Third party intervention in investment arbitration: Tribunal admits NGO submissions in Gabriel Resources’ claim against Romania concerning mining project

The Tribunal in Gabriel Resources v Romania recently issued an order (the Order) in response to an application (the Application) made by three Romanian NGOs, as non-disputing parties, for participation and an amicus submission (the Submission) in an ICSID arbitration under the Canada-Romania BIT (the BIT). Gabriel Resources’ allegations of breach of the BIT arise in relation to a proposed open pit mining development in Roşia Montană, Romania (the Project) which was not implemented.

The Tribunal granted the Application in part, admitting only certain sections of the Submission to the extent that they referred to factual issues within the specific knowledge of the Applicants and in relation to the interests which the Applicants claim to be protected.  However, the Tribunal denied admission to arguments on the law, as well as references to or reliance on testimonies which could not be tested by cross-examination. The Tribunal also rejected the NGOs’ request to attend and participate in the oral hearing.

The Tribunal’s analysis of the conditions relevant to an application by non-disputing parties – and its approach of considering each section of the Submission in relation to those conditions (rather than the Submission as a whole) – provides a significant contribution to jurisprudence in this area. The application in Gabriel Resources is also consistent with a general increase in such third party interventions, particularly in disputes which touch on issues of public interest, such as environmental protection, public health measures, labour standards, cultural rights and/or human rights.  Such a trend is likely to continue with civil society becoming more active in this context.

Continue reading

EU Parliament amends proposal on regulating importation and use of conflict minerals

On 20 May 2015, the EU Parliament adopted (by 402 votes to 118, with 171 abstentions) important amendments to a proposal for a Regulation of the European Parliament and of the Council setting up a Union system for supply chain due diligence self-certification of responsible importers of tin, tantalum and tungsten, their ores, and gold originating in conflict-affected and high-risk areas (COM/2014/0111; the Regulation). The new proposed Regulation, if accepted in its current form, aims to curtail opportunities for armed groups and security forces to finance conflicts and human rights abuses through the use of minerals in conflict-affected and high-risk regions1 by “breaking the nexus between conflict and illegal exploitation of minerals” in such regions.  The metals subject to the proposed Regulation are commonly used in many consumer products in the EU, in particular, in the electronics, aerospace, jewellery, industrial machinery and tooling industries. The proposed Regulation refers to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) a number of times and is inspired to some extent by section 1502 of the United States Dodd-Frank Wall Street Reform and Consumer Protection Act,2 which regulates the extraction of “conflict minerals” in the Democratic Republic of Congo and nine adjoining countries.

The proposed Regulation attempts to set up a system for supply chain due diligence certification that is tailored to the nature and the activities of the undertaking in question, and imposes supply chain due diligence obligations on all Union importers who source the listed minerals (recycled metals being treated as a special case) in accordance with the OECD Guidance. It also aims to distinguish between the roles of upstream and downstream undertakings;3 in the supply chain.4 Key amendments to the proposed Regulation include:

  • obligations upon smelters and refiners established in the Union to apply the Union system of due diligence (or other systems recognised by the Union as equivalent) or risk penalties as imposed by Member States,5 and
  • obligations on downstream companies to identify and address risks of minerals being sourced from conflict regions in their supply chains in accordance with the OECD Guidance, and to provide information on their due diligence practices,6

The Commission is to make publicly available an updated list, in a timely manner, of the names and addresses of responsible importers of minerals and metals, of responsible smelters and refiners and shall identify those smelters and refiners that at least partially source minerals from the said areas.7 Member States are to designate competent authorities within their respective territories to apply the provisions of the proposed Regulation.8 These competent authorities shall also be empowered to carry out ex-post checks on those Union importers certified as responsible importers to ensure that they comply with their obligations under the Regulation.9 Member States are also empowered to lay down rules as to the consequences of infringing the provisions of the Regulation, and inadequate remedial action taken by the responsible importer after being notified that it infringes the Regulation may result in the loss of its responsible importer certification.10

Various accompanying measures will need to be set out by the Commission in a legislative proposal within the transition period (currently proposed to be two years) to enhance the effectiveness of the Regulation.11 The EU Parliament has asked the Commission to support small and medium-sized enterprises which responsibly source for minerals by granting financial support towards their certification procedures from the COSME programme (the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises).12 This is because, the new regulations, if implemented, will potentially affect about 880,000 EU companies, most of which are expected to be small or medium-sized companies.

Industry impact

The EU Parliament’s adoption of the amendments resulted in a departure from the EU Commission’s earlier “self-certification” approach for EU importers that was meant to be voluntary. There are inconsistencies between the recitals and the main body of the proposed Regulation, suggesting a major overhaul of the proposed Regulation through the legislative process.13 One will need to wait to see what shape the final Regulation takes before determining which obligations will be mandatory or voluntary. This will help in conclusively assessing the repercussions the proposed Regulation is likely to have on the sourcing of “conflict minerals”.

Furthermore, in order to assess the full impact of the proposed Regulation, one would need to look closely into the obligations upon a “responsible importer” under the proposed Regulation. For instance, these require the adoption of “risk management measures” that are consistent with Annex II of the OECD Guidance to address any adverse impacts that may be caused in its mineral supply chain. Depending on the responsible importer’s ability to influence, it is required, where necessary, “to take steps to put pressure on suppliers” in order to mitigate the risk of adverse impact and may be required to “disengage with a supplier after failed attempts at mitigation”.14 Annex II of the OECD Guidance exhorts concerned parties to “immediately suspend or discontinue engagement with upstream suppliers” where “a reasonable risk” that their sourcing is from, or linked to, “parties committing serious abuses” of human rights exists. The OECD Guidance advocates a similar suspension or discontinuation of engagement with upstream suppliers where “a reasonable risk” is identified that their upstream suppliers are sourcing from, or linked to, any party providing direct or indirect support to non-state armed groups. Therefore, the practical effect of the OECD Guidance, when implemented through the provisions of the proposed Regulation may, in fact, require the disengagement of Union importers from certain upstream suppliers when identifiable risks of certain adverse impacts persist.

Although the proposed Regulation does not provide for penalties for the breach of obligations by downstream companies, there are concerns that such obligations, if and when imposed, might cause businesses to pull out of conflict regions due to either burdensome due diligence obligations15 or lack of sufficient risk assessment / risk mitigation mechanisms that may apply to some conflict-affected and high-risk areas. In practice, one would also have to consider how these obligations will be enforced, as Member States shall have the authority to make rules in order to address infringement of the proposed Regulation. At the moment, it is unknown how harmonised these rules will be across the Union.

The EU Parliament has decided not to close the first reading position for the Regulation and is expected to enter into informal talks with the EU Member States to seek agreement on the final version of the law and to ensure smooth passage of the Regulation through the EU parliamentary process.

For further details:

Please refer to the EU Parliament’s press release on the vote here.
Please refer to the original proposed Regulation here.
Please refer to the amendments adopted by the Parliament in the text of the proposed Regulation here.
Please refer to the procedure file of the proposed Regulation in the EU Parliament here.
Please refer to the OECD Guidance here.

For further information, please contact Stéphane Brabant, Partner, Paris and Yann Alix, Senior Associate, London should you have any specific queries as to how the proposed Regulation might affect your activities.


  1. Conflict-affected and high-risk areas” are defined in the proposed Regulation as “areas in a state of armed conflict, with presence of widespread violence, collapse of civil infrastructure, fragile post-conflict areas as well as areas of weak or non-existent governance and security, such as failed states characterised by widespread and systematic violations of human rights, as established under international law”. Whilst the Democratic Republic of Congo and the Great Lakes area are perhaps the most obvious examples, the proposed Regulation aims to tackle the abuse of metals and minerals in such areas anywhere in the world.
  2. Portions of the US Securities and Exchange Commission (SEC) rules issued under section 1502 of the Dodd-Frank Act are currently under review before an en banc bench of the US Court of Appeal for the District of Columbia (D.C.) Circuit after a smaller bench of the D.C. Circuit ruled in April 2014 that certain provisions of the SEC rules were constitutionally invalid as they required ‘compelled speech’ in derogation to the First Amendment of the US Constitution. Other portions that were upheld in April 2014 continue to be in force and require companies to make filings to the SEC on ‘conflict minerals’.
  3. “Upstream” under the proposed Regulation means “the mineral supply chain from the extraction sites to the smelters and refiners, included” and “downstream” means the “metal supply chain from the smelters or refiners to the end use.”
  4. Article 1(2)(b).
  5. Article 7(b).
  6. Article 1(2)(d).
  7. Articles 7(a) and 8.
  8. Article 9.
  9. Article 10(1).
  10. Article 14(3).
  11. Article 15(a).
  12. Recital 12.
  13. For instance, the amended recitals to the proposed Regulation refer to (i) an independent, third-party audit process for upstream undertakings such as smelters and refiners in accordance with the OECD Guidance (Recital 13), and (ii) a certification system for companies in the Union operating downstream of the supply chain which issues the “European certification of responsibility” when the company complies with the  OECD Guidance (Recital 12(a)). However, there are no provisions in the main body that crystallise these recitals in the form of obligations for the relevant entities.
  14. Article 5(1)(b).
  15. Conversely, it is argued by supporters of the proposed Regulation that by seeking a Union supply chain due diligence system for minerals regardless of where they are sourced from, the proposed Regulation does not target minerals from any particular area(s) of the world (in contrast to section 1502 of the Dodd-Frank Act) and thereby reduces the risk of market distortion.


EU Reporting by mining (and other extractive) companies on government payments – Early UK implementation

Two EU Directives were passed in 2013 which require annual reports on payments to governments by companies in the extractive industries (mining, oil and gas and logging).

The UK government has now published a consultation paper on the early adoption of the EU requirements under one of the two Directives: the Accounting Directive.

The UK implementation will apply not only to large UK incorporated companies (large is defined by meeting 2 of 3 minimum criteria) and all UK incorporated listed companies, but also UK companies which are subsidiaries of overseas registered companies.

Once (and if) rules are implemented under the Dodd-Frank Act in the USA, for example, the European Commission has the capacity to designate it as an equivalent regime (which could exempt companies from the reporting requirement), although it is not clear in any event whether this recognition would be reciprocated.

Here is a link to our briefing summarising the main features of the proposals for UK implementation.

Responses to the UK consultation are due in a short timeframe – by 16 May 2014.

For further information, please contact Jennifer Bell, Partner, London, or your usual Herbert Smith Freehills contact

Reporting by extractive companies on government payments: EU Directive published in the official journal and us court suspends SEC rule

There have been developments in the US and the EU in relation to the implementation of requirements for reporting by extractive industries on government payments.
The new EU Directive (Directive 2013/34/EU) requiring the disclosure, on a project by project basis, of payments to governments by companies operating in the extractive (oil, gas and minerals) and logging industries has become effective by being published in the Official Journal of the European Union. Member States now have until 20 July 2015 to implement the Directive. There are no changes of substance to the Directive since the version published in April, but some reformatting means the relevant Article numbers have changed.
In the US, a summary judgment has been granted by the D.C. District Court in the case of American Petroleum Institute v. Securities and Exchange Commission, No. 12-1668 (D.D.C. 2013) suspending the SEC rule implementing new project by project reporting requirements for SEC registered companies. The decision was based on the SEC rule requiring public disclosure of all the information reported by companies and the fact that disclosure would be required even if it violated local law (the EU requirements also contain no exception from the disclosure requirement where to do so is prohibited by local law). 
The US decision is important to issuers who are listed in both the US and EU. Under the EU Directive, such issuers will be exempt from complying with the EU regime if they comply with an “equivalent”, ie the US, regime. The US decision leaves the issue of whether the US regime will be determined to be equivalent, and even it is eventually determined to be equivalent, the timing of that decision, uncertain.
We have produced a briefing on the US court’s decision following the challenge to the SEC’s implementing rule and a briefing summarises the key aspects of the new EU requirements, when they come into force and how they compare with the US requirements. If you would like a copy of either or both publications, please contact: Greg Mulley or Carol Shutkever