Is Transparency Against Sovereignty?

March 8th, 2011

Last July, the Dodd-Frank act provided in its section 1504 that all companies operating in the extractive industries that must report to the U.S. Securities and Exchange Commission (SEC) would have to publish all payments they make to the U.S. government or any foreign government on a project basis. Since then, the French and British governments have supported similar EU legislation. Many international companies worldwide, and not only the U.S. companies, will be covered by the upcoming SEC regulations which implement section 1504.

The argument against such a provision—being a threat to competitiveness—was utilized widely even before Dodd-Frank was enacted, but we now hear another argument: forcing listed companies to publish their fiscal payments in each country would go against the sovereignty of those countries.

This argument is extremely interesting because of the use of the concept of sovereignty. The companies that effectively disclose their local payments, as shown in our Promoting Revenue Transparency 2011 report, do not appear to threaten the sovereignty of the countries in which they operate. Otherwise, they would probably have left these countries long ago.

If a government really wanted all contractors to hide their fiscal payments, it could exercise its sovereignty choosing only secretive contractors. However, this is clearly not the case as an extractive company like Statoil already discloses payments in very challenging environments such as Libya and Angola.

Sovereignty can however be misused for private needs. Some time ago, we were hearing that it was against the sovereignty of some countries to disclose any data on the bank accounts that were held on their territories, and it is still what we hear from some tax havens who misuse sovereignty instruments for the benefit of some individuals and financial institutions. Flags of convenience also derive from the misuse of sovereignty instruments, with intermediaries who are in the business of representing countries in international organisations for the sole purpose to make sure that international regulation on the subject will not change. As we all know, this has consequences in safety and human rights.

There should be no other sovereignty than the one produced by the social contract for the well-being of the people. No sovereign government should oppose disclosure of its fiscal revenue, unless this revenue is diverted to private uses under the protection of a false sovereignty. We cannot expect corporations to change the world, but corporations which publicly support transparency, and often genuinely do so, should not support misuse of sovereignty.

Written by François Valérian

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