Contracts, licenses and associated agreements establish many of the commitments between government and oil, gas or mining companies. In some cases, the terms of these contracts and licenses may be standard and complemented by taxation regimes. In other cases, these contracts, licenses and agreements include detailed terms for how the government and companies agree to share risk and reward over the life of long-term oil, gas and mining projects. Wherever the information is held, these documents address how costs and profits are shared between the parties and how taxes, royalties and other extraction related fees are to be calculated and paid.
The EITI Standard states that
“implementing countries are encouraged to publicly disclose any contracts and licenses that provide the terms attached to the exploitation of oil, gas and minerals” (requirement 2.4)
The EITI encourages such disclosure in order for citizens to better verify that what their country receives from its oil, gas and minerals is what ought to be received, and that other obligations, such as social or environmental commitments, are honored.
Some countries have legal requirements for contracts to be published, others have confidentiality agreements embedded in contracts preventing disclosure. In some countries, the government’s policy on contract disclosure is unclear, or there is inconsistency between policy and practice. To bring clarity, the EITI Standard therefore says that a country’s EITI Report must “documents the government’s policy on disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals. This should include relevant legal provisions, actual disclosure practices and any reforms that are planned or underway”.
The EITI International Secretariat conducted a study to find out which of the 51 implementing countries were making progress on contract transparency and the reasons why countries considered disclosing contracts. The research was primarily based on a study of country work plans.
What we discovered
The following 19 countries mentioned contract transparency in their work plans: Azerbaijan, Burkina Faso, Chad, Cote d'Ivoire, Germany, Guinea, Honduras, Malawi, Mali, Mongolia, Mozambique, Myanmar, Niger, Philippines, Republic of Congo, Senegal, Tanzania, Timor-Leste and Togo.
Delving further into country work plans revealed various levels of detail and emphasis on contract disclosure. Honduras and Niger mentioned no specific actions for ensuring contract transparency, but Tanzania provided very clear and detailed actions. These actions include hiring a consultant to address obstacles and to develop database infrastructure on disclosed contracts. The local EITI also intends to engage government, companies and civil society through 6 consultation workshops with the aim of reaching a consensus on establishing an open contracts registry. The motivation for disclosing contract transparency ranged from creating public awareness on the issue of contract transparency in Myanmar and the Philippines to improving government monitoring of the industry in countries like Cote d’Ivoire and Guinea.
Reasons for publishing contracts
Four common threads emerged from the analysis as to why countries consider publishing contracts: public awareness, better public understanding, EITI reporting and monitoring. The table below provides more details on these threads. Other country specific reasons also emerged. Malawi, for example, discloses contracts to attract quality investment.
What is being done
Various activities have been identified surrounding the issue of contract transparency and these activities can be broken down into three categories: broader stakeholder engagement through capacity building workshops and further MSG meetings, legal studies to assess feasibility of contact transparency, and intention to publish contracts. These topics are not mutually exclusive as some countries have identified several tools to achieve their various objectives.
Twelve countries have stated their intention to publish contracts namely Azerbaijan, Burkina Faso, Chad, Guinea, Malawi, Mali, Mongolia, Mozambique, Philippines, Tanzania, Timor-Leste and Togo. Five countries, Cote d’Ivoire, Germany, Republic of the Congo, Senegal and Tanzania, plan to discuss the matter further within their multi-stakeholder groups (MSG). It is worth noting that three of these, namely Republic of the Congo, Senegal and Tanzania, will also engage broader stakeholders. Three countries have referred to further legal work namely Azerbaijan, Cote d’Ivoire and Tanzania.
The information outlined above can be useful in understanding the MSG’s commitment to contract transparency and opportunities for furthering this work. Partners such as the Natural Resource Governance Institute (NRGI) has created www.resourcecontracts.org, which could be one source of inspiration for countries wishing to establish contract databases. The EITI guidance note on contract transparency could be useful in considering and evaluating options for contract disclosure.
As EITI Reports continue to be published, more up-to-date information on contract transparency disclosure will be made available to the public. For each report, implementing countries also submit summary data. This summary data includes whether or not the EITI Reports cover contract transparency and whether they actually publish contracts, including links. This is compiled under the legislation thematic page.
The EITI’s Validation work will also assess implementation of requirement 2.4 on contract transparency. This will provide opportunities to discuss whether a country is following its own policy on contract transparency, i.e. whether contracts are published in practice in Afghanistan, in the national gazette Diario de Centro América in Guatemala, and online repositories in Liberia and Sierra Leone, and whether there are national reforms underway with regards to contract disclosure in the future.
- Check out our thematic page on legal and institutional framework
- EITI Brief on contract transparency, covering EITI Reports produced under the Standard as of 31 December 2014