The parliamentary tug-of-war over the ‘Responsible Business Initiative’ (RBI) has come to a preliminary end. It is now certain that the Swiss public will vote on the popular initiative, which aspires to introduce the responsibility of businesses for human rights and the environment abroad into the Swiss Federal Constitution. The vote is likely to take place later this year, on 29 November 2020. If the Swiss electorate rejects the RBI at the ballot box, a parliamentary counter-proposal that entails a reporting obligation for large public-interest companies on social and environmental matters and a mandatory human rights due diligence provision in the areas of conflict minerals and child labour will enter into force.

The Responsible Business Initiative

On 10^th of October 2016, over 80 non-governmental organisations (‘the initiative committee’) submitted the RBI to the Federal Council. If accepted the RBI partially amends the Federal Constitution by adding article 101a on the ‘responsibility of business’. Following the UN Guiding Principles on Business and Human Rights, the RBI seeks to introduce a mandatory human rights due diligence provision, a process by which Swiss companies should identify, prevent, mitigate, and account for how they address their human rights and environmental impacts, including abroad and in regard to all their business relationships. It further specifies the civil liability of Swiss companies for damages caused by corporations under their control in violations of internationally recognised human rights or international environmental standards. According to the initiative committee the notion of control is a factual one, independent of a particular equity relation between two companies. A company can exonerate itself by showing that it has undertaken the appropriate human rights due diligence to prevent the damage. Lastly, the RBI includes a provision on the applicable law to ensure that Swiss law is relevant for the cases considered by the RBI. The RBI is formulated in general terms, since as a constitutional amendment it leaves the concrete legal implementation to parliament.

A saga of indirect counter-proposals

The National Council adopted a first indirect counter-proposal in June 2018. It resembles the RBI but limits the scope of the human rights due diligence and civil liability obligations. It is also more specific because other than the RBI it does not propose an amendment to the constitution but directly introduces new legislation. First, the counter-proposal complements article 716a of the Swiss Code of Obligations on the ‘non-transferable duties’ of the board of directors to also include a responsibility to ensure that human rights and the environment are respected throughout the entire business, including abroad. That human rights due diligence provision only applies to large companies that within one financial year either exhibit total assets of 40 million Swiss Francs (circa 33 million Pounds), a turnover of 80 million Swiss francs (circa 66 million Pounds) or have at least 500 employees. In addition, it would apply to companies engaged in business activities that pose a particular high risk to human rights and the environment. Second, it introduces a new provision on the liability of companies for companies under their control (article 55a) into the Swiss Code of Obligations. Unlike the RBI, civil liability only applies to companies within the same enterprise that are related through equity. A large buyer should not be held liable for harm caused by a supplier over which it had exerted contractual or de facto economic control. Further, liability may only arise from damages caused to life, body and property, therewith excluding harm caused by the violation of, for example, the rights of trade unions to freedom of assembly and association. As with the RBI, the counter-proposal includes an overriding provision to ensure the applicability of Swiss law.

The Council of States, the upper chamber,  consistently dismissed the counter-proposal of the National Council and in December 2019 at the suggestion of the Minister of Justice Karin Keller-Sutter adopted its own indirect counter-proposal. This proposal follows the EU Directive 2014/94/EU on non-financial reporting, the Dutch Child Labour Due Diligence Act of 2019 and the EU Regulation 2017/821 on supply chain due diligence obligations for conflict minerals. In concrete terms, it would complement the accounting legislation on consolidated accounts (new article 964) of the Swiss Code of Obligations to require large public-interest companies which in two consecutive financial years, together with the domestic and foreign corporations under their control, exceed the average number of 500 employees and have either a turnover of 40 million Swiss Francs or total assets of 20 million Swiss Francs to submit an annual report on non-financial information which shall address social and environmental matters. It only imposes a mandatory human rights due obligation on companies that import minerals from conflict-affected and high-risk areas and for products and services for which the use of child labour has been suspected. Notably, the proposal introduces a new provision into the Criminal Code (article 325ter) which establishes criminal sanctions for false reporting. Contrary to the indirect counter-proposal of the National Council, it refrains from introducing civil liability for violations of human rights and environmental standards of controlled companies and from ensuring the applicability of Swiss law.

Towards the endgame

After three rounds of back-and-forth between the two chambers a ‘conciliation committee’ decided last Thursday, 4 June 2020, that the settlement proposal will follow the indirect counter-proposal of the Council of State and the two chambers later followed suit. The initiative committee had always described that counter-proposal as ‘fig leaf’ and thus announced that it would not withdraw its popular initiative.

What will come next? Expect a heated debate in which supporters of the initiative will reveal malpractices of Swiss companies abroad and appeal to the global responsibility of the Swiss voter, and in which opponents will argue that the RBI burdens Swiss corporations unduly and will lead to a competitive disadvantage. Note that in the past 162 years of Swiss existence, out of 216 popular initiatives only 22 have been accepted. But note too that in a representative poll commissioned by the initiative committee, 78% of those sampled indicated that they would consider voting in favour of the RBI. Given the international trend towards more corporate responsibility, it might well be that the Swiss electorate will follow the regulatory direction of their European neighbours. And in any case, even if the RBI was rejected, the indirect counter-proposal of a reporting obligation on non-financial information and a sector- and issue-specific human rights due diligence provision would become law.

Laura Knöpfel is a PhD Candidate and Research Fellow at the Transnational Law Institute of King’s College London with a research interest in private law, legal anthropology and social theory.