The Netherlands has achieved a fairly low overall score in implementing the 2019 EITI Standard

08.12.2021
Decision 2021-72/BC-316
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Board decision in full

The Netherlands has achieved a fairly low overall score in implementing the 2019 EITI Standard (56 points). The overall score reflects an average of the three component scores on Stakeholder engagement, Transparency and Outcomes and impact.

The EITI Board commends the Netherlands for establishing a platform for multi-stakeholder dialogue on the governance of the extractive industries and for demonstrating that most extractive industry information including production, export and licensing data is systematically disclosed. However, the Netherlands achieved a low score on Outcomes and impact (48 points). This reflects low public interest in the initial set of narrow objectives for the Netherlands’ EITI implementation. There appears to be stakeholder interest in expanding the objectives to other areas which could increase outcomes and improve stakeholder engagement. The Board encourages the Netherlands to identify topics on which the EITI, through its disclosure requirements and multi-stakeholder model, can add value in public debate.

On Transparency, the Netherlands reached a fairly low score (68 points). The Netherlands has built a robust reconciliation of company payments with government revenues, even if the resulting data appears of little public interest. The lack of discrepancies in reconciliation has given comfort to government and industry stakeholders on the MSG. The Board further welcomed that most extractive industry information including production, export and licensing data is systematically disclosed by the Dutch Oil and Gas Portal (NLOG). However, data disclosures of public interest, from the terms of cooperation agreements between the oil and gas SOE, EBN, and license holders, to the environmental impacts of the extractive industries, are aspects of the EITI Standard that have not yet been addressed by the MSG. Further disclosures of contracts, environmental management and fiscal projection for extractive industry revenues could ensure closer alignment between NL-EITI data and public demands for information.

The Netherlands achieved a fairly low component score on Stakeholder engagement (53 points). There are weaknesses in the three constituencies’ engagement in EITI implementation, partly linked to the limited aspirations set for NL-EITI to date. While the MSG fulfils its basic functions of facilitating multi-stakeholder oversight of implementation, many of its processes, including MSG nominations, are conducted on an informal basis.

The Board has determined that the Netherlands will have until a next Validation commencing on 1 January 2024 to carry out corrective actions regarding the work plan (Requirement 1.5), public debate (Requirement 7.1), data accessibility and open data (Requirement 7.2), recommendations from EITI (Requirement 7.3), outcomes & impact (Requirement 7.4), government engagement (Requirement 1.1), industry engagement (Requirement 1.2), civil society engagement (Requirement 1.3), MSG governance (Requirement 1.4), economic contribution (Requirement 6.3), contracts (Requirement 2.4), contract and license allocations (Requirement 2.2), license register (Requirement 2.3), beneficial ownership (Requirement 2.5), in-kind revenues (Requirement 4.2), production data (Requirement 3.2), comprehensiveness (Requirement 4.1), barter agreements (Requirement 4.3), transportation revenues (Requirement 4.4), disaggregation (Requirement 4.7), data quality (Requirement 4.9), direct subnational payments (Requirement 4.6) and social and environmental expenditures (Requirement 6.1).

Failure to demonstrate progress on Stakeholder engagement, Transparency, and Outcomes and impact in the next Validation may result in temporary suspension in accordance with Article 6 of the EITI Standard. In accordance with the EITI Standard, the Netherlands’ MSG may request an extension of this timeframe or request that Validation commences earlier than scheduled.

Validation scorecard

Component & module

EITI Requirement

Progress

Score

Outcomes and impact

Low

48/100

Extra points

Effectiveness and sustainability indicators

0

Outcomes and impact

Work plan (#1.5)

Partly met

30

Public debate (#7.1)

Partly met

30

Data accessibility and open data (#7.2)

Mostly met

60

Recommendations from EITI (#7.3)

Mostly met

60

Outcomes & impact (#7.4)

Mostly met

60

Stakeholder engagement

Fairly low

53/100

Multi-stakeholder oversight

Government engagement (#1.1)

Mostly met

60

Industry engagement (#1.2)

Mostly met

60

Civil society engagement (#1.3)

Mostly met

60

MSG governance (#1.4)

Partly met

30

Transparency

Fairly low

68/100

Overview of the extractive industries

Exploration data (#3.1)

Exceeded

100

Economic contribution (#6.3)

Mostly met

60

Legal and fiscal framework

Legal framework (#2.1)

Fully met

90

Contracts (#2.4)

Partly met

30

Environmental impact (#6.4)

Not assessed

-

Licenses

Contract and license allocations (#2.2)

Mostly met

60

License register (#2.3)

Mostly met

60

Ownership

Beneficial ownership (#2.5)

Mostly met

60

State participation

State participation (#2.6)

Fully met

90

In-kind revenues (#4.2)

Mostly met

60

SOE transactions (#4.5)

Fully met

90

SOE quasi-fiscal expenditures (#6.2)

Not applicable

-

Production and exports

Production data (#3.2)

Mostly met

60

Export data (#3.3)

Fully met

90

Revenue collection

Comprehensiveness (#4.1)

Mostly met

60

Barter agreements (#4.3)

Mostly met

60

Transportation revenues (#4.4)

Mostly met

60

Disaggregation (#4.7)

Mostly met

60

Data timeliness (#4.8)

Fully met

90

Data quality (#4.9)

Mostly met

60

Revenue management

Distribution of revenues (#5.1)

Fully met

90

Revenue management & expenditures (#5.3)

Not assessed

-

Subnational contributions

Direct subnational payments (#4.6)

Partly met

30

Subnational transfers (#5.2)

Not applicable

-

Social and environmental expenditures (#6.1)

Mostly met

60

Overall score

Fairly low

56/100

Corrective actions

The EITI Board agreed the following corrective actions to be undertaken by the Netherlands. Progress in addressing these corrective actions will be assessed in the next Validation commencing on 1 January 2024:

  1. In accordance with Requirement 1.5.a, the Netherlands should set EITI implementation objectives that are linked to national priorities for the extractive industries. The MSG should address the steps needed to mainstream EITI implementation in company and government systems. The MSG is encouraged to explore innovative approaches to extending EITI implementation to inform public debate about natural resource governance and encourage high standards of transparency and accountability in public life, government operations and in business. In accordance with Requirement 1.5.b, the EITI work plan should reflect the results of consultations with key stakeholders. In accordance with Requirement 1.5.c.iv, the work plan should outline the MSG’s plans for implementing the recommendations from EITI implementation and Validation. In accordance with Requirement 1.5.d, the work plan should Identify domestic and external sources of funding and technical assistance where appropriate in order to ensure timely implementation of the agreed work plan.

  2. In accordance with Requirement 7.1.a.i, all constituencies engaged in EITI in the Netherlands should ensure that EITI information is widely accessible and distributed and could consider breaking this down into thematic reports. In accordance with Requirement 7.1.a.iii, the Netherlands should ensure that EITI-related outreach events, whether organised by government, civil society or companies, are undertaken to spread awareness of and facilitate dialogue about governance of extractive resources, building on EITI disclosures across the country in a socially inclusive manner.

  3. In accordance with Requirement 7.2, the Netherlands could ensure that government agencies and companies publish EITI data under an open license, and to make users aware that information can be reused without prior consent. The Netherlands should ensure that the data required by the EITI Standard is published in an open data format online and publicise its availability. The Netherlands could consider making systematically disclosed data machine readable and inter-operable, and to code or tag EITI disclosures and other data files so that the information can be compared with other publicly available data.

  4. In accordance with Requirement 7.3, the Netherlands is required to take steps to act upon lessons learnt; to identify, investigate and address the causes of any information gaps and discrepancies; and to consider the recommendations resulting from EITI implementation. Where appropriate, the Netherlands is encouraged to follow up on such recommendations.

  5. In accordance with Requirement 7.4.a, the Netherlands is required to document the annual EITI review of impact and outcomes of EITI implementation in an annual progress report or through other means agreed by the MSG, including a narrative account of efforts to strengthen the impact of EITI implementation on natural resource governance, including any actions to extend the detail and scope of EITI reporting or to increase engagement with stakeholders. In accordance with Requirement 7.4.b, all stakeholders should be able to participate in reviewing the impact of EITI implementation.

  6. In accordance with Requirement 1.1, the government should ensure that it is fully, actively, and effectively engaged in all aspects of EITI implementation, both in terms of high-level political leadership and operational engagement. The Netherlands may wish to consider the extent to which alignment of NL-EITI objectives with national priorities would demonstrate the use of EITI to government and ensure that adequate resources are devoted to ensuring outcomes and impact in line with government reform priorities for the extractive industries.

  7. In accordance with Requirement 1.2, the industry constituency should ensure that companies are fully, actively, and effectively engaged in all aspects of EITI implementation. The government must ensure that there are no obstacles to company participation in the EITI process, including by developing effective means of overcoming taxpayer confidentiality constraints, potentially by building on mandatory payments to government disclosures by extractive companies domiciled in the Netherlands. The Netherlands may wish to consider the extent to which revisions to the objectives for EITI implementation, potentially building on the legal framework for mandatory payments to government disclosures, could catalyse greater industry interest and participation in EITI implementation.

  8. In accordance with Requirement 1.3, the civil society constituency should ensure that it is fully, actively, and effectively engaged in all aspects of EITI implementation. The Netherlands may wish to consider the extent to which revisions to the objectives for EITI implementation, potentially including issues related to the environmental impact of the extractive industries, oil and gas infrastructure decommissioning and the energy transition, could catalyse greater civil society interest and participation in EITI implementation.

  9. In accordance with Requirement 1.4.b.ii, the Netherlands should ensure that the MSG undertakes effective outreach activities with civil society groups and companies, including through communication such as media, website and letters, informing stakeholders of the government’s commitment to implement the EITI, and the central role of companies and civil society. The MSG should also widely disseminate the public information that results from the EITI process. In accordance with Requirement 1.4.b.iii, the Netherlands should ensure that members of the MSG should liaise with their constituency groups. To strengthen implementation, the Netherlands is encouraged to ensure that the constituency nominations procedures for MSG membership are publicly codified. Subject to the recommended reassessment of EITI implementation objectives, the MSG may wish to consider whether the inclusion of new stakeholders relevant to these new objectives may be desirable.

  10. In accordance with Requirement 6.3, the Netherlands should ensure that estimates of the extractive industries’ contribution to government revenues and exports are publicly disclosed. Government revenues and exports should encompass the contribution of all subsectors of extractive industries, beyond natural gas and salt mining. Additionally, the Netherlands may wish to use EITI reporting as a means of explaining differences in publicly accessible data on the macroeconomic contribution of the extractive industries, potentially aligning these data disclosures with the International Standard Industrial Classification system’s category B. on mining and quarrying or equivalent.

  11. In accordance with Requirement 2.4.c.ii, the Netherlands is required to publish a list of all active contracts and licenses, indicating which are publicly available and which are not, with specific links to each published document.  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 Netherlands to substantiate such claims. In accordance with Requirement 2.4.c.iii, the Netherlands should publish an explanation for any deviations between disclosure practices and legislative or government policy requirements concerning the disclosure of contracts and licenses. The NL-EITI MSG should document its  view of whether Cooperation Agreements involving EBN in the oil and gas sector constitute forms of contracts, in accordance with the definition of contracts provided in Requirement 2.4.d.i, and ensure that any new contracts granted after 1 January 2021 are comprehensively disclosed to the public, including any annexes and amendments, in accordance with Requirement 2.4.a.

  12. In accordance with Requirement 2.2.a, the Netherlands should ensure that information on mining, oil and gas license transfers is publicly disclosed, including the identity of licenses transferred and the process for transferring licenses, including technical and financial criteria assessed. In accordance with Requirement 2.2.a.iv, the Netherlands is required to ensure public disclosure of its assessment of any material deviations from the applicable legal and regulatory framework governing license transfers and awards in license awards and transfers in the period under review by EITI reporting.

  13. In accordance with Requirement 2.3.b.iii, the Netherlands should ensure that dates of application and of expiry are public disclosed and accessible for each active license in the mining, oil and gas sector.

  14. In accordance with Requirement 2.5 and to prepare for the second phase of Validation of Requirement 2.5 from January 2022 onwards, the Netherlands is required to ensure that the beneficial ownership of all companies holding or applying for a mining, oil and gas license is comprehensively and reliably disclosed as of January 2022. In the meantime, in accordance with Requirement 2.5.c, the Netherlands is required to ensure that the MSG publishes an assessment of the comprehensiveness and reliability of beneficial ownership disclosures of all companies holding or applying for a mining or oil and gas license to date. Publicly listed companies, including wholly owned subsidiaries of companies listed on stock exchanges, are required to disclose the name of the stock exchange, and include a link to the stock exchange filings where they are listed, in accordance with Requirement 2.5.f.iii. Lastly, the Netherlands is also required to ensure that legal ownership data is available either through NL-EITI reporting or through systematic disclosures, in accordance with Requirement 2.5.g.

  15. In accordance with Requirement 4.2, where the sale of the state’s share of production of natural gas collected in kind is material, the Netherlands, including state-owned enterprises such as EBN, is required to disclose the volumes received and sold by the state (or third parties appointed by the state to sell on their behalf), the revenues received from the sale, and the revenues transferred to the state from the proceeds of natural gas sold.

  16. In accordance with Requirement 3.2, the Netherlands should ensure that both production volumes and values are publicly disclosed for each extractive commodity produced in the period under review. To strengthen implementation, the Netherlands’ public disclosures related to production data could include sources and the methods for calculating production volumes and values.

  17. In accordance with Requirement 4.1.a, the Netherlands should ensure that its materiality decisions related to selecting companies and revenue streams for reconciliation are clearly documented and followed in practice. In accordance with Requirement 4.1.c, the MSG should ensure that the materiality of payments from each non-reporting entity and the nature of discrepancies are clearly assessed to inform an IA’s overall assessment of the comprehensiveness of reconciliation. In accordance with Requirement 4.1.d, unless there are significant practical barriers, the government is additionally required to provide full disclosure of material revenues from non-material companies, disaggregated by revenue stream. To further improve the usefulness of EITI implementation in the Netherlands, the MSG may wish to consider cross referencing companies’ publication of Payments to Governments Reports mandated by the country’s implementation of the EU Accounting and Transparency Directives to provide assurances that all companies making material payments to government have been included in the scope of annual EITI reporting. This step could provide additional value in assessing the degree to which extractive companies in the Netherlands adhere to their legal payments to government reporting obligations.

  18. In accordance with Requirement 4.3, the Netherlands is required to consider whether there are any agreements, or sets of agreements involving the provision of goods and services (including loans, grants and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. Where the MSG concludes that these agreements are material, the MSG and the Independent Administrator are required to ensure that the EITI Report addresses these agreements, providing a level of detail and transparency commensurate with the disclosure and reconciliation of other payments and revenues streams. Should the MSG conclude that such terms do not exist in any agreement, it should ensure public documentation of the basis for its assessment.

  19. In accordance with Requirement 4.4, the Netherlands should ensure that the government and SOE publicly disclose the revenues received from the transportation of oil, gas and minerals, where material, to levels in line with the level of disaggregation prescribed under Requirement 4.7.

  20. In accordance with Requirement 4.7, the Netherlands should ensure that reconciled financial EITI data is disaggregated by each individual project, company, government entity and, for revenue streams levied on a per-project basis, by revenue stream. Disclosures of revenues should be disaggregated to the levels at which the payments are levied. The Netherlands should clarify which agreements are deemed to be substantially interconnected or are unified under a single overarching agreement.

  21. In accordance with Requirement 4.9.a, the EITI requires an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. In accordance with requirement 4.9.b.iii and the standard Terms of Reference for the Independent Administrator agreed by the EITI Board, the MSG and Independent Administrator should:

    • examine the audit and assurance procedures in companies and government entities participating in the EITI reporting process, and based on this examination, agree what information participating companies and government entities are required to provide to the Independent Administrator in order to assure the credibility of the data in accordance with Requirement 4.9. The Independent Administrator should exercise judgement and apply appropriate international professional standards in developing a procedure that provide a sufficient basis for a comprehensive and reliable EITI Report. The Independent Administrator should employ his/her professional judgement to determine the extent to which reliance can be placed on the existing controls and audit frameworks of the companies and governments. The Independent Administrator’s inception report should document the options considered and the rationale for the assurances to be provided.

    • ensure that the Independent Administrator provides an assessment of comprehensiveness and reliability of the (financial) data presented, including an informative summary of the work performed by the Independent Administrator and the limitations of the assessment provided.

    • ensure that the Independent Administrator provides an assessment of whether all companies and government entities within the agreed scope of the EITI reporting process provided the requested information. Any gaps or weaknesses in reporting to the Independent Administrator must be disclosed in the EITI Report, including naming any entities that failed to comply with the agreed procedures, and an assessment of whether this is likely to have had material impact on the comprehensiveness and reliability of the report.

  22. In accordance with Requirement 4.6, the Netherlands should ensure that extractive company payments to subnational government entities and the receipt of these payments are disclosed, where material. The multi-stakeholder group is required to agree to a procedure to address data quality and assurance of information on subnational payments, in accordance with Requirement 4.9.

  23. In accordance with Requirement 6.1, the Netherlands should ensure public disclosures of all payments by extractive companies to the government related to the environment mandated by law, regulation or contract, where such payments are material. The Netherlands could consider extending its EITI reporting to indirect environmental taxes given the public interest in companies’ contributions related to the environment.

Strategic recommendations

The Netherlands is encouraged to consider the following recommendations to strengthen EITI implementation:

Transparency

  1. To strengthen implementation, the Netherlands is encouraged to work with relevant government entities to improve the accessibility of systematic disclosures related to the fiscal regime governing the extractive industries in accordance with Requirement 2.1, including fiscal incentives designed to support the energy transition to respond to public demand for information on the country’s transition to a net-zero emissions economy.

  2. To strengthen implementation, the Netherlands could consider using annual EITI reporting to provide information on the government’s environmental sanctioning of extractive companies, with a view to addressing public demands for information on the regulatory oversight of companies’ environmental impacts. The Netherlands is encouraged to consider the public disclosure of extractive companies’ contributions to environmental remediation and offset, given the level of public interest in the environmental impacts of the extractive industries.

  3. To strengthen implementation, the Netherlands could consider using its EITI reporting to compare figures on the financial relations between EBN and the state in different public documents such as the EITI Report and EBN’s audited financial statements with a view to explaining and contextualising any differences identified. The Netherlands is encouraged to describe the rules and practices related to EBN’s procurement, subcontracting and corporate governance, e.g. composition and appointment of the Board of Directors, Board’s mandate and code of conduct.

  4. To strengthen implementation, the Netherlands is encouraged to develop mechanisms for ensuring the systematic disclosure of comprehensive and reliable data on all financial transactions involving the SOE EBN, including revenues collected from oil and gas companies and payments to government.

  5. To strengthen implementation, the Netherlands could work to ensure that extractive commodity export volumes and values are published disaggregated by region, company, and project. The Netherlands could consider extending the scope of its EITI disclosures to export data involving imported extractive commodities, such as crude oil, that subsequently re-exported as part of the Netherlands’ role as a leading global extractive commodities physical trading hub.

  6. To strengthen implementation and improve the EITI data’s contribution to public debate, the Netherlands is encouraged to improve on the timeliness of EITI data disclosures, by building on existing systematic disclosures by companies and government.

  7. To strengthen implementation, the Netherlands could consider using EITI reporting to reference national and international revenue classification systems in its public disclosures of government revenues from the extractive industries.

  8. To strengthen implementation, the Netherlands may wish to use EITI reporting to describe any extractive revenues earmarked for specific programmes or geographic regions. The Netherlands may wish to consider using EITI implementation as a means of ensuring timely government disclosures that would further public understanding and debate around issues of revenue sustainability and resource dependence, including the assumptions underpinning forthcoming years in the budget cycle and relating to projected production, commodity prices and revenue forecasts arising from the extractive industries and the proportion of future fiscal revenues expected to come from the extractive sector.

The government and the MSG are encouraged to consider these recommendations, and to document the MSG’s responses to these recommendations in the next annual review of outcomes and impact of EITI implementation.

Background

The Netherlands was accepted as an EITI implementing country on 27 June 2018. The first Validation of the Netherlands was scheduled to commence on 28 December 2020. Due to the transition to the revised Validation model, the Board rescheduled the Validation to commence on 1 April 2021. On 10 May 2021, the EITI Board approved the Netherlands’ request for an extension to its Validation deadline, to 1 July 2021.

The Netherlands EITI collated documentation for Validation using the Board-agreed data collection templates on Stakeholder engagement, Transparency and Outcomes and impact. The files are available on the Netherlands EITI website. The International Secretariat’s Validation team prepared an initial assessment following the Validation procedure and Validation Guide. In accordance with the Validation procedure, a public call for stakeholder views on EITI implementation was open from 1 June to 1 July. Virtual stakeholder consultations were undertaken from July to September 2021.

The draft assessment was shared with the MSG for feedback on 24 September 2021. MSG comments were received on 22 October, after which the assessment was finalised for the Validation Committee’s review.

In accordance with Article 4.c of Section 4 of the 2019 EITI Standard, the overall assessment consists of component scores on Stakeholder engagement, Transparency and Outcomes and impact, as well as an overall numerical score. The component score represents an average of the points awarded for each applicable requirement. The points awarded on the effectiveness and sustainability indicators are added to the component score on Outcomes and impact. The overall score is the average of the three component scores.

Keywords: Validation
Country: Netherlands