Switzerland's legislation on oil security
Part of Oil Security Toolkit
Introduction
The Swiss legal framework governing the response to a supply disruption of oil, as well as any other essential good and service, is provided by the 2017 National Economic Supply Act (NESA) dated from 17th June 2016. Certain principles governing the Swiss emergency stockholding system as well as specific preparatory measures and the organisation of Switzerland’s National Economic Supply are governed by the Ordinance on National Economic Supply (ONES) dated from 10th May 2017 (SR 531.11). The Ordinance on the Compulsory Stockpiling of Liquid Fuels and Combustibles dated from 10th May 2017 (SR 531.215.41) provides details concerning the character and modalities of emergency stocks.
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Circumstances triggering operation of the emergency response system
The emergency provisions of the NESA are triggered when the supply of essential goods or services is seriously endangered or disrupted. Article 4 NESA identifies the “essential goods and services”. Article 61 NESA stipulates that emergency measures may also be taken in pursuit of international obligations.
Authority determining whether emergency exists
Swiss primary legislation does not explicitly identify the authority determining whether or not the circumstances triggering an oil emergency are met. However, in practice Swiss National Economic Supply Organisation (NESO) observes the supply situation, and proposes measures to the Department of Economic Affairs, Education and research or the Federal Council in case of a supply disruption. Either the Department or the Federal Council then decide whether to implement them or not, as well as how (article 57(1) NESA).
Legal stockholding obligations
General
According to article 3(1) NESA, it is the Swiss private sector that is tasked to maintain oil supply. In particular, oil importers are required to maintain stocks (article 7(2) and 8 NESA). However, public authorities are to assist private actors in their efforts to safeguard Swiss emergency preparedness and it is public authorities together with the private sector that are in charge of preparing contingency plans (articles 3 (2&3), 5 NESA). In pursuit of this aim, Switzerland concludes compulsory stocks contracts with oil importers and other stockholding companies (article 10 NESA) regulating inter alia the nature and volume of stockpiled goods (article 10(a) NESA), the storage, treatment, supervision, control and replacement of stocked goods (article 10(b) NESA) and the storage location (article 10(c) NESA). Such compulsory stocks contracts may provide that stockowners must contribute to a guarantee fund set-up by their economic sector to cover the storage costs and loss in value of compulsory stocks (article 16 NESA).
In Switzerland, compulsory oil stocks always remain in possession of the oil importers, but accessing them is only possible with the permission of Swiss authorities (NESO/ Federal Council). Thus, they are all industry-obligated stocks. Swiss oil importers and other stockholding companies hold the compulsory stocks commingled with commercial stocks, but they are held “on top” of the commercial stocks, and thus are always available for an emergency release in their entirety. Switzerland holds exclusively oil products as compulsory stocks, never crude oil.
Storage Agency
If an economic sector sets up such a guarantee fund, NESA stipulates that it has to be administered by a privately owned entity (article 16 (1) NESA). To this end, the Swiss oil importers have founded CARBURA, the Swiss organisation for the compulsory stockpiling of oil products, which is primarily tasked with the coordination of compulsory stockpiling and the handling of related financial aspects, but does not own any oil stocks. Article 8(3) NESA provides that, by way of exception, persons otherwise obliged to store emergency stocks may be exempt from doing so if they import no more than 3000 m3 per year, and make the same financial commitment to CARBURA or a similar facility as they would have been subject to pursuant to a compulsory stocks contract.
Storage Quantity
Article 9 NESA stipulates that the Federal Department for Economic Affairs, Education and Research decrees the minimum demand, quantity and quality of each essential commodity that is stockpiled. The target volumes are not written into the law. Currently, they are 4.5 months for petrol, diesel, and fuel oil and 3 months for kerosene.
Availability of stocks
For the purposes of the NESA, emergency measures must be prepared in a manner that ensures the national economic supply in the event of imminent or already existing serious shortages (article 5(1) NESA).
Storage Locations
The location of stored stock is defined by the stockholding company, based on the stockholding contract between Switzerland and the respective private party holding the stocks (article 10(c) NESA). All compulsory stocks must be stored on Swiss territory; tickets are not permitted.
Sale of excess stocks
The stockholders increase and decrease obligatory stocks according to the federal requirements, coordinated by CARBURA. To this end, CARBURA implements so-called stockholding programs for a period of four years that need to be approved by Swiss NESO (article 22(2) ONES).
Mechanisms to address emergency
General
The Swiss legal framework provides for various measures that may be taken in response to an energy supply crisis depending on the cause and severity of the disruption. Note that all the measures listed below may in principle be used to respond to serious shortages caused by market disruption (article 31 NESA) and in pursuit of Switzerland’s international obligations (article 61 NESA).
Stockdraw
The first response to an oil supply disruption is the release of oil stocks (article 31 (2)(f) NESA). In case of severe and longer-lasting supply disruptions, additional measures may be taken, for example, to regulate the distribution of certain goods and available stocks (article 31(2) NESA).
Production Surge
At times of emergency, energy production may be increased in accordance with article 31 (2)(c) NESA. Further, at times of emergency, stocks may be increased (article 31 (2)(e) NESA). However, as Switzerland imports 100% of its oil and gas consumption, these articles are of limited relevance for these types of energy.
Demand restraint
At times of emergency, measures may be taken to reduce consumption or ration the purchase of oil products (article 31(2)(a)(b) NESA).
Fuel Switching
Article 31 (2)(a) NESA also allows for the enforced fuel switching at times of emergency. Switzerland has some fuel switching capacities from gas to oil.
Regulating sales prices
If necessary, at times of emergency, the Swiss Federal Council may fix maximum margins for the sale of oil products (article 33(2) NESA).
Monitoring and enforcement of emergency regime
Switzerland’s emergency regime is monitored and enforced on the domestic and international level. Each will be considered in turn.
Domestic
Reporting duties
Article 64 NESA obliges all stakeholders to provide the competent authorities and the private sector organisations involved with all information required to implement the NESA.
Enforcement
The NESA contains a variety of enforcement powers granted to federal and cantonal authorities (article 57-59 NESA). On the one hand, there is a variety of special administrative measures (article 40 and 41 NESA) available to executive authorities that include the revocation of or refusal to grant licences in response to derogations from any of the emergency measures listed above. Additional contractual penalties are available if applicable compulsory stocks contracts so provide (article 10 (h) NESA).
Moreover, violations of stockholding obligations can lead to a term of imprisonment or fines (article 49 NESA). Violations of the obligation to provide information may be penalised by imprisonment of up to one year or to a fine (article 50 NESA).
International
The IEA
As a Member of the International Energy Agency (IEA), Switzerland is obliged, pursuant to article 2 of the International Energy Programme (IEP), to maintain oil reserves equal to 90 days of net imports of the previous year. IEA Members are obliged to submit information concerning their emergency measures to the IEA secretariat (article 32 IEP) on a continuous basis and the IEA monitors Member countries’ compliance with the IEP.