U.S. President Trump ruled on a matter close to his heart on February 14, signing into law a repeal of U.S. Securities and Exchange Commission (SEC) disclosure requirements aimed at clipping corrupt practices amongst U.S. listed public oil, gas and mining companies.
“It’s a big deal,” Trump said at the signing ceremony. “The energy jobs are coming back. Lots of people [are] going back to work now.”
The repeal of the Cardin-Lugar anti-corruption rules, which is essentially a payment disclosure requirement for U.S.-listed companies, suggests a new low road to making “America great.” It also has companies listed on stock exchanges in other jurisdictions, such as Canada, where Cardin-Lugar-like rules are in effect, worried that they will be at a disadvantage in areas of the world where corruption is an issue.
“The standards for preventing corruption as a matter of law are now higher on Canadian corporations and on corporations in the United Kingdom and even in Russia, believe it or not,” says Peter Mantas, partner with law firm Fasken Martineau DuMoulin.
Even though the Cardin-Lugar anti-corruption rules passed into law in 2010, they were to come into effect only next year. But in the interim, the adoption of Cardin-Lugar in combination with the older Foreign Corrupt Practices Act (1977) and robust enforcement practices placed the United States at the forefront of the fight against corruption.
“Sometimes it's not just about the laws but what you do with the laws. The Americans and, to a lesser degree—but not by much—the British have been very aggressive about pursuing corruption issues,” Mantas says.
America's anti-corruption lead actually spurred Canada and other jurisdictions to introduce matching anti-corruption laws and the SEC has acknowledged that compliance in Canada, the EU and Norway would satisfy SEC standards under Cardin-Lugar.
But there has also been strong opposition to the Cardin-Lugar rules within U.S.
Industry groups, including the American Petroleum Institute, claim these disclosure requirements are onerous and put U.S. companies at a disadvantage to companies listed in non-U.S. jurisdictions.
Richard Lugar, the retired Republican senator and co-sponsor of the original amendment, however, has dismissed this critique, citing the matching rules in EU, Canada and Norway. That the majority of the world’s top oil and gas companies are listed in these jurisdictions further undercuts the industry argument.
“One of the bigger issues with respect to what has happened here with Cardin-Lugar is whether this is the beginning of something more than just this particular reporting requirement,” Mantas says.
“In itself, [the repeal] is a pretty significant development,” he says. “[But] the fact that is one of the first things President Trump signed off on is a pretty significant issue as well. The Republican Congress moved very, very quickly in the New Year to address this. I don't think the timing was accidental.”