The EU Conflict Minerals Regulation (the “CMR”), formally Regulation 2017/821 of 17 May 2017 laying down supply chain due diligence obligations for importers in the European Union of tin, tantalum, tungsten, and gold (“3TG”) originating from conflict-affected and high-risk areas, came into force on 1 January 2021, with the aim of stopping the financing of armed groups and security forces through the trade of 3TG from conflict-affected and high-risk areas.
Although the CMR is directly applicable in the EU, a number of aspects must be implemented and further developed by the Member States. To this end, the Belgian Government introduced a Bill before the Belgian Parliament on 9 December 2021, which was made public on 21 December 2021 (the “Bill”).
The CMR’s main objective is to break the link between human rights violations and the financing of armed groups in conflict and high-risk areas, on the one hand, and the trade in these minerals and metals, on the other hand. To achieve this goal, the CMR imposes due diligence obligations on natural and legal persons when importing certain goods in the European Union if they import more than the fixed threshold on an annual basis. These obligations include, among others, management systems, risk management, independent third-party audit and disclosure requirements.
Companies have to determine which countries constitute conflict-affected and high-risk areas (“CAHRAs”) under the CMR. However, the European Commission published in 2018 non-binding guidelines on the identification of CAHRAs and other supply chain risks under the CMR and provides an indicative and non-exhaustive list of CAHRAs which is regularly updated.
The CMR encourages compliance with international guidelines for the responsible procurement of these minerals and metals both within and outside the European Union and it builds on other initiatives involving the European Union, in particular the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, which provides recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices.
For more detail on the CMR, see our previous client briefing.
As indicated, the CMR has been fully applicable to EU importers since 1 January 2021 and has already been implemented by a number of Member States, including for example Italy and Germany.
EU Member States and their competent authorities are responsible for ensuring the effective and uniform implementation of the CMR. They must establish rules applicable in the case of infringement of the CMR, carry out the necessary ex-post controls and publish warning notices specifying the corrective measures to be taken by importers in the EU when an infringement is found. In addition, Member States are required to submit an annual report to the European Commission on the implementation of the CMR.
To this end, the Belgian Bill aims to implement the CMR by providing for:
- The designation of the Belgian Federal Public Service Economy and Energy (the “FPS Economy”) as the competent national authority to implement the CMR. The Bill indicates that an implementation royal decree will further determine which officers are responsible for monitoring compliance with the provisions of the CMR and that the appointed officers will be granted the general powers of investigation referred to in Book VX of the Belgian Code of Economic Law for the breaches to the same.
- The further elaboration, if necessary, of measures allowing the control of the compliance with the provisions of the CMR. The Bill mentions that an implementation decree could impose conditions or criteria to be met by independent third-party audits to ensure the quality of the audit.
- The laying down of rules and sanctions applicable in case of infringement of the CMR. A new execution procedure has been developed in the Bill, similar to the existing procedure contained in Book XV of the Belgian Code of Economic Law.
The Bill foresees that, if an infringement to the CMR is found during an inspection, a warning notice is sent to the offender with details the alleged violation(s). The notice may request the offender to cease the violation(s) and, if necessary, take one or more of the following actions: prepare an action plan outlining the steps to be taken to remedy the violation(s) of the CMR; conduct a new audit; or disclose information. The action plan must contain concrete actions to comply with the CMR and specify the deadlines within which these actions will be carried out.
If they are not satisfied with the action plan, the officers of the FPS Economy can request that the offender submits a new action plan within a fixed deadline or modify the action plan themselves by adding one or more actions, modifying the actions and/or adapting the deadlines.
Finally, the officers of the FPS Economy have the ability to impose an administrative fine on offenders who have violated the CMR and did not comply with a warning notice, did not present or respect the requested action plan, did not carry out the requested audit and/or did not communicate the requested information. The FPS Economy may also impose an administrative fine on offenders who obstruct or impede the compliance controls carried out by the relevant officers.
The amount of the administrative fine must be between EUR 250 and EUR 50,000 and will be set taking into account all relevant circumstances, in particular:
(i) the gravity and duration of the infringement(s);
(ii) the financial capacity of the offender (as shown by the total turnover of a legal person or the annual income of a natural person);
(iii) the degree of cooperation of the offender with the relevant authorities; and
(iv) any previous offences committed by the offender.
The Bill does not (at least at this stage) provide for criminal sanctions.
An implementation decree will further specify which officers are responsible for imposing administrative fines on potential offenders and which procedural rules apply to the review of those fines.
What to expect next?
The ball is now in the court of the Belgian Federal Parliament, and amendments may still be tabled by MPs.
As indicated, a number of rules will have to be further specified in one or more implementation royal decree(s), to be adopted by the Federal Government.
By 1 January 2023, and every three years thereafter, the European Commission will review the effectiveness of the CMR. This evaluation may lead to the imposition of additional mandatory measures, as well as a possible extension of the options Member States have available to sanction any persistent non-compliance with the CMR.
Companies falling within the scope of the CMR and active in Belgium should thus be on the lookout in the next months… and years!
Broader environment and human rights due diligence obligations may also be imposed on Belgian companies by the Vigilance Plan Bill, currently under discussion before the Commission of Economy of the Federal Parliament, and a forthcoming EU mandatory due diligence directive, for which a long-awaited proposal has been (once again) postponed to Q1 2022 (see here). Linklaters will be following these developments closely.