April 09, 2013
EU Mandates Disclosure of Payments to Governments
by Robert Kropp
Transparency International says that with the European mandate joining rules enacted by the
Securities and Exchange Commission in the US, 90% of companies in the extractives industries will
be required to disclose payments to governments.
The European Union reached agreement this week on a directive that will require companies in the
extractives industries to disclose payments they make to governments. The measure is designed to
combat the so-called resource curse, in which exploitation of natural resources in developing
nations leads to corruption and widespread poverty. It will also provide investors with important
information regarding risk factors for companies in the oil and gas and mining sectors.
The EU directive follows a similar rule in the US, originally mandated by Dodd-Frank and
enacted by the Securities and Exchange Commission (SEC). Last year, the Commission refused to delay
implementation of the rule despite a legal challenge mounted by industry trade groups. In a brief
filed in support of the SEC's implementation of the Cardin-Lugar Amendment, Oxfam America stated that it "addressed a number of
critical foreign and domestic policy challenges: the resource curse, i.e. the destructive
consequences of secret payments to governments by extractive industries, which affect economies and
communities, the security of investments in extractive companies, and the stability of US energy
In some respects the EU directive goes further than the rule implemented by the
SEC. Companies in the forestry sector will be covered by the mandate, and both public and private
companies registered in the EU "will have to disclose details of tax, bonus and other payments made
for every project they operate, over a threshold of 100,000 Euros," according to Transparency International.
"The combined scope of the
rules will cover 90 per cent of the world's major international extractive companies," Transparency
Describing the EU law as "a huge victory for citizens living in
resource rich countries," Ian Gary, senior policy manager of Oxfam America's oil, gas, and mining
program, said, "Oil companies should join citizens in resource-rich countries, investors, and
energy consumers in embracing transparency, rather than seeking to turn back the tide through
And Senator Ben Cardin, who with former Senator Richard Lugar crafted the
amendment to Dodd-Frank in the US, said, "Now the US and the EU are united in strengthening
financial markets and fighting the scourge of corruption in resource-rich countries."
"These new measures will improve sustainable business among multinationals active in the oil,
gas, mining or logging sectors," according to a statement by the EU Commissioner for Internal
Market and Financial Services and the EU Commissioner for Development. "It will play a
groundbreaking role in the better management of natural resources and in the increase of domestic
fiscal resources available to provide basic social services to the citizens."
help to achieve a new step in the quality of our relations with Africa, based on mutual
accountability and transparency," the Commissioners continued.
The new law in the EU is
expected to take effect later this year. Transparency International has urged the G8 and G20
countries to enact similar legislation for all government-owned companies, "to ensure that all
citizens can benefit from these reforms and that there is a level playing field for extractive