LONDON (Thomson Reuters Foundation) - Oil, gas and mining companies operating in the United Kingdom have agreed to sign up to some of the highest transparency and accountability standards in the world.
While the UK is generally considered neither resource-rich nor especially corrupt, the British government has taken the lead in pushing for more transparency in the extractive sector, particularly in its 2013 role as chair of the Group of Eight industrialised countries.
The UK committed in May 2013 to joining the Extractive Industry Transparency Initiative (EITI), a global standard for transparency of government revenues from natural resources. However, the standard represents a bare minimum with which countries must comply in order to become a designated EITI member.
The UK’s multi-stakeholder group (MSG) of business, government and civil society representatives have agreed to hold themselves to a higher standard by requiring companies to disclose their beneficial or true owner and also to disclose the payments they make to the British government on a project-by-project basis. While project-by-project reporting is a recent addition to the EITI standard, beneficial ownership disclosure is merely ‘encouraged’ and is not a requirement.
Company ownership can often be difficult to ascertain due to complex corporate ownership structures that obscure the true owner. If companies are required to declare their beneficial owner, it will make it harder for those companies to evade taxes and hide the proceeds of corruption, transparency campaigners say.
“It’s a really positive step forward, it’s the right thing to do and it’s really good that the UK is showing leadership in this,” Brendan O’Donnell, campaign head at transparency campaigning group Global Witness told Thomson Reuters Foundation.
“I think businesses have realised that who they’re going into bed with is very important... knowing who really owns companies they partner with helps them to do their due diligence and helps protect them from later falling foul of corruption laws,” O’Donnell added.
“I think there’s a sense that this is a useful step forward for everybody,” he said.
O’Donnell is an alternate in the civil society group on the MSG.
The EITI, first outlined in 2002 by former British prime minister Tony Blair, requires member countries to compel any extractive company operating within their borders to publish the payments it has made to the government, and the government to publish the revenue it has received from the company. The two sets of accounts are independently verified and published as a publicly available EITI report.
In addition to its revenue transparency requirements, the EITI announced in May 2013 a new, revised standard that will require that EITI-implementing countries to publish far more contextual data about their extractive industry including production figures, the registration of licences and permits and the transfer of extractive revenue from federal to local government.
The members of the UK EITI MSG appear to have listened to Clare Short, chair of the EITI and former British development minister, who, at the UK EITI launch conference in July 2013, said the UK’s stakeholder group should break new ground when implementing the initiative so that it could be an example to others.
“Make it work for the UK, make it useful and think of doing it in a way which will be useful to other countries to use the EITI more creatively and more meaningfully,” Short said.
A spokeswoman at the UK’s Department for Business, Industry and Skills (BIS) told Thomson Reuters Foundation the BIS was pleased with the MSG’s progress.
“Last year, the Prime Minister announced that the UK would sign up to the global EITI standard,” she said.
“There is a long road ahead to make sure that this works best for everyone, but nearly one year on the Government, together with members from civil society and industry, is making excellent progress towards the UK's membership,” she added.
There are 26 EITI compliant countries and 18 candidate countries, countries that have submitted their application to join but have not yet met all the necessary requirements.
The UK expects to submit its application by August 2014 to be considered at the October 2014 EITI International Board meeting.
This article was updated to clarify that project-by-project reporting is a requirement of the 2013 EITI standard but the standard does not require companies to disclosure their beneficial owners.
Our Standards: The Thomson Reuters Trust Principles.