Views on the Draft Regulation

The draft EU conflict minerals regulation is a voluntary system of certification, which covers imports of the minerals into the EU. The US rule, in contrast, is mandatory and applies to any US reporting company that manufactures products or contracts with others to manufacture products for it. The European Commission has been critical of the US rule, which in its view has encouraged companies to divert their purchases away from central Africa to avoid the cost and effort of complying with the due diligence reporting requirements.

It appears that European industry welcomes the voluntary nature of the reporting requirements. This was confirmed by a public consultation conducted by the Commission in July 2013, where it was suggested that self-certification will increase transparency for the sourcing of minerals. At the December 5, 2014 INTA committee public hearing, many MEPs and industry representatives generally supported the proposed regulation and were in favor of the voluntary self-certification element of the proposal. However, a representative speaker from the OECD did note that the proposed EU regulation “provides a number of uncertainties that might harm the competitiveness of European companies.”

Not surprisingly, there are those that would prefer a mandatory approach to the reporting requirements. Critics of the EU proposal, including NGOs and civil society groups, have argued that the reporting requirements should be mandatory, ensuring compliance by mining companies and creating what they call a “harmonious” approach to the issue between the EU and the US. At the INTA committee hearing, the representative from Global Witness called for mandatory due diligence requirements and for the proposal to cover all minerals entering the EU (whether as raw materials or in products), not only the imports of the minerals as currently proposed.

Discussions and debates have also taken place in the Parliament over which minerals should be covered by the proposal. It has been suggested that the regulation should cover other minerals, such as copper, jade and coal.

As a result of the Parliament elections in May 2014, the composition of the Parliament has become more sharply divided between right and left, with the S&D (Socialists & Democrats) and the EPP (Christian Democrats) as the two majority parties. The Liberal Group (ALDE) lost most of their MEPs in the May 2014 elections. This change in composition has led to a Parliament that is more divided on issues such as conflict minerals, with the industry-friendly, right-leaning parties supporting the current relatively “business-friendly” proposal, while the Greens and left-leaning parties opposing it. The Liberal Group is divided and therefore may hold the deciding vote on the proposed conflict minerals regulation.

Outlook

There is a great deal of uncertainty regarding the future of the proposed regulation and the timing of the proceedings. Given the fact that both the Parliament and the Council, as co-legislators, have the right to propose amendments, the regulation that is ultimately adopted could look quite different from the draft regulation as originally proposed by the Commission.

The Parliament is concerned with the mandatory or voluntary nature of the proposal, the type of businesses subject to the regulation, the minerals covered and the geographical scope of the proposed regulation. The Council’s Working Party on Trade Questions has discussed the draft regulation since April 2014, but it is too early to tell what issues will be of greatest concern to the Council.

We will continue to post updates as the committees of Parliament, the Council and the plenary Parliament consider the proposed regulation. One thing is clear: there is significant disagreement as to which provisions will be included in the final EU conflict minerals compliance regulation.