The month of July marked two years since the enactment of ground-breaking legislation to help fight corruption in resource-rich developing countries, namely the Cardin-Lugar amendment to the financial reform bill. This simple but powerful provision requires that all U.S.-listed oil and mining companies publicly disclose the payments they make to governments of countries where they operate.
Cardin-Lugar will help citizens "follow the money" that is often lost to corruption, give investors a clearer picture of oil and mining companies' financial soundness, and help create more stable governments, which will enable American companies to operate more freely on a level playing field. The bill will enhance American national security by lowering the risks that energy supplies become endangered by political upheaval, terrorism or depleted resources.
The legislation, which also covers many of the major foreign companies listed on U.S. stock exchanges, has been hailed by world leaders and anti-corruption fighters and lauded by the State Department as an important new foreign policy tool. Prompted by the passage of Cardin-Lugar, the European Union fast-tracked similar provisions, now pending. Thanks to U.S. leadership, the international community is taking an important step to fight the "resource curse" in which many countries rich in oil and minerals remain mired in poverty due to poor governance and lack of accountability.
Even those oil, gas and mining firms that disagree with the letter of the law, by and large, concede the urgent need for greater transparency. Better governance and accountability in developing countries are a win-win for companies, investors and citizens alike.
There's one problem with this picture: the U.S. Securities and Exchange Commission has failed to meet the deadline, clearly specified in the law, to issue the rules on how the petroleum and mining companies should report their payments. Until it does so, the law cannot take effect.
This is unacceptable. Through its inaction, the SEC, an independent agency, is derelict in its duty, flouts clear Congressional intent, and abrogates U.S. leadership in an important area of policy.
There can be no excuse for this delay. Our offices consulted with the SEC before we drafted the legislation and -- at the agency's urging -- we gave it leeway to write the specific reporting rules within the confines of the law after consulting with industry, investor groups, the public, and other interested parties. The April 2011, deadline has passed. We have called for an investigation into the SEC's failure to follow the clear letter of the law.
Since we passed Cardin-Lugar, the Arab Spring has created new opportunities for oil and gas investment in the Middle East, particularly Libya. It is vital that those investments be as transparent as possible, given the record of corruption and the yearning of those peoples for more accountable leaders. Similarly, as sanctions may ease, oil companies are rushing into Burma, where corruption is endemic, and the lack of an SEC rule hampers U.S. efforts to devise an appropriate investment framework.
Moreover, the EU is moving ahead with its version of a disclosure rule and there are disturbing signs that, because the SEC has failed to act, its version may differ from ours. We are concerned that U.S. companies may face unnecessary compliance costs if the two sets of rules do not match.
Underscoring the importance of Cardin-Lugar, Oxfam, a charity that works in corruption-ridden countries, has filed suit against the SEC to dislodge a final implementing rule. Microsoft founder Bill Gates, whose foundation works extensively to combat global disease and hunger, wrote the commissioners urging action, noting, "In Africa and elsewhere, natural resources represent the best chance to finance development and reduce poverty... Transparency of financial flows is critical."
This is more than just some bureaucratic squabble. Strong support for the principles of transparency, good governance and fighting corruption has been hallmark of American policy for more than three decades, since passage of the Foreign Corrupt Practices Act. It is a source of U.S. global leadership. Cardin-Lugar is an important reaffirmation of that support, and the SEC's dithering calls into question our commitment to these principles.
With a Commission vote not scheduled until late August, the lengthy delay has raised fears that the SEC may dilute the regulation, either by granting a broad exemption to countries that don't want the public to know the sums they receive, or by limiting the specifics of the payments disclosed. The law is clear on both points: no exemptions, and project by project reporting. We urge the commission: follow the law and issue the rule.