Stop watering down anti-corruption legislation – part two
Transparency is the first line of defence against corruption, which is why we are disappointed by a US court ruling this week that could weaken a new law that would force oil, gas and mining companies to publish detailed information about their business in each country where they operate. Lobbying organisations for the big oil companies had argued, amongst other things, on commercial grounds that they should be exempt from making these disclosures.
Although the Dodd-Frank Act still stands and the decision will not affect tough European legislation passed last month, this challenge by big extractive companies should be a warning sign.
Rather than rolling back legal efforts to increase company openness, anti-corruption legislation and laws on greater revenue transparency should be strengthened and should be implemented now. Special interests will continue to lobby to weaken these laws as we have seen recently with both the UK Bribery Act and the US Foreign Corrupt Practices Act.
The US Securities and Exchange Commission (SEC), which was to implement the law, has another chance to make its case. Although the oil companies achieved their goal to delay implementation of the law, the SEC now needs to re-consider the justification it used in its arguments in the light of this ruling.
Transparency International urge the SEC to do this as soon as possible. Large numbers of activists from around the world recently called on big oil companies to drop the lawsuit against Dodd-Frank, illustrating how critical this issue is and how concerned they are that the SEC imposes stringent regulations.
Oxfam America, a co-defendant in the suit brought by the oil industry lobbying associations, said:
– Ian Gary, Oxfam America
Why transparency matters
Revenue transparency, particularly in natural resource extraction, is essential so governments, citizens and shareholders know what companies are paying to whom, where these payments are going – and how they are being spent. Citizens need to be able to monitor the revenues received from companies to ensure that governments put them to good use to upgrade public services, such as healthcare and education, and alleviate poverty.
A lack of transparency is a corruption risk. In 2010 Africa’s natural resources were worth US$333 billion, a figure which is more than eight times the money that the continent received in aid flows. Transparency International works around the world to promote revenue transparency in the extractive industries because we believe this is an important way to hold companies and governments to account, and to ensure citizens in resource-rich countries benefit from the wealth that comes from exploiting natural resources.
Nigeria, Africa’s top oil producer, has estimated that US$300-400 billion of oil money has been stolen or wasted over the last 50 years. In Angola, the International Monetary Fund reported there was an unexplained US$32 billion discrepancy in the Angolan government’s 2007-2010 fiscal accounts linked to oil companies – which amounted to one fourth of the country’s total GDP.
A survey of major oil and gas companies by Transparency International in 2008 and again in 2011 found that very few companies voluntarily disclose financial information at country level. In these reports we recommended new legislation to make this mandatory.
The US included some of these recommendations in the Dodd-Frank legislation, which the SEC was in the process of implementing before the recent court ruling.
Progress in Europe, Canada
Last month, the European Union introduced new legislation that requires oil, gas, mining and logging companies to disclose what they pay to governments around the world, a move that Transparency International welcomed. Extractive companies must now disclose details of tax, bonuses and other payments made for every project they operate, over a threshold of US$130,000 (€100,000). Canada and Switzerland have also announced that they will seek to introduce transparency legislation for their extractive sectors in line with the EU and US legislation.
Instead of rolling back reporting in the extractives sector, the Group of 20 (G20) countries, including the US, should follow the recent EU initiative and consider extending payment reporting requirements to all large companies in all industries. Transparency should be the norm not the exception. The bar has already moved, despite this ruling, and companies will be under increasing pressure to report in more detail in the future.
- Read our related article from May this year, 'Stop watering down anti-corruption legislation'
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