Thursday, August 23, 2012

Major US leap on minerals transparency but Germany derails EU efforts

The Financial Times reports:
"Oil and mining groups with US listings will be forced to disclose details of their payments to foreign governments after US regulators rejected most of the industry’s efforts to water down new transparency rules."
This is very good news: essentially the US Securities and Exchange Commission yesterday published its implementing rules for transparency requirements in the extractive industry under the 2010 Dodd-Frank Act on financial report. This legislation is quite a piece of work. For instance, as the FT continues:
"They will also oblige manufacturers such as Apple to verify whether they use so-called conflict minerals from war-torn central Africa in their products."
TJN and particularly its Senior Adviser Richard Murphy have played a central role in getting traction for this concept, worldwide. As Murphy notes:
"This rule is directly inspired by my work on country-by-country reporting. I was the first person to link reporting payments in accounts in the extractive industries and financial reporting as a way to tackle corruption way back in 2005. So let me be honest: what the SEC has delivered is not country-by-country reporting and it’s therefore not all I want.

But it’s one heck of a big way forward."
Global Witness, who launched the Publish What You Pay coalition with help from George Soros in 2002 and has been a leading advocate of the concept ever since, has also published a quick, preliminary analysis of the rules. They came up with a mixed, but overall heartening first diagnosis. They note long delays in the rules, which were originally scheduled to be voted on 16 months ago but were stymied by a massive industry lobbying campaign. But among the positive things they note:
"We welcome the fact that companies will not be able to exempt themselves from reporting in countries where governments do not want revenues disclosed: exemptions represented a ‘tyrants’ charter’. The SEC’s announcement on de minimis requirements looks promising but requires further scrutiny."
On a less positive note, however, we note that the German Government under Angela Merkel has been playing a very different role, trying to trip up and block this transparency concept in Europe apparently under the influence of local industrial lobbies. Christian Humborg of Transparency International as more:
"The European Commission [has] presented similar proposals (called the Transparency and Accounting directives), adding the forestry sector which had been omitted in the Dodd-Frank Act, and also included large unlisted companies.

But Germany’s support is lacking."
What is more, Humborg notes, is that other European nations are baffled by Germany's reservations, since Germany does not really have any substantive extractive industries. The US administration, along with ex-BP boss John Browne, have publicly criticised Germany's blocking role.

He cites the existence of shady-sounding and recently formed German Alliance for Securing Natural Resources (“Allianz zur Rohstoffsicherung”) which includes big German companies such as BASF, Bayer, Daimler and Evonik ThyssenKrupp, and which will work to secure access to new mineral deposits abroad. He also cites the traditional secrecy of German Mittelstand companies as possibly another, more ideological factor behind Germany's spoiling tactics.

He concludes:
"It will be a major blow for the fight against corruption if [these interests] get their way and Germany (along with other governments that seem to be opposing the proposed transparency rules such as Austria, Finland and the Netherlands) helps to prevent transparency of payments of the extractive industries for each and every project they run."
For German readers, see more in the Frankfurter Runschau, and on the Tax Justice German blog, here and here.

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