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Oxfam Defends Transparency Law in Court

 

On January 16, 2013, Oxfam and several members of Congress submitted briefs with the United States Court of Appeals for the District of Columbia Circuit in response to the extractive industry’s legal attempt to overturn the Cardin-Lugar Amendment.  Formally known as Section 1504 of the Dodd-Frank Act, the provision would require every extractive company listed on the New York Stock Exchange to make public all its financial transactions with foreign governments, including those for rights to extract oil, gas, and minerals.

 

According to Transparency International, two-thirds of the world’s poor live in resource-rich countries, where the the majority do not benefit from their nations' natural wealth.  Without adequate transparency, billions of dollars are lost annually in the accounts of privileged groups instead of aiding state budgets.  International relief and development organizations argue that the Cardin-Lugar Amendment will contribute to increased financial transparency in these countries, meaning that revenue from mining and oil and gas drilling activities will flow not just to the elites, but to all citizens.

 

The provision will also supplement the work of the Extractive Industries Transparency Initiative (EITI), an international standard to increase transparency of the extractive sector.  The participation in EITI is, however, voluntary, and so far only 18 countries have achieved compliance.  In contrast, Cardin-Lugar will require all companies listed on the stock exchange to make all their transactions with foreign governments public.

 

In October 2012, after a long and unsuccessful campaign to kill the sunshine law in the legislative process, industry groups including the American Petroleum Institute (API) representing 500 oil and natural gas companies including Chevron, ExxonMobil, BP, and Shell, filed a lawsuit against the Security Exchange Commission (SEC).  API challenged the final rules to the Amendment the SEC adopted in August 2012.  These actions came two years after President Barack Obama signed the bill in July 2010. 

 

Specifically, the oil industry representatives demand exemptions in cases where foreign laws prohibit such public disclosure, as well as the right to submit confidential financial records to the SEC which, in turn, would report them to the public on an aggregate, country-by-country basis.   The API argues that law as it exists now would put US companies at a disadvantage because "disclosure would not be a two-way street. State-owned foreign companies would have to reveal nothing – and might even be favored for projects in host countries reluctant to have financial information disclosed."

 

Three briefs filed by Oxfam, members of the Senate, and members of the US House of Representatives challenge API’s claims and uderline the urgent need for the law to be adopted as it stands now.  The intervenors argue that API did not provide any meaningful justifications for its claims, including how exactly the law would damage the financial interests of the extractive industry and precisely how it would conflict with the existing laws in developing countries.  Furthermore, the Senate brief argued, exemptions  "would provide an incentive for foreign governments to subvert U.S. law by passing laws that prohibited disclosure.”   The authors of the briefs recommend that the Court reject API’s petition.

 

Meanwhile, similar transparency initiatives are moving forward in Canada and in the European Union, which is expected to adopt rules much like the US law in 2013.

 

Click here to sign Oxfam's petition to oil companies urging them to abandon their legal challenge to the Cardin-Lugar Amendment.  A similar petition by ONE is available here.  For more information on the existing campaigns that promote transparency of the extractive sector in developing countries, check out our media gallery, where you will find reports by EITI, Transparency International, Publish What You Pay, and Revenue Watch, among others.  


Watch what Oxfam has to say about the Cardin-Lugar Ammendment: