are allowed to compete with public enterprises with respect to market access, credits, and other business operations such as licenses and supplies.  Government-appointed supervisory boards oversee state-owned enterprises (SOEs).  In some instances involving large investment decisions, SOEs must consult with the cabinet ministry that oversees them.  As with any other firm in the Netherlands, SOEs must publish annual reports, and their financial accounts must be audited.

The Netherlands fully adheres to the OECD Guidelines on Corporate Governance of SOEs.

Privatization Program

There are no ongoing privatization programs in the Netherlands.

The Netherlands is a global leader in corporate social responsibility (CSR).  Principles of CSR are promoted and prescribed through a range of corporate, governmental, and international guidelines.  In general, companies carefully guard their CSR reputation and consumers are increasingly opting for products and services that are produced in an ethical and sustainable manner.

The Netherlands adheres to OECD Guidelines for Multinational Enterprises, and the Dutch Ministry of Economic Affairs and Climate Policy houses the National Contact Point (NCP) that promotes OECD guidelines and helps mediate concerns that persons, non-governmental organizations (NGOs), and enterprises may have regarding implementation by a specific company.  For more information, visit http://www.oecdguidelines.nl .

The Dutch government strongly encourages foreign and local enterprises to follow UN Guiding Principles on Business and Human Rights, which states that businesses have a social responsibility to respect the same human rights norms in other countries as they do in the Netherlands.

The Netherlands has no special government programs that promote women’s empowerment or women’s access to investment.  Under the law, there is no differentiation for men and women regarding equal access to investment.  Furthermore, no groups are excluded from participating in financial markets and the financial system.

The Netherlands has strong standards for corporate governance.  Publicly listed companies are required to publish audited financial reports.  As of 2017, the EU requires these companies to include a chapter on Responsible Business Conduct.

The Ministry of Economic Affairs and Climate Policy established an independent networking organization on CSR called MVONederland in 2004.  MVONederland currently has over 2050 members, including SMEs, multinational corporations, and NGOs, as well as local and national administrative bodies.  See https://www.mvonederland.nl/en/about-mvo-nederland/about-csr-corporate-sustainability-and-responsibility/ 

The Dutch government also encourages companies to engage in CSR through incentive programs and by setting high standards.  Examples include:

• The government reviews CSR activities of more than 500 corporations annually and presents an award to the company with the highest transparency score.
• The government boosts the development of sustainable products through its own sustainable procurement policy.
• Dutch companies can only join government trade missions if they have endorsed OECD Guidelines for Multinational Enterprises.
• Companies that observe the OECD Guidelines for Multinational Enterprises are eligible for financial support for their international trade and investment activities.
• The government supports the Sustainable Trade Initiative (IDH), which helps companies make their international production chains more sustainable.
• The government conducts sector-risk analyses to identify where problems are most likely to occur and target improvements.
• The government has completed seven of 13 sector-wide Responsible Business Conduct Agreement it intends to make with the private sector in the area of international CSR.  The seven agreements cover textiles, banking, pensions, insurance, promotion of vegetable proteins, sustainable forestry, and gold.

The 2020 National Trade Estimate of the Office of the U.S. Trade Representative (USTR)  refered to some Dutch sustainability criteria that  can bring about trade impediments:  “The Sustainable Trade Initiative (IDH) and the Forest Stewardship Council (FSC) have developed standards for soybeans and wood pellets, respectively, that have been supported by the Dutch government and effectively require U.S. producers to meet onerous certification requirements. [… ] These criteria include a requirement for sustainability certification at the forest level, which effectively precludes reliance on the U.S. risk-based approach to sustainable forest management.  As a result of the implementation of the criteria, wood pellet exports to the Netherlands have dropped from 7 percent of total U.S. wood pellet exports in 2014 to less than one percent in 2018.”

The Netherlands fully complies with international standards on combating corruption.  Transparency International ranked the Netherlands eighth in its 2019 Corruption Perception Index.

Anti-bribery legislation to implement the 1997 OECD Anti-Bribery Convention (ABC) entered into effect in 2001.  The anti-bribery law reconciles the language of the ABC with the EU Fraud Directive and the Council of Europe Convention on Fraud.  Under the law, it is a criminal offense if one obtains foreign contracts through corruption.

At the national level, the Ministry of the Interior and Kingdom Relations and Ministry of Justice and Security have both taken steps to enhance regulations to combat bribery in the processes of public procurement and issuance of permits and subsidies.  Most companies have internal controls and/or codes of conduct that prohibit bribery.

Several agencies combat corruption.  The Dutch Whistleblowers Authority serves as a knowledge center, develops new instruments for tracking problems, and identifies trends on matters of integrity.  The Independent Commission for Integrity in Government is an appeals board for whistleblowers in government and law enforcement agencies.

The Netherlands signed and ratified the UN Anticorruption Convention and is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

The Government agency that aids and protects whistleblowers is the Dutch Whistleblowers Authority or “Huis for Klokkenluiders.”  The Whistleblowers Authority Act, which came into force in the Netherlands on July 1, 2016, underlies the establishment of the Whistleblowers Authority.  An English version of the Act can be found at https://www.huisvoorklokkenluiders.nl/Publicaties/publicaties/2016/07/01/dutch-whistleblowers-act.

Huis for Klokkenluiders
Maliebaan 72
3581 CV Utrecht
The Netherlands
Website: https://www.huisvoorklokkenluiders.nl/english 
Telephone:  +31 (0)88 – 133 1000
E-mail info@huisvoorklokkenluiders.nl

The Dutch office of Transparency International is located in Amsterdam:

Transparency International Nederland
Offices at KIT:  Royal Tropical Institute, room d-3
Mauritskade 64
1092 AD Amsterdam
The Netherlands
Website: https://www.transparency.nl/ 
Telephone: +31 (0)6 81 08 36 27
E-mail:  communicatie@transparency.nl

Although political violence rarely occurs in the highly stable and consensus-oriented Dutch society, public debate on issues such as immigration and integration policy has been contentious.  While rare, there have been some politically and religiously inspired acts of violence.

The Dutch economy derives much of its strength from a stable business climate that fosters partnerships among unions, business organizations, and the government.  Strikes are rarely used as a way to resolve labor disputes.  With ten workdays per 1000 employees lost to industrial action, the Netherlands ranks tenth on the list of OECD countries with the lowest incidence of strikes, behind other major developed economies like the United States (four days) and Germany (three days).

The Netherlands has a strongly regulated labor market (over 75 percent of labor contracts fall under some form of collective labor agreement) that comprises a well-educated and multilingual workforce.  Labor/management relations in both the public and private sectors are generally good in a system that emphasizes the concept of social partnership between industry and labor.  Although wage bargaining in the Netherlands is increasingly decentralized, there still exists a central bargaining apparatus where labor contract guidelines are established.

The terms of collective labor agreements apply to all employees in a sector, not only union members.  To avoid surprises, potential investors are advised to consult with local trade unions prior to making an investment decision to determine which, if any, labor contracts apply to workers in their business sector.  Collective bargaining agreements negotiated in recent years have, by and large, been accepted without protest.

Every company in the Netherlands with at least 50 workers is required by law to institute a Works Council (“Ondernemingsraad”), through which management must consult on a range of issues, including investment decisions, pension packages, and wage structures.  The Social Economic Council has helpful programs on establishing employee participation that allow firms to comply with the law on Works Councils.  See https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do .

Prior to the Covid-19 outbreak, the annual unemployment rate was forecast to be 3.2 percent in 2020, well below the EU average of 6.5 percent and less than half of Eurozone unemployment.  In March 2020, the Dutch government established various economic relief measures designed to preserve employment by providing Dutch corporations that suffer coronavirus-related problems with wage subsidies up to 90 percent.

The working population consists of 8.9 million persons.  Workers are sought through government-operated labor exchanges, private employment firms, or direct hiring.  At 47 percent, the Netherlands has the highest share of part-time workers in its workforce of all EU member states (in 2017, the EU average of part-time workers was 19 percent).  A rise in female participation in the workforce led to a 37 percent increase in the share of part-time workers in the total working population.  Three-quarters of women and one quarter of men work less than a 36-hour week.  Labor market participation, especially by older workers, is growing, and the number of independent contractors is rapidly increasing.

To ensure continued economic growth and address the impact of an aging population, increased labor market participation is critical.  The age to qualify for a state pension (AOW) will increase from age 65 to 67 by 2023.  Governmental labor market policies are targeted at increasing productivity of the labor force, including the expansion of working hours.  For example, access to daycare is improving in order to raise the average number of hours per week worked by women, which is 10 hours below the average of hours worked by men.

Effective July 1, 2020, the minimum wage for employees older than 20 years is €1,680 ($1,820) per month.

The U.S. International Development Finance Corporation (DFC) does not operate in the Netherlands.  However, DFC insurance and funding is available for U.S. companies that partner with Dutch companies in third-country markets where DFC operates.  The Netherlands is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA).

Dutch-registered companies investing abroad can insure their investments against non-commercial risks through the privately owned Atradius Dutch State Business, N.V., which issues export credit insurance policies and guarantees to businesses on behalf of the Dutch government.  The legal basis for investment insurance is contained in the Framework Act for Financial Provisions.  Insurance covers assets and cash, as well as loans related to an investment.  Both new and (under certain circumstances) existing investments are eligible.

* Source for Host Country Data: CBP, DNB (see notes below)
Note 1:  Host country source for GDP 2019 is The Netherlands Bureau for Economic Policy Analysis (CPB). CPB provides more recent data than World Bank.  For a breakdown of Dutch GDP, see: https://www.cpb.nl/en/central-economic-plan-cep-2020-mlt 
Note 2:  Host country source for FDI stocks and flows is the Dutch Central Bank (DNB).  For Dutch outward FDI destined for the U.S., the accumulated value in 2018 is 865,458 million euros and for inbound FDI originating from U.S. the accumulated value in 2018 is 743,704 million euros.  The dollar value of Dutch FDI numbers is obtained with the official Treasury annual rate for 2018 of USD = 0.872 euros.  This shows $992,500 million for FDI outbound towards the U.S. and $852,871 million for FDI inbound from the U.S.

• See for outward FDI:  https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-outward-direct-investment-by-country-region-and-industry-class-year/dataset/8d7037d3-cb37-4087-8f78-780992666315/resource/9f770349-047b-4027-9943-1051914ce315 
• See for inward FDI:  https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-direct-investment-in-the-netherlands-by-country-region-and-industry-class-year-figures-are-available-from-2004-onwards/dataset/ea9fd02d-c53b-4c66-b9f9-de406e8371e3/resource/7e03971f-e249-43cc-a95c-7ac5529a79bf 

Gilles Everts
Economic Specialist
John Adams Park 1
2244 BZ Wassenaar
Telephone:  +31 (0)70 310 2276
Email:  EvertsGE@state.gov

Policies Towards Foreign Direct Investment

With the exception of its agricultural sector, foreign investment into Switzerland is generally not hampered by significant barriers, with no reported discrimination against foreign investors or foreign-owned investments.  Incidents of trade discrimination do exist, for example with regards to agricultural goods such as bovine genetics products.

A Swiss government-affiliated non-profit organization, Switzerland Global Enterprise (SGE), has a nationwide mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation.  SGE promotes Switzerland as an economic hub and fosters exports, imports, and investments.  Some city and cantonal governments offer access to an ombudsman, who may address a wide variety of issues involving individuals and the government, but does not focus exclusively on investment issues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic enterprises may freely establish, acquire, and dispose of interests in business enterprises in Switzerland.  Switzerland does not maintain an investment screening mechanism for inbound foreign investment; the Federal Assembly instructed the Federal Council to prepare one in March 2020, a process expected to take two years.  There are some investment restrictions in areas under state monopolies, including certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt.  Restrictions (in the form of domicile requirements) also exist in air and maritime transport, hydroelectric and nuclear power, operation of oil and gas pipelines, and the transportation of explosive materials.  Additionally, the following legal restrictions apply within Switzerland:

Corporate boards: 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 who is authorized to represent the company (i.e. to 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 controlled by foreigners.  The establishment of a commercial presence by persons or enterprises without legal status under Swiss law requires a cantonal establishment authorization.  These requirements do not generally pose a major hardship or impediment for U.S. investors.

Hostile takeovers: Swiss corporate equity can be issued in the form of either registered shares (in the name of the holder) or bearer shares.  Provided the shares are not listed on a stock exchange, Swiss companies may, in their articles of incorporation, impose certain restrictions on the transfer of registered shares to prevent hostile takeovers by foreign or domestic companies (article 685a of the Code of Obligations).  Hostile takeovers can also be annulled by public companies under certain circumstances; the company must cite in its statutes significant justification (relevant to the survival, conduct, and purpose of their business) to prevent or hinder a takeover by a foreign entity.  Furthermore, public corporations may limit the number of registered shares that can be held by any shareholder to a percentage of the issued registered stock.  In practice, many corporations limit the number of shares to 2-5 percent of the relevant stock.  Under the public takeover provisions of the 2015 Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading and its 2019 amendments, a formal notification is required when an investor purchases more than 3 percent of a Swiss company’s shares.  An “opt-out” clause is available for firms that 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 must take place well in advance of any takeover attempt.

Banking: Those wishing to establish banking operations in Switzerland must obtain prior approval from the Swiss Financial Market Supervisory Authority (FINMA), a largely independent agency administered under the Swiss Federal Department of Finance.  FINMA promotes confidence in financial markets and works to protect customers, creditors, and investors.  FINMA approval of bank operations is generally 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 Swiss; the bank must adhere to Swiss monetary and credit policy; and 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 must inform FINMA before they open a branch, subsidiary, or representation abroad.  Foreign or domestic investors must inform FINMA before acquiring or disposing of a qualified majority of shares of a bank organized under Swiss law.  If exceptional temporary capital outflows threaten Swiss monetary policy, the Swiss National Bank, the country’s independent central bank, may require other institutions to seek approval before selling foreign bonds or other financial instruments.  Government deposit insurance of individual current accounts held in Swiss banks is limited to CHF 100,000 per client per bank.

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 in-country.

U.S. investors have not identified any specific restrictions that create market access challenges for foreign investors.

Other Investment Policy Reviews

The World Trade Organization’s (WTO) September 2017 Trade Policy Review of Switzerland and Liechtenstein includes investment information.  Other reports containing elements referring to the investment climate in Switzerland include the OECD Economic Survey of November 2017.

• Link to the WTO report:

https://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm#bycountry 

• Link to the OECD reports / papers: https://www.oecd-ilibrary.org/economics/oecd-economic-surveys-switzerland_19990464;jsessionid=174m5wrgvwd7j.x-oecd-live-02 

Business Facilitation

The Swiss government-affiliated non-profit organization Switzerland Global Enterprise (SGE) has a mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation.  SGE promotes Switzerland as an economic hub and fosters exports, imports, and investments.  Larger regional offices include the Greater Geneva-Berne Area (which covers large parts of Western Switzerland), the Greater Zurich Area, and the Basel Area.  Each canton has a business promotion office dedicated to helping facilitate real estate location, beneficial tax arrangements, and employee recruitment plans.  These regional and cantonal investment promotion agencies do not require a minimum investment or job-creation threshold in order to provide assistance. However, these offices generally focus resources on attracting medium-sized entities that have the potential to create between 50 and 249 jobs in their region.

References:

• The Swiss government’s online portal (“easygov”) is Switzerland’s online registration website and includes links to the main local interlocutors for business related questions: https://www.easygov.swiss/easygov/#/ 
• Switzerland Global Enterprise connects companies with potential host regions: https://www.s-ge.com/en/investment-promotion 
• Some of the larger promotion offices are:
  • Invest Western Switzerland Area: https://www.ggba-switzerland.ch/ 
  • Greater Zurich Area: https://www.greaterzuricharea.com 
  • Basel Area: https://www.baselarea.swiss/ 

Switzerland has a dual system for granting work permits and allowing foreigners to create their own companies in Switzerland.  Employees who are citizens of the EU/EFTA area can benefit from the EU Free Movement of Persons Agreement.  U.S. citizens who are not citizens of an EU/EFTA country and want to become self-employed in Switzerland must meet Swiss labor market requirements.  The criteria for admittance, usually not creating a hindrance for U.S. persons, are contained in the Federal Act on Foreign Nationals (FNA), the Decree on Admittance, Residence and Employment (VZAE) and the provisions of the FNA and the VZAE.

• The Federal Act on Foreign Nationals (FNA) (unofficial English translation): https://www.admin.ch/opc/en/classified-compilation/20020232/index.html 
• Decree on Admittance, Residence and Employment (VZAE) (not available in English): https://www.admin.ch/opc/de/classified-compilation/20070993/index.html 
• Provisions of the FNA and the VZAE (not available in English): https://www.ejpd.admin.ch/dam/data/bfm/rechtsgrundlagen/weisungen/auslaender/weisungen-aug-d.pdf 

Setting up a company in Switzerland requires registration at the relevant cantonal Commercial Registry.  The cost for registering a company is typically USD 1,300 – USD 15,200, depending on the company type.  These costs mainly cover the Public Notary and entry into the Commercial Registry.

Other steps/procedures for registration include: 1) placing paid-in capital in an escrow account with a bank; 2) drafting articles of association in the presence of a notary public; 3) filing a deed certifying the articles of association with the local commercial register to obtain a legal entity registration; 4) paying the stamp tax at a post office or bank after receiving an assessment by mail; 5) registering for VAT; and 6) enrolling employees in the social insurance system (federal and cantonal authorities).

The World Bank Doing Business Report 2020 ranks Switzerland 36^th in the ease of doing business among the 190 countries surveyed, and 81^st in the ease of starting a business, with a six-step registration process and 10 days required to set up a company.

Outward Investment

While Switzerland does not explicitly promote or incentivize outward investment, Switzerland’s export promotion agency Switzerland Global Enterprise facilitates overseas market entry for Swiss companies through its Swiss Business Hubs in several countries, including the United States.  Switzerland does not restrict domestic investors from investing abroad.

The United States and Switzerland do not have a bilateral investment agreement (BIT).  Switzerland has concluded numerous investment protection treaties with developing and emerging market economies.  A total of 111 BITs and 34 relevant Free Trade Agreements (FTAs) with investment commitments are in force.

See the UNCTAD Investment Policy Hub for a full listing of BITs: https://investmentpolicyhub.unctad.org/IIA/CountryBits/203#iiaInnerMenu 

Currently, Switzerland (or the European Free Trade Association, of which Switzerland is a member) is in various stages of discussions regarding FTAs with Algeria, Belarus, India, Kazakhstan, Malaysia, MERCOSUR, Russia, Thailand, and Vietnam.

Switzerland concluded an Income Tax Treaty with the United States in 1996.  https://www.irs.gov/businesses/international-businesses/switzerland-tax-treaty-documents .  A 2009 Protocol to this Treaty entered into force in September 2019 after ratification by the U.S. Senate.  The protocol allows greater information exchange to bolster tax compliance and combat tax evasion.

Transparency of the Regulatory System

The Swiss government uses transparent policies and effective laws to foster a competitive investment climate.  Proposed laws and regulations are open for three-month public comment from interested parties, interest groups, cantons, and cities before being discussed within the bicameral parliament or promulgated by the appropriate regulatory authority.  Authorities take comments into account carefully, particularly since proposals may be subject to optional or automatic referenda that allow Swiss voters to reject or accept the proposals.  Only in rare instances – such as the case of the extension of a moratorium until 2021 on planting GMO crops – are regulations reviewed on the basis of political or customer preferences rather than solely on the basis of scientific analysis.

International Regulatory Considerations

Switzerland is not a member of the European Union.  However, Switzerland adopts many EU standards in line with a series of agreements with the EU.

The WTO concluded in 2017 that Switzerland has regularly notified its draft technical regulations, ordinances, and conformity assessment procedures to the WTO TBT Committee.  Switzerland has been a signatory to the Trade Facilitation Agreement (TFA) since September 2, 2015.

Legal System and Judicial Independence

Swiss civil law is codified in the Swiss Civil Code (which governs the status of individuals, family law, inheritance law, and property law) and in the Swiss Code of Obligations (which governs contracts, torts, commercial law, company law, law of checks and other payment instruments).  Switzerland’s civil legal system is divided into public and private law.  Public law governs the organization of the state, as well as the relationships between the state and private individuals or other entities, such as companies.  Constitutional law, administrative law, tax law, criminal law, criminal procedure, public international law, civil procedure, debt enforcement, and bankruptcy law are sub-divisions of public law.  Private law governs relationships among individuals or entities.  Intellectual property law (copyrights, patents, trademarks, etc.) is an area of private law.  Labor is governed by both private and public law.

All cantons have a high court, which includes a specialized commercial court in four cantons (Zurich, Bern, St. Gallen and Aargau).  The organization of the judiciary differs by canton; smaller cantons have only one court, while larger cantons have multiple courts.  Cantonal high court decisions can be appealed to the Swiss Supreme Court.  The court system is independent, competent, and fair.

Switzerland is party to a number of bilateral and multilateral treaties governing the recognition and enforcement of foreign judgments.  The Lugano Convention, a multilateral treaty tying Switzerland to European legal conventions, entered into force in 2011 (replacing an older legal framework by the same name).  A set of bilateral treaties is also in place to handle judgments of specific foreign courts.  While no such agreement is in place between the United States and Switzerland, Switzerland operates under the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, meaning local courts must enforce international arbitration awards under specific circumstances.

Laws and Regulations on Foreign Direct Investment

The major laws governing foreign investment in Switzerland are the Swiss Code of Obligations, the Lex Friedrich/Koller, Switzerland’s Securities Law, the Cartel Law and the Financial Market Infrastructure Act.  There is no specific screening of foreign investment beyond a normal anti-trust review.  The Federal Assembly instructed the Federal Council to prepare a foreign investment screening mechanism in March 2020, a process expected to take two years.  There are few sectoral or geographic incentives or restrictions; exceptions are described below in the section on performance requirements and incentives.

Some former public monopolies retain their historical market dominance despite partial or full privatization.  Foreign investors sometimes find it difficult to enter these markets due to high entry costs and the relatively small size and linguistic divisions of the Swiss market (e.g., certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurances and banking services, and the trade in salt).

There is no pronounced interference in the court system that should affect foreign investors.

Useful websites:

• The Swiss Code of Obligations, including an unofficial English translation: https://www.admin.ch/opc/en/classified-compilation/19110009/index.html 
• Information on the acquisition of property in Switzerland by persons abroad: https://www.bj.admin.ch/dam/data/bj/wirtschaft/grundstueckerwerb/lex-e.pdf 
• The Federal Act on Stock Exchanges and Securities Trading (unofficial English translation): https://www.six-swiss-exchange.com/download/participants/participation/education/sesta-stock-exchange-act-en.pdf 
• The Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Unofficial English translation): https://www.admin.ch/opc/en/classified-compilation/20141779/index.html 
• The Federal Act on Cartels and other Restraints of Competition including an unofficial English translation: https://www.admin.ch/opc/en/classified-compilation/19950278/index.html 
• Switzerland Global Enterprise provides a “handbook for investors” with the relevant laws: https://www.s-ge.com/en/publication/handbook-investors/handbook-investors 

Competition and Anti-Trust Laws

The Swiss Competition Commission  and the Swiss Takeover Board  review competition-related concerns.  In 2017, the Swiss Takeover Board concluded that Chinese conglomerate HNA had failed to list the HNA co-founders correctly as beneficial owners in its acquisition prospectus of Swiss airline caterer gategroup Holding AG and tasked the Swiss financial regulator and stock exchange with investigating potential breaches of Swiss financial regulations.  HNA was found guilty and was sentenced to pay a financial penalty of CHF 50,000 (USD 50,000).  The investigation into HNA’s shareholdings in Switzerland also revealed deficient statements on beneficial ownership in Swiss-based airport duty free operator Dufry; in September 2019, Switzerland’s Financial Market Supervisory Authority (FINMA) said it would file a criminal complaint in the matter.

The Swiss agricultural sector remains protected and heavily subsidized, with direct subsidy payments comprising two-thirds of an average farm’s profits and one of the lowest levels of productivity among OECD members.  However, this is starting to change: newly negotiated trade agreements, including between the European Free Trade Association (of which Switzerland is a member) and Mercosur, contain provisions which would open Swiss markets to new levels of agricultural imports.

The OECD ranks Switzerland’s educational, healthcare, and agriculture costs and subsidies as relatively high when compared to output.

Expropriation and Compensation

There are no known cases of expropriation within Switzerland.

Dispute Settlement

ICSID Convention and New York Convention

Switzerland has been a member of the International Center for Settlement of Investment Disputes (ICSID) since June 1968, and a member of the New York Convention on Recognition and Enforcement of Foreign Arbitral Law since June 1965.  Switzerland’s Federal Act on Private International Law (Art. 190 and 194) sets a minimum standard for the implementation of international arbitration awards in Switzerland.

Investor-State Dispute Settlement

Based on Switzerland’s membership in the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, local courts are entitled to enforce international arbitration awards.  According to the United Nations Conference on Trade and Development (UNCTAD), Switzerland has never been a respondent party to an investment dispute in international arbitration.

International Commercial Arbitration and Foreign Courts

Swiss courts recognize and enforce foreign arbitral awards in the framework of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards .  Post has no knowledge of any investor disputes in Switzerland involving U.S. persons within the last 10 years.

As business associations organized at the cantonal level, the Chambers of Commerce and Industry, of Basel, Bern, Geneva, Lausanne, Lugano, Neuchâtel, and Zurich have established the Swiss Chambers’ Arbitration Institution.  This entity offers dispute resolution based on Swiss Rules of International Arbitration and Swiss Rules of Commercial Mediation.  According to the Swiss Chambers’ Arbitration Institution, 100 cases were submitted in 2015 (latest available data); 89 of these cases involved foreign parties.

Bankruptcy Regulations

Switzerland’s bankruptcy law does not criminalize bankruptcy.  Under the bankruptcy law, the same rights and obligations apply to foreign and Swiss contract holders.

Swiss authorities provide information about Swiss residents and companies regarding debts registered with the debt collection register.

The World Bank’s 2020 “Doing Business” survey ranks Switzerland 49^th out of 190 countries in resolving insolvency.  The average time to close a business in Switzerland is three years (compared to 1.7 years average across the OECD), with an average of 46.7 cents on the dollar recovered by claimants from insolvent firms (compared to 70.2 cents OECD average).

The Swiss Federal Statute on Private International Law (PILS, Art. 166-175, in force since January 1, 1989) governs Swiss recognition of foreign insolvency proceedings, including bankruptcies, foreign composition, and arrangements.  Swiss law requires reciprocity for recognition of foreign insolvency.

• Federal Statute on Debt Enforcement and Bankruptcy of 11 April 1889 (https://wipolex.wipo.int/en/details.jsp?id=17092  in German, French and Italian).

Investment Incentives

Many of Switzerland’s cantons make significant use of financial incentives to attract investment to their jurisdictions.  Some of the more forward-leaning cantons have in the past waived taxes for new firms for up to ten years.  However, after criticism by the OECD and European Union, the Federal Council proposed tax reform measures that became known as “Tax Reform and AHV Financing” (TRAF), which was approved by the Swiss parliament in September 2018 and was accepted by 64.4 percent of Swiss voters in a May 2019 popular vote.

TRAF entered into force on January 1, 2020, and obliged Swiss cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal rates and offer incentives for corporate investment through deductions and preferential tax treatment for certain types of income, such as patents, or expenses, such as research and development.  Overall cantonal tax rates are expected to decrease under TRAF, but observers note that tax-friendly cantons such as Zug will likely remain competitive for foreign investment by continuing to offer aggressive incentives.  In Zurich, which is sometimes used as a reference point for corporate location tax calculations within Switzerland, the combined effective corporate tax rate was expected to fall to 19.7 percent in 2020, according to PricewaterhouseCoopers.  This includes municipal, cantonal, and federal tax.

The new corporate tax rules aim to create an internationally compliant, competitive tax system for companies while strengthening the AHV (Swiss pension scheme) by generating additional receipts.  The TRAF tax reform is intended to safeguard the appeal and competitiveness of Switzerland as a business location, and to secure jobs and tax receipts in the medium to longer term.

Individual income tax rates also vary widely across the 26 cantons.

Foreign Trade Zones/Free Ports/Trade Facilitation

Switzerland’s free ports remain an important hub particularly for art works and collectibles from all over the world.  The country has taken steps in recent years to strengthen anti-money laundering measures and minimize the risks of abuse in free ports, to ensure that processes are in line with international standards.

Performance and Data Localization Requirements

There are no “forced localization” laws designed to require foreign investors to use domestic content in goods or technology (e.g. data storage within Switzerland).  In a June 2017 court decision regarding a February 2014 Federal Council decision to exclude a foreign competitor from bidding on services related to the government’s critical infrastructure, the court ruled in favor of the Swiss state-owned enterprise involved in the bid.  U.S. companies have to date not voiced concerns.

Switzerland follows strict privacy laws and certain data may not be collected in Switzerland, as it is deemed personal and “worthy of protection.”  The collection of certain data may need to be registered at the office of the Federal Data Protection and Information Commissioner.  Some foreign companies have located data centers in Switzerland due to the country’s strict privacy rules and neutrality.  In April 2018, FINMA published an outsourcing circular clarifying regulations for data storage for the banking and insurance sector at: https://www.finma.ch/en/documentation/circulars/ 

Real Property

Physical property rights are recognized and enforced within Switzerland, which currently ranks 18^th out of 190 countries in the ease of transferring and registering property, according to the World Bank’s Doing Business Report 2020.

Intellectual Property Rights

According to the World Intellectual Property Organization’s (WIPO’s) World Intellectual Property Indicators, in 2018 Switzerland ranked 8th globally in filing patents, 11th in industrial designs, and 14th in trademarks, which reflects Switzerland’s overall strong protection and enforcement of intellectual property rights (IPR).

In 2020, Switzerland was removed from USTR’s Special 301 Watch List for revisions to its Copyright Act that came into force on April 1, 2020.  The revisions are intended to address specific difficulties in Switzerland’s system of online copyright protection, particularly regarding online infringement.  This is an important step after many years of engagement, and the United States will carefully monitor the implementation, interpretation, and effectiveness of the newly enacted legislation, as well as continue to engage with the Swiss government on these and other IP issues.

Federal customs authorities in Switzerland have the authority to seize counterfeit goods, upon request from the IPR holder or from related interest groups (e.g. professional associations).  Goods can be seized and held for 10 days if there is reasonable suspicion that they are counterfeit.  Provisional measures can also be obtained from a Swiss court to ensure evidence is not destroyed.  If the destruction of goods is requested by an IPR holder, the owner of the goods can dispute that claim in writing within 10 days.  In 2019, Swiss customs conducted 2,906 interventions to seize counterfeit commercial goods, up 73 percent from the number of cases in 2018.  The number of items seized rose from 14,388 in 2018 to 22,324 in 2019, most of which were counterfeit bags and watches.  In 2019, a total of 9,012 consignments of unauthorized pharmaceuticals were seized, the large majority of which were unauthorized erectile dysfunction medications from India and Eastern Europe.

Detailed information is available on Swiss Customs website:

https://www.ezv.admin.ch/dam/ezv/en/dokumente/stab/2020-fakten-und-zahlen.pdf.download.pdf/FaktenZahlenEZV_2020_WEB_en.pdf

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/ .

Resources for Rights Holders

Theodore Fisher, Economic/Commercial Officer
U.S. Embassy in Bern, Sulgeneckstrasse 19, 3003 Bern, Switzerland
+41 31 357 7011
Business-bern@state.gov

Country / Economy resources

Swiss American Chamber of Commerce
Talacker 41
8001 Zurich
+41 43 443 72 00
info@amcham.ch

Capital Markets and Portfolio Investment

The Swiss government’s attitude toward foreign portfolio investment and market structures is positive, resulting in high global rankings by many indices.

The SIX Swiss stock exchange based in Zurich is one of the top stock markets worldwide based on market capitalization.

Money and Banking System

Switzerland is home to a sophisticated banking system that provides a high degree of service to both foreign and domestic entities.  Switzerland also has an effective regulatory system that encourages and facilitates portfolio investment.  The Swiss Bankers Association (SBA), a trade association of almost 300 member financial institutions, estimated that Switzerland’s banking sector managed assets amounting to approximately USD 7 trillion in 2018, almost half of which come from abroad.  The largest banks, UBS and Credit Suisse, have total assets of approximately USD 1 trillion and USD 800 million, respectively, while Raiffeisen Switzerland holds about USD 230 billion and Zurich Cantonal Bank holds roughly USD 170 billion.  Switzerland also maintains an independent central bank – the Swiss National Bank (SNB).

U.S. citizens who are resident in Switzerland may face difficulties in opening bank accounts at smaller Swiss banks as a result of the administrative costs of complying with additional regulatory and administrative procedures required for U.S. related person accounts under accepted disclosure rules.

The Swiss government created a blockchain task force in January 2018 to foster cooperation between the traditional banking sector and the nascent industry and to discuss potential legal and regulatory reforms to attract blockchain technologies while maintaining anti-money laundering controls.  In December 2018, the Swiss government endorsed a report on the legal framework for blockchain and distributed ledger technology (DLT) in the financial sector, with the goal of creating favorable conditions for Switzerland to evolve as a leading location for fintech and DLT companies.  In March 2019, the Swiss government-initiated consultations on adapting federal legislation to recent developments in DLT, and following these consultations sent a draft law to parliament in November 2019.  The law will be discussed by parliament over the course of 2020.

Several associations provide information about Swiss banks that offer services to U.S. clients.  For more information, see the following page at the U.S. Embassy Bern website:

• https://ch.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/living-in-ch/banking-resources/

Foreign Exchange and Remittances

Foreign Exchange

In January 2015 the Swiss National Bank (SNB) abandoned the Swiss franc’s euro peg (CHF 1.20 / EUR).  In the wake of the SNB’s announcement, the franc increased over 30 percent in value against the euro.  Perceived as a “safe haven” currency, the franc often strengthens during times of economic downturn or crisis.  As of May 2020, the franc traded at just over CHF 1.05 / EUR, and just over CHF 0.97 / USD.

Since 2015, the SNB has attempted to prevent further strengthening of the Swiss franc by instituting a negative interest rate for commercial bank deposits at the SNB, currently -0.75 percent, while continuing an expansionary monetary policy through intervention in the foreign currency market.  With the onset of the COVID-19 crisis in March 2020, the SNB assessed that the Swiss franc was “even more highly valued,” as compared to a previous assessment of “highly valued.”  The SNB announced it would implement loose monetary policies and stronger foreign currency interventions to stabilize the situation.  The strength of the franc lowers effective prices of imports to Switzerland, but also harms Swiss competitiveness as an export-oriented economy.

Remittance Policies

There are currently no restrictions on converting, repatriating, or transferring funds associated with an investment (including remittances of capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at the legal market clearing rate.

Sovereign Wealth Funds

Switzerland does not have a sovereign wealth fund or an asset management bureau.

The Swiss Confederation is the largest or sole shareholder in Switzerland’s five state-owned enterprises (SOEs), active in the areas of ground transportation (SBB), information and communication (Swiss Post, Swisscom), defense (RUAG, which was divided into two companies in January – see below), and aviation / air traffic control (Skyguide).  These companies are typically responsible for “public function mandates,” but may also cover commercial activities (e.g., Swisscom in the area of telecommunications).

SOEs typically have commercial relationships with private industry.  Private sector competitors can compete with SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations.  Additional publicly owned enterprises are controlled by the cantons in the areas of energy, water supply, and a number of subsectors.  SOEs and canton-owned companies may benefit from exclusive rights and privileges (some of which are listed in Table A 3.2 of the WTO Trade Policy Review – https://www.wto.org/english/tratop_e/tpr_e/tp455_e.htm ).

Switzerland is a party to the WTO Government Procurement Agreement (GPA).  Some areas are partly or fully exempted from the GPA, such as the management of drinking water, energy, transportation, telecommunications, and defense.  Private companies may encounter difficulties gaining business in these exempted sectors.

Privatization Program

In the aftermath of a 2016 cyberattack, the Federal Council reviewed RUAG’s structure in light of cybersecurity concerns for the Swiss military, and decided in June 2018 to split the company. Swiss defense and aerospace company RUAG was split into two holding companies as of January 1, 2020.  One, MRO Switzerland, will remain state-owned and provide essential technology and systems support to the Swiss military.  The other, RUAG International, includes non-armaments aviation and aerospace businesses, and will be fully privatized in the medium term, according to the Swiss government.

The Swiss Confederation and Swiss companies are generally aware of the importance of pursuing due diligence to responsible business conduct (RBC) and demonstrating corporate social responsibility (CSR).  In response to criticism from civil society about the business practices of Swiss companies abroad, the Swiss government commissioned a series of reports on the government’s role in ensuring CSR, particularly in the commodities sector, and in December 2016 published a national action plan in conjunction with its commitments under the UN Guiding Principles on Business and Human Rights (https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64884.html ).  In June 2017, the Swiss government concluded that Switzerland promotes voluntary principles, such as the upholding of human rights standards, and also supports including mandatory CSR market incentives, such as minimum conditions for the protection of workers abroad, in forthcoming legislation.  In January 2020, the Swiss government approved the CSR Action Plan 2020-2023, which covers sixteen measures – particularly promoting sustainability reporting and due diligence by companies, stakeholder dialogue, and the alignment of private section CSR instruments with the OECD Guidelines for Multinational Enterprises.

The latest updates on corporate social responsibility are available on https://www.seco.admin.ch/seco/en/home/Aussenwirtschaftspolitik_Wirtschaftliche_Zusammenarbeit/Wirtschaftsbeziehungen/Gesellschaftliche_Verantwortung_der_Unternehmen.html 

There is ongoing political debate over whether Swiss courts should exercise jurisdiction over allegations of human rights and environmental abuses by Swiss companies abroad.  In March 2019, the upper house of the Swiss parliament (the Council of States) voted narrowly to reject talks on a proposal on responsible business put forward by the lower house (the National Council).  The National Council reaffirmed its proposal in March 2020, with some concessions. A planned vote by the Council of States was postponed due to the coronavirus outbreak, but was expected later in 2020.  The debate may culminate in an eventual referendum, known as the “Responsible Business Initiative” (RBI), in which Swiss citizens will decide whether to adopt or reject a partial revision of the Swiss Constitution that aims to introduce a specific provision on responsible business (https://www.bk.admin.ch/ch/f/pore/vi/vis462t.html ).

Switzerland ranked 1st out of 180 countries in the 2018 Yale University-based Environmental Performance Index (EPI).

The Swiss government implements the OECD Due Diligence Guide for Responsible Supply Chains of Minerals from Conflict and High-Risk Areas.  Switzerland is a member of the Extractive Industries Transparency Initiative and supports the Better Gold Initiative, which promotes responsible gold mining in Peru, with plans to expand to Bolivia and Colombia.  Switzerland’s Point of Contact for the OECD Guidelines at the State Secretariat for Economic Affairs (SECO) may be contacted at: https://mneguidelines.oecd.org/ncps/switzerland.htm .

Information about the Swiss Better Gold Association: https://www.swissbettergold.ch.

Switzerland has signed a number of nonbinding agreements outlining best practices for corporations, including the Voluntary Principles on Security and Human Rights and the International Code of Conduct for Private Security Service Providers.

Swiss law provides for criminal penalties, including imprisonment for up to five years, for official corruption, and the government generally implements these laws effectively.  Switzerland is ranked 4^th of 180 countries in Transparency International’s Corruption Perceptions Index, reflecting low perceptions of corruption in society.  Under Swiss law, officials are not to accept anything that would “challenge their independence and capacity to act.”  The bribery of public officials is governed by the Swiss Criminal Code (Art. 322), while the bribery of private individuals is governed by the Federal Law Against Unfair Competition.  The law defines as granting an “undue advantage” either in exchange for a specific act, or in some cases for future behavior not related to a specific act.  Some officials may receive small gifts valued at no more than CHF 200 or CHF 300 for an entire year, which are not seen as “undue.” However, officials in some fields, such as financial regulators, may receive no advantages at all.  Transparency International has recommended that at the federal level a maximum sum should be set.

Investigating and prosecuting government corruption is a federal responsibility.  A majority of cantons requires members of cantonal parliaments to disclose their interests.  A joint working group comprising representatives of various federal government agencies works under the leadership of the Federal Department of Foreign Affairs to combat corruption.  Some multinational companies have set up internal hotlines to enable staff to report problems anonymously.

In 2009, Switzerland ratified the United Nations Convention against Corruption.  The Swiss government experts believe this ratification did not result in significant domestic changes, since passive and active corruption of public servants was already considered a crime under the Swiss Criminal Code.

A review by the Council of Europe’s Group of States against Corruption (GRECO) in 2017 recommended the adoption of a code of ethics/conduct, together with awareness-raising measures, for members of the federal parliament, judges, and the Office of the Attorney General (OAG) to avoid conflict of interests.  These measures needed to be accompanied by a reinforced monitoring of members of parliament’s compliance with their obligations.  In March 2018, the OECD Working Group on Bribery in International Business Transactions recommended that Switzerland adopt an appropriate legal framework to protect private sector whistleblowers from discrimination and disciplinary action, to ensure that sanctions imposed for foreign bribery against natural and legal persons are effective, proportionate, and dissuasive, and to ensure broader and more systematic publication of concluded foreign bribery cases.  The OECD Working Group positively highlighted Switzerland’s proactive policy on seizure and confiscation, its active involvement in mutual legal assistance, and its role as a promoter of cooperation in field of foreign bribery.  Regarding detection, the OECD Working Group commended the key role played by the Swiss Financial Intelligence Unit (MROS) in detecting foreign bribery.

A number of Swiss federal administrative authorities are involved in combating bribery.  The Swiss State Secretariat for Economic Affairs (SECO) deals with issues relating to the OECD Convention.  The Federal Office of Justice deals with those relating to the Council of Europe Convention, while the Federal Department of Foreign Affairs (MFA) deals with the UN Convention.  The power to prosecute and judge corruption offenses is shared between the relevant Swiss canton and the Swiss federal government.  For the federal government, the competent authorities are the Office of the Attorney General, the Federal Criminal Court, and the Federal Police.  In the cantons, the relevant actors are the cantonal judicial authorities and the cantonal police forces.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

In 2001, Switzerland signed the Council of Europe’s Criminal Law Convention on Corruption.  In 1997, Switzerland signed the OECD Anti-Bribery Convention, which entered into force in 2000.  Switzerland signed the UN Convention against Corruption in 2003.  Switzerland ratified the UN Anticorruption Convention in 2009.

In order to implement the Council of Europe convention, the Swiss parliament amended the Penal Code to make bribery of foreign public officials a federal offense (Title Nineteen “Bribery”); these amendments entered into force in 2000.  In accordance with the revised 1997 OECD Anti-Bribery Convention, the Swiss parliament amended legislation on direct taxes of the Confederation, cantons, and townships to prohibit the tax deductibility of bribes; these amendments became effective on in 2001.

Switzerland maintains an effective legal and policy framework to combat domestic corruption.  U.S. firms investing in Switzerland have not raised with the Embassy any corruption concerns in recent years.

Resources to Report Corruption

Government Agency Contact:

Michel Huissoud
Director
Swiss Federal Audit Office
Monbijoustrasse 45
3003 Bern / Switzerland
Ph. +41 58 463 10 35
Messages can be submitted via https://www.bkms-system.ch/bkwebanon/report/clientInfo?cin=5efk11 

“Watchdog” Organization Contact:

Martin Hilti
Executive Director
Transparency International Switzerland
Schanzeneckstrasse 25
P.O. Box 8509
3001 Bern / Switzerland
Ph. +41 31 382 3550
E-Mail: info@transparency.ch

There is minimal risk from civil unrest in Switzerland. Protests do occur in Switzerland, but authorities monitor protest activities. Urban areas regularly experience demonstrations, mostly on global trade and political issues, and some occasionally sparked by U.S. foreign policy.  Protests held during the annual World Economic Forum (WEF) occasionally draws protestors from several countries in Europe.  Historically, demonstrations have been peaceful, with protestors registering for police permits. Protestors have blocked traffic; spray-painted areas with graffiti, and on rare occasions, clashed with police. Political extremist or anarchist groups sometimes instigate civil unrest.  Right-wing activists have targeted refugees/asylum seekers/foreigners, while left-wing activists (who historically have demonstrated a greater propensity toward violence) usually target organizations involved with globalization, alleged fascism, and alleged police repression.  Swiss police have at their disposal tear gas and water cannons, which are rarely used.

The Swiss labor force is highly educated and highly skilled.  The Swiss economy is capital intensive and geared toward high value-added products and services.  In 2019, 76.5 percent of the workforce was employed in services, 20.8 percent in manufacturing, and 2.6 percent in agriculture.  Full-time work compared to part-time work is more prevalent among foreign workers than among Swiss workers: 40 percent of the Swiss population works part-time, compared to 26 percent of the foreign working population.  Wages in Switzerland are among the highest in the world.  Switzerland continues to observe International Labor Organization (ILO) core conventions.  Government regulations cover maximum work hours, minimum length of holidays, sick leave, compulsory military service, contract termination, and other requirements.  There is no federal minimum wage law.

Foreigners fill not only low-skilled, low-wage jobs, but also highly technical positions in the manufacturing and service industries.  Foreigners account for 31.7 percent of Switzerland’s labor force estimated at about 5 million people.  Many foreign nationals are long-time Swiss residents who have not applied for or been granted Swiss citizenship.  Foreign seasonal workers take many lower-wage jobs in agriculture.

On September 27, 2020, Swiss voters will decide on an initiative to limit immigration across European borders, which could negate the Swiss-EU Free Movement of Persons Agreement and carry potentially significant implications for the immigrant-dependent labor market.  This follows a similar February 2014 initiative to impose limits on immigration.  In the wake of the 2014 referendum, the government introduced a series of measures aimed at bringing into the labor market traditionally underemployed groups – women, older job seekers, refugees, and temporarily accepted asylum seekers.  In December 2016, parliament introduced a requirement that companies in sectors with more than 5 percent unemployment provide information on job openings to government-run employment centers.  These centers would provide employers with suitable candidates, which employers would be required to interview before filling a job.  However, registration at the employment centers would be open to cross-border commuters and EU nationals as well, thus blunting the effect of the legislation, which was implemented by the Federal Council as of July 2018.

Switzerland generally prohibits commerce on Sunday.  Swiss voters narrowly accepted a 2005 revision of the Swiss Federal labor law in order to provide flexible working hours, such as Sunday openings in major railway stations and airports.  Shopping hours outside of these locations remain mainly regulated by cantonal laws.  Employees in the retail sector and in restaurants and bars, in cooperation with other interests, have been successful in resisting the easing of federal and cantonal laws governing opening hours, but in recent years the State Secretariat for Economic Affairs (SECO) has loosened work restrictions on Sundays, for example by allowing a limited number of malls to be open on Sundays.

Trade union density – the percentage of the workforce represented by trade unions – is on the decline in Switzerland, according to OECD data.  From over 20 percent in 2000, trade union density had fallen to 14.9 percent by 2017, according to the OECD (latest data available).  Labor-management relations are generally constructive, with a general willingness on both sides to settle disputes by negotiation rather than labor action.  According to the Federal Office of Statistics, some 581 collective agreements were in force in Switzerland in March 2018 (latest data available).  Of these, approximately 64 percent concern the services sector, 34 percent the manufacturing sector, and 1 percent the agricultural sector; these are usually renewed without major difficulties.  Trade unions continue to promote a wider coverage of collective agreements for the Swiss labor force.  Although the number of workdays lost to strikes in Switzerland is among the lowest in the OECD, Swiss trade unions have encouraged workers to strike on several occasions in recent years.  In difficult economic times, employers may temporarily shift full-time employees to part-time by registering with cantonal authorities and justifying reductions as necessary to business activities.  This practice, known as Kurzarbeit (“short-time work”), allows for the government to make partial salary payments through the unemployment insurance fund.  Kurzarbeit became widespread with the onset of the COVID-19 crisis and the temporary shutdown of wide segments of the Swiss economy.  Officials announced on May 4, 2020 that a total of 1.91 million employees from 187,000 companies – or more than 37 percent of the total workforce – were on reduced working hours under the program.  Employees can reject the shift to part-time work, but risk dismissal.  Responsibility for establishing and enforcing rules for the Kurzarbeit program ultimately belongs to the Federal Council, the seven-member executive of the Swiss government.

A prohibition on strikes by Swiss public servants was generally repealed in 2000, although restrictions remain in place in a few cantons.  The Federal Council may now 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.

Switzerland’s average unemployment rate was 3.9 percent in the fourth quarter of 2019 under ILO Labor Force Survey methodology, while registered unemployment was 2.3 percent.  Cantons bordering EU countries experience higher unemployment rates than Switzerland as a whole.

Switzerland does not have a free trade agreement with the United States, but has requested that talks begin to explore an agreement.  Switzerland has no agreed bilateral labor standards with the United States.

The U.S. International Development Finance Corporation (DFC – formerly the Overseas Private Investment Corporation, OPIC) cannot provide support to projects in Switzerland due to the country’s high income status.  Switzerland is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA); the country has not signed a political risk insurance agreement with any Western European country or the United States.

Average exchange rate for 2019: 1 USD = 0.9938 CHF
Average exchange rate for 2018: 1 USD = 0.9938 CHF
* Source: Federal Office of Statistics 
** Source: Swiss National Bank
***Significant statistical discrepancies are due to methodological differences in measuring foreign direct investment.  Data most recently available.

Theodore Fisher, Economic/Commercial Officer
U.S. Embassy in Bern, Sulgeneckstrasse 19, 3003 Bern
+41 31 357 7011