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EURegulatorySeptember2013IS THERE LIGHT AT THEEND OF THE TUNNEL?WILL YOUR COMPANY BE AFFECTED BYTHE NEW EU DISCLOSURE REQUIREMENTIN RELATION TO TRANSPARENCY?If your company is engaged in theextraction of natural resources, suchas oil, gas, mining and logging, thenit might be subject to the new EUregulations on transparency anddisclosure requirements. This newset of regulations requires extractiveand logging companies to disclosetheir financial information, particularlyin relation to any payment made togovernments.The European Parliament recently approveda new set of regulations requiring extractivecompanies to release certain financialinformation, particularly in relation to anypayments made to governments.The introduction of these new disclosurerequirements is driven by the prevalence ofcorruption and lack of transparency in themajority of resource-rich countries. Dealingwith governments and controversial leaders inorder to acquire assets tainted with allegationsof bribery and corruption has long been partof the extractive business in these countries.Persistent government failure and low levelregulation appear to be major constraints tothe effective implementation of anti-corruptionmeasures in many resource-rich developingcountries. Encouraging transparency is,therefore, crucial for tackling poor governanceand corruption in these countries.The Extractive Industries TransparencyInitiative Standard (EITI Standard)Alongside the enactment of transnational anticorruptionregulations such as the UK BriberyAct 2010 and the US Foreign Corrupt PracticesAct 1977, several initiatives have also beenintroduced to improve transparency in resourcerichcountries. The EITI is one such initiativewith a focus on promoting and supportingimproved governance through full transparencywith regards to company payments and

What must be disclosed?Mirroring the EITI Standard, theAccounting Directive requires theannual reporting of all materialpayments made on a countryand a project basis where thosepayments have been attributed to aspecific project, and where specificpayment thresholds are involved. Thethreshold above which reporting ismandatory is set at €100,000 withina financial year, including a singlepayment as well as a series of relatedpayments. The types of payments tobe reported are as follow:■ Production entitlements■ Taxes levied on the income,production or profits of companies■ Royalties■ Dividends■ Signature, discovery andproduction bonuses■ Licence fees, rental fees, entryfees and other considerations forlicences and/or concessions■ Payments for infrastructureimprovementsThe Accounting Directive came intoeffect on 26 June 2013 and TheTransparency Directive will enter intoforce later this year. Member Statesmust adopt laws and regulationswhich comply with the Directiveswithin two years after entry into force.How can HFW help?While Member States still have until2015 to implement the Directives, itis advisable for affected companiesto start to prepare new corporatecodes or frameworks for corporategovernance to regulate theireconomic behaviour. Nevertheless,simply having a good corporategovernance framework is not enough:the project company should ensurethat it can implement the complianceprogramme and be on top oftransparency and disclosure issues.When entering into a new project,assess carefully the project and thearrangement and check whetherdisclosure is permitted under locallaw and the respective contract.Companies who have been engagedin a particular project should considerrenegotiating the terms of thecontract to establish proper paymentprocedures and, in any event, ensurethat the confidentiality provisionspermit disclosures to be made whenrequired by law.For more information, please contactTemmy Kurniawan, Associate, on+65 6534 0195 ortemmy.kurniawan@hfw.com,or Brian Gordon, Partner, on+65 6305 9533 orbrian.gordon@hfw.com, or your usualHFW contact.For further information, please alsocontact:Henry FungHong Kong/Shanghai PartnerT: +852 3983 7777/+86 21 2080 1000henry.fung@hfw.comAaron JordanMelbourne PartnerT: +61 (0)3 8601 4535aaron.jordan@hfw.comJames DonoghuePerth PartnerT: +61 (0)8 9422 4705james.donoghue@hfw.comRula Dajani AbuljebainDubai PartnerT: +971 4 423 0502rula.dajaniabuljebain@hfw.comAlexia KleonakosPiraeus PartnerT: +30 2 104 293 978alexia.kleonakos@hfw.comRobert FollieParis PartnerT: +33 1 44 94 40 50robert.follie@hfw.comKonstantinos AdamantopoulosBrussels PartnerT: +32 2 643 3401konstantinos.adamantopoulous@hfw.comAnthony WoolichLondon PartnerT: +44 (0)20 7264 8033anthony.woolich@hfw.comWhen entering into a new project, assess carefullythe project and the arrangement and check whetherdisclosure is permitted under local law and therespective contract.EU Regulatory 03

Lawyers for international commerceHOLMAN FENWICK WILLAN SINGAPORE LLP3 Church Street, 19-03 Samsung HubSingapore 049483T: +65 6534 0195F: +65 6534 5864hfw.com© 2013 Holman Fenwick Willan Singapore LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not beconsidered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences pleasecontact Craig Martin on +44 (0)20 7264 8109 or email craig.martin@hfw.com

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