No being 100% sure where you are located and what standards would apply to you, I will base my response in general terms, trying to to reference OSHA too often.
In general terms, any isolation device must be capable of with standing the magnitude of energy the source is capable of. As for the location of the lock or tag, there are some cases where the equipment would need to be locked in the on position for other reasons, some of which are safety related. This differs from Lockout in which we lock energy isolating devices in the safe position, which is usually in the open/off position. In your industry, there are times when a piece of equipment is reffered to as "critical equipment". This would be equipment such as colling water pumps, emergency quench pumps, etc. By applying a lock to the controls for this critical equipment, you are somewhat assured that when the equipment is called upon to funtion, that it will indeed do so. In the states, we do what is called "car-sealing" in which we hang a tag on a non-resuable, self locking plastics tab tomake sure the equipment/device remains in the safe posiiton. Breaking a "car-seal" takes an act of congress, as if it is not returned to the proper position, a serious accident is highly possible. All of this could explain why you ahve equipment that is capable of being locked in the on position.
With that said, I MUST ALSO say that this function and LOCKOUT are two different animals and in most cases, the switches used in "critical equipment" control are in no way made for lockout/tagout. If you are in the USA, OSHA clearly states that control switch and control circuitry can NOT be used as an isolation device. This is for several reasons, but the simplest reason is this is where you will be testing to see if you got the energy source to ZERO energy. if you locked out the switch, verifying ZERO energy becomes an electricians job, as you would no longer have your switch to test the energy source.
Is all of this making sense???? Bottom line, I would be very skeptical of a switch that is designed to be capable of being locked out in the ON position; especially if the energy source(s) is electrical or mechanical. If I were in your shoes I would call the vendor and inquire about the proper energy isoaltion points for the equipment.
Bryan Haywood www.SAFTENG.net