By Alex Marriage

EU Country-by-country reporting rules are now being discussed by member states and the European parliament. But one of the clearest flaws in the European Commission’s (EC) proposal to increase corporate and government accountability has been ignored. Namely, the EC has included an exemption meaning companies would not have to disclose payments in countries where criminal law prohibits such disclosure. Effectively this poses the question “Should the law apply in places where it is most needed, where governments are determined to pass laws to hide their own wrongdoing?”

However no one has been able to produce evidence that any country in the world has a secrecy  law  that applies to the type of information that would be covered by the EU country-by-country proposal. Opponents of transparency have given examples like Angola, but this is spurious as although there is a confidentiality clause for oil contracts it does not apply where regulators from the country where a foreign company is from demand disclosure. Revenue Watch Institute and Columbia University School of Law studied 140 resource contracts and found in all cases that companies disclosed all information required by regulators in their home country. So the EU’s transparency bill is being knocked off course not by secrecy laws but by imaginary laws. If such secrecy laws don’t exist the EU should not be encouraging countries to create them. Governments can easily be tempted to act quickly to make legal changes. For instance, elements in the South African Government moved to neuter the police anti-corruption unit when it started to unearth high level corruption.

In 2010 USA introduced country-by-country reporting of payments to governments in the extractive sector as part of the Dodd-Frank stock market regulations, introduced after the financial crisis. The US Agency for International Development (USAID) hit the nail on the head when successfully arguing for the removal of exemptions for countries with laws criminalizing disclosure of facts about resource deals.

 ‘if such exemptions are granted, the intent of [Dodd-Frank] will then be easily thwarted by every opaque government seeking to hide some or all of its revenue streams’.  USAID

The wider the coverage of country-by-country reporting the more damaging this exemption will be and there is growing political pressure to enhance the EC’s proposal, see Pressure mounts to strengthen EU country-by-country reporting