Following an intense debate on November 29, 2020, the “Responsible Business Initiative” was rejected by a majority of the Swiss cantons. Instead, a reform of the Swiss Code of Obligations and Criminal Code is most likely to enter into force. This reform seeks to introduce for certain Swiss businesses transparency duties on non-financial matters and due diligence and transparency duties with respect to minerals and metals from conflict zones and child labor.
Transparency on Non-Financial Matters. Under the reform, publicly traded companies and other entities of a certain size (such as banks, insurance companies, or securities firms) who had at least 500 full-time employees and a balance sheet of 20 million Swiss francs ($22.3 million) or a turnover of 40 million Swiss francs ($44.6 million), for two consecutive years, will be subject to a duty to report annually on non-financial matters.
Such non-financial matters include environmental issues, particularly CO2 targets, social and employment-related issues, respect for human rights, and the fight against corruption. The targeted Swiss businesses will also have to report on their controlled foreign companies. Such reports will have to be approved and signed by the supreme executive or management body and approved by the body responsible for approving the annual accounts and remaining publicly accessible for at least ten years.
Due Diligence and Transparency Duties with Respect to Minerals and Metals from Conflict Zones and Child Labor. The second aspect of the reform provides that Swiss companies, whose registered office, central administration, or principal place of business is located in Switzerland, must comply with due diligence duties in their supply chain when they (i) release in the Swiss market or process in Switzerland ores or metals containing tin, tantalum, tungsten or gold from conflict or high-risk areas, or (ii) offer goods or services for which there is a suspicion of child labor.
Swiss companies will be required to set up a management system and supply chain policies on such issues and ensure the traceability in their supply chain. Moreover, companies will be required to implement a supply chain risk management plan to identify, assess, and minimize the risks of adverse effects in their supply chain.
Such companies will also be subject to an annual reporting obligation on implementing their due diligence duties, and such reports will have to remain publicly accessible for at least ten years.
Criminal Liability. A fine of up to 100,000 Swiss francs ($111,500) is levied upon anyone who provides a false indication in the above-mentioned reports or fails to maintain those reports. Negligent behavior is punishable by a fine of up to 50,000 Swiss francs ($55,800).
Still subject to a potential popular referendum, the reform is expected to enter into force in 2022. This reform comes at a time when human rights due diligence and corporate liability are under serious discussion within the international community. For instance, the European Union has already stated that it intends to introduce mandatory human rights due diligence legislation in 2021.
Dr. James F. Reardon, J.D., pictured above left, is a senior associate at FRORIEP based in Geneva, Switzerland. He focuses on complex international litigation and arbitration, as well as on a variety of regulatory matters, in particular in the fields of competition law, banking and finance, and compliance. As of 2020, he is a lecturer (chargé de cours) at the Institute for International Business Law of the Faculty of Law at the University of Fribourg, Switzerland (LL.M. program), where he teaches anti-corruption and anti-money laundering. He can be contacted here.
Tomás Navarro Blakemore, above right, is an associate at Swiss law firm FRORIEP, based in Geneva, Switzerland, within its international dispute resolution practice and also advises private clients, businesses, non-profit organizations and social enterprises on governance, structuring and ethical issues. He speaks English, French and Spanish. He can be contacted here.