In a letter to SEC
Chair Mary Schapiro, Arlene McCarthy, a Member of the European Parliament,
urged the Commission to adopt strong reporting rules for the resource extraction
industries at the scheduled August 22 open meeting. She noted that there is a strong majority in the
European Parliament for tough reporting requirements, including project
level reporting. The MP said it is equally
clear that investors
are demanding more
information and transparency
on companies' activities. In her
view, strong SEC regulations in this
area would send a clear and unequivocal message that the EU and the US are
united in their drive for stronger
transparency rules for the resource extractive industry.
The MP emphasized
the importance of the consistent cross-border regulation of global extractive
industries, which depends on the EU and US adopting strong common and equivalent oil
and mining company transparency rules. Member McCarthy is Parliamentary
draftsperson on the EU Transparency rules for the extractive sector. She is
also the Vice Chair of the Economic and Monetary Affairs Committee.
Section 1504 of the
Dodd-Frank Act directs the SEC to adopt regulations requiring resource extraction
issuers to include in their annual reports information on any payments made to
foreign governments or to the federal government for the purpose of the
commercial development of oil, natural gas or minerals.
Specifically, the MP
said that project level disclosure is essential if these regulations are to be effective and
deliver the necessary transparency to enable local communities to hold their
governments to account for the use of revenues from the extraction of natural
resources and to be
able to link payments to
local resources. The decision the
SEC takes on August 22 will send an important signal to legislators and
regulators globally of the SEC’s intention to introduce tough rules in the spirit of the
Dodd Frank legislation.
The MP further noted
that there is no
evidence that tough reporting
requirements for project reporting will either
be harmful to
companies competiveness or
be overly burdensome.
She cited Lord Browne, the former Chief Executive of BP, who pointed out
in his Op-Ed in the Financial Times (April
25, 2012), that the rules
would not force disclosure
of information during negotiations, which
is the most sensitive period
for dealings. Furthermore,
with both the US and EU
implementing disclosure of payments to government, around 90% of the
world's extractive companies will be
covered by the rules.
Again referencing
Lord Browne, the MP said that the alleged administrative cost to the extractive
industries is greatly
exaggerated. The largest
companies already spend a
vast sum on
compliance with both national
and international reporting standards. The
SEC itself estimated
that increased costs
arising from the new requirements would
only be around 0.33%. If companies operating in the extractive
industries are
already complying with
international good governance
codes, reasoned the MP, then they will
already be maintaining extensive
internal records tracking the
payments that the company
makes.