Conflict minerals: EU proposals set to enter the European Parliament

IN: Business news

The EU’s proposals to break the link between mineral trading and the financing of arms and security forces in conflict areas are set to go through the European Parliament in the coming months

NGOs are calling on MEPs to strengthen the draft regulations. The move follows similar legislation, Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States, which forces companies to audit their supply chains and report use of tin, tantalum, tungsten and gold from the Democratic Republic of Congo and adjoining countries. Conflict minerals were previously a major source of revenue for armed groups and security forces in the region.

Under the European Commission’s plans, importers, smelters and refiners importing tin, tantalum, tungsten, their ores, and gold into the European Union will be able to self-certify as responsible importers to demonstrate that they have exercised supply chain due diligence. This would involve tracking the origin of the purchased minerals and addressing and mitigating adverse impacts relating to the financing of armed groups. Those self-certifying will be required to pass on due diligence information to downstream purchasers. This, the Commission hopes, will help to create a market in the EU for responsibly traded minerals.

But while the US legislation specifically targets trade with the DRC and surrounding countries, the European proposal goes wider and is less prescriptive. It defines ‘conflict-affected and high-risk areas’ as ‘areas in a state of armed conflict, fragile post-conflict as well as areas witnessing weak or non-existent governance and security, such as failed states, and widespread and systematic violations of international law, including human-rights abuses.’ Many in industry are concerned that this open-ended approach will create uncertainty.

The Commission thinks its voluntary approach means companies are less likely to simply disengage from affected regions, which may result in unintended socio-economic impacts for those civilians whose livelihoods depend on mining. However, critics have responded by arguing that the opt-in nature of the regulation is too weak. Some, including human rights groups, want to see a mandatory system in place that also targets those importing finished articles into the EU. This is likely to be a key area for debate as the Regulation passes through the European Parliament.

If uncontested, the EU conflict minerals law will become operational in 2015. The full draft regulation can be found here.

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