In a statement released today, theEnough Project urges the US Court of Appeals for the DC Circuit to review the case, National Association of Manufacturers (NAM) et al. v. Securities and Exchange Commission (SEC), to ensure that a damaging recent decision on the issues of corporate free speech and peace in the Democratic Republic of Congo does not stand without review. Read More »
In a recent Bloomberg article, Cass R. Sunstein (former administrator of the White House Office of Information and Regulatory Affairs) defends the importance of strong corporate regulations as they relate to public disclosures.Read More »
In a promising development, on Friday, October 2 the Securities and Exchange Commission (SEC) and Amnesty International both filed petitions for a review of the most recent court decision on the SEC’s Conflict Minerals Rule. Read More »
Deadline for SEC to Appeal Latest Court Decision on Constitutionality of Requirement is October 2
September 30, 2015 (Washington DC) – The Enough Project highlighted today the significance of a looming deadline this Friday, October 2, for appeal of a court ruling on U.S. corporate “conflict minerals” reporting. On the heels of a disappointing decision from the U.S. Court of Appeals affirming that one part of the Securities and Exchange Commission’s (SEC) requirement is unconstitutional, the SEC and other parties can petition for a review. Conflict minerals experts at the Enough Project are available to media for comment and interviews.
Holly Dranginis, Policy Analyst at the Enough Project, said: “This next phase of appeal is essential, both for the sake of corporate transparency and for efforts to build sustainable peace in Congo. The court’s latest decision, calling the constitutionality of the rule's descriptor component into question, is on very shaky ground. Moreover, if the requirement for companies to conclusively describe their products is struck down permanently, the significant positive momentum that Dodd-Frank 1502 has helped trigger in Congo could be disrupted.”
Statement by the Enough Project: Friday Deadline for SEC to Appeal Latest Conflict Minerals Court Ruling September 30, 2015
This Friday, October 2, is the deadline for the Securities and Exchange Commission (SEC) and other parties to petition for a review of the most recent court decision on the SEC’s Conflict Minerals Rule. The Enough Project eagerly awaits word about the status of this court decision and the potential petition for an en banc review.
On August 18, the U.S. District Court of Appeals for the D.C. Circuit issued the latest in a series of decisions on the case National Association of Manufacturers, et al. v. SEC, upholding a previous decision that one part of the rule violates companies’ First Amendment rights, but keeping the majority of companies’ disclosure requirements intact. The deadline for parties to file for a review of the case by the court en banc is this Friday, October 2.
In 2012, the SEC promulgated the Conflict Minerals Rule based on the Dodd-Frank Wall Street Reform and Consumer Protection Act’s Section 1502. A group of industry associations challenged the rule in the D.C. Circuit Court of Appeals based on the Administrative Procedure Act and the First Amendment of the U.S. Constitution.
The Enough Project strongly disagrees with the recent ruling that the descriptor requirement violates companies’ free speech rights and agrees with the dissenting opinion that “DRC Conflict Free” is a factual and uncontroversial statement. Whether certain minerals in a supply chain are linked to the funding of an armed group is a matter of investigation, not a matter of opinion. It is not always an easy fact to determine, but it is a fact nonetheless.
Some misleading media reporting has said that the most recent ruling “threw out the rule” or “gutted” the rule. In fact, the only portion of the rule that industry associations are challenging in court is the requirement for companies to use “descriptors” in their reporting, that is, to report whether or not their products are “DRC Conflict Free” or “Not Been Found to be ‘DRC Conflict Free.’” The remainder of the reporting requirements are still in place. Thus, companies are legally bound to continue reporting on their minerals’ origins and their due diligence practices.
While it is only a limited win for the industry associations, the decision to strike the descriptor requirement is detrimental for the transparency and humanitarian goals of the Conflict Minerals Rule. In the absence of the descriptor requirement, three major problems arise:
First, the audit requirement for companies will likely disappear. The audit requirement represents an important accountability mechanism to make sure companies’ reports are truthful and accurate. Without audits, companies could make statements about their supply chains, and the public would have no way of knowing whether they were being truthful, as no independent third party would have verified them.
Second, companies’ Conflict Minerals Reports will become less accessible to the public and investors. Companies’ due diligence reporting can be complex and dense, whereas the descriptor provides a clear summary statement of the outcome of a company’s due diligence. This is critical for giving consumers and investors the information they need to both choose which companies to support and pressure companies to improve their practices.
Finally, the descriptor requirement exerts internal pressure for companies to understand and summarize their own supply chains and due diligence practices by requiring they reach a clear conclusion. As we have seen in the first two years of companies reporting to the SEC on conflict minerals, many companies are falling far short of robust due diligence reporting. Many companies are starting to simply claim that they looked a bit into their supply chains and did not find anything troublesome but give almost no information about what due diligence they actually conducted. The descriptor can act as a lever to push companies to do more thorough investigations and reporting in service of reaching a clear, truthful summary conclusion.
The decision, as it stands, is one result of a larger strategy by certain corporate actors using the First Amendment to avoid regulation and public accountability. In this case, that effort is particularly harmful: it aims to protect companies’ right to remain blind to their potential financial support of deadly armed groups. The growing number of investors and consumers who care about corporate responsibility, along with the people in central Africa affected by U.S. companies’ sourcing practices, deserve better.
For more information about how the Conflict Minerals Rule has already begun to promote peace and transparency in Congo, visit the Enough Project’s resource page: http://eno.ug/1iCJiVj
About THE ENOUGH PROJECT
The Enough Project, an atrocity prevention policy group, seeks to build leverage for peace and justice in Africa by helping to create real consequences for the perpetrators and facilitators of genocide and other mass atrocities. Enough aims to counter rights-abusing armed groups and violent kleptocratic regimes that are fueled by grand corruption, transnational crime and terror, and the pillaging and trafficking of minerals, ivory, diamonds, and other natural resources. Enough conducts field research in conflict zones, develops and advocates for policy recommendations, supports social movements in affected countries, and mobilizes public campaigns. Learn more – and join us – at www.EnoughProject.org
On the heels of a disappointing decision from the U.S. Court of Appeals affirming that one part of the Securities and Exchange Commission’s Conflict Minerals Rule is unconstitutional, the SEC and other parties can appeal for a review. The deadline is Friday, October 2. Read More »
“Progress and Challenges” web-page briefing features quotes from Congolese experts, reports, analysis, topical backgrounders, as European Union meets on new draft law
September 22, 2015 – The Enough Project has published a media briefing, “Progress and Challenges on Conflict Minerals: Facts on Dodd-Frank 1502,” as a resource for journalists covering issues related to conflict minerals. Enough experts based in the United States and in Central Africa are also available for backgrounders, commentary, and on-air interviews.
The briefing features quotes from Congolese experts, reports, analysis, and topical backgrounders for reportage on section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The briefing offers resources for journalists covering parallel legislation underway in the European Union, a recent Court of Appeals ruling on the Securities and Exchange Commission’s (SEC's) requirements for U.S. companies, the status of corporate compliance on supply chain reporting rules, and the impacts of the law in affected areas and mining communities in the Democratic Republic of the Congo (Congo) and the Great Lakes region of Africa.
Along with the publication of the media briefing, Enough Project experts commented today on the court case, and spoke about initial findings from recent research in mining areas of eastern Congo.
EUROPEAN UNION REGULATION:
Sasha Lezhnev, Associate Director of Policy at the Enough Project, said: "As European Union states meet about conflict minerals legislation this week in Brussels, they should make sure that the E.U. adopts a law that is mandatory for end-user companies, not just a handful of traders. The only way to keep the momentum for change going in Congo's mines is to hold the companies that make electronics and other products accountable for what's in their supply chains. We also strongly urge the E.U. to support livelihood programs for miners in Congo and assessment missions to identify whether rebels or the army are present at mines."
COURT CASE: Holly Dranginis, Policy Analyst at the Enough Project, said, "The latest decision from the DC District Court of Appeals fundamentally misinterprets the Conflict Minerals Rule, and encourages companies to remain blind to their own supply chains and potential support they're giving to armed groups in Congo. Requiring public reporting is a tool for investors and consumers who believe that transparency can and should help break the link between business and human rights violations."
COMPANIES' COMPLIANCE WITH DODD-FRANK 1502 AND THE IMPACT IN CONGO: Lezhnev noted: “Intel's, Apple's, and other electronics companies' tracing and auditing of their supply chains to adhere to Dodd-Frank 1502 law has already led to critical progress in Congo – 70% of tin, tantalum, and tungsten mines surveyed are now conflict-free. However, some companies are finding ways to do virtually nothing and skirt the law. That will come back to bite them, as campus activists and consumers are increasingly demanding that companies take real steps to make conflict-free electronics and other products.”
LOCAL VOICES SUPPORTING REFORMS: Fidel Bafilemba, Central Africa-based field researcher at the Enough Project, said: "Even in the face of violent threats, people in Congo are demanding a safer, more transparent mining industry. Many have been subjected to the worst forms of violence, abuses that were enabled by a lawless minerals sector. People we spoke to in mining areas and affected areas view Dodd Frank as one important catalyst for getting armed groups out of their communities and giving peace-abiding citizens access to the benefits of a formal mining economy."
Along with research-based overviews, topical analyses, further resources, and a downloadable text version, the web-based media briefing offers quotes and commentary from noted Congolese leaders and human rights activists, including Nobel Peace Prize nominee Dr. Denis Mukwege of Panzi Hospital in Bukavi, DRC.
Overview of facts and expert analysis included in the media briefing:
(Factual citations and source links are available in the online version)
MINERALS AND CONFLICT: Conflict minerals have fueled and continue to help sustain armed violence in eastern Democratic Republic of Congo (Congo), linking them to the deadliest conflict globally since World War II. The four conflict minerals (gold, along with tin, tantalum, and tungsten, the “3Ts”) are not the only source of income to armed groups, but they are some of the most lucrative. The illegal exploitation of natural resources today is a manifestation of the grand corruption linked to violence that has marked successive governments in Kinshasa and the broader region since colonial times.
o The U.N. Group of Experts on Congo found in 2015 that gold continued to be a source of funding for armed groups and Congo’s army. A study from the Enough Project found that armed groups made an estimated $185 million from conflict minerals in 2008. In 2007 the Pole Institute noted “minerals are a major source of income and of conflict in North Kivu as in the whole of the DRC,” and in 2001 the UN experts found that “minerals [were] the engine of the conflict.”
o A mortality study by the International Rescue Committee looking at conflict-related deaths between August 1998 and April 2007 estimated that more than 5.4 million people died as a result of armed conflict in Congo. There has been continuing violence since that study, but no definitive follow up has been conducted on the mortality toll.
THE LAW: Section 1502 on conflict minerals of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a transparency measure, one part of a comprehensive approach to Congo’s challenges. Passed in 2010 and implemented by the U.S. Securities and Exchange Commission in 2012, it creates a reporting requirement for all companies publicly traded in the United States with products containing any of the four conflict minerals. This creates a lever to support transparency, security, and the rule of law in the mining sector. Companies must now publicly disclose annually whether any of the gold or 3Ts in their supply chains originated in Congo or a neighboring country and, if so, describe the due diligence measures taken to determine the source of the minerals. Dodd-Frank 1502 does not require companies to divest from Congo or source from conflict-free mines. The law only requires companies to report on their mineral sourcing and due diligence practices.
o The cost of compliance has been significantly overestimated by industry lobbyists. Claigan, an independent environmental consulting firm with expertise in supply chain management, estimates the total cost of Dodd-Frank 1502 compliance was approximately $140 million for 2014. This is a fraction of the U.S. Securities and Exchange Commission’s estimate of $3-4 billion for the first year.
IMPACT: Consistent with its objective, Dodd-Frank 1502 along with related reforms has led to significant improvements in the transparency of corporate supply chains and to a major reduction in the number of 3T conflict mines in eastern Congo. More than 60 percent of the world’s smelters for the four minerals have now passed conflict-free audits. Before Dodd-Frank1502, there was no certification mechanism for distinguishing conflict mines (i.e. mines controlled by armed groups or the Congolese army) from conflict-free mines, and there were no federal transparency requirements for companies on conflict minerals. The law and related reforms have changed these circumstances and created a two-tier market whereby the price for untraceable 3T conflict minerals is significantly lower than the price for verified conflict-free minerals. This price difference has made the trade in 3T minerals significantly less lucrative for armed groups.
o By 2014, the International Peace Information Service found that 70 percent of 3T mines it surveyed across several provinces in eastern Congo were not controlled by armed actors. This is a significant change given that the U.N. Group of Experts stated as recently as 2010 that “in the Kivu provinces, almost every mining deposit [was] controlled by a military group.” As of May 2014, nearly three-quarters (74 percent) of 3T miners were working in mines where no armed group involvement has been reported.
o Today, 192 out of approximately 300 smelters/refiners worldwide (over 60 percent) for the four conflict minerals have passed audits by the Conflict-Free Sourcing Initiative or associated programs, and an additional 41 smelters/refiners are participating in the program (i.e. are in the process of being audited) for a total of 233 participants (over 75 percent).
o There is now an emerging certification mechanism run by the International Conference on the Great Lakes Region (ICGLR), and mines have begun to be validated as conflict-free. As of June 25, 2015, 141 mines in eastern Congo had been validated as conflict-free by multi-stakeholder teams made up of U.N. officials and Congolese civil society, business, and government representatives.
o In surveyed locations, “minerals that do not go through conflict-free programs sell for 30 to 60 percent less” than minerals verified as conflict-free, thus reducing profits for armed groups trying to sell conflict minerals.
MINING COMMUNITIES: Dodd-Frank 1502 must be fully implemented, not abandoned, and strengthened with livelihood projects and other support to mining communities. Similar to other places where black markets are being disrupted, many Congolese miners who have relied on 3T mining have been affected by the transition to a conflict-free economy and are experiencing livelihood challenges. The original conflict minerals draft legislation included resources for livelihood programs for mining communities, but unfortunately those provisions were omitted from the final law and thus resources were not forthcoming in a timely way, causing hardship for some communities. Some aid has been disbursed to support conflict-free mining, but more support for livelihoods projects is needed. The solution to uncovering and eliminating these harmful illicit markets is not to reduce transparency measures but rather to strengthen and expand them.
o Livelihood projects should include alternative livelihoods programs and artisanal mining support. Project planning should involve concerted community consultations and decision-making, and projects should encompass microfinance programs, programs to increase women’s accessibility to mining and other livelihoods, and transition programs for child miners. Projects should also include aid for the formalization of artisanal mining—including the demarcation of artisanal mining zones, validation of more conflict-free mines, capacity building for mining cooperatives, provision of equipment, and development of safety standards for miners.
o Section 5 of the original “Conflict Minerals Trade Act” (introduced on Nov. 11, 2009) included provisions for livelihood support. Since that time, the Enough Project has repeatedly called on the United Nations, the United States, and other governments to engage in a process of dialogue and reform in Congo that is broadly inclusive of Congolese civil society, business, and government representatives.
CONGOLESE SUPPORT: Many Congolese communities and leaders—including Nobel Peace Prize nominee and Sakharov Prize winner Dr. Denis Mukwege, community activist Justine Masika Bihamba, and Archbishop François-Xavier Maroy Rusengo of Bukavu, South Kivu—support Dodd-Frank 1502. Leaders and activists support the law because they have seen direct positive impacts, because they believe in transparency and the rule of law, or both.
o Dr. Denis Mukwege: "A conflict-free minerals industry would contribute to ending the unspeakable violence the people of Congo have endured for years. Government must not only enact strong legislation, they must be willing to enforce the law. Companies bear the responsibility of compliance and public disclosure, and acting transparently as consumers are increasingly aware of conflict-free components on the market. Tens of thousands of legitimate miners would benefit from a clean, transparent minerals industry…The mineral trade is one of the components that drive suffering in Congo.”
o Open letter signed by 31 Congolese civil society leaders, experts, and former ambassadors: “It is time for another broader push for reform on conflict minerals and natural resource governance in order to complement the Dodd-Frank legislation and deepen related minerals reforms. Dodd-Frank has been the primary driver of corporate and regional policy change on conflict minerals.”
The Enough Project seeks to build leverage for peace and justice in Africa by helping to create real consequences for the perpetrators and facilitators of genocide and other mass atrocities. Enough aims to counter rights-abusing armed groups and violent kleptocratic regimes that are fueled by grand corruption, transnational crime and terror, and the pillaging and trafficking of minerals, ivory, diamonds, and other natural resources. Enough conducts field research in conflict zones, develops and advocates for policy recommendations, supports social movements in affected countries, and mobilizes public campaigns. Learn more – and join us – at www.EnoughProject.org
The Enough Project recently released a resource page that provides a background and updates on Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act related to conflict minerals. It includes information on the law, progress in Congo, and views from Congolese civil society members. Read More »