At the same time, the implementation of the Extractive Industries Transparency Initiative in Ukraine turned out to be quite a troublesome process. In particular, publishing of the first report was possible only thanks to the timely amendments to the legislation. Efforts of MPs, experts and the public resulted in the Parliament’s adoption of the Law No. 521-VIII “On the Introduction of Amendments to Certain Legislative Acts of Ukraine on Ensuring Transparency in Extractive Industries” in June 2015.
At the same time, the Cabinet of Ministers approved a relevant procedure only on 2 December 2015 — only two days prior to the date when the EITI Report was published. This complicated the process of disclosure of information by certain companies that did not consider the requirements to disclosure of data on taxes and other payments to the state compulsory. Thus, only 38 of 120 subsoil users in the oil and gas sector disclosed complete data.
To reform the reporting system in extractive industries and bring it into compliance with best international practices, Ukraine needs to adopt new legislation to regulate the reporting process.
The first steps towards the development of the new legislation were made back in 2015 when the Ministry of Energy created a working group to draft the law on ensuring transparency in extractive industries.
Already in December, the document developed in cooperation with representatives of the public waspublished on the website of the Ministry of Energy and Coal Industry. This draft Law is now being finalized and prepared for submission to the Parliament — probably in May or early June.
The need to adopt this draft Law is caused by many factors. In particular, it will facilitate Ukraine in fulfilling its commitments under the Association Agreement, Anti-corruption Strategy for 2015–2017 and the Coalition Agreement.
The Law “On Disclosure of Information in Extractive Industries” will give each Ukrainian a possibility to view companies’ reports on the taxes they pay to the state and local budgets, their overall production, ultimate beneficial owners, projects, etc.
Project-by-project reporting (i.e. on each particular field being prospected) will be very important for communities. For companies, it may be the first step towards establishing a fair and efficient dialogue with local communities.
Corporate transparency and reporting are very important in the international arena too as they contribute to the company’s reputation and investment climate. In particular, the Extractive Industries Transparency Initiative is supported by such global energy giants as Eni, ExxonMobil, Shell, Statoil, Total and others. Some of them already publish detail reports on all their projects not only in developed countries, but all over the world. By the way, this practice gives us more information about the extractive industries in China and even Russia — the latter, vice versa, has been restricting access to some data recently.
Enhanced reporting by Ukrainian extractive companies will help the government understand the situation in the industry and conditions of doing business. In particular, this will guarantee that the market information — production, taxes — is true and accessible.
Such information will help the government in its decision-making process, in particular concerning tax burden, and facilitate the fight against corruption since the accuracy of payment data will be verified by an independent audit firm by means of reconciliation of data provided by companies and the state.
Hence, the implementation of the Law of Ukraine “On Disclosure of Information in Extractive Industries” will not only enable the implementation of EU Directives but also serve as a basis for the further reforms in the industry.
Mariia Melnyk
Specialist for European Integration Programs
