By Ben Geman - 09/03/13 06:47 PM EDT
The Securities and Exchange Commission (SEC) on Tuesday said it plans to rewrite regulations that would force oil and mining companies to disclose payments to foreign governments.
A court struck down a version of the regulations in July, and an SEC spokesman said the agency does not intend to appeal the ruling.
The move by a federal judge to vacate the 2012 disclosure regulation handed a victory to industry groups that alleged the rule would impose costly burdens and force companies to disclose sensitive information.
The decision is a setback for human rights groups, like Oxfam America, that cheered the SEC for refusing to include an array of exemptions sought by industry in the original regulations.
U.S. District Court Judge John D. Bates ruled in July that the SEC had failed to justify its decision to require that companies’ full filings to the commission, rather than just summaries of them, be made public.
The judge also said the SEC had failed to justify its decision to reject industry pleas that the rule should include waivers for operations in countries that bar payment disclosure.
The disclosure rule was mandated by the 2010 Dodd-Frank financial law.
The SEC decision not to appeal will revive an intense administrative lobbying battle to influence the regulation’s contents.
“U.S. companies are leading the way to increase transparency, and we look forward to working with the SEC to rewrite the rule in a way that recognizes these existing efforts and doesn’t harm competitiveness,” said Carlton Carroll, a spokesman for the American Petroleum Institute, which alongside the U.S. Chamber of Commerce and other groups, sued to overturn the rule.
Oxfam America, which had intervened in the lawsuit in defense of the rule, and other advocates quickly called on the SEC to rewrite the rule in a way that doesn’t weaken it.
“It is now up to the SEC to swiftly reissue strong rules ... with a stronger justification that satisfies the court’s requirements,” said Ian Gary, senior policy manager for extractive industries at Oxfam America.
Advocates also released an early August letter from four U.S. senators calling on the SEC to rewrite the rule to better justifies provisions that oil industry groups challenged.
“The new rule should continue to make all reports public and should not allow for host country exemptions,” the letter states. “We believe the SEC has the discretion and authority to retain both of these key aspects of the initial rule as long as sufficient analysis and justification is provided.”
The letter was from Democratic Sens. Ben Cardin (Md.), Carl Levin (Mich.), Patrick Leahy (Vt.) and Ed Markey (Mass.). Former Sen. Richard Lugar (R-Ind.), who co-authored the Dodd-Frank provision requiring the rules with Cardin, also signed the letter.
The rule in question forces SEC-listed oil, natural gas and mining companies to reveal payments to governments related to projects in their countries, such as money for production licenses; taxes; royalties; and other aspects of energy and mineral projects.
It’s aimed at increasing transparency to help undo the “resource curse,” in which some impoverished countries in Africa and elsewhere are plagued by high levels of corruption and conflict alongside their energy and mineral wealth.
This post was updated at 3:39 p.m.