Conflict Minerals and Financial Reform – Protecting Human Rights through Disclosure Standards

July 27th, 2010

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. This complex reform seeks to promote the financial stability of the United States by improving accountability and transparency in the financial system through empowering the government with the power to break up companies, oversee financial markets and create a new agency to guard consumers in their financial transactions.

Buried within the Act is a provision that was supported by human rights groups, including most actively the Enough Project. The provision, Section 1502 of the Act states:

SEC. 1502. CONFLICT MINERALS

(a) Sense of Congress on Exploitation and Trade of Conflict Minerals Originating in the Democratic Republic of the Congo- It is the sense of Congress that the exploitation and trade of columbite-tantalite, cassiterite, gold, and wolframite in the easternnflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein…

The provision essentially requires publicly traded companies to submit annual reports to the Securities and Exchange Commission disclosing whether their products contain minerals from Congo or adjacent countries. If so, these companies must explain the actions taken to trace the origin of the minerals and whether they come from mines that help fund armed conflict. Although no sanctions are contemplated in the Act, the disclosures are required to be made public on the company website, and a product may be labeled as “DRC Conflict Free” if they do not contain conflict materials that directly or indirectly finance or benefit armed groups.

In a statement of support for this provision, Secretary of State Clinton remarked:

Last year in the Democratic Republic of Congo, I spoke out against the trade in “conflict minerals” that has funded a cycle of conflict there that has left more than 5 million people dead since 1998, displaced countless more, and spawned an epidemic of sexual and gender-based violence.

President Obama has now signed into law a measure that will require corporations to publicly disclose what they are doing to ensure that their products don’t contain these minerals. The DRC has formally expressed its support for this law and has thanked both the executive and legislative branches of our government. This is one of several steps we are taking to stop this illicit and deadly trade…

At the same time, the United Kingdom is being sued by Global Witness, a London-based campaign group, for failure to name companies and individuals trading in “conflict minerals” from the DRC for UN Sanctions. A UN resolution on the issue passed in 2008 and renewed in 2009 requires a travel ban and asset freeze to be imposed on all individuals and entities supporting illegal armed groups in eastern Congo through the illicit trading of natural resources. The group alleges that the UK government has failed to adequately investigate companies and individuals that are linked to illicit mineral trade, thus breaching its international legal obligations.

Although the value in regulating the trade of these minerals has been questioned by some, the reality is that the provision in the Financial Reform bill is a starting point for ending the violence in the DRC by limiting some of the funding coming to the groups responsible. Right Respect has, in the past, noted the many benefits of enhanced disclosure as a tool for human rights protections. Still, as the suit by Global Witness indicates, active monitoring and oversight must be taken by regulatory agencies for any of these provisions to have value. Only then can human rights concerns be properly addressed in the DRC and businesses become part of the solution rather than part of the problem.