Dodd-Frank Act Extended to American Companies Overseas
American energy and mining companies will soon be under greater scrutiny by the Securities and Exchange Commission (SEC). A new regulation passed on 27 June 2016, is hoped to assist in advancing U.S. foreign policy interests by promoting greater transparency about payments related to resource extraction companies.
While industry watch groups have generally lauded this initiative, the corollary is that American companies may face new challenges that do not apply to their competitors. American companies will still be expected to uphold a domestic standard while operating abroad, even if their foreign domiciled competitors do not, regardless of the local jurisdictions ethical views and commercial practices.
This home and away standard has the potential of creating a tension between the fiduciary duty that a company owes its shareholders and compliance with the home nation’s domestic laws.
The new SEC regulation is not unique, similar legislation exists in Canada, Australia, and New Zealand, typically focusing on anti-bribery and anti-corruption objectives. In addition to being a difficult proposition relating to sovereignty, applying domestic standards abroad can create situations in which local practices are incompatible with domestic expectations. Companies are still required to convey their extracted resources to market and local regulators may not share an American company’s concern over an SEC regulation.
In addition to the extraterritoriality aspect of the regulation, industry pundits also express concerns that the new regulation will require the disclosure of propriety, or at least strategic, information. Regardless of the view taken, American companies have until September 2018 to develop a strategy to comply.
The SEC press release may be found here: