'Key moment' in drive for transparency hailed by MEP

A European Parliament vote in favour of new rules on disclosure for large companies in the extractive industries – together with a similar law in the US – marks progress towards strong global transparency standards, says MEP

In 2008 exports of oil, gas and minerals from Africa were worth roughly nine times the value of international aid to the continent, $393bn versus $44bn. Yet many of these countries remain trapped in poverty. Indeed, developing countries around the world are being robbed of the chance to earn vital revenue from oil, gas and other mining resources.

Over recent months I have been working closely with campaigners and civil society representatives from across the globe to secure a strong new law on transparency and disclosure in accounting for the extractive industries. This groundbreaking legislation would require all European listed as well as large private oil, gas, mining and logging companies, to disclose the payments they make to any governments on a project-by-project basis.

Project level disclosure is the only way in which local communities in resource-rich countries are able to expose corruption and hold their governments accountable for using revenues towards development. 

According to a report in May this year, documents came to light during an arbitration in New York detailing how Nigerian subsidiaries of both Shell and Eni agreed to pay over $1bn to the Nigerian government to acquire an oil block. The documents provided accurate details of the payment. On the same day the Nigerian government paid the exact same sum of money to Malibu Oil and Gas, owned by convicted money-launderer and ex-oil minister Dan Atete – who had given himself the oil block in the first place. Shell and Eni deny paying any money to Malabu Oil and Gas in return for the licence, and maintain that they only dealt with the Nigerian government. 

Had project level reporting been law, both companies would have been required to publish this payment and attribute it to the specific oil block. Citizens could have used this data to identify the payment and track it to government and then question the Nigerian administration about how the money was spent.

The positive vote of the European Parliament's Legal Affairs committee this week has sent a clear message that MEPs reject the 27 European Union member states' weak proposals for disclosure of payments at country and government level. The Council's proposed compromise would have enabled Shell and Eni to publish their overall payments made to the Nigerian government. The billion dollar sum would have remained invisible to citizens, indistinguishable from other payments for other projects. Under the weak British government proposals, citizens would have no possibility of holding their governments to account for what happens to these payments.

We have not given in to the pressure of industry and government lobbying for a weak transparency regime. We are insisting on project-by-project reporting with a low threshold of €80,000 for payment disclosure. Steve Manteaw, convener of 'Publish What You Pay, Ghana' and chairman of PWYP's Africa steering committee, came to speak to MEPs in April. He highlighted just how important a low materiality threshold was to citizens in Africa. In Asutifi, Ghana, the total district budget for 2008 was less than €1m to serve a population of approximately 108,000 people. That is less than €10 per person per year for local government to spend on vital services such as education and water sanitisation. These figures highlight the industry's neglect of corporate social responsibility – they were actively lobbying for the materiality threshold to be set much higher at €500,000. 

We also refused to accept exemptions that would create large loopholes in the law. For example, despite claims by some companies that criminal legislation in certain countries would prevent disclosure, there is no evidence that such explicit bans on disclosure exist. Meanwhile, it was disappointing that British Conservative members of the committee failed to back the compromise. This is another u-turn by the Tories, reneging on Prime Minister David Cameron's promise to the people of Nigeria to bring forth country and project reporting.

During the summer recess I met with United States senators who have led the campaign for greater transparency in the US. The US law currently requires all listed extractive companies to disclose the payments they make to governments around the world on a project-by-project basis. On the August 22 the US Securities and Exchange Commission voted to finalise these rules for the industry with heavy sanctions for failure to comply.

The European parliament's rules are more ambitious, broadening the scope of payment disclosure to include logging and country level disclosure for construction, telecoms and banking sectors. Large private European Union companies will also be required to report on payments made to governments. But perhaps most importantly, MEPs agreed that EU rules should include a strong definition of project, clearly defining when specific payments relating to a company's activities should be disclosed.

This is a key moment in the global drive for greater transparency. With this vote we now have a strong negotiating mandate to force the member states and the European Commission to accept the parliament's amendments, putting us on track to create strong global transparency standards, with equivalent rules in the EU and the US.

Arlene McCarthy MEP is a British member of the Socialists and Democrats group and sits on the Legal Affairs committee in the European Parliament