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GREAT insights Magazine

Empowering citizens in the extractive industry: Make contracts public

23-04-2015

Boden, G. 2015. Empowering citizens in the extractive industry: Make contracts public. GREAT Insights Magazine, Volume 4, Issue 3. April/May 2015.

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Imagine your government passes a law that could mean your home and job are taken away from you. It sets out whether you will be consulted or compensated and how your family and your local environment will be protected but you cannot read this law – it is kept hidden from public view.


Hidden contracts


It sounds outlandishly unfair, but a version of this scenario happens all too often to people living in mineral-rich developing countries when their government refuses to publish the contracts they have signed with oil and mining companies. The effects of these contracts are often as comprehensive as a national law or an international treaty and they last for generations. Land can be taken from people without their consent. Environments can get trashed and human rights abused. But unlike laws and treaties, these contracts are often hidden from the very people they affect.

Take Uganda’s oil contracts. Global Witness recently published two Production Sharing Agreements signed by the Ugandan Government, along with the first ever open source oil contract financial modelling tool. Until now, these contracts were not available to the public.

Global Witness was able to analyse their strengths and weaknesses and came to the view that while the contracts put more money in state coffers than previous contracts, they do not contain adequate measures to protect Ugandan citizens and their environment. The Lake Albert region, where oil exploration is currently taking place, is one of the most ecologically diverse areas in the world and yet it is afforded minimal protection under these contracts. Global Witness only found this out because they had seen the contracts. 


Exploration risks


Secrecy aside, there is no evidence of corruption, mismanagement or human rights abuses in relation to these Ugandan contracts. But the risk is there – exploration is at an early stage, and oil and mining companies frequently face such allegations elsewhere. Oil, gas and mining are all key factors in both economic growth and instability – take South Sudan or Democratic Republic of Congo for example. Doing deals behind closed doors heightens concerns that they favour the interests of a small elite rather than the wider population.

If contracts were made public people could scrutinise them and evaluate if they are getting a good deal, not only in terms of money but also how they are protected from the side effects of extraction and what their rights are. Such transparency empowers citizens and parliaments to fully understand the legal obligations of extractive companies as well as some of the risks. It also makes it harder for government officials to negotiate bad deals through lack of capacity or incompetence.

Poor resources and a lack of coordination amongst government agencies often mean that contractual commitments made by companies are not properly monitored. Wider public knowledge of these commitments through the publication of contracts would make it much easier to ensure that companies are adhering to what they have agreed to.


Consenting to transparency


Industry and governments will often claim that the information contained in extractive contracts is commercially sensitive, but this doesn’t wash. The International Monetary Fund has found that contract terms are likely to be widely known within the industry soon after signing, so little, if any, strategic commercial advantage is lost from publication. Indeed Simon Thompson, the Chairman of Tullow Oil plc, speaking at Chatham House in October, conceded that in the past confidentiality clauses were simply customary in these contracts and that this “may well change with time as more and more agreements become public”. It is worth noting that Tullow Oil plc already publishes its Ghana Petroleum Agreements at the request and with the approval of the Government of Ghana and has signalled its willingness to also publish in Uganda should the Government of Uganda consent. It is heartening that some governments are already taking steps to publish the contracts they have signed, proving that contract transparency is more than possible.

Contract confidentiality is an anachronistic customary hangover in the context of government contracts. It was a business principle designed with two companies entering a deal with each other in mind, but when applied to government natural resources contracts it undermines democracy and encourages corruption.

Extractive contracts need to be made public so that citizens can not only see what is happening to their resource wealth but can also understand what safeguards have been put in place for them and their environment. These contracts can dictate what will happen to citizens over a period of 30 years – that’s often longer than many national laws. People have a right to know what these contracts contain, it is a fundamental principle of democracy and it should be the norm.

george boden photo

George Boden leads the Uganda campaign at Global Witness.  Twitter: @georgebodengw

This article was previously published as a blog on http://www.globalwitness.org/


Photo: Ugandan anti-corruption sign – www.futureatlas.com

This article was published in GREAT Insights Volume 4, Issue 3 (April/May 2015).

African institutionsCross-cutting TopicsEconomic Transformation and TradeExtractive SectorsCivil societyDemocratic ownershipDemocratisationAfrica

External authors

George Boden