The Dodd-Frank Legislation

Since 2008, the U.S. Congress has considered a number of measures to undercut rebel movements and other negative forces in the Eastern DRC from using the sale of tin, tantalum, and tungsten to fuel conflict in the region. Like the KP, these measures were driven by broad mobilization of civil society actors seeking a regime that would restrain rebels implicated in fuelling violent conflict and widespread human rights abuses in the Great Lakes region. The U.S. Congressional measures also form a part of international initiatives including the due diligence principles adopted by the OECD and the UN sanctions against anybody who engages in the illegal extraction and trade of cassiterite (the ore for tin), coltan (the ore for tantalum), and wolframite (the ore for tungsten) from the Eastern DRC that benefit belligerents from the DRC and neighbouring countries." name="_ftnref1" title="">[1]

In July 2010, the U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly called Dodd-Frank Act). Sections 1502 and 1504 of Dodd-Frank address the problem of conflict minerals originating from the DRC. Section 1502 requires companies under the jurisdiction of the Security and Exchange Commission (SEC) to report annually on whether they are using minerals from the DRC. All companies, regardless of whether they are importing to the U.S. raw or processed minerals, or as finished components, are expected to report on the due diligence they have undertaken to verify their supply chain and avoid conflict-promoting metals.  Section 1504 requires publicly traded oil, gas and mining companies to make project-level disclosures of payments above $100,000 made to governments around the world for the purpose of commercial development of natural resources. Although signed into law in 2010, Sections 1502 and 1504 provisions took effect in August 2012 after the SEC issued the implementation regulations." name="_ftnref2" title="">[2]

            Industry advocates fought vigorously to water down the disclosures in Section 1502, claiming that there would be high compliance costs and that such disclosures would not address the sources of instability in the region. As a result, the SEC gave some reprieve from full disclosures, giving big companies a two-year phase-in period and a four-year phase-in period for small companies. But the SEC remained steadfast on Section 1504 provisions pertaining to project-level disclosures.  Oil companies lobbied against disclosure rules because, they argued, by being transparent, they would not obtain contracts in countries where there are legal prohibitions to disclosures or which prefer to work with companies that are not subject to payment disclosures. The SEC nonetheless rejected these arguments that would have allowed industry exemptions around project-level disclosures, noting that such disclosures would empower citizens to obtain information on how much their governments earn from natural resources." name="_ftnref3" title="">[3]

Dodd-Frank measures have been hailed as a major milestone in the global transparency regimes around conflict minerals. There is equally broad acknowledgment that company disclosures are not sufficient to solve the intractable nature of the conflicts in the eastern DRC without the resuscitation of state institutions." name="_ftnref4" title="">[4]  Since the illegal exploitation of natural resources is a manifestation of state inability to establish its authority across its territory, there have been calls to establish complementary national and regional initiatives that restore security and strengthen governance in the region. As Dizole observed, “Unless Dodd-Frank supports existing internal efforts to deal with the problem, it will not yield positive results. Any semblance of success will be superficial and not sustainable. The Dodd Frank can only succeed if it is supporting and closely integrating with national mechanisms. In the absence of a Congolese designed and owned national strategy to combat the conflict minerals, it is not assured that the Dodd Frank will succeed despite its good intention.” " name="_ftnref5" title="">[5]

The more innovative trend established by Dodd-Frank is the globalization of mandatory disclosure of payments by extractive sector companies. On the eve of the G8 summit in June 2013, the European Parliament and Council agreed on EU Accounting and Transparency Directives that compel oil, gas, and mining companies to publish payments they make to governments and release information on their earnings in each country. Under the new laws, European companies are required to report project-level payments of more than €100,000 made to governments in countries in which they operate, including taxes levied on their income, production or profits, royalties, and licence fees. In addition, the EU directive goes a step further than the Dodd-Frank by including the forestry industry." name="_ftnref6" title="">[6] Similarly mandatory rules of disclosure have already been adopted by the Hong Kong Stock Exchange and Canada has signalled interest in enacting similar legislation. In the aftermath of the EU directives, campaigners for transparency described them as “game-changers for activists fighting poverty” and pledged to push for the replication of such laws in other industries." name="_ftnref7" title="">[7]

" name="_ftn1" title="">[1] T. Vircoulon, “Behind the Problem of Conflict Minerals in DR Congo,” Brussels, The International Crisis Group, 2011;  D. Verbruggen, E. Francq, and J. Cuvelier, Guide to Current Mining Reform Initiatives in Eastern DRC, Antwerp, IPIS, 2011.

" name="_ftn2" title="">[2] Daniel Kaufmann and Veronica Penciakova, “SEC Passes Natural Resource Transparency and Conflict Minerals Rules: The Glass is Fuller than Expected,” Brookings Institution Briefing Report,    August 28, 2012 .

" name="_ftn3" title="">[3] Kaufmann and Penciakova, “SEC Passes Natural Resource Transparency and Conflict Minerals Rules.”

" name="_ftn4" title="">[4] O. Sematumba, “The Mining Economy in Eastern DRC: After Joseph Kabila’s Hammer, Barack Obama’s anvil? In Sematumba, ed., DRC: The Mineral Curse.  Goma. Pole Institute, 2011.

" name="_ftn5" title="">[5] Mvemba Dizole, “Conflict Minerals in the Congo: Let’s be Frank about Dodd-Frank,” Huff Post World, August 22, 2011, .

" name="_ftn6" title="">[6] Mark Tran, “EU’s New Laws will Oblige Extractive Industries to Disclose Payments,” The Guardian, June 12, 2013, .

" name="_ftn7" title="">[7]Mark Tran, “EU’s New Laws will Oblige Extractive Industries to Disclose Payments.”