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Switzerland to Impose Legal Obligation on Swiss-Based Firms for Environment and Human Rights Enforcement across the world

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Switzerland is all set to bring about landmark legislation that is aimed at tightening the responsibilities of Swiss-based companies with respect to their global activities. The key element of the mandate was the introduction of a legal obligation on Swiss-based multinationals to respect international environmental standards as well as human rights in all of their business activities worldwide.
The Responsible Business Initiative is part of a wave of similar legislation being proposed in other countries, based on the United Nations Guiding Principles on Business and Human Rights.

Objectives of Responsible Business Initiative

The Responsible Business Initiative is focused primarily on companies’ obligation to respect human rights in all of their business activities in Switzerland and abroad. The key objectives of the initiative include:
Introduction of a general principle into the Constitution, according to which the confederation would have to take measures to strengthen the respect for human rights and the environment in the Swiss economy;
Introduction of a duty of diligence of Swiss-based multinationals with respect to international environmental standards, combined with principles for its enforcement;
Making it an obligation of the companies to provide transparent information on the measures taken in case of a violation of environmental standards;
Extending the coverage of the legislation to all affiliates of a group of companies, as the duty of diligence would have applied to any domestic and foreign-controlled undertaking of a Swiss-based company;
Introduction of a ‘right for victims’ of any violation to claim damages from Swiss-based companies before the Swiss courts (ie, Swiss-based companies would be liable for the misconduct of foreign subsidiaries or economically dependent suppliers); and
Introduction of enforcement measures consisting of damage compensation claims and further measures to stop existing and prevent future violations of the abovementioned standards.
While the referendum held on 29th November 2020 rejected the proposal on basis of regional differences, the legislation was able to garner majority support of 50.7 per cent votes. In order for it to get approved completely, the Swiss parliament is proposing a counter-proposal.

Swiss Parliament’s counter-proposal

The counter-proposal which is an indirect proposal does not require a referendum. The proposal will be adopted and enforced if the referendum is not conducted within 100 days. The key elements of the proposal are:
The companies of public interest will be obligated to report details regarding non-financial matters including environment, social and employment issues, human rights and corruption. Failure to comply with this will be a criminal offence in the country. These new norms are proposed for all Swiss-based companies.
The companies will not be liable for the misconduct of foreign subsidiaries or economically dependent suppliers.