When the EITI family met in Lima back in February this year it revised the EITI Standard. The 2016 EITI Standard made some significant improvements from the 2013 Standard which was hugely different from the previous EITI Rules. The 51 EITI implementing countries have over the years upped their commitments in quite an extraordinary way.
From simple figures to comprehensive information
The EITI began with some relatively simple rules about the reconciliation of payments by operating companies and receipts by government entities. Through the introduction of the 2013 EITI Standard, implementing countries decided that they would to a greater extent develop their own national EITI objectives while committing to a more comprehensive disclosure standard. EITI Reports now provide data on laws, contracts, license allocation, state participation, trading of commodities on behalf of the state, social payments, transfers and more. In some countries, this data was already available. In other cases, new reporting systems have been built from scratch. Hence the tagline for the Lima Conference: “From Reports to Results”.
Building on the 2013 Standard, there were in particular three key changes agreed through the adoption of the 2016 Standard.
First, it was decided that beneficial ownership reporting should be required. The 51 EITI countries have until 2020 to put this in place, starting with setting out their plans in beneficial ownership roadmaps before the end of 2016. This commitment to beneficial ownership reporting is groundbreaking. It speaks to an enormous political will to not only make sure that citizens have reliable information about what is paid, but also that they can understand who the government is doing business with. It is a significant task to turn these commitments into reality. Laws may need to be amended, registers needs to be built and there has to be standards that can be easily followed for defining beneficial owners.
The second main change – opening for mainstreamed EITI reporting - reflects an appreciation that the EITI is not effective if transparency is confined to stand-alone EITI Reports. Rather, transparency should become part and parcel of how governments work. The 2016 EITI Standard encourages implementing countries to mainstream transparency, so that up-to-date information is routinely available. EITI implementing countries are increasingly making the information required by the EITI Standard available through government and corporate reporting systems (databases, websites, annual progress reports, portals etc.). Here’s an update on this work from our Asia team.
The other main change with the 2016 Standard is that it introduced a new system for how implementing countries’ performance is considered. Where it used to be that countries were first candidates and then became compliant, performance is now captured in various levels of progress. When implementing countries are validated, the EITI Board will decide on how much progress has been made against each requirement. Through this revised system, the EITI will hopefully provide a more nuanced assessment of progress and better incentivize continuous reforms.
Validation now assesses progress and improves implementation of the Standard
When the EITI Board met in Astana 24-25 October, it was the first time it considered a Validation under the 2016 Standard and it did so for Azerbaijan. The Board concluded that Azerbaijan had made meaningful progress with considerable improvements across several requirements compared to its first Validation in 2015. Azerbaijan now has a couple of months to implement corrective actions addressing the EITI Board’s concerns related to the environment for civil society to participate in the EITI process.
Over the next three years, all 51 countries will undergo Validation. This is a significant challenge both for the countries and the EITI itself. It should reveal in some detail the extent to which countries are becoming more open in how they manage their oil, gas and mineral resources.
Let us remember that improved Validation is about improving implementation. By knowing more exactly about what is and is not being done, EITI reporting and the underlying government systems are improving. In addition to the Board’s recent decision related to Azerbaijan, the Validations of Mongolia, Nigeria, Peru and Timor-Leste’s are close to completion. We must all now rally around reformers.
We must use Validation to further improve the quality of reporting, to continue on the road towards more openly available data, towards mainstreamed reporting and towards beneficial ownership reporting.