Contract transparency

MAKING CONTRACTS ACCESSIBLE FOR CITIZENS

What is contract transparency?

When EITI countries commit to contract transparency, they accept to publicly disclose the full text of any contract, license, concession or other agreement governing the exploitation of oil, gas and mineral resources.

Contracts, licenses and associated agreements are important parts of the legal framework. They explain the rights and obligations of all parties involved in the exploration and production of oil, gas and minerals.

Why is contract transparency important?

Contract transparency allows citizens to understand the agreed terms for extractive projects in their countries, to check that every party is following them and to determine who is accountable for non-compliance.

Contract disclosure also allows for comparison of different contracts. This can create a more level playing field and enable governments to negotiate better deals.

Key benefits of contract transparency

Benefits for citizens

  • Contract transparency enables all parties to understand the terms on which oil, gas and mining takes place.  

  • Communities affected by extractives operations can see how revenue from royalties and taxes flows to national, regional or local governments. They can see what subsidies and tax incentives are awarded to companies. They can understand what obligations are placed on companies to protect communities and the environment, make social payments or provide local employment. Knowing all these enables citizens to monitor compliance with these obligations.

Benefits for companies

  • Disclosing the terms of contracts supports open, fact-based dialogue that can help build trust, reduce conflict and reinforce a company’s social license to operate

  • Contract disclosure makes it easier for companies to show that they comply with their financial and social obligations, helping them to address reputational risks.

Benefits for governments

  • When contracts are disclosed they can be compared. Contract disclosure therefore incentivises government officials to arrange fair contracts and deters them from concluding contracts that are disadvantageous to citizens. Contract transparency therefore helps create a level playing field for business and supports stronger and more capable management of the extractives sector.  

  • Contracts that are disclosed can be more easily enforced. All agencies and ministries within government become aware of the contract terms and can collaborate more effectively to ensure that contract terms are maintained.   

  • Disclosing contracts can help increase the capacity for good governance. As well as consistency and comparability, contract transparency helps governments understand if contract terms are in-line with a country’s legal framework.  

Contract transparency in action in Ghana and Chad

Ghana: Accelerating contract transparency

Ghana’s journey to contract disclosure has been possible due to combined efforts by governments, companies and civil society. In February 2018, the government launched an online public register with 18 major petroleum contracts, responding to increased demands for contract transparency.

This has enabled the government to strengthen its systems and show that government and companies have nothing to hide, thereby promoting a more and competitive investment climate. This practice also enables effective enforcement of rules and regulations and provides a powerful incentive for officials to negotiate strong contracts in Ghana’s petroleum sector. 

Chad: Innovative solutions for contract disclosure

 

As a fragile state, Chad lacks the resources to systematically publish contracts and licenses online. Yet commitment from the government, along with the national secretariat’s innovative and solution-oriented approach, has paved the way to contract transparency. Following a decree in November 2019, ITIE-Chad collated existing contracts in open data formats, available online. 

  • 36
    EITI countries have disclosed some contracts
  • 900 +
    contracts have been published by EITI countries
  • 16
    companies support contract transparency

EITI’s role in contract transparency

EITI processes are helping countries advance contract disclosure in many ways, including in sector-wide legislation.

Mongolia

The contract for the most important mine in the country—the Oyu Tolgoi copper mine—states in clause 15.21 that “This Agreement shall be made public.” The government has published both the original 2009 contract and the 2015 contract amendment.

Afghanistan

The petroleum contracts state: “The Ministry shall have the right to keep a copy of this Contract in the Hydrocarbons Register, publish and keep publicly available and distribute to provincial offices such information and reports on the Contract, related documents and the Contractor as is required pursuant to the Hydrocarbons Law….” These contracts have been published by the Government.

Requirements for EITI implementing countries

Under the 2019 EITI Standard, implementing countries are required to:

  • Disclose any contracts and licenses that are granted, entered into or amended after 1 January 2021.

  • Document government’s policy on the disclosure of contracts and licenses that govern the exploration and exploitation of oil, gas and minerals. This includes:

    • A description of whether legislation or government policy requires or prohibits disclosure of contracts and licenses

    • An explanation of any deviations from the policy

    • An explanation of whether the policy is stated in laws, contracts or other regulations

    • Documentation of discussions in multi-stakeholder groups on government policy regarding contract disclosure

    • Reforms relevant to contract disclosure that are planned or underway

    • An overview of which contracts and licenses are publicly available. This includes a list of all active contracts and licenses with corresponding links.

    • An explanation of legal or practical barriers that prevent contracts from being published

Understand more about the terms: required, expected and encouraged.

Deadlines for requirements

All contracts and licenses that are granted, entered into or amended after 1 January 2021 should be disclosed.

Implementing countries are encouraged to publicly disclose any contracts and licenses that provide the terms attached to the exploitation of oil, gas and minerals (entered into before 2021).

The multi-stakeholder group is expected to agree and publish a plan for disclosing contracts with a clear time frame for implementation and addressing any barriers to comprehensive disclosure. This plan will be integrated into work plans covering 2020 onwards.

Helpful resources for implementation

For a list of EITI countries that have disclosed some of their contracts, see NRGI’s database.

For contract portals, see examples from Ghana, Mexico, Philippines .

The contract transparency network

A forum for governments to share experiences, provide expertise and champion the publication of contracts within EITI.

The members of the network aim to show leadership on this agenda and rally support from other governments to make contract transparency the default practice.

Governments from Armenia, Cameroon, Chad, Democratic Republic of Congo, Ghana, Guinea, Indonesia, Malawi, Mexico, Mongolia, Mozambique, Myanmar, Nigeria, Philippines, Republic of Congo, Senegal, São Tomé and Príncipe and Zambia have joined the network.