At the 5th Global Conference of the Extractive Industries Transparency Initiative (EITI), the CEO of Royal Dutch Shell, Peter Voser, indicated that Shell can support a global mandatory reporting rule, based on the EITI methodology which brings together governments, industry and civil society and respects a host country’s sovereignty. Legislation should be co-ordinated across countries and based on a clear, reasonable and consistent scope.
Unilateral approaches such as the Dodd-Frank act – which has been enacted in the USA – risks creating a situation whereby one country’s reporting rules conflict with the laws of other countries and undermine their sovereignty. Given that we want to obey the law in all the countries where we operate this type of approach would place companies in a very difficult position, and undermine co-operative approaches like the EITI.
At Shell we believe that the co-operative, multi-stakeholder approach of the EITI offers the best prospect for seeing real benefits accrue to people on the ground in host countries where extractive industries operate. We will continue to give the EITI our active support.
Remarks to the 5th EITI Global Conference 2011
Good morning your excellencies, ladies and gentlemen,
It gives me great pleasure to be speaking here today in Paris at the Global Conference of the Extractive Industries Transparency Initiative.
As you know, Royal Dutch Shell has played a large role in the founding of the EITI, in October 2002, and we continue to actively contribute to the EITI.
We are honoured and pleased to be taking on full board membership this year.
A lot has been achieved since the last EITI global conference took place in Doha 2 years ago:
We have moved from 26 to 35 countries implementing EITI.
Of those, 24 countries have achieved EITI candidate status. To our great satisfaction Iraq became a candidate last year and needless to say we are fully supportive of its endeavours to complete EITI validation by February 2012.
11 countries are now EITI compliant.
These are fantastic achievements!
We recognise that the momentum in EITI has taken time to build but we feel strongly that the benefits from the validation process are key to EITI’s long term success.
I am confident that the other EITI candidate countries, with all of our support, will meet that milestone of validation as well and Shell will continue to work for this goal.
These are encouraging signs and I would like to thank Peter Eigen for the great work he has done as EITI Chair. And we look forward to working with Clare Short as the new EITI Chair, with Peter continuing in his capacity of EITI Special Representative.
But as we all know, the major change to revenue transparency last year came from the USA, with the enactment of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Before I discuss Dodd-Frank let me be clear why we as supporters of the EITI believe so strongly in its future.
First and foremost, we believe the EITI is important to the communities we operate in. We did not join the EITI simply to please our investors.
What we like about the EITI is that it can drive positive changes in countries and help governments to serve their communities and citizens well.
Let me give you two examples to illustrate this point:
The reports published by the Nigerian EITI have had a positive impact in terms of the disclosure of payment data that had never been publicly disclosed before.
They have also provided useful feedback to the government revenue agencies about the effectiveness of their revenue collection processes, allowing for improvements to be made.
For example, the 1999-2004 report has highlighted the need to strengthen the capacity of the Federal Inland Revenue Service (FIRS) to assess and collect Petroleum Profits Tax and other direct taxes from the joint ventures, production-sharing contractors and sole risk operators.
In Iraq we feel that the EITI process has contributed to a better understanding by civil society of how we operate – including how revenues are shared – and how the industry presence could be a force for good in the reconstruction of the country. This is especially the case for the local NGOs who are represented on the Iraqi stakeholder council.
What these examples tell us is that transparency by itself cannot and must not be the goal. Rather, that development is the goal and transparency a tool to get us there:
Transparency alone does not provide jobs to a community;
It will not build schools, roads or hospitals.
It by itself cannot mitigate social tensions or encourage political stability.
No: at the end of the day, the reason EITI can make a real difference to people is the direct involvement of host country governments.
Companies and NGOs can contribute a lot, but we do not determine or control how taxpayers’ money is spent.
Only governments are in a position to determine the best use of the payments they receive from the industry.
Through the reconciliation process of the EITI, governments become participants in the process and can be held accountable accordingly.
Not mere observers, they are involved in a process which provides clarity around their actual revenue streams and gives insight into where the revenue comes from.
With this clarity and insight governments and only governments can take the next step in our journey – improving the lives of their citizens.
So I hope we all can agree that transparency for the sake of transparency is not enough and that transparency should help to advance society.
This is where we at Shell believe the EITI succeeds and Dodd-Frank fails.
For Dodd-Frank the highest goal is transparency. There is nothing more.
Dodd-Frank does not seek to involve foreign governments in the improvement of their communities.
Rather, it is based on the assumption that foreign governments are not only irrelevant in this process but are the problem rather than the solution.
Not only does Dodd-Frank ignore governments, but some in civil society organisations have argued that it may and should even require companies to violate host countries’ sovereignty and disclose information that is prohibited by these countries’ governments.
I don’t support this and hopefully the Securities and Exchange Commission will share my view as well.
I fear that once countries stop respecting each other’s laws, and even encourage industries to violate the laws of other countries, then there is little hope that we will be able to work through our disagreements.
With Dodd-Frank, voluntary approaches such as the EITI will be undermined and eventually could be destroyed.
Global reporting rule
But today I speak not to confront, but to offer an alternative that does respect the sovereignty of the countries we operate in.
In principle, we at Shell can support a global mandatory reporting rule, provided it is based on the EITI methodology and consists of coordinated legislation across countries, and provided that this legislation is based on a clear, reasonable and consistent scope and respects host governments’ sovereignty.
So let me summarise: we believe that host countries need to be at the heart of the solution and therefore EITI is the most effective tool to achieve the ultimate goal of improving the lives of the communities that we, as extractive companies, work together with.
I suggest that improving lives is the ultimate objective which we are all seeking to achieve, with greater transparency as an important tool to get there.
We at Shell look forward to continuing to be a very active participant in this journey.