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
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
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
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
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
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
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
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.
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
[i] Directorate-General for External
Policies, Implementation of the UN Guiding Principles on Business and Human
[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
[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
[vii] For more information on these
issues, see also Steffen van der Velde, The End of Conflict Minerals on the
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.
[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
[xxi] Förvaltningsrätten Jönköping (Jönköping
Administrative Court), 5 October 2016, case nr. 2095-16, Almträ Nordic AB
[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/.