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Why a Global Anti-Poverty Group Is Suing the SEC | Commentary

On Thursday, we at Oxfam America filed a lawsuit against the Securities and Exchange Commission. Yes, it is unusual for a global anti-poverty organization to sue the SEC, but we had felt it was necessary given the SEC’s feet-dragging in finishing a landmark transparency rule for the oil, gas and mining industry.

The SEC must put forward a rule to implement a provision passed by Congress and signed into law four years ago that will be a crucial victory for citizens of resource-rich countries around the world. Because of corruption and mismanagement fuelled by secrecy, nations often don’t see any of the benefits of their natural wealth. We and they simply can’t wait any longer.

This rule is so important because many countries suffer from what’s called the resource curse: They are rich in non-renewable natural resources like fossil fuels or minerals, but somehow have high levels of poverty, inequality, violence and instability. More than 60 percent of the world’s poorest live in countries that are rich in natural resources. Countries such as Nigeria, Chad and Venezuela are prime examples. We’ve seen it around the world many times over: Corrupt officials syphon off oil and mining taxes into their own private bank accounts, national and local governments squander these funds on nonstrategic or poorly designed public projects. Even worse, some extractive revenues are used to finance civil wars or violence that devastates lives and fundamentally destabilizes entire regions.

Four years ago, the U.S. took a huge step to fight this by providing a game-changing weapon: requiring U.S.-listed oil, gas and mining companies to disclose payments to U.S. and foreign governments under Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The provision was backed by a bipartisan group of senators and celebrated around the world. For citizens of resource-rich nations it promised an important tool in the long struggle to hold their governments accountable, build a sustainable economy and reinvest in their country. Investors celebrated too, because this information would help them assess risks in countries where oil and minerals are found in increasingly difficult environments and many times under unstable political and regulatory conditions.

Unfortunately, the oil industry’s lobbying arm, the American Petroleum Institute, along with the Chamber of Commerce and other trade groups sued to block the rule, part of a string of lawsuits aimed at dismantling Dodd-Frank. Ironically companies that API represents, such as ExxonMobil, Shell and Chevron, tout their transparency and dedication to fighting corruption while API fights to undermine one of the most powerful transparency weapons we can deploy: Section 1504.

API’s arguments didn’t hold up, and the court overturned the SEC’s rules on narrow grounds. Even still, we remained optimistic knowing that the SEC could reissue the exact same rule and still satisfy the judge’s ruling and stay true to Congress’ intent for the law.

Yet more than a year has passed. Billions of dollars in taxes, fees and royalties are changing hands between companies and governments, without being subject to public accountability, meaning countries face an uphill battle to manage this revenue and avoid the “resource curse.” Members of Congress, non-governmental organizations, investors and even API have called on the SEC to promptly issue new rules. So today, we’re suing the SEC after numerous attempts to get them to act on their own.

The SEC can again demonstrate strong leadership by promptly issuing a rule that requires public, company and project-level disclosures with no exemptions. Recent developments have made the SEC’s job easier: In Europe, Switzerland, Canada and Norway similar laws have been adopted or are being developed. And just last month, the UK government published draft regulations ahead of schedule, covering companies listed on the London Stock Exchange, including some of the largest oil and mining companies in the world, like Shell, BP, BHP Billiton, AngloAmerican and Rio Tinto, as well as important state-owned companies like Gazprom, Lukoil and Rosneft. There is now a global standard for this type of disclosure, paving the way for the SEC to follow suit and provide regulatory certainty.

Some companies are voluntarily disclosing payments, such as UK-based Tullow Oil, which voluntarily disclosed its payments this year at the project level (a first), demonstrating not only remarkable leadership on transparency but also that companies can comply with this at little cost and without hurting their competitiveness. API’s argument that this would hurt the competitiveness of companies like Exxon and Chevron simply doesn’t hold up, especially when their peers in other markets will have to report under the same standards.

This is a watershed moment for transparency. We are on the verge of a huge victory against corruption. We continue to hope that the SEC will do what we’ve asked of them all along and finish this rule quickly so we can drop this suit.

Raymond C. Offenheiser is the president of international relief and development organization Oxfam America and has more than three decades of experience in international development.

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