The European Commission proposed a stringent transparency law last week that has polarised opinion: mining, forestry and energy companies sit on one side of the debate and transparency watchdogs on the other.
The law, if passed by the European Parliament and individual European Union states, would force companies in the extractive and logging industries to disclose all payments made to governments.
Several mining and energy companies objected to part of the legislation in a letter to the EC. They said the law would force them to disclose politically and commercially sensitive information and would damage their competitiveness.
The EC proposals are far reaching in that they encompass all large private companies registered in the EU and they mandate that government payments are listed on a project-by-project basis as well as a country-by-country basis.
The EC’s press release says many of the companies that will fall under the proposed laws have already signed up to the Extractive Industries Transparency Initiative (EITI), a voluntary initiative under which companies agree to publish what they pay and governments agree to disclose what they receive.
Although the initiative is voluntary, companies are obliged to disclose their government payments if they wish to operate in a country that has signed up to the initiative.
Although the EC says its proposed law helps promote, complement and strengthen the EITI, a recent report by the UK-based relief and development charity Tearfund says that the EITI is weakened by the fact that few countries have signed up to it.
As a result, few extractive companies are obliged to disclose their government payments.
The Tearfund report included an in-depth study of the extractive industry in Colombia, a low-income, resource-rich, corruption-prone country that is yet to sign up to the EITI.
“It would be excellent to have legislation that makes it mandatory for companies to publish what they pay,” the report quoted Cesar Diaz, executive director of the Colombian Chamber of Mining and a Rio Tinto representative, as saying.
“It should be global and should cover all sectors. This will help the mining sector at the global level too,” Diaz said.
The International Council on Mining and Metals (ICMM) – an industry body set up to improve sustainable development in the mining sector - gave its reaction to the EC proposals.
“We believe that any new legislation should support EITI’s position as the leading global standard on transparency in the extractive industries,” Anthony Hodge, ICMM president and EITI board member told TrustLaw.
The EITI’s strength lies in bringing together companies, governments and civil society to find local solutions, Hodge said.
“Publishing corporate payments is just one element. A more important issue is how that money is spent by governments at the national and often sub-national level,” Hodge added.
The EC proposals are not without precedent. Last year the United States passed the Dodd-Frank Act which requires mining and energy companies listed in the United States to disclose all payments to foreign governments.
The EC proposals are considered to be even more comprehensive than the Dodd-Frank Act provisions.
Oil giant Royal Dutch Shell is a supporter of the EITI (their general counsel is on the board) but earlier this year its chief executive officer Peter Vosner made clear that he was not in favour of the Dodd-Frank Act’s provisions.
“Transparency for the sake of transparency is not enough,” Vosner told a March meeting of EITI members in Paris.
“Transparency should help advance society. That’s why we believe the EITI succeeds and Dodd-Frank fails. Dodd-Frank’s goal is transparency only. It doesn’t seek to involve host governments,” Vosner said.
The Shell CEO said the Dodd-Frank Act had been rushed through U.S. Congress, was unclear, threatened countries’ sovereignty by encouraging industry to violate national laws and took the power away from civil society that the EITI had worked hard to build up.