EU drafts conflict minerals law, with opt-in clause

  

EXCLUSIVE / European firms are set to be offered a voluntary self-certification scheme to prove that their products’ mineral components were not sold by warlords to fuel bloody conflicts, under a draft EU law that falls short of campaigners’ expectations. 

The proposed regulation, seen by EurActiv, would set up a "responsible importer" scheme for firms exercising 'due diligence' over commodity supply chains, offering incentives ranging from EU public procurement contracts to funding possibilities for SMEs.

But it would be limited to gold and the ‘Three T’s’ – tin, tungsten, and tantalum, a material that makes mobile phones vibrate. These minerals’ ores would also be covered.

Unless there is an eleventh hour intervention from the EU hierarchy, the scheme to be announced on 5 March will only apply to companies placing raw materials on the market - such as Europe’s 20 or so smelters - and not importers of products such as mobile phones, which may already have had the materials installed.

“This weak proposal risks undermining states’ duty to protect human rights and could even be redundant,” Sophia Pickles, a spokeswoman for the campaigning group Global Witness told EurActiv. “EU governments have already endorsed voluntary due diligence guidance developed by the OECD [Organisation for Economic Co-operation and Development].”

"We know only the most progressive companies heed voluntary measures,” she added. “An opt-in scheme would be tantamount to the EU saying that it’s ok for companies to choose not to source responsibly.”

The impetus for conflict minerals legislation stems from resource-fuelled conflicts in eastern parts of the Democratic Republic of Congo (DRC) between 1994 and 2003, known as Africa’s First World War, which reached near-genocidal proportions, claiming as many as five million lives. 

More recently, the control of natural resources has funded armed campaigns by militias ranging from the Farc in Colombia to Seleka in the Central African Republic.

In the US, a comparable piece of legislation passed in 2010, the Dodd-Frank Act, obliges corporate disclosure by stock exchange-listed firms of minerals sourced from the DRC, using OECD due diligence guidelines.

Companies' reputation at stake

“Our instrument does not carry legal liability like Dodd-Frank,” one EU official said, “but member states would have to nominate competent authorities to receive information and perform checks and audits [within the scheme] under the rules of the OECD process.”

Compliance would involve “a kind of self-transparency, looking in the mirror and putting pressure on yourself because the media could point a finger and say why is company X on board and not you,” another EU official told EurActiv. 

Queried on whether the proposal was all carrot and no stick, he added that the EU institutions would buy their laptops and cellphones from responsible importers and encourage member states to do the same. “It is where the stick is,” he said, “the reputation of the company. We don’t need to hit them because they’d be hitting themselves if they did not comply. Who wants to beat themselves up?”

“A certificate is a more powerful instrument than one would think,” another official commented. She declined to give an estimate of how many companies would need to participate to make the scheme effective, as volumes would be more important than numbers.

Dissenting voices

But dissenting voices within the Commission itself pushed for stronger language in the final text until the very end. A two-week-old version of the proposed regulation seen by EurActiv, contains redacted passages calling for firmer action.

“Three years after the entry into force of this regulation, the voluntary scheme will automatically become mandatory,” one paragraph reads. A triannual stock-take should consider “possibly extending the scheme to downstream operators and including additional minerals/metals,” the article continues.

These commitments now seem unlikely to appear in the text, although there will still be regular reviews of the programme. But the gap between the legislation’s ambition, and its lack of enforceability, could set up a clash with the European Parliament, whose development committee passed a much more biting proposal on 19 February.

“Four years after Dodd-Frank, the European Commission is presenting us with a neatly gift-wrapped, empty box that will not help the Congolese people set up a sustainable mining industry, does not demand transparent trading by European companies, and leaves them instead to obey an unbalanced piece of American legislation,” said Judith Sargentini, the Green MEP and European Parliament rapporteur on the file.

In stark contrast, the EU’s trade directorate, which prepared the new regulation, sees it as a complimentary law to the US legislation. Indeed, they argue that it would be more pragmatic, by concentrating on ‘upstream’ actors, and by not imposing an “extra burden” on small European businesses.

Firms such as Philips, Apple and Siemens are known to have taken a more activist line on due diligence sourcing than small jewelry businesses or, equally, big business sectors such as the automobile industry.

Financial burdens

Some firms have argued that the financial burden of due diligence reporting would reduce their profitability but 35% of respondents in one EU public perceptions study said that they would be prepared to pay more for such fairly-traded products.

Another study that forms part of the EU’s impact assessment accompanying the regulation will report that due diligence reporting typically costs less than 0.05% of company turnover. The best price estimate given by 74% companies surveyed in an EU public consultation was around €13,500.

Even so, Brussels staffers say that the lighter touch of their regulation would avoid the risk of decimating Africa’s mineral industry by collateral damage from an investment flight. Campaigners counter that if that was the concern, the regulation would have devoted more than three lines to promoting sustainable mining in Africa.  

“It is neither fish nor fowl,” Sargentini said. “It does not create a serious demand for conflict-free minerals in the EU, nor does it put in place a progressive development scheme for sustainable mining in conflict areas. It is disappointing.”

After substantial delays to the legislation though, officials hope that an actionable scheme is now at least on the horizon. The new conflict minerals law is intended to gather visibility at the EU-Africa summit next month, gain legislative assent in September, and begin operating in 2015. 

Positions: 

A spokesman for the French development NGO CCFD Terre Solidaire told EurActiv: "With this proposal, the commission shows that it pays more attention to business lobbyists and less to people around the world who suffer because of resource-funded conflicts."  

Timeline: 
  • 5 March 2014: EU expected to announce new conflict minerals regulation
  • April 2014: EU-Africa Summit
  • September: Possible legislative assent for regulation
  • 2015: Conflict minerals law becomes operational
External links: 

European Union

International

Business and Industry

NGOs and Think Tanks

Press articles

Advertising

EurActors

Content Partners