The EU  has in a series of votes agreed a draft anti-corruption law to make it illegal for oil, gas and mining companies to give illicit payments to officials in resource-rich nations that lack strong governance. See a news report here.

This was in part the result of initiatives taken in the US to impose reporting requirements on New York Stock Exchange listed companies to file reports in relation to payments made by companies to foreign governments.  The Securities Exchange Commission (SEC) recently adopted new rules and an amendment to a new form pursuant to Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to disclosure of payments by resource extraction issuers. The SEC set a minimum threshold for disclosure of $100,000. Here is a link to the SEC website.

The regulatory reform law directed the SEC to issue these rules requiring companies engaged in the development of oil, natural gas, or minerals to disclose the information annually by filing a new form with the SEC called Form SD. A resource extraction issuer is required to comply with the new rules for fiscal years ending after 30 September 2013. The form must be filed with the SEC no later than 150 days after the end of its fiscal year.

The EU draft laws apparently will to a significant degree mirror the new SEC rules. The EU has voted for detailed reporting to regulatory authorities starting from a minimum threshold of 80,000 euro (£65,000), almost identical in value to the $100,000 US requirement and far lower than the $1m (£615,000) level some resource firms had suggested.

In contrast to the US rules, the EU is also proposing to include the forestry industry, banking, construction and telecommunication sectors, but on a less detailed level than those for extractive industries.

The draft laws will only actually become law following further negotiations and approval by EU member states. In practice, this could take some time.

However, a levelling of the regulatory playing field ought to mean that European and US companies are competing more equally when trying to win business abroad involving foreign governments.

One of the objectives is to help foreign nationals track more easily what happens to monies paid to their own foreign governments, so that they can hold the government ministers accountable for these monies. All too often the monies do not benefit the poor citizens of those countries, but instead the monies line the pockets of the members of government.

Although this will produce yet another layer of regulation for companies to deal with if adopted by the UK, it will further bolster the UK’s international own anticorruption strategy, following the enactment of the new Bribery Act in April 2010.