The Extractive Industries Transparency Initiative (EITI) is a global standard for transparency in Oil, Gas and Mining. EITI is a voluntary commitment by a global coalition of governments, companies and civil society to work together towards openness and accountable management of revenues from natural resources.
In order to promote trust, strengthen governance and reduce risk of conflict, countries implementing the EITI disclose information on tax payments, licences, contracts, production and other key elements concerning resource extraction. Currently 48 countries implement EITI with US$1.3 trillion worth of state revenues from natural resources disclosed. The key facts about EITI can be found here.
Ten years since the 1st EITI Conference, a new EITI Standard was adopted at the VI EITI Global Conference held in Sydney, 23-24 May 2013. Full text can be found here. This Standard became the main regulatory document of the EITI implementation process, which replaced the mechanisms adopted in the previous years. The updated requirements aimed to improve the quality of reporting by making EITI reports easier to understand and assuring the credibility of the data provided by the signatories.
Azerbaijan joined the EITI in 2003 following the decision of the President of the Republic of Azerbaijan, Mr. Ilham Aliyev, to support international efforts for transparency in the extractive industries. It was the first country to pass the assessment process and become a full member of EITI. Azerbaijan volunteered to become a pilot country by agreeing to the three following reporting mechanisms:
- reveal receipts held by the host government from the foreign and local extractive industry companies;
- reveal payments made by foreign extractive industry companies to the host government;
- reveal payments made by the local extractive industry companies.
President Aliyev also initiated the creation of an interagency committee to implement EITI obligations. The Cabinet of Ministers of Azerbaijan established the National Committee on EITI by Decree No.224 from November 13, 2003.
The Executive Director of the State Oil Fund of the Republic of Azerbaijan (SOFAZ) chairs the National Committee and is also responsible for overseeing the work of the EITI Secretariat of Azerbaijan – which is hosted by the Oil Fund.
The Secretariat is responsible for the day-to-day operations of EITI in Azerbaijan. Additionally, the EITI Secretariat closely cooperates with foreign and local extractive industry companies, governmental and non-governmental bodies in order to implement EITI in Azerbaijan.
The establishment of a Multi-stakeholder Group (MSG) is one of the requirements of the EITI Standard. The MSG comprises of 3 primary and up to 3 alternative members from each Memorandum Party (Group of Companies, NGO Coalition and Committee) having equal rights and was established to further improve the EITI process, permanently implemented in Azerbaijan. The MSG conducts its activities in accordance with the agreement on the establishment of MSG and its activity on implementation of the EITI in Azerbaijan. The representatives from Government include members of the Ministry of Taxes, the Ministry of Ecology, the Ministry of Energy and SOFAZ. Representatives from the Group of Companies includes participants from SOCAR, BP and Statoil. In the case of the absence of one of these three companies, a representative from either Chevron or Neftchala OC participates. NGO representatives are selected from civil society groups and include, but are not limited to, the likes of Qubad İbadoğlu, Azər Mehtiyev and Elçin Abdullayev.
Meetings of the MSG are held at least four times a year in accordance with the EITI Work Plan. The Chairman of the Committee becomes the member of the MSG on behalf of Azerbaijan’s government and chairs these meetings.
The functions of the Multi-stakeholder Group:
- prepares and approves EITI work plans;
- improves and approves the reporting templates on EITI;
- prepares proposals on amendments and supplements to the MOU;
- selects and appoints the audit company for reconciliation (or checking) of EITI reports and the company (validator) for the validation of EITI implementation process in the country;
- initiates the proposals regarding the development and improvement of the initiative, communicates with the EITI parties, international institutions and develops the recommendations.
The State Oil Company of Azerbaijan Republic (SOCAR) has been a party to EITI since the beginning. SOCAR has always supported this transparency initiative and was one of the first companies to join. By taking a prominent role in meetings, SOCAR’s aim is to help EITI to be better implemented in Azerbaijan.
Azerbaijan regularly publishes EITI reports that disclose revenues from oil, gas and mining. EITI reports include a reconciliation of payments and revenues made by a credible and independent auditor who applies international auditing standards. The auditor’s opinion is then published, regardless whether any discrepancies are or are not identified. On 15 March 2005, Azerbaijan was the first country to publish a government report examined by independent auditor, Deloitte & Touche. Since 2003, a total of 17 EITI reports were reconciled and published by Azerbaijan. Azerbaijan EITI is working on producing its first report under the EITI Standard.
Due to Azerbaijan’s pioneering role in the EITI process, it participates at high level meetings and conferences worldwide to share its experience. One such significant role that Azerbaijan plays, is in the International Advisory Group (IAG) which was established in 2005 in order to direct further work of the International EITI Secretariat on defining and refining proposals on the further implementation of the EITI. The Executive Director of the State Oil Fund, Chair of the National Committee on EITI was elected as IAG member to represent Azerbaijan. Following this, Azerbaijan was selected as a member of EITI Board in 2006, 2009, 2011 and 2013.
In 2007, the State Oil Fund of the Republic of Azerbaijan won the United Nations Public Service Award in the category of “Improving transparency, accountability and responsiveness in the Public Service” for its contribution to the successful implementation of EITI in the country. It was the first state agency among Eastern European and CIS countries to win the most prestigious international award recognising excellence in Public Service. The “EITI Award 2009” was awarded to Azerbaijan for its commitment to EITI principles as well as its achievements in implementing EITI.
You can find the Azerbaijan EITI implementation timeline here. The deadline for the next EITI validation is in 2015.