New EU rules could force miners to air their dirty laundry

Deutsche Welle, 26 october 2011 

The EU wants to track mining
royalties paid to foreign nations

Brussels is considering new laws to force both privately owned and publicly listed oil, gas and mining companies to report all payments to foreign governments. Anti-corruption groups say the regulations are long overdue.

Companies could be forced to come clean on how much they pay foreign governments to secure oil, gas, coal and other raw materials, under proposals presented Tuesday by the European Union's executive.

The legislation - aimed at curbing corruption between poor countries' governments and EU firms - would apply to privately owned as well as publicly listed companies in the extractive industries, the European Commission said in a statement.

"Reporting taxes, royalties and bonuses that a multinational pays to a host government will show a company's financial impact in host countries," the Commission said in a statement. 

NGOs like Transparency International
have welcomed the amendments

"This more transparent approach would encourage more sustainable business," it predicted.

Long awaited

Anti-corruption campaign group Transparency International said the proposals, which still need to be endorsed by EU governments and the European Parliament, were long overdue.

In a statement, it said its researchers had found that only one out of 12 European companies operating in Libya had publicly disclosed their payments to the discredited regime of deposed leader Moammar Gadhafi.

Irish rock star Bono - speaking as co-founder of the anti-poverty group One - praised the EU for joining "the fight by the citizens of poor countries to ensure their natural resource wealth turns into actual wealth for the people - and doesn't line the pockets of dodgy dictators or distant exploiters."

Timber companies will be among those affected

Improved transparency

Diarmid O’Sullivan from the non-governmental organization Global Witness explained the historic problem of mineral exploitation: "In all the countries that are rich in natural resources, like Indonesia, (and where) you don't have any public accountability over taxes that the companies pay to government, you have problems like corruption and tax fraud, and the countries really don't benefit."

In 2004, the European Commission tightened the directives on transparency, but did not require detailed project and country-level reporting. The proposed amendments would force companies to give more detailed information and complement legislation passed in the United States last year, as part of the Dodd Frank financial reform act.

They would also bolster the work of the Extractive Industries Transparency Initiative (EITI), which sees governments, companies and civil society groups track and disclose cash flows to citizens in 30 countries.

European companies pay royalties
 to poor governments, but where
does the money go?

"Now the Commission has decided to require country-by-country and project-by-project reporting by all these oil, gas and mining companies," O'Sullivan told Deutsche Welle.

"What's coming out of that is a recognition that it's in European interests that the developing countries are prosperous and stable, and you can't do that without curbing corruption. So they're using the regulatory organizations to create requirements of transparency."

Still unclear

But a group of companies has objected to the rules, saying that it was commercially and politically sensitive to force disclosure on a project-by-project basis.

In a letter signed by Anglo American, BHP Billiton, Rio Tinto, Xstrata, BG Group, BP, Repsol, Shell and Total, the companies complained that the rules failed to define what constituted a project.

"One example is oil or gas fields which cross borders, where governments are understandably careful to safeguard the confidentiality of the terms they offer to investors," they wrote, according to a copy of the letter seen by Reuters.

"Further damage to competitiveness will be caused by the additional cost and administrative burden of project-level reporting," they said.

Author: Ben Knight

Editor: Sam Edmonds