The Resource Curse in the Wake of the Arab Spring

By Brannigan, Megan R. | Houston Journal of International Law, Spring 2014 | Go to article overview

The Resource Curse in the Wake of the Arab Spring


Brannigan, Megan R., Houston Journal of International Law


  I. INTRODUCTION  II. BACKGROUND      A. The Resource Curse      B. Disclosure and Accountability      C. The Foreign Corrupt Practices Act (FCPA)      D. "Leading by Example": The Cardin-Lugar         Amendment and the SEC      E. The Global Environment Following the Arab         Spring III. ANALYSIS      A. The United States' Role in the Future of Disclosure      B. The Necessity of Disclosure in the Years Following         the Arab Spring  IV. CONCLUSION 

I. INTRODUCTION

The great irony of oil, gas, and mineral resource wealth is that poverty, corruption, and social unrest often accompany the blessing of mineral resources. (1) This phenomenon is known as the "resource curse" (the Resource Curse). (2) The International Monetary Fund (IMF) maintains that the Resource Curse is not Inevitable (3)--countries that promote "prudent and transparent management practices" have flourished in spite of their resource wealth. (4) In an attempt to mitigate corruption and poverty, arguably sourced from mineral resource revenues, there has been an international effort to enable citizens of resource-rich developing nations through the publication and disclosure of mineral resource payments and revenues. (5) Emboldened with this information, citizens are empowered to hold their governments accountable for the mismanagement of mineral resource revenues. (6)

The effort to cure the Resource Curse begins with the publication of payments made by mineral extraction companies to resource-rich host-countries and the publication of revenues received by the host-countries, in a format easily accessible to citizens. (7) When payment and revenue information is published, it is more difficult for the leaders of resource-rich nations to conceal revenues made from mineral development exports, and subsequently more difficult to hide government waste and corruption. (8) The Extractive Industries Transparency Initiative (EITI) was one of the first efforts to formalize a payment disclosure and publication process. (9) A call to arms by several non-governmental organizations (NGOs) prompted the creation of this voluntary initiative. (10)

During the late 2000s financial reform in the United States, Congress added a provision, termed the "Cardin-Lugar Amendment," to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in order to apply the principles of the EITI to resource extraction companies operating within the United States. (11) The Cardin-Lugar Amendment added Section 1504 to Dodd-Frank and delegated authority to the Securities and Exchange Commission (SEC) to draft detailed payment disclosure regulations for mineral extraction companies already disclosing earnings to the SEC. (12)

The vast majority of the extractive industry did not welcome the initial SEC regulation (the Rule)--amidst great division between investors, former industry players, and extractive companies, the SEC implemented the administrative regulations on August 22, 2012. (13) NGOs and the legislators who initially sponsored Section 1504 praised the SEC action. (14) Some critics, however, immediately claimed that the SEC went too far in its requirements and argued that the provisions would place mineral extraction companies in the United States at a material disadvantage to state-owned and foreign-listed companies. (15)

Representatives of the petroleum industry, including the American Petroleum Institute (API), promptly filed suit against the SEC. (16) The lawsuit alleged the SEC acted arbitrarily and capriciously in enacting the Rule. (17) The same parties also petitioned the District of Columbia Circuit Court to review the Rule. (18) The Circuit Court found that it had no jurisdiction over the matter and dismissed the case. (19) In July 2013, the District Court for the District of Columbia ultimately vacated the Rule, sending it back to the SEC "for further proceedings." (20) The SEC declined to appeal the ruling, opting instead to redraft the Rule.

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