The SEC's final conflict minerals rule continues to present challenges for a vast number of businesses that are struggling to comply with its complex supply chain accountability requirements, meant to discourage the exploitation of mineral resources in central Africa that are funding ongoing violence and human rights violations in the Democratic Republic of the Congo. For background on the conflict minerals rule, see previous blog posts and webinars.
A May 21 hearing of a subcommittee of the House Financial Services Committee, entitled "The Unintended Consequences of Dodd-Frank's Conflict Minerals Provision," heard testimony from several witnesses who questioned the rule's effectiveness in reducing violence in the "Great Lakes" region of Africa.
One witness, journalist David Aronson, criticized the rule as a "case study in how good intentions can go awry, particularly when a compelling activist-sponsored narrative substitutes for considered and timely analysis," and blamed activists for "policy prescriptions that damaged an already tenuous economy, entrenched the position of the warlords, and accomplished little by way of resolving the conflicts." A second witness, Mvemba Dizolele, a Visiting Fellow from the Hoover Institute on War, said there is no evidence the new rule has reduced violence; "in fact, the emergence of the M23 militia last spring, which escalated tensions in the Great Lakes, is proof that this law has little bearing on war entrepreneurs." Taking the other side of the argument, Sophia Pickles of Global Witness, one of the advocacy groups that pressed for the conflict minerals rule, said that "just five months into the law's first reporting year, it is too early to measure the impact of due diligence on a wide scale. However, in sites where closed-pipe supply chains have been set up, there are indications that the implementation of due diligence is helping to establish and safeguard conflict-free supply chains." Copies of the Congressional testimony are available here.
Meanwhile, a legal challenge to the SEC rule encountered a procedural setback in late April when it became clear that the U.S. Court of Appeals for the D.C. Circuit would not hear the case on direct review. Following a successful motion for transfer to federal district court, the case is now set for oral argument July 1. The most recent District Court order is available here.
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