Transparent contracts allow citizens to hold their government and mining companys to account for the commitments and obligations that have been negotiated on their behalf.
Contract transparency goes hand-in-hand with revenue transparency. Revenue transparency allows citizens to see what a company has paid, while contract transparency allows citizens to see what should have been paid. These activities reduce opportunities for corruption and help citizens to lobby for mining revenues to be invested responsibly.
In many countries, contract terms are fairly standard for all companies operating within their borders. However, for a contract to be disclosed, both the government and the company need to agree to its disclosure – and in a number of countries, governments are resistant to the idea of contract disclosure. Although it’s not a condition of ICMM membership, the majority of our members are willing to make public the general terms of their contract in any specific country, assuming that proper protection for competitively-sensitive information is in place. This is good practice that we support.
To best support contract transparency, ICMM expects its members to support the Extractive Industries Transparency Initiative (EITI), a global standard that promotes open and accountable management of natural resources. Each country that implements the standard is expected to publish its policy on the disclosure of contracts and licences that govern the exploration and exploitation of oil, gas and minerals. It also encourages implementing countries to disclose contracts and licences (although this is not yet a mandatory requirement for EITI membership).
The substantial upfront mining investment costs and the fact that a mine is not a transportable asset can place mining companies at a significant disadvantage whenever a government attempts to renegotiate a contract. Contract renegotiations often occur when a new government comes into power, reviews the decisions made by the previous administration, and attempts to overturn them on the basis that they were ‘inappropriate' or ‘unfair’.
While an open and transparent contract can also be renegotiated, such risks are reduced, as scrutiny of the contract would be public from the moment it was signed.