• Sotiris Paphitis

The Swiss Responsible Business Initiative: An Examination

The use of child labour, the destruction of the environment and the abuse of human rights is not an infrequent phenomenon in the course of international business. On the 29 November 2020, Switzerland rejected the Responsible Business Initiative (RBI) in a referendum. This article will discuss both the proposal that was turned down in the ballot box and the one that was adopted in its place. The RBI is part of a much wider pattern that has been developing in all of Europe, demanding greater corporate accountability for violations of the UN Guiding Principles on Business and Human Rights.

Via Keystone/Frank Augstein

The Proposals

In November 2016 a coalition of Swiss civil society organisations submitted a formal proposal to hold Swiss companies accountable for human rights violations committed abroad, either directly or through their subsidiaries. This proposal came as a reaction to the Swiss Parliament’s failure to adopt greater corporate responsibility measures in March 2015. It essentially sought to ensure that Swiss corporations were not taking advantage of lax accountability measures in developing states, through their local subsidiaries or suppliers. The proposal was considered under the country’s constitutional procedure, and in November 2017 the Council of States, the country’s upper house of Parliament, submitted a counterproposal. After a series of discussions between the country’s houses of Parliament, it was decided that the two proposals would be put in a referendum in November 2020.

What essentially distinguished these two proposals was the intensity of their suggested measures. The original RBI belongs to a category of legislative proposals that do not only mandate the exercise of human rights due diligence but also provide for an associated civil liability regime in case of harm. This means that in the scenario that the RBI was to pass the referendum, Swiss corporations would be required to report on the level of adherence of their controlled companies with certain human rights standards.

Additionally, in cases of rights infringements, victims would be entitled to sue the controlling company, which would be civilly liable for the actions of its controlled companies. In this context, the term ‘control’ encompassed not only companies with a parent-subsidiary relationship, but also economic control that could be exercised over a supplier in its supply chain.

Contrastingly, the final version of the counterproposal was both reduced in scope and ‘toothless’ in terms of enforcement mechanisms. It merely contains a due diligence obligation, applies for specific companies and in only two areas of practice: conflict minerals and child labour. This counterproposal also deprived victims of abuses the potential of receiving damages for the violation of their rights, since the civil liability regime contained in the original RBI was replaced with one of criminal liability, in cases where a company fails to file a report.

The Premise

The original RBI was characterised by academics as ‘one of the most advanced legislative proposals’ ever to be made in the field of business and human rights. Indeed, the proposal even gained support outside the world of activism due to its high competency level. Prior to the referendum, nine mid-sized business associations had expressed their support. In comparison, the more reserved counterproposal was endorsed by right-wing and conservative parties, and the major business association Economiesuisse, as well as other groups like Swissmem, Swiss Holdings and Science Industries Switzerland.

In the aftermath of a heated campaign, the RBI failed to pass despite the fact that it received the majority of the popular vote. This is because, under the Swiss federal system, it is necessary to secure both the popular vote and the cantonal vote for a proposal to pass. This means that a majority of the country’s 26 cantons need to accept the proposal. Since that did not happen, the Swiss effectively adopted the ‘watered-down’ counterproposal.

The Aftermath

The referendum in Switzerland is part of a much wider pattern of legislative actions that seek to implement the UN Guiding Principles on Businesses and Human Rights. Naturally, these legislative pieces have exhibited varying degrees of severity.

Some, like the UK Modern Slavery Act, and the EU Non-Financial Reporting Directive, merely require corporations to disclose information regarding their human rights and environmental impact. Some stricter laws require the exercise of substantive due diligence in relation to specific sectors. Examples of this category include the European Union Conflict Minerals in Supply Chain Regulation and the Dutch Child Labour Due Diligence Act. Finally, the most severe ones provide for liability mechanisms in addition to the exercise of due diligence.

This would have been the category that the RBI would have fallen into, had it passed the referendum. So far, though, France is the sole jurisdiction that has adopted this kind of regulation. Apart from the exercise of vigilance, the French Commercial Code provides for an associated liability regime, whereby interested parties can file civil proceedings, whenever a company's failure to comply with its vigilance obligations gives rise to damage that could otherwise have been prevented.

Ethical considerations

Indeed, all of these proposals represent an ever-increasing demand from the public to know that they purchase no ‘blood-stained’ products. This is a demand that can be satisfied to a certain degree through mere reporting obligations. Nevertheless, the Swiss RB and its French counterpart take this concern a step further by posing the question: what happens when human rights abuses take place despite the exercise of diligence?

In an ideal world, this issue could have been addressed with preventative action adopted following the exercise of a corporation’s reporting obligations. In reality, though, the use of child labour, the destruction of the environment, and human rights abuse is not an infrequent phenomenon in international business. Therefore, one must ask oneself how we alleviate the deleterious effects of those abuses when they do occur. The answer most would reach when posing this question, is to do so through the imposition of civil or tortious liability on the perpetrating corporations.

This has been already implemented in France. On the other hand, in England and Wales a similar solution was offered by the courts, instead of Parliament, which have expressed their willingness to attach a foreign subsidiary’s liability to its English parent company under certain conditions. At the same time, discussions have been taking place for the introduction of similar regimes both at an EU and at an international level. Even if one turns back to Switzerland, it can be seen that the referendum did not put an end to the discussion.

Dick Marty, a prominent human rights academic and former politician, said that "if victory doesn't come today, it will certainly come tomorrow", implying that this is not the end to the movement built around the initiative. Considering the momentum this movement has gained, it seems like a matter of time until multinational corporations are faced with higher accountability and transparency standards, for the actions of their subsidiaries.