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History will show DC District Court has drawn the wrong conclusions on Dodd-Frank 1504

4th July 2013

Global Witness strongly disagrees with Tuesday’s DC District Court decision to vacate the implementing rules for Section 1504 of the Dodd-Frank Act, which requires oil, gas and mining companies to publish their revenue payments to governments down to a project level. Though Section 1504 remains law, the US Securities and Exchange Commission (SEC) will now have to review the most effective way of implementing the law.

This decision came after the American Petroleum Institute (API), an oil industry lobby group whose members include Shell, BP, Chevron and Exxon, brought a legal challenge against the SEC’s rule for implementation of Section 1504.

The court determined that the SEC did not adequately justify its rejection of industry demands for an exemption from disclosure, which would allow companies to keep their payments secret in countries that supposedly have laws prohibiting disclosure.  But the public record of submissions made to the SEC during its nearly two-year rule-making phase for 1504 is clear: industry failed to provide a shred of credible evidence to demonstrate the existence of any laws banning disclosure in any country. Instead other submissions, backed up by evidence, demonstrated the lack of such laws and that industry standard practice contracts, for more than two decades, have included a clause which allows for disclosure should it be required by issuers’ regulatory authorities – such as the SEC.

“We believe the SEC made the right judgement on exemptions. Industry claims of laws banning disclosure are pure fantasy,” said Simon Taylor, Global Witness Director and co-founder of the international Publish What You Pay campaign.  “Regardless of what the SEC now does, the US/EU dual-listed companies, such as Chevron, Shell and BP - all strong supporters of the API’s law suit - will have to disclose anyway. Perversely, the industry seems intent on scoring an own goal, with its legal action now aimed at creating an uneven playing field – the very thing the companies claim they wish to avoid,” said Taylor.

The court decision runs starkly at odds to the global trend towards extractive industry transparency. Since the API lawsuit was filed in September 2012 the European Union has ratified the ‘Accounting and Transparency Directives’, bringing in legislation requiring disclosure complementary to Section 1504 across the 28 member states of the EU. The EU law-makers provided no exemptions in the EU law, summarily rejecting industry claims as not credible. Canada is introducing a similar law, the Swiss government is considering one, and G8 leaders made a strong commitment in June to legal standards requiring disclosure of oil, gas and mining revenue payments.

On a positive note, the judgement allows for the rules to be reconsidered and re-stated by the SEC. We fully expect the SEC will re-issue them, providing a stronger justification for the points in contention. We also note that nothing in the judgement blocks the SEC from requiring public reporting, and neither does it require the SEC to provide exemptions from reporting.

“The SEC now has a chance to strengthen its case for 1504. Central to that is the need to re-state the case for public disclosure with no exemptions. The industry has utterly failed to credibly demonstrate any laws banning disclosure. To introduce exemptions on the basis of fantasy claims would be bad rule-making, not to mention tantamount to creating a “dictators’ charter,”  where the whims of dictators like Colonel Gadaffi would take precedent over US law,” said Taylor.

Contacts:  Simon Taylor, Director:  +44 7957 142 121, or Gavin Hayman, Director of Campaigns:  +44 7843 058 756