An oil rig in Brazil produces an estimated 180,000 barrels of oil each day. U.S. oil companies hope to block a rule that will require them to disclose contract details starting in early 2014.
Anti-corruption advocates are cheering an appeals court decision not to rule on a lawsuit against transparency requirements for U.S. energy and mining companies. A three-judge panel for the U.S. Court of Appeals for the District of Columbia decided it did not have jurisdiction in an industry challenge against the Securities and Exchange Commission regulation. Delays could make the case largely moot.
Under the 2010 Dodd-Frank financial reform law, companies will have to disclose details about payments to foreign governments starting early next year. But a coalition of industry groups, led by the U.S. Chamber of Commerce and the American Petroleum Institute, is suing the S.E.C., saying the rule will cost its members billions of dollars, place companies at a competitive disadvantage against non-U.S. competitors, and violate companies’ right to free speech by compelling them to disclose politically charged details of their contracts.
The judges unanimously decided that the case was out of its jurisdiction. In the court’s opinion, Judge David Tatel said the court lacked “authority to hear this suit.”
The decision will cause delays, as the case now returns to the District Court for the District of Columbia. Meanwhile, a parallel rule is wending its way through the European Union Parliament. Earlier this month, an E.U. body agreed on changes to financial regulations that would impose similar requirements on state-owned extractive industries and those that are listed on the stock exchanges of member nations. The European Parliament and Council of Ministers is expected to ratify the final text sometime this summer.
Isabel Munilla, director of Publish What You Pay U.S., a coalition of groups supporting the rule, said the E.U. provisions would indirectly affect U.S. companies.
“The E.U. rules cover cross-listed companies like Shell and BP, which are backing the U.S. lawsuit,” Munilla said. “This lawsuit is a moot point.”
To reduce potential delays, industry groups filed their suit in the lower court at the same time as their appellate case. The lower court must still prepare to hear the case, which could take months.
Munilla said the S.E.C. is in a better position to defend the rule at the lower court, because it more closely examines the rulemaking process.
“[The industry groups] wanted the case in the D.C. Circuit Court of Appeals, since it has been friendly to efforts by industry to overturn regulations,” she said.
Brian A. Straessle, a spokesman for the American Petroleum Institute, pointed out in a statement that the court’s ruling should not be construed as an indication that the case lacks merit.
“The court simply concluded that it does not have jurisdiction to decide the case at this time,” Straessle wrote. “We will continue to explore every avenue as our challenge moves forward in the District Court for the District of Columbia.”
The U.S. Chamber of Commerce did not respond to a request for comment.
In a hearing at the appeals court in March, the S.E.C. argued that companies are already forced to share factual information with the Internal Revenue Service and other government agencies, and such rules have never been considered violations of the First Amendment.
Following the court’s decision, S.E.C. spokesman John Nester said its legal team stands “ready to present our case to the district court.” He expressed confidence that the agency would successfully defend the rule.
“S.E.C. staff continue to believe that our legal interpretation and economic analysis are sound and that this Congressionally-mandated rule will be affirmed.”
Chad Bouchard
