6 Minerals originating in conflict-affected
and high-risk areas: an integrated EU approach
| Committee's assessment |
Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested; drawn to the attention of the International Development, Foreign Affairs and Business, Innovation and Skills Committees
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| Document details | (a) Proposed 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
(b) Joint Communication: Responsible sourcing of minerals originating in conflict-affected and high-risk areas: Towards an integrated EU approach
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| Legal base | (a) Article 207 TFEU; QMV; ordinary legislative procedure (b) —
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| Department | Foreign and Commonwealth Office
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| Document Numbers | (a) (35879), 7701/14 + ADDs 1-9, COM(14) 111;
(b) (35908), 7704/14, JOIN(14) 8
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Summary and Committee's conclusions
6.1 The draft Regulation covers tin, tantalum, tungsten, their
ores, and gold, whose supply chains have been identified as contributing
to armed conflict, particularly in the eastern Democratic Republic
of Congo. This is part of the Commission's response to the 2011
OECD Due Diligence Guidance and section 1502 of the 2010 US "Dodd-Frank"
Act.[ 30] The 2011 OECD
Due Diligence Guidance is not country or region-specific and sets
out a process to be followed by countries interested in developing
responsible sourcing capabilities: while primarily at the disposal
of companies in OECD jurisdictions, the Due Diligence Guidance
describes itself as a source of inspiration attracting the participation
of companies performing significant transformative or trading
functions in mineral supply chains for gold, tin, tantalum and
tungsten. In 2011, the EU took a political commitment in the OECD
framework to support the further uptake of the Guidance.
6.2 The Commission is proposing a voluntary scheme,
but one that would be binding on companies once they had volunteered.
Companies would be required annually to present to the competent
authority of a Member State evidence from a third-party auditor
that they had carried out due diligence in line with the OECD
guidance on the smelters or refiners in their supply chain. Member
States would report annually to the Commission on implementation,
and provide information on self-certified responsible importers.
The Commission would use the information to develop a list of
responsible smelters and refiners. The Regulation would be global
in scope. The scheme would be evaluated after three years, and
the results used for determining the ongoing EU approach —
including amendments to the regulatory framework, making it mandatory,
if appropriate, on the basis of a further impact assessment.
6.3 The accompanying Commission-EEAS Communication
(7704/14) sets out an overall integrated approach to the responsible
sourcing of minerals originating in conflict-affected and high-risk
areas, of which this Regulation is a part. Other elements of the
proposed integrated approach include financial support for implementation
of the OECD Due Diligence Guidance, and for
future uptake by SMEs of the "responsible importer"
scheme in the Regulation; the use of public procurement by the
Commission and Member States to provide incentives for uptake
of the scheme; policy dialogues with governments at different
stages of the mineral supply chain; and the use of development
assistance to support due diligence efforts.
6.4 The background thus far is briefly summarised
below and set out in detail in our predecessors' three earlier
Reports.
6.5 Most recently, in March, the Minister for Europe
(Mr David Lidington) said that, after relatively slow deliberations
on the technical issues, discussions were now beginning to pick
up in the Council, and that the European Parliament (EP) was moving
ahead with its consideration of the dossier and aiming to reach
a common position in June 2015.
The previous Committee's assessment
6.6 In looking forward to hearing again from the
Minister when there was more progress, the previous Committee
noted that, if not sooner, that update should be in good time
to obtain answers to any questions that might then arise, before
any text was put to the Council for adoption as a Partial or General
Approach, and the beginning of negotiations with the EP.
6.7 In the meantime, the documents were retained
under scrutiny.
6.8 These developments were also again drawn to the
attention of the International Development, Foreign Affairs and
Business, Innovation and Skills Committees.[ 31]
6.9 The Minister now reports that, while two key
elements of the draft Regulation — that the scheme should
be voluntary, and that it should only cover importers of the relevant
resources and not others in the supply chain — "continue
to find strong support amongst the great majority of Member States",
the EP "has come to a different view": a mandatory scheme
"all along the supply chain, including 'downstream' companies
(meaning the metal supply chain from the smelters or refiners
to the end use)".
6.10 The Minister also notes that:
— "other
significant amendments in the EP package" include the proposition
that in the guidelines to be drafted by the Commission on the
implementation of Directive 2014/95/EU (non-financial reporting
by large companies), the Commission should consider including
indicators on the responsible sourcing of minerals and metals;
— they also recommended that the Commission
submit a legislative proposal within two years to include the
use of performance clauses in national procurement contracts;
and
— the Plenary vote also contained some
elements more in line with the Government's thinking, e.g., that
already existing industry schemes aimed at responsible sourcing
could be recognised in the EU scheme.
6.11 With regard to the next steps, the Minister
says that:
— the
EP's International Trade Committee voted on 14 July to open trilogue
negotiations with the Council and Commission on the basis of this
EP vote;
— Member States have not yet reached political
agreement in the Council;
— the Commission and the majority of delegations
remain committed to a voluntary scheme covering importers only,
but several issues are outstanding, such as the role of Member
States in the audit process; and
— at the same time, the Commission and
Member States have started discussing the EP amendments.
6.12 We reiterate our predecessors' expectation:
that the Minister's next update should be in good time to obtain
answers to any questions that might then arise, before any text
is put to the Council for adoption as a Partial or General Approach,
and the beginning of negotiations with the European Parliament
— particularly as the EP is proposing that those trilogue
negotiations should be based on this EP vote.
6.13 We again draw these developments to the attention
of the International Development, Foreign Affairs and Business,
Innovation and Skills Committees. Given that there is now a fundamental
difference of approach between the Government, Commission and
most Member States (voluntary, importers of the relevant resources
and not others in the supply chain) and the EP (mandatory scheme,
all along the supply chain), and suggestions that there should
be requirements concerning non-financial reporting by large companies
and national procurement contracts, we should be grateful for
any views that they might have about the EP's "package".
6.14 In the meantime, both documents remain under
scrutiny.
Full
details of the documents:
(a) Draft 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: (35879), 7701/14 + ADDs 1-9, COM(14) 111; (b) Joint Communication:
Responsible sourcing of minerals originating in conflict-affected
and high-risk areas: Towards an integrated EU approach: (35908),
7704/14, JOIN(14) 8.
Background
6.15 When he submitted these documents for scrutiny,
the Minister welcomed what he described as the Commission's intention
to provide political support to implementation of the OECD Due
Diligence Guidance — it being in line both with wider international
efforts and the June 2013 G8 Lough Erne communiqué
(which agreed to continue to support responsible, conflict-free
sourcing of minerals from conflict-affected regions). The Minister
outlined what mechanisms were already in place in the UK, and
some aspects of the proposal upon which he would be seeking greater
clarity during the negotiations that are about to begin in the
relevant Council Working Party, and undertook to update the Committee
in due course.
6.16 The previous Committee's initial questions revolved
around why the Minister felt the need to question the use of Article
207 TFEU as the appropriate legal base; how well the OECD Due
Diligence Guidance had been implemented, and its effectiveness,
thus far; why the Minister did not favour a mandatory due diligence
scheme covering all imports, addressing all the relevant metals,
and also targeting finished products; and what he meant by "a
reputational incentive", which he believed would be sufficient
to make the scheme work effectively.[ 32]
6.17 The previous Committee reported his responses
in July 2014 (see our predecessors' Report for details).[ 33]
6.18 At its final meeting, on 24 March 2015, the
previous Committee reported the Minister's most recent update,
in which he said that:
— he
had concluded that Article 207 TFEU was an appropriate legal base,
stating that it "can be construed very broadly", and
noting that "this proposal clearly supports trade measures
and similar proposals have been based on Article 207 TFEU";
and
— how oversight and implementation would
work at the Member State level was still under discussion in the
Working Party on Trade Questions; he would "continue to play
an active role in negotiations"; he had asked the Commission
to investigate the benefits of hosting one competent authority
in the Commission, rather than the 28 Member States hosting one
separate authority each, to ensure a level playing field; and
was also considering proposals put forward by other Member States
that the Commission could produce a "conformity assessment
framework"; in any event, it was, he said, "vital to
avoid duplicating expensive audits" (see our predecessors'
Report for details).[ 34]).
The Minister's letter of 3 August 2015
6.19 The Minister states that there have been have
now been "significant recent developments on this dossier
in the European Parliament (EP)", which he outlines as follows:
"Two key elements of the draft Regulation are
that the scheme should be voluntary, and that it should only cover
importers of the relevant resources and not others in the supply
chain. These principles continue to find strong support amongst
the great majority of Member States.
"The EP has now considered and voted on the
draft Regulation in its International Trade Committee (INTA) and
in Plenary and has come to a different view. The INTA amendments,
which were voted through on 14 April, approved a mandatory scheme
for EU smelters and refiners (some of whom may not be importers
and therefore would not have been covered by the Commission's
draft proposal). On 20 May the Plenary voted significant amendments
to that INTA report: the text approved by the Plenary would make
the scheme mandatory all along the supply chain, including 'downstream'
companies (meaning the metal supply chain from the smelters or
refiners to the end use). Among the other significant amendments
in the EP package is the proposition that in the guidelines to
be drafted by the Commission on the implementation of Directive
2014/95/EU (non-financial reporting by large companies), the Commission
should consider including indicators on the responsible sourcing
of minerals and metals. They also recommended that the Commission
submit a legislative proposal within two years to include the
use of performance clauses in national procurement contracts.
The Plenary vote also contained some elements more in line with
our thinking: for example, it stressed that already existing industry
schemes aimed at responsible sourcing could be recognised in the
EU scheme. Most recently, the INTA Committee voted on 14 July
to open trilogue negotiations with the Council and Commission
on the basis of this EP vote.
"Member States have not yet reached political
agreement in the Council. The Commission and the majority of delegations
remain committed to a voluntary scheme covering importers only,
but several issues are outstanding, such as the role of Member
States in the audit process. At the same time, the Commission
and Member States have started discussing the EP amendments mentioned
above."
6.20 The Minister concludes by undertaking to "update
the Committee when there is further news to report".
Previous Committee Reports
Thirty-ninth Report HC 219-xxxvii (2014-15), chapter
11 (24 March 2015), Eighth Report HC 219-viii (2014-15), chapter
6 (16 July 2014) and Forty-sixth Report HC 83-xli (2013-14), chapter
5 (9 April 2014).
30 The US Dodd-Frank Act defines 'conflict minerals'
as colombite-tantalite or coltan (the metal ore from which tantalum
is extracted); cassiterite (the metal ore from which tin is extracted);
gold; wolframite (the metal ore from which tungsten is extracted)
or their derivates that are financing conflict in the DRC, Angola,
Burundi, the Central African Republic, the Republic of Congo,
Rwanda, South Sudan, Tanzania, Uganda and Zambia. Back
31 See Thirty-ninth Report HC 219-xxxvii (2014-15), chapter 11 (24
March 2015). Back
32 See Forty-sixth Report HC 83-xli (2013-14), chapter 5 (9 April
2014) for full details. Back
33 See Eighth Report HC 219-viii (2014-15), chapter 6 (16 July 2014). Back
34 See Thirty-ninth Report HC 219-xxxvii (2014-15), chapter 11 (24
March 2015). Back
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