sharing in governance of extractive industries
Open Society Foundations founder George Soros, US Senator Benjamin Cardin, former Vice-President of the European Parliament’s Economic & Monetary Affairs Committee Arlene McCarthy OBE, the Columbia Center on Sustainable Investment, UK MPs Caroline Flint (Labour) and Liberal Democrat Deputy Leader Jo Swinson, oil company Kosmos and PWYP UK have all made written submissions this month to the UK government.
Greg Clark MP, Secretary of State at the UK Department for Business, Energy and Industrial Strategy (BEIS), is undertaking a review of the UK’s Reports on Payments to Governments Regulations, under which UK-registered and London Stock Exchange-traded extractive and forestry companies are required to report their payments to governments at project level for all countries where they operate. The review of the 2014 regulations is a statutory requirement. Mr Clark is due to report to Parliament on the conclusion of his review early in 2018.
PWYP UK’s 46-page submission to the review emphasises the value of mandatory payment reporting in deterring corruption and fiscal mismanagement, preventing conflict, enhancing public understanding and citizen empowerment, and delivering business benefits for companies and investors. The submission includes 28 brief case studies highlighting civil society’s use of companies’ payment disclosures to promote accountability across the sector.
Miles Litvinoff, PWYP UK Coordinator, commented: “In times of political uncertainty it is critical that the UK upholds its leading role in the fight against corruption and that progress towards a more open and accountable global extractives sector remains on course. Oil, gas and mining are notoriously corruption prone.”
While commending the UK for its leadership on this issue, including for ensuring that companies’ disclosures are available to stakeholders in an open data format, PWYP UK has also identified areas where incomplete and inconsistent company reporting is occurring, and makes recommendations to the government to address weaknesses in the regulations and their implementation.
Among other improvements, PWYP UK is calling for more clarity on requirements for project-level disaggregation, joint venture and payment-in-kind reporting; for full identification of recipient government entities; for disclosure of payments to governments for the sale of oil, gas and minerals; and for better accessibility of reports and clearer information for companies on how to report.
“PWYP UK hopes that the government will take note of our recommendations to make the regulations more fit for purpose,” said Litvinoff.
In her letter to the Secretary of State, Arlene McCarthy, who led negotiations on chapter 10 of the European Union Accounting Directive – on which the UK regulations are based – for the European Parliament, urges the UK government to “build on the gains made thus far – not only in the UK and the EU but also in Norway, Canada and the United States” and to continue “momentum for a greater degree of accountability in this historically opaque sector, where so much potential public benefit has in the past been squandered”.
The UK regulations are part of a global standard of mandatory extractive sector transparency currently implemented in all 28 European Union member states, plus Canada and Norway, which complements the more voluntaristic (for governments) Extractive Industries Transparency Initiative. The original mandatory disclosure law, Section 1504 of the 2010 US Dodd-Frank Act, is yet to be implemented. Campaigns are under way in Australia, South Africa, Switzerland, Ukraine and other countries for similar extractive sector reporting laws.
Jo Swinson MP was Minister for Employment Relations and Consumer Affairs and oversaw the UK regulations’ coming into force in 2014. Her letter says: “It was crucial at the time for the United Kingdom to deliver on its commitment … to advance global standards of transparency in the extractive sector”, and notes that “the comprehensive payment reports now being published by UK-regulated oil, gas and mining companies” are delivering “substantial public benefit”.
Caroline Flint MP reminds the Secretary of State that “Oil, gas and minerals are finite resources that provide many developing countries with a relatively brief opportunity to mobilise domestic revenues on behalf of their populations, which will be necessary to meet the Sustainable Development Goals.”
The submission by the Columbia Center on Sustainable Investment (CCSI), part of the Columbia University Law School, underscores investors’ need for “the global standard for payment transparency” that the UK regulations sustain. CCSI outlines “seven areas in which public payment data such as required by the UK Regulations may add material insight to investment analyses and improve investment environments”.
According to US-based oil and gas exploration and production company Kosmos Energy, which listed on the London Stock Exchange in 2017: “We believe resource revenues are more likely to be managed in the best interests of a country if payments and receipts are made transparently, and if accountability measures are in place for the use of these revenues.”
Extractive companies’ reports on payments to governments under the UK regulations are available online at https://extractives.companieshouse.gov.uk (UK-incorporated companies) and http://www.morningstar.co.uk/uk/NSM (London Stock Exchange main-market-traded companies). PWYP member organisation the Natural Resource Governance Institute has compiled much of the data from the UK and other jurisdictions in a central and searchable location at http://resourceprojects.org/.
As well as accepting written submissions to the review, the UK government contracted PwC, one of the big four accountancy firms, to conduct stakeholder interviews with companies, investors, government officials and civil society. Members of the PWYP global coalition from sub-Saharan Africa, mainland Europe, North America and the UK took part in 10 interviews.
PWYP UK looks forward to seeing Secretary of State Greg Clark’s report to Parliament on his conclusions in early 2018.
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