UPDATED: Why would the Netherlands undermine transparency in Europe?

Update: Feb 9. We are delighted to read that the Netherlands has rejected these opt-outs. That is good news.

We use the popular term 'tax haven' and the more recent 'secrecy jurisdiction' (originally a U.S. term) interchangeably, but our choice of term often reflects the emphasis. We would call Panama a Secrecy Jurisdiction, because its industry is built very substantially on secrecy, whereas we would call the Netherlands a tax haven, because while it doesn't have a very high secrecy score it does facilitate massive tax abuse via providing all manner of tax loopholes.

There have recently been some very apt expressions of shame in the Netherlands about their role in facilitating this worldwide abuse of international tax rules, which is costing ordinary taxpayers in developed and developing countries many many billions of dollars each year. Now, from Global Witness, we have a press release about the Netherlands, which is an issue of financial secrecy:

Dutch government could undermine transparency laws while Shell’s payment scandal grows

7th February 2013 (In Dutch here)

As the scandal grows around a Nigerian oil deal involving Shell and Italian firm Eni who made a US$1.1 billion payment that ended up in the accounts of a company controlled by a corrupt former Nigerian Oil Minister, the Dutch government is coming under increasing pressure to stop supporting opt-outs in new EU legislation that would enable companies such as Shell to avoid having to publicly report these payments in certain circumstances.

While the Anglo-Dutch oil multinational Shell lies at the heart of the on-going corruption scandal, it appears that The Hague is out-of-step with the global movement towards transparency. “The Netherlands is a country we look to for high standards of global governance. Now, it has a historic opportunity to help create new EU law, aimed at preventing corruption. But if the Dutch government continues to support exemptions, it will show itself to be on the wrong side of history,” said Simon Taylor, director of Global Witness. “Anyone who looks at the payments made by Shell and Eni in Nigeria can clearly see why we need the strongest possible legislation with no exemptions.”

Support for opt-outs by the Netherlands in EU negotiations could prevent agreement on the EU Transparency Directive currently being discussed by member states. EU Parliamentarians insist that exemptions will destroy the efficacy of the proposed law. It could also prevent the creation of a new global transparency and accountability standard for the oil, gas and mining industry. When US regulators recently outlined rules for US companies they rejected exemptions outright.

Meanwhile the scandal around Shell’s Nigeria payment grows. US$1.1 billion was transferred by Shell and Eni in 2011 in exchange for an oil block, OPL-245, considered to be one of the most potentially lucrative oil fields in the whole of Nigeria. Though the payment was made originally to the Nigerian government, it was then transferred to Malabu Oil & Gas, a company controlled by ex-Oil Minister Dan Etete, who awarded himself the oil block in the late 90s. Etete was also convicted in France in 2007 for money laundering.

Court proceedings and other documents related to the disputed oil block have revealed that Shell and Eni were fully aware that the money would ultimately be transferred to Etete’s company. It seems highly likely that the main reason why the Nigerian government received the money first was simply to avoid the appearance of a direct deal between Shell & Eni and Etete’s Malabu Oil & Gas – even though both companies had met Etete to negotiate a deal in the years preceding the payment. Shell and Eni have consistently failed to answer key questions regarding their relationship with Etete in the responses they have given to Global Witness.

Meanwhile, Shell has tried to water down the proposed EU legislation, suggesting that such transparency may be against the law in certain countries. The idea that company executives could be held criminally liable for disclosing revenue payments has also been circulated amongst Dutch officials. As a consequence, much debate in the EU has revolved around whether exemptions should be made in certain circumstances, yet no credible evidence has been produced to support these arguments. Global Witness understands that the Dutch government are at the very least considering support for exemptions to the proposed rules, such as through a “grandfathering clause,” where companies would be exempt from disclosing payments, should it be demonstrated that the national law of a country prohibits disclosure.

If the EU really wants to create a credible transparency law, bringing in exemptions to disclosure is not acceptable. The EU should not create bad law by permitting exemptions, whether or not on the basis of a “grandfather clause,” which in effect provide a veto, or “Dictator’s Charter”, over EU law. Exemptions would also contradict the European Commission’s intention to achieve a level playing field between EU companies and those listed in the US, that will have to comply with new

US legislation, Provision 1504 of the Dodd-Frank Act – which provides for no exemptions to disclosure. The rules for Provision 1504 were agreed following a nearly two-year consultation process by the US Securities & Exchange Commission (SEC), which concluded that there was no evidence to support company claims of laws prohibiting disclosure – and therefore no basis to grant exemptions to the requirement of disclosure for any company operating in any country.

Taylor added, “This opportunity to create a new global standard of transparency and accountability for the extractives sector is now at risk and depends on the choices to be made in The Hague. The Dutch government needs to rethink its support for exemptions. Otherwise, it runs the risk of being seen to be fronting for Shell, at the time when questions remain unanswered about Shell’s payments for OPL-245 – the effect of which was to monetize an asset expropriated by Etete when he was Oil Minister under the notorious Nigerian dictator, General Sani Abacha. Instead, the Netherlands should live up to its reputation by supporting a strong, exemption-free EU transparency law that is consistent with the US law. The test for the law will be whether it covers the kind of payment that Shell and Eni made for OPL-245.”

/ Ends

Contact:

The Hague

Simon Taylor, 0044(0) 79571 42121, staylor@globalwitness.org

Dominic Eagleton, 0044(0) 77387 13016 , deagleton@globalwitness.org

London

Brendan O’Donnell, 0044(0) 7912 517128, bodonnell@globalwitness.org