The Board agreed clarifications to Requirement 2.4.

11.09.2020
Decision 2020-69/BC-295
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Board decision in full

The EITI International Board agreed recommendations for how to address ambiguities in the interpretation of Requirement 2.4, specifically on the scope of annexes that should be disclosed, disclosure of amended contracts and potential interim measures to address legal barriers around laws on confidentiality. It also agreed considerations for how to assess Requirement 2.4 for Validation purposes.

Considering the challenges highlighted in this paper, implementation support should focus on providing technical assistance to MSGs in developing an action plan for contract disclosure and integrating this in their work plans. The Secretariat published in January a checklist on what could be included in MSG work plans. Technical assistance could include legal support to assess and address barriers related to confidentiality provisions in laws and contracts, support for the establishment of mechanisms and platforms for disclosures, and approaches to assessing comprehensiveness of disclosures. Clarification of some ambiguities in interpreting Requirement 2.4 as discussed below is also a priority, as it would guide countries in defining their approach towards contract transparency. 

Clarifications to Requirement 2.4

I. Scope of the requirement 

Annexes, addenda or riders

It is agreed that the interpretation of “contract” and “license” as per Requirement 2.4.d.ii and 2.4.e.ii is confirmed, and that guidance is provided to ensure that the documents disclosed enable a full understanding of the details relevant to the rights granted to companies. Where there are clear rules on what should be considered as an annex, addendum or rider as specified either by law or by a specific contract, the country should ensure that such annexes, addenda or riders are disclosed.

Exploration contracts

It is agreed that the MSG be given the discretion to select which exploration contracts are considered material and should be disclosed.

Countries under license regimes

It is agreed that Requirement 2.4 be interpreted in the same manner for all countries regardless of whether a country is operating under a license or a contracts regime. However, where there are claims that all contracts under these regimes have standard stipulations as mandated by law and that there are no deviations from such provisions, the onus is on the country to substantiate such claims. It is further agreed that disclosure of relevant annexes which is already being done in some countries under license regimes such as Germany, Norway,

II. Disclosure of amendments

It is agreed that to fulfil the intent of Requirement 2.4.a to provide disclosure of the terms attached to the exploitation of oil, gas and minerals, the Board clarifies that full disclosure of the original contract that is being amended is required, including previous amendments. If there are concerns about disclosing terms from previous versions of the contract that are no longer active, the parties could opt to restate the terms in an updated version of the contract. 

If disclosure of full contracts would entail disclosure of confidential provisions entered into before 1 January 2021, an interim measure that MSGs could adopt is ask the parties to the contract to execute waivers on confidentiality.

III. Interim measures to address rules on confidentiality

Redaction and publication of summaries of contracts are not acceptable even as interim measures because these could potentially create more suspicion and could slow down progress in addressing legal barriers. The prevailing view from stakeholders is that the language of Requirement 2.4 on full disclosure of all contracts and licenses entered into or amended by 1 January 2021 should be applied without exception. An interim measure that MSGs could adopt to address confidentiality is to ask the parties to the contract to execute waivers on confidentiality. In accordance with Requirement 2.4.c.ii, if a license or contract is not published, the legal or practical barriers should be documented and explained. Thus. where there are claims of legal barriers, the MSG could be advised to investigate and document such claims to determine whether such barriers actually exist in laws or contracts, what the legislation or contract actually states that could constitute a barrier, and whether they apply to the entire contract or only to specific provisions of the contract.

Assessing progress in meeting Requirement 2.4 in Validation

Below are some considerations that the Board might want to take into account in agreeing on a procedure for validating Requirement 2.4, and propose that the Validation review working group reflects in the updated Validation model and guide:

  1. The time needed to address legal barriers vary from country to country. Some barriers are in contracts while others are in laws. The source of the barrier has implications on how fast they can be addressed. This also has implications on the ability of countries to achieve the next level of progress when they undergo second or succeeding Validations. A potential solution would be a two- stage approach to Validation where the first phase would assess the aspects of the requirement that the Board deems to be within the MSG’s power to address while the second phase would assess the measures adopted to address barriers and the disclosure of all contracts as required by Requirement 2.4. This approach gives MSGs time to address legal barriers while stressing the urgency of addressing these barriers. It also recognises the varying degree of difficulty in addressing legal barriers in each country. The fact that countries would also have different Validation dates would mean that not all countries will be validated on this requirement at the same time, thereby giving some countries a longer time to address barriers. In validating beneficial ownership, the agreement of the Board was that Validation on Requirement 2.5 will follow the regular Validation schedule. The same approach could be adopted with less complications for Requirement 2.4 where 1 January 2021 is not a cut-off date for disclosure but the date that determines the coverage of contracts that will be disclosed.<
     
  2. Aspects for the assessment of Requirement 2.4. In agreeing a Validation model for Requirement 2.4, the following aspects could be considered:
  • Whether the MSG has published a work plan from 2020 onwards that contains activities related to contract transparency and whether these work plans include measures and a clear time frame for addressing barriers to comprehensive disclosure
  • The extent to which countries have investigated and addressed barriers to contract disclosure
  • Whether countries have disclosed a comprehensive list of all active contracts with corresponding information on which contracts are publicly available and where they may be accessed
  • If a contract or license is not published, Validation will evaluate the MSG’s documentation and explanation of legal barriers as required under Requirement 2.2.c.ii
  • The extent to which the MSG has examined and documented the government’s policy on contract disclosure, as well as explanation of deviations from policy, if any
  • The extent to which the countries have comprehensively disclosed contracts that are entered into or amended after 1 January 2021 including relevant annexes, addendum or rider

The Board could further agree on which of the foregoing aspects should be met to attain a certain level of progress depending on the final outcome of the revised Validation model. If some countries claim that the Covid-19 crisis will affect their capacity to meet the requirements on contract disclosure, the Board could consider these claims on a case-by-case basis. Efforts of countries to undertake other types of work related to contract transparency could also be taken into account in assessing the requirement and whether a country could be considered to have gone beyond the requirement. For instance, Validation could recognise countries that have done analysis on contractual terms or renegotiated terms of contracts or an examination of contractual stipulations that are relevant during these times such as force majeure provisions, or social expenditure provisions in areas of operation.

 

Keywords: Policy