Due diligence obligation and liability for Swiss-based companies
The RBI takes the form of a suggested amendment to the Swiss Federal Constitution, which would result in the introduction of a new Article 101a “Responsibility of business” in the Constitution. Under the amendment, Swiss-based companies would be legally obliged to take into account respect for human rights in all their business activities, including activities conducted abroad, and may face the associated liability and litigation risks attached to non-compliance with the obligation to carry out “appropriate due diligence”.
Scope of due diligence obligation and liability for Swiss-based companies
Under Swiss Law, a counter-proposal may be prepared by the Federal Council (i.e. Swiss Government) or the Swiss Parliament. The counter-proposal eventually enters into force if accepted by the supporters of the initial proposal.
The Council of States (i.e. the Swiss Parliament’s upper house) and the National Council (i.e. the Swiss Parliament’s lower house) prepared diverging counter-proposals. While the Council of States’ counterproposal stood for a limited set of obligations concerning reporting and specific due diligence and contained no liability rules, the National Council’ counter-proposal focused on general parent company liability rules and broad due diligence obligations.
Although the organisers of the RBI stated they would withdraw their initiative if the stricter counter-proposal – with parent company liability rules and broad mandatory due diligence – were adopted, the Swiss Parliament voted on 2 June 2020 for the softer approach with due diligence obligations limited to child labor and mining conflicts and which does not contain any liability rules.
Swiss due diligence initiative set for a public referendum
As a result, the organisers of the RBI did not withdraw their proposal. Swiss voters will thus have to go to the polls this Sunday (29 November 2020) to decide whether the RBI should be accepted or rejected. If the RBI is dismissed by the Swiss population, the counter-proposal adopted by the Swiss Parliament would enter into force.
This means that, regardless of which of the proposal or counter-proposal prevails in the vote, Switzerland will definitely join the countries having enacted a body of rules regulating human rights due diligence next week.
Authored by Christelle Coslin and Margaux Renard.