The Responsible Business Initiative in Switzerland in a European and International Context

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The Responsible Business Initiative in

Switzerland in a European and

Interna-tional Context

Heidi Dörig

heidi-doerig@hotmail.com

Student no 12573329

European Private Law 2019/2020

Supervisor: Prof. Marija Bartl

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Abstract

In the field of corporate social responsibility, countless debates and law reforms are currently taking place. The developments of the past few years have created a new awareness towards the purpose of corporations and whether multinational companies should be responsible and liable for human rights abuses and environmental damage committed within their supply chains. In this context, the purpose of this thesis is to assess whether the concept of the current Swiss Responsible Business Initiative (RBI) is a well-balanced approach in order to introduce a man-datory corporate social responsibility regime into the Swiss legal system. This assessment will be based on a comparison between the Swiss proposal and its French, Dutch and European equivalents which already have been adopted in recent years.

It will be shown that the at first sight seemingly extensive provisions of the RBI do not funda-mentally deviate from existing CSR legislation in Europe. This is mainly due to the fact that controversial aspects of the Initiative would require clarification by implementing legislation. Nevertheless, in the end the Swiss citizens will have the final say on whether the Responsible Business Initiative is a well-balanced approach to corporate social responsibility.

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List of Abbreviations

AJP Aktuelle Juristische Praxis Art. Article

BHRJ Business and Human Rights Journal CapLaw Swiss Capital Markets Law

cat category

CHF Swiss Franc

Comp Law The Company Lawyer

CSR Corporate Social Responsibility CUP Cambridge University Press

DC Décision du Conseil constitutionnel DC District of Columbia

DQ The Dovenschmidt Quarterly

ECFR European Company and Financial Law Review ed(s) editor(s)

EL Rev European Law Review EU European Union

EUI European University Institute

EUR Euro

FCC French Commercial Code ff and following

GP Global Policy Journal HRQ Human Rights Quarterly JWT Journal of World Trade km kilometre(s)

KSLR The King’s Student Law Review

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ILO International Labour Organization Int. Comp.

Corp. Law J International and Comparative Corporate Law Journal J Bus Ethics Journal of Business Ethics

JPHR Journal of Public Health Research MWP Max Weber Programme

n footnote

NCP National Contact Points NFR Non-Financial Reporting NGO non-governmental organisation

no number

NORD Nordic Journal of International Law NQHR Netherlands Quarterly of Human Rights

p page

OECD Organisation for Economic Co-operation and Development RBI Responsible Business Initiative

RIW Recht der Internationalen Wirtschaft

s section

SCCJ Swiss Coalition for Corporate Justice SME small and medium sized enterprises

SWZ Schweizerische Zeitschrift für Wirtschafts- und Finanzmarkrecht UN United Nations

Unif L Rev Uniform Law Review US United States

vol volume

ZBl Schweizerisches Zentralblatt für Staats- und Verwaltungsrecht 3TG tin, tantalum and tungsten and gold

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Table of Legislation

International Law

ILO Minimum Age Convention 1973

ILO Worst Forms of Child Labour Convention 1999 OECD Guidelines for Multinational Enterprises 2011

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas 2016

UN Guiding Principles on Business and Human Rights 2011 UN Treaty on Business and Human Rights 2019 (Draft)

European Union

Council Directive 2013/34/EU of 26 June 2013 on the annual financial statements, consoli-dated financial statements and related reports of certain types of undertakings, amending rective 2006/43/EC of the European Parliament and of the Council and repealing Council Di-rectives 78/660/EEC and 83/349/EEC [2013] OJ L182/19

Council Directive 2014/95/EU of 22 October 2014 amending Directive 2013/34/EU as re-gards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L330/1

Council Regulation (EC) 864/2007 of 11 July 2007 on the law applicable to non-contractual obligations (Rome II) [2007] OJ L199/40

Council Regulation (EU) 2017/821 of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas [2017] OJ L130/1

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France

Civil Code 1804 (Code Civil)

Commercial Code 1807 (Code de Commerce)

Duty of Vigilance Law 2017 (loi relative au devoir de vigilance des sociétés mères et des

en-treprises donneuses d’ordre)

Netherlands

Criminal Code 1881 (Wetboek van Strafrecht)

Economic Offences Act 1950 (Wet op de Economische Delicten) Child Labour Due Diligence Law 2019 (Wet Zorgplicht Kinderarbeid)

Switzerland

Code of Obligations 1911 (Obligationenrecht)

Code on Private International Law 1987 (Bundesgesetz über das internationale Privatrecht) Constitution of the Swiss Confederation 1999 (Bundesverfassung)

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A. Introduction

In continental Europe, the purpose of companies has been stakeholder-oriented for a long time. By contrast, in Anglo-Saxon countries shareholder-oriented corporations have been dominant.1 However, in the past decades this perception of the purpose of companies began to shift. Con-tinental European companies followed more and more a shareholder-oriented approach, and

vice versa.2

Despite these differing developments, at the moment numerous debates on corporate social re-sponsibility are ongoing, in continental Europe and in Anglo-Saxon countries. Since many years, the lack of responsibility of multinational companies for human rights abuses and envi-ronmental damage conducted within their supply chains is regarded as a fundamental societal problem. Tragic accidents in third world countries such as the Rana Plaza catastrophe in 2013 in Bangladesh or the emergence of environmental damage or hazardous working conditions in such countries without appropriate responsibility for the harm occurred led to global demands for solutions and various legislative measures on national and international level.3

Against this backdrop, the focus of this thesis is on the law proposal of the Responsible Business Initiative (RBI) which is currently being debated in parliament in Switzerland and which will most likely be voted on by the Swiss people this year. This proposal was initiated by the Swiss Coalition for Corporate Justice which represents numerous NGOs. The Initiative stands out in an international comparison due to its far-reaching obligations for companies. The main re-search question thereby is whether the RBI is a well-balanced approach in order to introduce a mandatory corporate social responsibility regime into the Swiss legal system.

To answer this question, first the existing international framework on corporate social respon-sibility will be presented (B.). Afterwards, four prominent examples of recent national and Eu-ropean legislations in this field will be described (C.). The legislations of France, the Nether-lands and of the European Union have been chosen among many other examples because they demonstrate fundamental developments in Europe regarding corporate social responsibility, the context of these laws is comparable to the Swiss initiative and the different national and EU approaches all point in the same direction. Subsequently, the history and the main ideas and

1_{Pillay, p 100 ff.}

2_{Sjåfjell and Taylor, p 47 ff.} 3_{Giuliani, p 40.}

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principles of the Responsible Business Initiative in Switzerland will be presented (D.). Finally, a comparative analysis between these abovementioned national and EU legislations and the Swiss proposal of the RBI will be conducted (E.). Based on the outcome of the comparison, an assessment will be carried out on whether the provisions of the RBI are a well-balanced ap-proach in the field of corporate social responsibility (F.). Ultimately, the thesis will provide an answer to the main research question and end with some concluding remarks (G.).

Regarding the methodology, this thesis follows the legal comparative method. The first part of the thesis is therefore of a descriptive nature in order to establish the basis for the following legal analysis. The second part which includes the comparison itself and the assessment is then of a normative nature. The aim of this part is to provide an answer to the question whether the Responsible Business Initiative is a well-balanced approach to introduce CSR legislation in Switzerland.

B. International Framework

I. UN Guiding Principles on Business and Human Rights

One major step in the development of the corporate social responsibility debate was the adop-tion of the ‘Guiding Principles on Business and Human Rights’ on 16 June 2011 according to the resolution of the Human Rights Council of the United Nations. After many years of unco-ordinated and unsuccessful attempts of clarifying the responsibility of corporations for human rights, the Guiding Principles marked an essential step forward. These principles are to a large extent the result of the work of the Special Representative on the issue of business and human rights, professor John Ruggie.4

The Principles are not legally binding and address only states and their duty to regulate corpo-rations rather than the duties of corpocorpo-rations itself. In addition, the Principles are worded in a weak and non-obligatory language.5 Nevertheless, the Guiding Principles can be regarded as a great success and have led to many international and national legislation.6_{One main reason for}

this success was the unique process of drafting the Guiding Principles, in which many states and various stakeholders were involved. This dialogue between the different interest groups led

4_{Newton, p 42 ff.} 5_{Jägers, p 161.}

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to Principles which are to a large extent based on consent and therefore, many states follow these recommendations voluntarily.7

The mechanism of the articles of the Guiding Principles on Business and Human Rights consists of three pillars; the UN ‘Protect, Respect and Remedy’ Framework.8_{Accordingly, the first}

ar-ticles concern the duty of the state to protect human rights against abuses by third parties.9 In addition, the Guiding Principles impose a responsibility on corporations to respect human rights and to act with due diligence.10 The remaining articles deal with the duty of states to ensure access to both judicial and non-judicial remedies for victims.11

II. OECD Guidelines for Multinational Enterprises

Another milestone in the international corporate social responsibility debate are the OECD Guidelines for Multinational Enterprises. To be more precise, the major revisions of the Guide-lines in 2011, which already were adopted in the year 1976 and on several occasions revised,12 play an important role in the development of CSR standards around the world. They are closely connected to the aforementioned UN Guiding Principles, which were adopted in the same year. The OECD and professor Ruggie worked intensively together to draft some parts of the revised OECD Guidelines for Multinational Enterprises. Another parallel to the UN Principles is the process of the revision of the OECD Guidelines in 2011, in which a wide range of stakeholders was involved. This, again, was one of the reasons for the success of the OECD Guidelines and their acceptance among states and corporations.13

The OECD Guidelines are, as the UN Guiding Principles, characterised by their soft law nature and not legally binding for corporations. However, the Guidelines are binding for governments. The governments of numerous states which subscribe to the OECD Guidelines have the duty to implement these Guidelines and to recommend compliance with these standards to multina-tional enterprises.14 This is also one of the features which make this instrument unique. So far,

7_ibid.

8_{See the Guiding Principles on Business and Human Rights, p 1}

<https://www.ohchr.org/documents/publica-tions/guidingprinciplesbusinesshr_en.pdf> accessed 11 May 2020.

9_{Art. 1 Guiding Principles; Jägers, p 160.} 10_{Art. 11 Guiding Principles; Jägers, p 160.} 11_{Arts. 25 ff Guiding Principles; Jägers, p 160.} 12_{Fleischer and Hahn, p 398.}

13_{Kaufmann, Purpose of the Corporation, p 14.} 14_{Nieuwenkamp, p 172.}

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the OECD Guidelines are the only comprehensive code of responsible business conduct which was multilaterally agreed upon and which governments have declared to promote.15

Furthermore, the OECD Guidelines impose a duty on adhering countries to set up National Contact Points (NCPs).16 These are agencies established by the national governments and their purpose is both to support the OECD Guidelines for Multinational Enterprises and to handle complaints on breaches of the Guidelines by international corporations as an out-of-court com-plaints mechanism.17

With regard to the content, the Guidelines include principles and standards for responsible busi-ness conduct in an international context which are based on applicable laws and internationally recognised standards.18 The Guidelines contain standards and recommendations on all essential areas of corporate responsibility; inter alia, on human rights, environment, labour rights, cor-ruption and taxation.19_{Of special interest for this thesis are some of the revisions of the}

Guide-lines in the year 2011.

Most important, the OECD Guidelines incorporated a new chapter on human rights,20_{which is}

based on the concept of ‘protect, respect and remedy’ of the UN Guiding Principles. The incor-poration of human rights in the OECD Guidelines strengthened the position of the UN Princi-ples considerably and offers now, with the NCPs, a governmental complaints mechanism for global violations of human rights.21 Furthermore, the revision included new standards on supply chain responsibility, which state that multinational enterprises should avoid causing or contrib-uting to adverse impacts on the social, environmental or other interests of the Guidelines.22

III. UN Treaty on Business and Human Rights

Next to these for corporations non-binding international treaties, negotiations for a binding UN Treaty on Business and Human Rights are currently taking place. Already in the year 2014, the UN Human Rights Council, on the initiative of Ecuador and South Africa, adopted a resolution to establish a working group which should draft a legally binding international treaty on

15_{Foreword of the OECD Guidelines for Multinational Enterprises, p 3}

<http://www.oecd.org/daf/inv/mne/48004323.pdf> accessed 13 May 2020.

16_{Ochoa Sanchez, p 91.}

17_{OECD, National Contact Points <https://mneguidelines.oecd.org/ncps/> accessed 27 May 2020.} 18_ibid.

19_{Nieuwenkamp, p 171.}

20_{Part I Chapter IV OECD Guidelines.} 21_{Nieuwenkamp, p 172.}

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transnational corporations and human rights.23 The Zero Draft of the Treaty on Business and Human rights was then published in July 2018, and one year later, in July 2019, the Revised Draft of the Treaty was presented by the working group.24 Negotiations on the Draft Treaty are still taking place and it is not clear yet when the Treaty will enter into force. The working group will be holding its sixth session on the Treaty in October 2020.25

In any case, the adoption of such a binding UN Treaty is a ground-breaking development in the prevention of corporate human rights abuses and is expected to have great influence on trans-national corporations and other enterprises. One of the minor drawbacks of the Treaty is, how-ever, that some influential states such as the US reject the project of such a binding treaty.26 Some cornerstones of the Revised Draft are that it covers all business enterprises and not just transnational ones, it creates a system of legal liability for human rights abuses and its provi-sions are aligned with the UN Guiding Principles on Business and Human rights. However, many aspects of the Treaty still need refinement or completion during the upcoming negotia-tions.27

C. Responsible Business Conduct in Europe

After having established the international framework with the main international standards and principles in the field of corporate social responsibility, this chapter is going to discuss some prominent examples of how states in Europe and how the European Union have implemented these international principles into national and EU legislation. Therefore, the relevant law re-forms in France, the Netherlands and on the level of the European Union will be presented and the two sections on national laws will be completed by the description of a case study to illus-trate how the new laws (could) work in practice. The afterwards following chapters will then present the current initiative in Switzerland on responsible business conduct and contain a com-parison between the different national and EU measures.

23_{Cassel, p 497.}

24_{Business & Human Rights Resource Centre, ‘Binding Treaty’}

<https://www.business-human-rights.org/en/binding-treaty> accessed 28 May 2020.

25_ibid.

26_{Burrow, UN Treaty.} 27_{Lopez, Revised Draft.}

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I. France

1. Duty of Vigilance Law a. Requirements

The most prominent and most comprehensive example of national legislation in the field of responsible business conduct is the French Loi relative au devoir de vigilance des sociétés

mères et des entreprises donneuses d’ordre (Duty of Vigilance Law).28_{This Law was adopted}

on 21 February 2017 by the French National Assembly and came into force on 28 March 2017, after the French Constitutional Council had released its decision29 striking down the designated civil penalties. Apart from that, the majority of the legislation, being compatible with constitu-tional principles, was upheld by the Council and came into force.30

One key element of the Duty of Vigilance Law is the obligation for certain parent companies to establish a vigilance plan. Only companies with a certain size are subject to this duty; com-panies which have its seat in France and which employ at least 5’000 employees in France or at least 10’000 employees worldwide, and also companies not seated in France but with French subsidiaries with at least 5’000 employees in France.31

Unlike comparable laws of other states, the French Law requires these companies not only to report on their efforts to identify potential infringements of human rights but requires them to actually implement a vigilance plan.32_{Through the implementation of reasonable vigilance}

measures, the plan should identify the risks and prevent infringements of human rights and fundamental freedoms, including health and safety of persons and the protection of the envi-ronment.33

The Law states that the vigilance plan shall be drafted with the company stakeholders involved and names five measures which should be included in the plan.34 These five measures are (i) a mapping which identifies, analyses and ranks risks, (ii) procedures to regularly assess the situ-ation of the involved companies within the supply chain of the parent company, (iii) appropriate action to mitigate risks or prevent serious violations, (iv) an alert mechanism that collects

28_{Kaufmann, global agieren, p 333 ff.}

29_{Conseil constitutionnel 23 March 2017, DC 2017, 750.} 30_{Altschuller and Lehr, p 1.}

31_{Art. L. 225-102-4 FCC; Cossart and others, p 320.} 32_{Altschuller and Lehr, p 1.}

33_{Art. L. 225-102-4 para 3 FCC; Brabant and others, p 93.} 34_{Art. L. 225-102-4 para 4 FCC.}

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reporting of existing or actual risks and (v) a monitoring scheme to follow up on the measures implemented and assess their efficiency.35

b. Enforcement

The main objective of the Duty of Vigilance Law is to oblige parent companies to control the activities of their foreign subsidiaries as well as the activities of their suppliers and subcontrac-tors located in other states with which the company maintains an established commercial rela-tionship.36_{To enforce these obligations, another key element of the Duty of Vigilance Law is}

the liability of the parent company for infringements of the relevant provisions in the French Commercial Code.37

The legal penalties of the Duty of Vigilance Law are twofold. On the one hand, as a prevention the Law imposes a periodic penalty payment when a company does not fulfil its obligations within three months after receiving formal notice to comply with the duty to establish, publish and effectively implement a vigilance plan.38 Such a payment can be sought by any person with legitimate interest in this regard and therefore this procedure is open to many kinds of parties, irrespective of whether actual damage has occurred.39

On the other hand, the Duty of Vigilance Law imposes civil liability on parent companies which fail to comply with the vigilance obligations. Such infringements can be the non-establishment of a vigilance plan, the non-publication or the insufficient execution of the plan.40 According to the French Commercial Code, a company which fails to comply with these duties shall be liable and obliged to compensate for the harm that due diligence would have permitted to avoid.41 Consequently, claimants which can be, according to the law,42 any person with a legitimate interest to file such an action must prove both that the parent company has acted with negligence and that there is a causal link between the failure to comply with the duties and the damage that has occurred.43

35_ibid.

36_{Weller and Pato, p 412.} 37_{Art. 1240 ff FCC.}

38_{Art. L. 225-102-4 para 1 FCC.} 39_{Brabant and Savourey, p 4.} 40_{Weller and Pato, p 413.}

41_{Art. L. 225-102-5 para 1 FCC in connection with Arts. 1240 ff French Civil Code.} 42_{Art. L. 225-102-5 para 2 FCC.}

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c. Drawbacks

Even though the comprehensive regime of the French Duty of Vigilance Law can be regarded as a great success in the field of corporate responsibility, it received also some criticism. For instance, the high requirements regarding the size of the company and the limitation to certain legal forms of the corporation44 lead to the result that only approximately 150 companies can be regarded as multinational enterprises in the meaning of the Duty of Vigilance Law.45 This means that many French and international companies will not be subject to these vigilance ob-ligations.

Furthermore, victims of human rights abuses face various obstacles when filing a civil liability action before courts in France. On the one hand, the claimant bears the burden of proof for the conditions of civil liability such as the infringement of vigilance obligations or causation.46 It can be difficult for a victim to prove that a certain company has failed to fulfil its duty to effec-tively implement a vigilance plan or to evaluate the effectiveness of such a plan.

On the other hand, also in practice it is difficult for victims to gain access to courts in France. Some authors seem to deny the possibility of NGOs and other interest groups to file such a civil liability action on behalf of a victim since only the victim has standing to do so.47 However, others assume that NGOs can be of assistance and alleviate the burden of proof victims face when filing such a claim.48 Also the following case study shows that the very first case filed under the new Law was initiated by several NGOs and the question whether the NGOs were entitled to sue does not seem to have been an issue during the proceedings. Therefore, the in-clusion of NGOs as claimants compensates to a certain extent the practical difficulties for vic-tims to file a claim.

2. Case Study a. Facts

As an illustration of the application of the French Duty of Vigilance Law in practice, the first case based on this new act which was brought before court in France will be presented here.

44_{Weller and Pato, p 414.}

45_{See for the year 2017: Observations du Gouvernement sur la loi relative au devoir de vigilance des sociétés}

mères et des entreprises donneuses d'ordre (28 March 2017), para 1.A <https://www.legifrance.gouv.fr/af-fichTexte.do?cidTexte=JORFTEXT000034290672&categorieLien=id> accessed 18 May 2020.

46_{Brabant and Savourey, p 3.}

47_{Palombo, p 284; Brabant and Savourey, p 3.} 48_{Bright, p 7.}

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‘Friends of the Earth France’ and five other environmental groups in France and Uganda filed an action against the French multinational energy company ‘Total’ in October 2019 concerning Total’s plan for a giant oil project in a protected natural park in Uganda.49

The process against Total concerning the oil project in Uganda started on 24 June 2019. Six NGOs filed a legal notice against Total which was followed by a three months period during which Total could prove that it fulfils its duties under the Duty of Vigilance Law.50 Total did not comply with the legal notice and rejected the accusations within three months, which ena-bled the claimants then to file an action before court against Total on 23 October 2019.51 This oil project in Uganda, of which Total is the main operator, has already been planned since the year 2012. After the discovery of an enormous field of crude oil in a protected natural park in Uganda, Total planned to drill over 400 wells in this area in order to extract a huge amount of barrels of oil per day and to build a 1’445 km long pipeline for the transportation of the oil to Tanzania.52

Already the legal notice in June 2019 included a request for the revision of Total’s vigilance plan and for the implementation of that plan for the Ugandan oil project.53_{Before the High}

Court in Nanterre, France, the claimants then sought proceedings against Total for the breach of its obligations under the new Duty of Vigilance Law in connection with the violations of human rights and the endangering of the environment by its project in Uganda.54 For instance, the NGOs involved claimed that Total had displaced many thousands of people in Uganda and had intimidated local farmers in order for them to agree on compensation for their land.55 On 30 September 2019, Total released a statement as a response to the legal notice of the NGOs earlier that year.56 This statement provides various facts and arguments in defence of the posi-tion of the multinaposi-tional energy company. In particular, Total argues that its vigilance plan clearly identifies the risks to human rights and the environment that could arise from Total’s activities and that the rather general approach of the French Duty of Vigilance Law does not

49_{Morgan, Total in court.}

50_{Lough, campaign groups accuse Total.} 51_{Morgan, Total in court.}

52_{Caramel, Total devant la justice française.}

53_{Friends of the Earth International, ‘Oil company Total faces historic legal action in France for human rights}

and environmental violations in Uganda’ 23 October 2019 <https://www.foei.org/news/total-legal-action-france-human-rights-environment-uganda> accessed 19 May 2020.

54_{Caramel, Total devant la justice française.} 55_{Rosman, landmark ruling.}

56_{Statement Total, ‘Total Responds to Questions from NGOs About Its Projects in Uganda’ 30 September 2019}

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require disclosure of risks in connection with individual projects.57 Furthermore, Total claims to have conducted several social and environmental impact assessments and to have imple-mented measures to mitigate these impacts.58

With this action, the High Court in Nanterre has been asked to decide whether Total should be obliged to revise its vigilance plan, potentially under penalty, taking into account the true social and environmental impacts of its oil project or to decide on further measures to prevent damage to the environment or violations of human rights.59 After several hearings of the parties, the court announced its judgment in the present case on 30 January 2020. However, the court did not decide on the case itself but declared that it does not have the competence to hear this complaint against Total. Instead of the High Court in Nanterre, a commercial court should be competent to decide this case.60

Thereby, the court followed the arguments of Total. For the NGOs involved, the approved com-petence of a commercial court is an almost certain win for the multinational oil giant Total.61

Therefore, ‘Friends of the Earth France’ has announced to make an appeal against the decision of the court in Nanterre on 25 March 2020.62 Consequently, further developments in the case against Total can be expected.

To conclude, the first case on the application of the French Duty of Vigilance Law was unfor-tunately not decided on the merits due to the lack of jurisdiction of the court seized. Neverthe-less, it illustrates which sort of cases potentially could be brought before court based on the Vigilance Law in the future. In addition, these proceedings brought considerable attention to the activities of Total in Uganda and could therefore have preventive effects on the future be-haviour of the multinational company Total and on other multinational enterprises.

57_{Statement Total (n 56).}

58_{Statement Total (n 56); Morgan, Total in court.}

59_{Environment News Service, ‘Total Sued Under France’s New Duty of Vigilance Law’ 23 October 2019}

<https://ens-newswire.com/2019/10/23/total-sued-under-frances-new-duty-of-vigilance-law/> accessed 19 May 2020.

60_{Rosman, landmark ruling; Friends of the Erath International, ‘Total abuses in Uganda: French High Court of}

Justice declares itself incompetent in favour of the Commercial Court’ 30 January 2020

<https://www.foei.org/no-category/total-abuses-uganda-french-high-court-of-justice-declares-itself-incompe-tent-duty-vigilance-law> accessed 19 May 2020.

61_{Rosman, landmark ruling.}

62_{Les Amis de la Terre France, ‘Affaire Total Ouganda : nous faisons appel dans un contexte de justice au}

ra-lenti’ 25 March 2020 <https://www.amisdelaterre.org/affaire-total-ouganda-une-nouvelle-etape-malgre-une-justice-au-ralenti/> accessed 19 May 2020.

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b. Analysis

Even though the court of first instance did not pass a judgment on the activities of Total in Uganda, some legal aspects of the case can be analysed here. The fact that the multinational company Total is subject to the new French Duty of Vigilance Law and that it is obliged to effectively adopt and implement a vigilance plan has never been questioned in the proceedings. However, one of the essential questions in the present case is whether the new French law requires a vigilance plan to disclose risks to human rights and the environment in connection with specific individual projects, or rather only to disclose risks which arise from the general activities of a company. This question on the interpretation of the Law needs to be answered by the competent court.

Another critical point is the fact that a multinational company is only liable for the damage which could have been avoided if the company would have exercised due diligence with regard to its vigilance obligations. Thus, the claimants must overcome the obstacle of proving causa-tion between the non-compliance with the law and the harm which has occurred. It will then be the task of the competent court to clarify and decide these various questions.

II. Netherlands

1. Child Labour Due Diligence Law a. Requirements

The new legislation in the Netherlands concerning corporate social responsibility is of a more recent date than the French Vigilance Law. The Wet zorgplicht kinderarbeid (Child Labour Due Diligence Law) was adopted by the Dutch Parliament on 7 February 2017 and after having been pending for more than two years was approved by the Dutch Senate on 14 May 2019.63 How-ever, the Law is not expected to enter into force before 2022 and therefore cannot yet have direct effects on companies in the Netherlands.64

In general, the Law aims to prevent child labour in supply chains and therefore requires com-panies to identify, prevent and address the problem of child labour. Subject to the Law are all companies which sell or supply goods or services to Dutch consumers.65 The law states

63_{Littenberg and others, p 1.} 64_{Van Rhijn, possible impact.}

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explicitly that it applies also to companies which are registered outside the Netherlands.66 How-ever, many details still need to be clarified by implementing decrees, such as the potential cat-egories of companies which will be exempted from the Act.67

The scope of application of the new Dutch Law is not as broad as the French Vigilance Law but limits its due diligence obligations to the specific human rights violation of child labour. Art. 2 of the Child Labour Due Diligence Law defines the term ‘child labour’ and refers therein to the ILO Convention on Worst Forms of Child Labour and to the ILO Convention on Mini-mum Age. Included are all kinds of work which are covered by the Worst Forms of Child Labour Convention and which are performed by people aged under 18, such as all forms of slavery, child prostitution and the use of children for illicit activities.68 But child labour in the meaning of this Law are also other forms of work. If certain conditions are met, some forms of light work are excluded from the Law.69

In general, the new Dutch Law imposes a duty to exercise due diligence on companies within the scope of the law. However, the Law only provides the cornerstones of the obligations for corporations and, again, many details concerning the exercise of due diligence still need to be specified by an implementing decree.70 In order to fulfil the duty of due diligence, a company needs to assess whether there is a reasonable suspicion that the production of goods or services to be supplied to Dutch consumers involved child labour within its supply chain. If a company comes to the result that such a suspicion of child labour exists, it must adopt and implement an action plan.71

In addition to the potential duty to develop such an action plan, a company generally must give a declaration confirming that it exercises due diligence in order to prevent the use of child labour within its supply chain.72 The regulatory authority then publishes these declarations in a public register on its website.73

66_{Art. 4 para 1 sentence 2 Child Labour Due Diligence Law.} 67_{Art. 6 Child Labour Due Diligence Law.}

68_{Art. 3 Worst Forms of Child Labour Convention; Littenberg and others, p 2.} 69_{Art. 2 para 1 (c) and para 2 Child Labour Due Diligence Law.}

70_{Hoff, mandatory human rights due diligence.}

71_{Art. 5 para 1 Child Labour Due Diligence Law; Littenberg and others, p 2 ff.} 72_{Art. 4 para 1 Child Labour Due Diligence Law.}

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b. Enforcement

Art. 7 of the Law describes the procedure of the main designated penalty: the administrative fine. In case of non-compliance, the Law provides several steps to be followed by any claimant. First of all, any person or company whose interests are affected by the company’s non-compli-ance with its obligations under this Law will be able to submit a complaint to the competent regulatory authority.74 The company then has the opportunity to react to and remedy these al-leged breaches of the Law without any sanction.75 Only after the company has responded to the complaint, or after six months if the company has not addressed the accusations, the regulatory authority may impose a binding order on the company to comply with its legal obligations and the authority may set a time limit for the implementation.76

Only after all these steps have been completed, a person affected can eventually sue the com-pany before the regulatory authority and claim an administrative fine.77 The amount of the fine depends on the duty which the company fails to fulfil. For instance, if a company does not issue a declaration of due diligence, the authority may impose a fine of up to EUR 4’350,78_which

will be in most cases more of a symbolic nature.79_{However, the administrative fine may be up}

to EUR 870’000 if a company fails to comply with its duties to investigate the existence of child labour within its supply chain or to adopt an action plan.80 Furthermore, if such a fine is not deemed to be appropriate, the fine could even be higher and amount up to 10% of the annual turnover of the offending company.81

Lastly, the Dutch Child Labour Due Diligence Law additionally imposes criminal penalties on companies and its directors if certain conditions are met. These criminal sanctions for the vio-lation of human rights due diligence obligations with regard to child labour are one of the fea-tures which make the new Dutch law unique among other legislation following the global trend of responsible business conduct.82 If a company has received a administrative fine for one of the aforementioned reasons83 and commits within the five subsequent years after the violation

74_{Hughes-Jennett, Due Diligence Law.} 75_ibid.

76_{Art. 7 para 4 Child Labour Due Diligence Law; Littenberg and others, p 3.} 77_{Hoff, mandatory human rights due diligence.}

78_{As of 1 January 2020, Art. 7 para 1 Child Labour Due Diligence Law in connection with Art. 23 para 4 cat 2}

Dutch Criminal Code.

79_{Hoff, mandatory human rights due diligence.}

80_{As of 1 January 2020, Art. 7 para 2 Child Labour Due Diligence Law in connection with Art. 23 para 4 cat 6}

Dutch Criminal Code.

81_{Art. 7 para 3 Child Labour Due Diligence Law in connection with Art. 23 para 7 Dutch Criminal Code.} 82_{Hoff, mandatory human rights due diligence.}

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the same violation of the Law again, by order or under the effective leadership of the same director, the non-compliance becomes an economic offence subject to the Dutch Economic Of-fences Act.84 The consequences are that the company and the respective director may face as criminal penalties community service, additional fines up to EUR 87’000 and even up to four years imprisonment.85

c. Drawbacks

The most obvious drawback of the Dutch Child Labour Due Diligence Law is its limited scope of application to human rights violations in the specific form of child labour only. Nevertheless, the new Law is a crucial step towards the goal of establishing corporate social responsibility for companies’ activities abroad. The Law could also serve as a model for broader human rights due diligence legislation in the future in the Netherlands and around the world.86

Other criticism concerned the practical application of the Law and whether it will be feasible and effective. Companies could circumvent the new legal obligations by terminating the busi-ness relationship with certain suppliers or by avoiding the sale goods and services on the Dutch market instead of identifying and preventing the use of child labour within their supply chain.87

2. Case study a. Facts

Unfortunately, since the Child Labour Due Diligence Law did not enter into force yet, there is no case law on the new Law in the Netherlands which could be presented here. Therefore, a prominent case which is currently pending before a court in the United States and which in-volves child labour will be presented and analysed as if it would be subject to the new Dutch law in order to illustrate the possible future application of the provisions.

This landmark case concerns an action which was brought before court in Washington DC on 15 December 2019 against some of the largest tech companies in the world. The US human rights NGO ‘International Rights Advocates’ filed their claim against the five defendants Ap-ple, Alphabet, Dell, Microsoft and Tesla on behalf of 14 Congolese families whose children were harmed or killed in cobalt mines in the Democratic Republic of Congo.88

84_{Art. 9 Child Labour Due Diligence Law.}

85_{Art. 6 para 1 s 2 and 3 Dutch Economic Offences Act.} 86_{Hoff, mandatory human rights due diligence.}

87_{Hughes-Jennett, Due Diligence Law.} 88_{Kelly, US lawsuit.}

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Cobalt is a fundamental component of rechargeable lithium batteries which are necessary to produce many electrical devices. Therefore, the demand for cobalt increases year after year. This global development particularly affects the Democratic Republic of Congo since more than 60% of the cobalt supply worldwide is mined in this country.89 In order to cope with this massive demand for cobalt, the working conditions and human rights situation in most local mines are alarmingly poor.90

Against this background, the NGO filed its lawsuit against those tech giants. The families af-fected claim damages for forced child labour since their children were injured or harmed by accidents while mining cobalt in Congo.91 The claim includes several examples where children were buried alive or heavily injured by tunnel collapses.92

International Rights Advocates accuse the defendants of being involved in the deaths and inju-ries of these children while working in cobalt mines within their supply chains. Some of these children were forced to work in mines owned by the UK mining company Glencore. These companies then sell the cobalt directly or via other metal traders to the defendant tech compa-nies.93 Of particular importance is the fact that the claim argues that these five tech companies had awareness and specific knowledge of the involvement of child labour under precarious working conditions in the mining of the cobalt they use in their products, and thereby were complicit in these human rights violations.94 Furthermore, these firms allegedly had the power and the resources to control their cobalt supply chains and to prevent such hazardous mining conditions and the use of child labour.95

Most of the tech companies reacted with public statements to these allegations and ensured that they attach great importance to the responsible supply of minerals and to the respect of human rights. They do not tolerate involuntary or child labour and have never knowingly supported such operations. If a supplier does not comply with the strict standards of the companies, he will be removed from the supply chain.96

89_{Faber and others, p 10.} 90_{Scheele and others, p 6.}

91_{International Rights Advocates, ‘IRAdvocates Files Forced Child Labor Case Against Tech Giants Apple,}

Alphabet, Dell, Microsoft and Tesla for Aiding and Abetting Extreme Abuse of Children Mining Cobalt in DRC’ 15 December 2019 <http://www.iradvocates.org/press-release/iradvocates-files-forced-child-labor-case-against-tech-giants-apple-alphabet-dell> accessed 26 May 2020. See for the whole action

<http://www.iradvocates.org/sites/iradvocates.org/files/stamped%20-Complaint.pdf> accessed 26 May 2020.

92_{Cameron-Chileshe, Congolese child cobalt mining deaths.} 93_{Kelly, US lawsuit.}

94_{Action on 15 December 2019 (n 91), p 16.} 95_{Kelly, US lawsuit.}

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b. Analysis

Assumed this case would take place in the Netherlands after the enactment of the Child Labour Due Diligence Law, these five tech companies would be subject to the new Law since they sell their products on the Dutch market to end-users. Furthermore, these allegations certainly fall under the term ‘child labour’ within the meaning of the Law since many of the affected children are younger than ten and the cobalt mining poses a serious threat to the health of the children. As a result, supposed the accusations of the claimants are accurate, there is a reasonable suspi-cion that the production of cobalt involves child labour within the supply chain, and therefore the tech companies would be obliged to adopt and implement an action plan. In addition, the companies generally would have to publish a due diligence declaration concerning the use of child labour.

Accordingly, these companies could not directly be punished in the Netherlands for their be-haviour in the past with regard to cobalt mines in Congo within their supply chain. But they could be fined if they do not comply with the new legal obligations of the Child Labour Due Diligence Law to adopt an action plan and to declare due diligence. Depending on the nature of the violations of the Law and in case of repeated infringements, it could even lead to criminal penalties.

Not entirely clear is yet which parties will be entitled to file a complaint with the regulatory authority and thereby initiate the procedure of administrative fines and criminal penalties, and especially whether class actions, as in the present case, are possible. But since every natural and legal person whose interests are affected by the non-compliance with the law may file a com-plaint,97 a human rights NGO such as International Rights Advocates could reasonably be en-titled to file such a complaint on behalf of affected families of injured or killed children in Congo.

III. European Union

The following section will examine the two most outstanding pieces of legislation of the Euro-pean Union in the field of corporate social responsibility: The Non-Financial Reporting

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Directive and the Conflict Minerals Regulation. One important goal of the EU is to increase CSR and to promote sustainable and responsible European companies.98

1. Non-Financial Reporting Directive

The EU Directive 2014/95 on the Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings (NFR Directive) came into force on 6 December 2014. The NFR Directive amends the existing Accounting Directive.99 Until the end of 2017, the Member States of the European Union had to implement the Directive into their national legislations. Accord-ingly, companies are obliged to include non-financial reporting in their annual reports starting from 2018.100

Large undertakings in the meaning of the Directive and therefore subject to its obligations are public-interest companies with more than 500 employees.101_{These can be listed companies,}

banks and other companies which are of public interest according to national authorities. It is estimated that approximately 6’000 companies in the European Union fulfil these require-ments.102

These companies are required to publish non-financial statements. The report should include, as a minimum requirement, information on environmental protection, on social responsibility and treatment of employees, on respect for human rights and on anti-corruption and bribery matters.103 Furthermore, the statement shall include the business model, the policies of the un-dertaking and their outcome, due diligence mechanisms and related risks.104

However, companies do not necessarily have to disclose information on all the abovementioned matters since the Directive follows a so-called ‘comply or explain’ approach. This means that companies either need to include in their statement aspects of their corporate social responsi-bility policies in these areas or must reasonably explain why the information is not included.105 This and the rather open formulations of the Directive give companies significant flexibility when deciding which information is relevant and in which form it should be published.

98_{European Commission, ‘Corporate Social Responsibility & Responsible Business Conduct’}

<https://ec.eu-ropa.eu/growth/industry/sustainability/corporate-social-responsibility_en> accessed 30 May 2020.

99_{Directive 2013/34/EU.}

100_{Martin-Ortega and Hoekstra, p 622.} 101_{Art. 1 para 1 NFR Directive.}

102_{European Commission, ‘Non-financial reporting’}

<https://ec.europa.eu/info/business-economy-euro/com-pany-reporting-and-auditing/company-reporting/non-financial-reporting_en> accessed 29 May 2020.

103_{Art. 1 para 1 NFR Directive. The aspects on diversity of company boards can be disregarded for this thesis.} 104_{Art. 1 para 1 NFR Directive; Martin-Ortega Hoekstra, p 633.}

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The fact that the Non-Financial Reporting Directive is only a minimum harmonisation instru-ment leads to further divergence between the impleinstru-menting national legislations. In practice, the laws of the EU Member States on non-financial disclosure differ to a large extent. Therefore, the aim of the European Union to harmonise mandatory non-financial reporting has not been fully achieved.106 As a result of the flexibility for the Member States and the companies con-cerned, the non-financial statements of large companies across Europe cannot be regarded as comparable.107

A further shortcoming of the NFR Directive is that it does not regulate any sanctions for the non-compliance with these obligations. It is for the Member State to enforce the implementing legislation and to ensure compliance with the provisions.108 Consequently, the general sanctions of the Accounting Directive apply in case of non-compliance,109 such as collective responsibil-ity of the board members for the content of the statements and reports.110

Despite these points of criticism of the Non-Financial Reporting Directive, the mandatory min-imum standard of non-financial disclosure is an important achievement of the European Union and a considerable step towards corporate social responsibility. Even though the scope of the Directive is rather modest, it still leads to increased transparency of companies’ activities in all Member States of the European Union.111

2. Conflict Minerals Regulation

On 19 May 2017, the European Union published the Regulation (EU) 2017/821 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold (‘3TG’) originating from conflict-affected and high-risk areas (EU Conflict Min-erals Regulation). The Regulation enters into full force across the EU on 1 January 2021.112 Unlike the NFR Directive, the Regulation does not require implementation into national legis-lation but is directly applicable to all natural and legal persons which are subject to the Regu-lation.113

106_{Martin-Ortega Hoekstra, p 636.} 107_{Iglesias-Rodriguez, p 325.} 108_{De Catelle, p 60.}

109_{Kaufmann, global agieren, p 335.} 110_{Iglesias-Rodriguez, p 324.}

111_{Martin-Ortega Hoekstra, p 636; Iglesias-Rodriguez, p 325.} 112_{Art. 20 para 3 Conflict Minerals Regulation.}

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The scope of the EU Conflict Minerals Regulations is limited to the specific matter of trade in 3TG,114 regardless of whether these minerals are sold as raw materials or metals. With regard to the geographical scope of the Regulation, it applies to the sourcing of 3TG in conflict-af-fected and high-risk areas. These terms are defined in the Regulation115 and correspond to the concept in the OECD Due Diligence Guidance. The European Commission has the duty to publish non-binding guidelines on the application of the Regulation and include therein an in-dicative list of such areas.116 The Regulation further only applies to companies which import a certain annual volume of these minerals into the European Union. Consequently, EU importers are covered by the Regulation but not downstream operators within the supply chain of a com-pany.117

The aim of the Regulation is to establish an EU system for supply chain due diligence in order to, inter alia, increase corporate transparency and to prevent human rights abuses in the states where these minerals are sourced.118_{Therefore, EU importers of 3TG must comply with four}

categories of due diligence measures119_{provided for by the Regulation which are all based to a}

large extent on the system of the OECD Due Diligence Guidance.120

In order to enforce the EU Regulation, Member States must establish a competent authority which is responsible for the implementation of the Regulation.121 In case of non-compliance with the abovementioned obligations, it is not clear which sanctions an EU importer of 3TG may face. It is up to the Member States of the EU to lay down the rules which apply to infringe-ments of the Regulation. In any case, the national authority must issue a notice of remedial action to importers who do not comply with the Regulation.122 This means that the national authority orders the company to address the issue within a certain period of time and takes further steps if necessary to ensure compliance.123

A conclusion on the EU Conflict Minerals Regulation cannot be drawn yet since it only enters into force in January 2021. But what can be said is that the Regulation is another important step towards strict due diligence obligations and corporate responsibility for supply chains. With

114_{Art. 1 para 1 Regulation.} 115_{Art. 2 (f) Regulation.}

116_{Art. 14 Regulation; Voland and Daly, p 50 ff.} 117_{Voland and Daly, p 55.}

118_{Art. 1 Para 1, Recital 3 Regulation.}

119_{Management system obligations, risk management obligations, audit and disclosure obligations.} 120_{Partiti and Van der Velde, p 1047.}

121_{Art. 10 Regulation.}

122_{Art. 16 para 1 and 3 Regulation.}

123_{European Commission, ‘The Regulation explained’ 13 December 2017}

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respect to the matter of conflict minerals, this new law regulates a supply chain which is partic-ularly problematic and prone to human rights violations.124 Remarkable is as well that the close connection between the EU Regulation and the non-binding OECD Due Diligence Guidance leads to a transformation of soft law into hard law in this specific field.125

D. The Responsible Business Initiative in Switzerland

In short, the Responsible Business Initiative (Konzernverantwortungsinitiative)126 in Switzer-land has the objective of making multinational companies to respect human rights and the en-vironment when exercising their business activities abroad.127_{After the adoption of the UN}

Guiding Principles in 2011, some debates on corporate social responsibility and due diligence obligations took place in Switzerland. However, they did not result in any legislative measures.128 Also in the Position Paper on CSR in 2015 and the National Action Plan on im-plementation of the UN Guiding Principles in 2016, the Swiss government did not introduce any mandatory due diligence obligations concerning human rights or rules on liability of Swiss companies for activities abroad. The focus was rather laid on voluntary compliance of Swiss multinational companies with international standards, supporting companies implementing their corporate social responsibility and increasing corporate transparency.129 Parallel to these developments, the Responsible Business Initiative (RBI) was launched in order to implement mandatory due diligence provisions and corporate liability rules into the Swiss law.130

I. Legislative History

In April 2015, the Swiss Coalition for Corporate Justice (SCCJ), which represents more than 80 NGOs in Switzerland, launched the popular constitutional initiative called ‘Responsible Business: Protecting Human Rights and the Environment’.131_{After having collected more than}

100’000 valid signatures for the initiative, which is the threshold required by the Swiss system, the RBI was submitted to the Federal Chancellery on 10 October 2016.132_{At the beginning of}

124_{Partiti and Van der Velde, p 1066 ff.} 125_{Kaufmann, Sorgfaltsprüfung, p 974.}

126_{See the annex for the full text of the Responsible Business Initiative and the counter-proposals 1 and 2.} 127_{SCCJ, ‘Details about the Initiative’ <https://corporatejustice.ch/about-the-initiative/> accessed 31 May 2020.} 128_{Bueno, From Responsibility to Liability, p 8.}

129_{Bueno, From Responsibility to Liability, p 8 ff.} 130_{Bueno, Text and Developments, p 1.}

131_ibid.

132_{SCCJ, ‘Stages of the Responsible Business Initiative in Parliament’}

The Responsible Business Initiative in Switzerland in a European and International Context