- It is likely that Ruag will not be organized as a private company under private law in the future. According to the Federal Council, this legal form is no longer suitable for the defense company to carry out its tasks.
- In addition to other options, the reintegration of Ruag into the Federal Department of Defence, Civil Protection and Sports (DDPS) is also being examined.
The Federal Council has decided to review the legal form of Ruag MRO AG, as it announced. The federally owned arms company, which generates eighty percent of its sales through orders from the Swiss Army, is now to obtain a form of public law - which is still open.
Legend:
Ruag generates eighty percent of its sales through orders from the Swiss Army.
Keystone/URS FLUEELER
According to expert opinion, the public law institution or the special public corporation under public law, which can be designed according to the needs of the federal government, are eligible. In addition, the option of reintegration into the DDPS is being examined.
The Department of Defense should submit a consultation proposal to the Federal Council to change the legal basis by the end of May 2025.
Failure to enforce rules
At the media conference, Minister of Defense Viola Amherd mentioned the shortcomings in Ruag’s compliance system, ie in the enforcement of rules and guidelines within the company. In February 2024, an audit report from the Federal Audit Office (SFAO) showed discrepancies in Ruag’s deal with Leopard 1 tanks. When the 96 tanks were purchased from the Italian army in 2016, the competence and signature regulations were not complied with. Furthermore, the federal government found out about the sale of the tank too late.
This investigation by the SFAO was the reason to check if the current legal form was still suitable. A report by Martin Dumermuth, former director of the Federal Office of Justice, concluded that the private law ACC as a legal form Ruag MRO no longer meets today’s requirements.
The current geopolitical situation requires “a more dynamic political control than a private company is capable of,” says the Federal Council’s statement. If Ruag receives a new legal form under public law, these legal uncertainties would be clarified, Amherd said at the conference. In addition, the flow of information and the responsibilities of who decides what is then clear.
Jürg Rötheli will be the new Chairman of the Board of Directors
Jürg Rötheli will be the new Chairman of the Board of Directors of the federally owned defense company Ruag MRO. The lawyer has been appointed by the Federal Council as successor to Nicolas Perrin. Perrins announced his resignation in February following the publication of the SFAO report.
Defense Minister Viola Amherd explained that Jürg Rötheli, 61 years old, fully meets the profile of the requirements. In its message, the Federal Council specifically referred to Rötheli’s experience in managing various companies, including state-affiliated companies.
Rötheli was previously chairman of the board of ORS AG, which operates refugee accommodation on behalf of the federal government. He also operated the company until last July. The doctor of law previously worked, among other things, on the executive board of Swisscom.
How might compliance challenges impact the future operations of Ruag MRO AG under a new legal status?
Interview Transcript: Time.news with Defense Expert Dr. Johan Weber
Time.news Editor: Good afternoon, Dr. Weber. Thank you for joining us today to discuss the recent developments regarding Ruag MRO AG and its potential transition from a private company to a public law institution. What do you make of the Federal Council’s decision to review Ruag’s legal status?
Dr. Johan Weber: Good afternoon! It’s a pleasure to be here. The Federal Council’s decision is significant given Ruag’s pivotal role in Switzerland’s defense ecosystem, especially considering it derives 80% of its sales from the Swiss Army. Transitioning to a public law framework seems to be a necessary evolution reflecting the needs of a modern defense environment that prioritizes compliance and accountability.
Time.news Editor: You mentioned compliance and accountability. Could you elaborate on how Ruag’s current compliance challenges influenced this decision?
Dr. Johan Weber: Certainly. As highlighted in the recent audit report from the Federal Audit Office, there were serious shortcomings in Ruag’s compliance system. Issues such as improper enforcement of rules and discrepancies related to the Leopard 1 tank acquisition illustrate the vulnerabilities in their operational oversight. Changing to a public law structure could, ideally, mandate stricter governance protocols and enhance transparency in their dealings.
Time.news Editor: That leads us to the discussion about potential legal forms for Ruag. The scrutiny on whether to reintegrate it into the Federal Department of Defence, Civil Protection and Sports (DDPS) seems to be on the table. Would that be a wise move?
Dr. Johan Weber: It’s an interesting proposition. Reintegration into the DDPS could realign Ruag’s operations with national defense priorities more closely. It could also facilitate better oversight from the government, ensuring adherence to defense policies and regulations. However, it’s essential for this transition to be strategic—merely changing the legal format won’t solve existing compliance issues unless there’s a commitment to implementing comprehensive reforms.
Time.news Editor: Some critics argue that moving from a private company to a public law institution could stifle innovation and operational flexibility. How would you address that concern?
Dr. Johan Weber: That is a valid concern in defense contracting, where agility and responsiveness can be crucial. However, I believe that with the right framework and governance structure, a public law institution can maintain flexibility. The focus should be on establishing a culture that encourages innovation within a compliance-heavy environment. There are examples in other countries where state-owned companies remain innovative while operating under stringent regulations.
Time.news Editor: Looking forward, what steps do you think the DOD should take by May 2025 to ensure a smooth transition, should they choose to change Ruag’s legal status?
Dr. Johan Weber: The Department of Defense will need to engage in a thorough consultation process with stakeholders, including internal audits and legal experts. They must define a clear regulatory framework that addresses previous compliance failures while promoting operational efficiency. Furthermore, stakeholder education will be crucial, as the employees must understand the new compliance expectations and their roles within it. Engaging with industry experts could also provide valuable insights into best practices and innovative solutions for a compliant yet agile operational structure.
Time.news Editor: Thank you, Dr. Weber, for providing your insights into this complex yet crucial topic. It seems the road ahead for Ruag is both necessary and challenging.
Dr. Johan Weber: Thank you for having me. It’ll certainly be interesting to see how Ruag navigates these changes and whether it sets a new standard for compliance and operational integrity in the defense sector.
