Congressional Democrats Seek to Bolster SEC Rule on Conflict Minerals
By Douglas Gillison | March 11, 2013 8:13 am

Led by Sens. Dick Durbin (D-Ill.) and Barbara Boxer (D-Calif.), twelve congressional Democrats last Friday joined three activist organizations and U.N. experts in coming to the defense of a new government rule on the trade in minerals thought to fuel war in the Congo.

In friend-of-the-court briefs filed in the federal court for the District of Columbia, the new amici reject an industry lawsuit brought in October seeking the vacation of a rule adopted by the Securities and Exchange Commission. The rule, adopted in August, requires that manufacturers declare whether mineral content in their goods may have been acquired from trade supporting the conflict in the Democratic Republic of Congo.

In addition to the lawmakers, briefs were filed by the human rights organization Amnesty International, who have been recognized as intervenors in the suit, by Better Markets, a non-profit promoting financial reform, and by environmental transparency campaigners Global Witness.

Global Witness was joined by Fred Robarts, the former coordinator of the U.N. Group of Experts on the Democratic Republic of Congo, and Gregory Mthembu-Salter, a former member of the group.

Adopted in August, the rule was mandated by the 2010 Dodd-Frank financial reform legislation and is meant to help end the conflict in the Congo, which observers have said is in large part driven by the trade in the highly prized commodities that are regulated by the rule: gold, tantalum, tin and tungsten.

The minerals are used in the electronics industry.

The rule is expected to cost between $3 billion and $4 billion for compliance in its first year for about 6,000 companies. A widely cited death toll holds that 5 million people have been killed in the conflict since 1998, making it the deadliest since World War II.

The October lawsuit, brought by the National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable, claims the SEC failed in a duty to weigh the costs and benefits of its rule properly and should have included an exemption for trade amounts of the regulated minerals.

The amici who joined the arguments on Friday described the industry position as a belated and repeated attempt to achieve goals that had already been rejected by Congress and the SEC.

“Within 14 months of the law passing, over 500 mines in Rwanda and the Congo were producing over 550 tons of conflict-free minerals per month, replacing a substantial percentage–as much as 40 percent–of what was being mined in the black-market before the law passed,” said the lawmakers’ brief.

“[H]aving failed to obtain these exemptions from Congress and having failed to get those same desired exemptions during the rule-making process, NAM comes before this court seeking a third bite at the apple.”

The brief asserted that Samsung Electronics Co. Ltd., Ford Motor Co., Texas Instruments Inc. and Koninklijke Philips Electronics NV, commonly known as Philips, had committed to compliance even before the rule was in force.

In addition to Durbin and Boxer, the brief by lawmakers was submitted by former Sen. Russ Feingold (D-Wis.), Rep. William Lacy Clay (D-Mo.), Rep. Keith Ellison (D-Minn.), Rep. Raul Grijalva (D-Ariz.), Rep. John Lewis (D-Ga.), Rep. Ed Markey (D-Mass.), Rep. Jim McDermott (D-Wash.), Rep. Gwen Moore (D-Wis.), Rep. Maxine Waters (D-Calif.) and former Rep. Howard Berman (D-Calif.).

All said they had played a role in advancing legislation to disrupt the flow of money from the conflict minerals trade into the hands of combatants in the DRC.

Amnesty International said the SEC was not required to perform the sort of cost-benefit analysis sought by the plaintiffs.

“The agency was neither required nor even permitted to reassess the humanitarian benefits stemming from Section 1502,” the Amnesty brief said. “Nor was the SEC required to determine that all costs of the mandatory rule had corresponding benefits, or to quantify all benefits.”

Better Markets advanced a similar argument, saying Congress had imposed a “limited duty” on the SEC to consider the economic consequences of securities laws: “Requiring the SEC to conduct cost-benefit analysis for every rule would severely hamper the agency’s ability to implement Congress’s statutory directives and ultimately protect the public interest.”

Global Witness likewise sought to undermine the plaintiffs’ central argument about cost-benefit analyses. The organization also included detailed arguments as to the benefits the organization said that the rule would bring about, noting that the Congolese state in Kinshasa had itself passed laws requiring supply-chain due diligence to match practices favored by the Organization for Economic Cooperation and Development.

The conflict minerals rule “has generated regional momentum for harmonizing and implementing monitoring systems” in the sector, according to the Global Witness brief, which said that an organization of regional states known as the International Conference on the Great Lakes Region was developing a regional mineral certification system.

Oral arguments are scheduled for May 15.

The Democratic lawmakers are represented by Agniezska M. Fryszman and Thomas N. Saunders of Cohen, Milstein, Sellers & Toll PLLC. Amnesty International is represented by Julie A. Murray, Adina M. Rosenbaum and Scott L. Nelson of the Public Citizen Litigation Group.

Dennis M. Kelleher, president and CEO of Better Markets, represents his organization along with Stephen W. Hall and Katelynn O. Bradley.

Global Witness is represented by Jodi Westbrook Flowers, Michael E. ElsnerVincent I. Parrett and Brian T. Frutig of Motley Rice LLC.

The plaintiffs are represented by Peter D. Keisler, Jonathan F. Cohn and Erika L. Myers of Sidley Austin LLP.

SEC Senior Counsel Daniel Staroselksy has answered for the government.

The case is National Association of Manufacturers, U.S. Chamber and Business Roundtable v. Securities and Exchange Commission, 12-1422, in the U.S. District Court for the District of Columbia.

Previous coverage by Just Anti-Corruption:

Monday, March 4, 2013
Tuesday, January 29, 2013
Friday, January 18, 2013
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