UK Crackdown on Foreign State Payments
The UK government said that from 2015 onwards energy and mining firms will be required to disclose any payments made to governments in countries where they operate, in a bid to curb corruption in the natural resources sector.
UK-registered companies will have up to 11 months after the end of their financial year to report payments to Companies House under the new rule, which will take effect from 1 January 2015. The move follows a period of consultation with industry and the public on the proposal.
“The UK is determined to lead by example, which is why we have introduced reporting requirements on UK-based extractives companies early,” said business minister Jo Swinson.
“Oil, gas and mining can, if well managed, deliver precious economic benefits to the populations of developing countries. Too often, though, the assets from resource-rich countries are not benefiting local people or the local economy.”
Reporting on the move, Reuters quoted Rachel Speight, a partner at law firm Mayer Brown, who told the news agency: “While these reforms may be a step in the right direction to eradicate corruption, tax evasion and reduce extreme poverty in emerging markets, a disclosure regime is not of itself a cure.
“The changes may also negatively impact upon the commercial prospects for companies, with significant increased compliance costs and disclosure of sensitive information in circumstances where not all companies operating in the extractive industry are subject to the same regulations.”
Major oil and mining group, including BHP Billiton, Chevron and ExxonMobil, suggested that a UK move ahead of other countries could hit companies as well as Britain’s attractiveness as a location for listing shares and setting up operations.
BP estimated costs of about US$6.5m to deliver the first filing and subsequent costs of US$2.5m annually for setting up a team to interpret the legislation, develop relevant processes and implement them in the various locations where the company operates.
The Association of British Independent Oil Exploration Companies (BRINDEX) said the requirements might affect its smaller members disproportionately, since their systems may be less sophisticated than those of major operators.
“There appear to be very few benefits to our members of publishing the new extractive report, but instead it is imposing another administrative and unnecessary burden on our sector at a time of other similar transparency initiatives,” it said.