Guidance Note: EITI Requirement 2.2
Contract and license allocations
|This guidance note refers to the 2019 EITI Standard.|
Governments in most resource-rich countries have established systems for allocating contracts and licenses to companies for the exploration and exploitation of oil, gas and minerals. Often, these allocation procedures are defined in publicly available legislation and regulations that set out how and on what terms companies are granted rights. Sometimes, however, these procedures are unclear, which can increase corruption and investment risks and lead to revenue losses for both governments and companies.
Reporting information about license allocation systems enables citizens to access essential information about how the country’s natural resources are developed and managed. It is also a first step towards ensuring that licenses are not obtained through inefficient or corrupt practices or acquired by politically connected individuals. In cases where there are deficiencies or vulnerabilities in the licensing process, stakeholders can draw on disclosures to press for reforms for more transparent and efficient licensing systems. Transparency in contract and license allocation can also help improve the investment climate and the potential for extractives to contribute to sustainable development.
Requirement 2.2 of the EITI Standard requires that implementing countries disclose information about license awards and transfers that take place during the accounting period covered by the EITI reporting cycle. This information should include a description of the process for awarding and transferring licenses, the criteria used, as well as deviations from the legal framework and policies on license allocations. Disclosures may also include additional information on the licensing process, such as commentary on the efficiency and effectiveness of these systems.
This note provides step-by-step guidance to multi-stakeholder groups (MSGs) on how to address these issues as part of EITI implementation and strengthen regular disclosures related to licensing. It should be read alongside guidance on license registers (Requirement 2.3) and beneficial ownership of license holders (Requirement 2.5).