The sale of 180 personnel carriers from Switzerland to the United Arab Emirates (UAE) has been called off amid controversy over their use.
The Swiss authorities said the UAE had officially withdrawn its request to buy the used military vehicles, which were destined for Iraq.
Reports that the country had cancelled its bid for the carriers were confirmed by the State Secretariat for Economic Affairs (Seco) on Wednesday.
The UAE authorities argued they could no longer wait for the delivery of the vehicles, said Othmar Wyss of Seco.
In August the Swiss cabinet decided to suspend the sale, worth SFr12 million ($9.3 million), amid a row over how the tanks would be used.
The government said it wanted guarantees that the vehicles would be deployed for civilian purposes.
The UAE said the unarmed tanks would be given for free to Iraq to boost efforts by police to enforce law and order.
However it was reported that the M113 armoured personnel carriers would be used by Iraqi troops.
Wyss added that the UAE decision meant that the deal was off.
In June the Swiss government said the sale of the vehicles was in line with a United Nations request to support security forces in Iraq.
At the same time, the cabinet had also approved negotiations on arms exports, including personnel carriers, anti-aircraft guns and guided missiles, to India, Pakistan and South Korea.
A parliamentary committee has started investigating the planned deal following widespread criticism of the government policy to allow the sale of war material.
swissinfo with agencies
In June the Swiss cabinet gave the green light for the sale of 180 used personnel carriers to Iraq via the United Arab Emirates for SFr12 million ($9.3 million).
The move caused a public outcry amid reports suggesting the future use of the vehicles was not clear.
According to Swiss law on war material, the country receiving the tanks must first provide guarantees before the deliveries can be authorised.