On Monday, a Washington D.C. courthouse on Monday threw a late-in-the-game curve-ball for companies preparing to issue their first conflict minerals disclosures and reports by May 31.

In a ruling issued by the U.S. Court of Appeals for the District of Columbia, Senior Circuit Judge A. Raymond Randolph ruled that the National Association of Manufacturers and U.S. Chamber of Commerce were correct to claim, in a lawsuit filed in October 2012, that a requirement by the Securities and Exchange Commission that companies report products that may not be conflict-free on their own websites is unconstitutional and compelled speech could cause “irreparable First Amendment harm.”

The SEC, however, prevailed with its defense of the cost-benefit analysis that accompanied the contested rulemaking. Despite claims by the two plaintiffs, Randolph agreed that an adequate assessment was provided. “The Commission exhaustively analyzed the final rule's costs,” he wrote. “The Association argues on the benefit side that the Commission failed to determine whether the final rule would actually achieve its intended purpose. But we find it difficult to see what the Commission could have done better.”

The contested rule, mandated by Section 1502 of Dodd-Frank, applies to the mining of tin, tungsten, tantalum, and gold in war-torn Central Africa that is considered a source of funding for militant groups. The value of the Congo's mineral wealth is estimated as high as $24 trillion and the SEC rule is estimated to directly apply to 5,994 companies and hundreds of thousands of their suppliers. Even before the SEC's final rule was approved, critics have lamented that purging their supply chains of these substances, or even just tracking their origin, would be a costly challenge. In October 2012, NAM and the Chamber sued to stop the rule. The court decision was handed down as many companies are scrambling to meet their first reporting deadline established by the rule.

The rule will now be sent to a lower court for a review of whether the SEC's rulemaking, or language in the Dodd-Frank statute itself, is at the root of the free speech conflict. It is unclear how the SEC would proceed based on that determination, although it was spared having the rule completely invalidated.

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