photo: wallyg

This week in the United States, a new law called the Dodd-Frank Wall Street Reform and Consumer Protections Act (or the 'Dodd-Frank Reform Act' for short!) passed both the House of Representatives and the Senate, and is expected to be enacted by the President later this week.  Ground-breaking 'anti-corruption' provisions in this new legislation will have big implications for the extractive industries, and global justice.

Key new disclosures required

The Dodd-Frank Reform Act will require that companies in the oil, gas or mining business must disclose thorough details about any payments they have made to overseas governments during the year, if they are to have their shares traded in the United States.

The disclosures required will include taxes, royalties, license fees, production entitlements, bonuses, and other benefits paid by companies to any part of an overseas government.  The companies obliged to do this will include both US-based and international companies - any that trade on US stock exchanges.  Those companies will also have to disclose this information for any of their subsidiaries, or other companies under their control.

You can read the text of the Bill as it stands here.

Importantly, the US also has a powerful and well-resourced regulator to enforce their disclosure requirements - the Securities and Exchange Commission.  These requirements are very unlikely to end up as words sitting idly on the legislative books - they are likely to have real and specific impacts on company disclosures.

Leading the field

It's encouraging to see a major Western state starting to take on one of the major problems with the operation of the multinational extractive industries.  The money paid by Western multinationals to overseas governments, and the legitimacy of those payments, is a major concern for global justice.  Shining light on these payments is needed to ensure the accountability of companies for their use of money to leverage access to resources, and can also shine light on the fairness of the deal that populations outside of government get out of resource extraction.

Who next to step up?

Will the UK, or the EU, follow in the footsteps of the US in requiring these kinds of disclosures from those on our stock exchanges?  Civil society groups are certainly calling for the UK to do just that (see here), and a number of UK Parliamentarians have expressed a willingness to support such a move (as you can read here).

I hope that they will do so, and that we'll see similar legislative requirements put in place in the UK and Europe, alongside broader reform of company reporting law.  Transparency on these payments go to the heart of the legitimacy or otherwise of the West's international role, and the justice with which the resources that underpin many of our lives are extracted.  It can make sure that companies based or traded here operate in an honest and legitimate manner.  It can also protect investors or shareholders, making sure they have a full picture of the relationship a given company has with the government of key States, particularly where the political picture is complex or unstable.  For all these reasons disclosure requirements of these sort should be seen as a priority - I hope they're now seen as such by lawmakers and politicians in the UK and Europe.