UK – Faulty industry disclosure guidance puts responsible companies at risk

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Publish What You Pay condemns faulty industry disclosure guidance, which puts responsible companies at risk.

Industry guidance for the UK Reports on Payments to Governments Regulations is currently being prepared by and on behalf of the International Association of Oil and Gas Producers (IOGP) and the International Council on Mining and Metals (ICMM).

Key elements in the current version of the industry guidance are highly dubious and call into question the industry authors’ claimed purpose of assisting reporting companies in complying fully with the law. The approach to reporting in the guidance encourages companies to report in a way that is inconsistent with the law and would keep payments hidden from the public. Despite civil society concerns shared with industry and government, industry has so far refused to modify these elements, which will put responsible companies at risk.

Companies should be aware that the guidance will not have legal status and should not be relied upon alone to ensure compliance with the UK Regulations.

The current guidance proposes that only the operator of a joint venture need report payments made on behalf of joint venture partners, and that other partners need not report such payments. Legal opinion obtained by civil society states that this interpretation of the law is “inaccurate”, “incorrect”, without legal basis, and “highly unsatisfactory … to the extent of being positively misleading”.

Operator-only reporting of joint venture payments risks omitting from disclosure major payments such as production entitlements for projects with non-EU operators, even where EU companies are participants. In the kleptocratic state of Angola, for example, payments of around US$7.5 billion a year from EU companies could go unreported if companies followed the present industry guidelines. Similarly, production entitlement payments for 17 projects in Brazil will be excluded from reporting.

The guidance also indicates that two or more legal agreements may be reported under the Regulations as a single project even if they are not “operationally and geographically integrated”. A further legal opinion obtained by civil society states that this view is “misleading and wrong” and may lead companies to be “in breach of the Regulations”.

Licensing regimes in resource-producing countries commonly employ model form production sharing contracts and standardised licences. Aggregating payments simply on the basis of agreements having “substantially similar terms” would set an unreasonably low threshold for project reporting and fall foul of the legal requirement that “Payments, activities and projects may not be artificially split or aggregated” and that “Disclosure must reflect the substance, rather than the form, of each payment, relevant activity or project concerned.”1

Publish What You Pay believes that the industry guidance as it stands puts responsible companies at risk, undermines the intent of the legislation and prevents the type of transparency that civil society around the world has been demanding and G8 governments have committed to. This guidance is irresponsible and should not be published or in any way welcomed by the UK Government.

PWYP UK’s recent letters to Deputy Prime Minister Nick Clegg and Business Minister Jo Swinson are here and here.

Miles Litvinoff is Coordinator of Publish What You Pay UK

UK Regulations 5(4, 5), 9(5, 6).

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