TI: NR CORR

A lack of transparency throughout the contracting process – from planning, to allocation and award, to the terms and implementation of a contract – allow space for corruption to occur. The details of contractual arrangements for companies to exploit natural resources are often not disclosed, and when they are, are unduly complex

LEGAL/REGULATORY FRAMEWORKS

“Contract” vs. “law-driven” systems

A/Countries with well developed “law-driven” systems, allocate permits and licenses for mining based on a clear legislative framework with minimal space to negotiate terms

B/ countries with less developed legal frameworks may grant rights through individually negotiated agreements. Such “contract-driven” systems often result in more ad-hoc and opaque processes

TRANSPARENT LAND USE PLANNING AND REGISTRIES

Before a government takes the decision to lease out land or allow for extractive activity to take, some key prerequisites should be in place.

1) Land rights (both surface and sub-surface) should be recognised and transparently registered. This ensures that there is clarity regarding land ownership and avoids negotiations taking place over areas of conservation.

2) A comprehensive Environmental Impact Assessment EIA, should be conducted

3) Governments should follow their international obligations to consult with communities that will be affected …eg rights of indigenous peoples to Free, Prior and Informed Consent (FPIC).

1. Recognition of land rights and transparent land registries

BUT…communities have it difficult to exercise their rights, due to the lack of comprehensive, transparent and accessible registries of land tenure and sub-surface rights

Indonesia’s “One Map” policy is seeking to address this challenge, by creating a single portal for all land use (including extractives, protected forests, plantations, agricultural areas and customary lands) – and make the data publicly accessible and shareable

Another good practice in this area can be found in New South Wales’ “Common Ground” website, which the government of New South Wales developed to provide accessible and understandable information to their citizens on mining production and exploration in the state

2. Environmental Impact Assessments

3. Consultations and Free Prior Informed Consent

the ILO Convention 169 (1989) and the UN Declaration on the Right of Indigenous Peoples (2007) enshrined the right of indigenous groups to obtain free, prior and informed consent (FPIC) before any actions that take place on their lands. The FAO Voluntary Guidelines on the Responsible Governance of Tenure, includes FPIC for indigenous peoples. Civil society campaigning calling for the extension of FPIC to other (not only indigenous) affected communities was unsuccessful, however the FAO Guidelines do call for “consultation and participation” with all affected groups 

the timing of consultation affects corruption risks

Enshrining FPIC in national laws means that indigenous communities can seek recourse in the courts when their rights are violated. For example, in 2016 in Colombia, the Constitutional Court invalidated a series of administrative decrees that created numerous “strategic mining areas” on the grounds that the government had failed to consult with indigenous and Afro-descendent communities living in the designated areas. Even though no licences had yet been granted, the Court held that the government had a duty to consult before the land was allocated to mining

is good idea to draft a “Community Protocol” …include:

a description of the community, its leadership, and decision- making processes, including how they have defined free, prior and informed consent; an assertion of their customary laws and linkages with their bio-cultural ways of life; a map of their traditional territories and a description of their bio- cultural heritage; an inventory of their rights, according to national and international law

In the extractives industries there is an increasing trend towards the development of “Community Development Agreements” (CDAs) which seek to define the relationship between a company and the affected community 

TRANSPARENT ALLOCATION AND AWARD OF CONTRACTS

Host and home governments must guard against bribery and undue influence in decision making over leases and concessions

However, competitive bidding is not always possible or appropriate, in particular with respect to the allocation of mining licenses where the extent of economically viable mineral resources is harder to ascertain. For this reason, direct allocation or the rule of “first come, first served” is more common in the mining sector,

Where negotiation of a contract is part of the allocation process, governments should disclose which terms are negotiable and which are fixed, for example by publishing a model agreement and the final contract 

Where possible, putting in place an online submission and allocation process increases transparency. Governments should publish information on final decisions that have been made and provide clear and understandable justifications. Mexico’s National Hydrocarbons Commission (CNH) publishes schedules and agendas and web-casts its meetings where decisions on licenses and permits are made, allowing viewers to follow the decision-making process live

Governments should appoint independent bodies responsible for the allocation process

CONTRACT TRANSPARENCY

should be an obligation…. unless it can be proven that disclosure would harm commercial competitiveness or not be in the wpi

natural resource contracts should be disclosed, and include:

1. Who are the Parties to the contract, and how are they involved in the investment? (Includes: names of company, sub-contractors, affiliates, and beneficial owners; financial intermediaries and backers, and any third parties to the contract, such as affected communities).
2. What rights, responsibilities and obligations does the company have? (Includes: concession area and nature of rights, business plans and development intentions; terms of procurement; value of land, rents, and fees, projected profits and revenues, taxation regimes, and closure plans; Inter-relationship of legal jurisdictions and how they apply in the event of dispute; Obligations of the business enterprise, including how they will liaise with employees, local communities (respecting and protecting the rights of local communities and landholders), and maintain the environment; Obligations of the State to monitor the implementation of the contract’s terms and conditions, including grievance mechanisms, sanctions, and penalties in the case of non- compliance.
3. What have they done to assess and mitigate potentially negative impacts? (Includes: Publicly agreed and documented evidence of human rights, socio-economic, environmental, due diligence, food security, value and supply chain, and other impact assessments; Publicly agreed and disclosed mitigation and management plans; Resettlement and compensation plans.)

Since 2013, the Extractive Industries Transparency Initiative (EITI) has encouraged contract disclosure and the prevalence of contract transparency among EITI countries has increased significantly

For contract disclosure to be effective in tackling corruption, it must also be timely. Contracts should be published online and made available to affected communities without internet access, and also be made available in local languages

A good example is  ResourceContracts.org  ,developed by CCSI, NRGI and the World Bank, a user-friendly database of over 1,500 publicly available oil, gas and mining contracts from over 90 countries. CCSI has since supported a number of governments development their own country specific mining contract databases

EG:  The contract between the South Sudanese Government and the American company Nile Trading and Development, was for a 49-year lease for 600,000 ha, with a possibility of the company expanding this by a further 400,000 ha for US$25,000 (US$16 per ha), including unencumbered rights to exploit all natural resources in the leased land. The publication of the contract resulted in the community of Mukaya Payam leading a protest against the deal, which ultimately led to the President revoking it

TACKLING COIS

[government officials or their close associates] =  PEPS [“Politically Exposed Persons” ]

PEPS usually hold interests in mining companies. To mitigate this risk in Colombia, public bodies have a legal duty to keep registers of the assets and income of their staff. Unfortunately, these declarations are not always updated or thoroughly verified, and the regulation does not extend to consultants or contractors…also, NRGI bans PEPs from holding interests in companies applying for extractives licenses.

…however, these prohibitions are useless, because there are no BORs

EITI requires that by 2020 EITI countries ensure that all companies operating in their jurisdiction publicly disclose the identity of their BOS when applying for, or when holding a participating interest in, a domestic oil, gas reviewed mining and oil laws 

For example, Peru’s mining authority INGEMMET requires contractors and employees to submit a legal declaration that they do not work with private companies related to the authority and has further strengthened its access to information systems to allow tracking of any complaints made

EITI is the most comprehensive and far reaching multi-stakeholder transparency initiative to tackle natural resources,  and is implemented in 52 countries around the world

OVERSIGHT AND STAKEHOLDER INTIATIVES

independent monitoring :

audits, parliamentary oversight, civil society, media monitoring, as well as corporate transparency and monitoring.

CORP. LIABILITY

 by companies engaged in negotiations around natural resource exploitation. They should:

1. Conduct a risk assessment program
2. Develop a corporate anti-corruption policy
3. Implement anti-corruption policies and controls
4. Implement anti- corruption financial controls
5. Conduct anti-corruption compliance training
6. Monitor the program
7. Anti-corruption procedures in M&A

Where local mediation has failed, redress has been sought through the national/interl courts/ICC

eg. In 2016, a grand jury in Liberia indicted top government officials for conspiring to amend key laws to enable a London-listed company, Sable Mining SBLM.L, who allegedly paid US$950,000 in bribes to gain rights to one of the world’s richest iron ore deposits, the Wologozi Mountain Range

eg. In Cambodia in 2014, NGOs submitted a communication on land-grabbing to the ICC prosecutor’s office, alleging that land-grabbing has constituted a crime against humanity in the country