US ruling on resources may impact Indian businesses
The US court ruling on disclosing use of conflict minerals will have implications beyond the US
Can a court ruling in the US on use of conflict minerals from the Democratic Republic of Congo (DRC) have a bearing on how businesses may be forced to conduct themselves in India and other parts of South Asia—even Myanmar? In a world where matters of business and human rights increasingly intersect, and act as precedence and pressure points for the evolution of activism, community empowerment, corporate behaviour, and even judicial activism, it’s probable.
add_main_imageOn 23 July, a federal court in the District of Columbia upheld a decision of the Securities and Exchange Commission (SEC) requiring businesses to declare use of minerals such as tantalum, tin, tungsten and gold sourced from Congo “or an adjoining country”. If so, the court order mentions, “companies must also submit an additional report to the commission containing a ‘description of the measures taken...to exercise due diligence on the source and chain of custody of such minerals,’ and ‘a description of the products manufactured or contracted to be manufactured that are not DRC conflict-free’.”
Quoting legislation—the Dodd-Frank Act, enacted by the US Congress in July 2010 that directed SEC to implement the conflict mineral ruling—the court ruled that “DRC conflict-free” means that a product “does not contain conflict minerals that directly or indirectly finance or benefit armed groups in the (DRC) or an adjoining country.” And, one way or another, businesses which sourced such minerals for their products must declare on their websites their conflict-infected or conflict-free status.NextMAds
Expectedly, there was protest. A tag team of the National Association of Manufacturers, Chamber of Commerce of the US, and Business Roundtable—lobby groups known to pull policy strings that also affect other economies—took SEC to court. As the 23 July order states, they challenged SEC’s directive as “arbitrary and capricious” and the US Congress-backed ruling as a dilution of freedom guaranteed under the constitution. The court ruled that under all provisions the SEC directive has “reasonable fit”, found fair the “Congress’s objectives in promoting peace and security in and around the DRC”. And so, “…the conflict minerals disclosure scheme that plaintiffs challenge passes muster…”
Irrespective of further contestation, the significance of the ruling cannot be understated. Significantly, human rights watchdog Amnesty International was permitted as “intervenor-defendant” on behalf of SEC. The implication is staggering, and to my mind will have ripple effects beyond the US, and beyond the messy conflict in the Congo and nearby regions.
While, at the very least, it will enhance scrutiny of disclosures by businesses in their filing to SEC and to investors at large about links in the supply chain to situations of exploitation and conflict, organizations that work in the human rights and empowerment spaces worldwide will be further energized to push their agendas. Among other things, Indian businesses with global footprints or global businesses with presence in India—even those that do not require to file declarations with SEC or similar agencies in Europe—could come under greater human rights- and corporate governance-related scrutiny. This will work at various levels: questionable raw material sourcing and land acquisition practices in India, as Vedanta Resources Plc., for example, has already faced for some years; labour relations; workplace safety; exploitation of indigenous communities for profit—the list is as long as business practices and government complicity in such matters permit.
It will not pay for businesses to be isolationist in this regard, because in this world climate change is undeniable.
The Business and Human Rights Resource Centre reports that a Canadian court has ruled that “lawsuits against Hudbay Minerals alleging complicity in human rights abuses at its Guatemalan mine may proceed to trial”. Bunge Ltd, a major North American food processing and agri-business company, is being petitioned by human rights watchdogs to stop buying sugar cane from ancestral lands of Brazil’s Guarani tribe, claiming they have been displaced by big farming and now live in abysmal conditions.
The World Bank has said it will begin investigations in Ethiopia to gauge whether its funding has contributed to policies of forced eviction of locals in favour of foreign investors, particularly those in agri-businesses. It’s a move that will likely travel to other African countries with similar policies, and one that could easily snag Indian interests. Human rights watchdogs are already active in Myanmar trying to ensure greater rights compliance in this next-big-thing among Asian economies.sixthMAds
It’s only a matter of time before India’s increasingly robust indigenous protests against human rights malpractices by businesses find greater global purchase.
Sudeep Chakravarti is the author of Red Sun: Travels in Naxalite Country and Highway 39: Journeys through a Fractured Land. This column, which focuses on conflict situations in South Asia that directly affect business, runs on Fridays. Respond to this column at rootcause@livemint.com
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First Published:25 Jul 2013, 07:17 PM IST
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