ONE welcomed the European Commission’s proposals in October 2011 to include in the revision of the Accounting and Transparency Directives the requirement for European extractive and forestry companies to publish information on payments they make to governments in countries where they operate, on a per-project basis. If implemented effectively the proposals will help millions of people in resource-rich but poor countries hold their governments accountable for revenues received from oil, gas, mining and forestry companies. Transparency is a vital first step towards ending the ‘resource curse’ that has blighted too many African countries.
ONE is now calling on European Union member state countries to show leadership by supporting and strengthening these proposals, in particular:
Support the current proposal: ONE is asking Member States to support the Commission’s proposal, notably the fact that it includes project-level reporting and apples both listed and large unlisted companies.
Definition of project: The Commission has defined ‘project’ to mean ‘a specific operational reporting unit at the lowest level within the undertaking at which regular internal management reports are prepared to monitor its business’. This definition would allow each company to define its own version of ‘project’, producing data which is not comparable across companies, projects or countries, thereby weakening the stated objective of the provision. ONE recommends that ‘project’ be defined as “the contract, licence, lease, concession or other legal agreement which gives rise to a company’s tax and revenue liabilities in each country where it operates”. This definition is logical because companies in the oil, gas, mining and timber industries typically exploit the resource within a geographical area, and on the basis of fiscal terms, which are embedded in such agreements.
Definition of materiality: i.e. how large a payment stream has to be before companies are obliged to report it, was left for the Commission to define with delegated acts. We recommend that the Council defines materiality as an absolute figure within the legislative texts. ONE proposes a threshold of any payment, or set of payments, amounting to more than €15,000. This figure is compatible with that already used for extractive companies by the Alternative Investment Market of the London Stock Exchange (£10,000).
Exemption clauses: The Commission’s proposals envisage that companies would not have to publicly report their payments to governments in cases where ‘public disclosure of this type of payment is clearly prohibited by the criminal legislation of that country’. However, we are yet to see evidence as to why this provision is necessary. On the contrary, it would perversely incentivise corrupt governments in resource-rich countries to pass opacity laws outlawing disclosure, undermining the aims of the EU legislation. The exemption should be removed, as it constitutes a potential loophole.