10 April 2013
The European Union dealt a major blow yesterday to the oil
industry’s push for secrecy by agreeing transparency legislation. It marks a
critical step to counter corruption in the global oil, gas and mining
Representatives from the European Parliament and European
Council agreed to include strong rules governing the disclosure of payments by
extractive industry companies to resource-rich countries.
The rules will be incorporated in the EU’s Accounting
and Transparency Directives, which are expected to be approved in June. The
rules will require European public and private companies to publish what they
pay to governments around the world for natural resources, country-by-country
"This is a breakthrough decision ending secrecy in
the oil, gas and mining industry,” said Darek
Urbaniak, extractive industries campaigner at Friends of the Earth Europe.
“We applaud the EU for choosing transparency and the rule of law over
corruption and secrecy. People from numerous developing countries especially in
sub-Saharan Africa will now be able to see how much money their governments
receive from the extractive industries for their natural resources and to
monitor how this money is used.”
Despite intense pressure from the oil industry, European
decision makers decided on strong reporting standards that will not allow for
exemptions and require reporting of all payments over €100,000.
What has been agreed?
- The new transparency requirements will
cover companies active in the extractive or logging industries to publish
an annual report outlining the payments made to governments
- Companies will have to report payments at
both country-level and project-level.
- Project level reporting requires
companies active in the extractive and logging industries to publish the
payments they make to governments for each lease or licence that they
obtain to access resources. This creates a link between a project, for
example a mine or an oil field, and the payment.
- All levels of government are defined
within the rules, so payments to federal, national, regional and local
governments would have to be reported.'
- The types of payments that will have to
be reported include: production entitlements; certain taxes; royalties;
dividends; bonuses; fees - including licence fees, rental fees and entry
fees; and payments for infrastructure improvements.
- All payments - whether a payment or
series of related payments - above 100 000 EUR will have to be disclosed.
There is an anti-evasion clause to ensure companies cannot artificially
split or aggregate payments to avoid disclosure.
- The rules include a review clause which
is activated after three years, and calls on the European Commission to
explore the possibility of broadening the scope of these rules to
additional sectors, as well as the possibility of requiring the disclosure
of additional information.
- The review clause also calls for the
European Commission to consider proposing legislation that would require
all EU listed companies to carry out due diligence when sourcing minerals
to ensure responsible supply chain managements.
Why is this new law so important?
Many African and developing countries are rich in natural
resources, such as oil, gas, iron and other scarce mining products required for
modern technologies. Access to these resources is considered important for the
EU and European companies, as it is outlined in the EU's Global Europe
Strategy. Exploitation of these resources should ideally provide developing
countries with financial incomes and know-how, needed to develop their
economies and societies. Extraction and export of these products should result
in job creation and increased living standards, thus contributing to a
reduction of poverty in developing countries. Furthermore, by investing
earnings from the EI in other sectors of the economy these countries should be
able to stimulate other development opportunities. Assessment of the EIs
impacts on these countries in the last several decades, however, shows that
resource extraction has contributed very little to achieving the Millennium
In 2008, exports of oil, gas and minerals from Africa were
worth roughly 9 times the value of international aid to the continent (393
billion USD vs 44 billion USD), yet many of these countries remain trapped in
poverty. Developing countries around the world are being robbed of the chance
to earn vital revenue from oil, gas and other mining resources.
According to the latest December 2008 statistical update of
UNDPs 'Human Development Indices', a majority of countries that heavily depend
on EI are at the very bottom of the Index: 150 - Cameroon, 152- Tanzania, 154-
Nigeria, 176- Liberia (out of 179 countries evaluated). Furthermore, they
continue to score badly on the 'Human Poverty Index' as well: Cameroon - 144,
Nigeria – 158, Tanzania -159
What happens next?
The deal reached will now go back to the European
Parliament's Legal Affairs Commitment and then the full plenary for final
approval by MEPs.