Documents considered by the Committee on 6 January 2016 - European Scrutiny Contents


7   Minerals originating in conflict-affected and high-risk areas: an integrated EU approach

Committee's assessment Legally and politically important
Committee's decisionNot cleared from scrutiny; further information requested; drawn to the attention of the International Development Committee, Foreign Affairs Committee and Business, Innovation and Skills Committee
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
Legal base(a) Article 207 TFEU; QMV; ordinary legislative procedure; (b) —
DepartmentForeign and Commonwealth Office
Document Numbers(a) (35879), 7701/14 + ADDs 1-9, COM(14) 111

(b) (35908), 7704/14, JOIN(14) 8

Summary and Committee's conclusions

7.1  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.[57]

7.2  The 2011 OECD Due Diligence Guidance sets out a process to be followed by countries interested in developing responsible sourcing capabilities. In 2011, the EU took a political commitment in the OECD framework to support the further uptake of the Guidance.[58]

7.3  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.

7.4  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.

7.5  In the summer, the Minister for Europe (Mr David Lidington) reported 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 — continued "to find strong support amongst the great majority of Member States", the European Parliament (EP) had "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)".

7.6  We retained both documents under scrutiny. We reiterated 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 was 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 was proposing that those trilogue negotiations should be based on this EP vote.

7.7  Given that there was now a fundamental difference of approach between the Government, Commission and most Member States and the EP and suggestions that there should be requirements concerning non-financial reporting by large companies and national procurement contracts, we also asked for any views that the International Development, Foreign Affairs and Business, Innovation and Skills Committees might have about the EP's "package".[59]

7.8  Most recently, the Minister reported that the Government's position had not changed: it supported a voluntary scheme for importers, which recognised rigorous existing industry schemes, offered support for SMEs to carry out supply chain due diligence and did not allow a de facto embargo on conflict-affected areas to develop. The Commission had noted that "the mood in the Council was in favour of a light-touch regulation which avoided excessive red tape".

7.9  The Government remained concerned by the proposal that designated competent authorities in the Member States would be made responsible for the application of this Regulation; the Minister stated that a number of other Member States shared its concerns about cost and uniformity of implementation.

7.10  On timing, the Minister said that agreement in the Council was likely to be reached before Christmas, allowing trilogue negotiations to begin shortly afterwards; apologised for not being able to provide a more detailed exposition; assured the Committee that the Government was following the negotiations extremely closely; and undertook to "update the Committee when there are further developments".

Our assessment

7.11  We noted that the Minister had nothing to say about other Member States' and the Commission's current views on the EP's proposed "package".

7.12  We asked the Minister to ensure that his next update was in good time for any questions that might continue to arise, to be put and answered, before any decision was taken in COREPER or at the Council about the basis upon which the trilogue negotiations should proceed (c.f. paragraph 7.6 above). We could see no overriding reason why those negotiations must begin shortly after Christmas: what was much more important in our estimation was that the Government's position be fully known, and properly scrutinised, beforehand, especially given the EP's divergent views.

7.13  In again drawing these developments to the attention of the International Development Committee, Foreign Affairs Committee and Business, Innovation and Skills Committee, we noted that the timeline within which we could convey any views that they might have from their more expert perspective (c.f. paragraph 7.6 above) was now more pressing, and invited them to convey any such views to us as soon as possible.

7.14  In the meantime, we continued to retain the documents under scrutiny.[60]

7.15  In a letter dated 14 December 2015 and received on the 15 December, the Minister now says that a revised text circulated on 10 December is due to be agreed by silence procedure on 16 December, with a view to COREPER[61] agreeing a mandate for trilogues on 21 December.

7.16  He reports that the majority of Member States and the Commission "broadly share" the UK's views that the EP's call for a mandatory downstream due diligence scheme is unacceptable; but also says that "some of their other proposals are welcome". The Presidency compromise proposal thus proposes a voluntary scheme for EU importers; "in general", it "sticks close to" the original Commission text published in March 2014, but there are also various "number of points welcome to the UK by comparison with the original Commission proposal", a number of which are taken from the EP's amendments (see "Background", paragraph 7.30 for details).

7.17  The Minister would nonetheless "be surprised if this text passed through the trilogues process unamended", and is "therefore analysing the various possibilities that might emerge from that process, and what might be acceptable to the UK".

7.18  The Minister now regards the Commission's explanations for their preference for a Competent Authority in each Member State as "reasonable", and is "prepared to accept their arguments" (see "Background", paragraph 7.32 for details).

7.19  Finally, on the basis that the Government's position has been under scrutiny for a considerable period; his regular updates and answers to the questions raised by the Committee "have been informative, within the limits necessary to keep Council discussions confidential"; and the fact that the International Development Committee, Foreign Affairs Committee and Business, Innovation and Skills Committee have not raised any questions or concerns over the draft Regulation or the Government's approach to it, the Minister asks the Committee "again to clear this Regulation from scrutiny".

7.20  We cannot agree to the Minister's request. It may well be that, with the revised text now containing points welcome to the UK, some having been put forward by the EP, an acceptable outcome is foreseeable. However, as the Minister himself indicates, this is far from the end of the story; instead, "various possibilities" might emerge from the trilogue process, and "what might be acceptable to the UK" is thus not at all clear.

7.21  We expect the Minister to update us fully, in a timely fashion, at each such stage, viz:

·  to provide regular updates, prior to any decision point, with as much information as possible about progress, without breaching the limité constraints; and

·  before any text goes to the Council for adoption, deposit it along with a further EM explaining how it differs from the one originally deposited and how it meets and satisfies UK and EU objectives and interests.

7.22  We would also like to know if the Commission/EEAS intend to take forward any further aspects of the Joint Communication (c.f. paragraph 7.4 above).

7.23  We again draw these developments to the attention of the Business, Innovation and Skills Committee, Foreign Affairs Committee and International Development Committee, who will no doubt note the Minister's comments.

7.24  In the meantime, both documents remain under scrutiny.

Full details of the documents: (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: (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

7.25  The full background thus far is set out in detail in our predecessors' three earlier Reports.[62]

The Minister's letter of 14 December 2015

7.26  The Minister for Europe recalls that the Committee asked him to make sure that his next update was in good time for any questions that might arise to be answered before any decision was taken in COREPER about the basis upon which the trilogue negotiations should proceed; and that the Committee noted the importance of the Government's position being fully known and properly scrutinised, and says:

"COREPER is due to agree a mandate for trilogues on 21 December 2015, based on a revised text circulated on 10 December. A silence procedure on this text is due to end on 16 December."

7.27  With regard to other Member States' and the Commission's current views on the European Parliament's (EP's) proposed package, the Minister says:

"It is clear that the majority of Member States and the Commission broadly share the UK's views on the draft regulation and the EP's proposals, i.e., that the EP's call for a mandatory downstream due diligence scheme is unacceptable but that some of their other proposals are welcome."

7.28  The Minister then describes the most recent Presidency compromise proposal, which was circulated on 10 December 2015, thus:

"a voluntary scheme for EU importers and in general sticks close to the original Commission text published in March last year. But it also contains a number of points welcome to the UK by comparison with the original Commission proposal, a number of which are taken from the EP's amendments.

7.29  The Minister says that the most significant changes from the original Commission proposal are that it:

—  "paves the way for recognition of existing sector-specific due diligence schemes, so as to avoid duplication (suggested by EP);

—  "exempts importers of smelted and refined metals from the requirement for a third party audit, as long as they import from a certified responsible smelter or refiner (suggested by EP);

—  "excludes recycled products from the scope of the scheme (suggested by the EP);

—  "envisages a lead-in time of two years while businesses and Member States prepare for the scheme (suggested by the EP); and

—  "lessens the burden on small businesses who want to join the scheme."

7.30  However, he then says:

"Despite our positive view of this proposal, we would be surprised if this text passed through the trilogues process unamended. We are therefore analysing the various possibilities that might emerge from that process, and what might be acceptable to the UK."

7.31  The Minister then turns to the matter of whether there should be a Competent Authority in each Member State. He recalls the Government's opposition to this Commission proposal, "on the grounds that cost and uniformity of implementation may render preferable one single competent authority, housed by the Commission". He then says:

"The Commission has opposed this, insisting that it would need additional resources to administer the scheme; and that any issues surrounding uniformity of implementation with a competent authority in each Member State could be solved by means of the Comitology procedures envisaged in the Regulation. At the Working Party on 9 December there was no support from Member States to keep pressing for a single competent authority. Having now heard the Commission's explanations on uniformity of implementation in more detail, and being satisfied that the cost of implementation for Member States is reasonable, we now judge that the Commission's explanations for their approach are reasonable and are prepared to accept their arguments."

7.32  Finally, the Minister asks the Committee to clear this Regulation from further scrutiny, as follows:

"I hope you will agree that the Government's position has been under scrutiny for a considerable period, and that my regular updates and answers to the questions raised by the Committee have been informative, within the limits necessary to keep Council discussions confidential. I am grateful to you for bringing this matter repeatedly to the attention of the International Development, Foreign Affairs and Business, Innovation and Skills Committees. To my knowledge the Committees have not raised any questions or concerns over the draft Regulation or the Government's approach to it."

Previous Committee Reports

Tenth Report HC 342-x (2015-16), chapter 3 (26 November 2015) and Fourth Report HC 342-iv (2015-16), chapter 6 (16 September 2015); also see 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).


57   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 derivatives 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

58   See Tenth Report HC 342-x (2015-16), chapter 3 for more details. Back

59   Fourth Report HC 342-iv (2015-16), chapter 6 (16 September 2015). Back

60   Tenth Report HC 342-x (2015-16), chapter 3 (26 November 2015. Back

61   COREPER, from French Comité des représentants permanents, is the Committee of Permanent Representatives in the European Union, made up of the head or deputy head of mission from the EU member states in Brussels. Its job is to prepare the agenda for the ministerial Council meetings; it may also take some procedural decisions. It oversees and coordinates the work of some 250 committees and working parties made up of civil servants from the member states who work on issues at the technical level to be discussed later by COREPER and the Council. It is chaired by the Presidency of the Council of the European Union. There are in fact two committees: COREPER I consists of deputy heads of mission and deals largely with social and economic issues; COREPER II consists of heads of mission (Ambassador Extraordinary and Plenipotentiary) and deals largely with political, financial and foreign policy issues. Back

62   See 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). Back


 
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Prepared 15 January 2016