Should the EU follow Dodd-Frank?

Artisanal Mining
Artisanal Mining

For almost twenty years now, the Democratic Republic of Congo (DRC) has been paying a heavy price because of its wealth of natural resources. Despite the signing of peace agreements in December 2002, the East is still plagued by armed violence caused by many rebel groups. They have succeeded in developing a parallel economic activity by smuggling minerals, including coltan which is in great demand on the global electronics market.


For a long time, the international community has placed the need for peace agreements and free elections in the DRC at the head of its political agenda. Therefore, the issue of natural resources, already highlighted in 2001 by an Expert Group of the Security Council, has long been sidelined. The revelation in several UN reports of the involvement of a number of international companies in this trade has led to this issue taking on its current importance.


On 21 July 2010, the President of the United States Barack Obama signed the Dodd-Frank financial reform bill that, in Section 1502, requires U.S. companies buying ore from the DRC to establish whether their products contain conflict minerals by submitting their supply chain to careful scrutiny. Some companies have been implementing this law (that has yet to come into force) since April 2011 by not buying any more Congolese ore. Consequently, the minerals business is almost at a standstill, affecting rebel groups and miners alike.


In fact, this political initiative is the policy approach for a large-scale response on the smuggling of mineral resources in DRC. The idea is to dry up the source of funding for rebel groups in order to force their withdrawal and improve the conditions that are needed for bringing peace to the region. However, these initiatives have been widely criticized on the ground as counter-productive. There ensued a broad debate among international donors, actors in the field and government agencies as to how to create peace in the region. Supporters[1] and opponents[2] of these initiatives are divided.

The former stress the urgency of ending a disastrous humanitarian situation that has lasted for over 16 years. The latter denounce these laws because they affect some of the local population by depriving them of their only income. They say that there are political reasons impelling the rebel groups to fight and only 8% of the mining sites are hosting armed groups [3].


The price of peace in the Congo

Two decades of conflict in Eastern Congo have turned industrial mineral exploitation into a small-scale mining activity, providing a livelihood for millions of Congolese. More than a fifth of the population depend on this activity as their main source of income [4]. The economic situation of these diggers who work for a pittance in horrendous conditions has now become even more difficult. A kilo of cassiterite in South Kivu sells for 3.5 US$, half the price of a year ago. With the exception of the Chinese, all trading posts have closed, further destabilising the balance between supply and demand.


A complex situation that calls for comprehensive measures

Parallel to the measures introduced by the US, there are other approaches to the problem that date back to before the signing of the Dodd-Frank law. Based on Security Council resolutions made between 2003 and 2009, instruments for certification and tracing of minerals have been established. Among the more important are the Certified Trading Chains and the ITRI Supply Chain Initiative that operate together through the International Conference on the Great Lakes Region (ICGLR).     


I had the opportunity to work as an auditor on the minerals certification pilot project in the DRC and to see the real added value that these instruments bring to solving the problem. Firstly, these initiatives bring, paradoxically, a solution to the end of sales. Only through an international verification system will minerals from eastern DRC manage to find vendors. Secondly, these approaches also focus on developing a framework for mining. These initiatives are studying the classification of taxes, legal provisions concerning industrial investment on artisanal mining sites, administrative and material support for the miners, the fight against corruption, the impact on the environment and the control of child labour. Just the setting up of such instruments requires the collaboration of the Congolese state and with it the withdrawal of all military from the mining site. This is something positive since, very often, the DRC’s armed forces (FARDC) are strongly implicated in smuggling. More of a heterogeneous group of rebels, disarmed and remobilized than a regular national army, the FARDC are known for their involvement in illicit traffic by seizing minerals straight from the mine or by imposing safety "taxes" on the miners.


In its latest report of December 2011, the UN Group of DRC Experts notes that the effect of the Dodd-Frank law was a general decrease in the income of armed groups and other criminal networks. It also reports an improvement in governance of the mining sector in the zones where the outlets and traders have introduced tracing systems.


However, the report highlights a deterioration in the zones where none of these measures has been set up. This is linked with an increase in smuggling by the FARDC and other armed bands. The report mentions that, to make up for declining income, these groups have turned to smuggling gold, a mineral that is difficult to trace, and also to other natural, non-mineral resources. Opportunities for artisanal miners to survive Dodd-Frank by turning to agriculture are limited, too, because the rebel groups also threaten their incomes from crops.


From these observations, it would seem that the certification and tracing measures may be able to overcome the major downside of the Dodd-Frank which is the slowing down of business activity on mining sites that are unaffected by the trade in illegal ores. Legislation imposing restrictions on international companies is not enough as it does not help the Congolese themselves prove the source of their minerals. Today’s situation in the East of the country is the result of a weakness in the state apparatus where the corrupt administrative authorities favour parallel trade networks and hamper any socio-economic development and where the armed forces generate insecurity. Only a practical approach on the part of the international community based on good governance, reform of security services and consolidation of legal systems can enable the Congolese state to solve, on its own terms, the problem of the unofficial armed groups. It is within this framework for action that the certification and ore-tracing measures are taking place.


The EU seeks an answer from Dodd-Frank


At a European level, the link between the mining sector and development is very clear in the Action Plan for 2011-2012 for the Joint Africa-Europe Strategy. It refers to the need to promote the mining business, if there is to be coherent development. Also, in response to the situation in Eastern Congo, the European Parliament has highlighted the need to adopt legislation similar to Dodd-Frank. This was a resolution concerning the Africa-European Union Strategic Partnership, dated 15 December 2010 and following the third EU-Africa summit.


The EU may have addressed the issue, but it remains unclear as to what extent it should align itself with U.S. law. The issue calls for action because the European market is one of the main consumers of Congolese minerals. If such a text is necessary, it must go beyond Dodd-Frank. Nick Westcott, managing director of the European External Action Service, affirmed in a speech on 18 October 2011: “As the DRC illustrates, achieving peace is about more than stopping war.  It is about building institutions that are robust enough to preserve that peace and those freedoms [5]".


That is why a European law on the issue must include and support the efforts of certification and tracing made by actors in international civil society and in the producer countries of the Great Lakes Region. In this connection, it is worth noting that the ICGLR is the only organisation to work simultaneously on reforming governance, on the security sector and on development in the Great Lakes Region and to have developed a regional initiative against the exploitation of natural resources. Moreover, the tracing and certification efforts were approved in December 2010 in Lusaka by the Heads of States of the region, indicating that the issue is being addressed seriously in the field.


Finally, European legislation is vital to encourage the other countries to play the game. There must be international coherence if a distortion of competition is to be avoided and if the necessary pressure is to be put on the providers in the DRC. European and Asian companies should be bound by the same regulations as the US companies. This is all the more true seeing as the last report of the UN Group of Experts on the DRC showed that Chinese trading posts are buying minerals from criminal networks.



Sébastien Porter



[1] Bahati Jacques & Hall Aaron, “US Conflict Mineral Law Opens the Door to Peace in the DRC”,

[2] Aronson David, “How Congress Devastated Congo”, The New-York Times, 7th August 2011,

[3] Seay Laura E., “What’s Wrong with Dodd-Frank 1502? Conflict Minerals, Civilian Livelihoods, and the Unintended Consequences of Western Advocacy”, Center for Global Development, Working Paper n°284, January 2012, Washington D.C, p 17-19.

[4] Garrett Nicholas, “The Extractive Industries Transparency Initiative (EITI) & Artisanal and Small-Scale Mining (ASM)”, Extractive Industries Transparency Initiative, 22 October 2007, p 6.

[5] For the full speech, see:

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