“We need a legal system for the 21st century”
Companies based in Switzerland should ensure that their activities abroad respect human rights and comply with environmental standards: that is the view put forth by the Responsible Business Initiative (Konzernverantwortungsinitiative), which Swiss citizens will vote on this 29 November 2020. Its possible consequences have been hotly debated. But how much would actually change if the initiative were to pass? And what would a “yes” or “no” vote mean for Switzerland’s role in sustainable development? Elisabeth Bürgi Bonanomi, law expert at CDE, offers a legal perspective.
Interview: Gaby Allheilig
Elisabeth Bürgi Bonanomi, your research interests include the question of how Switzerland’s legal system and political framework affect developing countries and emerging economies. Is the Responsible Business Initiative capable of making Swiss business activities more sustainable in these countries?
The initiative refers to one of several elements needed to promote sustainable business activities in the global South. It stresses that companies bear responsibility for any severe damage they cause. This principle is basically already enshrined in civil law. But the initiators want to ensure that such liability is also upheld in the case of transnational business activities.
Where is that found in the law?
The initiative is based on the so-called liability of employers that is laid out in Article 55 of the Swiss Code of Obligations. This stipulates that businesses are liable when they or their “ancillary staff” unlawfully cause harm. According to prevailing jurisprudence and case law, the ancillary staff can also be a legal entity, for example a subsidiary company. Due to various procedural obstacles, however, the article is currently seldom applied to transnational activities.
“An increase in lawsuits would give companies a chance to show the public that they operate with care”
To date, there have been very few lawsuits against parent companies. What procedural obstacles get in the way?
The cases that have occurred so far – such as the Nestlé case in Colombia – have typically been discontinued due to the statute of limitations. Swiss liability law stipulates that damages must be claimed within a year. And there are other obstacles: the injured parties must present credible evidence. That can be difficult when the incident occurred far away; the court must rely on foreign-language documents and cannot make its own inspection. Finally, these procedures are expensive. The initiative doesn’t tackle any of these points.
Opponents of the initiative appear to view the risk of a flood of lawsuits a bit differently.
Yes, they warn of the possibility of numerous suits brought by NGOs. In fact, civil society organizations have initiated few such legal cases so far. Due to the high costs involved, such suits are still only likely to occur in serious cases even if the initiative passes. Critics of the initiative also argue that it’s unclear exactly when international human rights and environmental standards have been violated. This is true – this point has to be concretized at the level of individual rules and regulations. Anyway, if there were in fact a greater number of lawsuits, these would give companies a chance to show the public that they operate with care. This would give them legitimacy – something that’s little discussed in the political debate.
“Requiring conduct of due diligence along the entire value chain could have a preventative effect”
What else stands out for you in the debate?
Legal categories are sometimes incorrectly applied in the current political discourse. For example, we’re hearing that the initiative would reverse the burden of proof. But the term is being used incorrectly. It would remain the injured party who bears the burden of proof, not the company. The person or persons affected must prove that harm occurred, that it resulted from company activities, and that it violated the law. Only when this has been proven and liability has been demonstrated in principle does the company come into play. It can exculpate itself, that is, exonerate itself, by proving that it exercised sufficient care and did all it could to avoid damage. This duty of care also extends to company subsidiaries. This is not a reversal of the burden of proof, but rather an opportunity to free oneself from liability.
So what will change from a legal perspective if the initiative passes?
What’s new is that companies would need to carry out due diligence along the entire value chain, and would need to take measures to prevent harms to human rights and environmental standards. They would need to seriously consider the impact of their activities in sensitive contexts and how they can act responsibly. The provision would have a preventative effect in this regard.
“Switzerland currently has an opportunity to help shape the process by enacting its own regulations”
How do things look at the international level: Is Switzerland really going further than other countries?
No, you can’t say that in general. The EU, for instance, has called on all its member states to adapt their legal systems based on the 2011 UN Guiding Principles on Business and Human Rights, which were notably developed in cooperation with major companies. Various European countries have done so or are in the process of doing so. A variety of legal approaches are being developed to implement the UN Guiding Principles. Switzerland now has a chance to help shape this process by creating its own regulations. For example, it can introduce the business-friendly exculpatory evidence rule into the international debate, which is far from common across all countries. If Switzerland remains passive, it will be forced to adopt international guidelines sooner or later.
“Updated liability rules are only one side of the coin“
There are also people who claim that the initiative would hinder important investments in developing countries in particular. What is your view on that?
If the courts help to define what constitutes proper due diligence – that is, what can or cannot be expected of a company operating in a difficult environment – the initiative will create more legal certainty for companies. In the longer term, this will promote such investments. Sustainable development is always about curbing harmful developments and promoting sensible ones. Updated liability rules are only one side of the coin. On the other side, specific supporting instruments should also be introduced in the future.
The discussion revolves around how to harmonize standards as well as adapt trade and tax rules, export and investment-promotion instruments, and financing of development in order to make it easier for companies to implement sustainable investments in challenging contexts.
You emphasize the opportunities offered by the initiative. What would its rejection mean for Switzerland?
One consequence could be that the liability rule in Article 55 of the Code of Obligations would be interpreted more narrowly in the future, which would represent a step backwards from the current law in force. The question of how we can better embed transnational business activities in society would remain unanswered. In the end, it’s about adapting our legal system to the conditions and needs of the 21st century.
Small state, big companies: Rules for economic globalization and the role of Switzerland
Switzerland is small, rich, and profits greatly from globalization. Consequently, it is under growing international and public pressure from those who wish to make the world economy “fairer” and “more sustainable” by means of transnational rules. Home to many multinational companies, Switzerland is highly exposed to any such regulatory changes. Yet it need not assume a passive role. Indeed, the very process of implementing rules for multinational companies provides valuable scope for action. Learn more from a historical and a legal perspective in a white paper and a factsheet authored by Alex Gertschen and Elisabeth Bürgi Bonanomi, both at the University of Bern.