SEC Takes Long-Awaited Step to Combat Rampant Corruption in the Oil, Gas and Mining Industry
December 11th, 2015
December 11th, 2015
Global Witness Statement on Proposed Section 1504 Rule
Today the US Securities and Exchange Commission (SEC) announced a strong proposed rule to implement a landmark transparency law which requires US-listed oil, gas and mining companies to publish details of their payments to governments, broken down per country and per project, with no exemptions.
This is a critical step in deterring corrupt natural resource deals, and one that will enable citizens to “follow the money” generated by their country’s natural resources – giving them visibility of what companies are paying for oil, gas and mining deals, and helping them make sure the funds benefit their country, not the pockets of corrupt individuals.
Simon Taylor, Director of Global Witness and co-founder of the Publish What You Pay campaign, said:
“Today the US has reasserted its leadership in the effort to create a new global standard of transparency and accountability for the extractive industries, a sector that has been notorious for corruption. This will have a profoundly positive impact on helping to build a more peaceful and prosperous future for resource-rich countries. The SEC’s proposed rule has real teeth and is a big step towards making sure US-listed oil, gas and mining companies do their deals in the open.”
Known as Section 1504 (the Cardin-Lugar Amendment), the bipartisan law was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The SEC introduced an implementing rule for Section 1504 in 2012 but this was set aside by a US district court in 2013 as a result of a legal challenge by the American Petroleum Institute, an oil industry lobby group whose members include Exxon, Chevron, Shell and BP.
The court decision required the SEC to revisit and strengthen its legal justifications for its original rule and the SEC has now done this. Civil society groups around the world, prominent economic experts, the US State Department and investor groups managing trillions of dollars of assets have all submitted statements of support urging the SEC to put out a strong rule that is consistent with laws adopted in other countries.
Since 2012, the global movement for extractive transparency has gained momentum, as other countries have followed the lead initially set by the US. All 28 member states of the European Union, as well as Norway and Canada, have enacted their own transparency laws requiring project-level disclosure with no exemptions.
After a prolonged delay, today’s SEC proposal brings the US in line with the different jurisdictions requiring companies to disclose the same information. This simplifies compliance for multinational companies and makes it possible for civil society to use and compare disclosures from different jurisdictions to hold their governments accountable.
The proposed regulation is expected to be finalized by mid-2016. After the SEC solicits comments from the public next year, it will revise its proposal in response to comments received. Global Witness will continue to analyse the details of this proposal and will issue further comments.