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More countries join movement for publishing corporate data to show how governments use natural resource wealth - part of broadening trend to combat corruption
Natural resources are a country’s crown jewels. Sell them off, and you better be able to explain to your citizens why you did it, how much you got paid and what you did with the money.
That simple idea lies at the core of the fast-spreading regulations that require companies to disclose how much they pay governments for the right to extract oil, gas and minerals. Openness will allow citizens to hold their governments to account for the monies they receive for natural resources, lessening the risks of corruption. Financial transparency is not merely a way to promote good governance, but increasingly it is being viewed as a democratic right.
The campaign passes significant milestones this week.
The European Union Parliament on Wednesday holds a final vote on its new law for extractives. Canada’s mining association will release draft proposals for disclosure by Saturday. At their summit in Northern Ireland on June 17 and 18, the Group of Eight leaders of major industrialized countries will consider strengthening their support for heightened disclosure and financial transparency, issues championed by G8 host UK Prime Minister David Cameron.
Meanwhile the voluntary disclosure accord, the Extractive Industry Transparency Initiative, has grown to 39 member countries and is expanding its standards. The UK and France have pledged to join EITI. And in the United States, the Dodd-Frank regulations, requiring publicly traded oil, gas and mining companies to report their payments by project and country, take effect in 2014.
The EU and U.S. regulations combined would mean that 70 percent of major oil, gas and mining companies worldwide are covered by disclosure requirements, a massive amount of information for the 3.5 billion people who live in resource-rich countries yet remain desperately poor. And the Canadian rules, once adopted by its provinces, would add a swathe of prospectors and developers who work in developing countries from Latin America to Africa and Asia.
“The trend has clearly swung in favour of disclosure,” said Daniel Kaufmann, president of Revenue Watch Institute, which campaigns for accountability in the natural resource sector. “This train has left the station.”
YET BIG OIL BATTLES ON
Against this backdrop, Big Oil’s opposition in the United States looks increasingly anomalous. The American Petroleum Institute, whose biggest members include BP, Shell, Chevron and ExxonMobile, and the U.S. Chamber of Commerce, are challenging the U.S. rules in court.
Their arguments, presented at a hearing in the U.S. District Court for the District of Columbia on June 7, were three fold - the measure would be very costly to implement, at least $14 billion; disclosure is anti-competitive; and forcing companies to report their payments violates their First Amendment rights to free speech.
Eugene Scalia, an attorney at Gibson, Dunn & Crutcher who represents the plaintiffs, said the rules would mean a government could argue for better terms if it knows what a company paid its neighbor - and that could undercut business.
But if disclosure does become the international norm, as developments expected in the week ahead suggest is happening, the playing field soon will be leveled for all companies, largely undercutting the anti-competitive argument, though state-owned oil companies are not necessarily covered.
Judge John Bates gave few clues on how he might decide the U.S. case, though he did show little tolerance for the free speech argument. There are “just oodles and oodles of situations”, he said, in which the government compels companies to disclose information in the interest of the public and investors. And whatever his decision, Bates joked in court, it probably will be appealed anyway.
MOMENTUM TOWARDS TRANSPARENCY
Even if the U.S. case does drag on and on, the momentum globally is towards transparency. Under the EU law, for instance, the lumber, telecommunications, banking and construction sectors also are included - areas similarly known for large contracts with governments, providing ripe opportunities for corruption and bribery. And the Construction Sector Transparency Initiative, a new coalition of industry and business groups, is pressing for G8 financing to expand its work.
Extractive industries are just the beginning. Civil society groups should prepare for a tsunami of data if they are to truly hold their governments to account for how they use a country's wealth.
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