Tough new UK transparency law for extractives
Big Oil must call off its assault on transparency, says Global Witness
A historic law came into force in the UK today that will help fight poverty and corruption in resource-rich but poor countries said Global Witness, which has been campaigning for such measures for over 16 years.
The new rules compel UK oil, gas, mining and logging companies to publish details of the payments they make to governments across the world for access to natural resources. This move will help make hundreds of billions of pounds worth of taxes, royalties and licence fees available to public scrutiny.
Currently, such payments are largely made in secret, leaving vast amounts of public money vulnerable to corruption. With 887 million people living on less than US$1.25 a day in resource-dependent countries, the UK rules have the potential to help large numbers of people escape poverty.
“This is a game changer for citizens in some of the world’s poorest countries,” said Global Witness Director Simon Taylor. “Every year, billions of dollars that could be used to build schools and hospitals go missing because companies and governments do shady deals behind closed doors. We applaud the UK Government for bringing these deals out into the open, and we urge other countries to follow suit.”
Companies are required to publicly disclose payments for every project they operate in all countries with no exception, starting from 1st January 2015. Firms that fail to report fully, truthfully and accurately could face criminal prosecution.  The law’s passage puts the UK at the forefront of a global movement for greater transparency in the extractive industries, and sends a strong signal to regulators in the United States and Canada who are developing similar mandatory rules. 
The UK law makes it the first EU member state to fulfil its G8 commitment to quickly implement the EU Accounting Directive, which sets out requirements for EU extractive companies to publish these payments.
All 28 EU Member States are required to implement the Directive by July 2015, with Germany, France, Italy, Sweden, Denmark and Finland publicly committed to early adoption. In the UK, the legislation received strong cross-party support in Parliament. Commenting on the crucial requirement for companies to report separately on each project they invest in, the Liberal Democrat minister who championed the law, Jo Swinson, said this “reflects how industry manages and reports on its business activities.” 
The Conservative Peer Baroness Neville-Rolfe stated that: “Transparency makes good business sense. Those who invest in companies must consider a wide range of issues and many investors will welcome additional information to enable them to make sound decisions.”  Welcoming the new law, Labour MP Iain Wright MP urged the Government to push for “consistent global reporting standards that will help to level the playing field with UK companies.”
Global Witness Director Simon Taylor added: “The UK Government has stood firm against a lobbying effort to gut this law by a small number of oil companies, who simultaneously claim they support meaningful transparency. The legislation clearly requires payments to be publicly disclosed for each project, and rejects Royal Dutch Shell and ExxonMobil’s call for ‘exemptions’ that would allow companies to keep payments secret in certain countries, many of which have a big problem with corruption. Other countries must now follow Europe’s lead and introduce matching rules to provide a level playing field for industry.”
High-profile supporters of project-level disclosure laws include a group of global investors with over US$6.4 trillion in assets under management,  the oil major Statoil  and BP’s former chief executive Lord Browne.  In March 2014 the UK firm Tullow Oil voluntarily disclosed project-level payments in all countries of operation in advance of the UK law,  and the UK Prime Minister David Cameron has called on the United States to swiftly introduce a rule to implement Section 1504 of the Dodd-Frank Act, which requires U.S.-listed oil, gas and mining companies to disclose payments at the project level. 
UK: Colin Tinto, +44 7841 337 034 / email@example.com
US: Dominic Eagleton, +44 7738 713 016 / firstname.lastname@example.org
- The law requires companies to report on an annual basis payments of £86,000 and above, by project and by type of payment. The first reports are due to be published in 2016 and will cover payments made in 2015.
- The U.S. Securities and Exchange Commission is aiming to publish a draft implementing rule for Section 1504 of the Dodd-Frank Act by October 2015. The Act requires U.S. listed oil, gas and mining companies to report payments to governments on a project-by-project basis. Similar draft legislation, the Extractive Sector Transparency Measures Act, is currently before Canada’s Parliament.
- An official transcript of the House of Commons debate is available here.
- An official transcript of the House of Lords debate is available here.
- A group of 34 international investors including Allianz Global Investors, Aviva Investors, BNP Investment Partners, Henderson Global Investors and IMG IM International submitted a comment to the U.S. Securities and Exchange Commission in April 2014 calling for a strong rule to implementing Section 1504 of the Dodd-Frank Act, including a requirement for companies to report on a project-by-project basis.
- See page 19 of Statoil’s 2013 Sustainability Report.
- Lord Browne, ‘Europe must enforce oil sector transparency’, Financial Times, 24 April 2012.
- See pages 7 to 11 of Tullow Oil’s 2013 Transparency Report.
- Rt Hon David Cameron MP, ‘The Corruption Cure: Transparency, Taxes, Trade’, Wall Street Journal, 4 June 2014.