Improved Standard for improved sector governance

February 2016 marked an important milestone for transparency within the extractives sector – the Lima EITI Global Conference brought almost 1200 people from around 100 countries to discuss the latest achievements in opening up the oil, gas and mining sectors. Participants shared experiences throughout the Conference, side meetings and events, providing the EITI community with an important setting for discussing and sharing experiences from their countries.

Based on these country experiences the EITI Board last year decided to undertake some refinements of the EITI Standard.  The 2016 EITI Standard was adopted at its meeting in Lima on 23^rd February 2016. While it was not desirable to make major changes only three years after the Standard was significantly revised, the EITI deemed it necessary to make some updates reflecting the lessons learnt from this first period of implementation. The 2016 EITI Standard breaks new ground in requiring beneficial ownership reporting.  It also aims to embed transparent extractives reporting in government and company reporting systems.  This should make implementation becomes less burdensome while at the same time ensuring that the EITI delivers relevant and useful information. We highlight here the most significant changes to the revised EITI Standard:

1. Inclusion of provisions to enable mainstreamed transparency. In the long term, extractive industry transparency should not be confined to the EITI, but become an integral part of how governments manage their sector. Rather than simply relying on the EITI reporting mechanism to bring about transparency, governments implementing the EITI could to a greater extent make the information required by the EITI Standard available through government and corporate reporting systems such as databases, websites, annual reports, portals etc. In some cases, there might already be reporting mechanisms in place that the EITI can build on. In other cases such systems may not exist and need to be built, or are incomplete and require improvement. To this end, the EITI Standard has been refined to outline two possibilities for EITI disclosures: (i) “conventional EITI reporting” with data collection and reconciliation by an Independent Administrator; and (ii) “mainstreamed EITI reporting” where public disclosures of the information required by the EITI Standard are made through existing government systems. 
2. New provisions on beneficial ownership. In 2013, the EITI Board agreed that the EITI will in the future require disclosure of beneficial ownership. The 2016 EITI Standard contains new provisions on beneficial ownership (provision 2.5). By 1 January 2017, all countries will need to agree a roadmap for complying with the requirement on beneficial ownership. By 1 January 2020, all countries have to ensure that privately held companies disclose their beneficial owners as part of their EITI reports. This information must include the identity of the beneficial owner, the level of ownership and details about how control and ownership is exerted.  It is also recommended that this information be maintained in a public beneficial ownership register.
3. Improved Validation procedures.  While the Validation system has served the EITI relatively well in the past, there were concerns that the process was no longer fit for purpose as the EITI continues to expand both in membership and in scope. In response to an extensive consultation with implementing countries as well as the five pilot Validations undertaken in Ghana, Mongolia, Sao Tome e Principe, Solomon Islands and Timor-Lese, the EITI Board has elaborated new Validation procedures. The new procedures include changes to how the requirements are assessed, introducing more disaggregated assessments. The consequences of non-compliance and  timeframes for achieving compliance have also been modified, seeking to introduce a system that to a greater extent encourages and rewards continuous improvement. Finally, the EITI Board has decided that in the future, the International Secretariat will carry out the data gathering for Validations. A validator will quality assure the findings and submit a Validation report to the EITI Board.
4. Recommendations from EITI reports. The nature of the recommendations in EITI Reports and the extent to which the recommendations are followed up by the MSG and the government significantly affect the impact of EITI implementation. However, experience with implementation to date shows that relatively few recommendations from EITI reporting have been implemented. The lack of implementation of recommendations has contributed to lost opportunities for reform. To increase the focus on follow-up of the recommendations from EITI Reports, the 2016 EITI Standard includes provisions requiring MSGs to document the level of progress in addressing recommendations and the rationale for disregarding any recommendations from EITI reports. Plans for implementing recommendations should also be outlined in the MSG’s workplan.
5. Open data policy. The promotion of open data presents opportunities to substantially increase the efficiency and effectiveness of EITI implementation. The challenge is that a considerable degree of flexibility is needed to ensure that implementing countries can develop solutions that suit their circumstances. The 2013 EITI Standard included several provisions that addressed data accessibility. In order to promote open data, these requirements have been strengthened to require the MSG to agree a clear policy on the access, release and re-use of EITI data and encourage implementing countries to publish EITI data under an open license, and to make users aware that information can be reused without prior consent. This puts the issue of open data on the MSG agenda, without requiring a specific approach. The Board has also agreed an open data policy, and to establish a working group to develop more detailed open data standards.
6. Less ambiguities. A number of smaller refinements have been made to the following requirements: license allocations, license registers, state-participation, production and export data, data timeliness, data quality, in-kind payments and quasi-fiscal expenditures.  These revisions were made to address inconsistencies in the 2013 EITI Standard and do not constitute any new requirements.
7. MSG governance. The 2013 EITI Standard contained a general provision on internal governance rules and procedures for MSGs. However, there were no specific provisions on per diems. The EITI Code of Conduct, applying to all EITI Office Holders addresses the issue of per diems explicitly: “Specifically, EITI Office Holders shall follow these guidelines: ...Any per diems set, paid or obtained should be based on reasonable actual costs and good international practice."  The EITI has identified some challenges related to high per diem practices in MSGs. While the 2016 EITI Standard does not stipulate any policy on per diems, a new requirement was introduced that makes it mandatory for MSGs to publish their per diem policy.
8. The requirements have been restructured in accordance with the extractive industry value chain.  In the 2013 EITI Standard, the seven EITI Requirements follow the structure of the EITI process, which is not necessarily intuitive to stakeholders working in the extractive sector. Mapping the EITI disclosure requirements across the extractive industry value chain is considered a more logical way of illustrating how the EITI is relevant to the various issues in the extractive sector. It also ensures consistency with the framework for assessing the requirements during Validation, and increases opportunities for strengthen linkages with other initiatives and reform processes.

You can download the EITI Standard at https://eiti.org/document/standard          

Feel free to contact the EITI team should you have any questions regarding the revised Standard.