As the United States President Donald Trump moves to repeal provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), there are concerns it may threaten transparency in the oil sector in developing countries.
The financial reform act was initiated by former president Obama in 2010 with the objective of reforming U.S. financial regulation as a response to the global financial crisis of 2008 and 2009.
Donald Trump says he wants to overhaul the core principles for regulating the financial system, including empowering American investors and enhancing the competitiveness of American companies.
Concern in the developing world stems from a possible review of section 1504 which requires all publicly traded oil and mining companies to provide detailed disclosures of the payments they make to foreign governments relating to their operations.
As a result of this rule US companies abroad disclose payments made through taxes, royalties, contract fees and all other payments for infrastructure development and corporate social responsibility to host governments to the US Securities Exchange Commission.
“This attempt to repeal the Dodd-Frank Act spells grave danger for transparency in the oil and gas sector,” Adeola Adenikinju gas policy analyst for the World Bank and professor of Economics at University of Ibadan told BusinessDay.
Adenikinju further said, “The provision was supposed to give the US government some form of oversight into payments made by oil companies that may be deemed corrupt and this has reduced incentive of these companies to engage in sharp practices.”
In December 2010, Nigeria filed corruption charges against Dick Cheney, former US vice president, in connection with his role as the chief executive of Halliburton in a case of an alleged $182 million contract involving a four-company joint venture to build a liquefied natural gas plant on Bonny Island in the Niger Delta.
Earlier in 2009, KBR, a former subsidiary of Halliburton, agreed to pay $402 million after admitting that it bribed Nigerian officials, and Halliburton paid $177 million to settle allegations by the U.S. Securities and Exchange Commission without admitting any wrongdoing. In December 2010, the case was settled when Nigeria agreed to drop the corruption charges against Cheney and Halliburton in exchange for a $250 million settlement.
To forestall these kinds of controversies, the US Congress inserted provisions requiring elaborate disclosures for payments to host governments and a section that imposes additional reporting requirements on U.S. companies regarding their sources of certain “conflict minerals.”
The African Centre for Energy Policy (ACEP) similarly decried a possible review of these sections.
“What we are saying is that it is unfortunate because it is going to affect the transparency and accountability in the extractive sector. Also, other countries started following the same process – Canada, Norway and others,” said Ismael Ackah, head of policy Unit and Energy Policy Advisor at ACEP.
The current United States government has not hidden her intention not to allow transparency get in the way of business.
On February 3, the U.S. Senate used the Congressional Review Act to eliminate a June 2016 Securities and Exchange Commission rule implementing the bipartisan Cardin-Lugar extractive industries payment transparency provision.
The Natural Resources Governance Institute, a transparency advocacy institution decried the move.
“We are very disappointed that the rule implementing this trailblazing U.S. law, which deters corruption and improves governance in the notoriously opaque natural resource sector, has been gutted. Following a campaign of misinformation by the American Petroleum Institute and backers such as ExxonMobil, Republican lawmakers have shown themselves to be pro-corruption and have demolished U.S. leadership in this area,” said Daniel Kaufmann, president and CEO of the Natural Resource Governance Institute (NRGI),
Ackah said that the only recourse for African governments is to have their own laws perhaps at the continental or sub-regional levels either at the ECOWAS level or the AU level that will both international oil companies to disclose such payments to host governments.
“Apart from the bribes and other things, it will also help to check invoicing, transfer-pricing issues which affect African countries,” Ackah said.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
