Source: Global Witness

25th October 2011 - The European Commission took a vital step on Tuesday towards helping millions of people in poor countries to benefit from their natural resources by proposing legislation requiring EU-based oil, gas, mining and timber companies to publicly disclose their payments to governments for each project that they invest in around the world.

The Commission proposal, which takes the form of amendments to existing EU directives on market transparency and corporate accounting, would enable the public to scrutinise the flow of payments to governments as a deterrent to abuses. It would also give investors in extractive companies a much clearer view of companies’ operations and finances.

“We welcome the leadership of the EC’s President Barroso and Commissioner Barnier and the strong support of Britain and France for a proposal which could make a profound difference to many resource-rich-but-poor countries,” said Simon Taylor, Founding Director of Global Witness. ”When adopted into EU law, this would be a major step towards global standards in transparency.”

Natural resource exports are worth hundreds of billions of dollars a year to developing countries but many countries have derived little lasting benefit from them. Corruption and tax avoidance have drained away funds that are badly needed for development in countries like Angola and the Democratic Republic of Congo, leaving these countries poorer, less stable and more vulnerable to violent conflict.

An EU law promoting project-and country-level reporting of revenues would complement legislation passed in the United States last year, as part of the Dodd Frank financial reform act. It would also bolster the work of the Extractive Industries Transparency Initiative, an association of governments, companies and civil society groups of which Global Witness is a board member.

“This proposal provides a strong foundation which should be reinforced by the European Parliament and Council when they consider it in the coming months. This would send a powerful signal to resource-rich countries that Europe wants a trading relationship based on transparency, fairness and mutual benefit,” added Taylor.

Global Witness urges the European Parliament and Council to ensure that the proposal leads to a strong and consistent standard of disclosure by:

- Tightening the existing definition of “project”, to mean the contracts, licences or other legal agreements which are the basis for companies’ payments to governments.

- Ensuring that there are no exemptions from reporting requirements for particular countries or projects, so that resource-rich dictatorships cannot block disclosures.

- Providing for the disclosure of other key financial information by companies at the country level, including production volumes, sales and profits.