It has been a banner week for global anticorruption efforts. The United Kingdom has hosted governments, civil society actors and businesses from around the globe. The events here have aimed to tackle ill-gotten gains that could otherwise finance development, help address security threats and bolster countries’ finances. All have agreed that we must consign the grim realities exposed by the Panama Papers and Unaoil leaks to the past. There is consensus that the extractive industries—oil, gas and mining—are a major locus of corruption.
Nigerian President Muhammadu Buhari converted a hot mic gaffe by his host U.K. Prime Minister David Cameron into a showcase for Nigeria’s anticorruption resolve. And Cameron then rose to the occasion by announcing an end to secret corporates and anonymous property owners in the U.K..
Participants started an important process at this summit. But there’s more for the well intentioned to do, even in terms of commitments. The events in London took place over a tightly compressed two days, and we commend and are inspired by much of what transpired. But fighting corruption in general, and in the extractive industries in particular, will require a lot more.
Here, we present our initial impressions from the summit.
U.K. and Switzerland spearhead efforts to tackle secrecy in commodity trading.
Two of the world’s largest hubs for physical commodity trading, the U.K. and Switzerland, both committed to tackling the opacity endemic in that sector.
The U.K.’s pledge (including through its new Open Government Partnership national action plan) to enhance company disclosure of payments to governments for the sale of oil, gas and minerals represents the first time the U.K. has officially acknowledged two important facts.
One is the huge scale of payments made by commodity traders to governments (including national oil companies). The second is that good governance requires more visibility into these largely opaque financial flows. The U.K. government has also noted explicitly that these important payments are currently missing from its regulations on payments to governments, and that it will now explore ways to implement acommon global reporting standard.
Prior to the summit, Switzerland had said it would include physical commodity trading payments in a transparency law it will put to parliament later this year—if there is international action. At the summit, Switzerland signalled that it was willing to be in the vanguard of those efforts by also committing to enhance company disclosure where traders buy oil, gas and minerals from governments.
Today certainly marks the beginning of a concerted international effort on tackling trading secrecy, and it will be important that the U.K. and Switzerland turn these efforts turn into reporting regulations soon.
Other trading hubs such as the United States and Singapore did not signal this week that they would act. However, the U.S. will have another opportunity to stamp out trading secrecy next month when its Securities and Exchange Commission releases new rules on mandatory reporting of payments to government for oil, gas and mining. Hopefully the commissioners will have heard the beating of drums in London this week and will include commodity trading payments in their final rules.
A significant number of other countries—including Japan, Australia, Italy, Nigeria, the Netherlands and Norway—also explicitly recognized the need for transparency in trading-related payments to governments for the sale of oil, gas and minerals, adding to the international chorus for action.
The government of Ghana, which sells several cargoes of oil to international traders each year, welcomed the exploration of a global reporting framework for commodity sales, and committed its officials to joining a dialogue on the subject.
The spread of beneficial ownership disclosure has begun in earnest.
What once was a wonkish term known mostly by corporate lawyers has, thanks to the Panama Papers and this week’s events, become a byword for transparency. The disclosure of beneficial ownership of companies cuts to the heart of how corruption works, as secret companies are widely used to receive or pay bribes, hide illicit wealth, and enable politicians to covertly participate in private business.
Countries including France, Nigeria, Afghanistan, New Zealand, Jordan, Indonesia, Ireland and Georgia have joined the U.K., Netherlands, Norway and South Africa in committing to progress toward llic beneficial ownership registries. France’s will include trusts, which is a new and important feature, as trusts are a common way to hide ownership.
For many resource-rich countries, tackling beneficial ownership transparency in the extractive sector is the right place to start. Ghana has committed to amending laws, including its Petroleum Law, to require ownership disclosure, with a particular focus on oil and mining companies. Tanzania committed to disclosing beneficial ownership information for “all companies active in extractive sector.”
However, many countries have not yet agreed to public disclosure of this information, instead saying it would be made available to law enforcement at best. Even the more progressive British overseas territories and crown dependencies still fall into this category.
The U.S. also has much to do in this area: while it has long been a global leader in the prosecution of foreign bribery, it has lagged behind overall by allowing certain states to become secrecy havens where corrupt actors can easily establish companies. In its summit commitment, the U.S. included a draft law sent to Congress that called for establishment of a registry, but not a public one. Furthermore, getting this kind of law passed by the U.S. Congress is not easy, and real implementation will require action from individual states that benefit economically from being secrecy havens.
(What was totally missing from the summit, and glaringly in the case of the U.S., is the need to address the increasingly corrosive nature of money-in-politics, which is one key dimension of what we have elsewhere discussed as “legal corruption.”)
The U.K. will also establish a public register of beneficial ownership information for foreign companies that already own or aim to buy property in the U.K., or that bid on U.K. central government contracts. This is a major step. (For example, Nigerian officials convicted of corruption, and others who are facing charges, have bought London property.)
Open contracting takes off.
The summit communiqué and a few country commitments contained the admirable pledge to make public procurement contracting “open by default,” so that citizens and businesses have a clear public record of how public money is spent. (The process for allocating oil and mining sector contracts especially deserves this treatment, but received little specific attention.)
Ghana’s government said it will work toward contract transparency “for high-value contracts and contracts in the oil, gas and mining sector.”
Nigeria committed to full implementation of the Open Contracting Data Standard, starting with several key projects: repairing refineries, building health centers, roads, schools and the power grid. This is a solid and practical approach, but the absence of upstream oil contracts from the list is a cause for concern given the high value of those assets and the sector’s legacy of corruption. To its credit, Nigeria did also use the summit to commit to joining the Open Government Partnership.
Implementation is a major challenge.
In the area of tackling corruption in non-renewable natural resources, the need to move from commitment to action is more urgent than ever. The Open Government Partnership was identified in the communiqué as a key mechanism to monitor implementation. The independent monitoring mechanism and role of civil society innate to OGP offer a sense of optimism that this summit will, for once, lead to concrete outcomes.
And on the trading front, this is not the time to let up. We must secure greater political will to shine a light into all corners of the economy where public assets are in play—including in thetrading sector.
As delegations depart London, we congratulate them on the progress made, and pledge to aid them in translating words into action.
Alexandra Gillies is the director of governance programs of the Natural Resource Governance Institute (NRGI). Daniel Kaufmann is the president and CEO of NRGI. Joseph Williams is NRGI’s senior advocacy officer.
Credit: Photo used under Creative Commons license from Flickr / Commonwealth Secretariat