SUMMARY
When an oil industry group challenged U.S. regulations that would require disclosure of their payments to foreign governments, EarthRights represented Oxfam America to help defend the regulations. As part of EarthRights’ overall work to promote extractive revenue transparency under Section 1504 of the Dodd-Frank Act, we have fought to keep these important rules on the books.
Almost as soon as the U.S. Securities and Exchange Commission (SEC) issued strong rules requiring oil and mining companies to publicly disclose payments they make to governments, the American Petroleum Institute (API) sued the SEC to try to strike down the landmark transparency law and the regulations implementing it. We first challenged the jurisdiction of API’s chosen court – the D.C. Circuit Court of Appeals – and won. The court ruled that the case must be heard in the district court instead. The district court, however, sent the regulations back to the SEC. While the court did not rule that there was necessarily anything wrong with the rule, it concluded that the SEC had incorrectly assumed that some parts of the rule were required by Section 1504, and so the SEC had to re-do the rulemaking to see whether those aspects of the rule were supported by the record.
API made a number of disingenuous claims, arguing the disclosures were unconstitutional, arbitrary and capricious. API also argued that the SEC’s economic analysis in the final rule was flawed and that the SEC had failed to minimize competitive harms to companies. It also challenged the statute itself, Section 1504, by making the unprecedented claim that mandating disclosure of factual information violates the First Amendment rights of multinational corporations – essentially asserting a First Amendment right to conceal information. EarthRights’ brief on behalf of Oxfam took on all of these arguments, dismantling the First Amendment challenge and demonstrating that SEC’s careful economic analysis supported the rule. EarthRights also showed that API’s claim that some countries prohibited disclosure was unfounded; API failed to provide any evidence that any disclosure prohibitions actually exist.
The district court’s ruling did not address most of these arguments. Instead, the court simply ruled that the SEC needed to provide better justification for certain aspects of the rule. The SEC had not previously done so because it had assumed that these parts of the rule were required by Section 1504 itself, and not within the SEC’s rulemaking discretion, but the court ruled that they were discretionary. The decision did not require the SEC to actually change any part of the rule.
TIMELINE
2010
Congress enacted the Dodd-Frank Wall Street Reform Act, including Section 1504, which directed the SEC to issue rules requiring oil, gas and mining companies to publicly disclose the payments they make to the federal government and to foreign governments. The statute required the SEC to finalize the regulations by April 2011.
2011
The SEC published a Notice of Proposed Rulemaking in January 2011 to receive comments from the public on the proposed rule. But the SEC took no further action to finalize the rule, missing the statutory deadline.
2012
In May, over a year after the missed deadline, EarthRights represented Oxfam America in suing the SEC in federal district court in Massachusetts, arguing that the SEC had unlawfully withheld and unreasonably delayed action on finalizing the rule.
In August, shortly after EarthRights moved for summary judgment in the lawsuit, the SEC voted to approve the final rule.
In October, the American Petroleum Institute (API), along with other industry groups, filed suit against the SEC in an attempt to overturn the regulations and strike down Section 1504 itself. ERI, on behalf of Oxfam, moved to intervene in the case to defend the rule.
In November, the SEC denied industry’s request to stay implementation of the rule during litigation. Industry claimed that the rule would require companies to violate host country laws that prohibit disclosure of payments. EarthRights strongly opposed the request for a stay, arguing delay was not necessary to prevent injury to the companies and that compliance was not in the public interest. The SEC agreed and rejected API’s claims, finding there was no persuasive evidence that any laws actually existed that would prevent disclosure.
2013
EarthRights filed its brief in January, defending the SEC’s economic analysis, and refuting API’s claims that they would suffer billions of dollars in loses from disclosure of payments, and the argument that companies have a First Amendment right to conceal payments they make to governments. EarthRights also argued that industry had filed suit in the wrong court. Members of the Senate and the House filed amicus curiae briefs supporting the transparency rule and condemning API’s unprecedented attack on disclosures.
In April, the D.C. Circuit agreed with Oxfam that API had filed its lawsuit in the wrong court and sent the case to the district court.
In June, the European Union enacted mandatory disclosure requirements for the extractive industry modelled off Section 1504 and the SEC’s 2012 rule. The EU directives required all 28 EU-member states to transpose the requirements into national law by 2015.
In July, the district court issued an opinion vacating the rule and remanding it to the SEC, concluding that the SEC needed to reconsider certain aspects of the rule. The SEC was not required to change its decisions, but it needed to provide a fuller justification for the decisions it made.
2014
More than a year after the district court’s decision, the SEC had failed to take action on finalizing the rule. In September, EarthRights sued the SEC again for failing to meet its deadline, arguing the SEC had unlawfully withheld the final rule mandated by Congress.
In December, both Canada and the United Kingdom moved forward with disclosure requirements modeled partly off Section 1504. Canada enacted the Extractive Sector Transparency Measures Act, requiring the development of mandatory disclosure regulations. The United Kingdom adopted mandatory disclosure legislation to implement the EU directives, ahead of schedule.
2015
The district court issued an order agreeing with Oxfam that the SEC had failed to meet its legal duty, thus requiring the SEC to abide be a new schedule for rulemaking.
In December, the SEC issued a proposed rule and opened the public comment period.
2016
EarthRights again participated in comments to the SEC in support of a strong rule. In June, the SEC published a final rule implementing Section 1504 that was, once again, remarkably robust, mostly in line with EarthRights’ comments.
By the end of the year, more than 80 UK-listed extractive companies had disclosed their payments to governments under the UK regulations, including Shell, BP, SOCO, Tullow, Total (reporting under French law, too), Russian companies Lukoil and Gazprom, and mining giants like Anglo American, BHP Billiton, Rio Tinto, Total (France), and Tullow (UK).
2017
Congress and the Trump Administration began the year with a major push to roll back critical regulations passed during the Obama Administration using the Congressional Review Act. That law allows Congress to use expedited procedures to pass a “resolution of disapproval” that voids a final rule, with limited debate and without being subject to the filibuster. On February 14, Trump signed the resolution into law, nullifying the rule. Because this was a rule that Congress specifically required the SEC to issue, the SEC still has a legal obligation to promulgate a new rule within one year.
Canadian-listed companies began publicly disclosing payments to governments under Canada’s mandatory disclosure rules.
DOCUMENTS
API Complaint (Oct. 10, 2012)
Oxfam’s Emergency Motion to Intervene (October 24, 2012)
Oxfam’s Brief challenging the court’s jurisdiction to hear the dispute (Oct. 25, 2012)
SEC Order Denying Industry’s Request for a Stay to Suspend the Rules Pending the Outcome of Litigation (Nov. 8, 2012)
SEC’s D.C. Circuit Brief (Jan. 2, 2013)
ERI/Oxfam’s D.C. Circuit Brief (Jan. 16, 2013)
Amici Curiae Brief of Senator Ben Cardin, Former Senator Richard Lugar, and Senator Carl Levin in support of the SEC (January 16, 2013)
Amici Curiae Brief of Member of the House of Representatives (Jan. 16, 2013)
API D.C. Circuit Reply Brief (Jan. 28, 2013)
D.C. Circuit Court Ruling on Jurisdiction (Mar. 23, 2013)
ERI/Oxfam Supplemental Brief (Filed May 17, 2013 in District Court)
Judge Bates’s Opinion Vacating the Rule (July 2, 2013)
