The Swiss government said on Tuesday that the move would preserve the country’s neutrality and guarantee its "respected international law".
"This not only refers to prohibiting the direct participation in hostilities in the context of an armed conflict, but also to prevent private security companies from exercising in a foreign country activities that contravened Swiss interests," said the Federal Council in a statement on Tuesday morning.
Moreover, a draft put forward for consultation that will be discussed in parliament before January 31st 2012, would force all companies involved in such businesses to disclose their activities abroad.
According to the draft, these security firms would also be made to adhere to an international code of conduct signed on November 9th 2010 which includes limits on the use of force and an assurance that staff cannot invoke contractual obligations or "superior orders" in a conflict zone to justify crimes, killings, torture, kidnappings, detentions.
If the Federal Council believes these companies go too far, it would be able to forbid their activities, impose administrative sanctions and even punish the responsible people with up three years in prison.
"The companies will only provide services abroad that are not a problem [for Switzerland]," read the Federal Council’s statement.
In recent years, a total of 20 private security companies have settled in Switzerland. The companies, whose profits are thriving, are taking advantage of a loophole that allows them to conduct activities abroad without being disturbed by the Swiss authorities.
The controversy erupted last year when the British company Aegis Group Holding SA set up headquarters in Basel. The presence of one of the world’s largest private military contractors operating in war zones led some politicians to speak up. They said the company's activities were noit acceptable in a country that cherishes its neutrality and has strict regulations on weapons exports.