Oil companies have won a US court victory against the Securities and Exchange Commission (SEC), the financial regulator, over new rules that would have forced them to disclose details of their payments to governments in countries where they operate.
The US District Court for the District of Columbia has ruled that the SEC had misinterpreted Section 1504 of the 2010 Dodd-Frank financial regulation act when drawing up their regulations to implement the law.
The rules that the SEC had proposed were nevertheless supported by Oxfam and other non-governmental organisations (NGOs) as a way to improve transparency and help fight corruption in resource rich companies.
The American Petroleum Institute (API) has argued conversely; Harry Ng, the API’s general council, described how the rule would have jeopardised transparency efforts already underway by making American firms less competitive against state owned companies. Oil companies have warned that publishing payments would reveal information that could be valuable to competitors, and would put them at an huge disadvantage in four countries that prohibit such disclosure: Angola, Cameroon, China and Qatar.
Accepting the above argument, the court has concluded that reports on payments made to governments should be made privately to the SEC and not made available to the public. The ruling was described by Ng as ‘a win for American jobs, for [the US] economy and for international transparency’ in a statement that was backed by leading international oil companies including ExxonMobil, Chevron, Royal Dutch Shell and BP.
The court’s decision itself was strongly worded, describing the SEC proposed rules as ‘fundamentally miscalculated’. Elaboration indicated that the regulator has ‘abdicated its statutory responsibility to investors’ in failing to consider exceptions to the rules for countries that ban disclosure.
The SEC has announced that it is reviewing the decision, but has made no further comments.
Oxfam has outlined its disappointment in response to the ruling. However, the organisation has additionally highlighted that Exxon, Chevron, ConocoPhillips, Shell and BP will be otherwise covered by new EU disclosure rules due to the fact that they have listings on European stock exchanges; an EU law requiring extractive and forestry companies to report details of the payments they make to governments, including details for specific projects, was passed by the European parliament and member states last week. The US industry does not believe that the rules will apply to its companies.
Companies are expected to begin reporting under the new law in 2015 – 2016.Adapted from press release by Emma McAleavey
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