The End of Swiss Federal State Guarantee for Cargo Vessels


The end of the Swiss federal state guarantee for cargo vessels – a trigger for the tonnage tax?


The Swiss Federal Council decided to terminate the well-established funding instrument to facilitate the financing of Swiss owned and registered cargo vessels by issuing government guarantees.  Further, the Federal Council decided not to renew existing guarantees or grant new guarantees for Swiss Ship-owners as of June 2017.  The existing guarantees will continuously expire up to 2031.

Over the past years, the Swiss federal government has issued guarantees in the amount of approximately 800 Million Swiss francs in favour of a fleet of 50 vessels with a capacity of 1’812’148 DWT.  In return, the Swiss federal government is entitled to seize respective vessels in case an international crisis or war situation would complicate or hamper the national economic supply.

The Federal Council justifies this decision referring to substantial risk that its guarantees will be drawn in the wake of the current crisis in the international shipping business.  Further it argues that such a competence to seize and run a fleet of cargo vessels on high seas is no longer crucial for the national economic supply of Switzerland.  In this context, the Swiss Government requests Swiss ship-owners to implement further measures to improve their liquidity as well as their economic efficiency.

This is a turning point for cargo vessels sailing under the Swiss flag.  The state guarantee facilitated the financing of vessels substantially and was most likely the main reason to have cargo vessels registered in Switzerland.  It is therefore not only crucial but also an opportunity for Switzerland to now intensively work on a state of the art legal framework to establish Switzerland as a competitive and attractive flag state.  A first step in this direction would be the implementation of a tonnage tax.

This new approach by the Swiss Federal Council forces Swiss ship-owners to restructure the financing of their cargo vessels.

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