Three Ways Companies Can Make 2019 a Big Year for Contract Transparency

Many people understand the debate around the publication of extractive industry contracts as a battle between transparency activists on one side and secretive companies on the other. But if 2018 is any indication, this view is a bit outdated. As our summary of company and contracts stories from 2018 shows, several of the biggest advances in contract transparency actually came from the private sector.

• In February, Total became the first major oil company to make a public statement supporting the practice and committed to advocate for the public disclosure by countries of their Petroleum contracts and licenses.
• Also in February, the B-team launched the responsible tax principles, which included a pledge encourage authorities to publish tax incentives or contracts where these are not specified by law (principle 5C). These principles have already been endorsed by endorsed by AngloAmerican, BHP, Maersk, Repsol, Rio Tinto and Shell.
• In May, Oxfam published results of a company survey on contract transparency, revealing that at least 18 major extractive industries companies support contract transparency in some form.
• Between July and December, Luke Balleny of ICMM, Richard Morgan of Anglo American and Lesley Coldham of Tullow Oil engaged in the Center for Global Development’s Working Group on Commercial Confidentiality which sought to answer the question, How open should public contracts be? The results of this exciting work are expected to be published soon.
• Finally, in November, Rio Tinto published a new transparency statement, which went further than any other company on the issue. Like Total, Rio committed to encourage governments to allow such disclosure, but the company also made an unequivocal commitment to “disclose contracts… where they are not subject to a confidentiality undertaking”

With 2019 now underway, here are three ways that extractive companies can help drive the contract transparency agenda.

First, companies should make a public statement on contract transparency. One of the biggest blockages to contract transparency is that so many government officials believe that companies don’t want disclosure. A public statement supporting contract transparency is the clearest way to break this deadlock. Ideally, this would include both elements of the approach taken by Rio Tinto: (a) the commitment to disclose contracts where possible and (b) the commitment to encourage governments to disclose contracts.

Second, companies should support a contract transparency requirement in the Extractive Industries Transparency Initiative (EITI). Building global standards helps ensure that expectations for disclosure are the same worldwide, and that contract transparency rules are applied on a level playing field. An important opportunity is emerging within EITI, which is debating revisions to the EITI Standard ahead of a global conference to be held in July. More than half of EITI countries already disclose contracts. And the last consultation on the issue carried out by the EITI International Secretariat in 2013 showed that, of 20 implementing countries that took part, 17 supported making contract disclosure a requirement either comprehensively or with some exceptions. Among 10 extractive industries companies on the EITI board, seven have made public statements supporting the practice of contract disclosure.

Third, companies should quickly move to make disclosures where they can. A strong approach would be to publish all contracts and licenses in jurisdictions where contracts are not subject to a confidential undertaking; and in jurisdictions where it is not possible to publish, make a public statement explaining why they have been unable to publish (e.g. confidentiality clause in contract; government does not want to publish... etc.). In line with the expectations set out in the current EITI Standard, disclosures should include publication of the main agreement with the government, as well as any annexes or amendments, and related social and environmental documents. A great example of a project where all these documents are available is the Rio Tinto-managed Oyu Tolgoi project in Mongolia, where the project website provides access to the investment agreement with government, environmental studies and reports and cooperation agreements with partner communities.

In the long run, companies might consider establishing online project pages integrating contract disclosures with payment data and other project level disclosures under the company transparency policy. (Hat-tip to BHP for making this link in their economic contribution report – see page 10.) These platforms could become the company’s primary disclosure mechanism and could be updated on an ongoing basis to reflect changing circumstances in real time. Such a system has already been developed by CNH, the Mexican petroleum regulator. But no company has yet come close to developing something like this for its own communications purposes.

Private sector actors have never been more aligned with civil society on contract transparency. Now is the time to move from commitments to collective action.

Rob Pitman is a governance officer with the Natural Resource Governance Institute.