A case involving a Swiss energy company and the indigenous Sami people from Norway has resulted in the adoption of an opt-out clause in contracts if human rights are violated by third parties. This could put more pressure on Swiss companies to behave responsibly when they invest overseas.This content was published on August 30, 2021 - 09:00
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After months of back and forth and four mediation meetings, Swiss NGO Society for Threatened Peoples (STP) reached an agreement this month with Swiss energy company BKW on the latter’s investment in a Norwegian wind power project. The project was threatening the livelihood of the local Sami indigenous community.
The Swiss company has accepted to revise its code of conduct and further develop its due diligence on third party projects. Importantly, BKW has agreed to introduce an opt-out clause in contracts with third parties. This will give it the option to withdraw its contractual commitments at any time if violations are identified and the partner does not address them satisfactorily.
“BKW will ensure that contractual partners focus on the observance of human rights in power plant projects and will include an option to exit projects as a last resort,” the company stated on August 26.
The decision to incorporate an opt-out clause could set a precedent in the industry. While the commitment made by BKW is too late to help the Sami reindeer herders, it could serve as a template for Swiss firms looking to invest or partner in energy and infrastructure projects abroad.
“The STP welcomes these first steps towards greater corporate responsibility as a clear signal to the entire energy sector and expects BKW to consistently apply these new instruments,” the NGO responded.
Green energy vs traditional livelihoods
The group of indigenous Sami people in Norway had been fighting for years against the wind power project run by BKW that they claim would destroy their way of life. Storheia, the site of the biggest of six wind farms, is an important winter pasture for the reindeer herds of the Southern Sami people. BKW holds shares in Nordic Wind Power DA - a European consortium of investors founded by Credit Suisse Energy Infrastructure Partners - that in turn holds a 40% stake in the joint venture Fosen Wind DA that is implementing the project in the Fosen peninsula in western Norway. In January 2020, STP filed a complaint against BKW with the Swiss National Contact Point of the Organisation for Economic Co-operation and Development (OECD). STP claims that the loss of these lands to the wind power project would force the last of the Sami reindeer herders to give up their livelihood and culture.
Despite an ongoing legal challenge by a section of the Sami community, the wind power project was approved and the Storheia wind farm became fully operational in February. The public inauguration ceremony for the last of six wind farms was held on August 12, even though the legal case is currently being heard at Norway’s highest court.
The case brings to light repeated criticism of Swiss companies and banks that offer their services to firms accused of violating human rights or damaging the environment overseas. These include links to controversial projects affecting indigenous people and natural ecosystems like the Dakota Access oil pipeline in the US or oil exploration in the Peruvian and Ecuadorian Amazon.
In most of these cases, Swiss firms did not directly invest in the projects themselves but in third parties working on the projects, as was the case for the BKW project in the Fosen peninsula. This leaves the question of wrongful conduct by third parties largely open. In an ideal situation, companies and banks should be performing adequate due diligence before entering into such partnerships in the first place. However, the harmful implications of project may not always be clearly visible at the outset.
Another option is to require partners to comply with internal or international guidelines on human rights and the environment. Even so, there is little companies can do to distance themselves once the damage has already been done.
From an affected community and civil society point of view it is quite difficult to hold Swiss companies to account for their actions abroad. Even more so when third parties like suppliers or investment vehicles are involved. An attempt to introduce legal liability - the so-called Responsible Business Initiative - was narrowly rejected when put to the vote last year. The government is working on an alternative but it is likely to be more lenient on companies.
Due to limited options for legal recourse, affected people and NGOs have come to rely on filing complaints with the Swiss national contact point of the OECD. It offers a mediation service that brings both parties to the table but cannot prescribe solutions or enforce compliance.
It therefore remains to be seen if BKW will fulfil its promises. Nevertheless, the agreement is a major step towards acknowledging responsibility for investments and collaborations overseas.