This article was first published on The Huffington Post
Shining a bright light on the global operations of major multinational corporations, including details of the cash they pay to foreign governments, will not end corruption. But, it is a very good start on a long and vital journey.
Now, both the U.S. Government and the 27 governments of the European Union (EU) are on the cusp of opening a new era of transparency in the oil, gas and mining industries (the Europeans have also added the forestry sector).
Transparency is being forced upon such giants as Exxon of the US, Gazprom of Russia, the world's biggest mining company BHP of Australia, and many more. Every company in the extractive industries, and their affiliates, that is listed on a US or European stock exchange will be required under law to start providing detailed annual public reports on what they are paying to such governments as those in Nigeria, Indonesia, Congo, Angola, Saudi Arabia, Kuwait, Venezuela, and many more that are home to gigantic natural resources.
The payments themselves are mostly in the form of royalties and permit fees by the companies for the rights to extract resources from the host countries. To be sure, there are some bribes by some firms as well that are probably well hidden and may remain so. But, the new transparency actions will highlight for the first time the scale of the funds that pour into the host governments - much of which disappear and never fund public services in these countries as they should. Too much of the cash is pocketed by top government officials and their cronies and banked in their private Swiss and other foreign bank accounts. Too much of the cash also finances illicit arms deals that are deployed in civil wars - for example, millions of people have died in recent years in the natural resource rich Congo (for insights into resources, bribes and the Congo visit Global Witness).
The secrecy of global corporate payments to foreign governments enables crimes by host government officials that will not end with the new US and EU laws. But a new age of transparency is dawning in the extractive industries and over time it will be a game-changer. It will unleash pressures on the governments to disclose how they account for the funds.
How did this extractive industries' transparency revolution happen?
Much of the credit goes to Revenue Watch Institute (RWI) - a New York-based "think tank" that for more than a decade has been marshaling the facts and building the case for action. Working closely with RWI is the UK-headquartered Publish-What-Pay (PWP) coalition of 650 civil society organizations across the globe, including such major groups as Transparency International and Oxfam America - PWP has spearheaded remarkable lobbying campaigns that have always been a couple of steps ahead of industry associations that have opposed the new transparency regimes. Indeed, the industry may well start taking civil society campaigners more seriously in the future as a result. Daniel Kaufmann, president of RWI said recently: "We commend the EU for choosing rule of law over corruption, and transparency over opacity. Citizens from Iraq to Indonesia will be able to see how much money their governments receive for their natural resources and question how this money is used."
Huge credit goes to former Senator Richard Lugar, the Republican from Indiana, who on April 21 receives the TI-USA 2013 Integrity Award and rightly so. In the midst of the heated debates in 2010 in the US Congress over financial reform, Lugar at the behest of transparency campaigners, pushed clauses (Section 1504 of the Act) into what was to become the Dodd-Frank Financial Reform Act that requires oil, gas and mining companies to disclose their foreign payments. Once President Obama signed the legislation, then the Securities and Exchange Commission wrote the rules, mandating that the companies must start their public reporting in 2014.
And these US actions were the sparks that led to action by the European Parliament - a body that the companies underestimated. Firms lobbied against the transparency laws in national capitals in Europe, but failed to adequately recognize the rising power of the European Parliament. The draft legislation that will be formalized in June, calls on each EU member country to pass national legislation, which is widely seen as a formality. European Commissioner Michel Barnier, who is in charge of regulation, was reported by Trustlaw that the new law creates "a new era of transparency to an industry which is far too often shrouded in secrecy".
The EU deal goes further than the U.S. law in that it includes the logging sector and covers large unlisted EU companies, as well as stock exchange listed firms. The US and EU actions will cover 90 percent of the world's major international extractive companies, according to the Brussels office ofTransparency International (TI).
The arguments against the new laws and regulations by the corporations largely relate to claims that their competitive positions will be weakened as transparency increases. This is dubious. The biggest firms have intelligence on just what their rivals do and what they pay. The real reasons for opposition run deeper - corporations culturally oppose disclosing everything that they are not required to under law. In this case, those firms to be most vigorous in their opposition, including the American Petroleum Institute, which is striving to overturn the US law in the courts, fail to adequately recognize the crimes that are being perpetrated by the governmental leaders of many oil, gas and mining-rich nations. Their single-minded focus on corporate secrecy is a disservice given the enormity of the impact on peoples' lives in the resource rich countries. Fundamentally, it is a scandal that the vast majority of the citizens of many of the wealthiest natural resources countries in the world live in absolute poverty.
Expanding transparency into every aspect of governmental affairs strengthens the pressures for governments to be accountable to the peoples that they should be serving. The next stages will involve monitoring the reports by the firms under the US and European laws, then publishing the facts so that the peoples of the resource-rich countries know them. Thereafter, the goal will be to mount domestic and international pressures on the rogue governments to stop the theft of the massive treasure belonging to their peoples. That will take some tough fights and many years - but prospects of major reforms have now been improved significantly.