A Swiss soldier demonstrates mini-drone deployment.
Keystone / Gian Ehrenzeller
Swiss defence companies say the country’s efforts to build up its defence industry are being hampered by a decade-old law designed to keep Blackwater-style mercenaries out of the country.
Defence and technology groups have said the law complicates routine work, such as installing and maintaining military equipment or training foreign soldiers. It can also apply to overseas subsidiaries of Swiss-controlled groups and to the Swiss arms of international companies headquartered elsewhere.
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The Federal Act on Private Security Services Provided Abroad was introduced in 2015 after private military companies began establishing themselves in Switzerland, including Aegis Defence Services, a major US government contractor in Iraq and Afghanistan. Aegis has since left due to the legislation.
Industry executives say the law’s reach beyond Switzerland is particularly problematic because moving staff or operations overseas does not necessarily free companies from its restrictions. Some Swiss groups are now considering moving their headquarters abroad.
The industry has called for the law’s extraterritorial reach to be changed or even for the law to be scrapped altogether, given that the companies that originally prompted the rules have left.
“The original intent [of the law] was good,” said Peter Huber, a defence entrepreneur who sits on several company boards. “But then it got perverted . . . Bern [has] now interpreted this law into something completely different.”
The reach of the law is unusual even by international standards. While other countries regulate private military contractors, Switzerland is among the few to extend such rules to companies operating abroad that are controlled from its territory.
The problem had become more pressing as wars in Ukraine and the Middle East have increased demand for military suppliers able to provide not just equipment but maintenance, training and support, industry groups said.
Huber said he had seen a Swiss company lose a contract worth more than CHF5 million to a French rival because of the rules. One company he was involved with was considering moving its headquarters to the US.
Swissmem, the engineering industry association, said it knew of cases where the law had delayed or stopped services abroad, forcing companies to hire third parties at extra cost.
Zurich-based Acutronic Group, which makes equipment used to test navigation systems in aircraft and missiles, said it had struggled to establish whether its technicians could travel abroad to install and support its machines.
“This is an example of well-intentioned legislation with a gap between its original purpose and its implementation,” said chief executive Florian Aigrain.
The foreign ministry said parliament had deliberately written the law to cover a broad range of services, including those provided by foreign subsidiaries controlled from Switzerland.
Companies must notify Bern before carrying out such work. They must generally wait for officials to decide whether further checks are needed and can in some cases be barred from carrying out the activity at this point.
The ministry said most cases were processed within days and that changes introduced in 2021 — exempting some maintenance, repair and training work — had helped. Most declarations were processed within days, it said.
The foreign ministry said changes introduced in 2021 had sharply reduced the number of activities that companies were required to declare under the law, from 334 in 2020 to 33 in 2022. But the numbers have risen steadily since Russia’s full-scale invasion of Ukraine in 2022, reaching 60 last year.
Companies also sought guidance on another 68 activities in 2025 to establish whether they needed to be declared.
Swissmem acknowledged the 2021 changes had helped but said significant problems remained. Stefan Brupbacher, director of Swissmem, said the rules were “haunting” technology-intensive manufacturers. “The law . . . is an absolute disaster,” he added.
The law has also drawn criticism from parliament. Franziska Roth, a Social Democratic senator, said: “This law remains a problem. One company told me recently, ‘I’m leaving Switzerland. I’m packing up and going to France.’”
The dispute has raised a bigger question about the future of Switzerland’s tradition of “armed neutrality” — the idea that the country stays out of foreign wars but maintains a strong military for its own defence. The dispute comes as Swiss defence groups battle a series of strict arms-export rules that they say are driving business abroad. Voters will decide later this month whether to ease restrictions on weapons sales to countries at war.
Georg Häsler, a Swiss army colonel and defence expert, said the law on mercenaries had roots in Switzerland’s long history of sending mercenaries to fight in foreign armies.
He said the restrictions were now “an issue for all defence companies since they need to support their goods in foreign countries”, citing Pilatus and German group Rheinmetall as examples.
In 2019, Bern used the mercenary law to order aircraft maker Pilatus to stop servicing military aircraft in Saudi Arabia and the United Arab Emirates. Pilatus successfully challenged the ban and the dispute was resolved after the rules were eased in 2021.
Rheinmetall said it complied with all applicable laws and worked closely with the authorities but declined to comment on the legislation’s impact on its operations. Pilatus did not respond to a request for comment.
Copyright The Financial Times Limited 2026
