Brexit and Blood Diamonds
Particular industries stand to be affected more harshly than most in the event of a "no deal" Brexit, unless the appropriate countervailing measures are put in place.
One such industry - perhaps not well known to the public at large - is the trade in rough (unpolished) diamonds following Brexit. This is because of the so-called Kimberley Certification Scheme (in shortened form, "the Kimberley Process"), which has been in operation since 2003, and is designed to certify whether international exports and imports of rough diamonds are "conflict -free" and to prevent "conflict diamonds" (often called "blood diamonds") from entering the legitimate trade.
The Human Rights Group, "Global Witness", has criticised what it says is the "narrow definition" of "conflict diamonds" for the purposes of the Kimberley Process - "rough diamonds used by rebel movements to finance wars against legitimate governments" - thus leaving out , according to Global Witness, "the broader range of risks to human rights posed by the trade in diamonds". Nevertheless, the Kimberley Process - which has brought together Governments, the international diamond industry (in the form of the World Diamond Council) and civil society organisations (such as Partnership-Africa Canada) - has been instrumental in reducing the illicit trade in blood diamonds.
The Kimberley Process has 54 Governmental participants, representing 81 countries, with the European Union and its Member States most relevantly counting as a single participant for this purpose. The 54 Governmental participants are said to account for 99.8% of the global production of rough diamonds.
The UK is, therefore, currently represented by the EU in the Kimberley Process , which acts as the certifying body for EU member states and at present the UK does not have any independent certifying power.
The UK Government has recognised potential Brexit-related difficulties for the UK diamond industry for some time and in particular has produced some updated guidance on 4th March 2019 as to the likely implications for UK based rough diamond traders of Brexit, whether with a "deal" or with "no deal".
Where there is a "deal", there is likely to be a transitional "implementation period", presently envisaged to last up to and including 31st December 2019, and the guidance confirms that the UK and the EU have agreed that the EU will continue to represent the UK in the Kimberley Process during the implementation period so that UK based rough diamond traders will be able to make use of the existing certification process throughout that period. After the implementation period ends, the UK would hope to move to independent participation in the Kimberley Process.
In the event of a "no deal" Brexit , however, the guidance confirms that "UK based businesses will not be able to trade internationally in rough diamonds" , at least until the UK has secured independent participation in the Kimberley Process.
The guidance does confirm that the UK Government has applied to be an independent participant member in the Kimberley Process at the point that Brexit takes effect and the UK is no longer represented in that process by the EU ( that is to say at the end of the implementation period in the event of a "deal" or, immediately upon Brexit, in the event of a "no deal").
At the time of writing, there is no indication that the UK has yet been accepted as an independent participant in the Kimberley Process when it is no longer represented by the EU in that process and this uncertainty appears to be having a considerable negative effect on the UK trade in rough diamonds, with some traders apparently considering shifting operations to Antwerp and other trading centres within the EU.
The UK has issued a Statutory Instrument - the Kimberley Process Certification Scheme (amendment) ( EU Exit) Regulations 2019 ( SI 2019/844) - which seeks to onshore the certification process to the UK following Brexit but, pending admission of the UK as an independent member to the Kimberley Process and pending also the outcome of the Brexit saga, the March guidance advises UK traders to repatriate rough diamonds on consignment or loan to countries in the Kimberley Process ( including the EU) to the UK prior to Brexit and to comply with the UK certification requirements on exports of rough diamonds from the UK once the UK has hopefully been admitted as an independent participant to the Kimberley Process in due course. Exports of rough diamonds from the EU to the UK following the EU's ceasing to represent the UK in the Kimberley Process post-Brexit will need EU issued certification for the purposes of the Kimberley process.
These are worrying times for the UK diamond industry and should also be of concern to those who have the best interests of the Kimberley Process at heart and it is to be hoped that outstanding issues can be resolved quickly so that certainty for UK based traders in rough diamonds can return.
