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08/12/2016

France demands greater transparency from extractive industries

Development Policy

France demands greater transparency from extractive industries

British coal miners. Welby Grange, 2011.[Nottsexminer/Flickr]

The French parliament has adopted the first European directive to increase transparency in the extractive industries. Producers of wood, oil, gas and minerals will now have to declare payments to the states where they operate.

France had until July 2015 to implement the European directive on transparency in the extractive industries, but completed the task ahead of schedule.

French MPs adopted the bill on 18 September, assimilating the directive into French law. One of the directive’s chapters requires extractive businesses to publish an annual report on payments of over 100,000 euro made to foreign governments, “broken down by country and by project”.

The objective: to fight the corruption and the lack of transparency that surround transactions in the extractive sectors (oil, mineral, natural gas, etc.), particularly in developing countries.

 >> Read: EU moves again on financial disclosure of extractives industries

The UK made the directive law at the end of August, and was the first member state to do so. The first declarations from British companies should take place in 2016.

The United States became the pioneers of transparency in the mining sector in 2010, when it adopted legislation obliging Wall Street-based mining companies to report on payments to the governments of countries where they operate.

A minimal transposition

The French government believes the legislation places France at the top of the class in terms of transparency in the extractive industries. Christian Eckert, Secretary of State for the Budget, said, “France will be the only country to transpose the directive by 2015 whilst others will take until 2016”.

But the picture painted by non-governmental organisations is not so rosy. In a joint statement, NGOs Oxfam France, CCFD-Terre Solidaire, One France, Secours Catholique/Caritas France and Sherpa said that the bill was “a missed opportunity to combat tax evasion in particularly opaque sectors, whose activities do not greatly benefit the populations of developing countries, rich in natural resources”.

Fighting tax fraud

Under this new law, extractive companies will only be required to publish payments made in the countries where they carry out their activities. A subsidiary of the same company registered in a tax haven like the Bahamas would be under no obligation to publish this information.

“Banks are the only businesses today that report on the activity of all their subsidiaries worldwide. It is now necessary to broaden these obligations to include all businesses, to make real advances in the fight against tax evasion,” the NGOs added.

In implementing the directive, the French government was also careful not to put French businesses like Total or Areva at a disadvantage compared to their foreign competition. “This is a very competitive sector and I would not want to impose restrictions on French businesses that are not imposed on other businesses from Europe or the rest of the world,” rapporteur Christophe Caresche explained.

The question of the fight against tax fraud is set to return to the international stage with the summit of the G20 finance ministers, taking place on 20 and 21 September in Cairns, Australia.

Background

EU member states are under pressure to approve a bill on transparency regarding the overseas operations of mining and oil companies registered within the Union, following the adoption of similar rules in Washington.

The recent European directive requires all European based companies in the extractive and forestry industries to publish details of their financial activities outside the EU.

Further Reading