Washington – National and international civil society groups Thursday hailed the U.S. Senate’s passage of a major financial reform act that includes a key anti-corruption provision requiring energy and mining companies to publicly disclose payments they make to governments around the world.
“This historic measure gives citizens in resource-rich countries information they need to combat corruption in the oil and mineral sector and to demand government accountability for responsible resource use,” said Isabel Munilla, director of the U.S. chapter of Publish What You Pay (PWYP), a coalition of some 600 faith, human rights and development groups active in 55 countries.
“This legislation sheds light on billions (of dollars) in payments from oil and mineral companies to governments. Citizens now have a powerful tool they can use to scrutinise the levels of public spending on economic development, environmental protection, and health and human services,” she added.
A second, so-called “conflict minerals” provision in the bill will require companies whose products contain cassiterite, coltan, wolframite or gold to disclose whether the minerals originated in the Democratic Republic of Congo (DRC) or its neighbours and, if so, what measures were taken to ensure that they were not obtained from armed groups active in the region.
Based on legislation introduced by bipartisan group of senators earlier this year, the resource transparency provision was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was approved by the Senate Thursday by a 60-39 vote margin.
The Democrat-led reform package, which gained a filibuster- proof majority with the help of three moderate Republicans from the northeastern part of the country, marked a reversal of the more than three decades of de-regulation of the country’s financial sector.
Passed last month by the House of Representatives, the Dodd- Frank bill is expected to be signed into law by President Barack Obama next week.
Opposed by virtually all Republican lawmakers, the entire package will give the government agencies greater authority to detect and prevent future threats to the financial markets, regulate and even shut down financial institutions, including hedge funds and private-equity firms, and provide new protections for consumers.
The resource transparency provision, which was co-sponsored by Democratic Sen. Benjamin Cardin and Republican Sen. Richard Lugar, will require companies registered with the Securities and Exchange Commission (SEC), the regulatory agency that oversees U.S. capital markets, to publicly report how much they pay the U.S. and foreign governments for access to their oil, gas, and minerals.
Twenty-nine of the world’s largest internationally operating oil and gas companies and eight of the world’s 10 largest mining companies are currently registered with the SEC, according to the PWYP coalition, which includes such groups as ActionAid, Amnesty International, Earthrights International, Global Witness, the Open Society Policy Center, and Oxfam America.
“Transparency empowers citizens, investors, regulators, and other watchdogs and is a necessary ingredient of good governance for countries and companies alike,” said Lugar, the leading Republican on the Senate Foreign Relations Committee.
“It empowers investors to have a more complete view of the value of their holdings. It brings more information to global commodity markets, which would benefit price stability,” he said during the floor debate over the measure. “Most importantly, it helps empower citizens to hold their governments to account for the decisions made by their governments in the management of valuable oil, gas, and mineral resources and revenues.”
Billions of dollars paid by energy and mining companies to local, regional, and national governments are lost to corruption or gross mismanagement each year, resulting too often in astonishingly high rates of poverty in resource- rich countries, of which Nigeria, the DRC, and Equatorial Guinea, among others, are often cited as prime examples.
By requiring the public reporting of those payments, the PWYP members hope that local and international groups will find it easier to assess how governments are using – or misusing – them.
Some companies – including U.S.-based Newmont Mining, Canada-based Talisman Energy, and Norway’s Statoil – have been providing that information under the Oslo-based Extractive Industries Transparency Initiative (EITI), a voluntary public-private group created in 2003. The new law is consistent with the EITI’s best practice.
But Revenue Watch Institute (RWI), which, along with the Open Society Center, is part of financier George Soros’s civil society support network, stressed that other industrialised countries should now follow the Washington’s lead by making the reporting mandatory.
“Other important capital centres like the U.K., Germany, Canada and Australia should live up to their commitment to promote transparency in extractive industries by adopting similar listing rules,” said Karin Lissakers, RWI’s director and a former U.S. representative at the International Monetary Fund (IMF), who also noted that the Hong Kong Stock Exchange had enacted a similar reporting standard earlier this year.
“The logical next step is for the International Accounting Standards Board (IASB) to universalise the standard adopted by the U.S.” pursuant to the call at last month’s G20 Summit in Canada for “a single set of high-quality improved global accounting standards.” The London-based IASB sets standards for 110 member-countries in addition to the U.S.
Good-governance groups were not alone in praising the new legislation, as environmental organisations and even some socially responsible investment funds joined the chorus.
“A new international standard for transparency in the oil, mining, and gas industries has been set today, empowering people and communities around the world and here at home by giving them direct access to critical information they need to defend their land from the environmental risks posed by irresponsible extraction of natural resources,” said Margrete Strand Rangnes, director of the Sierra Club’s Responsible Trade Program.
Calvert Investments, a Maryland-based investment company that played a leading role in both promoting the legislation and persuading Newmont to publicly disclose its payments, also welcomed its passage. In a recent report, it argued that the increasingly remote areas where oil and gas companies were operating posed reputational and other risks that current SEC reporting rules did not adequately address.
Global Witness, whose pioneering work in the early 1990s focused global media attention on what is now often called the “resource curse”, also claimed victory.
“As well as helping the people of resource-rich-but-poor countries, these provisions will serve U.S. governmental and commercial interests around the world by promoting stability and responsible corporate investment,” said Corinna Gilfillan on behalf of the group.
*Jim Lobe’s blog on U.S. foreign policy can be read at http://www.ips.org/blog/jimlobe/.
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