A District of Columbia court on Tuesday ruled that the Securities and Exchange Commission misused a section of the 2010 Dodd-Frank Act in its attempt to compel oil companies to disclose payments made to governments in foreign countries where they do business.
Section 1504 of the Dodd-Frank financial regulation act that emerged in the aftermath of the global financial crisis of 2008 sought to make energy and natural resource companies provide detailed annual reports of the payments they make, including information about the projects being funded and recipients of the funds. The SEC, in its attempt to implement section 1504, was pushing for this information to be made available available to the public.
The world’s major oil companies, ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS) and BP (BP) were represented in the case by the American Petroleum Institute, whose counsel argued that such requirements would have “jeopardized transparency efforts already under way by making American firms less competitive against state-owned oil companies.”
The court emphatically concurred with the argument put forth by the API and its constituency, saying that spending reports should be submitted to the SEC privately, out of view of the public. The court also called the SEC’s interpretation of section 1504 “grave indeed”, and said that the regulatory body had essentially overstepped its jurisdiction in the matter.
The decision comes on the heels of a law passed by the European parliament last week requiring all companies engaged in the extraction of natural resources to report payments made to foreign governments along with details about specific projects, and it remains to be seen in what way this will affect the companies that escaped the SEC’s attempts at imposing transparency on big oil.
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