EU Commission backs voluntary scheme in draft conflict minerals law

14 March 2014

The European Commission has proposed a self-certification scheme to better regulate mineral imports into the trading bloc from conflict-affected and high-risk areas. Using an integrated trade and foreign policy approach, one stated aim is to stop profits from traded minerals being used to fund armed groups.

The "responsible importer" method would require firms to exercise "due diligence" by monitoring and conducting their purchases according to a series of steps set out by the Organisation for Economic Co-operation and Development (OECD), subject to third party audits.

The regulation targets tin, tantalum, tungsten - dubbed the "Three Ts" - and gold. The EU represents one of the largest markets for each of these sensitive minerals, importing around 25 percent of global trade in the Three Ts, and about 15 percent in gold.

"We are committed to preventing international trade in minerals from intensifying or perpetuating conflict," said a joint statement by EU foreign policy chief Catherine Ashton and trade commissioner Karel De Gucht. "Today's initiative on ‘conflict minerals' will help trade to work for peace, for communities, and for prosperity in areas around the globe affected by armed conflict."

The proposal indicates that the EU will not specify a list of origin countries concerned by the regulation, citing the volatile and fluid nature of the situation in affected areas. The Commission's own impact assessment, however, offers some guiding examples such as that of Africa's Great Lakes region - an area torn apart by resource-fuelled conflict in recent decades.

Importers under scrutiny

The draft regulation targets the early part of the supply chain, with the onus placed on the EU's approximately 400 importers. These firms transform the minerals and ores into the metals, which are then used by around 880,000 EU companies as components in a broad variety of end-products ranging from jewellery to cars and aeronautics.

While the proposal would not carry strict legal liability, EU officials say the goal is to promote transparency through threat of public scrutiny. To further increase accountability, the draft legislation also suggests publishing an annual list of EU and global "responsible smelters and refiners."

According to one EU official speaking with EurActiv, 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."

The initiative also offers further benefits for adhering to supply chain due diligence, such as public procurement incentives, along with financial support for small and medium-sized enterprises.

Calls for tougher legislation

Campaigners warn that only those companies who already approach the conflict minerals subject with care are likely to adopt these "opt-in" standards. According to current Commission estimates, 20 percent of smelters and 40 percent of refiners carry out due diligence on their supply chain.

"We know only the most progressive companies heed voluntary measures," said Sophia Pickles, spokeswoman for campaign group Global Witness. "An opt-in scheme would be tantamount to the EU saying that it's ok for companies to choose not to source responsibly."

Some officials, however, fear that a stricter policy - like that in the US' Dodd-Frank legislation - would cripple African miners by causing investors and companies to look elsewhere for minerals.  Unlike the 2010 US law, which focuses more specifically on Africa, the EU's regulation would apply worldwide.

"Mines can get shut down as they lose business. People lose not only their jobs but often the livelihood for their families: communities collapse," Commissioner De Gucht said on Wednesday, adding that America's legislation on conflict minerals had "unintended consequences."

Nevertheless, Gregory Mthembu-Salter, architect of UN guidelines on conflict minerals in Congo, says that both the proposed EU legislation and the US law are inadequate.

"The problem with Dodd-Frank is you can never fix things; you have to run away if you find a problem [in your supply chain]. You should have a chance to fix things but it shouldn't be voluntary - you shouldn't just do them when you feel like doing them," he told the Financial Times.

The Commission's proposal will now be examined by both the European Parliament and the Council, who will need to agree on a final text. The draft is likely to be met with fierce resistance from the bloc's legislative body in particular, whose development committee passed a much tougher proposal last month.

The latter called for "strong European legislation" on non-financial disclosure, obligations for firms to conduct risk-based due diligence, and enforcement of "strict compliance" with international standards and rules in the field of human rights, labour, and the environment. The proposal also suggested leveraging international trade and investment regimes "to foster a dialogue" on corporate social responsibility with key commercial partners such as the US, China, Japan, Brazil, and India.

"EU drafts conflict minerals law, with opt-in clause," EURACTIV, 4 March 2014. "EU plans voluntary rules on conflict mineral imports," FINANCIAL TIMES, 5 March 2014; "EU draft law on conflict minerals fails to satisfy campaigners," THE GUARDIAN, 4 March 2014.

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