Stephen O'Brien, British minister for International Development, talks to TrustLaw about efforts to force companies extracting natural resources in developing nations to disclose all payments made
LONDON (TrustLaw) – The UK’s coalition government has praised the efforts of the Extractive Industries Transparency Initiative (EITI), a voluntary coalition of governments and companies from the extractive industries, investors and civil society formed to increase transparency in resource-rich countries by getting businesses to publish what they pay and governments to disclose what they receive.
TrustLaw spoke to Stephen O’Brien, minister for International Development about disclosure standards for the extractive industries, why he thinks the standard should be formed at European Union - not national level and why he doesn’t think the UK should sign up to the initiative.
You recently said that the UK supports new disclosure standards for extractive companies at the EU level. Would those standards mirror the disclosure standards in the provision of the U.S Dodd-Frank Act (the U.S. law passed last year that will require mining and energy companies listed in the United States to disclose all payments to foreign governments)?
It’s very early days. You will (have seen) the announcement by George Osbourne, the Chancellor at the G20 Finance meeting on Feb 20. There’s no question the government has said that it’s going to take an active role at that EU level which is to require resource extraction companies to disclose payment that it makes to governments; it sits absolutely with our Department for International Development (DFID) approach to transparency and the Transparency Aid Guarantee. I know that President Sarkozy (of France) has made very similar remarks in relation to a call for EU disclosure requirements.
So in answer directly to your question about the most recent legislative requirements under the Dodd-Frank legislation in the U.S, clearly it’s going to be a little while before that’s absolutely clearly defined in terms of the exact requirements. I suppose in a couple of years they will no doubt form the discussion points that will take this forward in discussion with our EU partners. I think having the U.S initiative is useful in terms of being able to see how this legislation will work, where the balance is to be struck between the gains and the perceived problems.
Opposition MP Anas Sarwar introduced a bill in the House of Commons on March 1 aimed at forcing companies extracting natural resources in developing countries to declare all payments made. Does the coalition government support national legislation of this kind or would you prefer to see the legislation passed at EU level?
You would have to ask him (about the bill), he didn’t consult with me. I think it’s very clear from what the chancellor said that he sees the dynamics of this to be on an EU level. I think these things do work best if we move together. The positive impact which (transparency) can have on governance, development and reduction in corruption are well understood. The issue is going to be how we take that forward collectively with our EU partners.
Would DFID ever tell a resource rich country that EITI membership was a pre-condition of giving that country aid?
No, we wouldn’t use conditions to impose specific policy choices. Patently, the fact that I was able to attend (the EITI conference) in Paris (this month) and give that speech to demonstrate the UK government’s commitment to the importance that we set store by EITI, the processes engaged, the recognition of the 11 who have qualified and those who are currently being considered is testimony enough that we do set very strong store by what this enables us to have confidence is being tackled as a priority by those countries.
Why has the UK not signed up to become EITI compliant? Would it not send a strong message to other countries that the UK has nothing to hide and nor should they?
I understand how at a superficial level, one would ask the question but the EITI’s strength is to recognise the benefits of transparency for resource rich countries. By definition - and it is a definition by the International Monetary Fund, I think- the UK is not defined as a resource rich country so the example equivalent is not really valid. That’s why we’re such a strong international supporter because we can see the benefits of the EITI and transparency in the extractive sector particularly for those countries where it’s absolutely critical for their future.
It’s absolutely vital, in conjunction with having good mines and minerals legislation, to have a good revenue authority that is able to promptly make an assessment, to levy the taxes, to ensure that the royalties are being paid through so that there is a yield from the minerals extracted that is going to be available through democratic, institutional accountability for the benefit of the widest proportion of their people as they grow their economies. As I say, I fully understand why you ask the question but I think it’s very important to recognise that the IMF definition does matter; it’s the impact that these have on individual economies in resource rich countries, that’s why the EITI focused on those countries.
How does the government wish to see the EITI develop in the future?
For those countries who qualify, to maintain and improve those levels of compliance, increase transparency, continue to give information to their own citizens so that they can hold their own governments to account and to ensure that the opportunities for and the occurrence of corruption are brought down and minimised. The ultimate test at the end is not just better democratic accountability and people feeling confident in their own government but equally other governments feeling confident about the future with them.
The ultimate goal for all of us who are focused on development is to recognise how the best and biggest way out of poverty, to relieve the greatest number of people by far, is private sector development growth. Those countries which are blessed with resources, in order to avoid that becoming a curse have to do that in a transparent and open way which avoids corruption; then they can get the appropriate yield for the fullest number of people possible which will pump-prime their economies and lift the greatest number of people out of poverty, so the whole thing becomes a potential upward spiral. The extractive industries can be the foundations on which that spiral is based, that’s why this important. So our commitment is absolutely clear.
Our Standards: The Thomson Reuters Trust Principles.
