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Focus on Regulation

Switzerland: The next frontier for mandatory human rights due diligence?

Proposals are being considered to amend the Swiss constitution to require mandatory human rights due diligence for companies based in Switzerland. This post considers the contents of the amendment, its progress and what Swiss businesses can learn from the experience of their French counterparts in preparing for the “hardening” of the UN Guiding Principles.

The debate around imposing hard edged human rights obligations on corporations is not new. In April 2015, a coalition of Swiss civil society organisations launched the Responsible Business Initiative (“RBI“), to hold Swiss companies to account for human rights abuses committed abroad.

The coalition is led by NGOs, including Greenpeace and Amnesty International, and is supported by 85 organisations working in international aid, women and human rights and environmental protection, as well as churches, unions and shareholders’ associations.

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 incorporate respect for human rights and the environment in all their business activities, including activities abroad.

Popular initiatives in a nutshell

A popular initiative is a legal mechanism allowing Swiss citizens to request an amendment to the Federal Constitution (of one article or its entirety). If a popular initiative collects 100,000 signatures or more from the Swiss electorate within 18 months, it then progresses to the Federal Council and the Parliament, who can accept the amendment, reject it altogether, or put forward a counter-proposal.

Since 1848, only 22 initiatives have been approved at the ballot box. However, an unsuccessful (or retracted) popular initiative can still shape the political landscape by generating public debate, highlighting specific issues and putting pressure on politicians. Regardless of the legal outcome, it remains a useful tool for civil society organisations looking to lobby on specific topics.

Main elements of the Responsible Business Initiative

Under the RBI amendment, (the English version of which can be found here), companies based in Switzerland will be under an obligation to carry out “appropriate due diligence” to make sure they comply by certain human rights standards. This approach, which is based on the United Nations Guiding Principles on Business and Human Rights (“UNGPs“), requires that: risks must be identified, mitigated, and reported on.

This due diligence requirement would apply to companies that have their registered office, central administration or principal place of business in Switzerland.

The RBI relies primarily on the UNGPs to determine which fundamental principles must be respected abroad. Under the UNGPs, businesses have a responsibility to respect “internationally recognised human rights”, which includes at a minimum the International Bill of Human Rights and the principles concerning fundamental rights contained in the eight International Labour Organization core conventions as set out in the Declaration on Fundamental Principles and Rights at Work. The RBI goes slightly further by including in its mandatory due diligence “international environmental standards” (which, according to the RBI definition, goes so far as to include non-governmental standards such as the ISO standards).

Significantly, the RBI also provides for liability of parent companies for serious human rights violations committed by their subsidiaries or companies under their control.

Current status of the RBI

In September 2017, the Federal Council recommended the rejection of the RBI, on the basis that the proposal was going “too far” by imposing mandatory due diligence and by relying on stricter liability rules than in other legal systems, which could put Switzerland at an economic disadvantage on the global trade scene.

In November 2017, the Council of States issued a counter-proposal  to the initiative. The Council acknowledged that time had come for a hard law version of the UNDPs in Switzerland, but considered the RBI in its current state to be “too vague” and to be going “too far”. The Council therefore decided to submit a counter-proposal to the Legal Affairs Committee for approval.

If the Council’s counter-proposal is approved, both the original RBI and the counter-proposal will be voted on by Swiss voters through a federal referendum, which would take place towards the end of 2018 or the beginning of 2019.

Comment

The Swiss developments reflect the shift in focus from ‘soft’ to ‘hard’ law and highlight the need for responsibility throughout the value chain (see our post on key themes from this year’s BHR Forum). A recent example of that trend was the widely publicised enactment of the French ‘duty of vigilance’ law in 2017.  Experience there shows that businesses which seek voluntarily to comply with the UN Guiding Principles were at a competitive advantage when soft law ‘hardened’.

Sources note that the guidelines provided in the UNGPs are “rapidly becoming the norm in practice”. Swiss businesses wishing to stay ahead of the curve should take note of the proposed initiative, and might want to consider a proactive approach to human rights due diligence.