New York, March 2, 2011 – Tucked into the sweeping 2,200 page Dodd-Frank Act, two lesser-known provisions are having a profound effect on international efforts to break the cycle of violence, human rights abuses and corruption associated with natural resource wealth.
Both provisions in Dodd-Frank, a broad financial reform law, require publicly traded companies to disclose information related to natural resource extraction. Section 1502 is specifically targeted to addressing the link between conflict and minerals in the Democratic Republic of Congo, while Section 1504 requires all listed oil and mining companies to disclose the revenues they pay to governments.
Rosenblum’s work connects him with both provisions. He began his human rights work in the Congo more than 20 years ago including field missions in the region. For the past 10 years he has been focusing on the impact of the extractive industries on human rights and development, there and in other countries.
“In some countries, oil and mining revenues are a state secret,” said Rosenblum, the Lieff, Cabraser, Heimann & Bernstein Clinical Professor in Human Rights. “That undermines accountability and masks incompetence and corruption. While most leading companies and producing countries have already acknowledged the principle of revenue transparency, Section 1504 eliminates any equivocation.”
While Section 1504 takes aim at one of the endemic problems associated with natural resource exploitation worldwide, Section 1502 seeks to break the link between minerals and conflict by requiring publicly traded companies that use so-called “conflict minerals” to disclose whether they came from the Democratic Republic of Congo or an adjoining country.
Those minerals, including gold, tin, and rarer metals used in cellphones, machine tools and medical equipment, have been acknowledged as subsidizing the mass rapes, murders, and torture that have ravaged the region and contributed to the deaths of millions.
Rosenblum, who travels to the region two to three times a year, spoke in detail about the Congo provisions:
Sec. 1502 is specific to the Congo region. Why confine it that way?
Rosenblum: The measure is fueled by the persistence of graphic horrors. Reports by NGOs and the U.N. showed that mining profits were a constant incentive to violence. Section 1502, which relies entirely on corporate due diligence and disclosure, pushes companies to break the link while avoiding the problems of boycotts and trade restrictions. It doesn’t raise foreign policy tensions and WTO conflicts provoked by other means.
Is the aim to ban the mining of these minerals?
Rosenblum: No. It’s a way of effecting change. You are shaming companies that are getting minerals from there. At this moment, there is no way to support the trade without supporting the violence. For that to change, companies are going to have to start policing the supply chain.
How does that work?
Rosenblum: Companies have to determine whether their products use conflict minerals from the DRC. If they do, then those companies have to undertake substantial due diligence to avoid supporting armed groups that exploit the trade. What makes the law appropriately calibrated to the possibility of effecting change is it doesn’t exist in isolation. Because of processes that the U.N. and NGOs set in motion years ago, this kind of due diligence through the supply chain is possible.
How do you respond to objections that have been raised by companies that say the rule imposes undue burdens and that compliance will be difficult if not impossible?
Rosenblum: NGOs have already done a lot of the work for them. We already know a lot about the supply chain. We know where the focus has to be and where to do the research.
Is this enough to get the Congolese government to act differently?
Rosenblum: In theory, the government has the same goals as Congress: a formalized sector that pays taxes to a central authority rather than a warlord. At the moment, what it has is chaotic, artisanal mining where all the benefits stay with armed groups, whether they are government or rebels.
The goals of the law sound well-intentioned. But isn’t this a lot easier said than done?
Rosenblum: It is true there are issues along the way. The real goal is to change the incentives so that the cost of doing business illegally is so high that it isn’t worth it. It’s a big whip to say to them clean up your act if you want to sell into the reputable companies.
Sec. 1502 has been called the “sleeper provision” of Dodd-Frank. Is it?
Rosenblum: Not really. There was a broad bipartisan spectrum of members of Congress who were interested in trying to break the supply chain between the minerals and the conflict in the Congo. The only surprise was that it found its way into Dodd-Frank.
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