On May 20th the European Parliament voted in favour of a strong and binding law that requires companies operating in the EU who are importing tungsten, tantalum, tin and gold (3TG), as well as importing products containing those minerals, to certify that their supply chains are free from minerals that have caused violence within conflict areas. The European Parliament voted in favour of this much more restrictive law over the less restrictive one previously proposed by the European Commission last year.
The European Commission had proposed legislation that was viewed by many to be more ‘business friendly’. But the proposals were criticised by certain elements of the European Parliament and by some lobbyists for two main reasons. Firstly it was felt that the voluntary, self certification element of the legislation would not be adhered to by a majority of companies operating in conflict areas, due to the extra costs certification would incur. Secondly it was felt that the proposals to just target those companies importing the raw products into the EU did not go far enough, considering the majority of 3TG is imported into the EU within finished products, such as inside mobile phones and laptop computers.
As a result of these criticisms the new proposals are considerably more stringent. It is now proposed that the legislation be mandatory and not voluntary and that rather than applying to just importers of the raw product from conflict areas into the EU, importers of manufactured products containing 3TG from conflict areas will also be required to certify the absence of minerals blamed for violence. Such rules could now effect 800,000 companies within the EU. The certification procedure will follow the previous proposal in using OECD certification guidelines. These guidelines require companies to first establish strong company management systems. Second, to identify and assess risk in the supply chain. Third, to design and implement a strategy to respond to identified risks. Fourth, to carry out independent third party audits of the supply chain due diligence at identified points in the supply chain. Fifth, to report on supply chain due diligence.
With such stringent regulations being put forward, in many respects the EU is now looking to lead the fight against conflict minerals. In 2011 the US implemented Section 1502 of the Dodd-Frank Act that also aimed the break the link between armed groups and the trade of 3TG minerals. However, this US legislation is much weaker legislation, compared to that proposed by the European Parliament. The Dodd-Frank Act only focuses on the Democratic Republic of the Congo and nine neighbouring countries, compared to the European Parliament proposal which covers all of the conflict areas of the world. Furthermore, Parliament’s proposal, unlike the Dodd-Frank act, proposes that the European Commission publishes a list of ‘responsible importers’ to be available to the public. If this is implemented it would be the first of its kind.
However, the new proposals have also been met with criticism, particularly from conservatives within the European Parliament and from a number of business lobbyists. From Africa’s perspective, where many of the minerals from conflict areas are mined, it is thought that the bill will have a significant negative effect on African 3TG production. This is especially true for small and medium sized enterprises (SMEs) operating within legitimate trade channels in conflict areas, who may not be able to afford the requirements. As a result such enterprises may be forced to locate elsewhere. The French business group, Medef has lobbied MEPs warning them of what it sees as the costly consequences of regulating the whole supply chain. There will also likely be issues over deciding which areas should be classified as conflict areas.
Nonetheless, the proposals have a long way to go before they have the possibility of becoming law. They are still in draft form and will firstly require member-state review, before then being subject to negotiations between the Parliament, the Council and the Commission. The negotiation process will also be further complicated by the fact that the bill only passed through the Parliament with a relatively slim majority.