European Commission President Jose Manuel Barroso makes a statement on recent developments in Romania following a meeting on July 18, 2012, at the European Union Headquarters in Brussels.
It’s hard to imagine a more uncomfortable issue for U.S. and European natural resource companies than the required disclosure of payments to the resource-owning “governments” with which they do business. How exactly is a company expected to reconcile the normative virtue of transparency with the mean, dollar-driven, shovel-in-the-ground reality that defines much of the resource-rich (and nicety-poor) world? At what point does transparency simply accelerate the deconstruction of a company’s competitiveness (no matter how civic-minded relative to those of unfettered competitors from the east) BRIC by BRIC?
For those resource companies still trying to nudge the SEC’s proposed payment disclosure rules (as mandated by Dodd-Frank’s Section 1504) towards alignment with existing transparency mechanisms in the Extractive Industries Transparency Initiative, Clifford Chance adds a new set of disclosure requirements to worry about.
The European Commission has proposed disclosure rules that in some respects go “further than the US Dodd-Frank Act” and would require all (distinguishable from Dodd-Frank’s application to listed companies) European natural resources groups and companies exceeding fairly modest size thresholds to disclose payments to governments anywhere in the world.
Debate on key issues is heated, notably as to where the payment “materiality” threshold should lie and whether reporting should be on a project by project basis (per Dodd-Frank) or a country by country basis. What isn’t up for debate is this: Disclosure which would be (and is under many existing oil and mining concession contracts) a breach of contract will be required under the rules.
What Clifford Chance stresses, therefore, is that regardless of what the final rules look like when a Directive is enacted into state law by member states (by July 1, 2014), “any European natural resources company negotiating a license or concession with a government today needs to ensure it will be able to comply with forthcoming EU disclosure requirements without breaching its agreement with the host government.”
In short…don’t draft, paint or BRIC yourself into a corner. Read more.
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