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Court Should Overturn Decision Limiting Corporate Transparency

Oct. 2, 2015

Court Should Overturn Decision Limiting Corporate Transparency

Citing First Amendment, Court Limited Government’s Ability to Require Corporate Disclosures and Ignored Positive Impact of Conflict Minerals Rule

WASHINGTON, D.C. – Amnesty International is calling on a U.S. court to reconsider a decision protecting some of the world’s largest companies from having to tell consumers that they were unable to prove their products have not funded armed groups contributing to conflict in the Democratic Republic of the Congo (DRC) and neighboring countries.

Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies to publicly report whether their products contain certain minerals whose trade helps fuel violence in Central Africa. The U.S. Securities and Exchange Commission (SEC) adopted a rule to implement Section 1502. That rule requires companies to use specific language when describing their products that contain those minerals, saying that the products have “not been found to be DRC-conflict free.”

The organization today filed a petition (PDF) asking the U.S. Court of Appeals for the District of Columbia Circuit to reconsider two decisions issued in April 2014 and August 2015 striking down that disclosure requirement on the basis that it violates companies’ free speech rights under the First Amendment. Amnesty is represented by attorneys at Public Citizen.

“The panel’s decisions make a mess of the First Amendment with respect to commercial disclosure requirements, and they do so in the circuit where most challenges to federal laws and regulations are brought,” said Julie Murray, the lead Public Citizen attorney handling the case. “The full court should overturn these indefensible decisions, which threaten the government’s ability to require disclosures that inform investors, advance human rights and keep consumers and workers safe.”

“Five million people have died because of the conflict in the DRC. The conflict minerals disclosures are a groundbreaking effort to cut a cord that disgracefully links consumer products like smart phones to the funding of armed groups responsible for vicious human rights abuses,” said Steven W. Hawkins, Amnesty International USA’s Executive Director. “The links between armed groups and the minerals trade are well known, yet companies are still hiding behind the First Amendment to avoid disclosing whether their products help benefit an ongoing, brutal conflict.”

“Rather than allowing investors and consumers to know what lies behind a company’s logo, the industry is acting in its own interests to water down or roll back the advances in accountability. Instead of putting profits before people, the industry groups behind this lawsuit should act transparently and listen to the many consumers who want to know they are buying ethically sourced goods.”

“Information is power – only too frequently we work on cases where companies fail to disclose information needed to protect the human rights of individuals and communities. Laws such as the conflict minerals rule are vital in addressing that power imbalance.”

Setback for transparency triggered by lawsuit

Three industry groups – the National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable – took the SEC to court in 2012 to invalidate the conflict minerals rule. The rule requires certain companies to investigate and publicly disclose whether their products rely on conflict minerals from the DRC or adjoining countries and whether the trade in those minerals helps finance armed groups contributing to the conflict.

In 2014, a panel of the D.C. Circuit upheld the conflict minerals rule against most of the challenges, including a challenge based on the cost of the rule. However, the court of appeals invalidated the part of the law obliging companies to use specific language when describing their products that have “not been found to be DRC-conflict free.”

In August 2015, the panel, on rehearing, again held that measure unconstitutional under the First Amendment, in part because the panel questioned whether the conflict minerals disclosure requirement is effective.

Amnesty International USA and Amnesty International Limited are acting as intervenors in the case in support of the SEC, calling on the court to let the conflict minerals rule stand in its entirety.

The organization also says the panel’s decisions wrongly ignore the growing evidence that the conflict minerals rule is working to achieve its purpose: to inform investors and consumers about material product information and to reduce funding to armed groups in the DRC and its neighbors. With more than 1,200 companies filing conflict minerals reports in June 2015, the rule has led to an unprecedented level of transparency on mineral supply chains.

The decisions also set a bad precedent that companies’ First Amendment rights can limit commonsense disclosures intended to advance human rights around the world.

View the petition (PDF). Find more information about the case.