COMMISSION ON SECURITY & COOPERATION
IN EUROPE: U.S. HELSINKI COMMISSION
NATURAL RESOURCES, A NATIONAL RESPONSIBILITY
ASSOCIATE PROFESSOR OF ENVIRONMENTAL STUDIES,
UNIVERSITY OF VERMONT
PARTNER, HOGAN AND HARTSON
DIRECTOR, REVENUE WATCH INSTITUTE
THE HEARING WAS HELD FROM 11:00 A.M. TO 12:30 P.M. TIME IN 2325 RAYBURN,
WASHINGTON, D.C., [SHELLY HAN, POLICY ADVISOR, CSCE], MODERATING
THURSDAY, APRIL 15, 2010
MS. HAN: Good morning, everyone. I’d like to welcome you to the Commission on
Security and Cooperation in Europe’s briefing on the Natural Resource Charter.
The commission has the mandate to monitor implementation of the Helsinki
Accords, which were signed 35 years ago this year.
And those accords focus on three dimensions: security, economics and the
environment and human rights. At the commission, we tend to focus our efforts
on issues that cut across all three dimensions. And in the case of the
extractive industries, it’s a natural focus for us because we can see where the
impact of the oil, gas and mining sectors have implications for security,
implications for economic development, implications for the environment and
implications for human rights.
The Natural Resource Charter is aimed at giving countries the tools they need
to fully develop their natural resources for the good of the whole country. As
it was launched last year, I was struck by how far we’ve come in terms of
bringing the sometimes very difficult conversation of extractive industries
into the lexicon of world leaders. But I was also struck by how much farther
we need to go to achieve real progress on development and improvement of human
In today’s briefing, I hope we can accomplish a couple of things: First, I’d
like to come away with a good understanding of the charter itself – how it’s
being used, how it’s being developed and how it’s actually going to grow in the
future. And second, I hope that we can have a candid conversation on what gaps
remain and specifically what steps the commission itself, the U.S. Congress,
the State Department, international organization and others can take to address
Fortunately, we have an expert panel that will make what would otherwise be a
daunting task a walk in the park. The full bios of our three witnesses have
been distributed, but let me introduce them briefly. First, we’re going to
hear from two people who were instrumental in developing the charter from its
On my right here is Mr. Joseph Bell, who is a partner at Hogan and Hartson and
an experienced advisor to developing countries particularly in the extractive
industries. And then on my left is Ms. Karin Lissakers, the director of the
Revenue Watch Institute, who spent a number of years as the U.S. executive
director at the IMF, as well as a luminous career at the State Department and
on the Hill.
We are pleased that we have Dr. Saleem Ali joining us via videoconference from
the University of Vermont. Dr. Ali is a professor of environmental studies and
is actively involved in U.N. projects and most recently published a book
titled, “Treasures of the Earth: Need, Greed and a Sustainable Future.”
I’d like to note for the audience that we will have an opportunity for
questions from the audience at the end of the statements here, so if you’d like
to prepare in your mind some questions, you’ll have an opportunity to address
the witnesses at that time. So Mr. Bell, if you could start us off with your
JOSEPH BELL: And the fact that I’m sitting here has nothing to do with
alienation. (Laughter.) It’s simply I cannot fill the seat of the person who
was here without having my chin on the table. (Laughter.) In any case, thank
you for the invitation to talk about the resource charter. My colleague, Karin
Lissakers, who will discuss how the charter was developed and its current state
and how it fits in with other international initiatives. I will touch upon
some of the just basic substantive principles incorporated into the charter.
And the full document is part of the record.
As we all know, natural resources – oil, gas, minerals – have been the source
of many conflicts, much corruption and on occasion great environmental damage.
Even today, competition is fueling conflicts in the Eastern Congo, the Niger
Delta and elsewhere. But natural resources also provide an opportunity to
support growth and development. There are successful cases: Botswana, Norway,
even the history of the United States.
Now, resource management can be a thickety challenge for developing countries
with weaker institutions, with limited human resources and where such resources
can bulk very large in government revenue. But success is possible and that
success is not only a benefit to the country and its citizens, but also to the
international community in reducing conflict, overcoming poverty and, we hope,
producing a more stable international environment.
The charter enhances the likelihood of success by trying to draw together what
we know about the wise development of natural resources and to provide that
information in a useful format to governments and societies in resource-rich
countries. It’s organized around 12 principles. The first 10 are really
directed to citizens and governments in countries having natural resource
wealth and the other two are directed to the international community and home
governments – that is, governments that host the companies that do the
Furthermore, the charter is actually elaborated at three different levels.
There’s the general principles, which are about one sentence long. There is a
second level of explanation, which is a slightly longer elaboration. And then
there’s a rather important third level, which is much more extensive, pulling
together experience in various countries and elsewhere. It is a work in
progress. We are still receiving comments from many different groups and so
the final product is still a ways out there.
Now, under the Extractive Industries Transparency Initiative (EITI), probably
known to most everybody in this room, there has been much focus on one
important aspect of resource development: the transparency of payments to the
government by private entities or by – not necessarily private entities – by
producers. Now, the resource charter reinforces the EITI, especially with
respect to the importance of transparency, but it goes beyond EITI by looking
at the entire value chain from the decision to develop or not to develop, the
development process itself and very importantly, how to use the resulting
Outside the Anglo-Saxon tradition, natural resources are the property of the
nation. And the principles begin with the basic notion they should be used to
secure the maximum benefit for the citizens of the host country. The
implementation of this, simply stated – an unexceptional idea – is, in fact,
not easy. It requires many difficult decisions. Oil, gas and mining projects
are technologically complex, capital intensive, usually have very long
investment lives and are affected by highly volatile commodity markets.
Moreover, if not properly managed, they can impose very significant social and
Getting these decisions right in any country requires good processes, good
technical knowledge and, in the end, good judgment. A number of the precepts
actually involve the technical issues of resource management: What is the role
of competition? What are the options for the fiscal regime? What basic
principles should guide state-owned companies? What are the social and
environmental risks and how can they be mitigated? These tools emphasize the
use of competition to maximize value to the country and the adoption of fiscal
regimes that have flexibility to adjust to changing economic and social
conditions over the long periods typically required for resource extraction.
Certain of the precepts deal with process, especially the importance of
transparency and public involvement in resource use. The history of resource
exploitation is filled with much bad history – secret dealings, private
enrichment. The charter emphasizes that these resources are public assets,
that citizens have the right to information about their development. Moreover,
such information is a basic element in getting policies correct and in building
constituencies that will support such policies over the long term.
On the expenditures side – and this is important – the charter holds that
resource revenues should be principally devoted to promoting sustained economic
growth. Resource development needs to be integrated with the country’s
long-term development plans. And the additional revenues should be used to
accelerate a movement along that plan.
Now, this may seem an obvious conclusion, but there’s been much debate about
how natural resource revenue should be saved and how much spent currently and
on what. Some have argued that revenue should be deposited in some sort of
future generations fund with only the interest being spent to support the
While appealing on its face, in fact, the returns on investment and social and
physical infrastructure within the country should in most cases be much higher
than the returns available on internationally held funds. Even more so, when
one considers the vulnerability of such funds to future rating, particularly
for poorer countries but also for countries such as our own, it is this
internal investment that sets the foundation for prolonged and significant
economic growth – a process which increases the welfare of both current and
future generations of citizens.
The charter’s value rely on providing good advice, hopefully wise advice based
upon experience, as to how a country should go about this critical process of
converting the wealth in the ground into permanent wealth for its citizens.
And we will all be beneficiaries where countries are successful in this task.
MS. HAN: Thank you, Mr. Bell. Ms. Lissakers?
KARIN LISSAKERS: Thank you very much. Shelly, we really appreciate this
opportunity to present to the Helsinki Commission on the Natural Resource
Charter. My institute – the Revenue Watch Institute – is an independent,
not-for-profit organization dedicated to promoting effective, transparent and
accountable management of mineral resources in resource-rich countries. And my
team and I have participated in the creation of the resource charter and are
very much involved in carrying it forward.
Joe Bell just summarized some of the principal elements of the charter. I’d
like to talk to you a little bit about the process and where we go from here.
The broad goals of the charter are twofold. The first, as Joe said, is to
provide a practical guide for policymakers in resource-rich countries,
particularly developing countries that struggle with the complexities of
managing valuable, finite, capital-intensive mineral resources and meeting the
challenges of highly volatile revenue streams these will generate.
Now, this advice is certainly not limited to developing countries however as
we’ve seen in the United States with the fight over royalties from minerals
produced on U.S. federal lands and the difficulty the Department of Interior
has in collecting those royalties. The issues we address in the charter are
widespread and common for mineral-producing regions.
Second objective of the charter is to move the world toward a set of global
norms for the management of extractive resources that will guide not only the
producing countries but also extractive companies and their home governments in
the consuming countries. That was really the first goal of the charter that
brought the drafting group together. All of us – which includes a mix of legal
experts, tax experts, economists, political scientists – all of us are involved
in one way or another in advising governments on extractive policy and working
with parliamentarians and with civil society activists.
And we found that we kept getting the same questions from the stakeholders:
How should a country maximize its resource rents without driving away
investors? What happens when prices fall? How much should we spend? How much
should we set aside in a savings fund? What do other countries do? What are
the successful models?
So we decided that it would be useful to try to pull together our answers in
one concise, but fairly detailed document. We’ve handed out hard copies.
They’re also available on the Web site, www.naturalresourcecharter.org. But
the level threes, which are the detailed policy prescriptions are still being
revised, so they are not yet available.
And as you will see on the cover of the hard copy of the charter, it’s labeled
a draft for consultation. That’s because while the group that has been
drafting the charter has both broad and deep expertise, we know we don’t know
it all and there’s a wide consultation process underway with industry, with
civil society activists, with economists, with the various IFIs that have
expertise in this area. And there will be a revision and updating of the
charter in the fall based on all these global consultations.
Once we have an updated document, the charter group will make a big push to try
to convince individual countries to use the charter as a policy guide. And we
are very clear in making the point that to be really successful over the long
term, countries can’t just cherry pick one or two features of the charter. You
really need to follow best practice in all the elements in each stage of the
value chain in order to maximize the long-term economic benefit for the country
as a whole.
The second goal for the charter, as I said, is to try to develop and bring
acceptance of global norms for extractive resource management. Now, they say
this may sound very lofty and a tad unrealistic, but we don’t agree. We think
it is both highly necessary and doable. As Shelly Han said, there have been
dramatic changes in attitudes toward resource governance and industry practices
in the last decade. And I’ll just give you three examples:
When Tony Blair launched the Extractive Industries Transparency Initiative in
2002, very few companies were interested in the initiative. Civil society
said, nah, no country – serious major producing country is going to volunteer
or comply with a voluntary initiative. But as we have seen, there are now 32
countries in various stages of implementing EITI – not all of them
successfully, to say the least, but there’s significant buy-in and more
countries are joining every day.
Major oil and mining companies strongly support EITI and are actively engaged
in the process now. And that’s critically important. EITI has active support,
funding and endorsement from the World Bank, the Asian Development Bank, the
Inter-American Development Bank – all of the regional IFIs and global IFIs –
the IMF and major governments – the U.S., Germany, France – there is very
You can also see that companies themselves are trying to move in the direction
of improving their own behavior and practices. Probably the most advanced is
the concerted effort by a group of the 17 largest mining companies in the world
under the International Council for Mining and Metals, which is developing
under the guidance of their CEOs, a sustainable development framework for
And these guidelines are binding on all of the companies that are part of the
council. The framework falls short, to be sure, in certain areas, but it is
nevertheless a very ambitious undertaking and a very positive one. One wishes
that the oil industry would organize itself along the same lines and try to
develop some common guidelines.
Finally, I would say the U.S. Congress has really been a leader in the debate
on the question of the link between resource governance and resource security –
security for major importing countries like the United States. And of course,
has been moving – at least introducing – some critical legislation in this
area, most notably, S-1700, the Energy Security through Transparency Act, which
has bipartisan sponsorship. And we hope to see a similar bill emerge in the
House very shortly.
Now, this bill only addresses one part of the value chain issue – the
transparency of payments, but it would cover all of the major internationally
active – virtually all of the internationally active mining and oil companies.
So it would affect not just U.S. companies but would really help to move toward
setting clear rules that build on what has been accepted and has been
recognized through EITI and the various voluntary efforts.
So all of this movement is really going in the same direction. And that’s why
we think that it is – it will be possible with the right diplomatic outreach
and activist engagement and congressional encouragement to reach a global norm.
And while there’s been a lot of progress, there’s also I think a very big
threat that many of these gains will be reversed as competition that we see
already intensifies to control scarce nonrenewable mineral resources.
And not all the players are playing by the same rules. That’s very clear. And
we could very easily see a race to the bottom again, as the access to supply
overrides concerns about proper governance and the long-term damage that
abandoning a best practice will produce. So with the help of a prominent
oversight board, we will be pushing very hard to have the governance of
extractive resources taken up by the G-20, which is becoming the leading forum
– international forum for globally important economic issues.
It happens to include all of the major producing countries, both mining and
oil, petroleum – the major home base of the extractive industries and the
minerals importing countries. So it is an ideal forum in many ways. And we
have been talking to member governments about taking up this issue and using
the charter as a framework for these discussions.
Now, we’re very often asked whether the charter could become an international
convention. That would be, I think, pretty far down the road. We don’t know
if it will become a reality, but what we do know, as Joe said, is that it is a
matter of vital and mutual interest for producing countries, for consumers, for
investors that there be international norms for management of the nonrenewable
minerals resources upon which every modern industrial economy depends. The
commission titled today’s briefing, “Natural Resources, A National
Responsibility.” I would add that this is also an international
responsibility. Thank you.
MS. HAN: Thank you. Now we have our most eco-friendly witness – (laughter) –
joining us, teleconference from Vermont. Dr. Ali, go ahead.
SALEEM ALI: Thank you so much. Respected commissioners, congressional staff
and participants, we are convening this briefing in the shadow of the worst
mining disaster to befall our country in 25 years. The failings of
government’s mechanisms to ensure accountability of natural resource
enterprises is painfully evident to the communities in Appalachia. Not only do
they exemplify the occupational and environmental hazards of resource
extraction, they also show how poverty can persist despite an abundance of
However, my aim here is not to berate resource extraction but to deliberate on
how to make resource economies work most effectively for mineral dependent
communities. Minerals are undoubtedly an essential ingredient in developing
modern economies and consequently a security priority as well.
The mandate of the Helsinki Commission provides an opportunity to consider
efforts at reforming governance systems around natural resources at multiple
levels. Principle VII of the accords, which led to the establishment of this
commission under U.S. law, support the, and I quote, “respect of human rights
and fundamental freedom,” unquote. This principle coupled with the mandate to
promote humanitarian activities as stipulated in Basket III of the accords has
collectively led to the application of a so-called “human dimension” to this
The commission is thus in an appropriate position to provide the impetus in
moving its 55 signatories towards improved governance of natural resources and
promoting this vision more broadly at the international level. Two recent
initiatives to promote better governance of natural resources deserve our
attention today: the Natural Resources Charter and the Extractive Industries
Transparency Initiative (EITI).
Neither initiative has followed the usual path of an international convention,
but both have merit for greater global accountability if they can be properly
implemented. We have heard in more detail about the specifics of the charter
from the distinguished panelists already and so I will focus my comments on
some specific strengths and weaknesses of this effort.
The charter aims to provide a broad framework for considering the role of
natural resources by outlining 12 precepts and its substantive content is
backed by a group of distinguished academics. Each precept has a technical
document which is open for public comment and review since October, 2009.
Much of the content in these accompanying documents, which I have reviewed
assiduously, aims to exemplify best practices in natural resources management
and derive considerable material from already existing material from the World
Bank, the International Council on Metals and Mining and the outcomes of the
Mining, Minerals and Sustainable Development Initiative (MMSD), which was in
itself a long, deliberative process dating back to around 2000 to 2002.
It is thus meant to be a synthesis document and does not appear to have any
pretensions of having direct enforcement impacts as already stated. As
described by the Revenue Watch Institute, and I quote, “The charter is a
rallying point and an advocacy tool to promote natural resource extraction that
is conducted ethically and to the benefit of the community,” unquote. Since
the charter is not aiming to have treaty status at this time, it could perhaps
be a bit more specific in its goals of achieving these objectives since it is
less constrained with the imperative of ratification that treaty regimes might
be encumbered with.
For example, the precept which grapples with environmental and social aspects
of resource extraction could consider novel techniques for valuing ecosystem
services that may be impaired by resource extraction in a cost-benefit
analysis. The charter also avoids clear guidance on how contentious legal
notions, such as free, prior and informed consent of indigenous people might be
obtained and enforced – something which some mining companies are now even
willing to consider.
To their credit, the founders of the charter have said that it is a living
document which can be independently improved upon and act as a clearinghouse
for guidance to governments and companies on best practices. Its independence
is thus far guaranteed by a funding base from nonpartisan foundations. And its
anchorage in the academy would guarantee that to some degree. I would urge the
conveners of the charter to capitalize on this independence and be more
specific and bold in their recommendations for improving natural resource
Interestingly enough, the second initiative which I will talk about has its
origins with government institutions, but is more specific and bold in its
oversight recommendations. Focusing on the precept of transparency, the EITI
had its origins in the World Summit on Sustainable Development in 2002 when the
British government launched it. Subsequently, the effort has been embraced by
the Norwegian government, who are now providing about a fifth of the effort’s
funding and hosting its secretariat in Oslo.
The EITI aims to get as many countries as possible to join the effort through a
system of candidacy and milestones for achieving compliance with its founding
principles of revenue transparency. There is also a process of validation
which goes beyond the usual concept of an audit and this embraces a far broader
view of what we may often refer to as the social license to operate.
The compliance process for EITI is rigorous and is exemplified by the fact
that as of April 2010, only two countries have been deemed EITI-compliant. One
of these countries is Azerbaijan, which is happily also a member of the
Organization for Security and Cooperation in Europe and thus part of the
Helsinki process. The other compliant nation-state Liberia is an example of
how a country beset by abject violence caused by mineral smuggling can recover
within a decade of improved governance.
The challenge for EITI is that it has to seek membership from individual
countries with little international clout on its own. Therefore, some of the
largest players in the extractive sector – Australia, Canada, the United
States, Russia and China – are not even candidate countries under the EITI thus
far. The Helsinki Commission can help to change this by raising the profile of
EITI more effectively. Now, this can of course be done for the Natural
Resources Charter (sic) as well in terms of encouraging other countries to
adhere to its mandate.
The commission can also play a role in making such legislators within member
states pay more attention to revenue flight in countries with which their host
corporations and interests engage. With the growing influence of globalization
on national policies, some of the fears of resource dependency and its
connection to corruption may be assuaged.
For example, consider Equatorial Guinea, which has been under the same ruler
since its independence from Spain in 1968. The country has now signed up to be
a candidate country within the EITI, partly because of international attention
to its governance that was highlighted by its natural resource wealth.
After the discovery of oil in the mid-1990s, the international community became
more engaged with this tiny country. The United States reopened its embassy in
Malabo in 2003 and the State Department asserts, and I quote, “that the U.S.
intervention has resulted in positive developments,” unquote, such as – and as
an example, an office to monitor the human rights situation in the country.
The viability, however, of such a mechanism as a means of initiating positive
change in Equatorial Guinea was tested by a U.S. Senate hearing and an
investigation by the office of the comptroller of currency on siphoning of
funds from oil revenues to private banks in 2004. None of this would have
happened if the salience of Equatorial Guinea had not been brought to the
world’s attention by oil imports which the U.S. makes from that country and the
worthy efforts of civil society groups to bring those issues to light. So
trade is probably good as long as it is used with accountability.
The United Nations Security Council undertook a similar effort at vigilance
when it convened special panels to investigate the linkage between mineral
wealth and the ongoing dreadful conflict in the Democratic Republic of the
Congo and in Liberia to some extent. Yet the onus for exerting positive
influence once corruption is exposed still lies with the international
community, which needs to push for reform through scrutiny of natural resource
wealth. Without a unified stance against violations of agreements at the
international level, ad hoc accountability arrangements such as those initiated
by the World Bank in the case of the Chad-Cameroon pipeline can still fail
despite their noble attentions.
In conclusion, I would state that minerals are an important and perhaps
essential part of the development path in many countries. However, the
international community needs to realize that these resources must be governed
with great care and a long-term planning horizon. Natural resource endowments
are an accident of geography and they can certainly be an essential tool for
spurring economic activity.
Even though the extraction itself may be nonrenewable timescales, it can be a
catalyst for capital flows that can provide for lasting development. Efforts
at improving the vigilance of natural resource economies urgently need
strengthening and should be considered not only as a humanitarian effort but as
a vital security priority. Thank you.
MS. HAN: Thank you. I’d like to note we have been joined by Congressman
McIntyre. Thank you for joining us. Would you like to say something or you
want to chime in when you’re ready or – (inaudible)?
REP. MIKE MCINTYRE (D-NC): We’ve got so much happening today, I’ll be here for
a few minutes, but I wanted to come by because our natural resources are such
an important responsibility that we all have and that benefit all and should
not be the province of just one group or one concern. And so I’m appreciate of
the commission holding this hearing and wanted to come by to show my support
for having an open dialogue about this and especially thank our panelists who
are with us today and our other guests who are represented here. Thank you,
MS. HAN: Thanks for joining us. Before we get into some of the more
philosophical questions that the charter raises and those issues and some of
the questions I think that Dr. Ali raised in his testimony as well. I’d like
to get just a couple of questions on the – of how the charter is actually
operating right now and in terms of who is controlling – you know, who actually
is the charter right now?
And is there a specific location or is it people spread out? And then what
type of support are you getting from the international lending institutions or
other groups in terms of incorporating what the charter is doing into their
efforts? If you could talk a little bit more about the charter format.
MR. BELL: This is Karin’s bailiwick.
MS. HAN: Okay. (Chuckles.)
MS. LISSAKERS: Well, the charter is, to some degree, a virtual exercise.
There is a group of like – I can’t even remember how many of us – led by
Professor Paul Collier, who is probably the pre-eminent scholar and expert and
policy advisor on resources, economic development and conflict; we have a Nobel
laureate; we have an international tax expert from North Carolina, Professor
Robert Conrad of Duke University; Joe Bell, who has helped many countries
negotiate extractive deals; Michael Ross, who is a political economist and
expert on conflict and extractive resources and so on.
So there’s the core drafting group, but we have broadened the group that is
actively engaged – or we are in the process of doing so – to do two things.
One is to have a more diverse and prominent group of champions for the charter,
which is an oversight board that is chaired by professor and former president
of Mexico, Ernesto Zedillo. Mo Ibrahim, the prominent African entrepreneur and
philanthropist is a member of the oversight board.
There are a couple of other people who we are not ready to name yet but who
will be joining shortly. And we are also creating a technical expert group to
review each of the precepts to make sure that they are really right. And Dr.
Ali mentioned some weaknesses in the environmental and social precepts, for
example, and we are very conscious, as I said, that there are issues in the
number of the precepts, so we want to pull together more targeted expertise to
address those. And that group is still in the process of formation.
We’ve had a lot of interest from the World Bank because the World Bank has
something they’re calling – well, the nickname anyway is EITI Plus Plus, which
is to move beyond the transparency payments to other issues around the value
chain. And the World Bank has been using the charter as a reference point in
their discussions on EITI Plus Plus.
We’ve had a very good response from the U.S. and U.K. and Australian
governments about raising these issues in the G-20 and possibly using the
charter as a framework. We hope to take this forward in discussions with the
government of Korea and with – which will be chairing the fall summit – talking
to some people in Canada about it. So it’s a matter of building interest. The
U.K. government’s development arm is actually funding some of the consultation
and dissemination process to build on the contribution we got from the Bill and
Melinda Gates Foundation to get the project started. So I think there’s a lot
I think there is recognition of a need to have a broader international dialogue
around these issues. And as I say, we think that the framework is a good
reference point, precisely because it doesn’t have any institutional identity.
It’s not ideologic (sic). It’s an attempt to compile, as we say, best practice
that’s been developed by various groups and stakeholders and experts.
MS. HAN: Thanks. And I’m wondering if we could continue and comment more
directly on a couple of things that Dr. Ali mentioned because I think he brings
up a point – and I have to confess that I have not read all of level two of the
charter. I have looked at it, but I haven’t absorbed it at the same degree of
specificity as you have. But you know, for example, he does raise the issue of
because right now you don’t necessarily have the political need to be so broad
that so many countries or companies would be associated with it.
So are you working on addressing things like clear guidance on – he named
specifically free prior and informed consent – those types of issues, which
perhaps now you could afford to be a bit more specific? And is that part of
the technical working group that you all are – if you could just address that
question, that would be great.
MR. BELL: Well, it’s, as we said, of course it’s a work in progress, but there
are these various levels. Obviously in one-sentence summaries, you’re not
going to get in great depth. But you know, just take an issue like free prior
and informed consent. It’s not a simple issue.
There are many people who have very strong feelings about it, but it’s also
clear that there are some very complicated issues underlying this in terms of
the interests of the citizens – you know, the country as a whole versus the
citizens that are in the impacted areas and how those rights ought to be sorted
out. And I think in certain instances, the best thing that the charter can do
is to point out very carefully what the considerations are that need to be
taken into account and thought through. And moreover, particularly in issues
such as that, it very much is circumstance-specific.
Obviously, one needs to pay a great deal of attention to indigenous communities
and if there is relocation or changes, there is a lot that’s already in the
charter about how that – what types of things ought to be considered and done
if it is undertaken. And that’s the kind of detail, I think, that needs to be
elaborated. But certain of these issues don’t lend themselves to a very neat
black/white universal answer.
MS. HAN: I’m going to ask another question or maybe two more and then we’ll
open it up for the audience. One of the things that – this is more of a – also
more specific – but how you talk about the difference between the federal level
and the local levels and the idea of, you know, how revenue sharing works or
who has control of the resources. And we see that as a big issue in places
like Nigeria or even in Canada or the U.S. or somewhere else – (chuckles). How
does the charter currently address those types of issues?
MR. BELL: Of course, Revenue Watch itself is doing a lot of work on revenue
sharing and perhaps Karin might want to just say a little bit about that and
then I might say a word or two.
MS. LISSAKERS: Yes, this is a significant issue in many countries – Peru,
Indonesia, Nigeria of course for a long time – had decentralized both
government decision-making and revenue distribution from extraction. So there
is a revenue-sharing formula. The charter, I don’t believe – it doesn’t now
and I don’t believe it will take a position on what the formula should be.
What is critically important in our view is that whatever sharing be done be
completely transparent and that the management of the resources at the
sub-national level where governance in previously highly centralized states
tends to be extremely weak, that the management of those revenues be
transparent and accountable to the communities and the citizens of those
We are working in four countries currently with sub-national projects, working
with a governor in the Niger Delta and with mayors in Peru and in regional
governments in Indonesia and in Ghana to create a public monitoring process for
the revenue streams that they get from extraction.
I would just make a sort of general point here in response to something Dr. Ali
said about how important it is that the international community sort of push
countries to do the right thing. That’s certainly true, but building political
support and pressure in the producing countries, I think, is the most important
determinant of whether countries will have successful economic and political
management or not. And dealing with the sub-national issues is part of
building that process. So the key is accountability, not to an IFI or some
external organization, but government accountability to the people themselves,
to the citizens themselves.
MR. BELL: I just say, I mean, like the distribution issue, it is a very
complicated issue. Things that on the face may sound appealing may not work.
I mean, Peru has this canon which gives a substantial percentage of the revenue
directly to the affected municipalities, but this has also led to a situation
in which you have a number of resources going into areas that haven’t been able
to absorb it and then other areas in Peru that are totally bereft of resources
and so that you have a great inequality developing in the country in terms of
These are not – and that’s reason I say it’s much better to have something that
sets out some of the concerns and the things that have to be addressed and how
you have to think through it rather than black or white answers. And then
secondly, just underscoring what Karin has said, you have to have a process
that’s informed and one of the principal issues is to make sure that the
information is available to the citizens so that they can participate in that
process and have political resolutions which are consistent with that citizen’s
desires. Dr. Ali may still want to say something.
MS. HAN: Yeah, Dr. Ali, would you like to chime in at this point on any of
MR. ALI: Yes, I certainly appreciate the limitations. And the approach I take
is a very pragmatic one. I mean, I’m not one of those sort of activist
academics who are just out there to lobby for a particular stance. All I’m
saying is you need nuance within the way these issues are presented.
And if you look at an issue like free prior and informed consent, there could
be discussion of the jurisprudence around it which exists within national and
international law. There is the U.N. Permanent Forum on Indigenous People
(sic), which has already been working quite hard on this. I was at a meeting
in Manila last year where specifically the issues of extractive industries were
being discussed and there were clear guidelines which were being proposed.
So I’m saying we should follow a process absolutely, with care and nuance, but
that, you know, it’s tempting to also just relegate that to the national
governments. The reality in many developing countries is 70, 80 percent of the
budgets are run by international donors. So the amount of clout there is
enormous. And to just play the sovereignty card very easily on that account, I
think, is tempting, but will not reach the objectives we are trying to reach.
The other, if we do have precedents in international law in terms of dealing
with some of these issues even at a, sort of, this nomenclature of a charter.
For example, the energy charter, which had been – eventually became a treaty,
is something that maybe the Natural Resources Charter should look into and see,
you know, are there some lessons to learn as you evolve this institution
MR. BELL: Let me just say, Dr. Ali, I certainly agree with you that something
like the free prior and informed consent we definitely, particularly in the
level three discussion, need to point to a great deal of work that has been
done on this in the international community and the conventions. And I
certainly didn’t mean to leave the impression that we were just going to say,
well, this is a national – it concerns a nation to decide it by themselves.
Indeed, the very value of this exercise is to try to provide information to
that national process. And so by its very nature, it’s not just saying, well,
turn this over to the country. Ultimately, these are political decisions that
have to be made by the country. Our role here, though, is to try and provide
as much information to the citizens and to the governments to inform these
decisions as well as we can. And your point about having more exposition on
these is very well taken.
MS. LISSAKERS: I would just say also, I mean, I took your comments on, for
example, free prior and informed consent very seriously because it is certainly
not the intention of the drafters to go for the lowest common denominator by
any means. And if that’s where we are on some of these issues – and thus we
may well be – that’s not where we want to be.
On the, you know, some of the economic issues, for example, we are as a group
very critical of the very conservative stance taken by some of the IFIs in
advising governments that most of the money should be put away in U.S.
treasuries or invested abroad. When you have an acute need and a low level of
capitalization in the country and our message is very clearly, first priority
should be to spend the money, invest the money at home, taking account of
volatility. So are very open to changes, proposals for changes. And I hope we
can continue this discussion. Thank you.
MS. HAN: A couple of things you all said were very – dovetailed into some
questions that I’ve had myself on this whole process, not just the Natural
Resource Charter, but EITI and many of these transparency efforts. Mr. Bell,
you raised the issue of national processes and you mentioned the lowest common
denominator. And you know, the reality is, a lot of these countries that we’re
talking about in this conversation range from the barely functioning to the
somewhat functioning – (chuckles) – to the pretty solid, but have a lot of
And one of the things that we struggle with a lot is, how do you – you know,
we’ve got these standards, and we seem to be holding – particularly in EITI,
we’re holding these countries and asking them to participate pretty much at
equal levels, even though we know that countries are not at equal levels
politically, socially, in terms of any of the sort of precursors – the things
that they need to have in place to make these things work.
And so how do we address that? You know, sort of the, if they don’t have the
basics of a civil society, or even a government that has – you know, we were
talking about Liberia earlier – if they don’t have the basics in place of
people in their parliament who can read a law and pass it and know what they’re
doing and government officials who know – you know, the level. And I know that
the international community is working with a lot of governments to up their
But how do we address that? I mean, or should it not be addressed in these
efforts, but maybe in other efforts, and then sort of gradually take these
countries to this place? Or do we sort of hold it all back until – I mean, I’m
not sure; it’s kind of a philosophical question that I’ve been struggling with.
Wondered if you wanted to weigh in.
MR. BELL: Let’s talk about our capacity to –
MS. LISSAKERS: I mean, the EITI has been struggling with this issue. In fact,
just now, today, right now, there’s a big debate in the EITI international
board about the validation process, because countries, while EITI is a
voluntary process, once a country signs on, the rules are pretty strict about
what you have to do and when you have to do it. And there’s a deadline to have
all your processes reviewed – inspected, basically, and reviewed for compliance
with the EITI rules.
And a number of countries have not met the deadline for filing their validation
reports. Now, is that a matter of lack of capacity, or is it lack of will or –
and the rules say that there have to be circumstances beyond the government’s
control, in order to have an extension. Otherwise, you will be delisted as a
number of a countries. And my guess is, when we wake up tomorrow, we will see
that several countries – or a number of countries will have been delisted
because they didn’t meet the deadline.
There are obviously great cases – I mean, Liberia has certainly limited
capacity, but it has delivered. It’s done a very ambitious EITI process. It’s
fulfilled the validation, and so on. So that’s an example to other countries.
But the fact is, that if you work – we work a lot in Sierra Leone, for example
– you can see very clearly that at the moment, the capacity of this government
in Sierra Leone is much lower than that of even neighboring Liberia, even
though they had pretty much the same starting point.
So it’s very tricky. The key is capacity building – is to have clear rules,
clear guidelines, and back that up with capacity building. I mean, the Revenue
Watch Institute spends an enormous amount of effort working with
parliamentarians to understand the petroleum and mining law and the issues that
will come before them for approval. We work with civil society and with the
press in resource-rich countries to try to help them get a better understanding
of the issues.
We provide technical assistance to government officials. Joe Bell has done a
lot of work in countries. And as part of the charter exercise, since there are
a lot of academics involved, as you can see, we’re actually creating formal
courses around the charter – both the front – the upstream issues of contract
negotiation and tax structuring and so on and the macroeconomic issues. So
there will be a package of courses, and there’s already enormous demand from
governments for these kinds of trainings. The World Bank Institute is
designing courses around the EITI Plus Plus. So there’s certainly growing
recognition about the need to give a lot of expert and capacity support.
MR. BELL: It does seem to me that the charter is useful in two ways. First of
all, for governments that do want to try to do a better job, but have capacity
limitations or experience limitations, it’s a starting point. It’s a very –
and you know – (chuckles) – it’s the first thing that somebody can start, so
that, to the extent that it is a useful exercise in providing information to
the willing, that’s one part of helping with that capacity. The other aspect,
of course, is, it’s a tool for civil society and for building their education
and for them to, frankly, be able to utilize as they organize political
constituencies in support of better resource management.
I mean, one of the problems we all know about resources is, exploitation is a
very long-term process, and we spend a lot of time in countries where they
started out badly, locked themselves into bad deals, and now are trying to
clean them up. And hopefully, in processes like this, people can see, up
front, these problems and do a better job in doing it. So I think that there
are ways that this will interact with these very basic development problems.
But obviously, it’s just one of many different initiatives and activities that
have to take place.
MS. HAN: Dr. Ali, did you want to say anything on that issue, or –
MR. ALI: Well, I think most of the issues have been covered. I’m eager to
hear what the audience also has, in terms of questions. So I don’t want to
take their time.
MS. HAN: Yep, that’s where we’re going to go now. If there’s anyone who has a
question, there’s a microphone at the end of this dais. If you could come up,
state your name and your affiliation and a brief question, that would be great.
Q: My name is Pat Korovsky (ph). I’m an oil-cursed citizen from an oil-cursed
country, representing –
MS. HAN: Just one second. Can you hear, Dr. Ali?
Q: My name is Pat Korovsky. I’m an oil-cursed citizen from an oil-cursed
country, representing an NGO called Petropolitan (sp), that fights for oil
revenue sharing. And I appreciate much all the efforts of EITI, the Resource
Charter – all that. But when I – (inaudible) – that states very clearly, the
extractive resources are public assets. And the – (inaudible) – exploitation
are subject to informed public oversight, but places that completely within the
realm of the government, I must object. Because I don’t see anywhere here the
alternative that it would be the citizens managing the revenues or the raw
The USA – the oil is private. It was used in the U.S. as private. And it’s
really surprising for me to visualize something here that we are trying to
support – gather support for oil thugs to control those resources. And there
is some things there that we have to try to say, no to. Thanks.
MS. HAN: Thank you. Mr. Bell or Karin or Dr. Ali? I know, Mr. Bell, you had
actually, in your testimony, mentioned something about Anglo-Saxon law
tradition on that. (Chuckles.) Maybe you want to comment on that?
MR. BELL: Let’s start at the beginning. (Chuckles.) You know, some countries
do have private ownership of resources. Some countries, like ourselves, have
mixed ownership. Obviously, much of the public resources – natural resources
in the United States are on federal lands, have been treated as public
resources. They have been auctioned off to private developers for payments to
And so they have been managed in a public process, sometimes pretty well and
sometimes, perhaps, not so well. So even in the United States, we have a very
mixed system. Obviously, if the resource is committed to private ownership,
it’s in private parties. In most of the civil law countries – in fact, all of
them that I’m aware of – underground resources are considered the property of
the nation. Usually in the constitution itself, it starts out that as a basic
And you know, we have governments for the purpose, then, of making decisions
about how to manage those resources. Now, some governments are good
governments; some governments are bad governments. But we can’t pretend that
they don’t exist, and there’s no way to take that asset in the ground and
suddenly have it in every citizen’s pocket. It has to get there, either in the
form of cash or in the form of services, through some governmental process.
And I don’t see how you get beyond that. What we want to do is to get
governments to act wisely in that respect, in terms of how they manage that so
that the citizens see a long-term benefit.
MS. HAN: Dr. Ali?
MR. ALI: Yes, so I think this question goes back to what the level of national
identity is for the country in question. So if you have a very strong national
identity, there will be more willingness to have a situation where the state
has ownership of the minerals. But in cases where – like Nigeria, where the
national identity has been fractured since the country came into being, it’s
going to lead to conflict. And that’s why you have the situation where you
will want to have some disproportionately, you know, higher level of income
going to the place where the oil or mineral is being extracted, in order to
quell that level of conflict.
I think you need a hybrid system. You will definitely need to adapt
accordingly. Sovereign wealth funds are an important mechanism to do that, in
terms of how that can be managed when the wealth comes through. In the U.S.,
of course, we have the example of Alaska, with a very unique system of how the
sovereign wealth fund has been managed, where every citizen of Alaska gets a
check. In other places, that may not work out. You may need somewhat of a
hybrid mechanism. But I think there is – (inaudible, background noise) – for
us to ponder over.
MS. HAN: So Karin, do you think it makes a difference, then, in terms of, if
you’re looking just at it purely from a transparency or anti-corruption
standpoint, as to who controls or who has the reins over the resources? You
know, if we’re talking about local levels, or whatever level, do you think if a
government decides to disaggregate this, do you think it would make a
difference in terms of the ability to control the corruption or control the
MS. LISSAKERS: Well, who controls and what their motivations are certainly
make a difference. I mean, we see huge variations from, you know, whether
it’s, you know, Nigeria or Venezuela or Iran or Russia or the U.S. There is a
whole line of argumentation that the nature of extractive income to the state,
by itself, undermines democracy and accountability because the government is
independent of the people. That is to say, whoever controls the government in
a country where the resource is, by law, the state property, has an independent
source of income and doesn’t need to answer to the people through taxation.
Now, some people would argue that the way to solve that is to distribute all of
the resource rents to the individual citizens and then tax some portion back to
recreate that accountability mechanism. There are others who would argue that,
well, if you did that in the case of Nigeria, you know, the resource rent,
divided among all the citizens as individual income, would do very little for
the citizens and would deplete the government coffers. And not even Alaska
distributes all of the rents. But there’s certainly, you know, an interesting
argument around that issue. And some sharing of the rents with individuals may
have – will certainly make citizens pay more attention.
I mean, one of the phenomena we have seen until the EITI mechanism in, let’s
say, Cameroon, for example – the civil society groups we work with say that in
the past, it never occurred to any Cameroonian that they could or should ask
what was happening with the oil money because it was all abstract and had
nothing to do with them, because they never saw any information; they never had
any sense of a control.
Once the EITI numbers came out, there was an empowerment in the sense of
feeling they should ask, and say, well, where is the money going? Even the
Cameroonian parliament has asked the government, well, why don’t we have any
money for X, Y and Z? I mean, it hasn’t changed, yet, the economic trajectory
or development trajectory of Cameroon, but it has started a process, a dialogue
that was completely missing before. So that’s why we have so much emphasis on
MR. BELL: One other quick anecdote on that: Even in Nigeria, once the
ministry of finance began to make public the amounts that were actually going
to each of the states, there was a much greater demand for public services in
those states by the citizens of those states. I mean, transparency doesn’t
solve everything; that’s for sure. But without it, it’s practically impossible
to get the forces right.
Q: Good afternoon, Saleem. My name is Jeffrey Davidson (sp). I’m from Rio
Tinto, an international mining company with headquarters in London, U.K., and
Melbourne, Australia. I have a process question regarding the Natural Resource
Charter. I was at the World Bank in March of last year when Paul Collier
announced publicly this initiative. But it’s been a largely, kind of,
invisible initiative to certain elements of the broad, international community.
So people who know about it presumably have participated in it, and some
communities of interest know more about it than others.
And other groups that presumably have a relevance and a direct interest don’t
know a lot about it. So for example, even I got an e-mail not so long ago –
(chuckles) – from people in London saying, has anybody heard about this thing
called the Natural Resource Charter? So my question is, you know, I know that
on the Web site, you have a mechanism for people to comment; well, who’s
commented? Who’s participated in the discussion? Does it represent – is the
discussion representative of the broad community, or have only certain elements
MR. BELL: Well, Karin can say a lot. In fact, I mean, this is a concern, and
one of the issues has been to reach out and try to bring into this discussion.
To speak very parochially, the ICMM, which represents the major mining
companies, including Rio Tinto, actually has been involved. And Kathryn
McPhail, in fact, saw early drafts of this and participated in seminars with
the group to discuss these various issues.
Having said that, though, I think it is a very important point. And indeed,
Karin and others have been working, with some activity – not depending upon a
Web site – but to go out to these various groups and get comments. We’ve
circulated it very specifically to civil society groups that we know are active
and interested in these areas and asked for their comments. We have, as I’ve
indicated – there has been involvement with industry groups.
There have been a number of involvements with people in the regional bank and
the other international institutions. The World Bank and the IMF have both
taken a look at it and written comments. And Karin, you’re much closer to the
process than I am, but I just – the point’s well-taken, but it hasn’t been
MS. LISSAKERS: No, and I would say – we were talking about capacity
constraints – I mean, that’s been the issue. We now have a full-time
coordinator to organize schedules and develop events and so on. So it’s been a
bit ad hoc and off-again-on-again, because of the nature of the group that’s
pulled this together. We will have a much more systematic approach to
dissemination and public presentations and so on once we have the full
oversight board in place and the full technical advisory committee. But point
well-taken, and we’re conscious of it, but maybe not as conscious of this
shortcoming as we should be. Thanks.
MS. HAN: Isabelle?
Q: Hi, I’m Isabelle Munilla. I’m director of the Publish What You Pay United
States coalition. I had a three-part question, and it’s related to audiences.
I think this approach is really interesting, and I think it’s really practical.
But I was wondering, what does success look like? It’s a bit of a three-part
question. So from your perspective, for the Natural Resource Charter, what
does success look like, in terms of governments? Is it public policy forums to
talk about the charter’s recommendations? What do you think looks like success
from a government’s perspective?
And then, from a citizen’s perspective, I like that the second section is
called the citizen’s guide. And I think that’s really interesting, to frame it
that way. And what would you see as a success from a citizen’s standpoint, in
relation to the charter? How would citizens use it, and then work with it?
And then the third one, selfishly, from the coalition’s priorities, what do you
see as the U.S. government’s role in working with the Natural Resource Charter
in particular, the role of the transparency legislation that’s been introduced
in the Senate and its ability to influence governments that may be reviewing
the precepts within the charter? Thanks.
MS. LISSAKERS: Well, if you just take some of the transparency features of the
charter, what success would look like – that major capital markets, from Hong
Kong and Shanghai to Toronto and Melbourne and New York and Frankfurt and
London have listing requirements for extractive companies, so that it just
becomes the rule that extractive companies need to disclose their payments to
governments. We would like to see other elements on cost, production and sales
and so on be part of that package.
And an international accounting standard would be even better, and that’s
something we are working on, or at least, would be complementary. We would
like to have governments – you know, we have these precepts directed at home
governments as well. The export credit agencies from all the major
capital-exporting countries should have strict rules of compliance for
companies and governments that benefit from those – that cover the transparency
components, the human rights components, the environmental components.
I mean, the IFC has moved in that direction. The export credit agencies are a
bit all over the board. We succeeded in getting legislation for OPIC on the
transparency piece, but there should also be a rule for ExIm. The Australian
export credit agency is already encouraging countries where they are providing
guarantees and funding to implement the EITI.
We don’t think there should be a two-track dual standard – one for developing
countries and one for resource-rich countries. We think the U.S. should
implement the EITI, as Norway has done; Canada should implement the EITI;
Australia should implement the EITI. We think that extractive companies should
stop insisting on confidentiality clauses in the contracts, except on a very
narrow, genuinely commercially sensitive information basis and otherwise accept
that, since their counterparties are, to a large extent, governments and you’re
talking about public assets in those countries, contracts governing the
extraction of those public resources should be made public and disclosed to the
citizens of the country – citizens who own that resource.
Q: Good afternoon, Jeff Goldstein from OSI Washington. One natural resource –
not an extractive – that’s a source of a lot of tension in certain parts of the
world today is water. And I was wondering, do you see any applicability of the
terms of the Natural Resource Charter to water, or is the dynamic simply too
MR. BELL: Yes, go ahead, Dr. Ali.
MR. ALI: Yeah, I think that’s an excellent question, because ultimately, in
terms of scarcity, water is going to be, in terms of human needs, probably the
most important parity issue. There is that – I think we need to think about
water on two levels. There is the dynamic for what one might call –
(inaudible) – or artisanal wells and so on, which would fall under this
purview. But a lot of the other kinds of water – recharged aquifers, surface
water – there are many other initiatives which we should think about, and using
those to move forward on this.
There’s a Human Convention on Freshwater Resources which has been under
deliberation for several years. They are still 17 countries short to get that
moving. So I think there are efforts on the water front, but with the artesian
water – that’s an area where it has very similar characteristics as
non-renewable resources, so it should encompass that.
MR. BELL: Well, I would point out that there are other resources, such as
forest and logging, where much of this would be applicable, that are direct
natural resources. Much of this actually could be applicable to certain parts
of agriculture. I just read the precepts after you asked the question, and
some would be applicable in a water situation, but I think water also sets up a
whole set of other issues that are very complicated, very important – I agree
with the doctor (ph) – less addressed here.
MS. HAN: Any other questions from the audience, or – okay, David?
Q: Good afternoon. My name is David Fu (sp) and I work for the Helsinki
Commission. I did some of the preparations for this briefing today. And my
question is that, for many countries, a truly economically optimal oil policy
involves not just domestic reform, but also relations in corroboration with
neighboring bodies. The exports of Central Asian countries, for example, rely
heavily on collaborations with Russia or China for their oil and gas pipelines.
Should the charter be addressing in further detail the economic impact of
resource decisions regarding such international relations?
MS. HAN: Yeah, and I should say, David did a great job in helping prepare for
this hearing. So thank you. And part of that question, I think, that has been
discussed before is the transport – you know, transparency of transport – of
pipelines and et cetera, and so I think it raises a really good question.
MR. BELL: Well, I think it is an interesting question. I think we always
envisioned our targets as being, in a sense, the governments and citizens of
those countries, with significant resource wealth, and we’ve only addressed in
two precepts very generally some of the other countries.
There is, of course, that was already referenced here today already by someone,
the energy charter, which is, in fact, a convention that’s intended to directly
address some of these transshipment problems. It’s had mixed – you know, we’re
not an adherent to the energy charter. And so it’s an interesting question.
Frankly, I’d want to reflect on whether there’s something useful that we could
say about it.
MR. ALI: On transport, the energy charter is trying to develop a protocol
around pipelines, specifically. And my interest there is specifically how that
kind of infrastructure can beleaguer (ph) cooperation overall, which would tie
into the Helsinki Commission’s efforts. If you’re interested, I have just
finished a report for the Brookings Institution on the role of oil and gas
pipelines as a source of cooperation, which will be published in a few months.
And it grapples with these issues, especially in the Middle East. So stay
MS. HAN: Now, the – the Revenue Watch Institute has been very actively pushing
adding transit revenues to the EITI protocol, and in fact, the government of
Ukraine committed, last year, as part of an IMF program, that they would do
exactly that. Now, we’ll see what happens with the new government, but we
think that transit revenues – I mean, if you look at the European context,
obviously a huge security issue. I was just in Brussels, and that was one of
the issues we raised with the energy commission and with the development
commission, and others.
We think it’s both a matter of good revenue management to have this
transparency, but also as a way of – as an anti-corruption effort, and you can
see all the opaque pipeline and gas deals that were being cut in Central Asia
between Central Asia and Europe. And so we think this would be very – a very
MS. HAN: All right, I want to thank everyone for joining us today. I promised
to wrap up by 12:30, so I think we’re right on target. I appreciate everyone
joining us – our witnesses and our audience – and you can look for a transcript
of this briefing on our Web site, probably within the next 24 hours. We’ll
probably also have a video of the conference as well, so if you’d like to pass
it along to others who might be interested, thank you.
MR. BELL: Thank you.