Ten years on from its launch, the EITI has developed its standard and is expanding its membership

Earlier this year, the Extractive Industries Transparency Initiative took a major a leap forward with the adoption of a stricter new standard at its biennial conference in Australia.

“[This] is an illustration that multistate corporate governance need not be a feeble lowest common denominator effort, but can reflect real leadership in taking policy where it hasn’t been before,” says Jonas Moberg, head of the EITI’s secretariat in Oslo.

When EITI was launched 10 years ago, both governments and companies resisted disclosing even basic information. “With the new EITI standard, the consensus as to what should be disclosed has broadened significantly,” says Moberg.

The new standard requires going beyond merely looking at fiscal data – such as corporate tax and other payments – to look in detail at the licensing application, beneficial ownership, and specific contractual provisions that apply to resource extraction.

Although “any country with a significant resource extraction sector could benefit from implementing the EITI standard”, Moberg says, initially, the EITI was aimed at developing countries with a large dependency on resource extraction.

“Now, there’s been a shift to middle and higher income countries also implementing the EITI standard,” says Moberg, with the UK and France announcing intentions to join the EITI at the meeting in Australia, and Italy and Germany following at the G8 Summit in June. Forty-one countries are presently implementing the EITI standard.

EITI itself has no authority to enforce its standard by taking domestic or international legal action against countries that fail to meet their EITI commitments. But it can determine its membership – an authority it has used to enforce compliance.

“EITI delisted Equatorial Guinea in 2009, São Tomé and Príncipe in 2009, and Gabon in 2013. Currently, the EITI has suspended the Central African Republic, DR Congo, Madagascar and Sierra Leone, and each of these countries could face delisting, if remedial measures are not taken,” says Anders Kråkenes, EITI communications manager. São Tomé and Príncipe responded to EITI censure and the island nation has been readmitted to the organisation.

“What is always hard to get people’s heads around is that EITI started as a quasi multilateral response to NGO campaigning,” says Moberg. “The early hope was that it would result in a voluntary corporate social responsibility code. But it’s gone much further. The EITI instead evolved into a standard implemented by governments.”

US to join the party

In addition to the four EU countries that have announced intentions to join EITI, the US has revealed similar plans, and is expected to submit its EITI application early in 2014.

The EITI’s focus on transparency and disclosure has also stimulated tightened accounting disclosure requirements in both the EU and the US for companies involved in resource extraction, requiring them to report payments to government officials in third countries. (The US requirements are temporarily in limbo, following an adverse court decision in July.) 

Although the new US rules don’t make such payments themselves any more per se illegal than they already are under existing US law, inaccurate disclosure of such payments could trigger US securities law liability, and possibly prompt private lawsuits by investors. And the increased transparency will also alert the media and civil society groups in countries where such payments are made.

corporate governance  EITI  extractives  transparency