On November 8, the Securities and Exchange Commission (“SEC”) rejected a request by industry groups to stay new regulations requiring disclosure of payments to governments relating to oil, gas, and mining projects. The American Petroleum Institute, U.S. Chamber of Commerce, and other groups in the extractive sector had urged the SEC to stay the requirements while the groups’ litigation against the rules proceeds. As discussed in a previous post, on October 10, the industry groups had filed a suit in federal court challenging the rule.
In its order (.pdf), the SEC used the four-factor framework that the Commission and the courts generally use to determine if a stay is appropriate, including:
- whether there is strong likelihood of an appeal of the Commission’s decision succeeding on the merits;
- whether a party will suffer irreparable injury in the absence of a stay;
- whether the granting of a stay would cause substantial harm; and
- whether a stay would serve the public interest. The SEC also noted the inherent flexibility of the framework. For example, if the arguments of one factor are particularly strong, a stay may be appropriate even when other factors are less convincing.
In rendering its decision, the SEC cited the first two factors as most salient. In addition, the SEC said that the third and fourth factors must be considered together because any harm to third parties as a result of a stay would “significantly overlap” with the public interest.
Based on this analysis, the SEC determined that the plaintiffs “failed to carry their burden to demonstrate imminent, irreparable harm.” The SEC also rejected claims that initial compliance costs would be burdensome. Moreover, the SEC determined that claims of competitive harm are too speculative to warrant a stay; in the lawsuit, industry had argued that the rule will put SEC-listed companies at a considerable disadvantage when competing abroad against state-owned companies.
Finally, the SEC ruled that, on the balance, they were not convinced that a stay would serve the public interest. The order noted that the granting of a stay would hinder Congress’s intent under the Act and its subsequent regulations to “empower citizens to hold their governments to account” for decisions regarding natural resource management.
The SEC also noted that the federal court hearing the case has ordered a quick briefing schedule, making a decision likely as soon as next spring — almost a year before companies’ first disclosure filings are due under the new regulations.