With the E..U. having enacted legislation mandatory disclosure of resource extractions payments to governments, and impending fast-track implementation by the U.K., two global energy companies have urged the SEC to commit to rework Dodd-Frank resource extraction regulations struck down last year by a federal judge. In a letter to SEC Chair Mary Jo White, the Controller of ExxonMobil and the CFO of Royal Dutch Shell emphasized that the public interest of achieving a coordinated and harmonized global transparency regime for resource extraction paymemts, which will best serve the interests of all stakeholders.
The EU Accounting & Transparency Directives must be implemented by legislation adopted individually in each EU Member State. The U.K. is moving quickly on implementation, having already issued draft legislation for public comment with a current goal of meeting the October 2014 window for final adoption.
The energy companies understand that the U.K. government would like to know the probable direction of SEC rulemaking under Section 1504, the resource extraction provision of Sarbanes-Oxley. If the SEC were able to indicate their willingness to consider the proposed new rules under Section 1504 before the U.K. legislation is finalized, they noted, the U.K. government could take the SEC approach into account in implementing its own transparency legislation. Since the U.K. will be the first E.U. Member State to implement the EU Accounting & Transparency Directives, thus setting a precedent for other E.U. Member States’ implementation. This is especially important for purposes of equivalency between the E.U. and U.S. reporting regimes.
Equivalency, they believe, is critical as the EU member states move to implement the transparency reporting directives. No one benefits from an outcome under which multinational resource companies are required to file multiple reports in multiple jurisdictions providing substantially the same information in different forms. On the other hand, we believe all stakeholders would benefit from seeing the direction of SEC rulemaking under 1504 as transparency reporting is implemented around the world. An ideal solution to the issue might be that compliance with the reporting rules in one country would be deemed to satisfy the reporting requirements in another country notwithstanding variations in detail.
The energy companies recognize that it would be impractical to expect regulatory action from the SEC in time to influence the U.K. on the current U.K. timetable. However, they believe that if the SEC were to take concrete steps to indicate it will take up Section 1504 rulemaking this year, the U.K. government might be willing to defer implementation of its transparency legislation from the October 2014 schedule to the April 2015 timeframe. This would provide sufficient time for the SEC to discuss with the U.K. implementing authority (Department for Business, Innovation & Skills) how best to take into account the SEC rules before any EU Member State finalizes its transparency legislation.