If you were waiting to implement your compliance program until after the court reached a decision in NAM v. SEC, you may want to reconsider that strategy.
Over the last six months, the petitioners have challenged the SEC’s cost/benefit analysis of the conflict minerals rule and argued that the SEC failed to consider alternative provisions of the rule that could have reduced the burden of compliance. In response, the SEC focused on the stated intent of Congress, defended its cost/benefit analysis, and provided several new insights into how it might interpret a few of the rule’s gray areas. But after all the discussion about the substance of the rule, it is a procedural issue that has everyone talking. Yesterday, in American Petroleum Institute v. SEC, the Court of Appeals for the D.C. Circuit ruled that it did not have jurisdiction to consider the challenge of another SEC rule issued pursuant to the Dodd-Frank Act. Will the court reach the same conclusion about the challenge to the conflict minerals rule?
The petitioners in the other case were challenging the “resource extraction rule,” a new disclosure rule issued by the SEC as required by Section 1504 of the Dodd-Frank Act. (The conflict minerals rule was issued as required by Section 1502 of Dodd-Frank, and legal challenge was also filed with the D.C. Court of Appeals.)
The resource extraction rule was advocated by human rights organizations, and Congress believed it would be an important tool in curbing corruption in countries that are rich in natural resources but whose governments do not share the wealth with their people. Business groups objected to the rule, arguing that it would cost billions to implement without providing value to investors. They also challenged the SEC’s cost/benefit analysis. But, the court did not reach a decision on the merits.
Instead, it dismissed the petition of the business groups, ruling that it is the district court, not the court of appeals, that has original jurisdiction to consider a challenge of the resource extraction rule. The petitioners in American Petroleum Institute v. SEC had also filed a complaint in the district court, so the legal challenge will continue there.
Petitioners in NAM v. SEC made a decision to file in Court of Appeals for the D.C. Circuit, and in their reply brief, the SEC agreed that the Court of Appeals had jurisdiction to hear the challenge. The oral argument in NAM v. SEC is scheduled for May 15th, and many had been hoping for a decision about the conflict minerals rule by the fall. But, in light of yesterday’s ruling, it is not clear how the parties will proceed.
In the meantime, you will want to turn your attention (again) to your own conflict minerals compliance program and prepare for the requirements and deadlines as they currently exist.