Washington, DC – International development and relief organization Oxfam America expressed disappointment with the District Court’s decision on API v. SEC today, effectively vacating the SEC rules implementing the “Cardin-Lugar” provision of the 2010 Dodd-Frank Act. The underlying statute requiring disclosures still stands, but the SEC will now have to review the rules in light of the court’s findings.
“Oxfam is disappointed that the Court did not side with transparency today, and we strongly disagree with its finding that the SEC had discretion to withhold companies' payment reports from the public,” said Ian Gary, Oxfam America’s senior policy manager of Oxfam America’s oil, gas and mining program. “However, we believe the SEC will be able to ultimately reissue the rules in the same form, with a stronger justification that satisfies the court’s requirements.”
Also known as Section 1504, the law requires oil, gas and mining companies to disclose payments, such as taxes, they pay to foreign governments for the extraction of oil and minerals. The SEC conducted a robust and lengthy input process, thoroughly addressing public comments and analyzing the economic consequences of the final rules.
According to Oxfam, nothing in today’s decision says that the SEC may not require public reporting or deny exemptions; the ruling just says that the SEC has greater discretion under the law than it previously believed, and that it must therefore provide a fuller analysis of its choices.
“We disagree with the Court's view that the SEC did not adequately justify its rejection of the oil industry’s request for exemptions based on foreign laws,” said Gary. “Despite the Court's conclusions, the SEC balanced the potential costs and benefits of granting exemptions. The SEC’s decision that exemptions weren't warranted is adequately supported by its analysis. The oil industry has never been able to clearly show the existence of host country prohibitions against payment disclosure.”
The American Petroleum Institute, a lobby group representing companies such as BP, Exxon, Chevron and Shell, was joined by the US Chamber of Commerce to file the lawsuit against the US Securities and Exchange Commission (SEC) to overturn the law, which seeks to provide valuable information to investors and help prevent corrupt government officials from squandering oil and minerals wealth in resource-rich countries. In addition to challenging the process by which the SEC enacted the rule, these business groups also claim that Cardin-Lugar and the transparency rules violate their First Amendment free speech rights.
While the US litigation has proceeded, additional oil payment disclosures or commitments have come into place. The European Union earlier this month passed into law a payment disclosure requirement for oil, gas, mining and forestry companies. The law, covering companies such as Chevron, Shell, BP and Total, has parallel disclosure requirements to the SEC’s rules, including project-level disclosures, public reporting and no exemptions for alleged host country prohibitions.
“The global transparency train has left the station and the US disclosure law still stands. The Court did not make any ruling on the oil industry's First Amendment argument, while recognizing that the Supreme Court has upheld public disclosure requirements as an appropriate approach to regulation,” continued Gary. “The fight to lift the veil of secrecy on billions of dollars is not over, and we are considering all of our legal options – including appeal of this decision – in order to ensure that investors and citizens have access to the information required by this groundbreaking provision.”