On 9 April, following months of negotiations, MEPs and ministers finally agreed to new transparency rules regarding payments to governments from the extractive sectors, involving companies from the mining, oil and gas, as well as forestry industries. The agreement will oblige European companies to publish reports on payments of more than €100,000 made to the governments of countries in which they are operating in; thus including taxes levied on their income, production or profits, royalties and licence fees.
The agreement was generally welcomed by campaigners who were pleased that the European Parliament and the Commission resisted strong pressure from certain Member States and the Industries involved. Catherine Olier, from Oxfam, stated that it is “excellent news that the EU is moving towards a law that will help ordinary people harness the natural resource wealth of their countries to be lifted out of poverty”.
Why is such an agreement necessary?
The agreement goes beyond the rules of disclosure as adopted by the US in 2010 and raises global standards in terms of transparency, as well as considerably strengthens the fight against corruption.
Indeed, in 2010 alone, oil and mining exports in Africa were worth around USD 333 billion, or in other words, an amount worth seven times the aid received by the international community to the continent. With such huge cash flows, one can only wonder how the populations of countries so rich in terms of natural resources are trapped in extreme poverty. The new agreements in both the US and the EU will certainly not solve the whole problem, yet they will bring a certain amount of transparency to operations between companies and governments which have for too long been shrouded by obscurity and thus – it would be naïve to disagree – subject to corruption and tax evasion.
The disclosure of payments by multinational companies will allow citizens to better monitor the revenues derived from the extraction of natural resources and, perhaps, allow them to pressure governments to use the profits more adequately than they have done in the past.
Michel Barnier, the European Commissioner for the internal market, stated in a press release that “the agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help fight tax evasion and corruption as well as create the framework so both companies and governments can be held to account on the use of revenues from natural resources”.
Why arguments against do not hold up
One of the key barriers to an agreement was the project-by-project disclosure which was supported by both the Commission’s proposal and the European Parliament. For many months, the European Council’s position was to replace it by separate disclosures for each level of government involved; a proposal often put forth by the extractive industries.
However, it is clear that the Council’s proposal was counter-productive to the primary aim of the directive; which was to combat bribery through transparency. Indeed, for the directive to achieve its purpose, citizens must be able to situate on which project the corruption has taken place, rather than knowing at which level of government; which would in real terms bring very little added value to what already takes place. Citizens know that corruption takes place, they just want to know where.
Opponents to the “project-by-project” proposal are numerous and, rather unsurprisingly, originate from the extractive companies themselves. Their main argument is that project-by-project disclosures would reveal their companies price structure and thus reduce their competitiveness. Yet, the reality is that many businesses already disclose details of payments voluntarily and they do so because the information involved is not commercially sensitive information. As such, their claims do not seem to be overly convincing, to say the least. Indeed, even the former chief executive of British Petroleum, Lord Browne, supports the project-based approach which clearly demonstrates that the measures are feasible for the companies involved.
The fact that the agreement supports the project-by-project system of disclosure is thus a considerable achievement for all campaigners involved. Arlene McCarthy, the British Labour MEP in charge of the negotiations for the European Parliament, said that “we have stood up to attempts to water down these proposals from the member states demanding exemptions and loopholes, which would have defeated the purpose of the rules”.
U2 leadsman and campaigner on this issue Bono called this agreement a “game-changing breakthrough” and he is most certainly right. Taking together both the US and the EU agreements on the issue, a huge 90% of the world’s major extractive companies will soon have to disclose information regarding their payments to governments throughout the world.
Should this be the first and last step?
Yet the agreement might be game-changing, but it should be only be considered as starters. Further efforts must be made over the next few years to ensure that these agreements serve their purpose and really have an effect on the redistribution of revenue throughout the world, in Africa in particular.
One can also wonder why the proposals did not also include other areas worthy of such transparency, such as the agricultural or the financial sectors. This is also the position of the Greens in the European Parliament who, through their spokesperson Eva Lichtenberger, argue that “it is hard to see why project reporting should be limited to these sectors. Many developing countries depend on agricultural products and infant industries, which are not covered” by the agreement.
So while the EU agreement is certainly good news for those willing to fight corruption and eliminate tax evasion, this should only be a beginning. However, let’s not ask for too much too soon. Why can’t we just be glad that the European institutions are finally doing something to improve corporate transparency throughout the world, something that is much needed in these troubled times.
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