Newsflashes

Responsible Business Initiative – Swiss Council of States adopts conservative counter-proposal

20.12.2019

On Wednesday, 18 December 2019, the Council of States of the Swiss Parliament held a much anticipated vote on a counter-proposal to the Responsible Business Initiative (RBI).

The RBI was launched in 2015. If adopted, the key elements that it would introduce are:

  • A mandatory due diligence requirement in relation to human rights and environmental risks. Companies would have to identify impacts, take measures to prevent or put an end to violations and include these issues in their annual reports. This requirement would apply not only in relation to the companies' own activities and those of entities that it controls, but also to all business relationships in their supply chain.
  • A liability of Swiss companies for damages caused by their activities or by the activities of a company within their control, in breach of internationally recognised human rights or environmental norms, unless they can show that they fulfilled the due diligence requirement.

Following a series of debates and back-and-forth between the lower and upper houses of Parliament, there were ultimately two main parliamentary counter-proposals to the RBI on the table:

  • The first, which had the narrow support of the majority of the legal affairs committee of the Council of States, retains the key elements of the RBI, but included several restrictions such as (i) a limitation of liability to life, limb or property damage; (ii) a narrower definition of "controlled entities"; (iii) a mandatory conciliation proceeding before liability claims can be brought; and (iv) a restriction of the application of the due diligence duty to companies that exceed certain thresholds (number of employees, turnover) or that operate in high risk sectors.
  • The second, which had the support of the minority of the legal affairs committee of the Council of States, eliminates the liability provision and provides only for a nonfinancial reporting duty and a due diligence requirement limited to risks associated with child labour and conflict minerals.

The second counter-proposal came about following a statement issued by the Swiss Government in August 2019 that, while it was opposed to the introduction of a general mandatory due diligence requirement and a liability provision, it supported the introduction of a non-financial reporting requirement in line with regulations that are in place in the EU.

The Council of States adopted the second counter-proposal.

The matter will now go back to the National Council, which could (i) accept the second counter-proposal or (ii) propose further changes. If further changes are proposed, the houses would need to agree on a final version of the counter-proposal in the next parliamentary sessions. The RBI Committee has indicated that, if the second counter-proposal is adopted by Parliament in its current form, the initiative would not be withdrawn and would therefore go to the popular vote – which would most likely take place in the autumn of next year.

There is a fair degree of uncertainty as to the outcome of the parliamentary process and of a possible popular vote. With the adoption of the second counter-proposal, the prospect of a "hard" liability provision for breaches of environmental and human rights standards has lost some traction, but can by no means yet be discounted. Consequently, it is unclear what duties and standards will eventually apply to Swiss companies.

In any event, Swiss companies that operate in a complex and multinational context should seek guidance as to the rules and standards that might apply, both in Switzerland and abroad, and should not underestimate the risk of exposure in case of non-compliance.

 

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