A US appeals court has ruled that the SEC can’t oblige companies to disclose whether their products have minerals from conflict zones in the Democratic Republic of Congo (DRC), stating that doing so would infringe on the free speech of corporations.
The US Court of Appeals for the District of Columbia Circuit ruled two to one in favor of the National Association of Manufacturers, the US Chamber of Commerce and Business Roundtable, which argued that the ruling violated corporate free speech protections by forcing corporations to speak out against their own products.
The court ruled that the SEC – which created the rule to comply with the 2010 Dodd-Frank Wall Street reforms – and Congress had no argument for obliging companies to state whether they are ‘DRC conflict-free’. The court also ruled against the SEC amendment last year but agreed to accept an appeal after it upheld a US Department of Agriculture rule requiring country-of-origin labeling for meat.
‘Under the First Amendment, in commercial speech cases the government cannot rest on speculation or conjecture,’ the court said. ‘But that is exactly what the government is doing here. Before passing the statute, Congress held no hearings on the likely impact.’
Under the ruling, companies will still have to conduct due diligence regarding their use of minerals from conflict zones and file their findings to the SEC, but they will not have to state whether their products are conflict-free.
The court also notes that the conflict minerals law ‘may have backfired’ by harming poor workers in the DRC and helping the rebel combatants the law is supposed to punish: ‘Because of the law, and because some companies in the US are now avoiding the DRC, miners are being put out of work or are seeing even their meager wages substantially reduced, thus exacerbating the humanitarian crisis and driving them into the rebels’ camps as a last resort.’
