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Nigeria: Oil And People - Why Proposed EU Oil, Gas Anti-Corruption Law Is Good f

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The European Union (EU) recent decision to enact a law that will make oil, gas, mining and logging firms declare payments to governments, as part of efforts to end poverty in resource-rich nations is good for our country. The EU law mandates companies to report payments at project as well as country level, beginning at a threshold of 100,000 Euros ($130,600).

The new arrangement establishes rules ensuring that these companies disclose payments to governments (e.g. taxes on profits, royalties, and license fees) on a country and project basis where payments have been attributed to specific projects.

Oil and gas resources are often located in countries with high disposition of corruption. Revenues from the sector are too often vulnerable to corruption and mismanagement, the oil and gas industries have the potential to bring great wealth to countries if they are managed properly.

It is a known fact that the Nigerian oil and gas industry in particular, had acted in ways that were inconceivable, corrupt and embarrassingly inefficient for much too long. For example, Nigeria scored 27 out of a maximum 100 marks and is listed 139 of 176 countries on Transparency International's corruption perceptions index of 2012.

The nature of the petroleum industry makes it a natural focus for enforcement authorities from developed economies. Perhaps, this law may act as gradation to complaints of weak transparent regime in the proposed Petroleum Industry Bill (PIB).

The EU agreement goes further than the U.S. law (Dodd-Frank Act) in that it includes the logging sector and covers large unlisted EU companies, as well as listed firms.

In July 2010, the U.S. Congress passed Section 1504 of the Dodd-Frank Act, a measure requiring companies registered with the Securities and Exchange Commission (SEC) to publicly report how much they pay governments for access to oil, gas and minerals. It is a powerful tool that allows investors to properly assess risk and citizens to see the value placed on their natural resources.

Together with the U.S. rules, the EU rules will cover 90 percent of the world's major international extractive companies. The disclosure requirements will act as catalyst for change in developing countries. Citizens and local communities in resource-rich countries will finally be to know what their governments are being paid by international oil companies for exploiting oil and gas fields, mineral deposits and forests.

The agreement will bring in a new era of transparency to an industry which is far too often shrouded in secrecy and help stem the tide of tax evasion and corruption as well as create the framework so both companies and governments can be held accountable on the use of revenues from natural resources.

Existing EU Accounting Directive regulates the information provided in the financial statements of all limited liability companies which are registered in the European Economic Area (EEA). The same disclosure requirement has been incorporated in the proposal to revise the Transparency Directive in order to include all companies which are listed on EU regulated markets even if they are not registered in the EEA and incorporated in a third country.

The proposed law will in conjunction with the UK's anti - bribery act, the US Foreign Corrupt Practices Act (FCPA) and Section 1504 of the Dodd - Frank Act have serious consequences for corporations carrying on business in the hydrocarbon industry globally.

Corporations involved in bribery committed by persons performing services for or on their behalf anywhere in the world will be mandated by these laws to report such payments to the relevant reporting authorities. This reporting requirement may in some circumstances apply to joint venture relationships which are of course commonplace in the oil and gas industry.

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