LINDSEY MARCHES SAULT AND MICHAEL JARVIS
D. WHAT HAS BeeN THe PRIVATe SeCTOR
Industry positions with regard to increased disclosure and participation have varied by sector and continue to evolve. For example, there are those in the private sector that oppose increased disclosure and participation in public contracting because of vested interests in the status quo.
Yet, while governments have been the main proponents of these changes, there have also been some private investors who have also called for greater transparency and integrity in the con- tracting process and of the deals themselves. For example, the International Association of Oil and Gas Producers, an industry group, acknowledges and supports the benefits of competitive bidding and transparency in contracting.44 The International Council on Mining and Metals in its Principles also commits members to transparent engagement and communication, and open consultation processes, and has been supportive of disclosure of agreements in line with public positions of a number of its members.45
Many companies perceive transparent frameworks for public contracting as helping level the playing field, and there is some evidence to suggest that they have resulted in more partici- pation by small and medium-size enterprises in public contracting.46 Companies are also able to better tailor bids when they can access previous contracts and bid evaluations for similar goods, works, and services.47 Some companies are even utilizing open contracting data to cre- ate alert and market analytic services for firms wishing to contract with governments.48
In terms of disclosure of contract terms and resulting monitoring of implementation of said terms, there are also benefits for investors, particularly for those in sectors such as extrac- tive industries, large-scale agriculture or forestry, or infrastructure where companies will be present for years, if not decades. Given that they need to retain their social license to operate for the long term, transparency of the deals can help manage expectations, provide clarity about whom to hold to account for what, and potentially reduce pressures for renegotiation as the integrity of the award process and resulting terms are demonstrated to all. In situations where the terms are not public, conjecture as to their contents is often rife among civil society
44. International Association of Oil and Gas Producers, Position on Transparency, <http://www.ogp.org.uk/
pubs/OGPtransparency.pdf>.
45. International Council on Mining and Metals, Principles (2003), <http://www.icmm.com/our-work/
sustainable-development-framework/10-principles>.
46. World Bank, ‘Policy Note-Russian Federation: National and Regional Trends in Regulatory Burden and Corruption’ (2013) 3, <http://imagebank.worldbank.org/servlet/WDSContentServer/IW3P/IB/2013/
02/26/000442464_20130226124449/Rendered/PDF/755690WP0Russi00Box374337B00PUBLIC0.pdf>; Lee Kaspar and Andrew Puddephatt, ‘Benefits of transparency in public procurement for SMEs General les- sons for Egypt, Global Partners and Associates’ (2012), <http://global-partners.co.uk/wp-content/uploads/
Benefits-of-transparency-in-PP-for-SMEs.pdf>. This may be due, in part, to the fact that small and medium-size enterprises are disproportionately impacted by corruption in public contracting. See United Nations Office on Drugs and Crime and United Nations Industrial Development Organisation, ‘Corruption prevention to foster small and medium-sized enterprise development: Providing anti-corruption assistance to small businesses in the developing world’ Volume I (2007), <http://www.unodc.org/documents/corruption/Publications/2012/
UNIDO-UNODC_Publication_on_Small_Business_Development_and_Corruption_Vol1.pdf>.
47. Charles Kenny and Jonathan Karver, ‘Publish What You Buy: The Case for Routine Publication of Government Contracts’ (Center for Global Development 2012), <http://www.cgdev.org/files/1426431_file_
Kenny_Publish_What_You_Buy_FINAL.pdf>.
48. See e.g., Govini <http://www.govini.com>.
and media. As referenced by several mining firms, there are occasions where civil society has assumed the terms to be less beneficial to the state than the actuality. This creates public rela- tions complications for the investor, for whom it becomes hard to demonstrate the extent of their contributions. This can be fuel for future disputes or pressures to renegotiate if there is a change in government.
Recognizing these factors, a number of individual companies are working with govern- ments and civil society to support disclosure of contracts and related documents. A repre- sentative of global mining firm Rio Tinto explained, “If you’re a long-term investor, you want to build trust. I cannot see one reason why investment agreements are kept confidential.”49 Another mining firm, Newmont, not only agreed, but “insisted,” that its comprehensive investment agreement with the Ghanaian Government not only be made public but that it be put before parliament for discussion and ratification. As a result, the enhanced transparency
“helped build trust and credibility on all sides for working constructively to mutual benefit and social harmony.”50 Tullow Oil published its petroleum agreements in May 2011, at the request and with the approval of the Government of Ghana.51 Similarly, in South Africa, where the Mineral and Petroleum Resources and Development Act requires companies to report annu- ally on their social obligations, AngloGold Ashanti decided to disclose these otherwise confi- dential reports, to the benefit of citizen monitoring groups.52
Individual companies are also proactively consulting and cooperating with civil society organizations and communities, encouraging them to monitor the performance of the con- tract, and acting on their feedback. In Ghana, for example, Newmont Mining has collaborated with local communities in determining disbursement of a sustainable development fund set up by the company according to their mining agreements.53 Citizen monitoring of projects is also helping to build trust between companies and communities as noted in the example of Burkina Faso referenced above where the Kalsaka and IamGold Essakane SA mining com- panies actively collaborated with the civil society led contract monitoring effort. The coali- tion monitored the companies’ compliance with the contractual targets for local employment, finding that both companies were complying with contractual requirements, and employing over 90% local staff. Representatives from the mining companies welcomed the objectivity of the monitors, stating, “the private sector needs this kind of recognition to be more willing to participate on critical discussions on open contracting.”54
Outside of any particular industry sector, companies more broadly are collaborating within industry groups to promote transparency and responsible contracting. For example, the UN
49. Matteo Pellegrini, ‘Promoting Contract Transparency’ (Revenue Watch 2011) 3.
50. Striking Poverty, ‘Featured Conversation: Large Contracts and Community Oversight’ (31 October 2012).
51. Tullow’s website states that while, ‘most commonly, petroleum agreements (or production sharing agree- ments) between a company and a host government remain confidential at the request of the host government for commercial reasons, [Tullow Oil takes] the position that should a government wish to make these agree- ments public, we would fully support them in doing so.’
52. Erin Smith and Peter Rosenblum, ‘Enforcing the Rules’ (Revenue Watch 2011) 16, <http://www.revenue- watch.org/sites/default/files/RWI_Enforcing_Rules_full.pdf>.
53. Newmont Ahafo Development Foundation website, <http://www.nadef.org/pages/>. For more informa- tion about Community Agreements, see Rio Tinto, ‘Community Agreements Guidance’ (2012), <http://www.
riotinto.com/documents/Community_agreements_guidance_2012_2014.pdf>.
54. Ousmane Deme and Carey Kluttz, ‘Open Contracting addresses employment in the Burkina Faso mining sector’ (2013), <http://www.open-contracting.org/open_contracting_addresses_employment_in_the_
burkina_faso_mining_sector>.
Global Compact, “the world’s largest corporate citizenship and sustainability initiative,” sup- ports protection of human rights and anti-corruption in its core principles.55 Its latest Call to Action focused on anti-corruption calls for public procurement to be truly public. Similarly, a group of investors came together in 2011 to endorse the work of Professor John Ruggie, UN Secretary-General’s Special Representative on Business and Human Rights,56 which has produced Principles for Responsible Contracts that call for both community engagement and contract transparency.57
At the same time, there are some concerns. The private sector opposes the disclosure of commercially sensitive information and has concerns regarding the capacity of civil society to understand complex deals. In particular, there is concern that unfair comparisons could be drawn between different investments. These challenges are described in greater detail below.
e. CHALLeNgeS TO eFFeCTIVeNeSS
If open contracting is to be effective and help ensure that countries see full benefits of invest- ments, practitioners will need to overcome a number of challenges. First and foremost is that of the capacity of stakeholders to use information disclosed in agreements and meaningfully participate in contracting processes. These are complex sectors after all, where knowledge and understanding of agreements is often highly limited even across relevant government ministries, in turn affecting their ability to negotiate effectively and enforce agreements. Will civil society actors be able to build sufficient understanding of a sector to weigh the inevitable trade-offs involved in negotiating a comprehensive concession agreement or PPP contract? Such under- standing is an important basis to be able to play a constructive role and to be able to effectively advocate for policies and contracting practices supportive of positive development outcomes.
Capacity constraints, while often significant, can at least be practically addressed. Take the example of the extractive industries sector, where there has been growing investment in building capacity for the use of contract information and for active citizen monitoring of con- tract award and implementation. A growing list of organizations, including the World Bank Institute, Revenue Watch, the Columbia Center on Sustainable Investment, and organizations such as Open Oil, as well as some bilateral donors, are supporting capacity building for civil society understanding and monitoring of contracts. In-depth trainings are employing new tools developed explicitly to facilitate better understanding and use of contracting informa- tion. These include ResourceContracts.org—a user-friendly repository of publicly available extractives agreements together with supporting materials—and the Extractive Industries Contract Monitoring Roadmap—a nine-step guide to understanding and monitoring invest- ment contracts.58 These are supplemented by resources such as books on understanding oil and mining contracts and guides to oil/gas and mining terms, designed to be accessible to
55. UN Global Compact Principles (2004).
56. Investor Statement in support of the work of Professor John Ruggie, ‘UN Secretary-General’s Special Representative on Business & Human Rights’ (2011), <http://www.business-humanrights.org/media/docu- ments/ruggie/investor-statement-supporting-ruggie-feb-2011.pdf>.
57. Principles for responsible contracts: integrating the management of human rights risks into state-investor contract negotiations: guidance for negotiators (2011) A/HRC/17/31/Add.3 (Ruggie Principles), <http://www.
ohchr.org/Documents/Issues/Business/A.HRC.17.31.Add.3.pdf>.
58. See <http://Resourcecontracts.org>; <http://contractroadmap.org>.
non-technical audiences.59 One of these resources, a book on understanding oil contracts, was downloaded more than 60,000 times in less than twelve months since its first release, and uti- lized by oil companies as well as government and civil society.60
Similarly, capacity-building and knowledge tools around contracting are being devel- oped for stakeholders in other key sectors, such as infrastructure. The International Finance Corporation’s Private Participation in Infrastructure (PPI) Database has data on more than 3,800 projects in 150 low- and middle-income countries, across transport, energy, telecom- munications, and water and sewerage industries. Data cover the contractual arrangements, the sources and destinations of investment flows, and information about the main investors.61 The Land Matrix is an independent global land-monitoring initiative that promotes trans- parency and accountability in decisions over land and investment. It maintains a Global Observatory—an open tool for collecting and visualizing information about large-scale land acquisitions, with details of more than 900 land investments worldwide.62
Coalitions of Civil Society Organizations (CSOs) are monitoring contract awarding and implementation in countries ranging from Ecuador to Burkina Faso to Mongolia. More can and needs to be done, but informed monitoring of awarding and implementation of agreements by third parties is not an unrealistic expectation. Taking the additional step of linking contract data with revenue/payment data and with beneficial ownership data will help to tell more com- plete stories and show the additional value of having this information in the public domain.
In addition, the private sector concern for the protection of commercially sensitive infor- mation will need to be reconciled with principles of disclosure under access to information requirements of the relevant legal frameworks. In many cases, the parties to an investment contract agree to keep negotiations confidential to protect the confidentiality of any techni- cal, financial, or other commercially valuable information exchanged during the negotiation.
However, in practice it is rare for commercial information to be included in investment agree- ments. Certainly this is often an overblown argument in the case of extractive industry invest- ments, as detailed by Rosenblum and Maples and borne out by industry acceptance when governments have disclosed investment agreements online.63
Remaining concerns can be mitigated with the establishment of model contracts, oversight mechanisms, and legal requirements to govern the negotiation process and contract terms that are subject to public consultations.64 In the contract itself, such a balance can be struck by the parties the following ways, as described by Cotula:
• If the contractual relationship involves sharing genuinely sensitive commercial informa- tion, a confidentiality clause may be included to protect these specific aspects. In these cases, it is necessary to clearly define what type of information is confidential and there- fore protected, and for the parties to have to prove on a case-by-case basis that a particular piece of information falls within that category.
59. See Open Oil, Understanding Oil Contracts, <http://openoil.net/understanding-oil-contracts>.
60. ibid.
61. World Bank, ‘Private Participation in Infrastructure Database,’ <http://ppi.worldbank.org/>.
62. Land Matrix, <http://www.landmatrix.org/en/>.
63. Peter Rosenblum and Susan Maples, ‘Contracts Confidential: Ending Secret Deals in the Extractive Industries’ (Revenue Watch Institute 2009), <http://www.revenuewatch.org/sites/default/files/
RWI-Contracts-Confidential.pdf>.
64. Lorenzo Cotula, ‘Investment contracts and sustainable development: How to make contracts for fairer and more sustainable natural resource investments’ (IIED 2010), <http://pubs.iied.org/pdfs/17507IIED.pdf>.
• Clauses prohibiting the disclosure of confidential information without the consent of both parties can be qualified by language requiring that such consent cannot be unreasonably withheld or delayed. They can also clarify that if the public interest outweighs commercial considerations, information should be made public.
• Protection of confidential information can also be subject to exceptions concerning dis- closure required by law (including not only stock exchange regulations, as is frequently done, but also freedom of information legislation), or for the purpose of protecting health, safety, and the environment, particularly in emergency situations.
• As a public policy tool, it is good practice for the contract itself not to be confidential; if specific aspects of the contract constitute genuinely confidential information, they may be redacted before publication.
• Separate, more stringent clauses may be used to protect from disclosure proprietary infor- mation, particularly in contracts involving technology transfers.65
Although several governments are publishing un-redacted contracts and related docu- ments, others exempt or redact justifiably confidential, commercially sensitive information.
For example, in the United Kingdom, tenderers for public contracts are advised to consider the Guidance on Contract Information that is Exempt from the Freedom of Information Act to evaluate whether information in the tender can be exempted under a non-disclosure agree- ment. Contracts are then redacted in accordance with the Freedom of Information Act and official guidance.66 In Australia, exemptions for confidentiality are recorded along with the reasons.67 In the United States, some contractors bidding on public contracts mark with con- fidentiality legends the commercially sensitive information and trade secrets provided as part of the contracting process.68
For government, private sector, and civil society to collaborate on contract monitoring, the parties must often overcome mistrust among stakeholders to cooperate. Overcoming this challenge will involve assuring government and private sector parties of the integrity and con- stituency of the civil society actors. It is not always straightforward to ascertain whose interests civil society groups are truly representing, and it can be difficult to ensure engagement of the range of international, national, and community perspectives. For their part, government and private sector actors need to assure civil society of their willingness to disclose information and to act upon feedback raised and issues identified.
Finally, disclosure of awarded investment contracts alone, without contextual information related to formation and implementation and without incentivized participation, may not result in sufficient effective and responsible civil society participation to achieve the potential benefits of open contracting. In 2009, Liberia was the first country to release full natural resources con- tract documents as part of its commitment to the Extractive Industries Transparency Initiative, but the existence of contract disclosure alone has not meant the end of problems with large-scale contracting processes. As revealed by a 2013 independent audit report commissioned by Liberia
65. ibid.
66. See UK Contracts Finder, <https://online.contractsfinder.businesslink.gov.uk>.
67. Australian Government, ‘Historical Australian Government Contract Data’ (2013), <http://www.data.
gov.au/dataset/historical-australian-government-contract-data>.
68. Charles Kenny and Jonathan Karver, ‘Publish What You Buy: The Case for Routine Publication of Government Contracts’ (Center for Global Development 2012) 9, <http://www.cgdev.org/files/1426431_file_
Kenny_Publish_What_You_Buy_FINAL.pdf>.
EITI, of the 68 resource contracts awarded since 2009 worth US$ 8 billion, only two were conducted in full compliance with Liberian laws. Concessions granted in agriculture, forestry, mining, and oil were flawed.69 However, even the readiness to commission and publish such an audit is a positive signal of government recognition of the need for open contracting to ensure better value from such investments. Disclosure itself is useful but more effective when combined with capacity building and adequate resourcing for effective oversight of award and implementation. Dedicated efforts are needed to ensure that sufficient resources and systems are in place to facilitate ongoing disclosure and participation going forward.