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The fossil fuel industry is not just in terminal decline; it's also corrupt. #Vitol's settlement w/the Dep't of Justice over violations of the Foreign Corrupt Practices Act #FCPA is an important reminder that transparency & disclosure alone aren't enough to prevent abuse. Thread: https://twitter.com/acgillies/status/1334610484079845383
Full disclosure (pun intended): I wrote a lengthly law review article about this topic a decade ago. See "Transparency & the Natural Resource Curse: Examining the New Extraterritorial Information Forcing Rules in the Dodd-Frank Act of 2010 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1573385 /2
The FCPA is an extraterritorial criminal statute that makes it illegal for US firms to bribe foreign officials. Congress passed it in 1977 in response to genuinely outrageous behavior by Lockheed. Notably, until 2010 or so, the US was alone in criminalizing foreign bribes. /3
Without getting into the jurisprudence of extraterritorial criminal jurisdiction, two points worth noting: (1) FCPA was drafted because @SEC_News conducted an investigation, found a ton of international bribery by US firms, but couldn't do anything about it under existing law. /4
And (2) FCPA works because it makes bribing a foreign official a *crime* which means if you meet the elements laid out in the statute (and interpreted over time by the courts), you're per se facing jail time, fines or both. See, e.g., Vitol settlement: https://www.justice.gov/usao-edny/pr/vitol-inc-agrees-pay-over-135-million-resolve-charges-bribery-schemes-latin-america /5
What about wholly foreign corruption? Say a US firm, instead of "bribing" a foreign gov for a lucrative oil concession, just pays a dictator outright but turns a blind eye while he siphons millions into offshore bank accounts? Not an FCPA violation! https://www.nytimes.com/2004/07/19/us/at-riggs-bank-a-tangled-path-led-to-scandal.html /6
Senators investigated the Obiang family's finances & found they were basically intermingled with the public coffers of Equatorial Guinea. Oil company lease payments had made their way into US bank accounts... funding crazy, lavish spending. https://www.latimes.com/local/crime/la-me-malibu-kleptocrat-20141011-story.html /7
But under US law there was nothing the oil companies had done wrong... and no way to prevent these kinds of "not corrupt" foreign payments that nonetheless fuel corruption, prop up autocrats and immiserate millions. Just Google the "Resource Curse" if you care to learn more. /8
Meanwhile, as the Senate was negotiating the legislation that came to be known as Dodd-Frank for wholly other reasons, Senator Lugar pushed hard o add Section 1504, based on his earlier bill focused on... you guessed it, a disclosure-based approach to international corruption. /9
Still with me? Just a bit more history then we'll get back to present-day #ClimateRisk disclosure debates. Sec. 1504 required @SEC_News to mandate *disclosure* of foreign resource extraction payments. Making this info public, Congress hoped, would prevent the worst abuses. /10
The final language slipped into the bill without a lot of fanfare, but once big mining & oil companies realized what had happened, SEC's implementing regulations were subjected to litigation and eventual congressional action (2017) to overturn them. https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-sec-tries-to-solve-cra-conundrum-on-resource-payments /11
I should mention the critical role that @EITIorg @anticorruption @OxfamAmerica @PWYPtweets @Global_Witness @OpenSociety @JeffDSachs @JosephEStiglitz played, and continue to play, in shining light into the world's darkest corners, where fossil firm's $ fuels all kinds of ills. /12
Unfortunately, even if the SEC was fully enforcing rules implementing Sec. 1504 of the Dodd-Frank Act, which it's not, disclosure alone is likely insufficient to curb the kinds of resource curse/corruption problems it's meant to address. There are two big reasons why... /13
First, misaligned incentives. Notwithstanding the rise of #ESG investing, the people best positioned to make use of natural resource payment information to drive change are likely either local activists or NGOs, not corporate shareholders... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1573385 /14
Second, policing problems. Assuming it finalizes its long-delayed rule, can the SEC, motivated #ESG investors or even the most well-resourced NGO watchdogs actually police resource extraction issuers to ensure that they accurately report payments made to foreign governments? /15
So, finally, back to the topic at hand. Lots of speculation about whether and to what extent the Biden admin will make @FSB_TCFD recommendations mandatory, requiring firms to disclose climate risk info in financial filings not just via voluntary (and partial?) self-reporting. /16
And lots of debate about whether these disclosures will matter in terms of driving decarbonization, not just better managing risks associated with mounting climate impacts. Here's soon-to-be Acting SEC Chair Allison Herren Lee on the topic: https://www.sec.gov/news/speech/lee-playing-long-game-110520 /17
