On Tuesday, January 7, 2014, a three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in the challenge to the conflict minerals rule. Those attending the arguments observed the court’s skepticism with the rule, specifically from the two conservative judges on the panel, David Sentelle and A. Raymond Randolph, appointees of Presidents Ronald Reagan and George H.W. Bush, respectively.
According to the Wall Street Journal, Judge Sentelle indicated that the conflict minerals rule was written more broadly than required by Congress, while Judge Randolph appeared receptive to the business groups’ First Amendment argument. At one point, Judge Randolph rhetorically asked whether in the future, the SEC would require companies to disclose how the products are manufactured overseas, including whether they [the companies] comply with certain U.S. laws, rules and regulations. He added, “there seems to be a slippery slope problem here.”
There is no timetable set for when a decision may be made. Companies are wise to continue their inquiries and diligence efforts because the decision could go either way. And, even if the rule is vacated or overruled in part, customers and other stakeholders are likely to request or insist on supply chain information and disclosure about the sourcing of conflict minerals.