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.
5.36 pm