The House of Representatives voted yesterday 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 issued by the Securities and Exchange Commission (SEC) at the direction of Congress, who mandated the rule in the bipartisan Cardin-Lugar Amendment in 2010. One of the rule’s key purposes is to deter corruption and crony capitalism in business deals with foreign governments, leveling the playing field for American businesses.
The 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 the corruption and secrecy that has catalyzed conflict, instability and the growth of violent extremism.
But the House voted yesterday 235-187, largely along party lines, to pass a “resolution of disapproval” to eliminate the rule. It will be considered by the Senate next. If passed, it would void the rule, accelerate the opportunities for global corruption and poor governance, and encourage crony capitalism in countries like Russia, China, Iraq, and Saudi Arabia, who could keep information about the billions of dollars they receive from extractive companies – and what they do with it – secret.
“Yesterday, a majority of our elected representatives cast their votes for corruption. Make no mistake, there are only two winners today: corrupt foreign governments hostile 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 (ERI).
The move was widely condemned by national security experts, investors, faith-based groups, unions, government watchdogs, aid groups, and civil society in both the U.S. and in corruption-plagued countries. Organizations from Iraq and Yemen wrote to Congress on Tuesday emphasizing the rule’s critical role combatting terrorism and conflict and reminding them “corruption was essential” to gains made by ISIS, which relied on smuggled oil to raise finances.
In an op-ed this week, Senator Ben Cardin (D-MD) and former Senator Richard Lugar (R-IN), the co-sponsors of the 2010 law, called on Congress to “put American interests first, ahead of the special interests,” and vote against efforts to void the rule. “Besides Big Oil, those most eager to repeal Cardin-Lugar are the autocrats, in places like Russia, Iran or Venezuela, with oil wells, gas fields or copper mines who want to keep the money secret from their citizens. Why do their bidding?”
While the resolution of disapproval was on the floor in the House yesterday, the Senate voted to confirm former Exxon CEO Rex Tillerson as Secretary of State, despite immense controversy over his potential conflicts of interest and questionable ties to Russia’s Vladimir Putin. Tillerson’s confirmation faced the most opposition of any Secretary of State in U.S. history, with a record 43 Senators voting in opposition. Democrats speaking out against the resolution of disapproval in the House voiced similar criticism, noting Exxon and Tillerson had lobbied against the Cardin-Lugar rule and raising concerns about whether they were trying to hide suspicious payments to Putin.
Exxon and the American Petroleum Institute, the oil lobbying group that has also spent years fighting against transparency, claim the rule puts US companies at a disadvantage because foreign competitors are not subject to the same requirements. But in fact, the majority of the biggest foreign oil and mining companies are already subject to the same mandatory disclosure requirements under rules in Europe and Canada that were modeled off the Cardin-Lugar provision. The U.S. rule – which applies to both foreign and domestic companies listed on U.S. stock exchanges – would extend the disclosure requirement to other major foreign oil companies like PetroChina and Sinopec, Petrobras (Brazil), Ecopetrol (Colombia), and more than 30 foreign mining companies.
“Companies like Exxon and their bought-and-paid-for cronies on the Hill are using false and misleading information to push their anti-transparency agenda,” said Harrison. “What are they hiding? Should Congress really be spending its time making it easier for companies to profit from sweetheart deals and corrupt governments?”
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), and filed legal action against the SEC twice for delaying the process.