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Graphic Online 

Contract disclosure in the Ghanaian extractive industries

Author: Graphic Business
Without disclosures on contracts, corruption will still persist within the extraction industry
Without disclosures on contracts, corruption will still persist within the extraction industry

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 contracts.

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.

Why disclose contracts?

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:

• Supports effective and honest communication about resource projects, building public trust and managing citizen expectations

• Ensures officials can view parts of contracts that relevant to their responsibilities, enabling effective enforcement of rules and regulations

• Provides a powerful incentive for officials to negotiate strong contracts in the private sector

• Helps build a “social license to operate,” leading to stronger community relationships that make projects more stable

Ghana’s case

The Government of Ghana increasingly recognises the importance of contract disclosure and has made several recent commitments to improve open contracting in the extractive industries.
These include

• 2016 U.K. Anti-Corruption Summit: The government committed to “working 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 (NPP) election manifesto. Regarding the petroleum sector, the 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, licences, permits and authorisations.

• 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 frameworks.

• Sector current practice: Current law on petroleum provides partial disclosure. Following initial disclosure by companies, the Government of Ghana officially disclosed several contracts. These contracts were published on the ministry responsible for petroleum’s website, but they are now no longer available on government websites.

• Pending regulations: Section 56 of the 2016 Petroleum (Exploration and Production) Act requires a public register of petroleum agreements, permits and authorisations. However, further details about the registry, including whether it will include full-text copies of contracts with annexes and amendments are available, pending the development of upcoming petroleum regulations.
Mining no disclosure: No legal requirement for contract disclosure (under the 2006 Minerals and Mining Act).

Arguments for and against contract disclosure

Contracts contain commercially sensitive information that could cause competitive harm if disclosed. Analysis of contracts reveals that primary contracts do not usually contain information commonly cited as commercially sensitive.

Contracts that are disclosed do not generally contain information that would meaningfully impact a company’s competitiveness.

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 disclosure.7 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.

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 pay-walled 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.

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 gazette. 6. Contracts are too complicated for the public to understand.

What should be disclosed?

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) stabilisation clauses, which insulate resource projects from some or all changes to legal framework.

Four Contract Disclosure in the Ghanaian Extractive Industries Contracts and related documents in Ghana’s extractive sector of interest to the public Petroleum sector contracts: Petroleum agreements, Commodity sales agreements, Annexes and other related permits, leases and authorisations, including those relating to extensions, changes in ownership, assignment, relinquishments, work obligations and production commitments, coordination of activities and unitisation

Mining sector contracts:

Mining leases, stability agreements, development agreements, annexes and other related permits, leases and authorisations, including those relating to extensions, changes in ownership, assignment, relinquishments, work obligations and production commitments, and coordination of activities environmental documents for both sectors:

Environmental impact assessments, environmental monitoring plans, environmental reports,

Associated environmental studies

• Closure and decommissioning plans

Social documents for both sectors: local content/local employment plans, local content reports, community development agreements/corporate social responsibility plans (if available).