EU Parliament and Council legislators have agreed a deal on the disclosure requirements for the extractive and forestry industries. The anti-corruption deal aims to force big mining companies to make public the payments they make to governments where they operate.
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The agreement means that local communities in resource-rich countries will be better informed about what their governments are being paid by multinationals for exploiting oil and gas fields, mineral deposits and forests.
It is intended to bring in more transparency to an industry which has often been shrouded in secrecy, and to 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.
Background
On 25 October 2011 the European Commission adopted a legislative proposal requiring the disclosure of payments to governments on a country and project basis by listed and large (1) non-listed companies with activities in the extractive industry (oil, gas and mining) and loggers of primary forests (the so-called country by country reporting – CBCR). The Commission proposal followed guidelines developed by the Extractive Industry Transparency Initiative (EITI) but once adopted by the European Parliament and Council these requirements will be put into European law, thereby making them binding. This puts the EU on a level playing field with the US which also adopted disclosure requirements in July 2010 (Section 1504 of the Dodd-Frank Act).
The Commission has publicly expressed support for the Extractive Industry Transparency Initiative (EITI), and envisaged willingness to present legislation mandating disclosure requirements for extractive industry companies. A similar pledge was made in the concluding Declaration of the G8 Summit in Deauville of May 2011, where the G8 governments committed “to setting in place transparency laws and regulations or to promoting voluntary standards that require or encourage oil, gas, and mining companies to disclose the payments they make to governments.
This disclosure requirement has been incorporated in the proposals to revise the Accounting Directives (78/660/EEC and 83/349/EEC) and the Transparency Directive (2004/109/EC)
The existing Accounting Directive regulates the information provided in the financial statements of all limited liability companies which are registered in the European Economic Area (EEA). The same disclosure requirement has been incorporated in the proposal to revise the Transparency Directive in order to include all companies which are listed on EU regulated markets even if they are not registered in the EEA and incorporated in a third country. With today’s agreement, negotiations on the Transparency Directive can now be concluded swiftly.
The new agreement establishes rules ensuring that these companies disclose payments to governments (e.g. taxes on profits, royalties, and licence fees) on a country and project basis. Reporting would also be carried out on a project basis, where payments have been attributed to specific projects. The text requires the Commission to review the possibility of extending the disclosure requirements to other sectors.
Notes
1) The revised Accounting Directives defines a large company as one which exceeds two of the three following criteria: Turnover 40 million; total assets 20 million and employees 250.
Source: European Commission
