export-controls 20 June 2019

SECO recommends rejection of ‘financing of war materiels’ ban

On 14 June, SECO, the Swiss government agency that is responsible for export control and sanctions implementation, published a statement recommending that a proposed ban on the financing of war materiel producers, should be rejected. It says that were such a ban implemented, it would be ‘ineffective’ and ‘harmful’, particularly to Switzerland’s mechanical, electrical and metal (‘MEM’) industry.

The initiative, ‘For a ban on the financing of war materiel producers’, was presented by the Group for Switzerland Without an Army (‘GSsA’) in April 2017 and proposed that the Swiss National Bank (‘SNB’), charitable foundations, and state and occupational pension funds, should be prohibited from financing companies that generate more than 5% of their annual turnover from the production of war materiel.

As of June 2018, the initiative accrued the 100,000 signatures that are required to be put the proposal to a parliamentary vote.

‘The initiative’s approach and the planned measures are judged by the Federal Council to be ineffective. In addition, the ban on financing would have negative effects on the activities of the National Bank, foundations and pension funds…which would all be disproportionately affected,’ said SECO.

According to the Federal Council, Switzerland lacks the necessary influence to push a worldwide bar on investment in the defence industry. Moreover, the entities involved would either have to limit their investments solely to non-war materiel producers or inspect ‘thousands of companies a year’, both options that SECO deems ‘unrealistic’.