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New year, new rules

One way in which the EITI has impact is to create momentum for legislative and regulatory reform, underpinning a more systematic approach to transparency and good governance of the extractive sector. The New Year has brought with it three important and diverse examples of countries that have taken such steps.

Recent developments in the US, Myanmar and Iraq have paved the way for greater transparency of company ownership and contracts in the extractive sector – two strategic priorities for the EITI.

US: Raising the curtain on ownership

The new year kicked off with a legislative win for anti-corruption in the United States. As part of the National Defence Authorization Act (NDAA) passed on 1 January 2021, the US adopted new provisions related to reporting of beneficial owners of companies registered in the US. US companies will need to provide information to the Treasury Department on the individuals who own or control the company, including their names, address, date of birth and ID number.

The new bill follows years of campaigning by civil society organisations as well as bipartisan efforts to develop the legislative proposal. While it falls short of providing public access to beneficial ownership information, the NDAA is a significant step forward for anti-corruption and anti-money laundering efforts. Until now, companies could register in several states without providing basic ownership information to the authorities. The act makes it more challenging for companies operating in resource-rich countries to hide their real owners by incorporating subsidiaries or shell companies in the US for illicit purposes.

Even though the US is not a member of the EITI, this development is important because of the large numbers of US-domiciled companies which operate in resource-rich countries, many of which implement the EITI Standard. Disclosures such as these can also create momentum for the publication of data in other countries.

Myanmar: Enabling closer scrutiny of extractive contracts

Myanmar issued a government regulation on 15 December requiring the disclosure of oil, gas and mining contracts in the country that are entered into or amended by 1 January 2021. The requirement applies to all contracts carried out by the Union, states, regions, government departments, state-owned enterprises and private companies. The Ministry of Natural Resources and Ministry of Energy are tasked with implementing the regulation.

Addressing legal barriers to contract transparency has been on Myanmar EITI’s agenda since it began implementing the EITI in 2014. Existing contracts contain confidentiality clauses that prevent disclosure. Without access to these contracts, analysis by citizens of contractual terms and monitoring of compliance with contractual obligation has been impossible.  This has been a challenge to ensuring full transparency in the country’s extractive sector, especially amidst questions around its actual contribution to the economy and the terms of environmental and social commitments of companies in particular regions.

The reform introduced through the regulation represents a significant step and complements Myanmar’s recent reforms on beneficial ownership disclosure. By laying the legal framework for publishing contracts and making disclosure of the owners of all extractive companies in the country mandatory, the authorities have enabled greater insight into the terms on which resource extraction takes place and the individuals who stand to benefit.

Iraq: Moving closer to contract publication

Earlier this month, Iraq’s Ministry of Oil directed all state-owned enterprises in the oil and gas sector to publish all oil and gas contracts concluded to date on the ministry’s website. This builds on a previous policy that was formalised in 2019, which stated that all contracts governing the exploration and extraction of oil and gas should be publicly disclosed, and that model contract templates be published on the Ministry of Oil website. This policy was confirmed by Iraq’s Minister of Oil, Ihsan Abdul Jabbar Ismail, in December 2020. Crucially, the policy and its implementing directive cover all supplements and annexes to the contracts. This is important as most oil and gas service contracts in Iraq have been amended several times since they were originally concluded. In the absence of an oil and gas law in Iraq, the direction to publish all oil and gas contracts marks a significant step towards clarifying the legal and fiscal environment for oil and gas exploration and production in Iraq. 

In many countries, an important contribution of the EITI has been to inspire reforms, building on innovations in the EITI Standard and recommendations emerging from EITI reporting. Building momentum on contract transparency and beneficial disclosure is high on the agenda of the EITI in 2021. Watch this space for more examples of how commitment to transparency in these areas is translated into policy and regulatory changes on the ground.