Show us the money

A new draft law seeks to safe­guard fu­ture rev­enues

Executive Magazine - - Transparency - By Jeremy Ar­bid

Though Le­banon’s oil and gas sec­tor is ef­fec­tively on hold, it doesn’t mean pol­i­cy­mak­ers have stopped show­ing up to work. Law­mak­ing is not a high-speed process, even with a func­tional par­lia­ment and cab­i­net, and when it comes to build­ing the le­gal frame­work gov­ern­ing the nascent sec­tor, more time to draft bills and build con­sen­sus could ar­guably be a pos­i­tive thing.

The most re­cently pro­posed oil and gas leg­is­la­tion is an an­ticor­rup­tion bill in­tro­duced by Joseph Maalouf, a mem­ber of par­lia­ment’s com­mit­tee on energy, in April 2015. The MP has in­tro­duced the draft law aim­ing to mit­i­gate il­licit ac­tiv­ity in Le­banon’s yet-to-emerge oil and gas sec­tor and tells Ex­ec­u­tive that it has been fast tracked into com­mit­tee by Par­lia­ment Speaker Nabih Berri, a promis­ing sign for the emerg­ing sec­tor. The min­utes from a Septem­ber 8 com­mit­tee meet­ing how­ever do not in­di­cate whether the draft law was dis­cussed. In any case, the par­lia­ment has not leg­is­lated this year and is un­likely to do so given the cur­rent po­lit­i­cal im­passe and va­cant pres­i­dency since May 2014.

ANTI-COR­RUP­TION LAW

At a macro level, Maalouf’s law ex­am­ines where cor­rupt ac­tiv­i­ties may oc­cur along the full life­cy­cle of an oil and gas pro­ject. He tells Ex­ec­u­tive that, “We took the process from the 3D map­ping [seis­mic sur­vey­ing] all the way to pre-qual­i­fi­ca­tions, qual­i­fi­ca­tions, and [ten­der­ing] the con­tracts. Within the con­tracts [we look at] each step that will hap­pen and where the de­ci­sion points are. We said that at this point there is pos­si­bil­ity for cor­rup­tion – any place where there is a de­ci­sion point which some­one could in­flu­ence, we went into the de­tails.” The law also cov­ers down­stream ac­tiv­i­ties and the decom­mis­sion­ing of fu­ture wells, not only the first steps in an oil and gas pro­ject.

“I be­lieve this is the one sec­tor where we’re start­ing from scratch,” Maalouf says. “You can build fool­proof sys­tems eas­ier when they’re al­ready dis­man­tled. Un­for­tu­nately, a lot of the cor­rup­tion that ex­ists in Le­banon has been in­grained in our so­cial and po­lit­i­cal re­al­ity for decades.” The law it­self pre­scribes penal­ties for a num­ber of in­frac­tions in­clud­ing pro­hibit­ing min­istry of energy staff – that in­cludes the Le­banese Petroleum Ad­min­is­tra­tion (LPA) – from so­lic­it­ing pay­ments and gifts or ac­cept­ing any type of con­sult­ing work or part­ner­ship in oil and gas ac­tiv­i­ties while in of­fice. The law pro­vides the Gen­eral Pros­e­cu­tor with the au­thor­ity to in­ves­ti­gate and pros­e­cute the law’s stip­u­lated crimes, some of which may be pun­ish­able by three years jail time or a fine equiv­a­lent to the fi­nan­cial value of the in­frac­tion, or both.

But, Maalouf says, the law by it­self is not enough. Trans­parency mea­sures need to be sys­temic. In or­der to be most ef­fec­tive, Maalouf adds, the mea­sures need to be in place at vary­ing lev­els through­out the sec­tor’s le­gal frame­work. In ad­di­tion to his draft law, Maalouf says Le­banon must also rat­ify an ac­cess to in­for­ma­tion law, a law pro­tect­ing whistle­blow­ers, and es­tab­lish a na­tional anti-cor­rup­tion agency. “These will move us from be­ing lin­ear to look­ing at the sys­tem across the board. The chal­lenge in these and in other laws even when they’re en­acted and even [with] the min­is­te­rial de­crees for im­ple­men­ta­tion, is that some of the laws are not be­ing im­ple­mented pe­riod,” he says.

RO­BUST LE­GAL FRAME­WORK NEEDED

For their part, the LPA points to the Off­shore Petroleum Re­sources Law (OPRL) and the Petroleum Ac­tiv­i­ties Reg­u­la­tions (PAR) – a col­lec­tion of de­crees im­ple­ment­ing the OPRL – as the foun­da­tion to safe­guard trans­parency and ac­count­abil­ity. Ar­ti­cle 162 of the PAR re­quires any en­tity or in­di­vid­ual in­volved in Le­banon’s petroleum sec­tor to abide by lo­cal laws and the laws of their home coun­try. Ad­di­tion­ally, the de­cree forces those work­ing in Le­banon’s oil and gas sec­tor to abide by two in­ter­na­tional anti-cor­rup­tion con­ven­tions: the United Na­tions Con­ven­tion Against Cor­rup­tion rat­i­fied by Le­banon into law in 2008, and the OECD’s Con­ven­tion on Com­bat­ing Bribery of For­eign Public Of­fi­cials in In­ter­na­tional Busi­ness Trans­ac­tions. Le­banon has signed but not rat­i­fied the lat­ter con­ven­tion which in the­ory means that coun­tries com­ing to op­er­ate in Le­banon won’t have to abide by it. The de­cree, how­ever, de­mands that they do.

Ad­di­tional leg­is­la­tion from the United States – the For­eign Cor­rupt Prac­tices Act and a not-yet-fi­nal­ized part of the so-called Dodd-Frank Act – as well as the Euro­pean Union’s 2013 Ac­count­ing and Trans­parency Di­rec­tives may also help Le­banon curb il­licit be­hav­ior by in­di­vid­u­als and en­ti­ties hail­ing from those ju­ris­dic­tions (see over­view page 24).

Fi­nally, the LPA says the re­quired steps to adopt the Ex­trac­tive In­dus­tries Trans­parency Ini­tia­tive (EITI) – a tool for the dis­clo­sure of in­for­ma­tion that Le­banon’s civil so­ci­ety or­ga­ni­za­tions could use to keep a watch­ful eye on trans­ac­tions be­tween the state and petroleum com­pa­nies – are un­der­way (see story page 28). Maalouf says the move to adopt the EITI can be ini­ti­ated by ei­ther the LPA or the Min­istry of Energy and Wa­ter (MoEW). He prefers hav­ing the com­mit­ment writ­ten as a law and rat­i­fied by par­lia­ment so that re­port­ing re­quire­ments are manda­tory.

“UN­FOR­TU­NATELY,

A LOT OF THE COR­RUP­TION IN LE­BANON HAS BEEN

IN­GRAINED IN OUR SO­CIAL AND PO­LIT­I­CAL RE­AL­ITY

FOR DECADES.”

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