International relief and development organization Oxfam America applauded the European Parliament for voting today to give its final approval to a new mandatory payment disclosure requirement for the oil, gas and mining industries that will complement a law already in force in the US.
Today’s European Parliament vote follows a political agreement reached between the European Parliament, EU Member States and the European Commission in April after months of negotiations to include the payment disclosure provisions in revised Transparency and Accounting Directives.
“The transparency net has been cast even wider today, covering the vast majority of internationally operating oil companies and world’s largest mining companies,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program. “This is a huge victory for citizens living in resource rich countries as well as investors who have a right know this information. We applaud Europe’s leaders and Members of the European Parliament for not caving under oil industry lobbying efforts to water down the rules.”
Similar to the bipartisan “Cardin-Lugar” provision or Section 1504 of the 2010 Dodd-Frank Wall Street Reform Act, the European directives require both public and large privately-held companies to disclose their payments. In addition, the requirements extend to the logging industry. As in the US, companies will be required to disclose payments, such as taxes and royalties, above 100,000 Euros for individual projects ($100,000 in the US) in every country of operation. The vote further undermines oil company arguments in US courts against the US disclosure provision.
The vote comes on the eve of the G8 Summit June 17-18 hosted by the United Kingdom, where transparency in the “extractive industries” is a major plank of the host government’s agenda. The UK and French governments have been strong backers of the EU oil and mining disclosure provisions and have pledged to quickly enact the requirement in their national contexts. Member states have two years to incorporate the directives into their national legal frameworks.
“While the world is moving toward greater transparency, the oil industry seems determined to keep their heads in the sand, and fight against it as long as possible,” continued Gary.
In the US ,the American Petroleum Institute (API), an industry lobby group, filed a lawsuit against the Securities and Exchange Commission (SEC) last October in an attempt to overturn final rules promulgated by the regulatory agency last August. Oxfam has intervened in the lawsuit on the side of the SEC. The US Court of Appeals dismissed the case for lack of jurisdiction in April and the case is now being heard in the District Court for the District of Columbia. Mining companies and their industry associations have not joined the oil industry lawsuit in the US and Norwegian oil giant and API member Statoil has explicitly withheld support for the suit.
Companies have alleged that they may be forced to violate local laws or abandon assets in countries that allegedly prohibit disclosure of these payments. As in the US, EU regulators and political leaders were not convinced of the existence of any host country prohibitions against disclosing this payment information. The EU directive and final SEC rule do not allow for any categorical exemptions to the payment disclosure requirements.
“Mandatory disclosures of oil, gas and mining payments to governments are now a global fact and industry giants such as Exxon, Chevron, BP and Shell need to drop their misguided support for this litigation,” said Gary. “Now that the European Parliament has given final approval to payment disclosure rules, oil industry leaders should drop their support for this meritless attempt to stem the transparency tide.”
With the US and EU laws in place, a global standard for mandatory oil, gas and mining payment disclosure has emerged. These laws cover 65 per cent of the value of the global extractives market, including most major internationally operating oil, gas and mining companies, as well as significant Chinese, Russian, Brazilian and other state-owned companies. These laws also complement the industry-backed Extractive Industries Transparency Initiative (EITI), a voluntary initiative whose standards were revised this May to require project reporting that is consistent with the US and EU reporting regimes. Canada, Australia and other jurisdictions are considering adopting similar mandatory transparency requirements for their capital markets.