Swiss votations on November 29, 2020

Both Initiatives were rejected. The votation on the responsible businesses Initiative achieved an electoral turnout of 47% and yielded a very close result. A majority of 50.7% of the People voting supported the Initiative, but a majority of the Cantons rejected the proposal (14.5 out of the 23 Cantons). As the acceptation of a Popular Initiative, which always entails a modification of the Constitution, requires both, a majority of the People and a majority of the Cantons, the Initiative was rejected. This result can be qualified as historic, as it is only the second Popular Initiative in more than 125 years, which was accepted by the People while being rejected by the Cantons. As for other constitutional amendments, such constellations occurred slightly more often (8 times in total), but nevertheless remain an absolute exception in the history of Swiss direct democracy.

The result has spurred debate about the possible abolishment of the requirement of a double majority for constitutional amendments or for a modification to its way of functioning. However, as such steps would themselves require a constitutional amendment and would thus have to pass the hurdle of double majority, changes in this respect remain highly unlikely in the current constitutional and political context.

The result on the second Popular Initiative on financing war material producers was clearer: 57.5% of the People voting and 19.5 cantons rejected the Initiative while 3.5 cantons – mainly of the French speaking part of Switzerland – accepted it. The turnout was at 46.9%.

I. Popular Initiative “For responsible businesses – protecting human rights and the environment”

In recent decades, Switzerland has become a fairly attractive place for the establishment of multinational companies, due mainly to its competitive corporate tax system, its stability and its well-functioning infrastructure. Thus also quite a few international companies active in sectors which are at times seen with suspicion, such as commodity trading, chemical industry or agribusiness have their headquarters in Switzerland. These corporations are considered to be welcome tax payers, but they are also seen with a critical eye by a part of the population, because of their allegedly problematic behavior, when it comes to the respect of environmental and human rights standards abroad, particularly in developing countries.

In this context, a group of non-governmental organizations, human rights groups and church organizations has launched a Popular Initiative with the goal to implement a mechanism into Swiss law, which would have foreseen a liability of Swiss companies for business actions abroad. The proposed constitutional provision would have obliged Swiss companies to fully respect human rights and environmental standards abroad, an obligation which would have pertained not only to the companies themselves, but also to any subsidiary controlled by the company, both legally or in fact. The obligation would also have been effective for suppliers and business partners of Swiss companies. In case of damage caused by any of these undertakings, Swiss companies could have been held liable, except if they could have proven that they complied with due diligence obligations. This liability mechanism had the objective to make sure that injured parties in developing countries without a working legal system are able to assert their legal claims against Swiss companies in front of a Swiss Court.

The opponents of the Popular Initiative pointed out that the proposed liability mechanism was quite unusual by international comparison and would lead to high liability risks for these companies. They feared negative effects on the attractiveness of Switzerland as an international business hub. Further it was argued that the initiative may prove to be counterproductive also for developing countries, because it would render investments less attractive. A point of contention was also the question whether the Initiative would merely have an impact on international group companies or also on small and medium-sized Swiss companies. The initiators of the Popular Initiative underlined that the acceptation of the Initiative by the Swiss electorate would only have consequences for large international company groups, a contention, which is at least partially corroborated by the fact that the text of the proposed constitutional amendment explicitly foresees that when implementing the provision, Parliament should take into account the situation of small and medium-sized companies.

Both, Parliament and Federal Council (the executive) opposed the constitutional proposal. However, because of the broad support for the Initiative in politics, in ecclesiastical circles and even the economy, the Swiss Parliament worked out an indirect counter-proposal to the Initiative to lower the chances of an acceptance. The counter-proposal essentially foresees a reporting obligation for Swiss undertakings on environmental and social matters or the respect for human rights and implements additional due diligence obligations when it comes to the trade with minerals and metals from some regions considered to be high risk zones. Supporters of the Initiative contend that the counter-proposal constitutes some kind of a toothless tiger and that it would thus not be able to solve the problems that are addressed by the Initiative. After the rejection of the Popular Initiative the counter-proposal will enter into force if it is not attacked by a referendum. As it is highly unlikely that a referendum will be launched against the counter-proposal, it should enter into force in the course of the year 2021.

II. Popular Initiative “For a ban on financing war material manufacturers”

As in other countries, in Switzerland financial entities such as the National Bank, pension funds, foundations and other investors finance war material manufacturers in Switzerland and abroad. In this context some non-governmental organizations, namely a fairly well-known group aiming at the abolishment of the Swiss army, started a Popular Initiative to stop such investments as well as any financial support to the war material industry, thus hoping to contribute to draining the financial flows to war material producers worldwide. The proposed constitutional provision would have foreseen a ban of any kind of investment by the Swiss National Bank, foundations and pension funds in companies that achieve more than 5% of their annual sales with war material. The prohibition would equally have prevented the investment in collective investments schemes engaged in the financing of such undertakings. Further, the Swiss Federal Counsel would have been commissioned with the task to pursue the establishment of similar conditions with regard to banks and insurances on the international level.

Opponents, including the majority of the Swiss Parliament, the Federal Counsel and representatives of the economy, feared that its acceptance would have negative effects on the national economy. They argued that not only full fletched war material producers, but also ordinary Swiss mechanical engineering companies producing highly specialized components that are also used in the war material production, would incur substantial financial problems if the initiative was accepted. Another argument that was cited against the Initiative is that the Swiss National Bank and the pension funds should remain as free as possible in their investment decisions in order to allow for a maximization of the profits.

Quite plausibly the Popular Initiative was mainly rejected due to such economic considerations by the electorate. It was however comparatively successful in the Western part of Switzerland as well in urban areas of the country, while the German speaking Cantons and the more rural parts of the country strongly rejected the constitutional proposal.

III. Sources

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