On 9 April 2013, the EU Member States, Parliament and Commission agreed to adopt new transparency rules for oil, gas, mining and logging companies.
The agreement requires extractive and logging companies to publish details of the payments they make to governments for access to natural resources, in every country they operate in.
Crucially, extractive companies will have to report all payments of €100,000 and above made for each individual resource project they operate. This will enable people living in resource-rich regions to track the money and ensure it’s used to fund local and national development.
Subject to a June 2013 vote by the European Parliament, the rules will be included in the new EU Accounting Directive. This applies to all limited liability companies that are registered in the EU, including Shell, Rio Tinto and Total.
The rules will also be included in the new EU Transparency Directive. This applies to all companies that are listed on EU regulated stock markets but are incorporated outside the EU, such as Gazprom, Rosneft and Reliance Industries.
Once the Directives have entered into force, EU Members States will have 24 months to transpose them into national law. Companies will publish the information annually in a report, with the first disclosures expected to be published in 2015 or 2016.
Which companies do the Directives apply to?
- All companies listed on EU stock markets that are active in the extractive and logging industries.
- Large, unlisted companies registered in the EU that are active in the extractive and logging industries.
- EU-listed or large unlisted parent companies in any sector with subsidiaries active in the extractive or logging industries.
- Small- and medium-sized unlisted companies that have EU-listed subsidiaries active in the extractive and logging industries.
What commercial activities do the Directives apply to?
Companies are to publish payments made to governments for the exploration, prospection, discovery, development and extraction of mineral, oil and natural gas deposits. In addition, forestry companies will need to disclose payments that arise from the logging of primary forests.
What types of payments need to be disclosed?
- Taxes on income, production and profits.
- Royalties.
- Fees, including licence and rental fees.
- Bonuses, including production and signature bonuses.
- Production entitlements.
- Dividends.
- Payments for infrastructure improvements.
The Directives bring the EU into line with the US, which introduced a similar law in 2012 for US oil, gas and mining companies to publish their payments to governments. Together, the EU and US rules cover around 70% of the value of extractive industry companies that are listed on the world's most important stock exchanges.