European lawmakers will require European extractive and forestry companies to detail their government payments by project, with definition of project clearly spelled out
* Lawmaker to propose stronger language than U.S.
* Boost for civil society groups fighting corruption
* MEP wants to define "project", industry opposes
* Oil, gas and mining companies cite cost of new laws
By Luke Balleny and Stella Dawson
LONDON/WASHINGTON, Aug 24 (Reuters) - Most European lawmakers favour tougher rules than the United States has for oil, gas and mining companies to disclose how much they pay foreign governments for access to natural resources, a key member of the European parliament said on Friday.
Passage of a tough European law would mark a second victory for advocacy groups after the U.S. adopted disclosure rules this week as part of a growing world-wide movement to stop autocrat leaders siphoning wealth from resource-rich countries and to combat corruption, violence and poverty that often plagues these countries.
Arlene McCarthy, Member of the European Parliament who is responsible for preparing the EU bill on oil, gas and mining payment disclosures, said the committee report will require EU-listed companies to detail their payments by project, with definition of project clearly spelled out.
"There is a strong majority in the European Parliament who support the inclusion of a definition of project in the EU text and it is our intention to go further than the U.S. in this respect," McCarthy told TrustLaw.
The EU committee is set to consider the legislation on Sept. 18 and passage by the full parliament is expected by year's end. Australia and Canada also are considering extractive industry measures.
Global Financial Integrity, which tracks money flows, estimates that $1 trillion leaves countries each year illicitly, much of it due to crime and corruption linked to oil, gas and mining.
McCarthy said that the U.S. Securities and Exchange decision to give companies flexibility in deciding what constitutes a "project" when they file disclosure statements and instead to issue a guidance paper was inadequate.
"Allowing companies to determine their own definition of project will not result in meaningful disclosures - not for civil society in resource rich countries, or for investors. The European Parliament is therefore working towards finding a solution to this issue which we hope can be applied at a global level," McCarthy said via email.
GLOBAL STANDARDS
Her comments came a day after the Publish What You Pay Coalition, which has led the disclosure campaign, said that its next priority was a strong European law to raise the standards globally.
The U.S. law already covers 68 percent by global value of internationally active oil and gas companies. Adding European-listed companies would mean the majority of mining and mineral companies also will be covered.
GFI cites Libya, the world's 10th largest oil producer, as an example of a country that has lost wealth. It estimates over $43 billion in illicit money flowed out Libya between 2000 to 2009, fueling the uprising that toppled the Gaddafi regime last year.
"The U.S. law is a game changer, put simply, for good corporate governance efforts worldwide as well as for governance efforts in the countries in which extractive companies operate," said Heather Lowe, director of government affairs at GFI in Washington.
Some corporations have argued that it would be difficult and costly to follow tough disclosure rules that break down payments by project as well as by country. Publish What You Pay disagrees and wants even tighter language on projects.
"Resource-rich communities are often blighted by extractive company operations. Many of the world's poorest communities are literally living on top of natural resources, and yet they see little or no benefit from them," said Laura Taylor, head of public policy at Tearfund, a Christian relief and development agency that is part of the coalition.
UPHILL BATTLE?
Passage of the measure in Europe will require garnering support from 27 EU member countries, no easy task especially when the biggest state, Germany, shows reluctance.
In a recent blog post, Christian Humborg of Transparency International Germany wrote of a cultural hesitancy within German business. German family-owned businesses are "traditionally very secretive, their profits barely known" so there may be "instinctive philosophical barriers" to a requirement to disclose payments of any kind, he said.
As it stands, the Commission has called for extractive and forestry companies to disclose payments to governments of "material" amounts, while the European Parliament has pushed for anything over 100,000 euros ($125,000), similar to the U.S. requirement. Member states have suggested more than half a million euros. Publish What You Pay seeks a threshold of around 15,000 euros ($18,750), though it said the U.S. level of $100,000 would capture most projects.
Also high on the coalition's agenda is removal from the proposed EU legislation a clause that would exempt companies from reporting payments for access to natural resource if a country has a law that forbids such disclosure - a step they achieved in the United States.
Dubbed by civil society groups the "tyrant's charter," the coalition said no country was found by the SEC during its rulemaking to already prohibit disclosure, and if it is allowed in EU legislation they fear this would give license to corrupt regimes to pass such laws.
(Reporting By Stella Dawson; Editing by David Gregorio)
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