Doing Business Right Blog

T.M.C. Asser Instituut

Kiobel in The Hague – Holding Shell Accountable in Dutch Courts - Event Report - By Mercedes Hering

2. November 2020 Antoine Duval (0)

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project


On 25 September 2020, the final hearings in the Kiobel case took place before the Dutch District Court in The Hague. This case dates back to 25 years ago; and the claimants embarked on a judicial journey that led them from the US to the Netherlands. On 16 October 2020, the TMC Asser Institute hosted an online roundtable discussion to present and discuss the arguments raised before the Dutch court. The three panelists, Tara Van Ho from Essex University, Tom de Boer from Prakken d’Oliveira, and Lucas Roorda from Utrecht University each provided their stance on the case and analyzed the past, the present and the main issues of the proceedings.

Depending on the outcome of the case, Kiobel could pave the way for further business human rights litigation in Europe. It raises questions ranging from jurisdiction, applicable law, parent company liability and fee arrangements to state sovereignty and the responsibility of former colonial states vis à vis countries that emerged from colonial rule. Below you will find the highlights of our discussion, you can also watch the full video on the Asser Institute’s YouTube channel.More...


Doing Business Right Blog | All posts tagged 'Lieferkettengesetz'

Doing Business Right Blog

T.M.C. Asser Instituut

Corporate (Ir)Responsibility Made in Germany - Part III: The Referentenentwurf: A Compromise à la Merkel - By Mercedes Hering

16. March 2021 Antoine Duval (0)
Editor’s Note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. In September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.

 

I. What happened so far

It took Ministers Heil (Labour, SPD), Müller (Development, CSU) and Altmaier (Economy, CDU) 18 months to agree on a draft for the Lieferkettengesetz (Supply Chain Law) to be presented soon to the German Bundestag for legislative debates. For an overview of the different proposals put forward by the Ministries and NGOs, and political discussion surrounding them, please check my previous blogs, which you can find here and here. You can also watch the panel discussion on the Lieferkettengesetz that we organized in November 2020 with Cornelia Heydenreich (Germanwatch), Miriam Saage-Maaß (European Centre for Constitutional and Human Rights), and Christopher Patz (European Coalition for Corporate Justice).

On 15 February 2021 the government’s “final” draft was published – the so-called “Referentenentwurf”. This initial agreement was met with relief from all parties involved, as it was preceded by a long-lasting deadlock. At first, Minister for Economic Affairs, Peter Altmaier, blocked Cabinet meetings so that the government position paper (“Eckpunkteplan”) published by Ministers Heil and Müller could not be discussed. Afterwards, Altmaier again blocked a compromise proposal brought forward by Müller and Heil in Cabinet. The matter went up to the “Koalitionsausschuss”, the committee that negotiates if members of the coalition parties cannot reach an agreement. This committee failed to come to an agreement. The issue of civil liability and the scope of application were the most controversial points. Thereafter, the matter reached the “Chefetage”, Angela Merkel. She sat down with the three ministers involved and Olaf Scholz, Vice-Chancellor and Minister for Finance (SPD), and tried to mediate between the different positions. The group met twice before, eventually, an agreement was reached resulting in the Referentenentwurf of 15 February 2021. The agreement did not last for long. Peter Altmaier withdrew (again) his support for the draft just after it had been circulated.

On 28 March 2021, another “final” draft was published. Those two drafts differ in subtle but impactful aspects. This blog post was originally based on the first draft; its text has been amended to integrate the changes introduced in the second draft. The second Referentenentwurf is the one signed off by Cabinet on 3 March 2021. In this blog, I will first summarize the main points of the draft(s), and afterwards review the various critical points raised against it.More...


Corporate (ir)responsability made in Germany – Event report - By Mercedes Hering

28. January 2021 Antoine Duval (0)

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project

On 27 November 2020, the T.M.C Asser Institute hosted an online roundtable discussion on the German Supply Chain Law (Lieferkettengesetz). The full recording of the event can be seen here:

The three panelists, Cornelia Heydenreich from Germanwatch, Miriam Saage-Maaß from the ECCHR and Christopher Patz from the ECCJ reflected on the political framework surrounding the debate, current drafts, and Germany’s role in the European discussion on binding due diligence legislation.

I. The pathway to a Lieferkettengesetz 

As Heydenreich pointed out, civil society’s role in the struggle for a Lieferkettengesetz can barely be overstated. When in 2011, the UNGPs were passed, Germany was in no rush to implement binding due diligence legislation. Instead, the German legislators waited for their European counterparts to come forward with an action plan. It was in 2013 when a new – more left-leaning – government first voiced the idea that a national action plan should be drawn up. In 2015, consultations began. The consultation process was a dialogue, the drafting process itself was not. Even though the monitoring methodology fell short of civil society’s expectations, the result of the monitoring process was shocking nonetheless: Only 13-17% of companies complied with the National Action Plan. 

It became clear that the government needed to implement binding due diligence regulation. It also became clear that the drafting process would have to begin as soon as possible for a law to be passed before the general election in September 2021. 

II. Current drafts

Saage-Maaß turned to the different proposals for a Lieferkettengesetz: The government’s position paper from the Ministry of Development and the Ministry of Labour as well as civil society’s model law. Contrary to what the government currently envisages, Saage-Maaß emphasized the need to include small or medium-sized companies that operate in high-risk areas. 

The role of private international law must not be neglected. The question turns on whether or not the whole of the Lieferkettengesetz will be an overriding mandatory provision, or merely the due diligence obligation itself. 

Civil society organizations are particularly critical of so-called “safe harbor” provisions. These safe harbor provisions allow companies to be exempted from liability if they are part of certain multi-stakeholder initiatives (MSIs). All panelists agree, however, that as of today, no MSI meets the standards set out by the OECD. In its report, the Institute for Multi-Stakeholder Initiative Integrity (MSI Integrity) comes to the same conclusion: “MSIs are not effective tools for holding corporations accountable for abuses, protecting rights holders against human rights violations, or providing survivors and victims with access to remedy.” 

For an overview of other aspects of the legislative proposals, such as the burden of proof, please see the foregoing blog series “Corporate (Ir)responsibility Made in Germany”. 

III. EU-wide discussion

In April 2020, European Commissioner for Justice, Didier Reynders, announced that the Commission commits to legislation on mandatory due diligence. Patz emphasizes the positive impact Germany’s Council Presidency, beginning July 2020, has had on the endeavor. Germany’s Council Presidency stands out because of its strong affirmative call for a supply chain law and for reforms of directors’ duties. At the beginning of December, the Council published its Conclusion on Human Rights and Decent Work in Global Supply Chains, where it calls on the European Commission to launch an EU Action Plan by 2021 (n. 45) and to table a proposal for an EU legal framework on corporate due diligence (n. 46). According to Patz, this constitutes a strong political signal. This strong call is reinforced by three Committees, the Human Rights Committee, Development Committee, and the Legal Affairs Committee, that also spoke out in favor of civil liability. 

Another strong political signal was sent by the EU Fundamental Rights Agency, which in its report “Business and Human Rights – Access to Remedy” called for significant changes pertaining to the reversal of the burden of proof, class actions and procedural mechanisms in order to facilitate access to justice for those affected. 

The work of German MEP Anna Cavazzini (Greens) should be highlighted, too. In the European Parliament she pushed for an additional enforcement mechanism in the form of trade restrictions. Products that benefitted from human rights abuses along the supply chain should not have access to the European single market. In order for the trade restrictions to be lifted, remediation ought to be paid. This initiative counters criticism from civil society that points out that due diligence laws often have the effect of targeting whole sectors of one particular economy. Adopting additional trade restrictions allows for a much more targeted approach. 

In her report on an anti-deforestation legal framework, Delara Burkhardt(S&D) also advocated for civil liability. Companies that exercise control over companies should be held liable, even where it was not directly them, but the other company that committed an unlawful act. In order for this liability mechanism to be effective, Burkhardt advocates for a presumption in favor of control. This helps to balance the information deficit litigants suffer because they do not have access to internal corporate documentation. 

IV. Conclusion 

At the beginning of the roundtable discussion, Duval pointed out that Germany’s stance on any binding due diligence regulation will be decisive. Germany’s role in the EU-wide discussion can hardly be overstated. Germany amounts to 30% of all EU exports, and to 20% of all imports. Factoring in France’s loi de vigilance, both countries together could put enough pressure on the European legislators to push for an EU-wide mandatory due diligence regulation. 

Germany is as close as it has ever been to adopting a Lieferkettengesetz. Yet, the process has come to a halt. The government position paper should have been discussed in the Cabinet at the end of last year for the law to be adopted in 2021. All ministers have to agree, afterwards the proposition will go to Parliament. Heydenreich said that the law will have to be adopted in May, or June the latest; Parliamentary session ends in July. 

At least Germany’s involvement in the EU-wide debate looks promising. Germany’s Council Presidency as well as individual German MEPs have had a tremendous impact on the adoption of an EU-wide due diligence regulation.

New Event! Corporate (ir)responsibility made in Germany - 27 November - 3pm (CET)

20. November 2020 Antoine Duval (0)

On 27 November, we will host a digital discussion on Germany’s approach to corporate (ir)responsibility for human rights violations and environmental harms in the supply chains of German businesses. This event aims to analyse the evolution of the business and human rights policy discussion in Germany and its influence on the wider European debates on mandatory human rights due diligence EU legislation. Germany is the EU’s economic powerhouse and a trading giant, hence its position on the (ir)responsibility of corporations for human rights risks and harms throughout their supply chains has major consequences for the EU and beyond.

Background

Currently, Germany is debating the adoption of a supply chain law or Lieferkettengesetz. This would mark the end of a long political and legal struggle, which started in 2016, when the German government adopted its National Action Plan (NAP) 2016-2020. Germany’s NAP, like many others, counted on voluntary commitments from businesses to implement human rights and environmental due diligence throughout their supply chains. Unlike other NAP’s, the German one also included a monitoring process, which tracked the progress businesses made during that four-year period.

The final report, which was published in September, showed that only roughly 13-17% of German businesses implemented the voluntary due diligence measures encouraged in the NAP. On the basis of these rather disappointing results, as required by the coalition agreement between the two governing parties, a draft for a Lieferkettengesetz should have been presented to the Cabinet this autumn. However, the Ministry for Economic Affairs and Energy, backed by business lobby groups, strongly opposes any form of civil liability for human rights violations committed within supply chains and managed until now to delay the process.

Our discussion aims to review these developments and highlight the key drivers behind the (slow) movement towards a Lieferkettengesetz. Weaving political insights with legal know-how, our speakers will provide a comprehensive overview (in English) on Germany’s positioning in the business and human rights discussion and its potential influence on the future trajectory of a European legislation.

Speakers:

Moderator:


To register for this event, please click here. You will receive a link before the start of the event.


For enquiries, contact conferencemanager@asser.nl


Winter academy: Due diligence as a master key to responsible business conduct

On 25-29 January 2021, The Asser Institute’s ‘Doing business right’ project is organising an online winter academy on ‘Doing business right: Due diligence as a master key to responsible business conduct’.

This academy brings together students, academics and professionals from around the world and provides a deep dive into the due diligence process as a strategy to achieve responsible business conduct.

Learn more and register here. 

Corporate (Ir)Responsibility Made in Germany - Part II: The Unfinished Saga of the Lieferkettengesetz - By Mercedes Hering

16. October 2020 Antoine Duval (0)

Editor's note: Mercedes is a recent graduate of the LL.B. dual-degree programme English and German Law, which is taught jointly by University College London (UCL) and the University of Cologne. She will sit the German state exam in early 2022. Alongside her studies, she is working as student research assistant at the Institute for International and Foreign Private Law in Cologne. Since September 2020, she joined the Asser Institute as a research intern for the Doing Business Right project.

In Part II of this blog series, I intend to outline the different proposals for a Lieferkettengesetz. First, the Initiative Lieferkettengesetz’s model law, secondly the proposal submitted by the Ministry for Labour and Social Affairs and the Ministry for Economic Cooperation and Development, and lastly, I will present the amendments pushed by the business sector and the Ministry for Economic Affairs and Energy.More...

Doing Business Right Blog | The EU Conflict Minerals Regulation: Challenges for Achieving Mineral Supply Chain Due Diligence - By Daniel Iglesias Márquez

Doing Business Right Blog

T.M.C. Asser Instituut

The EU Conflict Minerals Regulation: Challenges for Achieving Mineral Supply Chain Due Diligence - By Daniel Iglesias Márquez

27. November 2017 Antoine Duval (0)

Editor’s note: Daniel Iglesias Márquez is an external researcher in Business and Human Rights at the Tarragona Centre for Environmental Law Studies. He holds a PhD from the Rovira Virgili University in Tarragona (Spain). Other main fields of interest include International Environmental Law, International Criminal Law and European law.


The EU and its Member States have largely endorsed the UN Guiding Principles on Business and Human Rights (UNGPs) in their Corporate Social Responsibility (CSR) strategy and have committed to supporting their implementation.[i] The UNGPs state that companies have a responsibility to respect human rights wherever they operate. Companies are therefore expected to take proactive steps to ensure that they do not cause or contribute to human rights abuses within their global operations and to respond to human rights abuses when they do occur. This implies establishing due diligence processes to identify, prevent, mitigate and record potential and actual adverse human rights impacts.

Although the EU has not played a constructive role at the Geneva negotiations for a UN Treaty on business and human rights,[ii] some modest developments in the right direction have been made at the EU level to foster a culture of ‘doing business right’ among companies in certain industrial sectors. Put differently, the EU has adopted regulations and directives that implement the UNGPs.

Due diligence requirements are the most common way of ensuring that business behavior meets social expectations. An example of this is the new EU Conflict Minerals Regulation (Regulation),[iii] which requires EU companies to ensure the responsible sourcing of minerals and metals. This EU law has an extraterritorial reach since due diligence requirements must be exercised by a company throughout its international supply chain. However, the Regulation raises a number of challenges ahead that may affect its purpose and implementation.


Conflict Minerals in the EU

In 2013, global trade in so-called 'conflict minerals' such as tin, tantalum, tungsten and gold (3TG) ores, concentrates, and metals was worth in excess of €123 billion.[iv] The EU has become one of the main destinations for these conflict minerals, which end up in products such as phones, computers, cars and jewelry.[v] Member States depend on the importation of mineral raw materials by European companies to sustain their modern-day high-tech societies. At the same time, the extraction of and trade in these minerals have been linked to corporate abuses (including human rights violations and environmental degradation) and have fueled some of the world’s most brutal conflicts in weak or unstable countries such as Colombia, the Democratic Republic of Congo (DRC), the Central African Republic (CAR) and Zimbabwe. In Colombia, the mining of tantalum, wolframite, coal and gold, which is controlled and taxed by armed groups, has cost the lives of millions and led to the forced disappearance of millions of others. This situation is also witnessed in the eastern DRC, where trade in tin, tantalum, tungsten and gold has provoked violent conflict in the provinces of North and South Kivu for almost a decade and a half. Similarly, in the CAR the trade in gold and diamonds has financed the conflict between the Seleka and the anti-Balaka.[vi] Although evidence shows that these minerals are associated with conflict, they are still used in products that are traded and sold on the European market.

Against this background, Guiding Principle 7 calls on States to assist businesses that are exposed to a greater risk of involvement in human rights abuses. Such assistance includes passing laws that require businesses to set in place adequate forms of human rights due diligence.


Responsible Mineral Supply Chain Efforts in the EU

In March 2014, the European Commission proposed a regulation to help reduce the financing of armed groups and security forces through mineral proceeds in conflict-affected and high-risk areas. The proposed regulation introduced a voluntary system of self-certification for 300 EU traders, 19 EU smelters/refiners, and over 100 EU manufacturers of components and semi-finished goods based on those minerals and metals. However, it lacked ambition, and the Commission’s non-legally-binding approach predominated in the text.

The proposal was a disappointment for civil society organizations and the European Parliament, which argued that a system of voluntary self-regulation would not be sufficient to convince EU upstream companies to take meaningful steps to improve their supply chain due diligence and demanded a strong mandatory law that would require all EU companies trading in minerals to undertake basic checks on their supply chains.[vii] In 2015 the European Parliament voted for radical amendments aimed at creating binding due diligence requirements on both upstream and downstream companies that bring minerals into the EU.[viii]

In 2016, after months of trilogue negotiations, EU institutions reached a political understanding on a law aligned with other landmark initiatives aimed at ensuring that minerals are sourced responsibly and do not fund conflict or human rights abuses, including the OECD Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Affected Areas and High-Risk Areas (OECD Due Diligence Guidance or OECD Guidance), Resolution 1952 (2010) endorsed by the UN Security Council, section 1502 of the US Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and various laws passed by several African countries, including the DRC and Rwanda, requiring companies to check their supply chains. The legal text of the EU Conflict Minerals Regulation was adopted and published early in 2017.


Aim, Scope and Obligations of the EU Conflict Minerals Regulation

The EU Conflict Minerals Regulation, which will enter into force on 1 January 2021, aims to ensure that minerals entering the EU do not finance conflict or result in human rights violations. The geographical scope of the EU Regulation is broader than its American counterpart, the Dodd-Frank Act,[ix] and targets imports not only from conflict zones and areas where a risk of armed confrontation exists but also from failed states and areas where widespread and systematic violations of international law, including human rights abuses, occur.[x] However, it excludes countries that are not conflict-affected or failed but in which documented links exist between grave human rights violations and minerals extraction, such as the use of child labor for hazardous work in Ghana’s gold mining industry.[xi]

The Regulation’s material scope comprises the 3TGs (article 1), since these are the resources that are most mined in conflict areas or in mines that rely on forced labor. However, this means that other minerals linked to conflicts and human rights abuses (such as diamonds, rubies, cobalt, coal and jade) are not subject to the same checks on their supply chains.

In line with the OECD Due Diligence Guidance, the EU Regulation combines mandatory and voluntary elements for implementing supply chain due diligence measures. This requires EU-based companies trading in the 3TGs (importers, smelters and refiners)[xii] to take responsibility for their supply chains and adopt the measures needed to prevent their trade being linked to conflicts or human rights abuses. These due diligence measures consist of five steps: establish strong company management systems, identify and assess risk in the supply chain, design and implement a strategy to respond to identified risks, carry out an independent third-party audit of supply chain due diligence, and report annually on supply chain due diligence (articles 4-7).

This five-step due diligence framework is not addressed at companies whose annual import volumes do not exceed the specified thresholds included in Annex 1[xiii] or to downstream companies that import the same minerals into the EU as part of electronic or other products (article 1). These are significant omissions since conflict minerals find their way into Europe mainly via the manufacture of tablets and smartphones, while the volume thresholds could leave the door open to trade in conflict minerals through small importers.


Challenges to Achieving the Aims of the EU Conflict Minerals Regulation

Adopting an EU Regulation on conflict minerals is just the first step to meeting the commitment to break the links between conflict, human rights abuses and the sourcing of minerals. Challenges must still be overcome to ensure that all EU companies source their resources responsibly. These challenges, which include, among others, engaging EU downstream companies, potential market distortion and lack of sanctions, may affect the implementation of the EU Regulation.

Arguably, due diligence is most effective when it involves companies throughout the supply chain. EU downstream companies are excluded from the scope of the Regulation and could create loopholes in the due diligence scheme by importing conflict mineral-derived products. It is expected that these companies comply voluntarily with the due diligence requirements and report on their sourcing practices. One of the main challenges in this regard is therefore to determine how to make sure that these companies do not import conflict mineral-derived products, by taking all reasonable steps to identify and address any risks arising in their supply chains for minerals and metals coming within the scope of this Regulation. The Commission has stressed that it will press large-scale manufacturers to disclose details of any products that may contain conflict minerals.[xiv] In line with the OECD Due Diligence Guidance that applies to all companies in the mineral supply chain that supply or use minerals sourced from conflict-affected or high-risk areas, EU downstream companies must therefore be provided with the tools they need to provide regular information on the source of their minerals and their trading routes. For example, the OECD Guidance suggests that downstream companies should visit the smelters and refiners in their supply chains and require them to source responsibly. Otherwise corporate complicity in human rights abuses may arise from a company’s business relationship with the entities in its supply chain. In this context, the UNGPs state that businesses should treat the risk of causing or contributing to gross human rights abuses as a legal compliance issue wherever they operate (Guiding Principle 23). Long supply chains and complex business relationships may therefore threaten the implementation of the EU Regulation.

The Regulation compliance is not limited to EU economic operators. Companies in third countries are de facto obliged to comply with the OECD Guiding Note for Upstream Companies Risk Assessment[xv] in order to access the EU market. This may create market distortion in the formal sector in the form of less demand and lower prices for minerals from certain conflict regions due to EU importers disengaging with upstream companies from those regions that fail to mitigate the risk of dealing in minerals.[xvi] Indeed, this unintended impact occurred after the implementation of the Dodd-Frank Act[xvii] when countries covered by the law suffered an immediate collapse of their formal 3TG exports, affecting the people that the Act was intended to help. The Regulation is greater in scope, as it covers all conflict-affected and high-risk areas, making it much more difficult to create an uneven regulatory landscape that may cause market distortions. However, it should be accompanied by measures to be deployed through political, diplomatic, and development cooperation means in order to ensure the effective implementation of the Regulation. In March 2014, the European Commission and the European External Action Service (EEAS) published, at the same time as the Commission proposal, a Joint Communication entitled Towards an Integrated EU Approach for the responsible sourcing of minerals originating in conflict-affected and high-risk areas, proposing measures covering different areas of intervention (incentivizing measures for the private sector, measures for policy dialogue with third countries and development cooperation measures) in order to alleviate some of the unintended consequences of the Regulation, like the creation of de facto embargos from certain conflict regions. These actions aim to assist and build the capacity of relevant stakeholders to transpose the due diligence requirements into a national framework and legislation to formalize the informal and small scale mining sector in areas like the Great Lakes region. The implementation of these ‘accompanying measures’ is essential to ensure not only a uniform approach towards mineral supply chain due diligence but also a positive socio-economic impact in conflict-affected and high-risk areas.[xviii]

Nationally, implementing the Regulation depends on the responsible authorities designated by Member States. These authorities should conduct ex-post checks on companies (article 10-11), be engaged, and have enough resources to fully implement the Regulation, otherwise the whole process involved in the responsible sourcing of minerals may slow down. It is noticeable that the Regulation focuses on compliance rather than on punishing companies (since it lacks sanctions). Member States set the rules that apply to infringements of the Regulation. When an infringement occurs, the competent authorities issue a notice of remedial action to be undertaken by the company (article 16). This hardly affects the conduct of EU upstream companies at all. Effective, dissuasive and proportionate sanctions would send out a clear message that failure to comply with the Regulation’s obligations will not be tolerated.


The Value of Experience with Other EU Due Diligence Law

Due diligence laws already exist at the national (French duty of vigilance law) and EU levels. This is not the first time that the EU has pursued due diligence systems through trade measures aimed at conditioning market access from third countries on compliance with EU values and standards. The EU Timber Regulation (EUTR), which aims to combat illegal logging, unilaterally extends obligations to all importers in order to prevent the placement of illegally harvested timber and its derived products in the EU market. Whether the timber is legal depends on whether it was harvested in accordance with the legislation applicable in the country of origin, even if that country is not a member of the EU.

The EUTR covers all companies that bring timber into the EU market for the first time. It requires companies to collect verifiable data on the timber’s origin so that it can be established that it was legally harvested for the entire chain of custody. Sometimes companies are also required to compile a risk inventory, analysis and assessment. However, as with the Conflict Minerals Regulation, certain types of timber and timber products are covered while other manufactured products such printed books, newspapers, manuscripts, musical instruments and seats with wooden frames are excluded.

The EUTR’s due diligence system affects business operations if the businesses wish to access the EU market, especially if they are from countries with high levels of corruption. Full implementation of the EUTR has been slow because the competent authorities in EU member states have been unwilling to begin enforcement.[xix] However, the situation is changing. Today, according to the Commission’s EUTR scoreboard, all 28 Member States have begun to conduct checks on companies and designated a competent authority, while only one Member State (Slovakia) has no legislation on penalties for breaching the EUTR.[xx] In recent rulings in Sweden[xxi] and the Netherlands[xxii], competent authorities sanctioned companies for not collecting enough verifiable information to demonstrate that the purchase complied with the laws of the country of origin. These cases both prove this paradigm shift is occurring and help to clarify the practical aspect of the due diligence requirements for companies. However, there is a need to increase efforts and priorities to correctly and constantly implement and enforce the EUTR[xxiii] and to expand its scope so that all wood-based products are covered.

Despite the notable differences between the Conflict Minerals Regulation and ETUR in terms of regulatory goals and design, both regulatory regimes require importing companies to provide information on the behavior of their suppliers. Experience gained from implementing and enforcing the EUTR should be taken into account for the Conflict Minerals Regulation in order to secure traceability and transparency in the global mineral supply chains of EU companies. The EUTR proves that mandatory due diligence measures are enforceable and therefore more pressure can be mounted onto EU companies and non-EU companies. Many national authorities have a good understanding of the flexible, progressive nature of the EUTR’s due diligence system. Despite its recent full implementation, companies are taking significant steps to meet the due diligence standards (trade association materials and dialogue with authorities).[xxiv] Therefore, this experience should provide mineral-trading companies with the insights they need to fully meet their due diligence requirements, especially since the Conflict Minerals Regulation will not enter into force until 1 January 2021.


Concluding Remarks

The EU Conflict Minerals Regulation is to be welcomed as an important step towards the responsible sourcing of minerals and metals. It may also be seen as the EU’s response to translating the UNGPs into effective legislation and policies that may significantly influence business conduct and, therefore, to support businesses meeting their commitment to implement the Guiding Principles, especially with regard to the second pillar. Arguably, the positive effects of the Regulation may eventually pave the way for greater legally binding due diligence obligations for EU companies in other sectors that outsource their production to third countries. These may include measures aimed at securing traceability and transparency since the European Parliament has repeatedly requested that the Commission should include rules on corporate liability for violations of human rights in all trade and investment agreements.

However, despite the Regulation’s positive aspects and opportunities, several challenges must be seriously taken into account before it enters into force. To achieve the responsible sourcing of 3TG and mitigate the risk of incomplete due diligence chains, legally binding obligations on disclosing information about sources of minerals and trading routes must be extended to EU downstream companies. The EU should also take political and diplomatic measures to avoid market distortion and involve crucial third countries in supporting the implementation of the Regulation. The first review on the functioning and effectiveness of the Regulation, scheduled for 2023, is another opportunity to afford responsible authorities the competence to impose penalties on companies that do not comply with their obligations. Indeed, the three-yearly reviews should play an important role in establishing a more ambitious Regulation that broadens its scope to other minerals that are linked to conflicts and human rights abuses and its obligations to downstream companies.

Given that the Conflict Minerals Regulation does not enter into force until 2021, the EU, its Member States, and companies have both the awareness and the time to overcome some of the obstacles it presents. Experience with similar instruments in other jurisdictions should provide a reference for improving its implementation and enforcement. There are therefore no excuses for not fully meeting supply chain due diligence requirements at this first stage of the process towards the responsible sourcing of minerals and metals in the European Union.

[i] Directorate-General for External Policies, Implementation of the UN Guiding Principles on Business and Human Rights, http://www.europarl.europa.eu/RegData/etudes/STUD/2017/578031/EXPO_STU(2017)578031_EN.pdf.

[ii] Friends of the Earth, EU Fails to derail UN Treaty Negotiation, http://www.foeeurope.org/un-binding-treaty-eu-derails-311017.

[iii] Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas, L 130/1.

[iv] European Commission, Website for DG Trade, http://ec.europa.eu/trade/. 

[v] See “A conflict minerals regulation that works. Strengthening the European Commission’s proposal for a ‘Regulation setting up a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas’”, https://www.globalwitness.org/en/campaigns/conflict-minerals/conflict-minerals-shaping-eu-policy/.

[vi] See, “Breaking the links between natural resources and conflict: The case for EU regulation. A civil society position paper”, https://www.globalwitness.org/en/campaigns/conflict-minerals/conflict-minerals-shaping-eu-policy/.

[vii] For more information on these issues, see also Steffen van der Velde, The End of Conflict Minerals on the EU Market?, Asser Institute Policy Brief 2017, pp. 1-11.

[viii] European Parliament. Conflict minerals: MEPs secure mandatory due diligence for importers, http://www.europarl.europa.eu/news/en/press-room/20161122IPR52536/conflict-minerals-meps-secure-mandatory-due-diligence-for-importers.

[ix] The Dodd-Frank Act applies only to the Democratic Republic of Congo (DRC) and nine adjoining countries.

[x] The European Commission is preparing guidelines to help firms identify conflict-affected and high-risk areas. The guidelines should be ready by the end of 2017.

[xi] Chiara Macchi, The Draft EU Regulation on Conflict Minerals: “Smart Mix” or Missed Opportunity? http://rightsasusual.com/?p=1106.

[xii] According to Commission estimates, the regulation applies directly to between 600 and 1,000 EU companies.

[xiii] The threshold for tin ores and concentrates is set at 5,000 kg, and for tungsten and concentrates at 250,000 kg. The threshold for tantalum or niobium and ores is to be determined through a delegated act of the Commission pursuant to article 1(2)(a) and article 15(b) Regulation.

[xiv] European Parliament. Conflict minerals: MEPs secure mandatory due diligence for importers, http://www.europarl.europa.eu/news/en/press-room/20161122IPR52536/conflict-minerals-meps-secure-mandatory-due-diligence-for-importers.

[xv] See OECD Guiding Appendix to Supplement on Tin, Tantalum and Tungsten, Guiding Note for Upstream Company Risk Assessment, p. 54.

[xvi] For more information on these issues, see Enrico Partiti and Steffen van der Velde, Curbing Supply-Chain Human Rights Violations Through Trade and Due Diligence. Possible WTO Concerns Raised by the EU Conflict Minerals Regulation, T.M.C. Asser Institute for International & European Law 2017-02.

[xvii] Commission staff working document impact assessment, SWD (2014) 53 final, Brussels, 5 March 2014, pp. 26-28.

[xviii] EurAc, Accompanying Measures to the EU Regulation on the Responsible Sourcing of Minerals. Towards a strengthening of the governance of the artisanal mining sector in the DRC, https://www.tecnologialibredeconflicto.org/wp-content/uploads/2017/04/EurAc2017-executive-summary.pdf.

[xix] See Wybe Th. Douma, Towards a ‘due diligence’ jurisprudence: The EU Timber Regulation’s requirements in courts, Doing Business Right Blog, 27 July 2017.

[xx] See EUTR newsletter from ClientEarth: https://www.clientearth.org/eutr-news-march-2016-to-march-2017/. 

[xxi] Förvaltningsrätten Jönköping (Jönköping Administrative Court), 5 October 2016, case nr. 2095-16, Almträ Nordic AB v Skogsstyrelsen.

[xxii] B.V. X v de staatssecretaris van Economische Zaken, Rechtbank Noord-Holland 24-05-2017, AWB - 16 5358, ECLI:NL:RBNHO:2017:4474. 

[xxiii] For more information about how Member States implement and enforce the EUTR, see https://www.clientearth.org/eu-timber-regulation-implementation-and-enforcement-updates/.

 

[xxiv] Timber Design and Technology, Big brands back battle against illegal timber, http://www.timberdesignandtechnology.com/big-brands-back-eu-battle-against-illegaltimber/.

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