The U.S. Is Making a Mistake by Withdrawing from the EITI

Last month, the Trump Administration announced that the United States would be withdrawing from the Extractive Industries Transparency Initiative (EITI). The decision was not wholly unexpected, especially since the Department of the Interior announced last spring that it would no longer host regular talks among a group of U.S. stakeholders that included representatives from the industry as well as activists and government representatives — one of the requirements of membership in the EITI. Nonetheless, the U.S. decision to withdraw from the EITI is a significant setback to the fight against corruption and misgovernance in the resource sector.

To understand the likely impact of the U.S withdrawal from the EITI, it’s useful first to review what the EITI is—both its mechanics and its objectives. Continue reading

Guest Post: The U.S. Retreat from Extractive Industry Transparency–What Next?

Zorka Milin, Senior Legal Advisor at Global Witness, contributes today’s guest post:

The US Department of the Interior recently took steps to halt its work on implementing a global transparency initiative for the resource sector, known as the Extractive Industries Transparency Initiative (EITI). This announcement came on the heels of the Congressional action repealing a related rule, adopted by the SEC pursuant to Section 1504 of the Dodd-Frank Act, that required oil, gas and mining companies to publish their payments to governments. The two issues are related but distinct. First, 1504 rule required US-listed companies to report payments they make to governments around the world. In contrast, the Extractive Industries Transparency Initiative (EITI) applies in those countries whose governments choose to join the initiative (including the US) and requires payments to be disclosed both by the recipient government as well as by all extractives companies that operate in that country. These differences in scope make the two transparency measures necessary complements to each other. EITI produces valuable information from governments about the payments they receive for their natural resources, whereas mandatory legal rules like 1504 are necessary to ensure meaningful and broad reporting from companies, including in those resource-rich countries such as Equatorial Guinea and Angola that are not part of EITI but are in desperate need of more transparency. Indeed, the US EITI experience shows that even in those countries that do commit to implementing EITI, EITI alone might not be enough to compel all companies to report, if it is not backed by domestic legislation.

Officials at Interior appear to be retreating from their ill-advised decision to effectively withdraw from EITI, but these mixed signals, especially when viewed together with the Congressional action, send a troubling message about the US government’s changing stance on anticorruption, and set back a long history of US leadership on these issues. Nonetheless, while these recent US developments are a setback from a US anticorruption perspective, the rest of the world is powering ahead with this much needed transparency. Continue reading

Guest Post: Rolling Back Anticorruption

Laurence Cockcroft, a founding board member of, and current advisor to, Transparency International, contributes today’s guest post:

The global campaign against corruption has become a cornerstone of Western foreign and development policy for the last 25 years. This campaign built on a number of earlier measures, most notably the 1977 enactment of the US Foreign Corrupt Practices Act (FCPA), which criminalized foreign bribery by companies under US jurisdiction, but the campaign really accelerated beginning in the late 1990s. For example, while European countries had resisted adopting legislation similar to the FCPA for 20 years, this changed with the adoption of the OECD Anti-Bribery Convention in 1997, which was followed a few years later by the 2002 UN Convention Against Corruption. International financial institutions like the World Bank have become more aggressive about debarment of contractors found to have behaved corruptly, and we have also seen the proliferation of corporate-level ethical codes, promoted by organizations like the World Economic Forum and UN Global Compact, designed to prevent corrupt behavior.

More recent initiatives have pushed for greater corporate transparency. For example, in the United States, the Dodd-Frank Act ended the aggregation of corporate income across countries; an EU Directive promulgated shortly afterwards imposed similar requirements. More recently, an initiative to disclose the true beneficial owners of corporations and other legal entities, pushed by former British Prime Minister David Cameron, has already taken legislative form in the United Kingdom; beneficial ownership transparency is also the subject of an EU Directive, and was being promoted by the Obama administration. And although the so-called “offshore centers” have yet to embrace similar transparency of beneficial ownership, regulatory systems in these centers have been significantly improved. There have also been a number of important sector-level initiatives, particularly in the resources sector. These include the Extractive Industries Transparency Initiative (EITI)—which requires participating governments of mineral and energy exporting countries, as well as companies in the extractive sector, to commit to a process of revenue transparency—as well as national-level laws, such as Section 1504 of the Dodd-Frank Act, which impose so-called “publish what you pay” obligations on extractive firms.

Even more encouragingly, this gradually improving regulatory environment has been accompanied by growing public opposition to corruption, as reflected in large-scale demonstrations around the world. Crowds on the streets, for example, have recently supported the proposed prosecutions of the current and past Presidents of Brazil, and opposed weakening of anticorruption laws in Romania.

But in spite of public opinion, the forces opposed to anticorruption initiatives have never gone away. The arrival of President Trump has let many of them loose both inside and outside the United States: Continue reading

After the Repeal of the U.S. Publish-What-You-Pay Rule, What Happens Next?

As most readers of this blog are likely aware, despite the valiant lobbying efforts of a broad and bipartisan swath of the anticorruption community (as well as a last-minute plug from GAB), the United States House and Senate recently passed a joint resolution, pursuant to a statute called the Congressional Review Act (CRA), to repeal the “Publish What You Pay” (PWYP) rules for the extractive sector (oil, gas, mining) that the Securities & Exchange Commission (SEC) had promulgated pursuant to a statutory mandate contained in Section 1504 of the 2010 Dodd-Frank Act. Once President Trump signs the CRA joint resolution disapproving the PWYP rule, it is wiped off the books. Professor Bonnie Palifka’s post last week explained some of the reasons why PWYP rules are so important to fighting corruption in the extractive sector, and why this repeal is the first sign that the new administration, and the Republican-controlled Congress, threaten to undermine U.S. anticorruption efforts and leadership. (For another very good analysis along similar lines, see here.) What I want to do in this post is to consider a somewhat more specific question: What are the implications of the CRA repeal of the SEC rule for the implementation of the Dodd-Frank Act’s PWYP mandate going forward?

This turns out to be a tricky legal question, involving some unexplored and untested issues concerning the relationship between the Dodd-Frank Act, the implementing regulations, and the CRA. Let me start with a quick summary of the key legal provisions, keeping this as non-technical as possible: Continue reading

Why the Repeal of the U.S. Publish-What-You-Pay Rule Is a Major Setback for Combating Corruption in the Extractive Sector

Bonnie J. Palifka, Assistant Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM) contributes today’s guest post:

Last Friday, following the U.S. House of Representatives, the Senate voted to repeal a Securities and Exchange Commission (SEC) regulation that required oil, gas, and minerals companies to make public (on interactive websites) their payments to foreign governments, including taxes, royalties, and “other” payments. The rule was mandated by Section 1504 of the 2010 Dodd-Frank Act, but had only been finalized last year. President Trump’s expected signature of the congressional resolution repealing the rule will represent a major blow to anticorruption efforts, and a demonstration of just how little corruption matters to his administration and to Congressional Republicans.

The extractive industry had lobbied against this rule, arguing that having to report such payments is costly to firms and puts them at an international disadvantage. Some commentators have supported their efforts, arguing, for example, that the Section 1504 rules are unnecessary because the Foreign Corrupt Practices Act (FCPA) already prohibits firms under SEC jurisdiction—including extractive industry firms—from paying bribes abroad. This argument misses the mark: The extractive sector poses especially acute and distinctive corruption risks, which the FCPA alone is unlikely to remedy if not accompanied by greater transparency. Continue reading

The Impending Repeal of the U.S. “Publish What You Pay” Rules for Extractive Industries

As many readers of this blog are likely aware, the U.S. Congress is poised to invoke a statute called the “Congressional Review Act” to override the rules that the Securities and Exchange Commission promulgated last year to implement a provision of the Dodd-Frank Act (Section 1504) that required companies in the extractive industries (oil, gas, and mining) to publicly disclose the amounts that they pay to foreign governments in connection with projects abroad. (A timeline of the legislation and its implementing regs is here.)

The vote is scheduled for this coming Monday. Like many in the anticorruption community, I think eliminating the Publish What You Pay (PWYP) regs would be a bad idea. Alas, I don’t have time to write up a substantive discussion of the issue before the Monday vote. Fortunately, there are already a fair number of discussions of the issue elsewhere; for example, Jodi Vitori of Global Witness, who previously served as an intelligence officer in the Air Force, has a succinct explanation of why eliminating these PWYP rules would be bad for U.S. national security here.

While I usually don’t use this blog to engage in direct activism/advocacy, in this case I wanted to reach out to those GAB readers who are based in the U.S., particularly those whose representatives are Republicans, and encourage you to call your House Representative and Senator to express your opposition to the invalidation of the rules implementing Section 1504. (If you’re not sure who your House Representative is, you can find that here, and you can find a list of contact information here. Senate contact information is here.)

Whistle While You Work: Protections for Internal Whistleblowers under Dodd-Frank

One of the many objectives of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was to encourage whistleblowers to report securities violations—including violations of the Foreign Corrupt Practices Act (FCPA)—to the Securities and Exchange Commission (SEC). Among other things, Dodd-Frank created new remedies for whistleblowers who suffer retaliation by their employers, including allowing whistleblowers to sue their (former) employers on more favorable terms than existing anti-retaliation laws. But what if an employee doesn’t report a possible violation to the SEC, but only told her boss? If that “internal whistleblower” is subsequently terminated, can she avail herself of Dodd-Frank’s anti-retaliation provisions?  Because of the way the law was drafted, this turns out to be a difficult legal question, one on which courts across the U.S. have divided.

Nevertheless, there are strong practical reasons—above and beyond the basic reasons that could be advanced in any context—why Dodd-Frank should cover internal whistleblowers. Unless the courts resolve their division in favor of internal whistleblowers soon (most likely through a Supreme Court decision), Congress should step in and rewrite the law to remove any doubt that internal whistleblowers are protected.

Continue reading