Show us the money

A new draft law seeks to safeguard future revenues

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.”