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Types of liability
What types of liability can arise for environmental damage (eg, administrative, civil, criminal)?
The main types of liability for environmental damage are:
- civil law liability for unlawful damages and landowner's liability;
- public law liability pursuant to the Federal Act on the Protection of the Environment and other specific laws governing environmental matters; and
- administrative sanctions and penalties.
Civil law liability is governed by the general rules of the Swiss Code of Obligations. Anyone that unlawfully causes loss or damage to another, whether wilfully or negligently must provide compensation.
If environmental damage is caused by the owner of a building or of a plot of land, the landowner's liability pursuant to the Swiss Civil Code may apply.
Further, pursuant to the Federal Act on the Protection of the Environment, the operator of an establishment or an installation that represents a special threat to the environment is liable for the loss or damage arising from effects that occur when this threat becomes reality. Liability pursuant to the Federal Act on the Protection of the Environment is strict liability. Therefore, a polluter is held responsible for the damage regardless of its culpability, with the exception of force majeure and liability of a third party or of the damaged party itself. In general, the ‘polluter pays’ principle applies to environmental damages. Accordingly, the polluter is held liable for damages and costs caused by its behaviour. The Environment Protection Act includes special liability clauses for other specific operations, such as the handling of pathogenic or genetically modified organisms.
In addition, a number of special laws governing environmental matters contain provisions on liabilities in specific cases – for example, liability for nuclear damages pursuant to the Nuclear Energy Liability Act and liability pursuant to the Radiation Protection Act.
Directors’ and officers’ liability
Can directors and officers be held personally liable for company environmental offences? If so, can liability be limited through insurance coverage and/or contractual indemnities?
In the first instance, a company is responsible for the wrongdoings of its corporate bodies. Directors and officers are not subject to civil law liability for environmental misconduct caused by the company itself. However, if a director or officer commits an intentional or negligent breach of their environmentally induced duties, they may become personally liable for any damages or losses arising therefrom.
Insurance for liability towards third parties can be taken out to cover potential damages in the case of liability claims against the company. In addition, directors' and officers' liability insurance may cover the personal liability of directors and officers.
Insurance coverage is subject to requirements, limitations and exclusions. It does usually not extend to damages resulting from wilful intent or gross negligence and cannot prevent criminal liability. Further, it does not cover fines or other claims subject to administrative law.
Personal liability can also be mitigated through contractual indemnification arrangements. However, indemnification is not possible for a wilful and grossly negligent violation of duties.
Liability for authorised activity
Can environmental liability arise even in the course of authorised activities (eg, operations subject to environmental permits)?
Conducting authorised activities does not generally exempt parties from environmental liability. Environmental liability is strict and allows no defence based on authorisations or permits. Consequently, liability for environmental damage is not excluded even if the operator has acted within the scope of the conditions of the permit and in compliance with the applicable environmental law.
What defences are available to environmental offenders?
Because environmental liability is strict, only limited defences are available to environmental offenders – namely, if the damages are caused by force majeure or gross negligence by a third party or by the damaged party itself.
In the case of general civil law liability, pursuant to the Code of Obligations, the offender may argue that it acted neither wilfully nor negligently.
Liability in share sale/asset purchase
What rules govern the transfer of environmental liability in share sales and asset purchases?
Generally, if the shares in a company with environmental liabilities are sold, the environmental liabilities remain with the company pursuant to the ‘polluter pays’ principle, meaning that the environmental liability is not affected by the change of ownership. If an asset is sold, pursuant to the polluter pays principle, the seller remains liable for the previous environmental wrongdoing, and the buyer will be liable for future pollution, if any. Nevertheless, as the new owner of the asset, the buyer can be asked to cover remediation costs for any pollution, including the one caused by the seller, so that it will have to take recourse against the seller based on the polluter pays principle.
Further, liabilities pursuant to environmental laws cannot be modified or excluded in agreements with the competent authorities. Among private parties, agreements on the allocation of environmental liabilities and related hold harmless obligations are possible and used in share purchase agreements and asset purchase agreements. The allocation primarily follows the rules of the Code of Obligations on purchase agreements and contractual liabilities, warranties and indemnities.
If a seller does not intentionally hide or withhold information about defects, its responsibility may be generally excluded or limited to certain points of particular interest. Disclosed or known environmental threats should be covered by an indemnity agreement between the seller and the buyer or be reflected in the purchase price.
What environmental due diligence measures are recommended before concluding share sales/asset purchases?
Generally, the scope of recommended due diligence measures for share deals and asset deals strongly depends on the type of business of the target as well as the previous use and the planned future use of the concerned real property, the age, previous use and planned future use of buildings that are part of the transaction.
A careful and comprehensive due diligence review is highly important for the seller in order to disclose defects properly and for the buyer to identify potential risks and request appropriate warranties and indemnities. Particular attention should be paid to potentially contaminated soil, because related damages may be discovered only after a long time. Even if the target complies with environmental ordinances, it may be obliged to advance investigation, monitoring and remediation costs. Long-term warranties and indemnities may be appropriate in this context.
Can lenders be held liable for environmental offences?
Swiss law does not provide a legal basis to hold a lender liable for environmental offences committed by the borrower. In accordance with the ‘polluter pays’ principle, if the lender itself causes environmental damages, it will be liable.
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