API argues that the rule, which the SEC issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act, would force it disclose commercially sensitive information and violates industry's First Amendment rights.
In oral arguments, the judges repeatedly interrupted API attorney Eugene Scalia to ask whether the case does not properly belong before a district court given language in the Securities Exchange Act. API has filed an identical suit with the US District Court for the District of Columbia. That action, however, has been stayed until the appeals court rules.
It his arguments, William Shirley, SEC senior litigation counsel, told the court the rule is best viewed as a foreign policy directive and an attempt to keep money out of the hands of terrorists or potentially corrupt governments.
Two judges, however, said they believed a stronger argument for the rule is that it would provide transparency for American investors and consumers.
In a statement later Friday, API Executive Vice President Marty Durbin said "US companies are already leading the way to increase transparency of their operations, and they can do it without compromising competitive information.
"But this rule damages the competitiveness of American companies and is not the most effective way to increase transparency in business investment abroad. The rule requires business-sensitive information to be shared with America's global competitors, giving state-owned companies in China and Russia an advantage since they are not required to disclose similar information."
The SEC has estimated the rule would impose $14 billion in costs on US companies, an amount API argues is excessive and enough of a reason for it to be overturned.
As an alternative, API has said it is working with civil society groups and the Obama administration to implement the Extractive Industries Transparency Initiative, which it said would promote openness without harming US companies and investors.
