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Conflict Minerals (Compliance) (Northern Ireland) (EU Exit) Regulations 2020

Volume 808: debated on Wednesday 2 December 2020

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Conflict Minerals (Compliance) (Northern Ireland) (EU Exit) Regulations 2020.

Relevant document: 31st Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument)

My Lords, these regulations, laid on 15 October, are necessary for the application

“to and in the UK in respect of Northern Ireland”

of the EU Conflict Minerals Regulation, which is listed in Annexe 2 of the Northern Ireland protocol. The regulation establishes the due diligence obligations of the largest importers of tin, tantalum, tungsten, and gold, or “3TG”. Supply chain due diligence here is absolutely crucial. A large proportion of these so-called conflict minerals originate from conflict-affected and high-risk areas. The EU regulation makes voluntary guidance set by the OECD mandatory. It aims to break the link between armed conflict and the exploitation of 3TG and to put an end to abuses of local communities, including mine workers, which are often linked to violations of human rights.

Parts of the EU Conflict Minerals Regulation have applied in the UK since 2017. However, its key operative provisions do not apply until 1 January, after the end of the transition period. These include the relevant obligations on business and member state competent authorities to ensure its effective implementation throughout the EU. Those key provisions will not take effect in Great Britain and will not form part of retained EU law. The regulations we laid before Parliament make that provision for Northern Ireland, as required under the protocol, and establish an enforcement framework for non-compliance.

This means that from the 1 January 2021, the largest importers into Northern Ireland of tin, tungsten, tantalum and gold will need to demonstrate due diligence to ensure that their imports have been mined and processed responsibly. They will have to demonstrate that they are managing any risks that their supply chains are linked to human rights violations or to the fuelling of conflict.

To enforce this in Northern Ireland, we are proposing powers for the Secretary of State to require businesses to report on their due diligence systems. The regulations also make provision for inspectors to enter business premises to inspect documents, data and records. These powers are necessary to ensure that the largest importers of “conflict minerals” into Northern Ireland do so in a way that is fair to everyone in the supply chain.

The regime follows a civil sanctions route and provides for a power to issue civil compliance notices and financial penalties where businesses do not comply. The decision to impose a financial penalty may be appealed to the First-tier Tribunal. The regime does not impose penalties for substantive breaches of due diligence obligations, as this is considered outside the scope of the EU Conflict Minerals Regulation. As required by the regulations, we will publish guidance at the earliest opportunity on how the civil sanctions will be used.

We accept the comments by the Joint Committee on Statutory Instruments that Regulation 8, which enables the Secretary of State to serve a notice requiring “a person” to produce information, is only enforceable against “Union importers”—importers into Northern Ireland—and that the regulations do not make provision for enforcing a requirement under Regulation 8 that is imposed on a person who is not a “Union importer”. We also accept as a point of principle that the imposition of obligations in statutory instruments should be accompanied by enforcement measures with equivalent scope.

It is necessary for these regulations to be made before the end of the transition period to meet the UK’s obligations under the Northern Ireland protocol. We are proceeding with the regulations as currently drafted but will bring forward as soon as possible amending legislation to amend Regulation 8, as I said.

This amendment will make explicit that the power to require the production of information can be exercised only in relation to a “Union importer”—an importer into Northern Ireland. In the meantime, the Secretary of State undertakes not to exercise the power to require production of information under Regulation 8 against persons other than “Union importers”. When the amending regulations are laid, they will also implement some minor administrative and clarifying corrections.

Our intention through these regulations is to allow businesses to operate responsibly in conflict-affected and high-risk areas. 3TG minerals are key components for much of our technology and our view is that, under the right conditions, their mining can build prosperity and security for local communities. Conducting due diligence, in accordance with OECD guidance, is key to managing the risks and to ensuring that businesses along the supply chains behave responsibly.

Our proposed regime for Northern Ireland is in line with the spirit of OECD guidance, incentivising businesses to continually improve their due diligence processes. The approach taken in the regulations, including the financial penalties for failure to co-operate with procedural requirements, corresponds with the European Commission’s stance on the scope of the EU regulation. We consider that this approach to the implementation of the EU conflict minerals regulations in Northern Ireland will meet our obligations under the protocol. I beg to move.

I am grateful to the Minister for his introduction. I do not think we need to detain the Committee long, as I have only two questions, about how these regulations are enforced. First, in his introduction, the Minister referred to inspectors employed by the Secretary of State. Can he be more explicit on who these inspectors are, and whether they are acting in Northern Ireland on behalf of the European Union or the Northern Ireland Executive? Secondly, can he please tell us what parallel arrangements will be in force in the rest of the country when we have left the European Union?

My apologies—I was finding it quite difficult to hear the Minister, but I caught most of what he said and I thank him for introducing this SI. I declare my interests as in the register.

The Minister is right that the global attempts to tackle the association of minerals with conflict must be supported. We have long known about the resource curse which has afflicted countries with weak development and poor governance. I saw that clearly in Angola, where oil helped to fuel a 30-year civil war and then untold corruption—a situation which is at last being tackled.

The Kimberley process was brought in to try to ensure that diamonds were sourced in a transparent way, unsullied by conflict. The minerals needed for our mobile phones and electric batteries are sourced from some of the most conflict-affected countries in the world and we cannot turn a blind eye. The whole supply chain is rightly coming under increased spotlight.

The OECD emphasises that companies in the minerals supply chain must be more than simply reactive in this area; they need to be proactive in making sure that they respect human rights and do not contribute to conflict. We have seen many examples of this. We see it still in Latin America, and certainly in Africa. The DRC is blessed with substantial mineral reserves but the people living there are currently condemned to suffer violence from those fighting over extracting them.

The OECD published guidance in 2016 to assist companies in adhering to these guidelines. The EU followed suit in 2017 but strengthened it, so that the guidelines became mandatory. This is therefore yet another change that we need to address because of leaving the EU. The regulations relate to one part of those EU arrangements for certain minerals, which were due to come into force on 1 January, as the Minister has laid out. The regulations ensure that this is in place in Northern Ireland from 1 January.

Northern Ireland has the charmed status, as government Ministers have said, of being in the internal market of the UK and the internal market of the EU— just as we used to be. Therefore, under the Northern Ireland protocol, this needs to go into place. Can the Minister tell me whether the rest of the United Kingdom will also adhere to these rules, as my noble friend Lord Bradshaw asked? The Government are always saying that we will meet the highest of standards, outclassing the EU. Are we doing so here? What will happen to companies in the rest of the UK after the transition period ends?

I note that the Joint Committee on Statutory Instruments said that these SIs were “defectively drafted” and the Minister’s department acknowledged this. In its report discussing the draft regulations, the committee stated:

“Regulation 8 enables the Secretary of State to serve a notice requiring a person to provide information”

on imports, where necessary, and that this may be imposed on, but is not limited to, EU importers. It goes on:

“Regulations 14 and 15, and the Schedule to the Regulations, contain provision for enforcing obligations imposed by the Regulations. However, this is limited to enforcing obligations imposed on Union importers.”

Therefore, the committee argued,

“the Regulations contain no provision for enforcing a requirement under regulation 8 imposed on a person who is not a Union importer.”

The Minister’s department has acknowledged that Regulation 8 was enforceable against EU importers only. Consequently, it said that it would

“bring forward amending legislation as soon as possible and that … the Secretary of State will not exercise the power to require production of information under regulation 8 against persons other than Union importers.”

Can the Minister tell us when this amending legislation will be brought forward? He does not have much time. Is this not a reflection of the overburdened department, for which he is now the single Minister in the Lords? It is in a state of reorganisation, at the same time as the country battles Covid and the Government have decided to take the United Kingdom out of both the single market and the customs union. My sympathies here are with the civil servants who drew up these regulations.

Can he also say when these regulations will be considered in the House of Commons, given that we have very little time before the transition period ends? There may well be one particularly large piece of business to get through before the Commons rises for Christmas—of course, if there is not, heaven preserve us. I look forward to the Minister’s response.

My Lords, I echo many of the comments that have already been made in this short debate. I, too, welcome the regulations and their need to address some important issues. When one looks at the title of the SI, it seems rather dry, but think about its impact. If, when people used their mobile phones, they realised the impact they have on certain conflict-afflicted countries, they may think twice about the need for such regulations.

I will pick up on a couple of points. The Minister mentioned defects and the report of the Joint Committee on Statutory Instruments in relation to Regulation 8. The department has acknowledged this defect and said—the Minister repeated this—that it will

“bring forward amending legislation as soon as possible and that … the Secretary of State will not exercise the power to require production of information under regulation 8”.

What does “as soon as possible” mean? What is the timeframe for that? The noble Baroness, Lady Northover, made the point that this is a time-constrained issue. These regulations should be in force once the transition period ends, so can the noble Lord give us a clear assurance that we will not be in breach of the protocol and that these regulations will be properly enforced, as required by that? I would like that reassurance.

The other thing that was mentioned—the noble Lord, Lord Bradshaw, in particular focused on this—was the question of who is responsible for the people required to enforce. The powers are designated to the Secretary of State rather than to the devolved Administration. Can the Minister confirm whether it is in line with precedent that such issues are reserved competencies and not ordinarily devolved to the Northern Ireland Administration?

The other point raised was on what we are doing. The Minister referred to the fact that parts of the requirement, the guidance and the statutory decision of the EU have applied in the rest of the UK. However, what are we doing to ensure that the spirit and letter of this requirement covers all parts of the United Kingdom? I am sure that all parties across the House would support this, because we know how important it is in terms of addressing conflict, which is often financed by the extraction of these minerals or caused by people wanting to extract them. It is therefore important that we get a clear indication that this policy will not be confined simply to the requirements of implementing the protocol.

My final point—I think that the Minister mentioned this—is that as an independent department DfID was a world leader in many of the developmental projects central to conflict minerals, including through support of the World Bank’s mineral sector reform programme, PROMINES. Can the Minister detail whether UK aid is today supporting similar programmes and whether any will be cut in the coming year? As we mentioned earlier in the House today, not many people realise how important ODA is for securing a safer and more secure world.

According to Global Witness, $3 billion in high-risk gold, including conflict gold from east and central Africa, flows to Dubai annually. Can the Minister confirm whether the UK is making any representations to other Governments regarding responsible importing of conflict materials, in particular those we are seeking agreements with on trade?

My Lords, first, I am grateful to all three noble Lords for their participation; I hope that the noble Baroness, Lady Northover, can hear me clearly. As all noble Lords have acknowledged and as I mentioned in my opening remarks, the EU Conflict Minerals Regulation comes into full force on 1 January 2021 and imposes a legal obligation on EU importers over the 3TG. We will also, in accordance with OECD guidance, issue further guidance in this respect in the early part of 2021 to ensure adherence.

Various questions were raised and I will seek to answer them as specifically as I can. First, on the report and the regulations mentioned, in particular the additional amendments we will seek to make in line with the committee’s report on Regulation 8, I do not have a specific date but I will of course endeavour to ensure that noble Lords are updated at the earliest opportunity to ensure that we are fully compliant in this respect. However, to answer the specific questions from the noble Lord, Lord Collins, these regulations will ensure we comply fully with our obligations under the Northern Ireland protocol.

The noble Lord, Lord Bradshaw, raised the competent authority that will operate for the Northern Ireland inspectors, who will be appointed on behalf of my right honourable friend the Foreign Secretary to exercise his powers with respect to entry and inspection. For the purposes of the regulations, the Foreign, Commonwealth and Development Secretary will take the role of the competent authority. This is also part and parcel of our fulfilling our obligations in this respect.

The noble Lords, Lord Collins and Lord Bradshaw, and the noble Baroness, Lady Northover, also rightly raised the issue of other parts of the UK, since we are taking these regulations forward only in Northern Ireland, in line with the Northern Ireland protocol. They asked specific questions on this. Outside of the EU, the UK is not obliged to enforce the substantive provisions of the EU conflict minerals regulation. However, the UK will continue to be an active member of the OECD and to promote the OECD’s due diligence guidance. In this respect, the UK Government fully expect all UK businesses to adhere to the OECD guidance. Since the EU minerals regulation is listed in Annexe 2 of the Northern Ireland protocol to the withdrawal agreement, the UK Government, in introducing the SI, are taking the necessary steps to ensure that the regulation is implemented and enforced in Northern Ireland. We will in due course consider what, if any, further regulatory framework might be appropriate for Great Britain.

In this regard, the noble Lord, Lord Collins, also asked about our work elsewhere in the world. We have of course been very effective in bringing regimes across the world to the fore regarding this issue. In particular, the UK is committed to addressing risks around conflict minerals through promoting and encouraging compliance with the OECD’s due diligence guidance, which has been issued for responsible mineral supply chains for conflict-affected and high-risk areas. We will of course continue to be a member of the OECD outside of the EU and we expect all businesses to take appropriate steps.

The UK is also a founding member of the European Partnership for Responsible Minerals. This initiative aims to increase the proportion of responsibly sourced minerals by working across the whole of the supply chain. In this regard, the UK Government funded projects, including in the African Great Lakes region, and supported the development of a due diligence hub to provide information for businesses to progress their supply chain due diligence.

The noble Baroness, Lady Northover, specifically flagged the importance of the Kimberley process. I have worked directly on this so I can reassure her. The Kimberley process, as noble Lords know, groups 55 like-minded participants, covering 82 states, with framework regulations designed to prevent the flow of conflict diamonds, which is also pertinent to our debate. We have been part of the Kimberley process since 2002. The UK remain committed to the policies and principles of the Kimberley process. We will become an independent participant at the end of the transition period.

I trust that I have answered most if not all of the questions raised. As I said, I will come back to noble Lords on the specific timetabling of the related amendments under Regulation 8. We seek to do that as soon as practicable and possible. I am sure that we will update noble Lords through the usual channels. With that, I once again thank all noble Lords for their participation. This is another important step forward in the passing of these regulations to ensure our compliance with the obligations under the withdrawal agreement as we prepare for the end of the transition period.

Motion agreed.

That completes the business before the Grand Committee this afternoon. I remind Members to sanitise their desks and chairs before leaving the Room.

Committee adjourned at 5.55 pm.