Publish What You Pay

Citizens groups applaud SEC for strong defense of landmark sunshine law

Mar 22, 2013

Groups continue to call for oil industry to drop anti-transparency lawsuit

WASHINGTON, DC – Today, citizens groups applauded the Securities and Exchange Commission (SEC) for its vigorous legal defense of a landmark transparency law under attack by the oil industry. Groups representing the faith, humanitarian, anti-corruption and tax justice community filled the courtroom of the District of Columbia Circuit Court of Appeals to hear the SEC defend Section 1504 of the Cardin-Lugar Amendment of the Dodd-Frank Act, which requires U.S. and foreign oil and mining companies to publish payments to US and foreign governments in annual reports to the SEC.

“We commend the SEC for aggressively defending the Cardin-Lugar Amendment and the intent of Congress,” said Isabel Munilla, Director of Publish What You Pay US. “In an era where tax dollars are scarce, this common-sense law shines a light on billions in financial flows to the U.S. and foreign governments to allow citizens to follow the money and make sure it’s put to good use. The SEC is clearly protecting the US leadership role against the fabrications and wild claims being made by the oil industry.”

The lawsuit, brought by the American Petroleum Institute (API), the U.S. Chamber of Commerce, the Independent Petroleum Association of America and the National Foreign Trade Council, seeks to overturn the law and the implementing regulations adopted in August 2012.

Among other arguments, API and petitioners have claimed that the disclosures required by the final rule violate oil companies’ rights to free speech under the First Amendment, a new claim that was not raised in the legislative or rulemaking process. This claim was strongly refuted by SEC attorney William Shirey, who said it “doesn’t even touch on the core values” of the First Amendment. API also continued to press its unsubstantiated claim that governments prohibit disclosure and failed to address the fact that standard oil industry contracts allow disclosure when required by stock exchange regulators. These claims were refuted in the SEC’s rulemaking record.

“API has no hesitation to misrepresent the facts, to misconstrue what the SEC did, or to misconstrue what the record says, and we think it’s important that all of those facts get as complete an airing as possible,” said Jonathan Kaufman, staff attorney at EarthRights International and co-counsel representing PWYP member Oxfam America, which intervened in the lawsuit.

In front of the three-judge panel, Eugene Scalia, attorney for API, claimed that the SEC said that companies faced a “minimum of $14 billion” in costs. The SEC made no such cost estimate – in fact, the SEC said that maximum initial compliance costs were estimated at $1 billion for more than 1,100 companies. The SEC has said it was not persuaded by industry that laws in host countries specifically prohibiting payment disclosures, and the associated claim that these alleged prohibitions would lead to a loss of productive assets.

The judges used most of API’s allotted time to press Scalia for an explanation of why this case belonged in their courtroom. A trial court -- in contrast to the appeals court where the case was heard today -- would be more suited to consider completely the voluminous rulemaking record, which provides clear evidence that API's claims are unsubstantiated, and would also havethe flexibility to seek evidence outside the record if necessary.

“Not only is the oil industry trying to overturn the will of Congress, its arrogance extends to trying to get this case heard in a court where it doesn’t belong,” said Kaufman.

In a gathering outside the courthouse, PWYP members voiced their support for Section 1504 and called for the industry to drop the lawsuit.

“American companies that operate in my country, primarily the ones covered by Section 1504, have generated and paid billions of dollars to the government of Equatorial Guinea. These billions allow a corrupt and dictatorial regime to maintain its power and control, while the majority of people live in poverty,” said Tutu Alicante, executive director of EG Justice, an organization fighting for transparency and human rights in oil-rich Equatorial Guinea.

API claims that the voluntary Extractive Industry Transparency Initiative (EITI) is the only way to provide transparency in countries like Equatorial Guinea, but has failed in any public statement to addressthe fact that EITI has not taken hold in many important oil-rich countries. “The EITI sadly, has not worked in Equatorial Guinea. Without the EITI, Section 1504 represents our only hope, the hope for citizens to dig themselves out of poverty,” said Alicante, “This lawsuit should be dropped.”

Clergy representing the Presbyterian Church USA also joined in support of Section 1504. “This is often seen as an individual, moral issue, but this is a profoundly ethical issue,” said Reverend Charles Booker of the Bethesda Presbyterian Church. “It’s important to stand with those who have very little voice in their country in terms of how their resources are being used, and the more transparent we can be about that, the better.” The Presbyterian Church USA sent a letter earlier this month to Jack Gerard, API President and CEO, calling on API to withdraw the lawsuit.

“In spite of big oil’s attack on transparency, momentum around the world is shifting toward disclosure over secrecy, and fair competition over cronyism,” said Daniel Kaufmann, president ofthe Revenue Watch Institute.

Europe is preparing to finalize new disclosure laws that apply to its 27 member states and that align with the US model. Leading Norwegian oil company and API member, Statoil,recently disassociated itself from the lawsuit. The mining industry has chosen not to join the lawsuit, and Canadian miners are moving ahead to prepare proposals for Canadian disclosure legislation in partnership with civil society groups.

“This lawsuit is a moot point. Companies that back this lawsuit will shortly have to report under the same requirements in Europe, where they are also listed, and Canadian companies are calling for their government to follow suit,” said Munilla. “This lawsuit is a waste of taxpayer and shareholder money and should be dropped.”

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Notes to editors:

  • SEC denied the oil industry’s request for a stay of the rules in November, and received presswhen it filed its own brief with the court roundly rejecting the industry’s arguments on Jan. 2nd.
  • Congress (Senate;House) and Oxfam America submitted briefs refuting industry arguments.
  • The U.S. Department of State produced a statement of support for Section 1504 which said that “the rule directly advances our foreign policy interests in increasing transparency and reducing corruption, particularly in the oil, gas and minerals sectors.”
    • Europe is getting close to finalizing itsown rules.
    • The Dutch and UK governments recently came out against exemptions in line with the SEC’s requirements.
    • Mega-miner Newmont Mining is planning to comply and says requirement “not onerous.”
    • Investors with assets under management of over $1 trillion, including Calvert Investments, support the rules.