Congress Takes Steps to Gut Anti-Corruption Rules and Enable Crony Capitalism
Location: Washington, D.C.
In the latest boon to big oil, Congress is planning to introduce a resolution next week to undo a landmark anti-corruption rule that shines a light on the revenues foreign governments receive from oil, gas and mining companies. The extractive transparency rule, known as “Section 1504,” was passed in the bipartisan Cardin-Lugar Amendment in 2010. One of its key purposes is to deter corruption and crony capitalism in business deals with foreign governments, leveling the playing field for American businesses.
The Securities and Exchange Commission (SEC) finalized the disclosure rule in June 2016, supported by a wide coalition of interests. Members of Congress, investors worth nearly $10 trillion in assets under management, anti-corruption watchdogs, and citizens of resource-rich countries all voiced support for a strong rule, emphasizing the need for detailed information about the payments foreign governments receive. Executive branch agencies also emphasized the rule’s important national security functions, explaining the role it would play in preventing corruption, secrecy and foreign government abuse that has catalyzed conflict, instability and the growth of violent extremism.
Most importantly, the rule applies to all companies listed on U.S. exchanges – including foreign companies like PetroChina and Sinopec, Petrobras (Brazil), Ecopetrol (Colombia), and more than 30 foreign mining companies. Without this rule, U.S. companies who act responsibly, and refuse to line the pockets of foreign leaders, may be at a disadvantage to these foreign competitors.
But the resolution Representative Bill Huizenga (R-MI) plans to introduce next week, if passed, would void the rule, accelerate the opportunities for global corruption and poor governance, and encourage crony capitalism in countries like China, Russia and Saudi Arabia, who could keep information about the billions of dollars they receive from extractive companies – and what they do with it – secret.
“It’s time to ask who Congress is really working for. This resolution will only benefit undemocratic and corrupt foreign governments that pose a threat to the United States and the few oil and mining companies that seek to profit off crony capitalism rather than honest business practices,” said Michelle Harrison, Staff Attorney at EarthRights International. “Congress should not be making it easier for companies – especially foreign companies – to profit from sweetheart deals and corrupt governments.”
The Cardin-Lugar provision inspired similar disclosure laws in Europe and Canada, further leveling the field for U.S. businesses. While the U.S. rule faced delay, the European Union and Canada plowed ahead, adopting similar laws. Many European companies, like Shell, BP, Total and Statoil, are thus already reporting on their payments in all countries of operation, and still others have voluntarily disclosed their payment information. But companies like PetroChina are not listed in Europe, and not subject to these disclosure rules.
“A handful of oil companies have been fighting to keep their relationships with foreign governments secret. They want special treatment,” said Harrison. “Congress should think twice before handing out anymore corporate favors.”
ERI has submitted numerous comments to the SEC during the 6 year rulemaking process on its own and as part of the U.S. Publish What You Pay Coalition (PWYP-US).
EarthRights International (ERI) is a nongovernmental, nonprofit organization that combines the power of law and the power of people in defense of human rights and the environment, which we define as "earth rights." We specialize in fact-finding, legal actions against perpetrators of earth rights abuses, training grassroots and community leaders, and advocacy campaigns, and have offices in Southeast Asia, the United States and Peru. More information on ERI is available at http://www.earthrights.org.