On July 2, 2013, the United States District Court for the
District of Columbia vacated the rule issued in 2012 by the
Securities and Exchange Commission (SEC) implementing the
extractive issuer disclosure requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank).
Section 1504 of Dodd-Frank aims to increase transparency in
resource-rich countries by requiring extractive issuers to disclose
payments made to governments to further commercial development of
oil, natural gas, and minerals. The court struck down SEC
Rule 13q-1 (the Rule), which would have required extractive issuers
to publicly file annual reports disclosing, at a project and
government level, all non-de minimis payments made to
foreign governments and the US federal government for the purpose
of commercial oil, gas, or mineral
development.
Plaintiffs, a group of oil, gas, and mining companies subject to
the Rule, initially filed simultaneous complaints in the District
Court for the District of Columbia and the District of Columbia
Circuit Court of Appeals. After the DC Circuit ruled that
original jurisdiction properly resided in the district court, the
district court heard summary judgment motions based on briefs filed
in the DC Circuit. Based on a carefully reasoned
analysis grounded in statutory interpretation, the court held that
Dodd-Frank Section 1504 did not require the SEC to make the
disclosure reports publicly available, and that the SEC's
refusal to consider an exemption for payments to foreign
governments located in states whose laws prohibit such disclosure
was arbitrary and capricious. Because the court did not reach
several of plaintiffs' other arguments under the First
Amendment, the Administrative Procedures Act (APA), and the
Securities Exchange Act of 1934 (Exchange Act), it remains to be
seen whether the SEC will revise other aspects of the Rule on
remand. In the meantime, however, the court's decision
relieves extractive issuers from compliance with the Rule, which
had been scheduled to take effect for payments made after October
1, 2013.
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