On June 17, British Prime Minister David Cameron made headlines around the world when he announced he would push for tougher monitoring procedures for mining, oil and gas projects in the UK – what is often referred to jointly as extractive industries. His announcement, which he made from the site of the G8 summit with the riveting coastline of Loche Erne, Northern Ireland as a backdrop, came only five days after Canada’s prime minister had made a similar announcement. The two press statements offered the impression that western governments were, for once, united in the need for public disclosure of the sums that are paid to governments by extractive industries.
Reports that companies were paying lucrative sums for mining contracts in countries with human rights violations were forcing western politicians to take a more public stand on the issue of transparency. So was the revelation that oil and gas companies were not being forced to acknowledge the potential ecological and social impact of their investments in underdeveloped nations, and that extractive measures like hydraulic fracturing were becoming more prominent globally.
And so was the announcement by the European Union’s parliament that it had overwhelmingly passed an update to its Accounting Directive the previous week that put more pressure on extractive and logging companies to disclose their foreign investments.
The EU’s new Accounting (and Transparency) Directive laws were meant to bring them in line with U.S. legislation that had been implemented in 2012 as part of the powerful Frank-Dodd Wall Street Reform and Consumer Protection Act of 2010. The federal legislation required mineral, oil and gas companies to disclose to the Securities and Exchange Commission (SEC) all payments they made to foreign governments. In short, it required companies to reveal their investments in records that could potentially become public knowledge – including to the press.
And that was a problem.
It’s interesting that the EU chose to pattern its updates after the highly contentious U.S. legislation. While the Frank-Dodd Act has been fairly successful in consumer rights protection, it has fallen woefully short when it comes to ensuring that mining, oil and gas companies “come clean” about their foreign investments.
Sections of the act that were designed to regulate extractive industries had only been implemented by the SEC last year. Disagreements between industry and transparency stakeholders delayed enforcement of these powers by more than a year. And by the time that the EU announced its successful passage of the Accounting Directive and Cameron had held his press conference on the shores of Loche Erne, the SEC was already embroiled in a lawsuit.
On July 2, barely two weeks after the EU passed its updates to the Accounting Directive, the District Court of the District of Columbia struck down the very section of the Frank-Dodd Act that would have required the disclosure not only of payments made to foreign governments, but the identity of the host country and the investor.
The American Petroleum Institute (API), which levied the suit, argued that in some cases the companies’ mining contracts prevented them from revealing the identity of the host countries. Angola, Qatar, China and Cameroon either prohibit publication of government contracts or require advance permission to do so.
The SEC, on the other hand, argued that that the law required public disclosure. Period.
U.S. District Court Judge John D. Bates however, rejected the SEC’s argument. He ordered the SEC to redraft the provisions, calling its interpretation “arbitrary and capricious.” The SEC, he ruled, had not followed the spirit of the law.
While the District Court’s ruling has hampered attempts by the U.S. government to increase transparency, it hasn’t halted the EU’s efforts. And the slow but methodic growth of a global initiative called the Extractive Industries Transparency Initiative, in which countries voluntarily pledge transparency, shows promise as well.
Still, the SEC’s recent loss can’t help but impact the effort to improve corporate social responsibility in developing nations.
As Senator Ben Cardin noted at the time of Bates’ ruling, “The U.S. has been at the forefront of the transparency fight and this decision will delay implementation of vital transparency.”
Recent admissions by Prime Minister Cameron where he says that he feels that “UK is missing out big time,” when it comes to not partaking in the “fracking boom” has unnerved environmental advocates as well. So has the news that one of Cameron’s aides operates a fracking consultancy business in Australia.
Cameron’s call for more disclosure laws and for more international partnerships is, no doubt, a boon for international relations that will benefit the U.S. But the absence of effective U.S. oversight of mining, oil and gas payments to foreign countries is still a concern when it comes to protecting human rights and the environment worldwide.
Photo by Phil Whitehouse.