November 1, 2012
Industry Lobbying Groups Seek to Mire Regulations in ‘Legal Quicksand’ Despite Widespread Support by World Leaders
WASHINGTON DC — Global Financial Integrity (GFI), a Washington DC-based research and advocacy organization, urged the Securities and Exchange Commission today to deny the suspension request made by the American Petroleum Institute for recently finalized rules implementing Dodd-Frank Section 1504 transparency requirements for oil, gas, and mining companies.
Section 1504 (or the “Cardin-Lugar Amendment”) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies publicly traded oil, gas, and mining companies in the U.S. to report payments they make to any governments. Cardin-Lugar has been hailed as one of the most important anti-corruption advances in U.S. law in recent memory.
The American Petroleum Institute (API), a lobbying group that represents oil companies, has filed a lawsuit challenging the Cardin-Lugar Amendment on the grounds that forcing disclosure information on their annual reports violates their corporate members’ First Amendment rights. Joining them on the lawsuit are the U.S. Chamber of Commerce and two other industry lobbying groups.
The groups also filed a motion with the SEC requesting that they suspend the rules, which were are already nearly 18 months late when they were adopted in August, for the duration of the litigation.
“This lawsuit is a shameless attempt to subvert the will of Congress and the American people, as well as deny the benefits of transparency to investors and the populations of resource-rich nations across the globe,” said Heather Lowe, Legal Counsel and Director of Government Affairs at GFI. “Cardin-Lugar helps combat everything from undisclosed investor risk to tax evasion to corruption at all levels. It informs good corporate governance efforts worldwide as well as governance efforts in the countries in which extractive companies operate.”
GFI estimates that developing countries lose roughly $1 trillion per year—or $2.7 billion per day—to crime, corruption, and tax evasion, much of which is facilitated by opacity in the global financial system.
“Allowing API and the Chamber to mire the regulations in legal quicksand and prevent a law from going into effect just because they filed a lawsuit sets a very dangerous precedent for the rule of law in this country,” Ms. Lowe continued. “Every day that these companies fail to disclose their payments is one more day that the people of resource-rich nations are prevented from being able to hold their government accountable for the revenue they receive from oil, gas, and mining companies and investors are kept in the dark about these payments from the companies they invest in.”
Support from World Leaders
GFI noted that prominent world leaders support the rules across the ideological spectrum. Secretary of State Hillary Clinton was a strong proponent of the rules, and her State Department welcomed their passage in August.
The European Union is currently in the process of adopting similar regulations that go even further than the Cardin-Lugar Amendment by applying the rules to large privately owned companies and including other industries such as logging and construction.
U.K. Prime Minister and Conservative Party Leader David Cameron is a strong supporter, arguing in favor of oil, gas, and mining transparency in an op-ed in the Wall Street Journal today. He wrote,
It also means driving improvements in transparency and accountability to ensure that corrupt elites cannot waste our aid money. I want people to see exactly where every penny is going… The U.S. has introduced legally binding measures to require oil, gas and mining companies to publish key financial information for each country and project they work on. And I want Europe to do the same.
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Notes to Editors:
- Click here to read GFI Director Raymond Baker and Global Witness’s Corinna Gilfillan’s CNN op-ed, “More reform for oil industry needed,” August 7, 2012.
- Click here to read Najwa al-Beshti’s New York Times Op-Ed, “A Libyan’s Plea to the S.E.C.,” from August 18, 2012.
- Click here to see a slide show on the costs of corruption for the top ten oil-exporting countries in the world compiled by GFI for the Huffington Post.
- GFI is a member of the Publish What You Pay U.S. (PWYP) coalition. PWYP is part of a global civil society coalition that helps citizens of resource-rich developing countries hold their governments accountable for the management of revenues from the oil, gas and mining industries. Natural resource revenues are an important source of income for governments of over 50 developing countries. When properly managed these revenues should serve as a basis for poverty reduction, economic growth and development rather than exacerbating corruption, conflict and social divisiveness.
Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.
For additional information please visit www.gfintegrity.org.