OIL REVENUE TRANSPARENCY : THE CURRENT REGULATORY SITUATION

1. NOT AN OFFICIAL UNCTAD RECORD OIL REVENUE TRANSPARENCY : THE CURRENT REGULATORY SITUATION Stéphane Brabant Avocat at the Paris Bar 8th Africa Oil and Gas, Trade and Finance Conference and Exhibition 26th-30th April 2004 - Marrakech

2. I - Oil revenues • Oil revenues are , directly or indirectly ,central and/or local states’ revenuesfrom oil project (concessions and/or PSAs) : • Tax Revenues (Corporate tax, royalty, rentals etc.) • Customs Revenues • Bonuses • Profit Oil • States’ participation in Joint Venture • Indirect Revenues (Municipalities, contractors, etc.)

3. Concession and PSA systems in North and West Africa MOROCCO(ONAREP) ALGERIA(SONATRACH) LIBYA(NOC) EGYPT(EGPC) MAURITANIA SUDAN (SUDAPEST GPC) MALI CHAD SENEGAL(PETROSEN) NIGERIA(NNPC) CAME-ROON EQUATORIAL GUINEA(GEPETROL) GABON CONGO(SNPC) ANGOLA(SONANGOL) Concessionary system PSC system Dual system

4. II - Oil revenues : a curse or a blessing ? • ·a blessing: In Africa, the development of natural resources is often the main source of revenues for the State • Most of the producing countries use a PSA system • NOCs hold an important share of the profit oil • Collection of proportional petroleum royalty even under PSAs • In Concession system, income taxes are usually high • In all case, signature bonuses

5. ·a curse: paradoxically adverse effects of oil and gas development on the social and economic achievements of certain countries • Conclusion: not a curse, simply a problem relating to the use of oil revenues

6. III - States’, NOCs’ or IOCs’ curse? ·Most oil revenues belong to the State and the NOCs (Budget issue with taxes, royalties, profit oil…) • Thus, subject to sovereignty • Little redistribution / allocation to local authorities · But, State interventionism decreases • The problem is now left at the IOCs’ doors and possibly at the NOCs’ doors

7. IV - The use of oil revenues in Africa became an international community concern • Oil revenues should benefit the country’s development • First reaction : Creation of soft law

8. V - From soft Law to binding legislation V.1 - "Political Declarations" • Western Governments and International Organisations such as the United Nations are concerned : • Comments of George Soros (June 2002) • Comments of Tony Blair (September 2002) • Recent declarations of the United Nations

9. V.2 - The rising of NGOs • Transparency International • Amnesty International • CAFOD • Christian Aid • Friends of the Earth • Global Witness • Oxfam • Save the Children • EITI (Extractive Industries Transparency Initiative) • Human Rights Watch • Publish what you pay Coalition • IISD – International Institute for Sustainable Development • Open Society Initiative for West Africa • G8 Statement • World Council for Sustainable Development, etc.

10. V.3 - From Best Practices to a Voluntary Framework • Best practice • Indirect ways of helping the community during oil and gas production : requirement to train local personnel, use local products etc. • Helping the community in ways totally unrelated to oil and gas production : building schools, hospitals, roads, etc. • Voluntary framework • Oil Industry oriented initiatives (IPIECA …) • Initiatives of individual oil companies • Desire to identify practical guidelines / framework in order to improve specific company practices • IFC and World Bank Guidelines

11. V.4 - From a Voluntary Framework to Conditionality • Banks and Multinational Investment Agencies • Equator Principles • Most International Organisations would like : • bilateral and unilateral development assistance, resource-backed loans from banks, and export credit agency funding • Institutional investors

12. V.5 - From Conditionality to Regulation • Most of the NGOs, International Organisations and National Authorities: • believe that only a regulatory framework could ensure that all IOC have to publish the net revenues they pay to governments as a requirement of being listed on major stock exchanges • are supporting governments to reform national laws, policies and institutions to promote investment and development of extractive industries in developing countries • E.g. : Restrictive methods : restricting the use of all or part of revenue paid to the Government (e.g Chad-Cameroon pipeline) • IFC recommendation conditionality implementation of national law • E.g. : IMF efforts to promote a Code of good practices on Tax Transparency • Mandatory Approach

13. Why should oil companies care? VI - Court action • ·Increasing risk of legal claims • ·Cause of these actions = universal jurisdiction • E.g.: The Alien Tort Act 1789 (US) • Legal claims based on crimes against humanity • Allegations from claimants that companies are: • aiding and abetting corruption, wasting public funds • aiding and abetting apartheid • conspiring with the military

14. Some conclusion • ·Potential creation of a customary law based on precedents • ·Possibility of the implementation of compulsory regulations by the legislator and not by the industry sector • ·AIPN initiative: “Contractual tools to facilitate management of energy project impact”.