WASHINGTON – (Reuters) – A federal judge on Monday questioned whether U.S. courts should intervene regarding a rule that forces public companies to disclose if their products contain minerals extracted in the Democratic Republic of Congo, which has been castigated for committing human rights abuses.
Three business trade groups are challenging the “conflict minerals” rule from the U.S. Securities and Exchange Commission, saying it is nearly impossible to track minuscule amounts of such minerals in their supply chains. They also say the rule violates companies’ free speech rights because it makes them engage in “politically charged” speech.
The rule is championed by human rights groups, which say disclosing this kind of information will help socially conscious investors. Opponents say the rule is a compliance nightmare that will cost billions and unfairly tarnish companies’ reputations by forcing them to make political statements about their products.
During roughly three hours of oral arguments, Judge Robert Wilkins of the U.S. District Court for the District of Columbia suggested to an attorney for the trade groups that federal courts should consider deferring to Congress on the matter. “This is a circumstance where a court should really defer to Congress and the executive in an area of foreign policy where the court has no expertise,” he said.
Wilkins did, however, also question whether the SEC properly used its powers to minimize any negative impacts when drafting the rule.
The National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable are challenging the rule, which was called for in an obscure provision of the 2010 Dodd-Frank Wall Street reform law and adopted by the SEC last year.
The case is being watched by the European Union, whose officials are also considering “conflict mineral” rules. The SEC case is not expected to end at the district court, because experts believe it will be appealed, whatever the decision.
The SEC rule in question requires publicly traded manufacturers to disclose whether any tantalum, tin, gold or tungsten used in their products may have originated from the conflict-ridden Democratic Republic of Congo.
Companies captured by the rule must undertake an inquiry to determine the country of origin for the minerals, which are often used in electronic devices such as cell phones.
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