Facts
The [C. AG] received the building permit from the Lachen Municipal Council on 5 October 2012 for the demolition of a residential house and the construction of a multi-family house on parcel No. 653/GB Lachen. The parcel lies in residential zone 3 and in the AU groundwater protection zone. The neighbours [A.A.] , [B.A.] , [C.A.] and [D.A.] (siblings [A.] ) lodged objections, which were dismissed. On 27 October 2015 the Schwyz Cantonal Government set aside the permit, because the basement lay well below the groundwater level of 407.9 m above sea level and required an exceptional permit under Annex 4 No. 211 para. 2 WPO.
Following a new building application of 8 February 2017 (project amendment with an underground garage), the Lachen Municipal Council again granted the permit on 6 November 2017. The Cantonal Government set this aside on 19 June 2018 for breach of the duty to give reasons. On 26 November 2018 the Municipal Council granted the permit again; the Cantonal Government dismissed the appeal on 22 October 2019. The [C. AG] had already sold the parcel to [B. AG] on 16 October 2019, which entered the proceedings.
The Schwyz Cantonal Administrative Court, Chamber III, dismissed the siblings [A.] 's appeal by decision of 18 June 2020. The siblings [A.] then lodged a public law appeal with the Federal Supreme Court and requested that the lower court's decision be set aside.
The disputed issues were: (1) the calculation of the flow capacity (reduction by no more than 10 percent under Annex 4 No. 211 para. 2 WPO), in particular whether several aquifers were to be considered separately; (2) whether the authority had to carry out a balancing of interests when deciding on the exceptional permit; (3) the question of the material exhaustion of the instances. The FOEN held the aquifer to be inhomogeneous but not divided into hydraulically separate strata; the flow capacity was to be assessed on the total thickness of 17 m. The lower court assumed a mean groundwater level of 407 m above sea level, which would result in a reduction of no more than about 4 percent.
Considerations
The Federal Supreme Court affirmed its jurisdiction (Art. 82 let. a, Art. 86 para. 1 let. d FSCA) and the timeliness of the appeal, taking into account the suspension of time limits (Art. 46 para. 1 let. b FSCA). The appellants, as owners of a neighbouring parcel, have standing to appeal (Art. 89 para. 1 FSCA). The complaint of a failure to exercise discretion is admissible, since it concerns the correct application of the law ex officio (Art. 106 para. 1 FSCA) and the subject matter of the dispute does not change, so the respondent's objections regarding the material exhaustion of the instances do not succeed.
Under Art. 19 para. 2 WPA, structures in particularly endangered areas such as the AU groundwater protection zone require a cantonal permit. Constructing installations below the mean groundwater level is in principle impermissible there. Exceptions are possible only if the flow capacity is reduced by no more than 10 percent (Annex 4 No. 211 para. 2 WPO), which is consistent with Art. 43 para. 4 WPA. The applicants bear the burden of proof for compliance with the requirements of water protection law (Art. 32 para. 3 WPO).
The provision is drafted as a discretionary rule (Kann-Vorschrift), so there is no legal entitlement to an exceptional permit. The discretion must nonetheless be exercised in accordance with duty, taking into account the systematic context and the purpose of the norm. Since the exception calls for restrictive application, a balancing of interests is required, in which the interests in reducing the flow capacity must outweigh the opposing water protection interests. The extent of the reduction within the 10 percent margin must be considered, as must whether an underground watercourse or a marginal area is affected, and the usage interests of the applicants. Establishing the interests is a question of law, whereas their weighting is largely a matter of discretion.
The lower court examined only the reduction of flow capacity (at most 4 percent at 407 m above sea level; also complied with at 407.9 m above sea level) and omitted a balancing of…