Publish What You Pay one-year anniversary
Interview with Isabel Munilla, director of Publish What You Pay U.S.
It has now been a year since the passage of the oil and mining transparency provision of the Dodd-Frank Act. What are the next steps to see the law enacted?
We were very happy to see that the SEC issued a proposed rule for public comment in December 2010 that included several of Publish What You Pay’s (PWYP) recommendations. The SEC is now looking over those public comments and we expect the final regulations to come out at some point in August. But we’re on the right track, and we’re optimistic.
Is this a long timeline for the SEC?
The SEC was to release their final rules in April, but this has been delayed for a few reasons. They normally only produce a few rules a year, and with Dodd-Frank, they have hundreds of new rules to produce. So there have been some delays due to the volume. They also want to get it right, and there have been a large number of comments provided. What’s notable is how transparent their public comment and meeting process has been in preparing the rule. You can go right on their website and see everyone’s comments and see who’s met with SEC staff.
What are the major obstacles right now? And what, in particular, are the oil companies saying? What is the PWYP response?
Our comments are in, and we’ve had multiple meetings with the SEC staff and Commissioners, both before and after the draft rules were released. As a result, the rule proposal includes several important PWYP recommendations including: that there be no exemptions for any type of company; that the disclosures be made in annual reports (10-K, 20-F, 40-F); that payments for transport for export be included; that the interactive data tagging standard used commonly by the financial sector (XBRL) be used to tag the data to allow users to explore and sort more easily; and, that dividends should be included in the categories of payments to be disclosed.
We are not yet clear on how the final regulations will treat a number of key issues. Our comments to the SEC on the proposed rules stressed the need to keep the proposals which were in line with our recommendations and expand on those in key areas.
The oil and mining industry have lobbied the SEC with several proposals that go against the Congressional intent of the law. Firstly, they want the rules to include an exemption if the host government has a law in place that prevents them from reporting the payments required, or if their existing contracts have a confidentiality clause that prevents them from reporting. They also want an exemption in cases where they would release information that they believe is “commercially sensitive”. Foreign companies listed in the US want an exemption because they will have to provide financial reports in multiple financial markets.
We’ve got great momentum and the future looks bright.
—Isabel Munilla
The exemptions proposed by the industry would contravene the Congressional intent to get the greatest coverage possible, and would create an incentive for countries that want to maintain secrecy to adopt laws that prevent disclosure. Foreign companies should not get a pass on reporting, because no other market currently includes the same disclosure requirements.
The industry also does not want to report on a project by project basis and say that it puts them at a competitive disadvantage in relation to other companies who do not have to report. They have proposed definitions for a “project” that would aggregate project payments and only require country-level payment reporting. This would negate and gut the intent of the law to provide information on a project by project basis.
Project payment data is critically needed by communities to weigh the costs and benefits of projects. They typically bear the brunt of the environmental and social impacts and they need to hold their government accountable to making sure that the revenues generated by specific projects result in concrete benefits for them. The first step in holding governments accountable for this, is to know how much each project is generating.
Also, many times local governments don’t know how much a project in their jurisdiction is generating for the national government. This is also critical in order for local governments and citizens of these jurisdictions to ensure that the transfers from the national government are fair and that money is being distributed according to the law.
Also, for investors, understanding the amount invested in specific projects is important, because projects may be located in different parts of a country and widely varying risk profiles depending on the location of the country. For example, take a project in Sudan or perhaps one that will now be in Southern Sudan, or a project in different states in Nigeria. The risks would be very different. That’s why information provided only at the country level isn’t sufficient to meet the needs of communities, local governments and investors.
The industry also says that the voluntary, Extractive Industry Transparency Initiative should be the only approach to payment transparency. While it’s true that the EITI has been kicked off in over 30 countries, the industry doesn’t mention the serious implementation problems in the EITI. They don’t suggest how to address the lack of coverage of EITI, the inconsistency in reporting, and data quality. Libya and Burma are unlikely ever to sign up to the EITI, but communities in these countries are clamoring for the type of information that the Cardin-Lugar provision, Section 1504, will provide.
What kind of outreach is needed to the SEC to ensure a strict interpretation of the legislation?
SEC is still developing the rules. And while the formal public comment period is closed, we can still provide them with new examples of countries in which project payment information is critically needed. This can be very helpful.
What bills presently are a risk to the goal of PWYP?
Right now, we don’t face any specific risk in an existing piece of legislation. But the industry is making behind the scenes attempts to shop around proposals to weaken 1504 in any piece of fast moving legislation they can find. We are monitoring this closely.
When should constituents renew contacts with Congress? What do they need to say?
With the one year anniversary of 1504 and the Dodd-Frank Act (July 15 was the anniversary of Congress passing it, and July 21 was the anniversary of Obama signing it into law), now is the perfect opportunity to reach out to Congress, thank them for their leadership, and remind them of the critical importance of this legislation. We will continue to look to Congressional leadership to protect the law from attempts to weaken it, to ensure effective implementation by the SEC, and to push other countries to adopt similar legislation.
Are other countries following the U.S. lead?
Yes! We’re seeing great progress here. The G8 endorsed mandatory payment reporting at their recent summit in Deauville, France. We have strong public statements of support from the President of the European Commission. The EU plans to come out with a legislative proposal in the fall for laws similar to Section 1504, and EU member states have come out publicly in support. We’ve heard statements of support from Sarkozy, the Chancellor of the Exchequer Osborne in the UK, and many other officials around the world.
Even in smaller markets, this is catching on. In South Korea, legislators introduced a bill with similar requirements to cover the operations of South Korean companies abroad. We’ve also heard calls from parliamentarians in Zimbabwe and Uganda in support.
We’ve got great momentum and the future looks bright.
