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January 18, 2013

Briefs Supporting SEC Filed in Lawsuit Challenging Transparency Rules for Extractives
    by Robert Kropp

Oxfam America and members of Congress argue that a rule mandating disclosure of payments to governments will contribute to stability and help investors make informed decisions.

SocialFunds.com -- In November, the Securities and Exchange Commission (SEC) refused to delay the implementation of a rule mandated by Dodd-Frank, requiring that companies in extractive industries such as oil, gas, and mining disclose their payments to governments. In response to a request for a stay of the rule, the Commission stated that the arguments of industry trade groups were "speculative and unsupported by evidence."

But the Commission's decision does not mean that the rule is safe from further attack. The trade groups—including the US Chamber of Commerce and the American Petroleum Institute (API)—filed suit in October, requesting that the US Court of Appeals in the District of Columbia overturn the law. Among the arguments made in the lawsuit is that the law violates the first amendment rights of companies. One of the requests of the plaintiffs is that the rule provide exemptions for companies operating in countries where such disclosures are illegal.

Oxfam America and many members of Congress have filed briefs with the Court supporting the law. The "law will arm the public with information it can use to track the amount of money governments receive from oil and mining companies and help investors assess a company's risk," Oxfam stated in a press release.

"The oil industry lawsuit is based on a series of unsubstantiated claims," Ian Gary, senior policy manager of Oxfam America's oil, gas and mining program, said. "As the Senate and House briefs emphasize, Congress was clear in the statutory language requiring public reporting of oil, gas and mining company payments at the government and project levels."

The Dodd-Frank amendment that includes the law was sponsored by Senator Benjamin Cardin and former Senator Richard Lugar. They, along with Senator Carl Levin, filed a brief with the Court. "This Court should strongly affirm that the Cardin-Lugar Amendment is clearly within the ambit of legislative power and does not implicate Petitioners' First Amendment rights in any way," the brief states.

Furthermore, it continues, "Petitioners can point to no evidence that the final rule would actually conflict with the existing laws of any foreign country. Absent that evidence, there is no practical basis even to consider an exemption, and if the agency allowed exemptions, this would provide an incentive for foreign governments to subvert US law by passing laws that prohibited disclosure."

The Senators also pointed out that voluntary disclosure of such payments through the Extractive Industries Transparency Initiative (EITI) is insufficient.

In its brief, Oxfam stated, "Cardin-Lugar addressed a number of critical foreign and domestic policy challenges: the resource curse, i.e. the destructive consequences of secret payments to governments by extractive industries, which affect economies and communities, the security of investments in extractive companies, and the stability of US energy supplies."

Oxfam also pointed out that institutional investors with collective assets under management exceeding $1 trillion have "identified numerous benefits of the rule," including greater accountability of governments and improved information for investors.

Twelve members of the House of Representatives also submitted a brief in support of the rule. And the State Department declared recently, "Corruption and mismanagement of these resources can impede economic growth, reduce opportunities for US trade and investment, divert critically-needed funding from social services and other government activities, and contribute to instability and conflict."

"The oil industry should drop its last ditch effort to deprive investors and citizens of important information regarding billions of dollars companies pour into countries for oil and mineral projects," Gary of Oxfam said.

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