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New proposed conflicts diamond definition |
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In about three months the
Kimberley Process Certification
Scheme Plenary will convene in
Washington where the Kimberley
Process Chair Ambassador Gillian
Milovanovic’s proposed amended
definition of “conflict diamonds”
will be put up for discussion and a
vote. It is expected that a large
majority of countries, the industry
and the NGOs will support the
amendment. The challenges, pitfalls
and difficulties are in the
implementation procedures that are
in the process of being finalized.
Reading between the lines,
the new text will dramatically
change the nature of the Kimberley
process and has also some (maybe
unintended) consequences for the
diamond trade. These areas,
discussed further below, broadly
can be summarized as follows: |
(1) The new definition
mandates considerable involvement
of the KPCS in the internal affairs of
member countries. This is a change
from the present, when the
sovereignty of the countries is
unassailable. Actions can be taken
not only against rebels, but also
against states, military and police
forces.
(2) The KPCS will get
involved in the determination of
human rights violation or of
violence. With all due respect, the
KPCS participants don’t possess the
capacity, the skills, to make such
determination. There are hundreds
of international organization who
are far more qualified to do so.
(3) The Zimbabwe precedent,
i.e. the declaration that the mining
output of a certain area within a
mining country consists of conflict
diamonds, will be institutionalized.
In other words, there will be, de
facto, regional certificates. The
concept that a country is a “conflict
country” is eroded. |
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Left to right : Ms Gillian Milovanovic and Mr Chaim Even-Zohar |
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(4) The proposed procedures
give enormous power to the KP
Chair to initially determine whether
a region produces conflict diamonds
or not. The Chair is, at present, still
a rotational appointment for a one
year period. The KPCS Core
Principles never intended for the
Chair to be much more than hosting
the various KP intercessional and
plenary meetings. The final
determination must made by a
consensus, which is puzzling. No
country will support sanctions
against it.
(5) What seems most
problematic to the diamond
downstream industry is that
wherever it is determined that there
are conflict diamonds, the KP Chair
must prepare and submit a list with
“the name(s) of any parties involved
in the conflict who may be involved
with the trade of the conflict
diamonds.” This is really a “naming
and shaming” of diamond trading
companies, which might ruin entire
businesses, ostensibly, virtually
without due process.
(6) Systematic violence,
political or otherwise, also when
taking place far away from diamond
mining areas, can still trigger a
“conflict diamonds” if a financial
link can be established between
owners or operators of a mine and these acts of violence.
Let’s look at these issues in
more detail and start with comparing
the old and newly proposed
definitions.
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Background to the Evolving
Redefinition Process
When the United States was
elected to the Chairmanship of the
KP, it was clear that changing the
definition of “conflict diamonds”
would be at the top of the Chair’s
agenda. Anyone who attended some
of the many Washington meetings
or the WDC Plenary in Italy for that
matter will attest to a lengthy process
of consultation and a gradual
moving to a definition that might
actually get a consensus behind it.
Now the US State Department
has circulated a range of documents
among KPCS member countries and
Observers with its proposed draft. It
must be said at the outset that quite
a few countries are opposed to any
change as a matter of principle and
anyone of these can block a
unanimous decision. Thus the
acceptance of a proposal – any
proposal for that matter – is far from
certain.
During the past year many
proposals have been circulated and
there is no such as thing as a “final”
draft. The proposed implementation
procedures seem to contain
safeguards to prevent renewed or further politicization of the KPCS.
It is not clear whether this objective
has been achieved or is achievable
– but the efforts are as surprising (to
many) as welcome. After all, the
KPCS is political organization.
Presently the definition reads as
follows:
CONFLICT DIAMONDS
means rough diamonds used by
rebel movements or their allies to
finance conflict aimed at
undermining legitimate
governments, as described in
relevant United Nations Security
Council (UNSC) resolutions insofar
as they remain in effect, or in other
similar UNSC resolutions which
may be dopted in the future, and
as understood and recognized in
United Nations General Assembly
(UNGA) Resolution 55/56, or in
other similar UNGA esolutions
which may be adopted in future.
The latest draft, which is
actually shorter and more concise,
reads:
“Conflict diamond” is a rough
diamond used by rebel movements
or their allies to finance conflict
aimed at undermining legitimate
governments, or otherwise directly
related to, armed conflict or
systematic violence. This definition
includes instances as set forth in: a)
resolutions of the United Nations
Security Council or United Nations
General Assembly, or b) as
identified pursuant to the process
outlined below. [Emphasis added.
Ed.]
There seems to be no intention
to make an intentionally broad
definition that in the future might
lead to unintended interpretations
and applications. Clearly great
efforts were made to precisely
define the terms. Thus “systemic violence” is defined as “regular,
protracted and violent internal
disturbances and tensions, grave
acts of violence or acts of a similar
nature over an extended period but
does not include situations
involving only individual or isolated
violent incidents.” Prima facie it
doesn’t seem to be limited to
diamond mining areas – and it
doesn’t. |
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Thus many instances of
“systemic violence” in a producer
country can turn a diamond into a
conflict diamond. The US State
Department explains that if systemic
violence occurs in a diamond mining
area, the applicability of the “conflict
diamond” determination is clear.
However if it occurs elsewhere in a
producer nation, one follows the
flow of the money. The emphasis is
on the word “finance” – there must
somehow be a connection to the use
of funds which have been generated
by diamond mining. This may be
“problematic” for a number of
countries.
That flow of funds must be
proven. The “systemic violence”
clause could not be applied if it is
not “directly related to” the mining
of diamonds. It is our understanding
that “directly related” means that
tangible, verifiable, and credible
evidence demonstrates the specific
financial or other connection of the
rough diamond to the armed conflict
or systematic situation of violence.
Thus the mere presence of conflict
or systematic violence in a country
with rough diamonds does not
suffice to deem the rough diamonds
to be conflict diamonds.
The State Department has
worked out precise procedures for
what happens when a Participant,
Observer or other party files a
complaint (supported by evidentiary
documents) about violence. Then a
KPCS Assessment Mission selected
from the Chairpersons of various
KPCS Committees will conduct a
fact finding mission. Ostensibly, this
sounds reasonable, but several countries think otherwise. The
KPCS doesn’t have expertise in
human rights, to determine what
constitutes violence – and what
doesn’t. When dozens of illegal
diggers trying to penetrate (trespass)
a private mining concessions are
bitten by guard dogs, is that
violence? KP Chairpersons are
bureaucrats from foreign ministries,
industry ministries or mining
ministries. These are not human
rights experts – as they neither claim
nor are supposed to be.
One country recently
suggested that when there are
reports on violence, an independent
and neutral structure would be
necessary to exercise proper
investigation in an objective manner
and beyond reasonable doubt. Such
structures can only be found in
organizations or institutions with
proven competence in dealing with
the same issues – the KPCS does
neither have the skills, the capacity
or competency to do so. In other
words, the determination of
violence may well need to be
outsourced – and the KPCS could
act on professional recommendations. |
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Regional KPCS Certification
within a Country
The drafters of the Interlaken
Agreement, some ten years ago,
which formed the basis for the KPCS, operated on the premise that
sovereign states are “always o.k.”
and that conflict diamond problems
could only be with rebels. Anyone
watching the news and sees what is
happening today in Syria and
yesterday in half a dozen of the
countries realizes that the
international community cannot
tolerate state violence against
civilians.
The widening of the definition
of “armed conflict” to include
internal conflicts, or state violence,
is a deviation from the sovereignty
principles that, so far, has been the
basis of the KPCS. That may well be
a good idea, but it has many
consequences. Basically, it gives
the KPCS a mandate to intervene in
the internal affairs of a country.
This isn’t spelled out in the new
definition; it is a consequence of its
implementation.
The procedures which are
spelled out address specifically the
hypothetical situation in which
conflict diamonds are deemed likely
to be present as a result of the
involvement of public security
forces or their affiliates are involved.
If suitable remedial action is not
taken, then the sites would be
declared as sites with the likely
presence of conflict diamonds. In
the case of rebels, there is no option
for remedial action – the diamonds
become immediately conflict
diamonds.
With Zimbabwe, the KPCS
had already created a precedent: a
country can be compliant and issue
KPCS certificates, however
diamonds from certain mining areas
may be viewed as “conflict
diamonds” – and these diamonds
could not be traded. This will now
become a permanent feature: in any
country where conflict diamonds
are identified, specific regions
within a country would not be
entitled to certification. This
represents a major departure from
present practices. |
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Naming and Shaming of Diamond
Companies
The new procedures, if
adopted, also call for the naming
and shaming of diamond trading
companies purchasing such
diamonds. When it is determined
that the diamonds in a certain area
are “conflict diamonds”, not only
the mining parties are to be
identified, but the KP Chair must
also submit “the name(s) of any
parties involved in the conflict who
may be involved with the trade of
the conflict diamonds.”
That sounds quite all-right,
but we should consider the method
and the consequences. It is up to the
KP Chair to publish a list of diamond
traders. This will then compel the
diamond bourses to expel these
traders from the bourses – meaning
they are not able to stay in the
diamond business. Assuming that
they “deserve” such expulsion,
where is due process?
Assume, for a second, that a
recalcitrant country refuses to allow
a KP Assessment Mission to come
and inspect the suspected conflict
areas. Then the KP Chair, after
various consultations, “is to make a
preliminary determination whether
it is more likely than not that there is
a presence of conflict diamonds.”
What should worry the industry is
that in the small letters, the
implementation procedures, the KP
Chair holds enormous power.
How can a Trader Conduct Due
Diligence?
Recently the High Court in
London had to decide who the true
owners of an Angolan diamond
marketing company were. One party
had claimed his share was secretly
held in trust by another party. This
particular case underscores the
difficulty for diamond traders to be
able to successfully and definitely
determine the beneficial ownership
of their rough suppliers. And,
theoretically, even if traders would be able to find out, what means do
they have to know and verify what
such beneficiary owners do with
their money?
Angola is just one example.
One could cite more. But such
examples raise the question of how
can rough diamond traders conduct
meaningful due diligence? As such,
much more thought needs to be
given to that part of the KPCS
implementation procedures. Rough
diamond traders are neither human
rights experts nor forensic
accountants able to check their
suppliers’ cash flow. It seems highly
unreasonable for the KPCS to use
its regulatory authority to impose
this on the diamond trade. It might
harm trade compliance with the
KPCS. |
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After Adoption the New Definition
becomes the Law of the Land
If the KPCS Plenary adopts
the new conflict diamonds
definition, it will be implemented
immediately. Apparently, there is
no need for the major
players to amend
legislation. In Europe, for
example, EC Council
Resolution No 2368/2002
of 20 December 2002,
implementing the
Kimberley Process certification
scheme for the international trade
in rough diamonds, defines as
“rough diamonds as defined under
the KP Certification Scheme.” So if
the KPCS amends this definition,
then it becomes the law of the land
in Europe.
Likewise in the United States.
The Clean Diamond Act that legally
mandates the KPCS in that country,
refers to a system of controls on the
export from, and import into, that
country of rough diamonds that
meets the [certain] requirements,
and is consistent with “an
international agreement which
requires such controls and to which
the United States is a party.”
In Israel its Free Export Decree
1987 (Amended in the year 2002)
notes that export of rough diamonds
are allowed “only
with an issued KP
Certificate and may
be exported out only
to countries that are
members of the
Kimberley Process.” It doesn’t get
into definitions.
Passed the Point of No Return
The Kimberley Process needs
an overhaul and a majority of
member countries want to update
the “conflict diamond” definition.
This is going to happen – we have
passed the point of no return.
Whether the current draft will
ultimately be adopted – maybe with
some variations – is yet to be seen.
The decision is one of the member
governments – the say of industry
is limited.
By and large, and that is often
forgotten, making changes to meet
the circumstances of the day is also
in the best interest of the diamond
industry. It is not without reason
that the World Diamond Council
supports and assists in this process.
But we need to be alert and try to
understand all the implications of
what seems to be just a “minor”
adjustment in the “conflict
diamond” definition. One also must
ponder what will happen to the
KPCS if the new definition fails to
attract unanimous consent. That’s a
different issue altogether. —
Courtesy of Diamond Intelligence
Briefs. |
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