Why the Repeal of the U.S. Publish-What-You-Pay Rule Is a Major Setback for Combating Corruption in the Extractive Sector

Bonnie J. Palifka, Assistant Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM) contributes today’s guest post:

Last Friday, following the U.S. House of Representatives, the Senate voted to repeal a Securities and Exchange Commission (SEC) regulation that required oil, gas, and minerals companies to make public (on interactive websites) their payments to foreign governments, including taxes, royalties, and “other” payments. The rule was mandated by Section 1504 of the 2010 Dodd-Frank Act, but had only been finalized last year. President Trump’s expected signature of the congressional resolution repealing the rule will represent a major blow to anticorruption efforts, and a demonstration of just how little corruption matters to his administration and to Congressional Republicans.

The extractive industry had lobbied against this rule, arguing that having to report such payments is costly to firms and puts them at an international disadvantage. Some commentators have supported their efforts, arguing, for example, that the Section 1504 rules are unnecessary because the Foreign Corrupt Practices Act (FCPA) already prohibits firms under SEC jurisdiction—including extractive industry firms—from paying bribes abroad. This argument misses the mark: The extractive sector poses especially acute and distinctive corruption risks, which the FCPA alone is unlikely to remedy if not accompanied by greater transparency. Continue reading

Guest Post: The Long, Long Road from Talking Transparency to Curbing Corruption in Mauritania

GAB is delighted to welcome back Till Bruckner, an international development expert who recently spent six months living Mauritania, and contributes the following guest post based on his experience there:

What do fish and iron have in common? Answer: Mauritania, a largely desert country of less than four million people in north-western Africa, is immensely rich in both. At the same time, most Mauritanians are poor. And one of the biggest reasons is corruption and misgovernance.

Consider first fishing. Although Mauritania has some of the world’s richest fishing grounds, its marine wealth is carried away by foreign ships whose owners often bribe senior government figures to obtain fishing permits and take their catch straight to Europe or Asia. As a result, the country has failed to develop a significant fishing industry, or domestic fish processing industry, of its own, and a fishing industry that boasts an annual catch of half a million tons generates a mere 40,000 jobs inside Mauritania. Yet to the south, Senegal translates a catch of similar size into at least 130,000 jobs, while to the north, Morocco has turned its million-ton-a-year catch into a massive export industry whose turnover is projected to reach two billion dollars by the end of this decade.

Inland, deep in the Sahara, some mountains contain more metal than rock, consisting of up to 75% iron, one of the highest concentrations in the world. Mauritania nationalized its iron mines in 1974, creating the state-owned monopoly company SNIM. Its workers blast the slopes to rubble, and conveyor belts transport the rubble into waiting railway waggons. The longest train in the world then chugs its way across 700 kilometres of desert, loads its cargo onto giant foreign freighters—and neither the ore nor most of the money paid for it are ever seen again. The looting dynamics in Mauritania’s mining sector are illustrated by the stark contrast between Zouerate, the town in the Sahara where the iron is mined—which looks like a dystopian hellhole straight out of a Mad Max film—and the rich suburbs of the capital city of Nouakchott (which produces virtually nothing), where giant villas rise out of the sand, and oversized SUVs cruise the streets. And in Nouakchott itself, in the poor suburbs, families living five to a windowless room have to pay for their drinking water by the barrel.

The preferred prescription in a situation like this (from the usual suspects: development professionals, anticorruption activists, etc.) is a combination of transparency, accountability, and civil society monitoring. But Mauritania is actually doing well on those dimensions. Continue reading

Public Trust Theory: A Way Citizens Can Combat Resource Corruption?

Public trust theory derives from the sovereign’s duty to act as the guardian of certain interests for the benefit of the nation as a whole. In the United States it serves as the basis for citizen suits to vindicate environmental rights, and it has been incorporated into the African Charter on Human and Peoples’ Rights which provides in article 21 that the wealth derived from a nation’s resources is for “the exclusive interest of the people . . . [and in] no case shall a people be deprived of it.”  Could it be used by civil society to combat grand corruption in the allocation of land and natural resources?

That is the question Elmarie van der Schyff, a professor of law at South Africa’s North-West University, addresses in a new paper prepared for the Open Society Justice Initiative’s project examining how civil society can help spark more anticorruption enforcement actions.  After carefully parsing South African law governing civil suits for damages, Professor van der Schyff concludes that “public-trust theory has a supportive role to play” in helping South Africans recover damages for injuries sustained when corruption infects the distribution or use of the nation’s natural resources.  Her thoughtful analysis shows how citizens of other states can use the principles that underlie the public trust doctrine to bring damage actions too.

Professor van der Schyff’s paper is the sixth in a series commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation.  It follows earlier ones on i) standing by GAB editor-in-chief Matthew Stephenson, ii) civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta, iii) private suits for defrauding government by Houston Law School Professor David Kwok, iv) private prosecution in the U.K. by Tamlyn Edmonds and David Jugnarain, and v) damages for bribery under American law by this writer.