The Board agreed that the United Kingdom has made meaningful progress in implementing the 2016 EITI Standard.

Outcome of the Validation of the United Kingdom.

Decision reference: 2019-62 / BC-281
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

14 November 2019

Board decision

Following the conclusion of the United Kingdom’s (UK) Validation, the EITI Board decided that the UK has made meaningful progress overall in implementing the 2016 EITI Standard.

The Board congratulates the Government of the UK, the Multi-Stakeholder Group (MSG) and local stakeholders on establishing a robust platform to increase public understanding of the social and economic impacts of the UK's extractive industries and enrich public debate on the governance and stewardship of the UK's oil, gas and mineral resources. Having helped establish the EITI globally, the UK’s EITI implementation has effectively set an example for other resource rich countries. While information disclosed through the EITI is of interest to relatively small and specialised audiences, the UK’s EITI reporting is recognised by the Board as underscoring the government’s commitment to transparency and accountability. The MSG’s efforts to streamline EITI implementation through systematic disclosure are welcomed and present a further opportunity for the UK to set an example to other EITI implementing countries. Validation has identified gaps relating to disclosures that are not onerous, and it should be possible to address these quickly.

While acknowledging civil society’s strong and proactive role in the EITI’s work globally since its inception and in establishing the EITI in the UK, the Board notes that civil society’s engagement had been insufficient in the period reviewed by Validation. The United Kingdom is encouraged to ensure that challenges in constituency coordination are avoided in future. The Board also encourages the MSG to review the impact of the first five years of EITI implementation and explore the opportunities to further leverage the EITI platform to enrich public debate on the governance and stewardship of the UK's oil, gas and mineral resources.

The Board has determined that the UK will have 12 months, i.e. until 13 November 2020 before a second Validation to carry out corrective actions regarding the requirements relating to civil society engagement (#1.3), MSG governance (#1.4), license allocation (#2.2), license register (#2.3), contract disclosure (#2.4), mandatory social expenditures (#6.1), public debate (#7.1) and outcomes and impact of implementation (#7.4).

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by the UK. Progress in addressing these corrective actions will be assessing in a second Validation commencing on 13 November 2020.

In accordance with Requirement 1.3.a, the civil society constituency should demonstrate that they are fully, actively and effectively engaged in the EITI process. Specifically, civil society should ensure that they are able to fully contribute and provide input to the EITI process by ensuring that the constituency is adequately represented on the MSG, with agreed mechanisms for wider constituency engagement.
In accordance with Requirement 1.4.a.ii, the MSG should ensure that the civil society constituency is adequately represented, and that the civil society constituency appoints its own representatives, bearing in mind the desirability of pluralistic and diverse representation.
In accordance with Requirement 2.2, the UK should disclose information related to the award or transfer of licenses pertaining to the companies covered in EITI reporting. This information should include the number of mining, oil and gas licenses awarded and transferred in the year covered by the EITI reporting cycle, a description of the award procedures, including specific technical and financial criteria assessed, and highlight any non-trivial deviations in practice. The UK is encouraged to consider innovative solutions for embedding a public accountability mechanism to ensure transparency on any non-trivial deviations from statutory procedures in its systematic disclosures of information per Requirement 2.2.
In accordance with Requirement 2.3, the UK should maintain a publicly available register or cadastre system(s), including comprehensive information on all active licenses held by all mining and quarrying companies included in the scope of EITI reporting. In the interim the UK should ensure that future EITI reporting provides the information set out under Requirement 2.3.b for all mining and quarrying companies. The UK is encouraged to consider the extent to which integration of EITI reporting with the work of organisations like the British Geological Survey could ensure systematic disclosure of information mandated under Requirement 2.3.b.
In accordance with Requirement 2.4, the UK should ensure that the government’s policy on disclosure of contracts and licences that govern the exploration and exploitation of oil, gas and minerals is publicly codified.
In accordance with Requirement 6.1, the UK should assess the materiality of mandatory social expenditures ahead of future EITI reporting and ensure that reporting of mandatory social expenditures be disaggregated by type of payment, nature of in-kind contributions and beneficiary(ies), clarifying the name and function of any non-government (third-party) beneficiaries where applicable.
In accordance with Requirement 7.1, the UK should ensure that outreach events, whether organised by government, civil society or companies, are undertaken to spread awareness of and facilitate dialogue about the EITI Report across the country.
In accordance with Requirement 7.4, the MSG, with the full, active and effective engagement of civil society, should review the impact of the first five years of EITI implementation and explore the opportunities to further leverage the EITI platform to enrich public debate on the governance and stewardship of the UK's oil, gas and mineral resources.

The government and the MSG are encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat [English]. The findings were reviewed by an Independent Validator, who submitted a draft Validation report [English | French] to the MSG for comment. The MSG’s comments on the reports [English] were taken into consideration by the independent Validator in finalising the Validation report [English | French] and the independent Validator responded to the MSG’s comments [English].

The Government of the UK committed to implement the EITI in May 2013, and established a multi-stakeholder group (MSG) in September 2013. The country was accepted as an EITI Candidate in October 2014. On 25 October 2016, the Board agreed that the country’s Validation under the 2016 EITI Standard would commence on 1 July 2018.

The Validation Committee reviewed the case on 17 October 2019. Based on the findings above, the Validation Committee agreed to recommend the assessment card outlined below. The Committee also agreed to recommend an overall assessment of “meaningful progress” in implementing the 2016 EITI Standard. Requirement 8.3.c of the EITI Standard states that:

ii. Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard.

…

iv. Meaningful progress. The country will be considered an EITI candidate and requested to undertake corrective actions until the second Validation.

On 30 September, the MSG wrote to the Validation Committee [English | French] contesting the assessment of “inadequate progress” on Requirement 1.3 in the final Validation report. On 17 October, the Validation Committee agreed to consider the MSG’s representation and upgraded the assessment of Requirement 1.3 to “meaningful progress” and the assessment of Requirement 3.2 to "satisfactory progress".

The Validation Committee agreed to recommend a period of 12 months to undertake the corrective actions. This recommendation takes into account that the challenges identified are relatively significant and seeks to align the Validation deadline with the timetable for the UK’s upcoming EITI Reports.

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
The government is fully, actively and effectively engaged in EITI. Government leadership, oversight and funding of EITI implementation and the MSG has been consistently strong. Government agencies participate actively in the MSG’s work and have actively supported EITI implementation, overcoming barriers to comprehensive reporting.
1.2Company engagement
The Secretariat does not find any indications of obstacles to company participation, and industry participation in the reporting process has been consistently high.
1.3Civil society engagement
There is no evidence of any legal, regulatory or practical barriers to civil society’s ability to engage in EITI. There are no barriers to freely operating, communicating and cooperating with the broader constituency. However, the dispute between civil society organisations has led to a situation whereby the civil society constituency is not adequately represented or engaged. The current CSO MSG members have on an individual basis sought to contribute the work of the MSG. However, most of them are not deeply engaged in the EITI process, and have had limited interaction with other civil society organisations outside the MSG.
1.4MSG governance
The Government is committed to working with civil society and industry, and has established a MSG, ensuring that the invitation to participate was open and transparent. The role, responsibilities and rights of the MSG were clear, with appropriate internal governance rules and procedures. However, the MSG has encountered a debilitating crisis regarding how civil society representatives to the MSG should be selected. The result is that the civil society constituency is not adequately engaged or representative. All stakeholders consulted agree that it is for the civil society constituency to resolve the matter of their representation on the MSG.
1.5Work plan
The 2018 work plan has been agreed by the MSG and made publicly available. It includes objectives for implementation linked to the EITI principles and reflect national priorities. It includes measurable and time-bound activities. It also addresses the scope of EITI reporting, legal or regulatory obstacles, and plans for implementing the recommendations from EITI reporting. The work plan is costed and includes a detailed timetable for implementation.
Licenses and contracts
2.2License allocations
The 2016 EITI Report does not systematically track license awards and transfers involving companies covered in the scope of EITI reporting in the year under review. While the report clarifies the lack of oil and gas license awards in 2016, it only implies the existence of transfers without clearly listing them. The only material sub-sectors in mining and quarrying appear to be Minerals Licenses in Northern Ireland and terrestrial and marine mining agreements with The Crown Estate. While the EITI Report describes the general process for awarding licenses, it does not systematically indicate the technical and financial criteria assessed, nor clarify the statutory process for transferring licenses. The report only refers to an assessment of non-trivial deviations for license awards and transfers in oil and gas, not mining and quarrying.
2.3License register
The 2016 EITI Report provides guidance on accessing the register of licenses in oil and gas, coal, marine aggregates and marine potash. However, there is no guidance on accessing the register of licenses for Mineral Prospecting Licenses in Northern Ireland. In oil and gas, all information is publicly accessible, aside from dates of application. In coal, all information is accessible upon request from the Coal Authority. The TCE website provides much information on marine aggregates licenses, aside from dates of application, award and expiry, but does not provide information on marine potash licenses. The lack of publicly-accessible information on silver and gold Option Agreements is less material. The DfE website provides access to much of the required information aside from dates of application, award and expiry.
2.4Policy on contract disclosure
The 2016 EITI Report clarifies that there are no contracts in the UK extractive industries, aside from agreements concluded for marine aggregates and marine potash with TCE. The report clarifies the practice of publishing licenses, and the accessibility of published licenses, for most mineral commodities. However, it is unclear from the report whether the government has a policy to publish the full text of all licenses in the mining and quarrying sector.
2.1Legal framework
The 2016 EITI Report provides an overview of the legal framework and fiscal regimes governing the oil and gas and mining and quarrying sectors, including an overview of the relevant laws and regulations, key government entities with jurisdiction, the degree of fiscal devolution and recent or ongoing reforms. The UK has gone beyond the minimum requirement in systematically disclosing all key information on relevant government websites.
2.5Beneficial ownership
The UK Government has publicly stated its policy on beneficial ownership disclosure and has taken steps to establish a public beneficial ownership register. The UK has gone beyond the minimum requirement in systematically disclosing all key information in accordance with Requirement 2.5.
2.6State participation	Not applicable
All of the UK’s EITI Reports confirm that there is no state participation in the extractive industries and that Requirement 2.6 is not applicable in the UK context. The OGA does not hold equity in the extractive industries and is not entitled to participate in or retain revenues from the extractive industries it regulates.
Monitoring production
3.1Exploration data
The 2016 EITI Report provides an overview of the oil and gas, shale gas, coal, mining and quarrying sectors, including significant exploration activities.
3.2Production data
The 2016 EITI Report provides production volumes for all commodities produced in 2016 aside from silica sands, industrial and agricultural carbonates, and tungsten, and production volumes only for oil, gas and coal. It is possible to source annual average prices for certain minerals produced in the UK from government sources. The outstanding production data was published in the 2018 UK Minerals Yearbook after the start of Validation.
3.3Export data
The 2016 EITI Report provides export volumes and values for oil, gas and coal, but not consistently for mineral commodities such as lignite, iron ores, kaolin, non-ferrous metal ores, unworked stone, gravel, sands, as well as other mining and quarrying products. The supplement to the 2016 EITI Report highlights constraints in the public availability of export data for non-energy minerals. The lack of export data on individual construction and industrial materials is not a material gap, given that the revenues they generate for the UK are not material.
Revenue collection
4.3Barter agreements	Not applicable
While the 2016 EITI Report only states that there were no in-kind revenues in the UK extractives sector, there was consensus among stakeholders consulted that Requirement 4.3 was not applicable in the UK in 2016.
4.6Direct subnational payments	Not applicable
The 2016 EITI Report confirms the existence of direct subnational payments to Local Planning Authorities (LPAs) and it can be inferred that these were excluded from the scope of reconciliation given that they were not considered material. While the report only explicitly confirms the lack of material direct subnational payments related to oil and gas to Northern Ireland’s DfE, not related to mining, there was consensus among stakeholders consulted that the DfE did not collect material mining and quarrying revenues in 2016.
4.7Disaggregation
The 2016 EITI Report and UK EITI data available online presents reconciled financial data disaggregated by company, revenue stream and government entity, for all revenues in scope of reconciliation aside from payments to The Crown Estate and Ring-Fenced Corporation Tax / Supplementary Charge (RFCT/SC). However, TCE collected only one revenue stream (royalty) from mining and quarrying. It would not have been possible to provide final figures for RFCT/SC disaggregated until up to 24 months after the end of the UK fiscal year. Payments to the Coal Authority were not in scope of reconciliation. The UK has implemented project-level reporting for taxes and fees levied on a per-project basis.
4.9Data quality
The reconciliation of payments and revenues has been undertaken by an IA, appointed by the MSG, and applying international professional standards. The IA and the MSG agreed ToR for the production of the 2016 EITI Report consistent with the standard ToR, and applied this ToR and procedures in practice. The final report provides a clear statement from the IA on the comprehensiveness and reliability of the (financial) data, including an informative summary of the work performed by the IA.
4.1Comprehensiveness
The 2016 EITI Report includes a definition of the materiality threshold for selecting companies. All payments and revenues whose omission or misstatement could significantly affect the comprehensiveness of the EITI Report were reconciled. The MSG approved the materiality threshold for payments and for companies. All but three material companies and all government entities reported comprehensively all material payments and revenues in the 2016 EITI Report and full unilateral government disclosures was provided. The IA included a clear assessment that the reconciled financial data was comprehensive.
4.2In-kind revenues	Not applicable
While the 2016 EITI Report only states that there were no in-kind revenues in the UK extractives sector, there was consensus among stakeholders consulted that Requirement 4.2 was not applicable in the UK in 2016.
4.4Transportation revenues	Not applicable
While the 2016 EITI Report only states that there were government transport revenues in the UK extractives sector, there was consensus among stakeholders consulted that Requirement 4.4 was not applicable in the UK in 2016.
4.5SOE transactions	Not applicable
The 2016 EITI Report confirms the lack of state participation in the UK extractive industries in 2016.
4.8Data timeliness
The UK has consistently published EITI Reports on an annual basis, with data no older than the second to last complete accounting period.
Revenue allocation
5.1Distribution of revenues
The 2016 EITI Report confirms that all extractives revenues are recorded in the national budget, aside from revenues collected by the Oil and Gas Authority. Guidance is provided on accessing reports on the OGA’s management of off-budget revenues.
5.2Subnational transfers
The 2016 EITI Report categorises transfers of oil and gas license fee revenues to the Northern Ireland Government as a form of earmarked extractives revenue. These transfers to Northern Ireland represent subnational transfers. There is information on the 2016 EITI Report and public websites on the revenue-sharing formula, the value of transfers calculated according to the revenue-sharing formula and the value of executed transfers, allowing the public to assess the existence of discrepancies.
5.3Revenue management and expenditures
It is encouraging that the MSG has made some attempt to including information on the budget-making process as well as production and revenue projections in the 2016 EITI Report.
Socio-economic contribution
6.1Mandatory social expenditures
The 2016 EITI Report appears to confirm the MSG’s view that mining companies’ provisions of off-site in-kind infrastructure, as part of local planning agreements, constitute a form of mandatory social expenditures. The 2016 EITI Report provides the aggregate value of mandatory social expenditures reported by one company, but it does not provide the nature of in-kind mandatory social expenditures nor confirm the identity of the beneficiary(ies).
6.2Quasi-fiscal expenditures	Not applicable
While the 2016 EITI Report does not explicitly comment on the lack of quasi-fiscal expenditures linked to extractives revenues, it clarifies the lack of state participation in the extractive industries. Although the report refers to the OGA’s acquisition and interpretation of seismic data for the benefit of industry, these expenditures were funded by the government and recorded in the national budget.
6.3Economic contribution
The 2016 EITI Report provides estimates of the extractive industries’ contribution, in absolute and relative terms, to GDP, government revenues, exports and employment, identifying the location of production.
Outcomes and impact
7.2Data accessibility
In accordance with the MSG’s open data policy, the EITI data is published on data.gov.uk in a range of file formats. The UK EITI has also completed summary data files for the four EITI Reports that have been published to date.
7.4Outcomes and impact of implementation
The annual progress reports published by the MSG are generally adequate. However, these lack a thorough examination of the EITI effectiveness and impact.
7.1Public debate
UK EITI has ensured that the EITI Report is comprehensible and accessible to the general public. The reports have brought together information on the regulation and governance of the sector that is otherwise scattered. There have been limited efforts to promote this work beyond Report launch events. Contribution to public debate appears to be weak, at least partly because of the CSO representation issue.
7.3Follow up on recommendations
The MSG has ensured that there has been adequate follow up of the recommendations form EITI Reporting, including identifying, investigating and addressing the causes of discrepancies.