"The Federal Council authorises the opening of a penal procedure against the Libyan regime... over hostage taking and extortion and blackmail in the case of the two Swiss citizens Rachid Hamdani and Max Goeldi," the ministry said in a statement.
The two men were blocked from leaving Libyan territory in a tit-for-tat action after the brief arrest in Switzerland of one of Libyan leader Muammar Qaddafi's sons in July 2008 over mistreatment allegations by domestic staff.
On September 18, 2009, Hamdani and Goeldi were taken from the Swiss embassy, where they were staying, by Libyan officials to a secret location where they were held until November 9.
The two businessmen were later returned to the embassy, and Hamdani was allowed to leave the country in February 2010, while Goeldi was sentenced to jail for visa offences.
Goeldi only managed to return to Switzerland in June 2010.
The action against the two Swiss came about after Kadhafi's son Hannibal and his pregnant wife were held by Swiss police over complaints by two of their domestic staff that they had been mistreated by the couple at a Geneva hotel.
The two servants, who were subsequently compensated by the couple, later dropped their assault charges.