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Zimbabwe’s diamonds and the kimberly process

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The debate surrounding the renewal of the export of rough diamonds under the Kimberly Process from Zimbabwe’s Marange diamond fields—an area in Eastern Zimbabwe notorious for illicit mining and human rights abuses by the Zimbabwean security forces—was renewed in July 2010 by the World Diamond Council (the “Council”). Following the conclusion of its seventh annual meeting in St. Petersburg, the Council announced that consensus had been reached on an agreement that will allow the renewed export of a limited number of rough diamonds from Marange. 

Under the agreement, Zimbabwe will be authorized to carry out two supervised exports of rough diamonds mined at Marange. Review missions to Zimbabwe will be undertaken by the Kimberly Process and the Kimberly Process Monitor during this limited period. The Kimberley Process Monitoring Committee will review the report issued by the review missions to formulate a position regarding future exports.

The agreement followed the issuance of a report by the special monitor appointed by the Kimberly Process in March, 2010, which recommended that two mining companies operating in the Marange diamond fields be allowed to export rough diamonds under the Kimberly Process Certification Scheme.

The Kimberly Process and the Certification Scheme

The Kimberley Process resulted from discussions in May, 2000 in Kimberley, South Africa among interested governments, the international diamond industry and various civil society groups as an initiative to combat the illicit trade of rough diamonds originating in areas of conflict in Africa such as Liberia, Sierra Leone, Guinea, Côte d’Ivoire and Angola.

The Kimberley Process Certification Scheme (the “Scheme”) established the rules that govern the international trade in uncut diamonds and is intended to encourage transparency and accountability in the diamond industry by preventing the entry of “conflict” diamonds into the international diamond supply chain while protecting legitimate trade in rough diamonds.  The Scheme imposes certain minimum requirements on its members to enable them to establish a system of internal controls to ensure that shipments of rough diamonds imported or exported do not originate in conflict areas.  The Kimberley Process has also developed a number of tools to asses implementation including regular statistical reporting, annual reports and other compliance verification measures such as review missions.

Zimbabwe’s Situation

Although Zimbabwe is not in an outright state of war, its diamond producing regions have been monitored by the Kimberly Process since 2008 when reports began to surface of illicit diamond mining and smuggling and widespread human rights abuses (including forced labour) of citizens in the Marange mining area allegedly conducted by Zimbabwe’s security forces under the control of President Robert Mugabe’s Zimbabwe African National Union - Patriotic Front (“ZANU-PF”).  Revenues from the sale of these diamonds are thought to support Mugabe’s repressive regime and reward its allies. 

In response to a global outcry led by non-governmental organizations such as Human Rights Watch, Global Witness and Partnership Canada Africa against the human rights abuses carried out at the Marange diamond fields, the Kimberly Process suspended official sales of Zimbabwe’s diamonds in November, 2009.

Implications for the Kimberly Process

The full spectrum of implications of Zimbabwe’s re-admittance into the Kimberly Process remains to be seen.   Some member countries of the Kimberly Process, most notably Canada, Australia and the United States have registered their opposition to the decision to allow limited exports of Zimbabwe’s diamonds.
While it is indisputable that the Kimberly Process has played a significant role in reducing the volume of conflict diamonds in the global diamond supply chain, the decision by the Kimberly Process to allow Zimbabwe to remain a member and to resume limited exports of Marange diamonds has tested both the efficacy and viability of the Kimberley Process and has underscored a number of weaknesses within the regime. 

Most notably, the lack of willingness of some state actors to provide effective oversight within their own borders is a source of significant weakness in the regime particularly in view of the fact that a viable enforcement mechanism that ensures compliance does not exist under the Scheme at the present time.  There is speculation in some quarters that the re-admittance of Zimbabwe into the Kimberly Process, notwithstanding its failure to fully comply with the Joint Work Plan established under the auspices of the Kimberly Process, resulted from a fear on the part of certain members of the Scheme that the Zimbabwean regime would follow through on its threat to trade its diamonds outside the ambit of the Kimberly Process.

Also, the Scheme’s exclusive focus on conflict diamonds is very narrow as it is confined to  “rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments” (Official Kimberly Certification Process Scheme document).  The exploitation of a country’s diamond wealth by its military and political elite is not a captured offense under the Scheme.  As a result, diamonds that fuel corruption and exacerbate inequality continue to be certified by the Kimberley Process because they are not strictly “conflict diamonds” and this has the effect of undermining the value of Kimberly Process certification.

Perhaps another fundamental flaw in the Scheme, is that it appears that some profit driven actors, in the diamond industry are only willing to ensure that member states comply with the minimum requirements in the Scheme so long as the benefit of such compliance outweighs the financial incentives for non-compliance. 

This article highlights aspects of the legislation discussed and does not constitute legal advice.

Avril Cole is an associate in the private capital, banking and mining groups of Macleod Dixon LLP.  Avril also works closely with the securities group, acting primarily on behalf of agents and underwriters on a variety of transactions, including private placements and public offerings.  Monica Peters is a summer law student at Macleod Dixon LLP.

Macleod Dixon LLP is a global law firm with offices in Canada (Calgary and Toronto) and four emerging markets with natural resource based economies - Venezuela, Brazil, the Russian Federation and Kazakhstan. The firm is known for excellence in the natural resources arena, primarily mining, oil and gas and renewable energy. Macleod Dixon was named the 2010 Global Mining Law Firm of the Year by the International Who’s Who of Business Lawyers and nine of our mining practitioners also received individual acknowledgement - the highest number of any firm in the industry.

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