Revenue transparency: global, not local solutions

Abstract

The theory of revenue transparency is simple. If the public knows what payments are made to its government from the oil, gas and mineral extracting companies, then they can hold the government more accountable in their spending. Revenue transparency is important in building trust, and for strengthening good governance and accountability in order to mitigate the risk of misappropriation of public funds. In this article, Peter Rees, Legal Director of Royal Dutch Shell, argues that the Extractive Industries Transparency Initiative offers the best and only effective global common alternative to a patchwork of variable and ad hoc national rules to legislate for so-called ‘financial transparency reporting’ in the USA and Europe. This issue is urgent because the EU Accounting Directive includes legislation that was drafted to create ‘equivalence’ with the now defunct Securities Exchange Commission (SEC) rules promulgated under section 1504 of the Dodd–Frank Financial Regulation Act, which has been adopted by the European Parliament and which now awaits implementation into national law in all Member States. He further argues that as it stands, the USA and EU legislation will not remedy the issue of the ‘resource curse’, will not provide adequate revenue transparency and will not reduce corruption. What it will do is cause competitive harm to the companies that are subject to the legislation and may also, somewhat counter-intuitively, create the potential for increasing corruption within the bidding process for extractive rights.