obama dod frank

Briefing / Jan. 26, 2015

The Dodd Frank Act

Eastern Congo’s violent conflict has lasted twenty years. In this time, millions of people have died unnecessarily. Although complex, the conflict has in part been fuelled by control of lucrative mineral resources. Breaking the link between armed groups and minerals will deprive some groups of significant revenue and remove an incentive to fight, but it will not by itself end these conflicts. They are underpinned by a web of factors including long-standing political tensions, ethnic grievances, disputes over land, and competition for natural resources. 

Global Witness was one of the first organisations to document the links between the international mineral trade and armed groups in Congo, and to push for solutions.

In 2010, a landmark law was passed in 2010 by US Congress and requires U.S.-listed companies to determine if their products contain one or more of four minerals – tin, tantalum, tungsten and gold – sourced from Congo or one of its nine neighbouring countries.

Section 1502 of the US Dodd Frank Act, better known as the conflict minerals provision, is the first piece of legislation aimed at breaking the links between eastern Congo’s lucrative minerals trade and abusive armed groups. 

It requires U.S. listed companies who believe they source from the region to carry out checks on their supply chains, known as due diligence, to determine whether their minerals purchases have benefited abusive armed groups. 

Companies must then report publicly to the US regulator, the Security and Exchange Commission (SEC), on the measures they've taken. 

The filing deadline for the first round of company reports under the law was May 31, 2014.

Corporate fightback against the transparency rules

Section 1502 is one of the most prominent pieces of legislation on supply chain transparency for U.S. businesses and it has not gone unchallenged. 

In October 2012, the U.S. Chamber of Commerce, the National Association of Manufacturers (NAM) and the Business Roundtable – three of America’s largest industry associations and key opponents of this ground-breaking law – mounted a legal challenge against the SEC. 

The lawsuit challenged the regulator’s final rules on how companies should comply with the law. Global Witness was deeply involved in the case and filed several amicus briefs in support of the SEC rule. In July 2013, the District Court for Washington D.C. ruled against the business groups, saying their arguments ‘lacked merit’ and that some of their concerns about the effect of the law on businesses were ‘overinflated.’ 

The industry groups appealed in 2014, but the majority of the regulation was upheld. 

However, in a damaging and disappointing move, the Court of Appeals found the regulation’s requirement that issuers describe their products as 'not been found to be DRC conflict-free', to be compelled speech, a violation of the First Amendment’s right to free speech. That decision has been reopened and is under review. As part of that review, Global Witness submitted its argument to the court in December 2014, detailing that companies do not have a constitutional right to hide information about whether their products contain conflict minerals. 

Dodd Frank 1502 has helped to catalyse reforms in Congo, Europe and China and encourage industry groups to create innovative ‘conflict free’ programmes. All this could be at threat if the law is weakened.

Do U.S. corporations have a constitutional right to conceal information about conflict minerals? Find more about the court case here.

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