SWITZERLAND Law and Practice Contributed by: Liburn Mehmetaj, Roxane Allot and Andreas Hösli, Walder Wyss Ltd
to a director’s breach of duty, the company (or shareholders in “derivative” suit, or, in the case of insolvency, the bankruptcy estate on behalf of the creditors) can sue the director to recover damages. In contrast to some other jurisdictions, there is no explicit provision in Swiss statutory com - pany law requiring directors to have regard to human rights or environmental issues. However, directors owe a duty to act in the best interests of the company. At the minimum, this requires directors to prevent or mitigate adverse human rights and environmental impacts to the extent that these impacts represent risks to the com - pany (eg, liability risks, reputational risks, opera - tional risk). A more expansive interpretation of directors’ duties would require directors to have regard to adverse human rights and environmen - tal impacts regardless of whether these are per - ceived as risks to the company. Arguably, given the emergence of due diligence laws, it is more and more the case that adverse human rights impacts coincide with business risks. Under Swiss criminal law, directors or execu - tives could be held liable in particular in situ - ations where they are personally involved in a human rights abuse. As a hypothetical example, if a senior executive orders or knowingly permits illegal exploitation of workers, he or she may be charged under the relevant criminal provisions (eg, human trafficking, coercion, bodily harm, homicide, etc). In Switzerland, there have been instances of executives being criminally investi - gated for corporate misconduct – eg, for bribery of foreign officials, for industrial accidents, and for environmental crimes. Human rights-related crimes would be treated similarly. Notably, the conviction of a company under corporate crimi - nal liability (see 3.1 Criminal and Civil Corporate Liability ) does not preclude charges against the
responsible individual. Further, in case of breach of a company’s obligations in relation to non- financial reporting and due diligence in relation to child labour and conflict materials, a criminal fine of up to CHF100,000 may be imposed on the responsible individual, which primarily tar - gets members of the board and senior execu - tives (Article 325ter SCC; see 2.2.2 Corporate Human Rights Due Diligence Legislation ). 3.3 Parent Company Liability Under Swiss law, the general principle is that each company has a separate legal personal - ity – a parent company is not strictly liable for the acts of its subsidiary. Courts in Switzerland, as in many jurisdictions, are rather reluctant to “pierce the corporate veil” , at least in a civil liabil - ity context. However, there are scenarios where a parent company could be held accountable for a subsidiary’s human rights-related harms, either through direct liability or by piercing the veil in cases of abuse of rights. According to the literature and case law of the Federal Supreme Court, piercing the corporate veil may arise only in exceptional circumstances, including in particular: • the parent company misuses the group struc - ture to escape liability (abuse of corporate form); • the parent company acts as a de facto corpo - rate organ of the subsidiary; • group trust doctrine (Swissair Decision); • it is impossible to distinguish the parent from the subsidiary; and • in certain specific circumstances (eg, envi - ronmental crimes), if the subsidiary has been stripped of any assets, the parent company may be held liable (eg, to cover remediation costs).
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