Last updated: October 26, 2012 11:09 pm

EU closer to new rules for resource groups

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Tough transparency rules for European natural resources companies moved closer on Friday, as EU member states took a harder line requiring companies to disclose payments made to governments for individual projects.

The diplomatic shift makes it likely that the EU will at least match the stringency of recent US anti-graft rules, which force oil and mining groups to lay bare their financial relations with resource-rich nations.

Once agreed, such transparency laws would affect listed companies such as Royal Dutch Shell, Anglo American and Xstrata, as well as large private oil, gas and mining groups, which are not covered under the US regime.

Industry lobbyists were banking on the EU member states standing up to the European parliament, which is demanding the rules are defined as strictly as possible and applied to even more sectors, such as banking and telecoms.

The EU Council had supported a German and UK backed alternative that would require natural resource groups to publish only what they pay central and local government, without breaking down the numbers by projects.

But after US regulators this summer rejected industry efforts to water down the rules, diplomats conceded that applying a lighter touch approach in Europe was politically indefensible.

Their position was revised at a meeting of EU ambassadors on Friday, which was supportive of moving to a system more aligned with the US.

“It opens the door to finding some kind of compromise,” said one diplomat, referring to the process whereby the parliament and the EU council must agree a text for it to become law.

Many unresolved issues remain. There is no consensus on how projects are defined or on the threshold for disclosure – both technical issues that could have big implications for industry.

The US transparency rules are triggered for projects of $100,000, a much lower level than the €500,000 initially proposed by the council.

There was also strong consensus among the EU ambassadors to reject the parliament’s demands for the rules to be applied more widely, to financial services, construction and telecoms groups.

Companies have responded to the US and EU push for transparency with varying degrees of dismay. They argue that it places a heavy administrative burden on business, forces them to disclose valuable commercial secrets and damages their chances against Chinese or Russian rivals.

The American Petroleum Institute is suing the US Securities and Exchange Commission over its implementation of the rules, likening the requirements to “giving [out] the formula for Coca-Cola”. The SEC estimated that about 6,000 US companies would be covered, at an initial compliance cost of up to $4bn and ongoing costs of $609m a year.

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