SEC ruling will spotlight financial dealings of firms in Africa
SEC ruling will require oil and mining companies to disclose payments to foreign governments. It could put those operating in resource-rich Africa at odds with governments that prefer secrecy and at a disadvantage to less-regulated companies.
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In Pictures Mining: A gritty job
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The law will leave your average miner "forced to choose which law it would violate – the US or the host country law," said Rio Tinto, the world's third-largest mining company, in its initial complaint to the SEC.
Rio Tinto mining executives aren't likely to sit in an Angolan jail cell any time soon, industry analysts say. Most contracts contain clauses demanding that US law supersede local law. But such executives are probably in for a heated conversation with a minister or two the next time they make public the amount of money they're wiring to governments whose citizens – wrongly or rightly – suspect oil and mining revenue is being embezzled, not spent on the public good.
US-listed companies argue that such disclosure will only put US-listed companies at a further disadvantage to Chinese and Russian miners and oil scouts who in recent years have won swaths of the continent's best mining and oil concessions and wouldn't have to abide by the same rules as the US companies.
US and European companies are already up against Britain's 2010 antibribery act, not to mention the 1978 Foreign Corrupt Practices Act that Washington has, over the past decade, begun enforcing with greater vigor.
The recent stream of high-profile Corrupt Practices Act cases has rung a warning bell not so much for major oil companies, but for the bevy of pint-sized operators they contract out to. Industry personnel say smaller companies, not the world's massive oil giants, face the most direct pressure to mete out bribes to bureaucrats who take months to grant import permits for urgently needed gear or work visas for staff.
For major companies tasked with winning hundred-million dollar mining concessions, straight bribes are an increasingly archaic practice, says Goncalo Falcao, a Africa oil and gas law specialist and partner at law firm Tauil & Chequer.
“Corruption is getting more and more sophisticated. It's not in the awarding of the concession where you get problems," he says.
Companies, he adds, are free to tack on a multimillion dollar signing bonus to governments hawking prized land. As long as the bonus isn't, say, wired into someone's bank account, "you don't have any issue," he says. “Of course, what happens to that money afterwards is none of your business.”
IN PICTURES - Mining: A dirty job