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Breaking the links between conflict and natural resources: How EU financial regulation can help

For over a decade, the United Nations Group of Experts on the Democratic Republic of Congo has been reporting on the connection between the minerals trade, armed conflict and human rights violations. International solidarity groups and human rights activists have also been very active in addressing this link and proposing policy measures, in the Democratic Republic of Congo and elsewhere. Colombia, the Central African Republic, Angola, Myanmar are frequently cited as conflict-ridden countries where revenues coming from the extraction and trade of natural resources have been financing human rights abuses. Armed guerrillas, State security groups and corrupt officials hiding behind opaque company ownership structures have been financing their criminal activities through the illegal exploitation of natural resources that end up as manufactured products in the hands of industries, consumers and citizens. The global nature of supply chains imply that natural resources sourced from conflict-areas can, directly and/or indirectly, contribute to cause harm and havoc. The better understanding of the links between natural resources and conflict and the growing research-based evidence of those links are building a consensus in favour of a better international and European regulation on responsible sourcing of minerals and natural resources.

 

However, only after a specific section (1502) on conflict minerals of the US financial reform legislation –commonly known as the Dodd-Frank Act– was passed in July 2010, companies sourcing from Central Africa started to take a closer look at what was going on in their supply-chains. In spite of the many weaknesses and uncertainties regarding the implementation aforementioned law and other regional and private initiatives, European institutions, business and citizens must learn from the experience and push for a legislation that, at minimum, meet international standards endorsed by the United Nation and the OECD and reflect the principles contained in the EU´s Corporate Social Responsibility strategy.

 

On the 5th of March 2014, the European Commission published a draft of such legislation. Unfortunately, its most controversial feature is that it does not require legal compliance, setting up a voluntary system for European companies to conduct Due Diligence on their supply chains and, thus, failing to fully regulate a market that currently represents 25 per cent of the global trade in conflict minerals and 15 per cent in gold. Two positive features of the proposal are: its global geographical scope (it does not confine itself to Central Africa) and its use of public procurement as an incentive for companies to opt-in. The proposal will be examined by the Council and the new Parliament that will result from the coming European elections on May 25.

Alicia Aleman Arrastio is a research and advocacy officer at ALBOAN Foundation.

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