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25 November 2019
Current environmental liability applicable only to Swiss-based companies
Business responsibility de lege lata
Objective of Responsible Business Initiative
Weak points of Responsible Business Initiative
On 10 October 2016 the so-called 'Responsible Business Initiative' was submitted to the Swiss Federal Chancellery. A key element of the initiative is the introduction of a legal obligation on Swiss-based multinationals to respect international environmental standards in all of their business activities worldwide. The popular vote on the initiative is expected to take place in 2020.
The proposed amendments to the Constitution and their implementation by the legislature may have a considerable impact on Swiss-based companies with subsidiaries abroad and their environmental policies.
Swiss-based companies should therefore analyse whether they may be affected and, if so, determine appropriate implementation measures.
Swiss environmental laws set out a number of core principles, including:
The polluter pays principle applies to environmental damage such as the pollution of water, air and soil. The costs of investigating, monitoring and cleaning up polluted sites are allocated under the polluter pays principle. A limited liability applies with respect to each polluter's respective share where there are multiple polluters. The first to bear the costs is the legal person that, through its own conduct, caused the required measures (so-called 'disturber by conduct'). Simply being the owner of a contaminated site (so-called 'disturber by maintaining the harmful condition') bears no costs if, by exercising the required care, the owner could not have known about the pollution.
The liability for environmental damages is a so-called 'strict liability'. The operator of an establishment or installation that represents a special threat to the environment is liable for the damages caused by such establishment or installation. Polluters are responsible for any damage that they cause regardless of whether it was their fault, except force majeure and third-party or damaged-party liability.
Under the current Swiss regulations, a Swiss-based company is responsible in the first instance for the wrongdoings of its corporate bodies with respect to environmental matters.
Additionally, individuals of that company who are responsible for the business decision which lead to environmental damage can be held liable by the company or their shareholders based on director and officer's liability. In practice, the personal liability of directors and officers is often covered by liability insurance, if no limitation or exclusion applies, which is typically the case for damages resulting from wilful intent, gross negligence and criminal conduct.
Moreover, aggrieved parties can claim damages or losses directly from directors or officers based on tort liability. To establish tort liability they must prove damages, unlawfulness (ie, the violation of an erga omnes legal right such as life, physical and mental integrity and ownership), causality and fault.
Under Swiss law, a Swiss-based company could potentially be held liable for the wrongdoing of its foreign subsidiaries if it actually manages the foreign subsidiary. 'Actual management' is given if:
Thus, liability of Swiss-based companies for the wrongdoing of their foreign subsidiaries already exists. However, in such contexts, complex legal questions as to jurisdiction and applicable law arise.
The Responsible Business Initiative focuses primarily on companies' obligation to respect human rights in all of their business activities in Switzerland and abroad. Thereby, the initiative's promoters qualify the environmental law as the third generation of human rights (ie, the right to a safe, healthy and sustainable environment).
In particular, the initiative's promoters hold that certain foreign affiliates of such Swiss-based multinationals do not sufficiently comply with established principles of conduct and international environmental standards.
Against this background, the initiative aims to:
While the initiative certainly pursues honourable goals and while there is a broad agreement that established principles of conduct and environmental standards must be met by any business activity worldwide, there is some disagreement on the appropriate measures to achieve this goal.
In particular, the approach of the initiative is criticised for the following points:
The Federal Council opposes the initiative. The government argues that the initiative goes too far by governing any and all foreign affiliates. Such a broad duty of diligence would pose considerable difficulties and implementation problems. Further, the suggested liability rules are stricter than in most other legal systems and would put Switzerland at a disadvantage as a business location.
Parliament is currently discussing a counterproposal, which will contain more business-friendly rules and the possibility for companies to exempt themselves from liability for damages caused by affiliates abroad.
The honourable goals of the Responsible Business Initiative are undisputed. However, it seems that the initiative overshoots the target and more appropriate measures should be found to achieve this goal.
Additionally, actions against Swiss-based companies for the misconduct of their subsidiaries are already possible according current Swiss law if the subsidiary is actually managed by its mother company.
It would be counterproductive if, as a consequence of the initiative, companies decide to leave Switzerland; if so, the initiative would lose its desired effect with regard to these companies and their foreign affiliates.
For further information on this topic please contact Michael Lips or Larissa Rickenbacher at Pestalozzi Attorneys at Law by telephone (+41 44 217 91 11) or email (firstname.lastname@example.org or email@example.com). The Pestalozzi Attorneys at Law website can be accessed at www.pestalozzilaw.com.
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