A Review of the Nigerian Energy Industry

GFI applauds European leaders for strong extractive transparency agreement

GFI*Historic EU Transparency Rules Would Build Upon Landmark Cardin-Lugar Provisions to Include Logging Companies and Large, Privately-Owned Firms

09 April 2013, WASHINGTON, DC – Global Financial Integrity (GFI) lauded  European leaders today for agreeing to adopt historic transparency rules  for European companies operating in the extractive sectors.

The rules,  announced this evening  in Brussels, will require large, privately-owned European companies and  EU-listed firms operating in the oil, gas, mining, and logging sectors  to disclose information on payments made to governments.

“This  agreement is a major victory for anyone who cares about fighting  poverty, protecting investors, making markets more efficient, or  reducing corruption,” remarked GFI Director Raymond Baker. “Our research  shows that the developing world loses roughly US$1 trillion per year to  crime, corruption, and tax evasion. This is a systemic problem caused  largely by the opaque, secretive global financial system. For citizens  of resource-rich countries, the new EU rules will shine a light in  places that need it most.”

The agreement will require firms  covered by the rules to disclose on a project-by-project by project  basis all payments made to governments above €100,000 (approximately  US$131,000) including taxes-paid, royalty fees, and license fees.

Connections to Cardin-Lugar

The European agreement builds upon U.S. legislation passed in 2010, the Cardin-Lugar provisions (section 1504) of the Dodd-Frank Wall Street Reform and Consumer Protection Act,  which requires all companies registered with the U.S. Securities and  Exchange Commission operating in the oil, gas, and mining sectors to  report on payments made to foreign governments.

Unlike the  Cardin-Lugar provisions, the European rules will also cover large,  privately-owned firms, and they will extend to companies operating in  the logging sector.  Moreover, the new rules would instruct the European  Commission to consider extending the rules to more industries.

Extending the Rules

“While  it’s important to enact transparency in the extractive industries,  corruption and tax evasion are not exclusive to oil, gas, mining, and  logging,” added Heather Lowe, GFI’s Legal Counsel and Director of  Government Affairs.  “The next step is extending these rules to require  multinational companies operating in all industries to disclose profits  earned, taxes paid, royalties, license fees, subsidiaries, and staff  levels on a country-by country, if not subsidiary-by-subsidiary, basis.”

The European Union announced in late February  that it would move to require all financial institutions to disclose  profits made, taxes paid, subsidiaries, and staff levels on a  country-by-country basis.  GFI praised that move as progress and likewise urged the EU to extend those transparency requirements to all business sectors.

Final Approval Process

The  transparency and accounting directives proposed today by the European  Union still require formal approval by the European Parliament’s Legal  Affairs Committee as well as the full European Parliament. Nevertheless,  the rules were agreed to informally by negotiators from the Council,  Parliament, and Commission, making it very likely that they will be  formally adopted within the coming few months.


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