Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

As a democracy that values transparency and accountability, and as a major player in the global extractives market, Australia has a responsibility to ensure that our companies demonstrate best practice revenue transparency. Currently, the legislative framework that governs the conduct of Australian companies overseas is opaque, with many Australian companies the subject of concerning allegations in relation to corruption, bribery, human rights abuses and environmental degradation.

There are many legislative changes that need to occur to deal with this problem in its entirety, but there are important initial steps that we can and must take immediately. This Bill, the Corporations Amendment (Publish What You Pay) Bill 2014, is the first important stage in this process.

This Bill creates mandatory reporting requirements for ASX-listed and Australian based extractive companies – including those involved in oil, gas, mining and native forest logging – on all financial payments they have made, over the previous year, to any government in whose country they operate, on a project-by-project basis. This is a reform that has long been called for by some of Australia's most prominent and respected NGOs who are members of the Publish What You Pay coalition, including Oxfam Australia, the Australian Council for International Development, Transparency International, and World Vision.

Currently, the extent to which Australian companies self-report this information is very limited. As highlighted by Publish What You Pay Australia's report Australia: An Unlevel Playing Field – Extractive industry transparency on the ASX 200, current levels of voluntary disclosure are very low. Furthermore, in the instances where companies have disclosed information, it is fragmented across country, sub-national and business units. As such, there is a need for far greater clarity, transparency and consistency in the reporting of payments to foreign governments by Australian extractive companies.

The global push for extractive industry transparency

Among our closest allies, Australia is now being left behind in its reticence to introduce this legislation, and we must catch up. Around the world, countries including the United States, Canada and the United Kingdom are all introducing mandatory reporting requirements for extractive companies, coming together to create a global standard. While they hold their extractive companies to higher standards, Australia lags behind.

In the United States, the Dodd-Frank Act was introduced in 2010, with section 1504 of this law requiring all U.S. and foreign companies registered with the United States Securities and Exchange Commission (SEC) to publicly report how much they pay foreign governments for access to their oil, gas and minerals.

In the European Union in 2013, EU member states signed 'Publish What You Pay' requirements into law, extending extractive companies to include not only oil, gas and mining companies, but also those involved in logging native forest. The United Kingdom recently completed their consultation on this EU Directive, and is set to have legislation finalised later this year, ready to come into effect in January 2015. Norway has also introduced domestic legislation to activate this EU Directive, with many other member states in the process of developing this legislation.

In July 2013, Canada also committed to development of mandatory standards for payments by extractive companies. Like Australia, Canada is heavily involved in extractive industries, and in this example the Canadian Government, the Canadian Publish What You Pay coalition, and the mining sector – including the Mining Association of Canada, and the Prospectors and Developers Association of Canada – all came together to develop draft recommendations for mandatory reporting mechanisms. This is an encouraging example of the resources sector working constructively with Government to commit to transparency, and I am hopeful that Australian extractive companies will show their support for this legislation like their Canadian counterparts.

Led by this example, Australia must commit to Publish What You Pay legislation. Already we are being left behind in the push toward this global standard. Not only have we failed to implement these payment transparency mechanisms, but we are failing to investigate concerning corporate behaviour overseas. We remain one of the few countries that still permit facilitation payments rather than recognising them as bribes. The OECD recently said they were "seriously concerned" at the lack of effort regarding foreign bribery. We must do better, and this Bill is a first important stage in achieving greater transparency and accountability for Australian companies.

This Bill establishes for Australia the same standards that have been set already within foreign jurisdictions, establishing similar requirements and thresholds that are being introduced in the United Kingdom, United States and Canada. As the Publish What You Pay Coalition in Australia has highlighted, the United States, European Union and Canadian legislation will cover 70% of the global extractive market, including companies that are also listed on the ASX. This Bill would substantially contribute to increasing this global effort, capturing an additional 5% of the global extractive market. As the rest of the world moves forward with this important initiative, we must not be left behind.

Investment, costs and business benefits

In addition to improved transparency, this Bill would benefit the investment environment. Both the Financial Services Council and the Australia Council of Superannuation Investors, major players in the Australian investment market, support mandatory disclosure mechanisms like those established in this Bill because they provide more information which members can use to better evaluate risks associated with investments. Similarly, it will enable ASX listed companies to better assess risks associated with pursuing projects in developing countries. This was a key benefit identified by the United Kingdom Government in developing their mandatory reporting legislation. By the same reasoning, as the rest of the world moves toward Publish What You Pay regimes, Australian companies that don't report this data may be viewed as higher risk investments due to their comparatively opaque reporting standards. As the UK Government's Impact Assessment of their Publish What You Pay legislation highlighted, this kind of regime is expected to reap benefits for both business and investors.

Companies already compile and track the data that would need to be disclosed under the legislation, for themselves and their subsidiaries. Furthermore, as other foreign jurisdictions introduce mandatory disclosure laws, many companies will need to comply with mandatory reporting requirements due to their participation in other stock markets. Estimates of the cost associated with the Publish What You Pay legislation for companies in the EU were estimated to be just 0.05% of their annual revenue in the first year of implementation, and then less thereafter. Given the multibillion dollar profits associated with extractive companies (in the financial year 2011-12, Rio Tinto and BHP Billiton made profits of USD 5.8 billion and USD 15.4 billion respectively), and the fact that companies will already have to provide this information under schemes in other jurisdictions, compliance costs are not a barrier to implementation.

Extractives transparency and international development

With Australian firms heavily involved in extractive industries overseas, including in countries where resource extraction is often linked to poverty, instability and corruption, this Bill is an important transparency mechanism. Despite many developing countries having large resource bases, the citizens of these countries often remain in poverty due to corruption and poor governance structures. By improving accountability with this Bill, citizens and civil society groups in these countries will have far greater access to information about payments, and as a result, a far greater capacity to hold their governments to account. For this reason, aid and development organisations around the world including Oxfam, World Vision, Action Aid and many others, back the introduction of mandatory payment disclosure legislation. In their recent report Trillion Dollar Scandal, international NGO ONE identified introduction of mandatory reporting requirements for extractive companies as one of the central ways through which we can stem the billions that flow illicitly out of developing countries every year. This Bill reduces the opportunity for corruption and other illicit activities by requiring the reporting of payments that have previously been in the dark. By promoting better governance through these measures, better social outcomes for citizens of developing nations will follow.

As the Publish What You Pay Coalition has noted, the amounts of money at stake are "potentially transformational" with, for example, "exports of oil and minerals from Africa [in 2008] were worth roughly $393.9 billion, nearly 9 times the value of international aid to the continent and over 10 times the value of exports of agricultural produce."

As current chair of the G20, signatory to both the United Nations Convention Against Corruption and the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions, Australia must show leadership by implementing this legislation.

I seek leave to continue my remarks.

Leave granted; debate adjourned.