If you thought you could get away without implementing a conflict minerals compliance program because the US Court of Appeals was going to throw the rule out, you'd better take a second look at that strategy.
That's because the same court hearing a similar case ruled in April that it lacked jurisdiction to hear the case, leaving the rule intact.
For those of you completely in the dark, the US Securities and Exchange Commission adopted in August 2012 a regulation under Section 1502 of the Dodd-Frank Act that requires publicly traded companies to annually disclose information on the source of conflict minerals — including tantalum, tin, gold, or tungsten sourced from covered countries, mostly in Africa — contained in their products. Companies will have to begin to file this with the SEC information in 2014, based on 2013 data, and to disclose that information on their websites.
Several reports, including this EBN blog, authored by Brian Fuller, have disclosed that many companies have not done enough to prepare for this new compliance regime.
Last October, the National Association of Manufacturers and others filed a petition with the US Court of Appeals for the DC Circuit, challenging the validity of the rule on the grounds that the SEC failed to consider alternatives that could have reduced the burden of compliance.
Meanwhile, another set of petitioners challenged the “resource extraction rule,” adopted by the SEC under Section 1504 of Dodd-Frank. That rule also requires disclosure, in this case of payments to governments — “made to further the commercial development of oil, natural gas, or minerals” — that do not share the wealth with their people.
The rule was pushed by human rights organizations, but business groups objected to the rule, arguing that compliance would cost too much, would not provide value to investors, and that the SEC's cost/benefit analysis was faulty.
In April, in the case American Petroleum Institute v. SEC, the DC Court of Appeals ruled that it didn't have jurisdiction to consider the challenge to the resource extraction rule and that only the district court, and not the court of appeals, has jurisdiction to consider such a challenge in the first instance.
The petitioners in the American Petroleum Institute case also filed a complaint in the district court, so the challenge will continue there. Not so in in NAM v. SEC. Although the SEC agreed that the court of appeals had jurisdiction to hear the case, the court may disagree. And in light of the court's ruling in the other case, it looks like the court will disagree.
Oral arguments in NAM v. SEC took place on May 15 and a decision expected in a few months. In light of April's ruling, it doesn't look like detractors of the conflict minerals rule will get what they hoped for.
And that means that the time line to start compliance activities is only growing shorter. So for those not already doing so, it's time to get cracking.