Australia has taken a significant step in supporting a global
movement for accountability and transparency in the mining and
extractives industries. On 28 October 2014, Greens leader Christine
Milne introduced the Corporations Amendment ('Publish What
you Pay') Bill 2014 to the Senate. The legislation would
establish mandatory reporting of payments made by Australian based
resource extraction companies to governments in Australia and
around the world. Introduction of the Bill follows the
global decade long 'Publish What You Pay' movement to
encourage full public disclosure of oil, gas and mining revenues in
resource-rich countries. The Bill aims to stamp out
corruption in the industry through mandating public disclosure of
all payments to governments and encouraging governments to publish
funds received, so that a full accounting may be disclosed.
If passed, the legislation will require Australian public and
large proprietary companies (or subsidiaries of those companies)
that carry out resource extraction activities (including mining,
oil and gas, and logging) to submit annual financial reports
detailing all payments made to Australian and foreign government
entities that relate to extraction activities valued over
AUD100,000. The obligation will include all stages from exploration
through to rehabilitation. The Bill follows the introduction of
similar legislation in the Unites States, Canada and United Kingdom
and is the next step in the completion of the Australian pilot of
the Extractive Industries Transparency Initiative (EITI).
The EITI is a voluntary mechanism under which governments,
companies and civil society have sought to enhance openness and
accountable management of natural resources revenues. The EITI is
premised on the theory that enhanced transparency and dialogue will
assist in overcoming poverty, conflict and corruption - the
"resource curse" afflicting many developing country
economies that are heavily reliant on resource extraction.
Globally, there are 31 EITI compliant countries and another 17
In its current form the Bill will mandate filing of an
annual report of payments on a country-by-country and
project-by-project basis. The disclosures are intended to capture
not only 'traditional' payments to the government such as
royalties, license fees and taxes, but also indirect payments such
as 'infrastructure improvements', 'social payments'
and 'security services'. Disclosure will be mandatory for
cash or in-kind payments. The disclosure will be required for
directly controlled and joint venture subsidiaries. The Australian
Securities Investment Commission (ASIC) will then be required to
disclose the reports within 28 days of receipt.
ASIC may, under certain circumstances, make an order relieving a
company of its reporting obligations if disclosures substantially
hinder the company in the exercise of its rights over the assets or
management of the subsidiary; (ii) the information necessary to
comply with the requirement cannot be obtained without
disproportionate expense or undue delay; or (iii) the subsidiary is
a subsidiary of the holding company only because the holding
company holds shares in the subsidiary for the sole purpose of
The Bill raises a number of important issues for
Australian resources companies, including the management of
confidentiality provisions in agreements with foreign governments
and the potential ramifications of breaching those agreements in
order to comply with the compulsory disclosure regime. Australian
resources companies should carefully monitor progress of the
Bill and their obligations within it.
If enacted, companies will need to consider the consequences of
disclosing host government payments, in particular whether such
payments include any confidential information, or could otherwise
impact on third party obligations (such as non-Australian resident
joint venture parties). Consideration should also be given to
implementation of appropriate systems and controls to ensure that
all payments to government entities, that are subject to the
Bill, are recorded in a central location to ensure
compliance if the Bill is passed. If companies propose to
enter into new agreements with foreign government entities, it will
be prudent to closely consider the impact of the Bill on
any confidentiality obligations when negotiating those
The K&L Gates Energy, Infrastructure and Resources Group
will continue to monitor progress of the Bill and will
provide updates as required.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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