European resource groups’ payments to governments are to be subject to strict transparency regime, after the EU reached a provisional deal on an anti-graft law that will expose details of business in some of the world’s most secretive states.
EU governments and the European parliament agreed a tough disclosure requirements for oil, gas, mining and forestry groups that broadly match rules adopted by the US and leave little flexibility for companies.
Once the law is formally adopted, which remains all but a formality, both public and private companies will be forced to break down payments to governments on any resource project generating more than €100,000.
“The agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help fight tax evasion and corruption,” said Michel Barnier, the EU commissioner responsible for the proposal.
Under the reforms, companies will need to publish total payments for each project, taxes on profits or production, royalties, dividends, bonuses, related fees and payments for infrastructure improvements.
In spite of a hard push from industry and some member states, there is no exemption for disclosing these details in countries where this may breach local laws.
Industry lobbyists were banking on the EU member states trumping the European parliament, which took a stricter stance on transparency. Initially most states supported a German and UK-backed alternative to require 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.
Arlene McCarthy, the British Labour MEP spearheading negotiations for the parliament, said: “We have stood up to attempts to water down these proposals from the member states demanding exemptions and loopholes, which would have defeated the purpose of the rules.”
Companies privately see the transparency regime with varying degrees of dismay. The American Petroleum Institute is suing the US Securities and Exchange Commission over its implementation of similar the rules, suggesting they are akin to “giving [out] the formula for Coca-Cola”.
Jana Mittermaier of Transparency International said the law would help create “a new global benchmark for transparency in the natural resource sector”. She said: “The secrecy that surrounds these deals has been fertile ground for the corruption that has too often blighted the development of natural resources.”
Global Witness, one of the non-government organisations campaigning for the reforms, described it as a “watershed moment”. “Millions of people will now be able to see how much companies pay their governments, enabling them to follow the money if they don’t see any benefits from the cash.”
Bono, the rock star and founder of the One campaign, said: “Europe’s leaders have stepped up and delivered a game-changing breakthrough tonight. Transparency is one of the best vaccines against corruption.”
The transparency rules are part of an accounting directive that is designed to lighten the administrative burden of reporting on small and medium-sized companies. Richard Bruton, the Irish minister who represented EU member states in the talks, said the deal to cut red tape would allow business to “grow and create jobs”.
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