The Federal Court has ruled that bank documents relating to a $2.5 billion (SFr3.25 billion) warships corruption case should be turned over to Taiwan.
The final decision on granting judicial assistance to Taiwan - which could cause some controversy - rests with the Swiss government.
On Wednesday judges said that the documents could now be turned over to Taipei, because Taiwan has guaranteed that it will not use the death penalty against anyone convicted in the case. This mainly affects the main suspect, former arms dealer Andrew Wang.
In an initial ruling last year, the Lausanne-based court said that Taiwan should have the documents, but later upheld an appeal from Wang's family that previous assurances from Taiwan not to invoke the death penalty had to be strengthened.
Since then Taiwan's Prime Minister Frank Hsieh has given these assurances. The court said it was satisfied that they were binding, enabling the transfer of the documents.
The affair, involving the controversial sale of six warships to Taiwan, goes back to 1991.
It is alleged that the French former state-owned firm, Elf Aquitaine, used kickbacks to persuade French and Taiwanese authorities to approve the sale of the frigates.
These were to be sold via another French firm, Thomson-CSF, for which Wang was a local agent.
Investigations began after Taiwanese authorities concluded from the inflated price that the deal constituted a serious case of international corruption.
In all, some $500 million remains blocked in 46 accounts in different banks in Switzerland as part of a Swiss investigation into alleged money laundering linked to the Elf case. Authorities in Liechtenstein have frozen a further $27 million.
Judicial assistance remains blocked for the moment, pending a decision on a separate appeal lodged by Wang directly with the Swiss government.
China is notoriously sensitive to any signs of support for Taiwan's independence. Some commentators have pointed out that the Swiss government could be placed in a difficult position if it grants judicial assistance to Taiwan.
In August the Chinese ambassador to Switzerland expressed his "strong dissatisfaction" about a visit of the Senate speaker Bruno Frick to Taiwan.
The Christian Democrat and co-founder of the parliamentary group "Switzerland-Taiwan" met the Taiwanese president on a private visit to the country.
However, the government said in November 2004 that any judicial assistance given to Taiwan should not be construed as official recognition of an independent status.
swissinfo with agencies
The six warships were sold in 1991 to the Taiwanese navy by the French firm Thomson-CSF.
The deal cost Taiwan $2.5 billion.
Andrew Wang, who was a local Thomson agent in Taiwan , is suspected of having paid bribes to Taiwanese officials to secure their agreement on the deal.
$100 million was allegedly paid to the Chinese communist party to persuade them to accept the sale of the ships to the "rebel" province.
In 1949 the Chinese archipelago of Taiwan, population 22 million, did not join the people's republic founded by Mao Tse-Tung.
It went on to create its own political structure. But since 1979 it has only been recognised by about 20 small countries.
The Swiss government considers Taiwan to be a province of China, "without a judicial personality in international law", meaning Taiwan's authorities are only local authorities.
This is also the position of Beijing for which there is only one China. Any country that recognises Taiwan as an independent state automatically risks Beijing breaking off diplomatic relations.