US court rules against oil transparency
A US court has dealt a blow to demands for greater transparency in the global extractives industry by ruling that companies do not have to publish details of payments they make to foreign governments.
Section 1504 of the 2010 Dodd-Frank Financial Regulation Act had been widely interpreted to mean that natural resource companies listed on the US stock exchange would have to disclose all overseas payments.
The law was to come in force in September 2013, and would affect two major operators of Uganda’s oil fields, Total S.A. and CNOOC (the Chinese National Oil Offshore Oil Company), which are both listed on the New York Stock Exchange. The law would have required them to publish details of any payments made to the Government of Uganda.
However, the District Court in Washington DC yesterday interpreted the law to mean that companies must report information only to the Securities and Exchange Commission (SEC), America’s financial regulator. Neither the companies nor the SEC are under any obligation to share the information more widely.
The ruling came after intense lobbying from US corporate interest groups, including the American Petroleum Institute. They had argued that wider disclosure of payments could damage the commercial interests of American companies, especially when they are competing against state-owned companies from overseas.
Transparency activists have long maintained that that secrecy over financial transactions leaves government and corporate doors wide open to corruption.
Winnie Ngabiirwe, Executive Director of Global Rights Alert in Uganda, expressed disappointment with the court’s decision. “This ruling goes a step further in entrenching corruption and misuse of natural resources revenues in poor countries like Uganda” she told Oil in Uganda. “It denies us an opportunity to get information needed to demand for accountability.”
The US court ruling does not affect a Transparency and Accounting Directive issued by the European Union on June 13, with higher transparency requirements for companies listed on European stock markets. The directive will affect Total S.A. and Tullow Oil plc, which are both listed on European exchanges.
In Uganda’s case, therefore—ironically, in view of American fears of foreign state-owned companies—only CNOOC will be allowed to slip through the net of greater corporate transparency.
Report by NY