When Section 1504 of the U.S. Dodd-Frank Act was enacted in July 2010, requiring all oil, gas, and mining companies to disclose the payments they make to the governments in which they operate, Oxfam America and other revenue transparency advocates celebrated a major victory. But the detailed rules that will implement Section 1504 still have not been written, almost two years later – which means that the law still is not in effect. This may change, however, if a federal court in Massachusetts grants Oxfam what it seeks in a complaint filed today by ERI and lawyers from Baker & Hostetler LLP: an order requiring the issuance of final rules by the Securities and Exchange Commision (SEC), the government agency charged with writing those rules.
Transparency and disclosure of the revenue streams governments derive from extractive companies is crucial in breaking the cycle of corruption, poverty, and human rights and environmental abuses that plagues many resource-rich societies. It also provides important information to investors, who seek to understand more accurately the political, reputational, and legal risk that extractive companies face when engaging in financial transactions with governments like the regimes in Congo, Burma, and Libya. Congress recognized these facts when it enacted Section 1504, giving the SEC 270 days to write the detailed regulations that will govern the disclosure of taxes, royalties, signing bonuses, and other payments from extractive companies.
After Section 1504 was passed, the SEC solicited comments from NGOs, businesses, academics, and other experts on the details of the disclosure rules. Oil and mining companies pushed back, predicting that strong disclosure rules would be expensive to implement, would cause them competitive disadvantages, and could even promote terrorism. Oxfam, ERI, and other members of the Publish What You Pay US coalition – a network of civil society groups dedicated to revenue transparency – participated and provided research refuting these arguments and supporting the idea that the SEC could and should act quickly to issue regulations that would be consistent with the will of Congress.
The 270-day deadline that Congress set for the SEC to develop rules implementing Section 1504 came and went more than one year ago. In the interim, the SEC has repeatedly published timeframes for finalizing the rules, only to miss its own internal deadlines again and again. As a result, Oxfam has gone to court to compel the SEC to act, invoking a provision of U.S. law that applies when an agency has unjustifiably delayed or unlawfully withheld action. The SEC is expected to respond to Oxfam’s complaint within sixty days.