Those warranties on diamond invoices are changing

Rob Bates

Ever since 2003, after the Kimberley Process (KP) went live, World Diamond Council (WDC) has required that all natural diamonds have the following wording stamped on their invoice:

The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations resolutions. The seller hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.

The World Diamond Council recently adopted new language for the invoices, which it will ask everyone in the diamond industry to use starting next year:

The diamonds herein invoiced have been purchased [or sourced] from legitimate sources not involved in funding conflict, in compliance with United Nations Resolutions and corresponding national laws. [If they wish, companies can list the countries from which they are sourced.] The seller hereby guarantees that these diamonds are conflict free and confirms adherence to the WDC SoW Guidelines.

WDC president Stephane Fischler says the group had long wanted to strengthen the system of warranties (SoW), the voluntary system that backs up the Kimberley Process.

The Kimberley Process is designed to weed out conflict rough from the main supply chain. It has the force of law and is administered by governments. Yet, illicit diamonds can still sneak into the supply chain as a piece of polished. And since there is no KP for polished, the warranties were designed to square the circle.

But some complain those warranties have never been strictly policed. They are supposed to be checked every year by an independent auditor. But many in the industry seemingly view them like those license agreements that people sign when they download software. They know they are there, but they don’t really consider what they are agreeing to.

Yet, when a dealer stamps a warranty on an invoice, it carries weight—just like it matters when people click okay to terms of service. Everyone who stamps those words on an invoice is warranting that what they are saying is true—just like if an invoice says a parcel contains diamonds, it can’t contain CZ.

A warranty does have a certain level of enforceability,” says Cecilia Gardner, the former World Diamond Council general counsel who is now a legal consultant for the industry. “If the diamonds you are selling do not meet the Kimberley Process standards and you include that warrant, you can be sued.”

Fischler adds that while individual governments may differ on how they view the warrants, diamond groups take them seriously.

It’s no different than any other commitment a supplier makes to a customer. If a customer can prove there is a breach, it is up to the bourse to mediate.

All that said, we don’t know of any cases of anyone sued, or even taken to a bourse arbitration, for a faulty warrant.

Which brings us to new language. It is meant to be more than just a “ticking exercise,” says Peter Karakchiev, head of international relations for Russian diamond producer Alrosa and a WDC board member.

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Source JCK Online