Judge rules that industry arguments are ‘overinflated’ and ‘lack merit’
Global Witness applauded the decision yesterday by the Washington, D.C. District Court to uphold the Securities and Exchange Commission’s (SEC) final rule for Dodd Frank Section 1502, a provision that aims to stop the minerals trade fuelling violence in eastern Democratic Republic of Congo (DRC).
“The court’s ruling on Section 1502 is a major victory for human rights and corporate accountability,” said Sophia Pickles from Global Witness. “Yesterday’s ruling will help stop some of the world’s worst human rights abusers from funding their fight using illegal proceeds from the minerals trade.”
The ruling follows an aggressive campaign against Section 1502 led by the U.S. Chamber of Commerce, National Association of Manufacturers (NAM) and Business Roundtable that culminated in a legal challenge against the SEC over the final rule. The provision requires U.S.-listed companies to carry out due diligence on minerals sourced from DRC and neighbouring countries and to publish information about whether they have funded armed groups.
Global Witness filed an amicus curiae brief in March urging the Court to uphold the SEC’s final rule, arguing that it fulfilled Congressional intent to ensure that U.S.-listed companies don’t contribute to conflict in eastern DRC. The Court supported this view and upheld the rule in its entirety, stating that the plaintiffs’ arguments ‘lacked merit’ and that some of their concerns were ‘overinflated’.
The Court’s ruling included the following key decisions:
- Contrary to industry arguments, the SEC’s analysis of the costs and benefits of Section 1502 was neither ‘arbitrary’ nor ‘capricious’. The Court found that the SEC had fully considered comments received and used an ‘eminently appropriate’ methodology to calculate the costs to industry of implementing the final rule.
- The plaintiff’s argument that the final rule should include a de minimis clause exempting companies using small amounts of tin, tantalum, tungsten and gold from reporting under the law, was rejected. The Court agreed with the SEC’s view that a de minimis exemption would undermine the impact of the final rule.
- Companies that ‘contract to manufacture’ products containing tin, tantalum, tungsten and gold will remain within the scope of the law. The Court’s decision means that the final rule will cover a broader spectrum of companies, including major electronics retailers.
- Industry claims that requiring public disclosure of supply chain information was a violation under the First Amendment, were firmly rejected. The Court judged that the final rule’s disclosure requirements ‘directly and materially advanced Congress’ interest in promoting peace and security in and around the DRC’.
The passage of Section 1502 generated unprecedented momentum within DRC to reform the mineral sector. Last year, the Congolese government took action by passing a law requiring all trading and mining companies operating in the country to carry out due diligence to avoid sourcing conflict minerals. The European Union is taking steps to adopt a similar policy to break the links between minerals and conflict, while Canada has introduced draft legislation to tackle this issue.
“By upholding the final rule for Section 1502 the Court rejected wholesale the Chamber and NAM’s aggressive bid to gut a law designed to address a dire humanitarian situation,” said Sophia Pickles. “Some firms, notably members of the electronics industry, have invested in sourcing minerals responsibly from eastern DRC. The companies behind this court case should follow suit.”
Sophia Pickles, in London: +44 7703 108 449; +44 207 492 5893; [email protected]
Corinna Gilfillan, in DC: +1 202 725 8705; +1 202 621 6665; [email protected]