Seems that the US government has a penchant for putting US businesses on the hook for ensuring that foreign governments don’t mistreat their citizens, or carry on with corruption — principally through the Securities and Exchange Commission (SEC).
The SEC (more precisely, its enforcement of the now-notorious Dodd-Frank legislation) is still causing a ruckus within the American business community.
Whether we’re talking conflict minerals (Dodd-Frank Section 1502) — as MetalMiner has been for a while — or payments made by mining companies (Dodd-Frank Section 1504), one way or another, it all comes down to regulatory audits and disclosures.
Most recently, the SEC defended its decision to ostensibly put the onus of “enhanced governmental accountability” of foreign nations on US gas, oil and mining companies (i.e. ‘extractive industries’) by requiring them to disclose payments they make to foreign governments via the SEC’s new rule, according to a recent Reuters report.
The SEC claims this rule, based upon Section 1504 of Dodd-Frank, will “address the ‘resource curse,’ or the phenomenon of resource riches leading to corruption in poor countries,” according to the article.
However, as in the case of the SEC’s conflict minerals rule, several US business organizations have come together and filed a lawsuit against this “resource curse rule,” including the U.S. Chamber of Commerce and the American Petroleum Institute, arguing that the rule puts US miners and other companies at a competitive disadvantage.
The business groups cited a violation of the First Amendment, among other grievances, in its lawsuit.
Now, where have we seen this before? Hmmm…
Manufacturers’ Conflict Minerals Complaint Vs. the SEC
Not too long ago, the National Association of Manufacturers (NAM), the Business Roundtable and the US Chamber of Commerce filed a preliminary statement of issues with the SEC regarding the conflict minerals rule.
MetalMiner spoke with Sarah Altschuller, an attorney in the Corporate Social Responsibility practice of Foley Hoag LLP, to better understand the filing and, of course, to determine how “strong of a case” the business groups made challenging the rule, which is based on Section 1502 of the Dodd-Frank financial reform legislation.
Turns out, Altschuller said, that the First Amendment argument is hard to make.
“One of the key roles of the SEC is to prompt public disclosures from entities like the companies subject to this rule,” she said. “Companies are required to disclose all sorts of information pursuant to the securities laws and regulations.”
In Altschuller’s legal viewpoint, overall, manufacturers will have a tough time persuading the SEC to amend the language of the rule — which forces an audit process upon manufacturers who source any materials with conflict minerals in them — let alone overturn it.
Same goes for the current case between the SEC and oil, gas and mining companies.
However, there could be a glimmer of hope yet: evidently, the SEC and the Commodity Futures Trading Commission have both lost a handful of these types of challenges, often over whether the agencies adequately considered a rule’s costs and benefits.