The US Dodd-Frank Act and Mandatory Disclosure Requirements for Extractive Industries
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The US Dodd-Frank Act and Mandatory Disclosure Requirements for Extractive Industries

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Presentación de Todd Arena de Revenue Watch Institute United States, en el Foro de Transparencia en las Industrias Extractivas, organizado por Grupo FARO el 10 de mayo de 2011 en la ciudad de Quito

Presentación de Todd Arena de Revenue Watch Institute United States, en el Foro de Transparencia en las Industrias Extractivas, organizado por Grupo FARO el 10 de mayo de 2011 en la ciudad de Quito

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  • Revenue Watch takes a comprehensive approach to improving governance and development, beginning with the organization of extractive production, revenue generation, and revenue management, and continuing through to expenditure processes and development outcomes.Underlying all of this work is the premise that natural resources are public assets to be managed for public benefit. Revenue Watch believes that decisions about resource extraction and use must therefore be transparent and subject to informed public and legislative oversight.
  • Investors agree – These investors- with around 12 trillion dollars under management have signed on to a statement supporting mechanisms for revenue transparency and disclosure, including the EITI.But not everyone in the private sector agreed. For example, the CEO of Shell spoke out very strongly against D-F earlier this year, after years of strong advocacy on behalf of Shell in favor of voluntary rules.

The US Dodd-Frank Act and Mandatory Disclosure Requirements for Extractive Industries The US Dodd-Frank Act and Mandatory Disclosure Requirements for Extractive Industries Presentation Transcript

  • The US Dodd-Frank Act and MandatoryDisclosure Requirements for Extractive IndustriesTodd ArenaLegal Fellow, RWItarena@revenuewatch.orgApril, 2011 | Quito, Ecuador
  • About Revenue Watch Institute Where We Work Latin America Ecuador Mexico Peru Bolivia Brazil Trinidad y Tobago
  • About Revenue Watch InstituteWho do we work with?Over 300 organizations, working in over 45 resource richcountries
  • Linking Resources to Development Ensuring Managing Investing in Getting aDeciding to extract revenue Volatile sustainable good deal transparency resources development © M. Genasci ©Jacob Silberberg/Panos Pictures
  • The EITI and PWYP Movements EITI advantages • MSG approach • Provides critical baseline, audited data • Reporting required from companies and governments © 2010 - Transparency International Indonesia
  • International Disclosure StandardsVoluntary:• EITI—Extractive Industries Transparency Initiative• Company disclosure policiesMandatory:• National laws• Accounting standards• Bank lending policies• Stock market listing requirements – London Stock Exchange’s AIM – Hong Kong Stock Exchange – US Securities and Exchange Commission/Dodd-Frank rules
  • Passage of the US Dodd-Frank Act • Section 1504: ―Disclosure of Payments by Resource Extraction Issuers‖ • Passed by Congress and signed into law by President Obama in July of 2011―We are leading a global effort to combat corruption, which in manyplaces is the single greatest barrier to prosperity, and which is a profoundviolation of human rights. That’s why we now require oil, gas and miningcompanies that raise capital in the United States to disclose all paymentsthey make to foreign governments.‖ –US President Barack Obama, 22.09.2011
  • Cooperation between CSOs and GovernmentThe Role of Congressional ―Champions‖ – Key allies within Government – Typically members of Congressional staff – Constructive relationship • First, CSOs (and lobby groups) work with Champions in the drafting of a piece of a legislation draft • Second, Congressional Champions monitor the progress of the draft legislation to ensure it becomes law • Third, CSOs and Champions meet to discuss the progress, and CSOs may continue pushing for the draft legislation to be come low ―outside‖ of government (public campaigns)
  • What the Law DoesLaw requires all companies registered with the US stockmarket regulator – the Securities and ExchangeCommission – to disclose their payments togovernments: • In standard annual reports, which will be published online • Including payments to the US and foreign governments • At the national and sub-national level • Country-by-country, in all countries of operation • For each project • Disaggregated by payment type including: royalties, signature bonuses, taxes, fees and other benefits
  • Implementation• Law will be interpreted by new US stock exchange rules that will apply to ―resource extraction issuers‖• The US Securities and Exchange Commission (SEC) has opened up a fully transparent public comment period as it drafts rules – Companies, investors and civil society groups are meeting with SEC officials and offering written comment – The SEC has released proposed (draft) rules, and will issue final rules by December, 2011• Payment data resulting from the US law may not be published by companies until 2013
  • Who Will the Law Apply To?• Applies to US and foreign companies making payments related to ―the commercial development of oil, natural gas or minerals‖• Companies under the control of and/or owned by foreign governments will report payments• The law covers over 90% of the major internationally operating oil and gas companies, and eight out of 10 of the world’s most profitable mining companies
  • Company CoverageInternational majors coveredChevron (fmr. Exxon BP ShellTexaco)Total Petrobras Petrochina TalismanConocoPhillips Statoil ENI - AGIP NewmontOccidental Repsol BHP SinopecHess Anadarko Marathon FreeportRio Tinto Vale Ecopetrol YPF (Colombia) (Argentina)Companies operating in Indonesia that are NOT covered PDVSA, Petroecuador, YPFB, Pemex, Codelco, Perupetro, Petroperu
  • What is Gained through Mandatory Disclosure?• A new tool to empower citizens and civil society groups in natural resource dependent countries• A permanent mechanism; Dodd-Frank disclosures will not wax/wane based on host government political will, or on the voluntary decisions of companies• Mandatory disclosure frameworks complement the EITI, and increase the amount of information coming from implementing and non-implementing countries – Dodd-Frank disclosures are meant to build productively on the EITI’s gains – Reporting under Dodd-Frank will provide more detailed information than EITI’s minimum requirements produce – Mandatory reporting will also produce standardized and regular data, which can encourage improved EITI reporting standards
  • Replicating Dodd-Frank in Other Markets 14
  • Services Employees International Union (SEIU) (US) – Ste ve Abrecht Legal & General Investment Ma Legal & General Investment Management (UK) – Peter Chambers – Karina Litvack SNS (The Netherlands) – TheoAsset Management (UK) F&C Dijkstra Local Authority Pension Fund F ency in the Extractives Local AuthorityLife Investments (UK) – Julie McDowell Standard Pension Fund Forum (UK) – Tessa Younger Merrill Lynch Investment Mana Merrill Lynch Conneticut (US) AberdeenL.–Nappier & Donald A. Kirshbaum Preston & Clare PaynMorley Fund Management (UK State of Investment Managers (UK)Asset Managers Ltd (UK) – Andrew – Denise Alex Popplewell State Street Global Advisors Toby BelsomManagement (The Netherlands) – Gemma Taylor- Newton Asset Management Ltd Morley Fund Management (UK) – (US) – Bill Page ABN Amro Asset xposure to companies eve it is in the interest of Newton Asset Pensioenfonds Gee (TheKatie Swanston Stephen Lister Stichting Management Ltd (UK) – Netherlands) – ABP New York State Common Retir to operate in a business New Storebrand Common Retirement Fund (US) – Julie Gresham– Lucy Butler York State (Norway) – Kristine Meisingset Association of British Insurers (UK) Norges Bank Investment Mana by stability, transparency Norges Bank Investment ManagemeGifford & Co – PaoloKennyHenrik Swiss Re Asset Management (Swit zerland) (UK) – – Dr. Be ll Baillie nt (NBIM) (Norway) Sismondi 4 Sysese factors are essential to Banco Fonder (Sweden) – Sasja Beslik SyseTIAA-CREF (US) – Peter Clapman Nottinghamshire County Counc Trades Union Congress (UK) – Tom Powdrill Daniel Simard Bâtirente (Canada) – ocial cohesion, which, in ch we invest to prosper. Nottinghamshire County Council (UK) – John Pearson Ohio Public Employees Retirem tatement orstandards details for contact Boston Common Asset Managemen t (US) – Dawn Wolfe mined by poor Ohio Trillium Employees Retirement System (US) – Cynthia Richson Public Asset Management (US) – Steve Lippma n Ontario Teachers’ Pensions Plaease can give rise to which contact Karina UBS Global Asset Management (UK) Ltd – da) Pitfield Litvack, CalPERS (US) – Dennis Johnson Ontario Teachers’ Pensions Plan (OTPP) (Cana Ian – Catherine Jacksonce & Socially Jackson CalSTRS (US) – Janice Responsible Superannuation Scheme (UK) – Dan Hester-Amey Universities Summerfield PGGM (The Netherlands) – Ka Management PGGM (The – Sector. Management (US)GroupF&C(US) – Lily Donge Ltd Investors Statement on Transparency in the Extractives plc Walden Netherlands) – Karina Litvack, Smith Asset Calvert – Tim For further information on thi ompanies are particularly Canadian Labour Congress (Canad a) Railpen Investments (UK) – Fra 7506 1219. University Pensions Fund (Canada) – Leona Fields Railpen Investments (UK) York investors with exposure – Frank Curtiss the Investors listed below,by operating in these RCM (UK) – Bozena Jankowsk make legitimate, but institutional the world, we believe it is into companies (UK) – Neville White As operating around – Bozena Jankowska of CCLA Director, Pension Investments Head of Govern of RCM (UK) ents may be accused the companies in which we invest to operate in a Central Finance Board of the Methodist Church ( UK) – Bill Seddon Rio Tinto the interest business environment that Pension Investments Ltd (UK) – Steph en Burley Rio Tinto is characterised by stability, transparency Investment, Netherlands) – E Robecco (The F&C Ass er which corruption can Christian Brothers Investment Servic es (US) – John Wilson s risk, making companies Robecco (The Netherlands) – which, inBreen Erik and respect for the rule of law. These factors are essential to securing economic prosperity and social cohesion, Co-operative Insurance Society (UK) – Jo Allen karina.litvack@fandc.com or 0 Sarasin (Switzerland) – Eckhar 4 city in corrupt behaviour, enable the companies in which – Eckhard Plink Sarasin are frequently undermined by poor standards Agricole Asset Management (France) – David Diamond turn, (Switzerland) we invest to prosper. Schroders Investment Manage ce to operate”, renderingHowever, they Crédit ofSchroders Investment Management (UK) – Sue Livingston governance and transparency, which can give rise tod insecurity, and possibly operating environments. corrupt Dexia Asset Management (Belgium/France) – Leene Colle Scottish Widows Investment Pa ercial prospects in these Scottish Widows Investment Partnership (SWIP) (UK) – Anne – Adam Kanzer Domini Social Investments (US) C Fraser We are concerned that extractive companies are particularly Fraser the risks posed by operating in these exposed to The Dreyfus Premier Third Century F und Inc and The Dreyfus Legal & General Investment Man Services Employees Internation ) – Karina Litvack payments to governments may be accused of Responsible Growth ve Abrecht – John O’Toole ncy about both payment Services Employees International Union (SEIU) (US) – Ste Fund Inc (US) environments. undisclosed, Companies that make legitimate, but Socially Local Authority Pension Fund For SNS (The Netherlands) – Theo contributing to theNetherlands) – Theo Dijkstra SNS (The conditions under which corruption can Merrill INVESTOR GROUP EITI Lynch Investment Manage Standard Life Investments (UK ant contributor to good thrive. This is a significant business risk, making companies Funds (Canada) – Robert Walker Ethicalalthough its Preston &Standard Life Investments (UK) – Julie McDowell – Andrew effectivenessClaretoPayn global “licence to operate”,behaviour, Investment Foundation (Switzerland) – Caroline Schu m vulnerable accusations of complicity in corrupt Ethos Morley Fund Management (UK) – State of Conneticut (US) – Den der initiatives to combat impairing their local and rendering Netherlands) – Gemma Taylor- conflict and insecurity,Denise L. Nappier & Donald – Niamh W hooley them vulnerableConneticut (US) – andFidelity Investments (UK) A. Kirshbaum State of to local possibly Newton Street Management Ltd(U F&C Asset Global Advisors (U State Asset Management ( es. compromising their long-term commercial prospects in these New York State Common Retirem markets. Street Global Advisors (US) – BillInsurance Group (Sweden) – Carina Lundberg State Folksam Page Stichting Pensioenfonds ABP (T Lucy Butler Stichting Pensioenfonds ABP (The Netherlands) – Stephen Lister overnance problem often believe that improved transparency about both Förster AP-fonden (AP1) (Sweden) – Nadine Viel Lamare We payment Storebrand (Norway) – Kristine Norges Bank Investment Manage Aberdeen Asset Managers Ltd (UStatement or contact details (Norway) – contributor Frater Asset Management (South Africa) – William Frater y in many host countries. revenue flows isfor important Kristine Meisingset ll Storebrand Syse Swiss Re Asset Management ( and an to good ABN Amro Asset Management (T governance by host governments, although its effectiveness ease oncontact about depend Rethe successManagementtoGartmore Investment Management plc (UK) – Tony Little ssions corruption andslik transparency will Karina on Asset of wider initiatives (Swit zerland) – Paolo Sismondi Swiss Litvack, combat Nottinghamshire County Council TIAA-CREF (US) – Peter Clapm reate Gee corruption and the misuse of revenues.nce & sector has an Responsible – Peter Clapman corporate Socially TIAA-CREF (US) Goldman Sachs Asset Management International (UK) – Alex Trades Union Congress (UK) – Ohio Public Employees Retireme Association of British Insurers (U Ontario Teachers’ Pensions Plan t (US) – Dawn Wolfe – Management Trades Union Congress (UK) Marshall – Tom Baillie Gifford & Management (US Trillium Asset Co (UK) – Kenny We recognise that the root of the governance problem often plc vernment and multilateral in underdeveloped local capacity in many host countries. Powdrill lies Banco Global Asset Managemen Jackson0otect its 1219. 7506 own long-term Trillium Asset Management (US) – Steve Global Investors (UK) – Rob Lake Henderson Lippma n However, in the light of the G8 discussions on corruption and UBS ForPGGM FonderSuperannuation Sc further information on ––Sasja (Sweden) y increased international attempts to create transparency about UBS Global Asset Management (UK) Ltd – Ian PitfieldHermes Investment Management Limited (UK) – Jennifer WelmsleyUniversities (The Netherlands) this St Karin revenue flows, we believe that the corporate sector has an Bâtirente (Canada) –below, Sim Investors listed Daniel ple the Railpen Investments (UK) – Frank te sector cannot single- important opportunity to support government and multilateral institutions by taking Superannuation Scheme (UK) – Dan Pension Plan (HOOPP) (Ca nada) – Julie C. Cays Universities action to protect its own long-term of Ontario Summerfield Hospital Walden Asset Management (U Boston Common Asset Managema)iness practices such as interests. Walden Asset Management (US) – Tim Smith HSBC (UK) – Francis Sullivan Director,(UK) – Bozena Jankowska RCM Universityof Governanc York Head – Pensions Fund CalPERSPensionDennis Johnson (US) Investments Lt to government, nor can acknowledge that the corporate sector cannot single- We York University Pensions Fund (Canada) I.DE.A.M. – – Leona Development Asset Management (France) Rio Tinto (US)F&C Integral Fields Investment, Asset CalSTRS(The Netherlands) – Erik – Janice Hester-A hout compromising their handedly reform long-standing business practices such as Robecco karina.litvack@fandc.com–or 020 owever, we believe – Billof transparency over payments to government,Illinois State Board of Investment (US) – William Attwood ist Church ( UK) that Seddon Sarasin Group Ltd (US) Eckhard Calvert (Switzerland) – Lily Do lack nor can individual companies act alone without compromising their es (US) – John Wilson commercial interests. However, we believe that anies in which we invest ING Investment Management (The Netherlands) – Hendrik-Jan Boer 4 Schroders Labour Congress (Can Canadian Investment Manageme immediate – Jo Allen ributors to, and not just will give the extractive companies in which we invest Investment Management (UK) – Rachel Crossley reform Insight an opportunity to be seen as contributors to, and not just CCLA (UK) – Neville White ent and reconstruction. beneficiariesFrance) – David Diamond of, economic development and reconstruction. JPMorgan Asset Management (US) – Amy Davidsen Scottish Widows Investment Part K) – Karina LitvackFrance) – Leene Colle Jupiter Asset Management (UK) – Aled Jones Fraser Finance Board of the Me Central Christian Brothers Investment Se
  • Lessons Learned • Support by many investors, mining companies and some oil companies (Petrobras), but not all supporters of Voluntary rules could be counted upon to support Mandatory rules LESSON: Contested spaces can be a powerful entry point for CSO and activists. • Mandatory rules v. voluntary rules—which to pursue first? • The U.S. branch of the Oil lobby, the American Petroleum Institute (API), along with executives from Exxon, Shell and others have said begun a campaign against Dodd- Frank, and increased hiring of lobby and PR firms. LESSON: Difficulty in achieving even politically moderate reforms in the Extractive Industry sector.
  • Thank you!• Questions?• For more information: www.revenuewatch.org Todd Arena Legal Fellow Revenue Watch Institute tarena@revenuewatch.org