Swiss due diligence initiative set for public referendum as Parliament only opts for reporting-centred proposal

Swiss Coalition for Corporate Justice

In April 2015, a coalition of Swiss civil society organizations launched, and in November 2016 filed a public initiative to hold Swiss companies to account for human rights abuses committed abroad. The initiative would trigger a binding vote on a constitutional amendment to introduce mandatory human rights due diligence requirements for all Swiss companies.

Under the Swiss system, government or parliament can try to persuade initiators to withdraw an initiative by suggesting a counter-proposal. The Federal Council (Swiss Government) did not recommend the initiative for adoption or issue a counter-proposal. In November 2017, the Legal Affairs Committee of the Council of States, the Swiss Parliament's upper house, decided to issue a counter-proposal. In December 2017, the Legal Affairs Committee of the National Council (lower house) decided not to support the counter-proposal of its sister committee, however on 2 May 2018 revised its position and put forward a concrete legal proposal to the National Council. On 14 June 2018, the plenary of the National Council adopted the bill. 

On 19 February 2019, the Legal Affairs Committee of the Council of States adopted a counter-proposal. It differs from the National Council's proposal in that it introduces a clause on limited liability for subsidiaries of Swiss companies. Swiss civil society has criticised the clause, saying it essentially renders the proposal toothless.

On 12 March 2019, the Council of States decided to reject both the Responsible Business Initiative and the counter-proposal of its Legal Affairs Committee. The matter was referred back to the National Council, which on 13 June 2019 reaffirmed its decision and voted in favour of an indirect counter-proposal.

On 14 August 2019, the Legal Affairs Committee of the Council of States communicated its intention to enter into discussion of the counter-proposal and requested the Council of States to support such a counter-proposal. The Legal Affairs Committee also released a comparative study (partly in English) by the Swiss Institute of Comparative Law, the purpose of which was to examine whether the counterproposal would lead to a uniquely rigorous liability regime. The study found that parent company liability exists to some extent - either in legal literature or in law - in all countries analysed.

On 4 September 2019, the Legal Affairs Committee of the Council of States once more requested the Council of States to adopt the counter-proposal. It also proposed, among other things, the introduction of a special arbitration process intended to settle disputes arising from claims brought against a company. On 10 September 2019, the Swiss Coalition for Corporate Justice stated it would withdraw its initiative if the counter-proposal were adopted in either the version put forward in September 2019 by the Legal Affairs Committee of the Council of States or in the version the National Council adopted on 14 June 2018.

On 18 December 2019 the Council of States voted against this due diligence counter-proposal and instead adopted a proposal encouraged by the Government, limited to reporting and issue-specific due diligence without liability rules and thus strongly criticised by civil society and others.

On 31 January 2020, the Legal Affairs Committee of the National Council reaffirmed its commitment to and voted in favour of its more substantial counter-proposal, with parent company liability rules and broad due diligence obligations. In March 2020, the National Council decided to follow the decision of its Legal Affairs Committee and stick to its counter-proposal. 

UPDATE: On 2 June, the Council of States decided to abide by its weaker proposal. On 4 June, a parliamentary conciliation committee trying to iron out differences in the proposals put forward by both houses opted for the reporting-centred proposal that only extends to due diligence obligations regarding child labour or conflict minerals and contains no liability rules. It was approved by both the National Council (by a narrow majority) and the Council of States on 8/9 June. This proposal was supported by right-wing and conservative parties and major business association Economiesuisse. The more stringent proposal with liability rules and broad mandatory due diligence had been supported by nine mid-sized business associations and companies like Nestlé; the organisers of the Responsible Business Initiative had stated they would withdraw their initiative if the counter-proposal were adopted in this version. Now that this is not the case, the Responsible Business Initiative is set for public referendum, possibly in November. If the initiative is dismissed by the population, the counter-proposal just adopted by the Parliament would enter into force.

Further information is available in German here.

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9 September 2019

Legal Affairs Committee of Swiss upper house supports civil liability of companies

Author: Secretariat of the Committee for Legal Affairs

[Note: This is an unofficial summary translation by Business & Human Rights Resource Centre of the Swiss Parliament's press release. The original is available in FrenchGerman and Italian. See above for more context.]

4 September 2019

The Legal Affairs Committee of the Council of States concluded the detailed content discussion of the indirect counter-proposal to the Responsible Business Initiative, which it had begun at its meeting on 12 August 2019. The Committee proposed by 7 votes to 5 with 1 abstention to adopt the counter-proposal in the overall [plenary] vote. 

With 8 votes to 5, the Committee supported a counter-proposal which includes civil liability of companies. A minority requested that the liability provisions be removed and the proposal to be limited to mandatory due diligence and reporting. With 7 votes to 6, the Committee, like the National Council, refrained from proposing a subsidiarity regulation. A minority requested its introduction. They believe that the plaintiffs, where reasonable, should take action against subsidiaries abroad.

By 7 votes to 2 with 4 abstentions, the Committee requested the introduction of a special arbitration process. This is intended to settle disputes arising from claims brought against a company under the civil liability provisions included in the indirect counter-proposal. The Committee proposes the National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises as the special arbitration authority. The Committee has introduced this new arbitration process in order to restrict access to justice and thus prevent an increase in court cases. 

The Council of States will discuss the matter in its autumn session.

20 August 2019

Legal Affairs Committee of Swiss upper house affirms political will for an indirect counter-proposal to Responsible Business Initiative

Author: Secretariat of the Committees for Legal Affairs

[Note: This is an unofficial summary translation by Business & Human Rights Resource Centre of the Swiss Parliament's press release. The original is available in FrenchGerman and Italian. See above for more context.]

14 August 2019

Following the Council of States' decision on 12 March 2019 to reject an indirect counter-proposal to the Responsible Business Initiative, the National Council on 13 June 2019 decided to stick to its counter-proposal. The Committee [Legal Affairs Committee of the Council of States] has now decided by 7 votes to 4 with 1 abstention to follow the National Council and thus requests its Council [of States] for the second time to support the indirect counter-proposal. 

At its next meeting, the Committee would like to conclude the detailed content discussion of the indirect counter-proposal and submit its proposals to the Council of States in the autumn session. In its press release dated 5 April 2019, the Legal Affairs Committee of the National Council set out a number of principles which, in its view, are important for further discussion and development of the proposal. The Committee will examine these aspects as part of the content discussion. It has already taken note of a comparative legal study by the Swiss Institute of Comparative Law on the legal situation in Europe with regard to parent company liability.

13 June 2019

Swiss National Council insists on Responsible Business counter-proposal

Author: Swissinfo

"Parliament keeps Responsible Business counter-proposal alive", 13 June 2019

...One chamber [of Switzerland's Parliament] is insisting on a counter-proposal to a people’s initiative that would ward off a nationwide vote on the issue.

Thursday’s decision puts the House of Representatives on a collision course with Senate, which had earlier rejected the watered-down version of the Responsible Business Initiative. Senate will later have a second vote on whether to accept or reject the counter-proposal.

If rejected, the voters of Switzerland would then have the final say [on] the issue.

At stake are proposed new laws that would hold Swiss-based companies legally accountable if their overseas subsidiaries violate human rights or environmental standards...

In the House of representatives on Thursday, parliamentarians voted by 109 votes to 69 (with seven abstentions) to yet again accept a counter-proposal to the initiative...

Read the full post here

13 June 2019

Swiss National Council votes in favour of pursuing an amended proposal to the Responsible Business Initiative

Author: SDA

"Nationalrat will Konzerne in die Pflicht nehmen", 13 June 2019

[unofficial summary translation of the SDA press release on the Swiss Parliament's website]

On Thursday 13 June 2019, the Swiss National Council [the Parliament's lower house] voted in favour of an indirect counter-proposal to the citizen Responsible Business Initiative. 

A year ago, the National Council had already agreed to take up the concerns of the Initiative and decided on legal rules meant to serve as an indirect counter-proposal [which maintained key elements of the Initiative]. The Council of States [the Parliament's upper house/Senate], however, then rejected a counter-proposal [in a first vote in March 2019]. The National Council has now confirmed its decision to pursue a counter-proposal [and referred the dossier back to the Council of States].

The National Council will not be able to discuss the content again until the Council of States agrees to a counter-proposal. However, reaching such an agreement could be difficult.

If the Parliament were to adopt the initial version of the counter-proposal, the organisers would withdraw their Initiative.

13 June 2019

Switzerland weighs the merits of mandatory human rights due diligence

Author: Sam Jones, Financial Times via Swissinfo

"Switzerland weighs the merits of being the global good guy", 13 June 2019

...The Responsible Business Initiative... is straightforward in its intent. Companies based in Switzerland, it states, will be liable for the misdemeanours of their subsidiaries worldwide - and potentially liable for the conduct of any organisation with which they do significant business...

Switzerland is hardly alone in considering such requirements on business... Britain’s Modern Slavery Act came into force in 2015, France’s Duty of Vigilance law in 2017... 

Companies should... shoulder more responsibility for abuses across the world. But working out who in a supply chain or corporate web is legally responsible for a misdemeanour, accident or crime, is a fiendish task... 

[I]f parliament cannot agree on a counterproposal, the initiative as formulated in its original popular petition is put to a national referendum... Popular support for ethical constraints on businesses is relatively high in Switzerland...

[T]he time when companies could sidestep legislation on such matters - or offer to regulate them themselves - is probably over in Europe. Consumers expect companies to behave sustainably and responsibly. Shareholders are weary of costly lawsuits or political risks related to corporate malfeasance. 

...An era of harder compliance is here already and Switzerland cannot afford to fall behind.

Read the full post here

11 June 2019

Switzerland: Investors call on parliamentarians to support legislation for mandatory human rights due diligence

Author: Ethos

Ethos Foundation and 22 Swiss and foreign institutional investors, who represent assets under management of CHF 395 billion, sent a statement to the members of the lower house... [T]he signatories call on parliamentarians to back the introduction of mandatory human rights due diligence by supporting the counter-proposal to the responsible business initiative...

"As institutional investors, we have a responsibility to consider whether the companies we are investing in have negative impacts on human rights and the environment and, if so, to prevent and mitigate these impacts", explains Vincent Kaufmann, CEO of Ethos Foundation. “Reputational and operational risks related to human rights breaches have a significant negative financial impact on the companies in which we are shareholders".

Adopted by the lower house in June 2018 before being rejected by the upper house in March, the counter-proposal is to be discussed again on Thursday 13 June in the lower house. For the signatories of the declaration, ... [t]he disclosure and processes required by the mandatory due diligence under the counter-proposal would thus give investors the opportunity to better analyze how companies manage and mitigate their human rights and environmental impact, thus enabling institutional investors to fulfill their fiduciary duty towards their beneficiaries.

Read the full post here

Download the full document here

13 March 2019

Switzerland: Responsible business initiative heads closer to public vote as Council of States rejects counter-proposal

Author: Jessica Davis Plüss and Andrea Tognina, Swissinfo

"Responsible business initiative heads closer to a national vote", 12 March 2019

On Tuesday, the Senate, with a vote of 22 to 20, rejected discussion of the counter-proposal on responsible business put forward by the House of Representatives. It also rejected the popular initiative launched last year by a coalition of NGOs by a vote of 25 to 14.

With this decision, the counter-proposal heads back to the House of Representatives, which had voted to support it after some revisions. The next steps are unclear though. It is probable that the initiative could go to a nationwide public vote. 

The so-called "Responsible Business Initiative" seeks to oblige companies based in Switzerland to assess the impact of their activities and those of subsidiaries on human rights and the environment at home and abroad. Swiss-based companies failing to exercise appropriate due diligence could be liable for damages...

The counter-proposal presented to the Senate does not go as far as the original initiative in terms of liability...

This was not enough to convince certain economic associations in the country though...

Read the full post here

19 July 2018

Commentary: Another step towards the adoption of a mandatory HRDD bill in Switzerland

Author: Swiss Coalition for Corporate Justice via European Coalition for Corporate Justice

"Another step towards the adoption of a mandatory HRDD bill in Switzerland", 16 July 2018

On the 14th June, the National Council (first chamber in the Parliament) in Switzerland approved a counter-proposal to the citizen Responsible Business Initiative (RBI)...

[T]he National Council’s counter-proposal represents a compromise among the views of the RBI’s proponents, the Parliament and the business community. It has gathered the support of [...] John Ruggie, and of the business association representing 90 Swiss multinational companies...

Nonetheless, [...] the counter-proposal widely reduces the scope of the law, as it only applies to large companies. Civil liability provisions are also importantly restricted [...] (a table comparing the two proposals can be consulted in the SCCJ’s website).

Despite its shortcomings, the counter-proposal represents an important step forward... The process to adopt and implement the counter-proposal is also quicker than the one to adopt the RBI...

For these reasons, the RBI’s committee had committed to withdraw the initiative if the counter-proposal was adopted by the National Council...

The Council of States (upper chamber in the Swiss parliament) has still to vote the text, something which is expected for next fall or winter...

More information on the RBI evolution , legal table and more,  on the website.

Read the text of the initiative with explanations, here.

Read the full post here

1 July 2018

How does the parliamentary counter-proposal differ from the popular initiative (RBI)?

Author: Swiss Coalition for Corporate Justice

Read the full post here

19 June 2018

Switzerland: Natl. Council adopts corporate human rights due diligence bill; NGO calls it a compromise but welcomes step forward

Author: Simon Bradley, (Switzerland)

"Swiss firms lack 'unified approach' on business and human rights", 14 June 2018

Companies in Switzerland are quite active when it comes to corporate social responsibility, but a common approach is lacking and many large firms are unfamiliar with their international human rights obligations, says business ethics campaigner Chantal Peyer. Peyer, head of business and human rights at the Swiss non-governmental organisation Bread for All, was in Geneva on Thursday for the Second Swiss Global Compact Dialogue... Bread for All is part of a coalition of 105 NGOs, church groups, unions and campaigners behind the Responsible Business Initiative, currently a hot political topic in Switzerland... On Thursday, the House of Representatives [National Council] adopted a counter-proposal to the Responsible Business Initiative, which is less binding in terms of human rights obligations. The Senate [Council of States] must still vote on it. Can this counter-proposal really improve the situation for victims whose human rights may have been violated by Swiss firms?

C.P.: We were disappointed as we were forced to compromise and drop lots of elements from our initiative in favour of the counter-proposal. But it's a compromise that allows us to take a step forward, and something which we intend to support if it is not modified anymore. In fact, it enables us to go much faster in finding solutions to these issues, as we will have a legal text and not a constitutional change, which could take years with parliament.

Even though the initiative has been watered down, the counter-proposal contains two fundamental elements from the initiative. First, firms will be obliged to do due diligence – the preventive aspect. Second, there is a sanction component, and the possibility for a victim to file a complaint in Switzerland. The sanction has been seriously limited, however. A victim can file a complaint only if the parent company controls a subsidiary abroad and only for three violations: damage to life, damage to personal integrity, or violation of property rights. But it's a first step that will allow victims of the worst violations to be able to seek justice.

Read the full post here