Features

EU law targets resource company transparency

In a move to stamp out corruption in the developing world, the EU has ordered resource firms to open their books.

Last Modified: 13 Jun 2013 09:49
Email Article
Print Article
Share article
Send Feedback
Under sweeping EU law, extractive companies must file payment reports to foreign governments [AFP]

London, United Kingdom - The European Union and Canada have taken major steps to make oil, gas and mining companies declare payments to governments, widening the drive to end poverty in resource-rich nations by ensuring their wealth is shared out.

Their actions on Wednesday, days ahead of G8 meetings where financial transparency is on the agenda, represent a high watermark in the campaign to hold governments to account for natural resource wealth, transparency advocates said.

The EU parliament approved the most sweeping disclosure law to date, while Canada’s Prime Minister Stephen Harper for the first time pledged to push forward mandatory reporting requirements for energy and mining companies, bringing a country with one of the world’s largest extractive sectors in developing countries into the transparency push.

This followed Swiss lawmakers on Tuesday backing a transparency proposal for extractives and for commodity trading companies, a $20bn industry with major operations in Switzerland. Together with rules that take effect in the United States next year, these regulations will cover 70 percent of extractive industries by market capitalisation.

"This new law will be a major new weapon in the fight against corruption, ensuring that citizens of resource-rich countries can hold their governments to account for the exploitation of their natural resources."

- Arlene McCarthy, European lawmaker

“It shows the world is moving toward a new global standard on extractives transparency,” said Dominic Eagleton, an analyst at the advocacy group Global Witness.

US pushback

Campaigners now want Russia and Japan at the G8 leaders’ summit of major industrialised nations on June 17-18 to join in endorsing disclosure, which they see as a way to tackle poverty in resource-rich countries and to combat corruption.

However, the drive faces a pushback in the United States, where some of the biggest oil companies represented by the American Petroleum Institute and the US Chamber of Commerce have filed a lawsuit challenging the legality of US regulations to reveal project payments. They want to void the law.

But that lawsuit potentially has less bite now that the EU will require disclosure by project and by country, and companies such as British Petroleum and Royal Dutch Shell, which are party to the US suit but headquartered in the United Kingdom, would be subject to EU rules.

Additionally, the Extractive Industry Transparency Initiative (EITI), a voluntary accord between companies, countries and civil society that litigants prefer as a forum for setting disclosure rules, last month also widened its disclosure requirements to match the US and EU rules.

“Consensus is developing that [detailed] disclosure is the new normal,” Eagleton said.

Making history

Under the sweeping EU law, both public companies and private companies registered as limited liability in the extractives and logging sectors would have to file reports by 2015 on payments they make to governments for natural resources, broken down by country and per project.

And EU lawmakers want transparency in the extractives to be just a beginning. 

Oil companies will now disclose financial dealings [EPA]

They required the EU Commission to study extending the rules within three years of their implementation by the 28-member states. A parliamentary official said the intent is to eventually cover banking, telecommunications and construction - sectors that also have major government contracts making them prime venues for corruption.

Arlene McCarthy, the European lawmaker who has guided the law through the legislature, called the EU vote “history in the making”.

“This new law will be a major new weapon in the fight against corruption, ensuring that citizens of resource-rich countries can hold their governments to account for the exploitation of their natural resources,” McCarthy said in a statement before the vote.

“We have an agreement that we can be proud of and that shows how effective cooperation between legislators, citizens and action groups can deliver real change.”

Canada moves forward

Already Canada’s mining sector is working on a transparency agreement with civil society groups, and they expect to publish a draft proposal this week. Harper’s announcement should provide momentum to including the oil industry and implementing the agreement, which faces the protracted process of getting all 10 Canadian provinces and three territories to adopt the legislation, said Kady Seguin, from the transparency advocacy group Publish What You Pay Canada.

"This sends a really strong message because Canada is such a giant in the extractives worldwide,” Seguin said.

The Canadian Association of Petroleum Producers said it welcomed Harper's initiative. 

"We are looking to engage constructively in the dialogue. We are well-aligned with the government's objective for mandatory reporting of revenues from natural resources and transparency," said Bob Bleaney, its vice president for external affairs.

"The Federal Council … will now consider transparency rules for the whole sector, meaning for listed and non-listed commodity companies as well as for commodity trading and extractive activities."

-  Simonetta Sommaruga, Swiss Justice Minister

He said the oil industry wants to see "effective and efficient" rules that comports with those in other jurisdictions.

Resource development accounts for close to 20 percent of Canada's gross domestic product. Harper said Canada would be "further enhancing its reputation" as a leader in transparency and accountability by establishing mandatory reporting requirements in the sector. 

In Switzerland, a top global hub for commodities trading and home to the giant commodities company Glencore Xstrata, the federal government will take up the initiative.

"The Federal Council … will now consider transparency rules for the whole sector, meaning for listed and non-listed commodity companies as well as for commodity trading and extractive activities," said Swiss Justice Minister Simonetta Sommaruga.

This article first appeared on the Thomson Reuters Foundation news service

1041

Source:
Thomson Reuters Foundation
Email Article
Print Article
Share article
Send Feedback
Topics in this article
People
Country
City
Organisation
Featured on Al Jazeera
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
Israel's Operation Protective Edge is the third major offensive on the Gaza Strip in six years.
Muslims and Arabs in the US say they face discrimination in many areas of life, 13 years after the 9/11 attacks.
At one UN site alone, approximately four children below the age of five are dying each day.
Featured
Amid vote audit and horse-trading, politicians of all hues agree a compromise is needed to avoid political instability.
Part of the joint accord aimed at ending the political impasse establishes an independent National Election Commission.
Rights groups say the US prosecution of terrorism cases targets Muslims and are fraught with abuses.
Local painters forgo experimentation to cater to growing number of foreign buyers.
Cyprus is a tax haven and has long attracted wealthy Russians, but it could become a European energy hub.
join our mailing list