What might be the implications of Brexit for the UK’s policy on international extractives governance and its anti-corruption agenda?

As the country emerges from the political storm caused by the momentous Brexit vote, Eddie Rich reflects on what lessons the referendum teach us for the future of Br-EITI. 

The history of the EITI and the involvement of the UK government has been intimately intertwined. The EITI was announced by Prime Minister Tony Blair at the World Summit on Sustainable Development in Johannesburg in 2002 and DFID hosted the secretariat until 2007. The first two Global Conferences were held in London.  Since then, the UK Government has been an active advocate for the EITI providing technical, political and financial support to the process internationally and in countries with whom it has close relations. 

In 2013 with commodity prices at a high, the UK hosted the G8 Lough Erne Summit focused on tax, transparency and trade. It committed to implement the EITI and to establish a beneficial ownership register which is now up and running.

Three months ago in the midst of the Panama paper revelations, the UK Government was publishing its first EITI report, preparing its anti-corruption Summit which heralded a raft of commitments from 48 countries and getting ready to publish its first batch of beneficial ownership disclosures.

Even if there is still much to do, few governments can claim to have been as active on the extractives transparency agenda as the UK.

It would be too much of a stretch to say that extractives governance featured heavily in the EU referendum discussion. However, both sides used anti-corruption arguments to make their case.  Where has the vote left UK policy? 

Before the dust has settled, two things are already clear:

  1. The movement has lost a seemingly sincere and passionate champion in Prime Minister Cameron, who was one of the most prominent supporters of the EITI at the international level and saw the EITI as a key part of the anti-corruption agenda in resource rich countries. It is unlikely that Cameron-ism has given way to complete May-hem. Theresa May has been in charge of all the major anti-corruption enforcement agencies for the past six years, even if she has not been directly exposed to the EITI or led the work on the UK public beneficial ownership register.  We need to reach out to the new Prime Minister and seek to maintain momentum domestically and internationally on these issues
  2. With the distractions of a domestic political reboot, potential economic fallout and social division, and trade negotiations, the temptations to let standards slip will be high. The funds for enforcement of standards such as the EITI domestically and internationally, might diminish. The UK’s global standing might fall in the eyes of many.  Many will argue for the UK to lower its disclosure requirements to enhance its competitiveness. In addition, our expectations of others might fall - quick deals without due diligence, paperwork or full disclosure may be higher up the in-tray.  At worst, the UK could be tempted to be a full blown tax haven, and could even suffer becoming a finance-cursed nation, with one dominant sector distorting political and economic decisions, as we have seen with the resource curse in other countries.  The UK’s own standards and determination to be a global leader must not decline

The building blocks

A slew of polls show that Brexiteers voted out for two main reasons – immigration and wanting the UK to have more control of its governance. On the former point, good governance in unstable countries is a key element of preventing mass migration and displacement of people. The EITI is part of a wider set of actions in countries like Afghanistan, Iraq and Niger, to ensure stability, jobs and prospects.

On the latter point on self-governance, many were angry at what they perceived to be major wastage, opacity and corruption in the European institutions. For many, the out vote was a vote for higher, not lower, standards.  The UK should now look at our existing building blocks of being a global leader in extractives governance outside an EU framework:

  • The UK legislative framework - On 30 June, the UK published the first batch of beneficial owners on its public register. The UK requires project-by-project reporting by UK registered extractives companies ahead of the EU-wide requirement. The UK is implementing the EITI. The UK Bribery Act goes further than European legislation.  The UK did not rely on the EU to establish such laws and systems.  Some might argue that freed from the shackles of European legislation, the UK can move faster on such reforms for its own governance and the behaviour of its companies. 
  • International cooperation will not be dismantled – New International Development Secretary, Priti Patel, says “Successfully leaving the European Union will require a more outward looking Britain than ever before, deepening our international partnerships to secure our place in the world by supporting economic prosperity, stability and security overseas”. The UK will be establishing new agreements – trade, aid, consular and military – all around the world. Issues of the highest standards of governance – including the UK Government’s commitments at the May Summit – will surely be on the table.
  • Public engagement – a large turnout reflects a more politically engaged and enraged public. Many feel disenfranchised and their expectations are high. With less attention on how Eurocrats spend public funds, more scrutiny will likely be directed to how the UK conducts its business. 

EITI next steps

So the referendum does tell something about the new UK landscape for international extractives governance policy – some which is heartening, much which is troubling. The EITI sees itself a tool for informed decision making. Its role should include the following practical actions:

  • Build the facts – the referendum showed the need for reliable information. With one side arguing with one set of ‘facts’ and the other with another, the public was left confused and mistrustful. Whether or not £350m a week is sent to Brussels, almost USD 2 trillion of payments to governments have been disclosed in almost 300 EITI reports around the world.  It is clear where the focus should be.  The UK is home to some of the most important academic, media and think tanks forums – we need to help them see and understand EITI data and processes.
  • If facts don’t get them, don’t be afraid to use values – A prominent Brexit campaigner darkly said that “people in this country have had enough of experts”. We shouldn’t be afraid to make value based arguments. The 12 EITI Principles remain a succinct statement of why all stakeholders have supported the EITI.  
  • Broker agreements – we can’t sit in a data bubble. We will continue to work with partners in government, companies, and civil society – hopefully alongside the UK Government - to help countries build up a widely accepted analysis of the situation and agree reforms for the sector. The EITI is a process of sharing the analysis and a journey to affect policy change, improved practices, and changed mindsets.
  • Programmes, pilots and innovations – The EITI will work with the UK and its partners to develop for best practice in beneficial ownership, disclosure on commodity trading, monitoring contract transparency policy, and so on. 
  • Coordinating energy – finally we all have a responsibility to keep the fire of public outrage burning. The UK political scene is chaotic at the moment. We need to be entrepreneurial, strategic and opportunistic to keep good governance in the extractives high on the agenda for action.