Contract Transparency in Extractives (MN0045)

Main objective:
Community oversight increased, corruption and conflict of interests infringements reduced and contributions made to improving sector governance by creating legal framework for ensuring extractives sector all types of contracts

Brief description of commitment:
Disclose the following types of agreements widely made in the extractive sector, including, but not limited to:
-Investment agreement
-Product sharing agreement
-Deposit development agreement
-Product sales agreement
-Community development contract
-Stabilization agreement
Agreement for reimbursement of exploration costs made by state funding
Product sales agreement of state-owned and public companies (with state participation) Agreement on products purchased for concentration and processing factories Rehabilitation agreement for mining operations carried out head water areas, protection zones of water resources and forest areas
Land use agreement
Water use agreement

Ambition:
Requirement on extractive sector agreement disclosure fully obligated by law;
Contract database http://www.iltodgeree.rrrn created and contracts disclosed
Erdenes MGL, state-owned enterprise, become a leader in contract disclosure
Contribution made to achievement of paragraph 4.1.6.5 of National Anti-Corruption Program.

Milestones:
1. Renew the conceptual note/framework for the Extractives Sector Transparency Law, get adopted, carry out analyses and evaluations, create legal environment
2. Establish legal environment obligating to administer and update http://www.iltodgeree.mn website frequently and stable to Ministry of Mining and Heavv Industry, Mineral Resources and Petroleum Authority and EITI Secretariat
3. Raise awareness of contract parties that the Natural Resources Use Agreements are classified as Administrative contract according to General Administrative Law, ensure civil participation, conduct evaluation on performance and advocacy
4.Carry out mid-term and final evaluation on enforcement of laws and implementation of Action Plan

11. Ensure Transparency of Contracts

Disclose the following types of agreements widely made in the extractive sector, including but not limited to:

• Investment agreement
• Product sharing agreement
• Deposit development agreement
• Product sales agreement
• Community development contract
• Stabilization agreement
• Agreement for reimbursement of exploration costs made by state funding
• Product sales agreement of state-owned and public companies (with state participation)
• Agreement on products purchased for concentration and processing factories
• Rehabilitation agreement for mining operations carried out in head water areas, protected zones of water resources, and forest areas
• Land use agreement
• Water use agreement

Main Objective

Community oversight increased, corruption and conflict of interests’ infringements reduced, and contributions made to improving sector governance by creating legal framework for ensuring extractives sector for all types of contracts.

Milestones

1. Renew the conceptual note/framework for the Extractives Sector Transparency Law, get adopted, carry out analyses and evaluations, create legal environment.
2. Establish legal environment obligating to administer and update iltodgeree.mn website frequently and stable to Ministry of Mining and Heavy Industry, Mineral Resources and Petroleum Authority, and the EITI Secretariat.
3. Raise awareness of contract parties that the Natural Resources Use Agreements are classified as administrative contract according to General Administrative Law, ensure civil participation, conduct evaluation on performance, and advocacy.
4. Carry out midterm and final evaluation on enforcement of laws and implementation of action plan.

Editorial Note: For the complete text of this commitment, please see Mongolia’s action plan at https://www.opengovpartnership.org/wp-content/uploads/2019/12/Mongolia_Action-Plan_2019-2021.pdf.

Commitment analysis

This commitment aims to enhance transparency in the extractive sector by publishing agreements and contract information online. The commitment is closely linked to Commitment 10—which aims to legislate beneficial ownership transparency in the extractive sector—and even includes an overlapping milestone on the revision of the Extractive Sector Transparency Law (Milestone 1). Mongolia’s Ministry of Mining and Heavy Industry and Mineral Resources and Petroleum Authority will lead implementation of this commitment, along with the Cabinet Secretariat, the Ministry of Justice and Internal Affairs, the Ministry of Environment and Tourism, Erdenes MGL LLC, Publish What You Pay (PWYP), Open Society Forum (OSF), Natural Resource Governance Institute (NRGI), and the Extractive Industries Transparency Initiative (EITI) Mongolia.

This commitment is relevant to the OGP value of access to information as it aims to publish different types and categories of agreements in the extractive sector. The commitment is also relevant to the OGP value of civic participation as it proposes to ensure citizens’ participation in the form of public/community hearing actions on Natural Resources Use Agreements.

As with Commitment 10, at the time this commitment was designed, contract information has already been published through the government website https://www.iltodgeree.mn; established by the OSF in partnership with EITI and the Ministry of Mining and Heavy Industry. This enables access and scrutiny of the full text of resource contracts. However, it is difficult to achieve full transparency as there is no legislation that explicitly mandates the transparency of contracts in the extractive sector.

As of 2018, a total of 439 resource contracts had been disclosed online, including agreements on land use, community cooperation, concession, water use, product sharing, investment, and pre-operation. ^[94] This was achieved through an information reconciliation process in which government and civil society partners requested 54 companies to disclose their contract information. Out of those 54 companies, 31 submitted their contract information to be uploaded on the website, while the remaining 23 chose not to disclose. ^[95] While this signifies pre-existing progress, the voluntary and selective nature of such disclosure means that the government cannot enforce action or take any measures against companies that do not comply with such contract disclosure practice.

If fully implemented, this commitment stands to have moderate potential impact on the transparency of contracts in the extractive sector and, therefore, on combatting possible corruption within it. Consistent with Commitment 10, the revision and implementation of legislation to mandate and enforce disclosure of contract information, in a sector that contributes significantly to Mongolia’s economic activity, ^[96] will represent a major step forward. Similarly, efforts to ensure and raise awareness on existing provisions for public participation in Natural Resource Use Agreements will help public scrutiny of agreements—although the commitment does not specify mechanisms to facilitate such participation.

According to a civil society representative—as with Commitment 10—the overall success of this commitment is contingent on passing the Bill on Extractives Sector Transparency at the State Great Khural. ^[97] However, unlike beneficial ownership transparency which does not have a pre-existing legal basis, EITI’s 2018 report ^[98] outlines several existing laws that could be used as the legal foundation for contract disclosure in Mongolia. This includes several articles in the Constitution, the Law on Minerals, Law on Petroleum, Law on Information Transparency and Right to Information, and the Law on Glass Accounts. This existing legal framework can be leveraged in advocacy of legislators to push through the proposed reforms.

Going forward, the government needs to streamline efforts to improve transparency in the extractive sector by consolidating related initiatives such as contractual and beneficial ownership transparency, in order to avoid overlap and duplication. In implementing this commitment, stakeholders could build on existing, or new, legislative provisions to raise public awareness of the contract information database and disclosure requirements and involve them in related decisions; with a particular focus on reaching populations that are disproportionately affected by extractive activities.

11. Ensure transparency of contracts

Limited:

According to the Open Society Forum, efforts under this commitment mainly related the Mongolian government’s EITI membership. [47] As discussed above, the key milestone of this commitment was not completed, as the bill on Extractive Sector Transparency was still pending in November 2021. In September 2021, after the end of the implementation period, the Ministry of Mining and Heavy Industry enacted a ministerial order on management of https://www.iltodgeree.mn, a website for disclosing contracts. The order has not yet been registered with the Ministry of Justice. According to EITI, it resulted in approximately 150 more contracts published on the website by November 2021. [48] For context, the number of contracts uploaded on the website increased from 439 to 833 between 2018 and November 2021. [49] To improve civil participation in Natural Resources Use Agreements, the Open Society Forum ran a pilot project in several provinces, where local parliaments consulted with citizens before undertaking these agreements. When the project funding ran out, the consultations stopped, reflecting a lack of long-term impact on this practice. [50]