opinion by Jo Monteiro*
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| JO MONTEIRO |
There has been a huge talk by the society at large on
the lawsuit made by ConocoPhillips against TL submitted to the Dili District
Court recently. There might have a public scrutiny at this stage on question of
whoever would be lawfully proven by the court of being guilty or either
way. For the purpose of this article, it
will not touch upon how the legal processes of both sides have taken place. It
will rather concentrate on how the aforesaid case is rightly taken into account
as a wake-up call for TL-EITI. It therefore discusses; first, does TL-EITI work
properly? Secondly, does TL-EITI need an improvement? Finally, in answering
these two questions, comments and recommendations will be provided.
TL fulfilled its status as one of the EITI
implementing states in 2010, of which made the country became the first Asian
country that hold such title, (IETI, 2010). Despite of the fact that the
implementation of the EITI principles are based on the notion of “voluntary”;
nevertheless, such an accomplishment could be seen a paramount milestone to be
appreciated by the Timorese people and all relevant stakeholders. As this
showcases how the government entities, industries, and civil society
organisations are committed to hold each other accountably and transparently in
the petroleum development sector. However, the question should be asked is;
Does TL-EITI work adequately? If it is viewed from the broader picture of how
the EITI International principles are implemented in practice then TL – IETI
has done its task properly. As briefly speaking, the requirement of the EITI
International (EITI) is that the material payments made by the extractive
companies and the incomes collected by the government are meant to be
reconciled of which the results are published publically. Despite such
reconciliation is carried out by an independent auditor applying the
international auditing standards, it essentially looks only at whether the
reported amounts agree, not whether they are correct. (Olcer, 2009). If this is
an issue, then TL-EITI should go beyond the current pattern. Some questions
might be raised. Are the payment of royalty, taxes and other payments made by
the companies are exactly the same as the volume of the production which are
normally regulated under the license or Production Sharing Contracts (PSC) in
the case of TL. Is the payment made by the companies on time to the government
authority (e.g. National Petroleum Authority and/or the Petroleum Tax
Directorate)? The EITI International still fails to cover these critical issues
(Olcer, 2009); the same status quo also prevails in TL – EITI model. These
kinds of practices often result into discrepancies which eventually may turn
into disputes; thus, these probably could be seen as a serious subject during
the on-going legal dispute between ConocoPhillips v TL. As a case in point, in Nigeria, some
companies were detected by auditors that companies reported making payments to
the Central Bank of Nigeria that the bank had no record of receiving. Equally,
the bank had no recording of the payments made by the companies, (Olcer, 2009).
When this practice arises, the companies have an opportunity to make profit out
of it. It is therefore seen that TL-EITI might have not performed adequately to
hold each stakeholder in a transparent and accountable manner.
It has been already mentioned that the principles of
the EITI International are literally implemented on voluntary basis. This means
that governments and extractive industries need to voluntarily agree for
adopting the initiative before publishing the data, and there is no such kind
of enforcement among them, (Publish What You Pay, 2009). Hence, the IETI International
principles are primarily considered as a “soft law” to be relied upon by the
Stakeholders Working Group (SWG). Considering that the EITI International principles
are “toothless” to secure the concept of transparency and accountability in the
development of natural resources, TL needs to go beyond such principles. It is
worth noted that the 2011 Regional Conference themed “Beyond EITI: Timor-Leste
Transparency Model Extractive Industries Transparency Initiative” hosted by TL in
Dili was a sort of milestone of which the country is thought being committed to
the core principles of the IETI International. In the opening remarks of the
Minister of Finance, Mrs. Emilia Pires says that “…the EITI acts as a
complimentary mechanism to the Timor-Leste Strategic Development Plan (SDP), by
helping to reduce corruption and make politicians and civil servants
accountable,” (Ministry of Finance, 2011).
Apparently, the wording of “complementary” here does
sound wimpy as some might assume that the TL-EITI’s nascent in the country
would be seen as a kind of recommendation, rather than legal action to be
further undertaken seriously, in one hand. On the other hand, the
abovementioned expression could be regarded as a possible avenue for the state
to actually exercise its power in the long-run for establishing a special law/Act
of the EITI itself in order to reaffirm the commitment of TL through the
TL-EITI which could have a legal enforceability, instead of being dependent to
the EITI International which is mostly regarded as “toothless.” This is so to
follow the example of other EITI compliant state such as Nigeria which has
enacted its Nigeria EITI (NEITI) Act of 2007 that is meant as an
anti-corruption tool to mitigate the magnitude of mishandling the revenues
collected and generated from the extractive industry in Nigeria. Briefly
speaking, the NEITI Act of 2007 regulates how the parties involved in the
extractive industry could be held accountable and transparent, yet still
harmonizing such Act with the EITI International’s principles and criterions,
(Ewere, 2011). It is worth mentioned that under Article 16 of the Act regulates
that both the governments and industry players have contractual liabilities to
be carried during the life of petroleum development in the country. In case if
either government and/or companies that exercise its role violating the NEITI
may lead into imprisonment and fined, (NEITI Act 2007).
TL-EITI still has a long way to go in order to
maximise its role sufficiently for ensuring the motivation of transparency and
accountability in the extractive industry development. There are several “food
for thoughts” to be sought, inter alia; first, given the fact that the EITI International
principles are applied on the notion of voluntary, it is possibly advocated
that the proposal of creating the TL-EITI Act should be put forward. This has
to be initiated by the TL-EITI SWG in the first place. However, the bill would
have to be carefully scrutinised (either by Parliament or Council of Ministry)
for avoiding conflict of law towards several related-laws which are already in
place such as Petroleum (Activities) Act No. 13 of 2005, the Decree Law No. 20
of 2008 on the Establishment of the ANP, Decree Law No. 7 of 2005 on Public
Tenders in Respect of Petroleum Contract Awards, Petroleum Taxation Law of 3
August No. 8 of 2005, and Law No. 9/2005 on Petroleum Fund. Furthermore, the
bill also needs to cautiously consider the role of several relevant
institutions that have been established, inter alia Commission of
Anti-Corruption (CAC), ANP, Petroleum Tax Directorate of the Ministry of
Finance, otherwise the compatibility and applicability of such a proposed law
might never be attainable. This might happen due to the conflict of interests
among the institutions both at individual level and organizational level.
Secondly, due to the complexity of extractive
industries’ operation, it is submitted that the TL SWG member should be
constantly trained in order to comprehend how the whole chain of the industry
operates, especially in terms of information and data disclosure made by
government and companies. At this point, the local NGO should be engaged more
actively as the voice of the society at large. In order to produce quality and
accurate information, highly well-trained people are needed. This is mostly not
the case in the developing nations, since not many people are well-informed
about the flow of information in the country, whereas in developed world, the
information mostly well-produced. And, the citizens normally question over the
accuracy of information disclosed, (Olcer, 2009). There more people are
well-trained; the demand of the accuracy of information is higher. It should
also be mentioned that media’s role here is paramount. However, the
impartiality shall be upheld in order to avoid “rumours and gossips”
publications, which might eventually let into public confusion and conflict.
Finally, it is noteworthy that the corruption
involved with oil and gas often occurs in the early stage of the process where
the contracts or licenses are being granted to the oil companies or oil service
companies, (Global Witness, 2008). This can be seen in the case of Security and
Exchange Commission vs. Halliburton Former Executive Albert Jack Stanley who
admitted in a guilty of plea to Houston, Texas Federal Court which held that
Halliburton’s engineering subsidiary, Kellog, Brown, and Root paid U$ 180
million in bribes to the Nigerian government to in order to win a natural gas
plan contract, (US District Court Southern District of Texas Houston Division,
2009). It is so firmly suggested to TL-EITI and the relevant national
authorities to be a “watch-dog” towards whichever the company that operates or
might come to operate in TL. Often occurs that the British Petroleum (BP) in United
Kingdom Continental Shelf (UKCS) has its own way of practice comparing to the
BP in Nigeria, or ConocoPhillips which operates in TL is different with the
ConocoPhillips in Norway. As both Norway and the UK arguably have a strong and
well-established petroleum legal framework that can be able to endorse the idea
of international best practices, and hold the companies act responsibly which
is also being advocated by the EITI International; whereas, TL and Nigeria do
not have as such. It should be further noted that although these giant
companies operate under the same flag, yet their respective management is
always different from country to country. Inevitably, the international best
practices applied by major international oil companies are somehow different
from jurisdiction to jurisdiction which is pretty much dependent on the rules
and regulations which are available in one particular country. If the country
has an adequate legal framework in place, the international best practice which
is one of the cornerstones principles of the EITI International could be
attained. By contrast, if the country has a very limited rules and regulations,
it might rather trigger to the international oil companies to behave
irresponsibly.
[*The author
is the recipient of SERN – Norway Master Scholarship Program and presently
completing LL.M in Oil and Gas Law at Aberdeen University School of Law, Scotland,
UK. This article is a personal opinion. Any mistake and omission is solely
responsible by the author himself. He
can be reached via email at joniantomonteiro@yahoo.co.uk]
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