(Feb. 10, 2021) On November 29, 2020, the popular initiative “For Responsible Businesses – Protecting Human Rights and the Environment” (Responsible Business Initiative) failed to reach the necessary majority for approval in Switzerland. The initiative aimed to introduce stricter statutory requirements for Swiss businesses abroad to comply with human rights obligations and environmental standards. It was approved by Swiss voters by a vote of 50.73% to 49.27% but was rejected by the cantons. To be accepted, popular initiatives require majority approval by both the voters and the cantons. (Federal Constitution of the Swiss Confederation art. 139, para. 5 in conjunction with art. 142, para. 2.) Voter turnout was 47.02%.
Background to the Popular Initiative
On October 10, 2016, the Responsible Business Initiative was officially submitted to the Federal Council with 120,418 valid signatures. The Federal Council, the Swiss government, agreed that companies should comply with human rights and environmental standards but did not endorse all of the popular initiative’s objectives. It therefore endorsed the indirect counterproposal submitted by the Federal Assembly (parliament), which would make the now voluntary rules legally binding for Swiss companies.
The Swiss Parliament and the Federal Council both argued that businesses should comply with human rights and environmental standards, but neither supported the initiative’s approach to determining how corporate liability should be assessed and to what extent it should be assessed. They stated that the proposed rules on liability were harsher than in other countries. The Swiss Parliament and the Federal Council preferred an internationally coordinated approach. Furthermore, they voiced concerns about companies that might change their place of business because the provisions in the initiative would affect only Swiss companies, and Switzerland’s appeal as a business location might be weakened as a result.
Constitutional Amendment Procedure
The Swiss Constitution mandates that all constitutional amendments be subject to a mandatory referendum. (Const. art. 140.) Popular initiatives that seek to revise the Swiss Constitution and succeed in gathering the required 100,000 signatures are put to a vote. (Art. 139.) The Federal Assembly may submit a counterproposal to the popular initiative (id.), as it did with regard to the present initiative (although in this case, the Federal Assembly’s counterproposal to make the now voluntary rules legally binding for Swiss companies was not subject to a mandatory referendum because it sought to amend only federal law (the law of obligations) and not constitutional provisions). The Constitution also provides that the Swiss public has the opportunity to gather 50,000 signatories within 100 days of the official publication of the counterproposal to initiate an optional referendum. (Art. 141.) However, to date, the counterproposal has not been officially published in the Federal Gazette. Unless it is rejected in a referendum, the counterproposal submitted by the Federal Assembly will come into effect.
Content of the Popular Initiative
The popular initiative sought to insert a new article 101a in the Swiss Constitution. According to the text of the initiative, companies headquartered in Switzerland should take on more responsibility and liability with regard to their business abroad. They should bear the risk and be liable if a foreign company that is controlled by a Swiss company (for example a subsidiary) violates human rights or harms the environment. It therefore recommended that Swiss companies be required to perform due diligence with regard to their affiliates and to their chain of economically dependent suppliers. If the popular initiative had been adopted, claims for damages could have been filed against the respective affiliate or supplier at their place of business, but also in Switzerland against the holding company. Furthermore, the holding company would have been obligated to implement measures to prevent any future infringements and to report on those measures.
Content of the Counterproposal
The most important difference between the popular initiative and the counterproposal is that the latter does not include a provision that would make Swiss holding companies jointly liable with their affiliates or suppliers. According to the counterproposal, certain big companies would be legally bound to include in their annual reports the risks for individuals and the environment resulting from their business model and to be transparent with regard to issues of corruption. Furthermore, a process of due diligence would be mandatory—for example, with regard to child labor and conflict minerals. As required by the popular initiative, companies would be obligated to report on the measures that they have implemented to reduce or counter these risks. Reporting duties and the process of due diligence would also include Swiss companies’ subsidiaries and their chain of suppliers. The counterproposal provides for a particular system of sanctions (for example, fines) if obligations to report are not complied with.
Prepared by Viktoria Fritz, Law Library intern, under the supervision of Jenny Gesley, Foreign Law Specialist
Updated February 16, 2022, to change article number of the Federal Constitution in the first paragraph from art. 140, para. 1 to art. 139, para. 5.
