Contracts

It is important for all stakeholders in the MSG to appreciate how contract disclosure could benefit their respective constituencies. In agreeing the objectives, MSGs could consider links to broader reforms related to mitigating corruption, increasing tax revenues and monitoring environmental and social obligations.

Examples of objectives could include:

• Understanding the fiscal terms for each agreement, and how they can inform better projections of the timing and volume of national and subnational government revenues;
• Enabling citizens and government oversight bodies to monitor compliance with legal obligations in contracts;
• Enabling citizens and oversight bodies to understand the state’s legal rights, obligations and limitations in the contract, including around cost auditing timing and rights, stabilisation clauses and their scope, and requirements for allocations of revenues to local governments or local communities;
• Addressing reputational risks for companies;
• Ensuring consistent access to contractual precedents as references for future negotiations;
• Understanding how contract terms have an impact on broader strategy goals, including energy transition plans;
• Setting expectations among government agencies and the public on the timing and volume of government revenues from key projects.

These objectives should guide MSGs in agreeing on activities in their work plans. According to Requirement 2.4, MSGs are 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. All work plans are required to be fully costed, indicating the staff and funding needed to carry out these activities, as well as plans to address funding gaps.

MSGs are also expected to identify measurable targets within a specific timeframe to carry out these activities. MSGs should obtain clarity on what reforms could be implemented immediately, what long-term reforms are needed (e.g. legal amendments), and what practical steps should be taken to implement such reforms.

Full contract transparency requires the commitment of high-level officials and technical staff in government and industry. MSGs are expected to identify challenges in securing commitment and to adopt strategies on how to address them, for example through a stakeholder engagement plan. Ensuring that contract disclosure contributes to government and companies’ own objectives is key. Civil society can also play an active role in explaining the importance of contract transparency to all constituencies, including drawing attention to specific terms or contracts that should be publicly available.

In engaging key stakeholders, MSGs could consider identifying champions of contract transparency, potential saboteurs, effective communicators (including media), drivers of related reforms (such as anti-corruption actors), technical assistance providers, and responsible parties in government (e.g. contract repositories). Legal advisers for government and companies also often play a key role in discussions on legal barriers. When engaging with government agencies, MSGs might wish to ensure that they are working with all the agencies that participate in awarding and monitoring contracts, which can be hosted in different ministries.

Contract transparency should not be an end in itself, but should contribute to better governance of the extractive sector. Key to this is for stakeholders to understand contracts and develop skills to analyse contractual stipulations. To this end, MSGs could consider identifying capacity building activities to meet its objectives for contract disclosure. For example, if the objective is to strengthen revenue collection, MSGs could consider organising workshops on understanding the fiscal terms of contracts.

Countries are required to publish a list of all active contracts in the country, including those executed before 1 January 2021 (Requirement 2.4.c.ii). The MSG should agree on what constitutes extractive contracts in the country given the different nomenclatures and a determination of relevant annexes.  

It is suggested that MSGs proceed as follows:

1. Conduct a scoping exercise. The scope of the exercise should include exploitation and exploration contracts, annexes, amendments, addenda or riders.
   Agree on considerations for materiality of exploration contracts. This could include:
   1. Agree on a list of active contracts and licenses, including exploration contracts. MSGs should request a list of all active contracts in the country from the government body that granted the right to explore or exploit. Industry parties could be asked to confirm the information provided. For countries that follow license regimes, MSGs are still required to include all issued licenses in this list, even if these licenses have standard or uniform stipulations.
      
      Other sources could also be consulted. For example, some jurisdictions require  extractive contracts to be filed with the Securities and Exchange Commission or with parliament, or for these contracts to be published in national gazettes. Some companies also disclose contracts on their websites. The MSG could draw on these sources to cross-check the list provided by the government agency that executed the agreement. The MSG may also wish to consult resourcecontracts.org, a global repository with around 2,400 extractive contracts, including summaries of contract terms.
      
      Scoping exploration contracts
      
      All exploration contracts, regardless of materiality, should be included in the list of active contracts that implementing countries must provide under Requirement 2.4.c.ii. With respect to their publication, MSGs are given the discretion to select which exploration contracts are considered material and should be disclosed. However, where the terms of exploration are bundled with exploitation contracts (as is commonly the case in the petroleum industry), the requirement applies even if the project is in the exploration phase.
      
      Determining the materiality of exploration contracts  could involve the following steps: 
      • Agree on considerations for materiality of exploration contracts. This could include:
        • Whether there are material payments stipulated in these exploration contracts. The MSG could opt to use the same threshold it uses for material payments in EITI reporting.
        • Whether the exploration contract is granted to a material company as determined by the MSG for EITI reporting purposes.
        • Whether exploration contracts contain non-fiscal obligationsHideThis could include time limits for exploration, minimum work obligations over a certain period, extent of state supervision, terms of relinquishment, public financial obligations associated with SOE equity holding in exploration projects, social and environmental expenditures, as well as obligations for monitoring environmental impact at the exploration stage, etc. that the public would be interested to know.

      • Consider other factors such as demand from stakeholders and the administrative burden of disclosing these contracts.

   2. Determine relevant annexes, addenda or riders. The scoping exercise should determine what annexes and associated documents should be disclosed for each contract or license in the list. 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. The MSG would need to examine further what additional documents are needed to fully explain the terms attached to the rights granted to the company. These discussions should be documented by the MSG through meeting minutes or scoping studies, including references to specific rules on what constitutes an annex, addendum or rider to ensure consistency with applicable law.
   3. Indicate in the list which contracts are publicly available, and which are not. For all published contracts and licenses, the list should include a reference or link to the location where the contract or license is published (Requirement 2.4.c.ii). The MSG could encourage the relevant ministry to systematically disclose the list of active contracts with corresponding links.    
2. Identify ongoing and future bid and contract negotiations. To keep track of new contracts, government agencies that conduct bidding or negotiations are encouraged to routinely publish information on these bidding rounds on their websites. Where feasible, they are encouraged to inform the MSG on the status of these processes. Where this information is publicly available, national secretariats could also monitor them.

1. The MSG should first seek to understand current practices on contract disclosure. This step is recommended before the MSG commissions a legal review. The MSG could then identify practical or legal barriers to disclosure and how to address them. The MSG could consider:
   • Determining which contracts are already being disclosed;
   • Identifying which contracts have not been disclosed but could be disclosed without legal restrictions;
   • Identifying which contracts are still not being disclosed despite a legal mandate to disclose them.
2. The MSG should then seek to understand current policies on contract disclosure. The MSG could undertake a review of existing policies on contract disclosure as reflected in the law, regulations or contracts. The review could include:
   • The contracts regime in the country;  
   • The regulatory framework (e.g. which government entity is responsible for granting, implementing and monitoring extractive contracts? What are their roles and responsibilities?);
   • A description of whether legislation, other policy documents or contractual stipulations prohibit disclosure of contracts and licenses;
   • Documentation of the MSG’s discussion on what constitutes government policy on contract disclosures;
   • Reforms underway (e.g. are confidentiality clauses still included in contracts that will be entered into after 1 January 2021? Are there opportunities to ensure that these clauses are no longer included in contracts that will be entered into after 1 January 2021?);
   • Other laws and policies that could be used to support contract disclosure.
3. The MSG should seek to address legal barriers. In doing so, it is recommended that the MSG considers the following:  
   • Where there are laws or contractual stipulations prohibiting disclosure, explore the option of voluntary disclosure by parties through the execution of waivers. The EITI Board has clarified that waivers could be accepted as interim measures when it is anticipated that addressing legal barriers permanently could take time.
   • Agree a time-bound action plan for permanently addressing legal barriers and recommending policies for disclosure. These activities should seek to eliminate these barriers and ensure that all contracts and licenses entered into or amended from 1 January 2021 no longer contain these confidential stipulations or that laws requiring confidentiality are amended. This should be integrated into the EITI work plan.
   • Discuss what the confidentiality clauses prohibit in practice and whether they apply to the disclosure of the contract itself. In some cases, confidentiality provisions are invoked without the stakeholders fully understanding the extent of their application. MSGs could facilitate a dialogue among relevant parties to reach a common understanding on the application of these provisions. In conducting these discussions, key points to consider include:
     • The definition of “confidential information” often does not include the contract itself;
     • Confidentiality clausesHideFor an overview of approaches to confidentiality, see Revenue Watch (2009), Contracts Confidential, pp. 23-32, might not be absolute. They could be addressed through waivers, where both parties agree to disclosure, where the host government requires disclosure, or where disclosure is demanded by company investors, company stock exchange listing requirements or the company’s home government; 
     • These clauses are sometimes time-bound, which means that confidentiality is not permanent.

The EITI Board has clarified that the redaction and publication of summaries of contracts are not acceptable even as interim measures under Requirement 2.4, because these could potentially create more suspicion and could slow down progress in addressing legal barriers. Because contracts contain many detailed and interlinked terms, publication of full-text documents is important to avoid misrepresentation, misunderstanding and mistrust that may arise when incomplete or inaccurate summaries of contract documents are produced.

1. Agree on a method for disclosure. The EITI Standard has no formal requirements on methods for contract disclosure, but public access in open formats is recommended. Different countries have various ways of publishing extractive contracts. Some have done so through dedicated platforms such as resourcecontracts.org (e.g. Philippines, Sierra Leone), while others disclose through government websites (e.g. Ghana, Mexico, Timor-Leste) or company websites.
   
   In agreeing methods for disclosure, MSGs could consider the following:
   • Consider systematic disclosure of contracts through government websites as default practice to enable public access to the list of active contracts, the actual contracts and the annexes. MSGs are expected to systematically disclose data through government platforms by default. This approach strengthens the government’s implementation of a full contract disclosure policy and enables easier information-sharing across relevant government agencies.
     
     Publication of contracts elsewhere (e.g. in EITI Reports or EITI websites, independent contract portals) are useful interim measures when the government is transitioning to systematic publication of contracts. In discussing systematic disclosure of contracts, MSGs should also consider the technical, financial and administrative resources needed to establish and update the government’s contract portal. MSGs could also look into whether contracts could be linked to other project-level information already being disclosed, such as payments or production or online cadasters, to facilitate use of contracts by stakeholders.
   • Ensure free access to disclosed contracts. While establishing and maintaining contract portals could require administrative costs, it is good practice to make contracts freely accessible. As a last resort, fees could be imposed as long as they are reasonable and not prohibitive. If fees are necessary at the initial stages of establishing a contracts database, MSGs are encouraged to consider a plan to enable free access in the long term.
   • Develop and update the contracts database. This could entail:
     • Identifying who is responsible for keeping track of and publishing newly executed contracts;
     • Identifying who is responsible for keeping track of amendments and for publishing them. This responsibility includes keeping track of amendments of contracts executed after 1 January 2021 and publishing these amendments. It also includes keeping track of amendments of contracts executed before 1 January 2021 and publishing the full text of the original contract and the subsequent amendments;
     • Conducting a periodic review on the comprehensiveness of disclosed contracts;
     • Agreeing on a period within which new or amended contracts and amendments to contracts should be disclosed, where there is no government policy on when amendments should be disclosed;
     • Using machine readable formats. Often, documents are in locked PDF files that a computer cannot read. Machine-readable formats make the process of using contracts much easier. For example, with a machine-readable contract, someone interested in knowing more about company royalties could conduct a keyword search of “royalties”, rather than reading through the contract in full;
     • Collating all documents managed by different agencies. Full disclosure includes the complete range of contracts, annexes and amendments. In some countries, these documents may be held by different agencies within a government. For example, the main contract may be managed by the sector ministry, while environmental documents may be managed by an environmental protection agency. Bringing all these documents together in one place can make it easier for users to understand the big picture and find what they need;
     • Organising documents according to the local legal framework. Each country has a standard range of contracts, annexes and amendments associated with each project. Organising documents according to these categories will make it easier for users to understand how documents relate to one another, and to find what they need.

2. Ensure that full texts of contracts, all relevant annexes, addenda or riders and exploration contracts as agreed by the MSG are comprehensively disclosed. As previously noted, redacted contracts do not fully meet Requirement 2.4. MSGs could seek the attestation or confirmation of the parties that there are no omissions on the published version of the contract. The MSG could undertake spot checks, comparing published versions with original versions kept by the relevant government body.

3. Consider what features to add to increase access and comprehensibility of contracts. For example, annotations of contracts or explanation of some stipulations could be added by the MSG. Machine-readable formats could allow for key terms in the contract to be searchable. Summaries of contractual provisions could also be provided, along with links or related permits.

License regimes

For countries that follow license regimes (i.e. where agreements have standard stipulations as mandated by law), ensure that the MSG has evaluated whether there are deviations from standard stipulations that merit publication of individual licenses. If there are claims that these licenses 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. As clarified by the EITI Board, the MSG could consider the following approach:

• The MSG should document and evaluateHideIn doing so, the MSG could be guided by the following: (i) whether the obligations of contractors are defined in laws or defined in contracts; (ii) If defined in laws, whether these laws cover all terms of the agreement between the parties to the contract or there are stipulations that are left for the parties to negotiate; (iii) whether the same terms prescribed by laws exist in all contracts. the claim that there are no deviations;
• If the MSG concludes that all the terms of agreements in all contracts are governed by laws and that there are no deviations from these legal provisions in any of these contracts, it is sufficient for the country to publish only model contracts. Otherwise, the MSG should disclose individual contracts in line with Requirement 2.4;
• In making this decision, the MSG could consider whether non-disclosure would invite suspicion or erode public trust on the parties to the contract;
• To ensure that MSG decisions in this regard are not outdated, the MSG could consider undertaking the same review process for each license issued.