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Manipulations by Shell and Exxon?

Screen Shot 2014-03-10 at 23.56.16By John Donovan

Shell and Standard Oil have been engaged in manipulating governments for over a hundred years.

The joint self-explanatory letter Shell and Exxon sent to the US Securities & Exchange Commission on 1 May seems to have good intentions –  concerning the timetable for implementation of transparency legislation – but the past track record of both oil giants brings to my mind, for more than one reason, the phrase “beware of Greeks bearing gifts.”

Suspicion as to their real motive is heightened by the following extract from a related Reuters article published today.

The U.S. Congress in 2010 passed a law, known as Dodd-Frank Section 1504, requiring publicly traded companies to disclose how much they pay governments around the world to explore and drill for oil, gas and minerals. The legislation was intended to address corruption in the resource extraction industry by giving citizens another tool for checking how their governments are using the money from natural resource wealth.  But the rule still has not been implemented after a lawsuit filed by the American Petroleum Institute (API) and the U.S. Chamber of Commerce, with vigorous support from Shell…

Exxon and Shell are both members of the American Petroleum Institute.

The joint letter is signed by Simon Henry, whose claimed respect for transparency should be treated with some skepticism given his starring role in the Shell reserves scandal.

THE JOINT LETTER

May 1, 2014

Chair Mary Jo White
U.S. Securities and Exchange Commission 100 F Street, NE
Washington, DC 20549-1090

Subject: Rulemaking under Section 13(q) of the Securities Exchange Act of 1934 Dear Chair White:

We are writing on behalf of our respective companies, Exxon Mobil Corporation and Royal Dutch Shell plc, to provide you with additional information concerning the timetable for implementation of transparency legislation in the U.K. While we understand the 2014 agenda has been submitted but not yet published, we are not aware whether 1504 features on the agenda and, since we believe that the UK timetable is material to U.S. consideration of this issue, we felt we should advise the Chair.

We believe this additional information increases the urgency for the Commission to consider Dodd-Frank 1504 in calendar year 2014.

As you know, the EU Accounting & Transparency Directives must be implemented by legislation adopted individually in each EU Member State. The deadline for Member State implementation is June 2015. The U.K. Prime Minister, David Cameron, has publicly committed the U.K. to be the first EU member state to implement the Directives.

The U.K. has a customary procedure under which legislation such as this is adopted annually in either October or April. The U.K. is moving quickly on implementation, having already issued draft legislation for public comment with a current goal of meeting the October 2014 window for final adoption.

We understand that the U.K. government would like to know the probable direction of U.S. Securities and Exchange Commission rulemaking under 1504. If the SEC were able to indicate their willingness to consider the proposed new rules under 1504 before the U.K. legislation is finalized, the U.K. government could take the SEC approach into account in implementing its own transparency legislation. Since the U.K. will be the first EU Member State to implement the EU Accounting & Transparency Directives, thus setting a precedent for other EU Member States’ implementation, this is especially important for purposes of “equivalency” between the EU and U.S. reporting regimes.

U.S. Securities and Exchange Commission Page 2 of 2

Equivalency, we believe, is critical as the EU member states move to implement the transparency reporting directives. No one benefits from an outcome under which multinational resource companies are required to file multiple reports in multiple jurisdictions providing substantially the same information in different forms. On the other hand, we believe all stakeholders would benefit from seeing the direction of SEC rulemaking under 1504 as transparency reporting is implemented around the world. An ideal solution to the issue might be that compliance with the reporting rules in one country would be deemed to satisfy the reporting requirements in another country notwithstanding variations in detail.

We recognize it would be impractical to expect regulatory action from the SEC in time to influence the U.K. on the current U.K. timetable. However, we believe that, if the SEC were to take concrete steps to indicate it will take up 1504 rulemaking this year, the U.K. government might be willing to defer implementation of its transparency legislation from the October 2014 schedule to the April 2015 timeframe. This would provide sufficient time for the SEC to discuss with the U.K. implementing authority (Department for Business, Innovation & Skills) how best to take into account the SEC Rules before any EU Member State finalizes its transparency legislation.

In short, we believe implementation of the EU Accounting & Transparency Directives, in particular the fast-track schedule being pursued in the U.K., increase the urgency of our industry’s request for the Commission to consider 1504 in 2014 and to work towards publishing proposed rules as soon as possible and in any event before year-end.1 We strongly believe that the public interest of achieving a coordinated and harmonized global transparency regime, which will best serve the interests of all stakeholders, depends upon it.

Please do not hesitate to contact either of the undersigned if you have any questions or would like additional information on this important subject.

Sincerely,

Screen Shot 2014-05-06 at 12.06.52

Cc:
Commissioner Luis A. Aguilar
Commissioner Daniel M. Gallagher
Commissioner Kara M. Stein
Commissioner Michael Piwowar
Geoffrey Aronow, Chief Counsel and Senior Policy Adviser, Office of International Affairs Elizabeth Murphy, Associate Director, Division of Corporation Finance
Barry Summer, Associate Director, Division of Corporation Finance

1 As noted in the API comment letter dated November 7, 2013, SEC rule-making under 1504 this year is also necessary in order to harmonize with the current schedule for the U.S. to become an EITI member country.

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