Citing a recent Executive Order promoting international
regulatory cooperation, the American Petroleum Institute said that proposed SEC
regulations implementing Section 1504 of the Dodd-Frank Act, which requires
companies in the extractive industries to disclose information pertaining to
certain categories of payments made to the governments of the countries in
which they operate, would create
inconsistencies with the existing international disclosure standard promoted by
the Extractive Industries Transparency Initiative. In a letter to the SEC, the
Institute noted that the proposed regulations would require some US companies
operating abroad to make the ``Hobson's choice’’ between violating foreign laws
or abandoning operations in foreign countries that prohibit disclosure.
In order to avoid such
conflicts and their costly consequences, the API urged the SEC to authorize a
reporting exemption where reporting would cause a company to violate foreign
law. Tailoring the rule in this manner, reasoned the API, would further the
Administration's goals of harmonizing regulatory approaches among nations and
facilitating economic growth and job creation.
In the view of the API,
Executive Order No. 13609, of May 1, 2012, recognizes that differences between the regulatory approaches of U.S.
agencies and those of their foreign counterparts might impair the ability of US
businesses to export and compete internationally. The Order imposes heightened
responsibilities on federal agencies, including the requirement that they
designate significant regulations that the agency identifies as having significant
international impact, which is defined as
a direct effect that a regulation is expected to have on international trade
and investment, or that otherwise may be of significant interest to US trading
partners. The Executive Order encourages independent
regulatory agencies to comply with its provisions.
In addition to the
Executive Order, noted the Institute, longstanding principles of international
law require agencies to construe statutes to avoid conflicts with foreign laws.
The Restatement (Third) of Foreign Relations Law, cited approvingly by federal
courts, provides that a state may not require a person to do an act in another
state that is prohibited by the law of that state. The Restatement extends this
principle to executive agencies engaging in statutory construction. The same
rule of construction flows from the doctrine of comity, continued the
Institute, under which courts will interpret statutes so as to avoid conflicts
with foreign laws, and regulatory agencies appropriately adhere to the same
interpretive principle.
In light of these principles and the Executive Order, the
Institute asked the SEC to construe
Section 1504 to avoid imposing conflicting commands on regulated entities. In
Section 1504, Congress sought to require resource extraction issuers to
disclose to the Commission their payments to foreign governments, said the API,
but Congress left to the Commission's discretion the requisite level of
specificity of those disclosures, as well as how disclosures would be made
available to the public. Importantly, Congress crafted Section 1504 to allow
the Commission to exercise its definitional authority, and, if necessary, its
exemptive authority to adopt regulations that avoid conflicts with foreign
laws.