The U.S. Court of Appeals for the D.C. Circuit put off - at least for now - reviewing a controversial rule by the U.S. Securities and Exchange Commission that would require oil and gas companies to disclose government payments.
The appeals court concluded that the petitioners, led by the American Petroleum Institute, first had to litigate their case in district court.
"To be sure, this may not be the most efficient way to resolve such cases, and we certainly understand petitioners' desire to have these important issues addressed expeditiously," wrote Judge David Tatel for the panel, which also included Judge Janice Rogers Brown and Senior Judge David Sentelle. "But it is Congress’s job, not ours, to determine ‘the court in which judicial review of agency decisions may occur.’”
Represented by Gibson, Dunn & Crutcher partner Eugene Scalia, the petroleum institute challenged the SEC’s new disclosure rule, which was issued in September and required under the Dodd-Frank Act. The rule forces publicly traded companies to disclose to the SEC any payment to a foreign government or the United States that is “made to further the commercial development of oil, natural gas or minerals.” The disclosure requirement covers taxes, royalties, fees, bonuses and “other material benefits.”
The petroleum trade group said that this will damage the competitiveness of American companies and give state-owned companies in China and Russia an advantage, since they are not required to disclose similar information. The petitioners argue that the rule violates companies’ First Amendment rights, and they also challenge the SEC’s cost-benefit analysis.
Those who back the rule, including amicus curiae U.S. Senator Ben Cardin (D-Md.) and former Senator Richard Lugar (R-Ind.), authors of the disclosure provision at issue, along with U.S. Senator Carl Levin (D- Mich.) argued in court papers that it “furthers the critical public policy goals of i) protecting United States interests in both national and energy security, ii) ensuring investor awareness and protection, and iii) promulgating American core principles of transparency, integrity and good governance worldwide.”
Both the SEC and the petroleum institute agreed that the dispute should go directly to the D.C. Circuit. But intervenor OxFam America Inc. protested that the suit had to start first in district court.
“Not only is the oil industry trying to overturn the will of Congress, its arrogance extends to trying to get this case heard in a court where it doesn’t belong” said Jonathan Kaufman, a staff attorney at EarthRights International and co-counsel representing Oxfam in a news release.
The D.C. Circuit did not reach the substantive issues of the case, concluding instead that it lacked original jurisdiction.
The court found that section 25 of the Exchange Act establishes the framework for instances when SEC disputes can proceed directly to appellate review. “Significantly, Congress did not confer appellate jurisdiction over all Commission rules,” Tatel wrote. Rather, review is limited to “specified Exchange Act provisions”—and this was not one of them.
Still, it’s not a crippling blow for the petitioners. In what they termed “an abundance of caution,” they also filed suit in district court. “Their caution proved prescient,” Tatel wrote.