Towards enforcement of the EU Conflict Minerals Regulation in Belgium

About the CMR

Under the CMR, EU-based companies importing tin, tantalum, tungsten, their ores, and gold above certain volume thresholds², must comply with, and report on, supply chain due diligence obligations, if they originate (even potentially) from conflict-affected and high-risk areas. These due diligence obligations include, among other things³, management systems, risk management, independent third-party audit and disclosure obligations⁴. Their purpose is to ensure that the metals and minerals imported into the EU are sourced responsibly and have not been produced in a way that funds conflict or other related illegal practices.

The CMR applies to EU-established importers of the targeted minerals. Companies producing mobile phones, technology, automotive products, and medical devices or jewellery are the most likely to be impacted by the obligations under the CMR in view of the list of targeted minerals.

The CMR’s territorial scope encompasses all conflict-affected and high-risk areas (CAHRAs). The European Commission provides an indicative and non-exhaustive list of CAHRAs⁵, which places the burden of determining and continuously reassessing which jurisdictions constitute such areas on companies⁶.

In terms of enforcement, the national regulators are responsible for ensuring on the ground compliance with the CMR⁷. Companies failing to meet the supply chain due diligence obligations under the CMR may therefore be subject to national enforcement actions⁸.

The Belgian bill 

Six months after the entry into force of the CMR, Belgium was one of the only member states that had not yet taken any steps towards its implementation⁹. The Belgian Government has now decided to take the necessary actions to enforce the CMR in Belgium, and introduced a bill implementing the CMR before the Belgian Chamber of Representatives on 9 December 2021 (the Bill)¹⁰.

The Bill confirms that the national competent authority designated for the enforcement of the CMR in Belgium under Article 10 of the CMR is the Federal Public Service Economic Affairs (the FPS Economic Affairs)¹¹. This is not surprising as this service is already responsible for ensuring compliance with economic regulations in Belgium, and has some knowledge and experience in the sector of metals and minerals through its participation in relevant EU and OECD working groups. However, one may question the FPS Economic Affairs’ capacity to effectively enforce the CMR with its current resources, as the service will also be responsible for enforcing the upcoming Belgian corporate vigilance law (see our contribution “Focus falls on corporate vigilance and accountability in Belgium”).

The Bill also specifies some measures and sanctions that competent FPS Economic Affairs agents may impose on non-compliant companies. They may for instance issue a notice of warning to non-compliant companies, detailing the CMR provisions that have been breached and providing the company with a deadline within which to comply with its CMR obligations¹². Subject to the discretion of the agent in charge, the notice of warning may also require the non-compliant company to provide the agent with an action plan setting out “how” and “when” the breaches will be remedied, and/or to undertake a new independent third-party audit as foreseen under Article 6 of the CMR. If the action plan does not offer satisfactory compliance guarantees, the agent may either request that the company submit a new action plan, or decide to modify the company’s action plan.

Although the Bill may still be amended, it does not currently contain any criminal fines for non-compliance with the CMR. Article 6 of the Bill allows competent FPS Economic Affairs agents to impose administrative fines of up to EUR 50,000.00 on companies that:

• have not complied with the notice of warning issued to them; 
• have not drafted, presented or respected the requested action plan; 
• have not undergone the requested audit or communicated the required information; or
• have hindered the FPS Economic Affairs agents in the performance of their tasks.

The amount of the administrative fine imposed on the company will be determined based on various factors, such as the seriousness and the duration of the breach of the CMR, the total revenue of the company, the level of cooperation with the authorities, past CMR breaches, etc.

Take-aways

While it is difficult to estimate precisely how much time it will take for the Belgian Parliament to adopt the Bill, the chances are high that things will move relatively quickly in view of the application of the unicameral procedure pursuant to Article 74 of the Belgian Constitution. Companies subject to the CMR and active on the Belgian territory will therefore have to monitor their CMR compliance more closely in the near future, as checks and controls by FPS Economic Affairs agents will increase with time.

Moreover, the European Commission will re-examine the functioning and the efficiency of the CMR on 1 January 2023 (and every three years thereafter), so that the range of sanctions applicable in the case of recurrent non-compliance with the CMR might be broadened, allowing member states to impose heavier sanctions in the future. Companies should therefore stay informed and actively monitor any future developments in this area.

Please contact Camille Leroy  or Gauthier van Thuyne, if you would like to know more about how the CMR and the Bill might impact your business.

Footnotes

_{¹Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2017:130:FULL&from=EN.}

_{²The volume thresholds are specified in the first annex of the CMR.}

_{³Article 2(d) of the CMR.} 

_{⁴Articles 4-7 of the CMR.}

_{⁵This list is regularly updated and is available at: https://www.cahraslist.net/cahras.} 

_{⁶For non-binding guidelines on the identification of conflict-affected and high-risk areas and other supply chain risks under the CMR, see the European Commission Recommendation 2018/1149 of 10 August 2018, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018H1149.} 

_{⁷Article 10 of the CMR. The list of national competent authorities in the various member states is available at: https://trade.ec.europa.eu/doclib/docs/2019/april/tradoc_157843.pdf.} 

_{⁸Article 16 of the CMR.}

_{⁹See, for example, the appendix to the review paper of the European NGO Coalition on Conflict Minerals, “The EU Conflict Minerals Regulation - Implementation at the EU Member State level”, June 2021, available at: https://www.eurac-network.org/sites/default/files/202106_coregroup_reviewpaper_3tg_implementation_memberstates.pdf.} 

_{¹⁰Projet de loi portant exécution du Règlement (UE) 2017/821 du Parlement européen et du Conseil du 17 mai 2017 fixant des obligations liées au devoir de diligence à l’égard de la chaîne d’approvisionnement pour les importateurs de l’Union qui importent de l’étain, du tantale et du tungstène, leurs minerais et de l’or provenant de zones de conflit ou à haut risque / Wetsontwerp tot uitvoering van Verordening (EU) 2017/821 van het Europees Parlement en de Raad van 17 mei 2017 tot vaststelling van verplichtingen inzake passende zorgvuldigheid in de toeleveringsketen voor Unie-importeurs van tin, tantaal en wolfraam, de overeenkomstige ertsen, en goud uit conflict- en hoogrisicogebieden, available at: https://www.lachambre.be/FLWB/PDF/55/2379/55K2379001.pdf.} 

_{¹¹Article 3 of the Bill.}

_{¹²Article 5 of the Bill.}