Payment transparency

It is only possible for the civil societies and governments to ask critical questions and demand accountability regarding the allocation of revenues if government revenues from resource rents are disclosed. Transparency is a classic means of helping countries to help themselves, whilst also contributing to building trust and combatting corruption, as outlined in Public Eye’s factsheet on payment transparency.

International measures to promote payment transparency

In recent years, the international community has established a global standard for transparency through various complementary instruments that share responsibility between the host and home countries of commodities companies.

1. Measures in countries that host commodities trading companies

The principle of transparency of financial flows in the commodities sector was picked up by the Extractive Industry Transparency Initiative (EITI) in 2003, at the initiative of the global NGO network Publish What You Pay (PWYP) (which Public Eye is part of).

The rules are established at the international level, in a multi-stakeholder forum of countries, companies and NGOs (on the form in which payments are published, the level of granularity, etc.). Countries – rather than companies – become members of the EITI; in doing so, they commit to two principles: 1) to disclose all revenues that the government receives from commodities companies, 2) on their side, companies operating in the country must commit to disclosing the payments they make to governments. This makes it possible to identify discrepancies and possible instances of embezzlement. As Switzerland does not have any resources, it cannot become an EITI member; however, it is a ‘supporting country’ and makes financial contributions.

EITI is important but not sufficient, because for ‘good reason’ particularly opaque countries (such as Angola, Venezuela or Russia) do not want to join and weak states lack the capacity to monitor the sector. Moreover, EITI has no means of sanctioning countries that are not part of the initiative.

2.  Measures in countries where commodities companies are headquartered

Given the weaknesses of EITI, increasing numbers of countries that host commodities companies (i.e. the country where a commodity company is registered) have implemented measures to strengthen transparency: they require commodities companies to publish their payments to governments of all countries, regardless of whether the country in question is a member of EITI.

In 2013, the European Union adopted financial reporting rules and transparency directives to this end. Nearly all EU member states have since transposed the directives into their national legislation. Since 2014, Norway and Canada have implemented similar laws, bringing the number of countries with legislation on payment transparency to 30.

In June 2016, the United States adopted implementing provisions for transparency legislation from 2010. Following the election of Donald Trump, the US Congress revoked these provisions in a move that was met with strong criticism from civil society and the international media.