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Get ready for UK extractive industries disclosure rules

Image courtesy of the Houses of Parliament Flicker streamThe UK government recently announced the publication of draft legislation entitled “Reports on Payments to Governments Regulations 2014.” The legislation would require UK-registered mining, quarrying, and logging companies to report on payments they make to governments all over the world, when such payments exceed £86,000 ($137,000) in a financial year.

The UK’s initiative represents an initial step toward a broader expansion of regulatory transparency requirements that we expect will, over the coming year, be imposed upon companies operating in the extractive and logging sectors.
Under the UK legislation, “payments” are broadly defined to include money or in kind contributions. The legislation would apply to “large undertakings” and “public interest entities” that extract oil or gas, engage in mining, quarry or logging activities. A company subject to the legislation must file reports with the Registrar of Companies within 11 months of the end of its financial year. Failing to meet the deadline could result in an unlimited fine for the company or imprisonment for directors who fail to take all reasonable steps to comply. Subject to Parliamentary approval, the legislation will apply to fiscal years commencing on or after January 1, 2015.
In addition, the UK Financial Conduct Authority (FCA) recently published a consultation paper on the proposed implementation of transparency rules for companies with publicly listed securities on the UK market. If implemented, the measure would also apply to fiscal years commencing on or after 1 January 2015. The FCA is accepting comments until October 7, 2014.
The proposed measures would make the UK the first EU country to comply with the extractive industry transparency provisions introduced by the EU Accounting Directive and Transparency Directive. All other EU Member States are required to adopt similar measures into national law by July 20, 2015 and November 26, 2015 respectively.

In the U.S., the Securities and Exchange Commission is also expected to issue new reporting rules in 2015, following the decision of the U.S. District Court for the District of Columbia in July 2013 vacating Rule 13q-1, the SEC’s first effort to adopt reporting rules for resource extraction payments.
Affected companies should, accordingly, familiarize themselves with the proposed UK reporting standards, some of which may require the implementation of new or enhancement of existing internal accounting and reporting protocols. Companies also may wish to respond to the FCA consultation, and engage in dialogue with other Member State regulators who are considering similar reporting standards.

The draft legislation “Reports on Payments to Governments Regulations 2014” is here (pdf).


Robert Amaee is a partner in Covington’s London office and recognized internationally as a leading white collar crime lawyer specializing in governmental and regulatory investigations. He advises companies and senior individuals on serious economic crime matters, internal investigations, disclosures to governmental and regulatory authorities and the development of effective compliance programs. Before joining Covington, Dr. Amaee served as Head of Anti-Corruption and Head of Proceeds of Crime at the UK Serious Fraud Office.
Alicia Rathod-Papier is an associate in Covington’s London office. Ms. Rathod-Papier’s practice covers a broad range of advisory matters, including internal corporate investigations, export controls and economic sanctions compliance, anti-corruption compliance, and dispute resolution.

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