The Netherlands Must Support Strong Oil Transparency Laws
By George Soros
Ten years ago I co-founded a campaign called Publish What You Pay, which today has grown to a global coalition of hundreds of organizations working across 60 countries, mainly in Africa. The idea was simple: empower people by requiring oil, gas, and mining companies to be open about the payments they make to governments around the world.
The global movement to ensure that oil, gas, and mining companies disclose their payments to host governments has continued to gain momentum over the last decade. We are now at a tipping point and the European Union is on the cusp of agreeing to strong new transparency rules which will establish a global standard in the sector.
Oil, gas, and mining operations generate billions of euros each year for governments and companies. These industries have the potential to drive economic development in resource-rich countries. Yet, despite this abundant natural wealth, a majority of the people in these countries live in poverty.
Transparency is a crucial part of the solution to the so-called “resource curse.” Providing people with information about the payments their governments receive for each oil or mining project will greatly assist them in holding their governments to account for the use of those funds. This is essential to ensuring natural resource revenues are spent wisely on essential services like health and education, rather than wasted through corruption and mismanagement which is sadly so often the case.
The United States has already passed legislation through a provision in its 2010 Dodd-Frank Act which requires all oil, gas, and mining companies listed on U.S. stock exchanges to publish their payments to all countries and for every project without exception.
All eyes are now on Europe as it works to deliver an equal dose of transparency through the EU Accounting and Transparency Directives. If the number of countries with these progressive laws went from one to twenty-eight, a new global standard of transparency would be achieved.
If Europe fails to deliver this major advance soon, hard won progress to increase transparency in the oil, gas, and mining industries could be put at risk.
As Europe continues to endure the effects of economic austerity, improved use of revenues in resource-rich countries will reduce the dependence of those countries on Dutch foreign aid and therefore on Dutch taxpayers too.
Investors stand to gain from greater disclosure as well: Assessing risk in companies becomes a lot easier when shareholders are able to see where companies are paying their taxes. In addition, the stability that is created in countries where natural resource revenues are made transparent provides an improved investment climate.
However, the value that citizens will derive from these laws depends on getting the detail right. It is vital for the final legislation to be robust.
Firstly, this means there must be no country exemptions of any kind. Some have argued that there are foreign countries which prohibit the disclosure of payments to governments. This argument does not stand up to scrutiny. Legal research has found no evidence of foreign laws which would prevent companies from disclosing the payments they make, and the United States makes no such provision for exemptions in its legislation. Countries looking to attract foreign investment realize they need to allow companies to abide by the disclosure requirements of the large capital markets in their home countries.
The loophole created by introducing an exemption would only serve to incentivize opaque regimes to pass secrecy laws, thereby fatally undermining the purpose of the legislation which is to shine a light on payment flows between companies and governments. Europe must not allow this to happen under any circumstance.
Secondly, payment information needs to be meaningful to people and therefore must be disclosed for each and every project. Oil, gas, and mining projects are governed by the legal agreements which companies sign with resource-rich governments. The most logical way to define a project within the legislation is therefore in relation to those legal agreements. This would ensure that the information is comparable, would add little to compliance costs, and will do nothing to reduce a company’s competitiveness.
Regrettably, a number of oil companies including Royal Dutch Shell are putting pressure on European governments to weaken these rules. Shell is also a member of a U.S. oil industry association which is going to court to try to overturn the U.S. legislation passed in 2010 and is therefore fighting these laws on both sides of the Atlantic.
It would be a great shame if the Netherlands were to bow to this pressure at the expense of citizens who seek empowerment and accountability through these truly historic rules.
Europe has a tremendous opportunity to pass ground-breaking legislation which could improve the lives of millions of people around the world. Final negotiations are now taking place; my hope is that the Netherlands will play a constructive role in ensuring strong rules are put in place without exemptions of any kind.
George Soros is founder and chair of the Open Society Foundations.