Federal Popular Initiative "For Responsible Large Businesses – Protecting Human Rights And The Environment": Part 2

1. Introduction

Our first blog post detailed the new popular initiative, "For responsible large businesses- protecting human rights and the environment" (in German: Volksinitiative «Für verantwortungsvolle Grossunternehmen – zum Schutz von Mensch und Umwelt»; «KVI 2.0»). This second post highlights legally interesting aspects of KVI 2.0, particularly where it deviates from or expands existing legal concepts, thereby creating new obligations and claims.

KVI 2.0 will require a reassessment of some established legal principles like territoriality and corporate responsibility (and liability). If the initiative is accepted, it will therefore need to be implemented consistently by the legislature to avoid legal uncertainty.

2. Extraterritorial effect of Swiss regulations for the protection of Human Rights and the environment abroad

The new initiative aims to apply Swiss human rights and environmental protection regulations to events abroad, which contrasts with the principle of territoriality. For example, under Art. 101a para. 3(c) draft Federal Constitution, the initiative would make large Swiss businesses liable for damages caused by businesses they control abroad. The wording of the initiative does not specify which law should govern such damage. One interpretation is that Swiss law would apply, but this extraterritorial application seems sensible only if the foreign state concerned fails to provide adequate legal protection from a Swiss perspective.

International human rights and environmental standards primarily addressing states, not businesses, and thus typically lack specific provisions on corporate liability for damage abroad. This leaves Swiss law to be applied extraterritorially, which interferes with the sovereignty of foreign states.

This approach would protect people and the environment in legal systems that offer inadequate or no protection. However, the extraterritorial effect of Swiss regulations presents a challenge: Swiss courts would have to rule on complex foreign cases without knowledge of the local circumstances or the ability to gather evidence directly. This is because a Swiss court is not permitted to take evidence on foreign territory itself and must rely on foreign authorities in order to conduct proceedings and perform official acts. It is questionable whether such cooperation between foreign and Swiss authorities can properly function, especially in countries that already fail to guarantee adequate human rights and environmental protection.

The extraterritorial application of Swiss regulation will also likely impose a significant additional burden on Swiss courts. International court proceedings are inherently more costly due to activities on foreign territory. Furthermore, it is likely that such lawsuits will increasingly be filed in Switzerland (as exemplified by the pending climate lawsuit brought by Indonesian islanders against Holcim).

3. Duty of care

Article 101a para.3(a) of the draft Federal Constitution stipulates that companies must exercise due diligence to ensure that human rights and the environment are respected abroad. The protection of human rights and the environment is generally considered to be a state responsibility and not a corporate obligation. The corporate due diligence obligations required by KVI 2.0 extend these responsibilities to private actors.

Swiss law currently lacks comprehensive corporate due diligence obligations. The duties concerning conflict minerals and child labour under Art. 964j CO apply only to limited business activities. In contrast, KVI 2.0 proposes a broader duty of care, drawing on European developments and international standards like the UN Guiding Principles and OECD Guidelines . This would transform these non-binding guidelines (soft law) into binding legal obligations (hard law) for Swiss companies.

The initiative's proposed duty of care would apply across all of the company's business relationships on a risk-based basis, and requires legislative clarification in three areas in particular. First, the legislator must define the specific duties of care under Art. 101a para. 3(a) draft Federal Constitution, referencing the aforementioned international regulations. Second, for legal certainty, the term "business relationships" must be clearly defined. Third, the required risk-based approach incorporates the principle of proportionality. To adhere to this principle, the scope and depth of the due diligence must be limited, for instance, in proportion to the severity and probability of adverse impacts, consistent with international standards. The legislator must utilize these margins when implementing KVI 2.0 if it is adopted.

4. Liability of Swiss companies for environmental offences and human rights violations

The liability standard in Art. 101a para. 3(c) draft Federal Constitution is intended to ensure the effective enforcement of the aforementioned due diligence obligations. It holds companies accountable for environmental offences and human rights violations, even if not caused by them directly, but by a company under their control.

Liability law traditionally rests on the principles of separation and fault. The separation principle dictates that each [legal] person is liable only for their own actions. The fault principle holds the person who caused the damage through their own fault liable.

KVI 2.0 would break with these principles by introducing a new form of causal liability. Causal liability is an exception to the principle of fault-based liability, whereby the fault of the liable party is not a prerequisite. Under KVI 2.0, businesses would be liable not only for their own misconduct but also for that of third parties. While not new to Swiss law (e.g., employer liability under Art. 55 CO), this concept remains a distinct exception.

Precisely because causal liability is an exception to the fault principle, it requires a clearly defined legal basis. The initiative's text cannot, by its very nature, provide the necessary level of detail, leaving the legislator to specify the liability standard. It will for example be up to the legislator, taking into account existing legislation, to define the necessary level of control and thus determine which (third-party) liability issues should be covered by the new liability standard. Other unresolved key issues that will need legislative clarification include the specific liability requirements or the applicable standard of proof.

In conclusion, it is clear that the details of a complex legal issue such as causal liability for environmental offenses and human rights violations committed by third parties cannot be conclusively regulated by the text of the initiative. The legislative process will define the specific form and scope of the new liability provision. Regardless, the liability requirement in KVI 2.0 represents a – potentially far-reaching – development in Swiss liability law.

5. Internationally coordinated solution

The new initiative requires the federal government to consider international guidelines and 'European developments' when implementing the KVI 2.0 legislation (see Art. 101a para. 3 draft Federal Constitution). This provision is not objectionable insofar as the initiators are expressing their view that Switzerland should refrain from applying a Swiss finish when implementing legislation for the initiative. However, the provision could be problematic in that its primary orientation towards the European Union does not take into account that other Swiss trading partners may have more efficient and effective rules, which Switzerland might be more inclined to adopt.

6. Conclusion

The initiative aims to directly commit businesses to safeguard human rights and protect the environment both domestically and abroad. This would extend a traditionally state-held responsibility to private actors, representing a significant conceptual innovation. The initiative would transform non-binding international guidelines (soft law) into binding principles (hard law) for large Swiss businesses. It would also soften the liability separation between legal persons and expand the grounds for causal liability under Swiss law. Should the initiative pass, its implementation will require careful clarification and assessment of these points.

The international scope and extraterritorial effect of the proposed changes are central to KVI 2.0. To avoid contradictions with established legal doctrines like the principle of territoriality, the legislator must ensure coherent implementation. Acknowledging that KVI 2.0 is breaking new ground is essential for properly integrating existing legal concepts.

Should KVI 2.0 be adopted, its implementation must provide legal certainty. This requires a long-term, clear, and internationally coordinated regulation that builds upon existing legal principles wherever possible.

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