The EITI and Parliamentarians – Improving natural resource governance in Iraq Pablo Valverde, Country Manager, EITI International Secretariat 17 October 2016

outline What is the EITI The EITI - The parliamentarian’s swiss army knife Budget oversight, legislation and scrutiny over the sector

History of EITI December 1999

One Standard 51 member countries 51 reasons to implement the EITI

Three core aspects Oversight by the multi-stakeholder group. Disclose information, usually through an EITI report. Disseminate, debate, act on recommendations, make policy recommendations, and review the impact.

A global standard to promote open and accountable management of natural resources along the value chain.  Seeks to strengthen government and company systems, inform public debate, improve policy and enhance trust. 

Government publishes receipts Companies publish payments Informs the extractive industry value chain for parliamentarians Contracts & licenses Monitoring production Revenue collection Revenue allocation Social and economic contribution Licensing information Government publishes receipts National systems Production data Beneficial ownership Company social and infrastructure investments State ownership Production contracts (encouraged) Subnational payments Transit payments (encouraged) Transfers to local government State Owned Enterprises Cadaster Companies publish payments Beneficial ownership (encouraged) Fiscal and legal code Decision to extract Negotiating the best deal Developing the resurce and monitoring operations Collecting and disbursing revenues Tracking and auditing expenditures

outline What is the EITI The EITI – a parliamentarian’s swiss army knife Budget oversight, legislation and scrutiny over the sector

The parliamentarian’s swiss army knife for the extractive sector

Example: Beneficial ownership Beneficial ownership an EITI requirement by 2020 Who owns what? Legal owners, beneficial owners, share of ownership. What is the government policy? Strengthen government systems (public register).

Key messages: There are many definitions of politically exposed persons. Such definitions typically refer to individuals “with prominent public functions”. Some definitions also encompass “family members and close associates”. The EITI Standard states that the definition of beneficial ownership “should specify reporting obligations for politically exposed persons”. It does not define the term PEP. It is for the MSG to decide on a definition, taking into account national laws and global practices. Give examples of PEP disclosure rules in pilot countries: In Honduras, the Mining Law prevents public office holders from obtaining extractive licenses due to potential conflicts of interest. In DRC, there are legal requirements for government officials to disclose assets before taking up and leaving office, including any shares in mining operations. In Zambia, the legal framework stipulates that senior officials must disclose their income and assets in some form. However, in most cases the disclosure is made to an anti-corruption body or other government entity and is not made publicly available to the general public. The Nigeria Code of Conduct and Tribunal Act 1990 require that senior government officials including Political Exposed Persons (PEP) involved mainly in the three arms of government (executive, legislative and judiciary) disclose their assets and interests in companies. “PEPs are individuals who are, or have been, entrusted with prominent public functions, and their family members and close associates.” United Nation Convention Against Corruption (Article Art.52).

Example: Accessible Transparency by default

Example: Audits and assurances In Iraq, EITI Reports have consistently shown that the existing audit system in the country is out of date and not adapted to international best standards. EITI reports identified weaknesses in quality assurance of government data and made recommendations to address these in Afghanistan, Albania, Azerbaijan, Côte d’Ivoire, DRC, Iraq, Ghana, Mali, Mauritania, Mongolia, Nigeria and the Philippines. In Iraq, reports have consistently shown audit system is not up-to-date with international standards.

Example: Improving policy an instrument for reform Recommendations from NEITI reports that are now government reforms: Scrapping of crude oil SWAPs Break-up of NNPC Review of NNPC royalties and debt Review of contracts Review of fuel subsidies

outline What is the EITI The EITI – the parliamentarian’s Swiss knife Budget oversight, legislation and scrutiny over the sector

A tool for parliamentarians in the sector EITI informs Budget approval and oversight Parl. scrutiny Legislation

Budget approval and oversight EITI informs Budget approval and oversight Parl. scrutiny Legislation “Iraq's Parliament ratified the 2016 budget Tuesday, outlining a level of state spending that many legislators characterized as unrealistic given the country's financial crisis. "The figures in the budget are not real and do not match the reality on the ground," said Nora al-Bejari, an MP with the Mutahidoon bloc. As with earlier drafts, the budget assumes the government will sell oil at an average price of $45 per barrel. Iraq's average sale price in November was $36.42 per barrel, accord...”

Budget approval and oversight EITI informs Budget approval and oversight Parl. scrutiny Legislation Philippines: Report showed subnational payments were not being paid according to the law, leading to a 154% discrepancy between government and company figures. PhEITI created a mechanism to monitor payments no local communities. 1 year later had cut discrepancies down to 22%.

Budget approval and oversight EITI informs Budget approval and oversight Parl. scrutiny Legislation Ghana: EITI Report identified gaps in the existing legal and fiscal regime, leading to lack of capital gains tax by oil companies. It recommended putting in place legislation on capital gains tax, including harmonizing the relevant legal regimes. Nigeria: the NEITI Act of 2007 has given NEITI standing and authority assisting it to hold other government entities, such as the national oil company, to account. Philippines: EITI findings have been discussed in Parliament and are being used in debates over proposed reforms in mining taxation. “The failure of Nigeria to pass an over-arching law for the petroleum sector after repeated attempts continues to accumulate huge costs for the country, estimated at more than $200bn.”

Possible Roles For parliamentarians Get involved in EITI to enhance expertise and leadership on EI good governance Engage yourself in ensuring a well-functioning EITI in your country Coordinate efforts with other stakeholders, such as CS and other control organisms Use the data that EITI provides and transmit it through your regular contact with constituents Build and leverage relationships with other EITI actors Consider inserting EITI reporting provisions in legislation Use the EITI to help strengthen government reporting systems

Thank you! www.eiti.org @EITIorg Author: Pablo Valverde Date: 18 Octoberl 2016 Occasion: ICGLR Conference on Strengthening Extractives Governance Email: erich@eiti.org - Telephone: +44 780 55 74 549 Address: EITI International Secretariat, Ruseløkkveien 26, 0251 Oslo, Norway

Additional examples A new unit created in response to recommendations by previous EITI Reports in Chad is dedicated to tracking government revenues from oil, gas and mining companies. The unit monitors that company payments are adequately recorded and that revenues flow to the right accounts. “Today, we can say with confidence that oil payments from companies enter into the government budget and are appropriately monitored.” Mr. Deboumra Kordje, Minister of Finance of Chad Using the EITI to strengthen government systems in the Philippines The first EITI Report from the Philippines showed that the National Commission on Indigenous Peoples (NCIP) was not able to properly monitor the payment of royalties to indigenous peoples, leading to a 154% discrepancy between government and company figures. Identifying the gap led the NCIP to carry out a number of improvements so that by the second report, the 154% discrepancy was cut down to 22%. To build on this, PH-EITI collaborated with NCIP in developing a monitoring mechanism for royalties to indigenous peoples. This tool has been formally adopted by NCIP for use by their Regional Directors. Among the information that will be disclosed under this tool are the companies’ compliance with stipulations in their Memorandum of Agreement with Indigenous Peoples and whether the legal requirements for the management of royalties are met.

Additional examples “Parliament must have access to the contracts, licenses and other agreements between the government and resource developers and investors, including provisions on changes in ownership of projects and the arbitration of disputes.”– Concluding statements, workshop on the role of parliaments and the extractive industries “There is not a direct relationship between the number of tools and accountability outcomes; rather it is the way in which Parliaments use these tools in order to promote political accountability that matters. Parliamentarians should think about the tools available to them in their jurisdictions and how they can be deployed effectively to enhance accountability of the extractives sector. Furthermore, Parliaments need to be able to collaborate with external accountability actors, such as Supreme Audit Institutions, Corruption Commissions, Civil Society Organizations, and National EITI secretariats, in order to provide analysis and feedback as an input when using accountability tools.” Key messages and lessons learned from the Global seminar on the role of parliaments and extractive industries, Commonwealth Parliamentary Association, Kigali, Rwanda. 13-15 January 2015

Additional examples Examples of recommendations from EITI Reports being implemented or considered by national multistakeholder groups: Legal and fiscal framework: Ghana’s EITI 2010-11 Oil and Gas Report identified gaps in the existing legal and fiscal regime, leading to lack of payments of capital gains tax by oil companies. The 2013 EITI Report recommended putting in place legislation on capital gains tax as early as possible, including harmonizing the relevant legal regimes. License allocations: Burkina Faso’s 2012 EITI Report identified an agreement between the government and a mining company which was not in accordance with the laws and regulations governing the sector. Given this finding, the 2012 EITI Report recommended that mineral agreements and contracts should be entered into in accordance with the applicable laws in order to guarantee and safeguard the interests of the state and the company. The report also recommended that there should be laws and regulation governing signature payments. Audits of national oil companies (NOCs): Iraq’s 2013 EITI Report found that although NOCs were audited according to national audit standards, these had not been updated since the 1980s. The report recommended that NOCs be audited in accordance with international standards. Sub-national transfers: The Philippines’ 2012 EITI Report found that local governments were not able to quantify how much they receive from the extractive companies. Given this finding, the 2012 EITI report recommended that the concerned government agencies and the Department of Budget and Management should monitor and report on such transfers, disaggregated by local government and revenue streams.