Law secures the stability of societies. In times of the Coronavirus, one is under the impression that law is no longer a foundation of our society but a bed of quicksand. Certainties erode at breathtaking speed. The following contribution looks at the current legal situation in Switzerland from a perspective of constitutional and administrative law. Needless to say that it may be outdated quickly.
2. Constitutional Background
In times of crisis, important decisions must be taken quickly. Typically, such powers shift to the executive branch. Switzerland is no exception. The Federal Council takes measures to safeguard external security, independence and neutrality of Switzerland. According to article 185 paragraph 3 of the Swiss Constitution, the Swiss Federal Council may issue ordinances and rulings in order to counter existing or imminent threats of serious disruption to public order or internal or external security. It is undisputed that the current pandemic qualifies under this article. Less certain is the question whether the Constitution not only allows police measures but also financial benefits in order to address the social and economic hardship that follows from the virus. The Federal Council has invoked this article in order to support Swiss bank UBS in 2008 but many doubted the constitutionality of this act. Newer doctrine tends to include social and economic emergencies.
The Federal Council has enacted several ordinances on the Coronavirus, the latest on March 17, 2020 (available here in German, French and Italian). Schools and universities are closed, gatherings are prohibited, services drastically reduced to groceries or everyday items. More drastic measures are likely to come in order to reduce the number of social contacts.
Parliament must ratify such ordinances if the duration is longer than six month (Article 7d Government and Administration Organisation Act of 21 March 1997, GAOA). More power has Parliament when it comes to emergency spending. A delegation of both chambers must approve immediate expenses and appropriation credits must be ratified by Parliament. Parliament has also its own emergency powers and may derogate the emergency measures of the Federal Council by its own ordinances.
3. Legal Protection and State Liability
There is no doubt that businesses are heavily affected by the measures in place. Although the Swiss economy is robust, it is only a matter of time before businesses will run out of money. Short-time work is a possibility and is regulated by Swiss social security law but it helps neither especially hard hit companies like airlines nor the self-employed next door worker, at least not if the measures will keep in place for months.
It comes as no surprise that legal challenges were discussed already at the time of relatively “tame” measures as the prohibition of large events with more than 1000 participants (see for this and the following Felix Uhlmann in German). The problem with such lawsuits: the events are long over until the courts will decide. Precautionary measures are not likely to be obtained by the courts. This is not to be said that there is no legal protection. The Federal Council is bound by the Constitution, especially by the principle of proportionality even in the event of emergency measures. Courts can set a precedent that will soften the measures. Still, in the light of the dominating public interest of health protection, private organizers and businesses should not be too optimistic.
There remains the question of compensation for the losses after an event cancellation or closure of the business. Again, there is hardly any reason for optimism for private enterprises to win such cases. In the case of quarantines, the Swiss Federal law on epidemics provides for the possibility of compensation for individuals, but not for any further financial loss (available here in German, French and Italian) suffered by enterprises as a result of lockdown. Even if a court finds a measure disproportionate, Swiss state liability typically requires a substantial breach of an official duty. This requirement is a high hurdle and, given the difficult decision-making situation for the authorities, will only be met in exceptional cases.
Hence, legal protection and state liability are weak under the current legal situation. They will hardly help hard-hit businesses.
4. Financial Aid
It is likely that the Federal Council will announce a detailed financial aid program early next week. It is too early to speculate on its content but is obviously an extremely difficult task to draw up a concept that satisfies the criteria of effectiveness, equality, and proportionality. As this writing, the Federal Council has enacted a first ordinance on financial aid for sports. More ordinances will follow. Some cantons, e.g. Zurich, have enacted financial ordinances backing up banks giving credits to private enterprises (available here in German).
From a regulatory standpoint, such aid must cope with diverse situations from the threatened airline Swiss to the barber shop next door. Both may be in extreme need of support. But what about the enterprises that are indirectly affected such as banks, insurances etc.? What about businesses that may suffer losses from the absence of face-to-face sales but may compensate such losses by mailing articles? Should the government also save businesses that were already in a critical situation before the pandemic? Who should assess such questions, especially under time pressure and with the already given promise of the Federal Council that the aid will be given “unbureaucratically”?
Switzerland is a federalist state. The federal ordinance concerning the Coronavirus has already triggered a debate on the residual powers of the cantons (states). It is clear that the cantons may still regulate questions not covered by the federal ordinances. Still, it is unclear what shall happen to areas that have been addressed by the Federal Council but only vaguely or in principle. Answers to these questions are expected in the next few weeks.
When it comes to financial compensation, the standards are more lenient as the Federation and the cantons may act in parallel. Still, coordination is needed, and it is likely the Federal Council is in negotiations with cantons what entity is best placed to support which kind of businesses. In the example of Zurich, the canton concentrates on smaller businesses.
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All the best, Max Steinbeis