A Review of the Nigerian Energy Industry

Court takes backward step on SEC extractives disclosure rules

Scales of justice gavel07 July 2013 – Revenue Watch, a non-profit policy institute promoting the effective, transparent and accountable management of oil, gas and mineral resources for the public good, expressed its disappointment with the District Court’s ruling on Tuesday, July 2 in the American Petroleum Institute v. Securities and Exchange Commission (SEC) litigation.

The ruling vacates and remands to the SEC rules required by Section 1504 of the Dodd-Frank Act. Section 1504 calls for the SEC to issue rules requiring oil, gas and mining companies listed in the U.S. to disclose payments they make to governments. Section 1504 remains in place as law, but the remand means the SEC will need to determine the most effective way to implement the law following the Court’s ruling.

“The District Court’s ruling is a setback for citizens in resource-rich countries and for investors,” said Daniel Kaufmann, President of Revenue Watch. “Clearly the struggle for transparency in the extractives sector continues, and today we are reminded of the extent to which Big Oil still opposes transparency.”

Revenue Watch expressed its disagreement with key elements of the ruling. “The court has misread Congress’ clear intent to promote greater transparency by making payment information publicly available,” said Kaufmann.  “The court’s suggestion that a selective compilation of company information is all that needs to be made public under the terms of the statute, fails to consider that such a compilation, by itself, would not further the transparency goals of the law.”

With respect to the court’s position on exemptions, Kaufmann said, “The court’s analysis of the exemptions issue ignores the SEC’s reasoned rejection of exemptions.” Kaufmann added, “Exemptions run contrary to congressional intent, and furthermore they create an incentive for a ‘tyrant’s veto,’ encouraging some anti-democratic countries to adopt laws prohibiting disclosure.” The court ignored the fact that the industry has failed to show that any host country prohibitions exist, relying instead on the unsupported assertions of industry.

“The court’s decision is a hurdle to achieving transparency, but one that can be overcome and will not significantly alter the global trend towards extractives sector transparency.” Kaufmann said. Just last month, the European Union (EU) adopted robust extractive sector payment transparency rules, and both the G8 and the Canadian government announced their support of mandatory disclosure regimes for extractive sector payments. Kaufmann said, “While the court’s ruling might delay implementation in the U.S., it is worth noting that many of the large oil companies underwriting the plaintiffs in this case, such as Shell, Total and BP are also subject to analogous European disclosure rules.”
*Revenue Watch, press statement

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