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GHEITI & NRGI WRITES :Contract Disclosure in the Ghanaian Extractive Industries

  • SOURCE: | qwesa2big
  • Contract disclosure is rapidly becoming standard practice in the extractive industries. At least 39 countries now disclose contracts. Since 2013, the EITI Standard has “encouraged” implementing countries to publish contacts. Yet, while Ghana has made significant progress on transparency issues, extractive industry contracts are still not disclosed in a systematic and ongoing way. This brief explores the issue in more detail and suggests recommendations for the path ahead.
    Contracts signed between the government of Ghana and oil, gas and mining companies are crucial documents that citizens within and outside the government need to fully understand the rules by which petroleum and mining projects are governed. Disclosing contracts brings important benefits to all stakeholders.
    The government of Ghana increasingly recognizes the importance of contract disclosure and has made several
    recent commitments to improve open contracting in the extractive industries.
    • 2016 U.K. Anti-Corruption Summit. The government committed to “work toward making government
    public procurement ‘open by default’—beginning with Open Contracting Data Standards for high value
    contracts and contracts in the oil, gas and mining sector.”1
    • 2016 New Patriotic Party election manifesto. Regarding the petroleum sector, the New Patriotic Party
    (NPP) committed to “a transparent, accountable and efficient management of the country’s petroleum
    resources for the benefit of all Ghanaians.”2 In the mining sector, the NPP committed to “increasing
    transparency in the allocation of mineral rights and the utilization of mineral revenues at national and
    community levels.”3
    • 2017 “100 Days of Change.” In a recent document outlining the achievements of President Nana Addo
    Dankwa Akufo-Addo’s first 100 days in office, the government notes that “a team of experts has been
    constituted to work with the Petroleum Commission to develop regulations for the transparent allocation
    of petroleum blocks as provided by Act 919.”4
    • 2017 Africa Open Data Conference. The deputy minister of energy in charge of petroleum, Mohammed
    Amin Adam, announced that by the end of 2017 a publicly available petroleum register will contain the full
    text of all petroleum agreements, licenses, permits and authorizations.
    At present Ghana does not systematically disclose oil, gas and mining contracts in a timely manner. The
    experience to date differs across the petroleum and mining sectors—each has different legal and institutional
    Arguments against contract disclosure in Ghana and responses
    1. Contracts contain commercially sensitive information that could cause competitive harm if
    disclosed. Analysis of contracts reveals that primary contacts do not usually contain information
    commonly cited as commercially sensitive.6 Contracts that are disclosed do not generally contain
    information that would meaningfully impact a company’s competitiveness.
    2. Confidentiality clauses in contracts do not permit disclosure. In most cases, confidentiality clauses
    are not major barriers to disclosure. A 2009 review of oil, gas and mining contracts showed that few
    confidentiality clauses actually refer to the contracts themselves. Furthermore, in most cases room
    is made for exceptions when parties to the contract agree to disclose or when legislation requires
    3. Contract transparency might scare away investors. Currently at least 39 countries have disclosed
    contracts. Among these countries there is no evidence of investors deciding not to invest because
    contracts were slated to be public. Furthermore, many companies also disclose contracts in stock
    exchange filings.
    4. Disclosure of contract terms will make it more difficult for governments to negotiate good deals.
    There is an argument that contract secrecy benefits government negotiators by giving them an
    information advantage, since companies are unable to see the deals that governments have negotiated
    with other companies. However, this ignores the fact that most contracts are generally available through
    expensive paywalled sites.8 So while contract secrecy does not prevent financially strong companies
    from being able to access contracts, it does prevent governments from being able to access contracts
    signed elsewhere around the world. There is also a powerful argument that contract disclosure actually
    makes good deals more likely. This is because when government and company negotiators know that
    the outcome of their work will be public, they draft more carefully to ensure that the terms are able to
    withstand public and commercial scrutiny.
    5. Ghana’s parliament approves contracts. Therefore, contracts are already public. While it is true that
    Ghana’s parliament approves contracts, parliamentarians only receive access to summaries of terms
    rather than the full contracts as part of their review, and contracts are not published in the national
    6. Contracts are too complicated for the public to understand. Extractive industry contracts are complex.
    However, while the public may not fully understand the complexities of the extractive sector,
    accountability initiatives such as the Ghana Extractives Industry Transparency Initiative (GHEITI) and
    Public Interest Accountability Committee (PIAC), and civil society organizations, such as the African
    Centre for Energy Policy (ACEP), are building public capacity to understand industry contracts. Risks of
    misunderstanding are minimal, but risks of opacity are great. In the long run, contract disclosure ensures
    that corruption or mistakes relating to contracts are more likely to be caught and corrected earlier.
    Large extractive sector projects typically involve dozens of contracts, mostly between private parties. Contract
    disclosure does not entail disclosing each and every one of these documents. Rather, it refers to full-text
    disclosure of state-investor agreements made between the government and extractive companies. These
    documents contain the following rights and obligations that are of interest to the public: (a) company rights to
    natural resources; (b) fiscal terms, including taxes and royalties; (c) social obligations, including infrastructure
    and local content requirements; (d) environmental obligations; (e) worker health and safety; and (f) stabilization
    clauses, which insulate resource projects from some or all changes to legal framework.
    Contract disclosure as an emerging global norm
    In recent years, the publication of extractive industry contracts has emerged as a global norm, practiced
    by governments, oil, gas and mining companies, and the international community. More than 1,500
    contracts and other related documents are now in the public domain, according to open online contract
    repositories, such as and the OpenOil repository,10 and this number is growing.
    Contracts are being made public for multiple reasons:
    Governments are making it their policy to disclose contracts because they contain rights and obligations
    that are of interest to the public. Recent research by the Natural Resource Governance Institute (NRGI)11
    shows that 39 governments have disclosed at least some extractive industry contracts. Most of these
    governments have made disclosure a requirement by writing it into national laws, including extractive
    industry laws, freedom of information laws and, in some cases, even the constitution. Disclosure laws
    make contract disclosure more likely to occur. They also ensure that disclosure is systematic and standardized,
    making contracts easier to find, access and use.
    Companies are publishing their contracts. Some do so in stock exchange filings, such as Kosmos Energy
    and Tullow Oil, which published their Jubilee field contracts in Ghana as part of filings made with the
    United States Securities and Exchange Commission.12 Others disclose contracts on their own websites
    as important background information on projects, like Turquoise Hill Resources, which published its investment
    agreement with the Mongolian government for the Oyu Tolgoi copper deposit.13 As companies
    experience the benefits of disclosure, several are also developing policy statements supporting the publication
    of contracts. These include Kosmos Energy, Rio Tinto, Tullow Oil and the International Council on
    Mining and Metals (ICMM)—a global mining industry body comprising several member companies and
    associations active in Ghana including AngloGold Ashanti, Gold Fields, Newmont Mining and the Ghana
    Chamber of Mines.14
    International organizations are incorporating contract disclosure principles into their guidance. In 2007,
    the International Monetary Fund’s Guide on Resource Revenue Transparency called for the disclosure
    of extractive contracts.15 In 2010, following four years of extensive multi-stakeholder consultations, the
    U.N.’s special representative for business and human rights, John Ruggie, included the recommendation
    that contract terms be disclosed among core “Principles for Responsible Contracts.”16 In 2011, the International
    Bar Association released the Model Mine Development Agreement, which included a provision that
    “this contract is a public document.”17 Since 2013, the EITI Standard has encouraged contract disclosure.18
    International financing organizations have also taken note. In 2012, the International Finance Corporation
    (IFC)—the World Bank’s private sector lending arm—added a financing requirement that IFC-backed
    oil, gas and mining projects disclose the “principal contract with government that sets out the key terms
    and conditions under which a resource will be exploited.”19 In Ghana, this rule will apply to Eni’s Sankofa
    project, which the IFC has agreed to finance.20 The European Bank for Reconstruction and Development
    established similar requirements for hydrocarbon projects in 2013.21
    By GHEITI and NRGI
    For information and enquiries, contact
    GHEITI Secretariat
    Ministry of Finance
    P. O. Box MB 40, Accra
    Telephone: +233-(0)302-686101 Ext. 6319
    Download attached file to read more

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