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sharing in governance of extractive industries

Address by EITI Chair Fredrik Reinfeldt on contract transparency

The below is based on a speech given by Fredrik Reinfeldt, Chair of the EITI, at the EITI Board meeting side event on contract transparency in Berlin June 2018. 

In 2013, the EITI Standard started to encourage contracts to be disclosed. Contracts, it is worth reminding ourselves, are legal documents that governments enter into on behalf of their people. Experience has shown that in many cases, in particular in countries with weak institutions and governance, the terms to extract oil and minerals may be unduly favourable to one side or another. Sometimes, one side can benefit more because the profitability of the project changes over time, or the prices of the extracted commodity can change considerably. Consequently, it has been argued that citizens should have the right to know the terms and conditions of these contracts.

Today, we see that 29 EITI countries[1]—over half of all implementing countries— have disclosed at least some contracts. In total, more than 800 contracts have been published by EITI countries. And companies are also engaging on the issue. 16 EITI supporting companies have now made statements supporting publication in some form, including 7 out of the 9 companies on the EITI board[2].

Governments and companies are increasingly agreeing to publish contracts. By providing a space where citizens, companies and governments can share experiences and lessons learned across stakeholder groups and national boundaries, EITI has helped these actors share concerns and potential benefits, and discuss possible approaches and ways of achieving contract transparency

You get the picture - the past few years have seen a steady stream of extractive contracts being published. More recently, companies and governments have begun to adopt proactive contract disclosure policies. There is a growing acknowledgement that not everything in a contract needs remain confidential forever, and that information can be released – to the benefit of governments, companies and citizens.

To illustrate:

  • The Oyu Tolgoi mine in Mongolia will be the world’s largest copper mine when it fully opens in 2020. The contract for the mine was published in 2009. The contract and the data released under the EITI have led to a wealth of analysis that has helped raised issues and flagged concerns. In some cases, disclosure leads to awkward and difficult conversations but the alternative – where mistrust builds and potentially leads to discord and violence due to a lack of transparency is surely worse. The EITI exists to ensure that point is not reached, that data is released, understood, debated and when appropriate acted on.

Validation has highlighted best practice and benefits of contract transparency in EITI countries. In many countries this includes improved inter-agency collaboration, leading to an improved ability to monitor contractual obligations, more reliable forecasting of future revenues and better assessments of the implications for affected communities.

To illustrate:

  • Peru’s Law on Transparency and Access to Public Information requires that public entities disclose contract information and Peru’s 2014 EITI Report includes a list of hydrocarbon contracts.
  • In the Philippines contract data has been disclosed in ways that allow for deeper analysis of contracting data by a wide range of users, including civil society groups working with indigenous communities.
  • In Mongolia, an EITI working group on contract disclosure was established and, working in collaboration with the Petroleum Authority of Mongolia, ensured that confidentiality clauses were removed from new model production-sharing agreement.
  • Guyana has published the terms of their contract with Exxon Mobil, which is expected to bring in significant revenues for the country when oil starts to be extracted in 2020. The contract has been analysed and its merits discussed at length by domestic and international observers.
  • And in Senegal, the government’s policy is to publish all mining, oil and gas contracts and describe the actual practice. Senegal has published their contracts for the largest oil and gas fields in West Africa.

These practices have emboldened other countries. Yet, it is also clear that there is still room for improvement for EITI reporting and engagement on contract information:

Some countries are keen to catch up - civil society organizations in Cameroon, Kazakhstan and Madagascar have put contract transparency on the MSGs’ agenda as part of their advocacy for full contract disclosure.

In Myanmar, where contracts are not disclosed due to confidentiality provisions, discussions within the EITI process resulted in contract disclosure being included as one of the key recommendations in the first MEITI report.

The EITI can also address general confusion on the role of confidentiality clauses and how governments and companies can break these confidentiality clauses and the use of ‘best practice’ model contracts.

These issues were highlighted in Albania, Cote d’Ivoire, Ghana, Iraq, Mozambique, Timor-Leste and Ukraine. Where there are justifiable concerns that commercially sensitive data is contained in a contract, this could be resolved through redaction or even delayed publication of the contract. We need further discussion on whether and how contract transparency potentially harms commercial competitiveness and how these concerns can be addressed.

I hope that we can use this session to put focus on the issues and to learn from each other on the various efforts that are underway to open up contract transparency and contracting. We have an impressive panel with us today, representing institutions that have significant knowledge on this topic. Many in the audience have practical experience from working on contract transparency in their home countries. I look forward to a fruitful discussion!

 

[1] Afghanistan, Burkina Faso, Chad, Colombia, Dominican Republic, DRC, Germany, Ghana, Guatemala, Guinea, Guyana, Honduras, Iraq (Kurdistan), Kyrgyz Republic, Liberia, Malawi, Mali, Mauritania, Mexico, Mongolia, Mozambique, Peru, Philippines, Republic of Congo, São Tomé and Príncipe, Senegal, Sierra Leone, Timor–Leste, United Kingdom

[2] BP, BHP Billiton, Freeport McMoran, Rio Tinto,Statoil, Total and Royal Dutch Shell.

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