Building upon efforts already underway in the U.S., members of the European Union on Tuesday reached a preliminary agreement to adopt new rules requiring oil, gas, and mining companies to report payments made to governments for extraction rights.

In August, the Securities and Exchange Commission issued a final rule that, as mandated by the Dodd-Frank Act, requires such reporting from publicly traded companies in the U.S. Although similar to that legislation's “Cardin-Lugar” provision, the European directive goes further by requiring both public and privately-held companies to disclose their payments. It was also expanded to include the timber industry.

European companies will be required to disclose payments on a country and project basis. Payments (which can include taxes, royalties, license fees and in-kind goods and services) totaling  100,000 Euros or more must be disclosed for individual “projects” in every country of operation. The directive defines “projects” as "operational activities that are governed by a single contract, license, lease, concession or similar legal agreements and form the basis for payment liabilities with a government." The initiative now awaits final approval by member countries of the EU.

“With the U.S. law covering the vast majority of internationally operating oil companies and world's largest mining companies along with the European rules covering even more companies, the transparency net will be cast far and wide,” said Ian Gary, senior policy manager of Oxfam America's oil, gas and mining program, a longtime advocate for such disclosures.

Gary pointed out that, like the SEC rule, the EU directive does not allow for any company exemptions to the payment disclosure requirement. He said the EU directive and U.S. law will complement the Extractive Industries Transparency Initiative, a set of principles adopted by nearly two dozen countries under which governments publicly disclose their revenues from oil, gas and mining projects, and companies make parallel disclosures regarding payments they make to host governments.

In the U.S., the SEC rule is being challenged by the American Petroleum Institute, the Independent Petroleum Association of America, the National Foreign Trade Council, and the U.S. Chamber of Commerce with a complaint filed with the U.S. District Court for the District of Columbia and petition for review filed with the U.S. Court of Appeals for the D.C. Circuit.

The groups claims that the SEC failed to conduct an adequate cost-benefit analysis, and that the rule violates the First Amendment by compelling unwanted speech. The SEC has rejected the plaintiff's call for a stay of effectiveness. On March 22, oral arguments in the case were heard before the U.S. Court of Appeals.