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Oxfam Lawsuit Pushes for Quick Action on Resource Payment Disclosure Rule

September 19, 2014

The international aid group Oxfam America Inc. is suing the SEC for moving too slowly in issuing a rule requiring oil and mining companies to publicly disclose the payments they make to governments as part of their business. Oxfam’s complaint said the SEC should be compelled to issue a final rule to implement a Dodd-Frank Act provision that should have been issued more than three years ago. The agency’s failure to issue a rule puts it in violation of the will of Congress from the 2010 landmark reform law, the group said.

Recent years have seen the SEC hit with a volley of lawsuits from businesses for moving too quickly on some market reforms.

Now the international aid group Oxfam America Inc. is suing the agency for moving too slowly in issuing a rule requiring oil and mining companies to publicly disclose the payments they make to governments as part of their business.

“With transactions worth billions of dollars in oil, gas, and mining projects taking place in some of the poorest, most corrupt, and highest-risk countries in the world, citizens and investors simply cannot wait any longer,”; said Ian Gary, a senior policy manager with Oxfam.

The complaint filed on September 18, 2014, in U.S. District Court in Boston said the SEC should be compelled to issue a final payments disclosure rule to implement a Dodd-Frank Act provision that should have been issued more than three years ago. By not issuing a rule, the agency is flouting the will of Congress in the 2010 landmark reform law.

The agency had issued such a rule in 2012, Release No. 34-67717, Disclosure of Payments by Resource Extraction Issuers, although it was more than a year after the legal deadline set by Dodd-Frank. Had the rule been implemented, more than 1,100 companies would have had to file reports with details on payments of $100,000 or more to U.S. and foreign governments, including taxes, royalties, fees, production entitlements, bonuses, dividends, and infrastructure improvements.

In July 2013, a federal district court in Washington vacated the disclosure requirement. The decision agreed with the plaintiffs led by the U.S. Chamber of Commerce and the American Petroleum Institute that their First Amendment rights were violated and their businesses interfered with because the rule required public disclosure of the information, which the court said went beyond the authority the SEC was given in the Dodd-Frank Act.

In September 2013, the SEC decided not to appeal the case, and since then agency staffers have been reviewing the decision and gathering information as they plan their next move. The SEC is expected to produce an amended rule that will take the court’s decision into account.

An SEC spokesman said the agency was unable to comment on the Oxfam complaint until its staff had reviewed it.

The Dodd-Frank provision was one of three requirements from the landmark financial reform law on so-called social issues. The others dealt with disclosures about safety issues by mining companies and disclosures by manufacturers about their use of minerals from the eastern Congo, a war-torn region in which rebel forces finance their arms purchases partially through illicit trade.

Companies complained about the conflict mineral and resource extraction disclosures almost from the outset because, they said, the requirements were outside the SEC’s traditional mandate for financial and governance disclosure rules. In their view, the laws were costly to follow and demanded the release of information of little value to investors.

The rules were challenged in court soon after being issued. In the case of the conflict minerals rule, the SEC and the manufacturers are awaiting a decision by a federal appeals court that may either reinstate the rule or return the case to a lower court for a retrial.

In its complaint, Oxfam said it’s a shareholder in some of the companies that would be affected by the rule and that access to the payment information would help the group assess its investment risk arising from the payments to the governments.