A big win for campaigners: EU agreement on transparency of extractive industries

We are delighted to report that EU bodies have agreed a new regime for transparency in the extractive industries. From a correspondent in Washington, via e-mail:

"The relevant representatives of the European Parliament, Council and Commission have agreed a compromise text of the EU Accounting and Transparency Directives which, taken together, will create the EU equivalent to, which goes beyond, Dodd-Frank Section 1504 (the law that requires all oil, gas and mining companies that have to report to the SEC to disclose all payments over $100,000 that they make to any government anywhere in the world).

The EU legislation goes beyond the US version by including logging companies as well as large, privately held companies.  This is a massive victory because there were a lot of details being discussed that could have watered down the law in the EU, but those efforts were thwarted."

A long list of comments from interested parties is available here.

A background note from Eurodad explains more:

Reaction to EU agreement on transparency of extractive industries

BRUSSELS, 9 April. Today the European Commission, the European Parliament and the Council of the EU agreed a compromise text on transparency of extractive industries. The text will be adopted by the Parliament and the Council in the coming months.

If passed, this law will oblige EU-listed and non-listed big oil, gas, mining firms and the logging industry to declare payments they make in resource-rich nations.

In response to today’s developments,

Catherine Olier, Oxfam’s EU development expert, said:

“It’s 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. But EU politicians today could have taken a bolder stance against tax evasion and corruption by including other sectors such as telecommunications or construction. Strikingly, poor countries lose more to tax dodging than they receive in aid each year.”  

Øygunn Sundsbø Brynildsen, senior policy officer at Eurodad, the European Network on Debt and Development, said:

“Despite today’s promising progress, there is still a long way to go to have EU legislation that properly fights tax dodging. While it is very important to know how much companies pay to governments, this figure alone does not give a clear picture of whether they pay their fair share of taxes. Multinationals will continue plundering developing countries until they are obliged to report information such as sales volumes, assets, staffing and profits. The currently negotiated EU banking sector reform is an example to follow in this regard.”

Although welcoming the Directive, Oxfam and Eurodad have mixed feelings about the deal:

POSITIVE
We strongly welcome the proposal because it is a huge step in the fight against corruption. If the legislation is finally adopted by the EU:

It will help citizens in resource-rich countries like Nigeria and the Democratic Republic of Congo to hold governments to account for their use of natural resource revenues and make sure that these benefit the many and not just the few.

It will oblige companies in the extractive and forestry sectors to disclose the payments they make to governments in all countries at project level - as opposed to reporting at government level only- and without any exemptions. The latter has been a contentious issue in negotiations as companies claimed that in some countries they would have to break national criminal laws which prohibit the disclosure of such information. However, such laws do not exist and companies couldn’t come up with any examples and EU member states finally agreed to remove that exemption which would have been a massive loophole.

NEGATIVE
On the other hand, the proposal failed to:

Include other sectors beyond extractive and forestry such as telecommunications and construction which would widen corporate accountability and help both developing countries and EU member states better combat tax evasion and avoidance. In October 2012 the European Parliament’s Legal Affairs committee voted in favour of expanding the reporting requirements to the telecommunications, construction and banking sector.
Require companies to report on additional financing information such as production or sales volumes, numbers of employees and profits. Such basic accounting information that are already available to companies would allow to identify potential cases of tax dodging.

For more information and comments, contact:
Oxfam: Angela Corbalan on + 32 (0) 473 56 22 60 or angela.corbalan@oxfaminternational.org

Eurodad: Øygunn Sundsbø Brynildsen on + 32 (0) 2894 46 44 or obrynildsen@eurodad.org

The Directives still have to approved by the European Parliament’s Legal Affairs Committee (likely in May) and then by the full sitting European Parliament (likely in June) before the laws can be said to have been formally adopted.  This process is expected to go smoothly.

For those who are not aware, after a European Directive has been adopted, it has to be transposed into each Member State’s national laws and they have some room to amend or modify bits of the requirements (but never to a lesser extent than required by the Directive), which can take some time.  This is in contrast to a European Regulation, which must be taken as is into a Member State’s legal code.