Legal Compass Switzerland

1. Due Diligence – Changes ahead

Under current Swiss law, due diligence obligations are limited to two specific areas according to the Code of Obligations (CO): conflict minerals and child labour. The NUFG intends to replace this sector-specific approach with comprehensive due diligence covering all internationally recognized human rights standards and all internationally recognized environmental protection standards that are binding on Switzerland, both domestically and abroad (art. 4 NUFG). This represents a fundamental shift in scope: the NUFG would require companies to assess risks across their entire operations and value chain, while current due diligence obligations are only mandatory for conflict minerals and child labour and allow a "comply or explain" approach for human rights and environmental aspects (art. 964a et seq. CO). 

The second key change concerns the reach of these obligations. Current law covers only the upstream supply chain (art. 2 para. 1 lit. b of the Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour, “DDTrO”). The NUFG would extend due diligence to the entire "activity chain", encompassing both upstream and downstream business partners (distribution, transport, storage) as well as all controlled companies in Switzerland and abroad (art. 3 and art. 6 NUFG). 

The draft act sets out nine specific due diligence obligations, of which some are already existing in one form or another and of which some are entirely new with no equivalent under existing Swiss law: due diligence strategy, identifying and prioritising actual and potential adverse impacts, preventing potential adverse impacts, remedying actual adverse impacts, providing remediation for harm that has occurred, engaging stakeholders, establishing a complaints mechanism, providing appropriate support for SMEs in the activity chain and monitoring the effectiveness of measures (art. 6 NUFG). At the moment, the due diligence regime basically only requires a four-step process — management system including supply chain policy and traceability, risk identification, risk management plan and third-party audit for conflict minerals only (art. 964b CO and art. 10 et seq. DDTrO).

Key new mandatory elements in the draft include an institutionalised prevention action plan to prevent potential adverse impacts, the adoption of a corrective action plan to address and minimise actual adverse impacts and an explicit separate obligation to provide remediation for harm that has already occurred. Companies must also meaningfully engage stakeholders and provide appropriate support to SMEs in their activity chain. Against the backdrop of the discussion if and to what extent directors may or even have to consider interests of different stakeholders when making business decisions, identifying and engaging stakeholders would for the first time be mandatory.

A risk-based approach will continue to apply, meaning that companies must prioritise based on the severity and likelihood of adverse impacts (art. 6 NUFG). Companies that comply with equivalent international frameworks (e.g. the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct) may be exempted from certain obligations by the Federal Council. 
A distinction that is critical for the liability regime is that the due diligence obligations apply to both controlled companies and business partners, but liability — as discussed below — is limited to harm caused through controlled companies as defined in Art. 963 para. 2 CO ("subsidiaries") only (art. 15 para. 2 NUFG).

The NUFG would require that an audit firm reviews the report of companies in scope on the due diligence obligations (art. 7 para. 4 NUFG). The purpose of the review would be to identify circumstances that would render statements in the report to be incomplete or wrong (art. 13 para. 2 NUFG). This would mean a significant expansion of the mandate of an auditor, which is expected to substantially increase the costs for audit services.

2. The New Liability Regime – A Statutory Cause of Action

The centrepiece of the NUFG is alternative 1 of the proposal for an explicit liability provision in art. 16 et seq. NUFG for Swiss parent companies whose subsidiaries cause harm abroad through a breach of due diligence obligations. The draft act creates a fault-based liability that serves as a lex specialis to the general tort provisions of art. 41 and art. 55 CO (see art. 15 para. 1 NUFG).

The claimant would bear the burden of proof for all of the four elements: (i) damage, (ii) breach of a due diligence obligation, (iii) a causal link between the breach and the damage, and (iv) fault (intent or negligence) on the part of the parent company. With these requirements the explanatory report of the Federal Department of Justice and Police ("FDJP") clarifies the discussion which has not been resolved by Swiss courts so far; whether due diligence obligations in the CO in terms of conflict minerals and child labour qualify as statutory protective norms — so that a breach of these duties renders the resulting damage “unlawful” within the meaning of Art. 41 CO. In other words, with the draft act entering into force the unlawfulness of damages would be established through the violation of the NUFG’s due‑diligence obligations themselves, something which has been denied so far by probably most of the authors. No additional showings of unlawfulness — in particular, no separate infringement of an absolutely protected legal interest — are required beyond the other tort elements of damage, causation and fault.

There would be no reversal of the burden of proof in the draft to support victims in their pursuit to claim damages. However, two mechanisms would significantly lower the practical barriers for claimants. First, the NUFG intends introducing a new rule on applicable law. Swiss law would mandatorily apply to claims under the act, regardless of where the harm occurred (new art. 139a Federal Act on Private International Law, "PILA"), while art. 129 PILA already sets out the competence of Swiss courts at the registered seat of the Swiss parent company. This would provide a clear legal basis for victims of overseas harm to bring claims before Swiss courts under Swiss law. Second, art. 19 NUFG would introduce a right to disclosure of evidence, which complements the existing mechanisms under the Swiss Civil Procedure Code ("CPC"), i.e. the general production and disclosure of evidence as well as, and in particular, the precautionary taking of evidence under art. 158 CPC. According to art. 19 NUFG, where the claimant credibly shows a breach of due diligence obligations, the necessity and materiality of the requested evidence, the court may order the defending Swiss company to disclose relevant evidence in its possession. This materially reduces the information asymmetry that has traditionally made cross-border corporate accountability litigation difficult to pursue. 

Additional specific procedural features would include mandatory conciliation proceedings before a specialised cantonal authority (new art. 212a et seq. CPC), a single cantonal court instance (new art. 5 para. 1 lit. j CPC), and a limitation period of five years from the date on which the injured party became aware of the damage and the liable person (relative), and in any event twenty years from the date on which the harmful conduct occurred or ceased (absolute) (art. 18 NUFG).

It is very important to note that liability would be expressly excluded for harm caused by business partners (as opposed to controlled companies). In practice, this means that even where a company breaches its due diligence obligations in relation to a supplier, distributor, or other business partner in the activity chain, no civil liability under Art. 16 NUFG follows — enforcement in those cases is limited to administrative sanctions by the RNAB (see below).

Particular attention deserves the proposed claimant standing under this liability proposal. Individual victims can bring NUFG damage claims in their own name in front of Swiss courts. NGOs may support such cases through evidence gathering, coordination and funding. Alternatively, victims may assign their claims to an NGO, enabling the NGO to sue as assignee. Affected communities can act as claimants if they have party capacity. Incorporated communities with legal personality may sue for their own damage suffered. Unincorporated communities would need to proceed via a legal-entity vehicle, through assigned claims from individual members, or by coordinating individual claims via voluntary joinder under art. 71 CPC. NGOs do not have a general right to bring NUFG damage claims on behalf of diffuse victims. This would only be possible if a federal statute expressly grants such a right for NGOs. The group action under art. 89 CPC is narrowly framed for the protection of members’ personality rights and is not a vehicle for tort damages claimed by an NGO for non-members. As a policy observation, the draft act could have strengthened legal remedies further by creating a special group action for the NUFG context.

The draft act also presents an alternative 2 for the liability regime, which does not introduce a specific provision. Instead, it would rely on existing art. 41, 55 and 722 CO with the same procedural facilitations explained above for applicable law, evidence disclosure, conciliation and single cantonal instance, limitation period and liability exclusion for harm caused by business partners. However, this alternative provides less legal certainty for both claimants and defendants, as the scope and conditions of liability would be determined on a case-by-case basis by the courts.

3. Enforcement – Fines of up to 3% of Global Turnover

The NUFG proposes the establishment of a new supervisory authority ("RNAB"), previously the existing Federal Audit Oversight Authority ("RAB"), with comprehensive enforcement powers (art. 20 et seq. NUFG). This marks a paradigm shift: for the first time in Swiss corporate law, a dedicated state authority will actively oversee compliance with human rights and environmental due diligence and reporting.

The RNAB would conduct risk-based reviews and, if necessary, on-site inspections (art. 23 NUFG). Third parties — including NGOs, affected communities and individuals along the activity chain — may file confidential reports of suspected non-compliance (art. 22 NUFG); these reports do not confer party status or procedural rights on the reporting person, but may trigger a formal review. 

Where violations are established, the RNAB would have an extensive, escalating catalogue of measures at its disposal (Art. 30 NUFG). At the lowest level, it could issue a formal warning for minor breaches. For more serious violations, it could prohibit the unlawful conduct, order the company to take remediation measures and restore lawful operations (e.g., ordering the cessation of child labour), and require security deposits. If a company failed to comply with such orders despite a prior formal warning — or in urgent cases without prior warning — the RNAB could escalate further by carrying out the required action itself at the company's expense, transfer the powers of the company's governing bodies to a third-party administrator, or — as last resort in cases of serious or repeated violations — order the reorganisation, change of purpose, strategic realignment, or dissolution of the controlled companies that contributed to the breach.

Beyond these operational measures, the RNAB could impose pecuniary administrative sanctions of up to 3% of global net turnover (Art. 31 NUFG), with the amount determined by the severity and duration of the violation, the company's financial situation, and the estimated profits derived from the non-compliant conduct. In addition, the authority could order the disgorgement of profits obtained through non-compliance — to the extent not already paid to injured parties as damages — and exclude companies from public procurement at federal, cantonal, and municipal level for up to 5 years (art. 30 para. 6 and para. 7 NUFG). Final decisions may be published («naming and shaming»), adding reputational risk to the financial and operational consequences; however, publication is limited to cases of serious violations and must be proportionate (Art. 32 NUFG). 

For affected companies, the dual enforcement structure — civil liability claims from victims combined with administrative sanctions from the RNAB — would create a two-front compliance risk that demands proactive attention.

4. What This Means for Your Business

The NUFG is still in the consultation phase, but companies within its scope should not wait for final legislation to act. Transitional provisions allow companies to continue under existing rules for the current and first two financial years following entry into force of the NUFG (art. 45 NUFG). This window should be used strategically. The good news is that companies potentially being in the scope of the NUFG most likely have already been subject to one or several of the existing reporting obligations.

First, companies need to determine if they are in scope of the due diligence obligations according to the NUFG. If so, already this fact needs to be notified to the RNAB and not doing so could result in the sanctions explained above.

Second, companies should conduct a gap analysis of their existing due diligence processes against the nine obligations set out in art. 6 NUFG, with particular focus on the extension from supply chain to activity chain and the new due diligence requirements. 

Third, boards and senior management should begin preparing the internal governance structures required by the act — in particular, integrating the due diligence strategy into corporate policy and risk management at the highest level of the organization, establishing prevention and corrective action plans, operationalizing the complaints mechanism and stakeholder engagement processes, building remediation capacity, and ensuring appropriate support structures for SMEs in the activity chain. All of these will need to be operational from day one. 

Fourth, a review of the group structures is essential to identify the entities which qualify as "controlled companies" and their risk exposure. The distinction between controlled companies and business partners also directly determines liability exposure of the Swiss parent company. Companies should therefore carefully assess which of their value‑chain relationships qualify as control relationships under art. 963 para. 2 CO and which constitute business partnerships.

The implementation of all this on company level and the expanded audit are expected to increase the costs. However, this is not all. In addition to this, the NUFG proposes to fund the RNAB via fees and maybe annual supervision levies, both to be paid by companies in scope of the due diligence obligations.

Finally, the consultation period runs until 9 July 2026 and affected companies should track this date for any developments.