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It’s Time for EITI to Require Contract Transparency. Here are Four Reasons Why.

The Extractive Industries Transparency Initiative Board has an important opportunity to strengthen the EITI Standard’s provisions on contract transparency when it meets next week in Kiev.

State-investor contracts and licenses which provide the terms attached to the exploitation of oil, gas and mineral resources must have citizen oversight. They can determine taxes, subnational transfers, audit rights, infrastructure and barter arrangements, community consultation requirements and social spending—issues with far-reaching effects for a country’s economy and its people.

Publishing these documents enables citizens to bring much needed accountability to deals that might last decades and be worth billions. At the same time, publishing contracts allows governments and companies to build public trust. (For more details on the benefits of contract transparency for civil society, governments and companies, see here, here, here and here.)

Six years after the standard was changed to “encourage” contract disclosure, the Publish What You Pay Coalition is now calling on the EITI Board... to include “a requirement to publish contracts and licenses.”

Here are four reasons why the board should finish the job on contract transparency:

1. Contract transparency is already a global norm.
Reflecting on the immense progress made on contact transparency in recent years, the International Monetary Fund last month wrote that contract transparency is “established as an international norm”. There are now 44 countries around the world that have disclosed contracts, including more than half of EITI implementing countries (now 31 of 51). Ten years ago, only nine member countries had a law requiring the publication of oil, gas or mining contracts. Now 24 have such laws.

Contract disclosure is supported by at least 18 leading extractives industry companies and has been endorsed by private sector forums including the International Council on Mining and Metalsand the B Team. Leading development finance institutions including the World Bank’s IFC and MIGA already require private sector clients developing extractive resources to publish contracts. The EBRD has the same requirements for hydrocarbons development. The IMF, the U.N., the International Bar Associationand the OECD have endorsed the practice.

Graphic by Rob Pitman, based on the Contract Transparency Policy and Practice Tracker

2. There is support for contract disclosure in each EITI constituency.
Civil society, led by the PWYP coalition, has supported contract disclosure for more than a decade. Within the company constituency, we now see that of seven out of 10 companies on the EITI Board have made public statements supporting the practice of contract disclosure. These are BHP, BP, Equinor, Freeport-McMoRan, Rio Tinto, Shell and Total. Among implementing countries, the latest consultation on contract transparency carried out by the EITI International Secretariat in 2013 showed that of the 20 implementing countries that took part, 11 supported making contract disclosure mandatory. Another six supported requiring partial disclosure.

3. The risk that this will be another requirement that countries will struggle to implement is low. 
Compared to other kinds of extractive industry disclosures, publication of contracts is technologically simple. It is not labor intensive. There are few legal impediments to disclosure. Twenty-four implementing countries already have laws requiring disclosure. There are no obvious legal obstacles in at least 22 additional countries. While some argue confidentiality clauses within contracts prohibit publication, review of actual confidentiality clauses in publicly available contracts shows exploration and technical data are usually the targets of these clauses. Contracts are not.

It is also increasingly accepted that fears of competitive harm from contract disclosure have been exaggerated. This is demonstrated by statements from extractive industry companies. For example, Simone Niven, group executive of corporate relations at Rio Tinto, noted that confidentiality and commercial sensitivity “has not… prevented us from disclosing a vast majority of our contracts with governments as most of them do not contain commercially sensitive information.” Jean-François Lassalle, formally a senior adviser at Total, remarked that “[a]s soon as a state wishes to publish all oil contracts... it is our view that the legal and commercial issues have been addressed.”

4. Failure to act threatens the credibility of the EITI Standard. The EITI Standard should keep pace with global norms and the good practice of its members. If the standard fails to reflect the practices and commitments of its members and remain modern and relevant, this threatens the credibility of EITI as a governance initiative. It threatens the credibility of those organizations who support, promote and participate in it.

The arguments for contract transparency are clear. Now it is time for the EITI Board to act.

Rob Pitman is a governance officer with the Natural Resource Governance Institute (NRGI). Isabel Munilla is extractive industries transparency policy lead with Oxfam America and a representative on the PWYP Global Council. 

This was first posted on the NRGI blog.

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