European Union: Business And Human Rights - What Swiss Companies Need To Know

Last Updated: 21 February 2018
Article by Peter Burckhardt and Anya George
Most Read Contributor in Switzerland, August 2018

Both in Switzerland and abroad, companies are coming under increasing pressure to assess human rights impacts and adhere to international reporting standards. This newsletter outlines the main developments – at the international and national level – that are relevant to help Swiss companies navigate this new and evolving area of the law.

1 INTRODUCTION

Under international law, the primary obligation to protect human rights is on states. However, in recent years, civil society has increasingly called for companies to be held to human rights standards. The debate on this issue led to the adoption, in 2011, of the United Nations Guiding Principles on Business and Human Rights (UNGPs, see section 2.1 below). This marked a turning point in the attitude of stakeholders towards the issue of corporate social responsibility for human rights violations.

More and more states have started implementing business and human rights policies and discussing legislative and regulatory measures in that area.

Businesses themselves are increasingly aware that showing respect for human rights, and implementing robust policies and processes to identify, prevent or mitigate adverse human rights impacts, are relevant to investor relations, brand management, access to finance, and may help avoid exposure to the risk of litigation and reputational damage.

2 INTERNATIONAL STANDARDS

2.1 UN GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS

The UNGPs were developed by the UN Special Representative John Ruggie and unanimously endorsed by the UN Human Rights Council in June 2011. While the UNGPs are not legally binding, they are recognised as the authoritative global standard on business and human rights. They consist of 31 principles implementing a "three pillars" framework, according to which: (i) the state has a duty to protect against human rights abuses by third parties; (ii) businesses have a responsibility to respect human rights in their activities; and (iii) victims are entitled to access to effective remedy.

According to the UNGPs, businesses can discharge their responsibility to respect human rights by:

  • conducting due diligence to identify actual and potential adverse human rights impacts;
  • embedding a policy commitment to respect human rights into business operations; and
  • having processes in place to remedy human rights issues which arise.

To date, 19 states (of which 15 within Europe, including Switzerland) have published national action plans on business and human rights (NAPs) setting out their policies for implementing the UNGPs. NAPs may include proposals for legislative and other regulatory measures, but may also consist of non-binding guidance, recommendations and initiatives.

2.2 OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

In 2011, the OECD added a new dedicated chapter on human rights to its Guidelines for multinational Enterprises, which are recommendations by governments to multinational enterprises operating in or from adhering countries. The new chapter on human rights explicitly adopted the due diligence process of the UNGPs as its standard for what companies should do to avoid and mitigate involvement in human rights impacts, both for their own activities and in their business relationships.

2.3 FURTHER TRENDS

There have been a number of further developments at the international level with the aim to encourage and assist States and enterprises in developing and implementing corporate social and human rights strategies, e.g. the UN Global Compact, the Global Reporting Initiative, and the Council of Europe Recommendation Cm/Rec(2016)3, to name but a few.

In 2014, the UN Human Rights Council adopted a resolution calling for the elaboration of a legally binding treaty on Business and Human Rights. The process towards adoption of such an international treaty may take several years yet.

3 DEVELOPMENTS IN THE EU AND ABROAD

3.1 EU NON - FINANCIAL REPORTING DIRECTIVE

In 2014, the European Parliamant adopted Directive 2014/95/EU which lays down the rules on disclosure of non-financial and diversity information. Relevant companies will be required from 2018 onwards to include non-financial statements in their annual reports. These statements must address, inter alia, the companies' human rights impacts and policies. With a view to facilitating implementation, the European Commission published guidelines on non-financial reporting in June 2017.

The rules apply only to public-interest companies with more than 500 employees. About 6,000 companies and groups across the EU currently meet those criteria. The Directive may also be relevant for large Swiss public- interest entities (such as insurance companies or banks) whose subsidiaries operate in the EU. most member States have already enacted legislation to implement the Directive. Some laws provide for the possibility of monetary sanctions in case of a failure to comply with the non-financial reporting requirements.

3.2 NATIONAL LEGISLATION

A few States have adopted further specific legislation in relation to business and human rights:

  • The UK Modern Slavery Act 2015 requires certain large UK and non-UK businesses to release reports on steps taken to consider the risks associated with suspected human trafficking or coerced labour in their businesses and throughout their supply chains.
  • The French Loi de vigilance adopted on 27 march 2017 requires large French companies to establish an annual "vigilance plan" setting out the measures that they will take to prevent, inter alia, the violation of human rights in their own activities as well as in those of their subsidiaries and throughout their supply chains. The French law goes farther than the EU Directive, imposing a compulsory duty of care and compelling companies to plan for and carry out affirmative action. Companies that fail to publish plans and comply with them may be ordered to do so by courts in decisions that can be made public. They may also be required to compensate victims who have suffered as a result of non-compliance.

Swiss companies with subsidiaries or activities in the UK and France should be mindful of the new legislation, even if they are not directly subjected to it, as it is indicative of the standards applicable in those countries.

4 MAIN DEVELOPMENTS IN SWITZERLAND

4.1 NAP

The Swiss Federal Council issued a NAP for the implementation of the UNGPs on 9 December 2016.

The NAP focuses on the duty of the state to protect human rights and provide access to remedy. It contains a "smart mix" of instruments aimed at ensuring that Swiss companies operating in Switzerland and abroad respect human rights, but does not foresee the establishment of any legally binding requirements for companies. The Federal Council has indicated that it expects Swiss companies to implement human rights due diligence and non-financial reporting processes even in the absence of a legal obligation to that effect.

4.2 RESPONSIBLE BUSINESS INITIATIVE

On 11 march 2015, the Swiss National Council, by a narrow margin, rejected a parliamentary motion that sought to establish a legally binding human rights and environmental due diligence requirement for Swiss businesses. One month later, a coalition of NGOs launched the Responsible Business Initiative (RBI). The required signatures were collected and the RBI was submitted to the federal authorities on 10 October 2016.

The Federal Council published its official message on the RBI on 15 September 2017, recommending that the initiative be put to the vote without any direct or indirect counter-proposal. It recognised the fundamental goals of the RBI, but considered that the initiative goes too far.

In essence, the RBI would require Swiss companies to respect human rights not only in their activities in Switzerland, but also in their activities abroad and to ensure that companies under their control do the same, the notion of "control" being a factual rather than legal one.

The RBI would also introduce a mandatory due diligence requirement in relation to both 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. The due diligence requirement would apply not only in relation to the companies' own activities and those of controlled entities, but also to all business relationships in their supply chain. The interests of small to medium enterprises would be taken into account when implementing the due diligence requirement.

A further critical aspect of the RBI is that is proposes to hold companies liable for damages caused by a company within their control, unless they can show that they fulfilled their due diligence duty.

The initiative is currently being examined by the Parliament, which will decide whether it wishes to agree to or reject the RBI, and/or make a counter-proposal. The initiative will then be put to popular vote. Irrespective of the outcome, it is advisable for Swiss multinationals to consider the potential exposure that this and the further developments outlined above could bring.

5 REQUIREMENTS AND EXPOSURE FOR SWISS BUSINESSES

5.1 NON - FINANCIAL REPORTING

As yet, Swiss law does not provide for any binding obligations to report on human rights impacts and related issues, but Swiss companies may nevertheless be required to disclose non-financial information based on existing legislation (e.g. art. 961c(d)(d) of the Code of Obligations, "CO") or due to their activities abroad. moreover, the Swiss government has stated its intention to propose legislation that would align with the EU Directive.

For companies seeking to voluntarily comply with the UNGPs reporting standards, there are a number of initiatives and tools available that can be of assistance, in particular the Global Reporting Initiative and the UNGPs Reporting Framework.

5.2 DUE DILIGENCE

There is no specific duty of due diligence in relation to human rights risks under Swiss law. However, the existing duty of care of company directors (art. 717(1) CO) could be held to encompass a corporate social responsibility component requiring multinational enterprises to consider human rights impacts. The RBI, if adopted, would introduce a specific human rights due diligence duty for companies as such.

5.3 CIVIL LIABILITY

As there is no explicit due diligence duty of companies in relation to human rights risks under Swiss law, there is also no specific civil liability on that basis. However, that is not to say that such a liability could not be construed based on existing legal principles and tort provisions.

Swiss companies should also be aware of the potential extraterritorial reach of foreign legislation. In some cases, victims of corporate human rights abuses can seek redress in a jurisdiction that is neither the place where the wrongdoing occurred nor the seat of the defendant.

5.4 CRIMINAL LIABILITY

In recent years, there have been several criminal investigations, both in Switzerland and elsewhere, launched against companies for failure to respect human rights in their international activities – e.g. for alleged sourcing of raw materials plundered from a conflict zone.

Companies whose activities bring them into contact with areas of armed conflict are particularly at risk of being the target of criminal investigations and may wish to consider implementing measures to ensure compliance with international standards and thus minimise their exposure.

5.5 REPUTATIONAL RISK

Companies often view reputational damage as the biggest risk related to human rights issues. Experience shows that it can be difficult to restore a company's reputation once it has been tarnished by allegations of human rights violations (irrespective of whether they prove true).

Again, a simple awareness of the issues related to human rights impacts, and the implementation of policies when risks are identified, can go a long way to preventing such situations from occurring.

6 CONCLUSION

There is a clear trend towards increased transparency and accountability for businesses in relation to the human rights impacts of their international activities. This is mirrored in a growing body of soft law, but also in initiatives aiming to introduce binding due diligence and reporting obligations.

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. They may also benefit from voluntarily implementing pro-active human rights policies – and indeed many of the largest companies worldwide have already done so.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions