Due diligence obligation and liability for Swiss-based companies
Launched in April 2015 by a coalition of Swiss civil society organisations, the Responsible Business Initiative suggested the modification of the Swiss Federal Constitution to hold Swiss-based companies to account for human rights abuses committed abroad. Swiss-based companies would have been legally obliged to take into account respect for human rights in all their business activities, including activities conducted outside Switzerland, and may have faced associated liability and litigation risks attached to non-compliance with the obligation to carry out “appropriate due diligence”.
Under Swiss Law, a counter-proposal may be prepared by the Federal Council (i.e. Swiss Government) or the Swiss Parliament. The counter-proposal will eventually enter 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) thus prepared diverging counter-proposals and the Swiss Parliament eventually issued a counter-proposal on 2 June 2020 which stood for a limited set of obligations concerning reporting and specific due diligence: the counter-proposal limits due diligence obligation to child labour and mining conflicts, with only public interest corporations being required to make a report.
Although the counter-proposal does not contain any liability rules for Swiss-based companies operating abroad, it foresees imposing a fine of up to 100,000 Swiss francs on any company violating the UN guidelines on business and human rights (UNGPs).
As the organisers of the Responsible Business Initiative did not withdraw their proposal, the Swiss due diligence initiative was set for public referendum on 29 November 2020.
Swiss public initiative rejected at ballot box
In Switzerland, a majority of both popular and cantonal vote is required for an initiative to pass. On 29 November, the RBI was narrowly rejected. While it reached 50.7% of the popular vote, it only received 8.5 of the required 12 regional majorities across the Swiss cantons.
As a result, the counter-proposal adopted by the Parliament will automatically enter into force in 2021. Civil society actors expressed their disappointment but recognised that the counter-proposal does at least support the responsibility of businesses and the respect of human rights and the environment.
Switzerland has now joined the ever-expanding list of countries that have enacted specific rules governing human rights due diligence, even if this obligation is strictly limited to certain topics. We will follow with great interest how the counter-proposal will be applied when it comes to the criminal sanctions for non-compliance with the UNGPs.
Authored by Christelle Coslin and Margaux Renard.