CONTRACT TRANSPARENCY

The contracts between governments and oil, gas and mining companies are central to any effort to trace revenues and expenditures in the extractive industries. Extractive industries contracts determine the benefits, obligations and indeed the transparency of the agreements between countries and industry.

The recent commodities boom in oil, gas and mineral resources such as copper, tin and iron–driven in part by growth in middle-income countries such as China and India–has resulted in unprecedented profits for many extractive companies. But in many countries where these resources are found, government budgets remain meager, high poverty levels persist and development indicators are dismal.

If citizens are to know whether payments and receipts from extractive companies reflect a fair deal for the country, the contracts on which they are based must be made transparent as well. Unfortunately, the widespread use of confidentiality clauses often protects oil, gas, and mineral contracts from this much-needed disclosure. Companies typically claim that payment information is proprietary and would either cause commercial harm if made public or would lead citizens who lack an understanding of industry dynamics and investment risks to demand overly generous terms for their countries. Likewise, policymakers who commit their countries to bad deals based on poor information, advice or outright corruption fear a political backlash if they make these contracts public.

Revenue Watch is actively engaged in an international effort to promote greater contract transparency, through both research and advocacy. We are supporting the Publish What You Pay coalition in its efforts to embed contract disclosure requirements in US and international legislation. Revenue Watch and our partners are also working to collect, compare and analyze relevant government contracts.

Given the central role that contracts play in managing the relationship between governments and extractive companies, RWI and the Publish What You Pay campaign are calling for the publication not just of revenues and expenditures in the extractive industries, but publication of contracts as well. International Financial Institutions such as the World Bank and the IMF are also beginning to encourage contract transparency.

RWI is currently conducting a survey of contract reviews and renegotiations in the extractive industries. Our policy research seeks to provide insight into how both companies and countries can create contractual and legislative regimes that provider greater economic benefit to host countries.

We are also collaborating in a comparative study on regulatory and contractual restraints on transparency. In partnership with the Human Rights Institute at Columbia Law School, RWI is undertaking a broad survey of stock exchange disclosure requirements, national oil and mining laws and extractive industry contracts. The research aims to survey and assess the information in the public domain, explore how to make that information more accessible to civil society and governments, and suggest information-sharing methods that do not threaten the legitimate business and security interests of extractive companies or host governments.