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While litigation over the SEC’s climate disclosure rules proliferates (as we have covered in this blog and on PracticalESG.com over the course of the past week and a half), some in Congress have been maneuvering to invoke the rarely used Congressional Review Act to overturn the SEC’s rulemaking action. This Kramer Levin memo notes:

House Republicans began drafting a CRA resolution to repeal the final rule before it was published. Senate Republicans are working on a similar proposal. If both houses of Congress pass and the president signs a joint CRA resolution or if Congress successfully overrides a presidential veto, then not only would the final rule be rescinded but the SEC would be prevented from re-promulgating the rule or any substantially similar rule without specific authorization in a law enacted after approval of the joint resolution.

The machinations of the Congressional Review Act are very complicated, and the Congressional Research Service has provided some helpful FAQs to explain Congress’s authority to overturn rules that have been newly issued by federal agencies. The Congressional Research Service FAQs provide this helpful overview:

The Congressional Review Act (CRA) is a tool that Congress may use to overturn rules issued by federal agencies. The CRA was included as part of the Small Business Regulatory Enforcement Fairness Act (SBREFA), which was signed into law on March 29, 1996. The CRA requires agencies to report on their rulemaking activities to Congress and provides Congress with a special set of procedures under which to consider legislation to overturn those rules.

Under the CRA, before a rule can take effect, an agency must submit a report to each house of Congress and the comptroller general containing a copy of the rule; a concise general statement describing the rule, including whether it is a major rule; and the proposed effective date of the rule. After receiving the report, Members of Congress have specified time periods during which they must submit and act on a joint resolution of disapproval to take advantage of the CRA’s special “fast track” procedures. If both houses pass the resolution, it is sent to the President for signature or veto. If the President were to veto the resolution, Congress could vote to override the veto.

If a joint resolution of disapproval is submitted within the CRA-specified deadline, passed by Congress, and signed by the President, the CRA states that the disapproved rule “shall not take effect (or continue).” The rule would be deemed not to have had any effect at any time, and even provisions that had become effective would be retroactively negated.

Furthermore, if a joint resolution of disapproval is enacted, the CRA provides that a rule may not be issued in “substantially the same form” as the disapproved rule unless it is specifically authorized by a subsequent law. The CRA does not define what would constitute a rule that is “substantially the same” as a nullified rule. Additionally, the statute prohibits judicial review of any “determination, finding, action, or omission under” the CRA.

Since its enactment, the CRA has been used to overturn a total of 20 rules: 1 in the 107th Congress (2001-2002), 16 in the 115th Congress (2017-2018), and 3 in the 117th Congress (2021-2022).

I am certainly no politico, but it seems to me that a successful CRA challenge to the SEC’s climate disclosure rules is a long shot, given that Republicans would need to not only garner support of a joint resolution of Congress, but also override an inevitable Presidential veto. Then again, I never thought the CRA would be used as successfully as it was in the beginning of the Trump administration, when the SEC’s resource extraction issuer rule was successfully overturned (only to reemerge yet again at the very end of the Trump administration).

– Dave Lynn