R&G DRAFT 6/7/2010

Table of Contents Page I. 1

I. BACKGROUND.......................................................................................................................1 II. UGANDAN LAW REQUIRES THE DISCLOSURE OF THE PSAS...................................3 A. Under Article 41 of Ugandas Constitution and Under the Access to Information Act, the Attorney General Must Disclose the PSAs..........................................................3 1. Under Section 41(3) of the AIA, the Burden of Proof Rests on the Party Refusing Disclosure.........................................................................................................4 2. The Exemptions to the Broad Obligation of Disclosure in the AIA Do Not Apply to the PSAs.......................................................................................................6 3. Even if an Exemption Applies, the Publics Interest Outweighs any Potential Harm...............................................................................................................21 B. The Government of Uganda Is Obligated to Disclose the PSA to the Public Because it is a Trustee of Public Resources..............................................................................31 III. INTERNATIONAL LAW ALSO SUPPORTS DISCLOSURE OF THE PSAS.................33 A. Under International Law, Duties of the Sovereign Impose a Requirement to Disclose Information Related to the Exploitation of Natural Resources...............................33 1. The Fundamental Rights to Information Guaranteed by Article 9 of the African Charter on Human and Peoples Rights Requires Disclosure the PSAs........34 2. The Fundamental Rights to Natural Resources Guaranteed by Article 21 of the African Charter on Human Peoples Rights Requires Disclosure of the PSAs37 B. International Case Law Holds that the Right to Information Overrides Confidentiality Clauses.....................................................................................................................40 IV. REBUTTALS OF OTHER ARGUMENTS AGAINST DISCLOSURE.............................44 A. Due to Widespread Disclosure of PSAs, Disclosing Additional PSAs Will Not Lead to a Race to the Bottom or to the Top..........................................................................45 B. Renegotiations Could be a Positive Result of Disclosure..........................................47

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I.

BACKGROUND On May 3, 2007, Charles Mwanguhya Mpagi and Angelo Izama (the Applicants)

applied to Attorney General (the Respondent) of the Republic of Uganda (Uganda) and to the Permanent Secretary of the Ministry of Energy and Mineral Resources requesting that certified copies of agreements made between Uganda and certain multinational companies for the purpose of oil prospecting and exploitation around the Lake Albert Region be released to the Applicants. Magistrate Opinion, at 1. These agreements are often referred to as Production Sharing Agreements (PSAs). Under section 18 of Ugandas Access to Information Act (AIA), the Permanent Secretary constructively refused to disclose the PSAs by not responding to the Applicants. Magistrate Opinion, at 2. In response to the application to the Attorney General, the Solicitor General, through the Principal State Attorney Nakkungu, refused to disclose the PSAs, stating that the agreements included confidentiality clauses and therefore required the consent of the companies to be disclosed. Id. In response, the Applicants filed an application with the Magistrates Court requesting an order to disclose the PSAs (the Order). Id. They filed the Order under sections 41 and 244 of the Constitution of the Republic of Uganda 1995 and under sections 37, 34(b), 41, and 42 of the AIA. The Applicants also cited section 98 of the Civil Procedure Act. Id. The Order sought that (i) the decision of the Attorney General denying them access to the PSAs be set aside; (ii) a declaration be made that the public interest in the disclosure of the PSAs is greater than any harm

R&G DRAFT 6/7/2010 that may exist to a third party; and (iii) the Respondent grants the Applicants unrestricted access to the record of the PSAs in the public interest. The Magistrate Judge ultimately ruled in favor of the Respondent. The Judge initially ruled that, once the Order was brought before a court of law, the Respondents breach of contract claim under section 28 of the AIA was not sustainable stating that [o]nce an order for disclosure is made against an Information Officer under the Access to Information Act I believe this would be a plausible defense to any action brought in the cause of such disclosure even where there is provision for confidentiality and privacy for the information disclosed. Second, the Judge ruled that the Applicants failed to show how disclosure of the PSAs would serve the public interest or how the Applicants would use the information in the agreements to bring the government to be more transparent, accountable and efficient in the management of the oil resources. Id. at 5. Proving that the Applicants brought this particular application in the public interest, noted the Judge, is a condition for disclosure under section 34(b) of the AIA. Id. at 4-5. Third, the Judge determined that the Applicants did not prove that the public benefit in the disclosure of the details of the [PSAs] far outweighs the harm that such disclosure would entail in view of the confidentiality clauses. Id. at 4, 5. The Judge acknowledged that Ugandas resources were held in Trust by the Government for the people, but he did not agree that whatever a government holds in trust for its people it must always disclose. Id. at 5. Furthermore, the Judge considered the negative impact that disclosing PSAs may have on potential investors and prospecting companies. The Judge finally dismissed the application, finding that the public interest in the disclosure of the agreement[s] is [not] greater than the harm contemplated by the confidentiality clauses. Id. at 6.

R&G DRAFT 6/7/2010 II. UGANDAN LAW REQUIRES THE DISCLOSURE OF THE PSAS A. Under Article 41 of Ugandas Constitution and Under the Access to Information Act, the Attorney General Must Disclose the PSAs

The government of Uganda showed strong commitment to democracy and economic prosperity by enacting the Constitution of the Republic of Uganda, 1995. The Constitution provides that [e]very citizen has a right of access to information in the possession of the State or any other organ or agency of the State except where the release of the information is likely to prejudice the security or sovereignty of the State or interfere with the right to the privacy of any other person. Constitution of the Republic of Uganda art. 41. To secure this right for its people, the government passed the Access to Information Act, 2005 (the AIA). The AIA echoes the language of Ugandas Constitution, guaranteeing that [e]very citizen has a right of access to information and records in the possession of the State or any public body, except where release of the information is likely to prejudice the security or sovereignty of the State or interfere with the right to privacy of any other person. Access to Information Act, 2005 5(1). The purpose of the AIA is explicitly to give effect to article 41 of the Constitution by providing the right of access to information held by organs of the State and to promote transparency and accountability in all organs of the State by providing the public with timely, accessible and accurate information. Access to Information Act, 2005 3(b), (d). Production-Sharing Agreements are entered into by the government and held by organs of the state. They involve the distribution, allocation, and production of state resources. Teh people of Uganda need to have access to this information so they can better evaluate how their elected officials are performing. Accordingly, the terms of the AIA, and the purposes that underlie it, require that citizens of Uganda have access to the PSAs and their terms, both to

R&G DRAFT 6/7/2010 promote transparency in government and to permit Ugandans to participate in the development and use of their natural resources. 1. Under Section 41(3) of the AIA, the Burden of Proof Rests on the Party Refusing Disclosure

The Chief Magistrates decision in this case misstates the burden of proof. In assessing the burden of proof, the Chief Magistrate finds that the applicants had a duty to prove to a standard satisfactory in civil proceedings that the public benefit in the disclosure of the details of the agreements far outweighs the harm that such disclosure would entail in view of the confidentiality clause. Chief Magistrates Ruling at 4, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010). Although the Applicants appeal is a civil proceeding,1 the Chief Magistrate errs in stating the burden of proof. Section 41(3) of the AIA states that when a party wishes to appeal the decision of an information officer to a Chief Magistrate, or the decision of a Chief Magistrate to the High Court, [t]he burden of establishing that . . . the refusal of a request for access . . . complies with the provisions of this Act rests on the party claiming that it complies. Thus, the Applicants do not need to prove that a strong public interest in disclosure exists. Rather, the public interest in disclosure is presumed, and the Attorney General must show that the reason for denying the request falls under a specific exemption provided for in the AIA. The Attorney General has not met this burden. With the exception of section 28 of the AIA, which addresses the relevance of the confidentiality clause in the PSAs, the Magistrate Judge did not refer to, nor did the Applicants receive, any evidence that one of the exemptions in the AIA applies to the PSAs at issue.

Section 41(1) of the Access to Information Act holds that proceedings on application are civil proceedings, and 41(2) holds that the rules of evidence applicable in civil proceedings should be applied

R&G DRAFT 6/7/2010 The burden of proof as stated under section 41(3) of the AIA is also consistent with international standards. Similar to the AIA, international standards require that the party claiming that disclosure is not necessary or permitted under its FOI law prove that an exemption to the general disclosure obligation applies. South Africas Promotion of Access to Information Act contains language identical to Ugandas section 41, placing the burden squarely on the party refusing access. See Constitution of the Republic of South Africa, 81(3), (a), (b) ([t]he burden of establishing that ... the refusal of a request for access ... complies with the provisions of this Act rests on the party claiming that it complies.). South Africas Supreme Court of Appeal applied this provision in Transnet, holding that the burden of proof is on the party that has refused access to show that refusal was in accordance with the provisions of the Act. Transnet Ltd. v. S.A. Metal Machinery Co. (PTY) Ltd., (147/2005) [2005] ZASCA 113, 9 (29 Nov. 2005) at para 21. Section 48 of Canadas Access to Information Act states that the burden of establishing that the head of a government institution is authorized to refuse to disclose a record requested under this Act . . . shall be on the government institution concerned. In the United States, the Freedom of Information Act holds that where a decision to withhold records under the Act is challenged, a court may determine whether such records or any part thereof shall be withheld under any of the exemptions . . . and the burden is on the agency to sustain its action. Freedom of Information Act 552(a)(4)(B). The United States Court of Appeal for the Ninth Circuit applied this provision in Minier v. CIA, 88 F.3d 796 (9th Cir. Cal. 1996), holding that the agency resisting disclosure of requested information has the burden of proving the applicability of an exemption (p. 7). See also National Association of Home Builders v. Norton, 353 U.S. App. D.C. 374, 309 F.3d 26, 32 (D.C. Cir. 2002) [cited in Flathead at 5] (add parenthetical).

R&G DRAFT 6/7/2010 Although the method of meeting this burden of proof varies by country, a showing of some evidence is necessary. For example, the court in Minier held that the agency withholding information could meet its burden if it submitted a detailed affidavit showing that the information logically falls within the claimed exemptions. Minier at 6 citing Hunt, 981 F.2d at 1119. Here, in addition to the Chief Magistrate incorrectly placing the burden of proof on the Applicants rather than the Attorney General, no evidence was offered by the Attorney General or cited by the Judge. Accordingly, his decision is at odds with both Ugandan law and international FOI standards. Because the Attorney General has not met its burden, we request that the Court order the PSAs to be disclosed. 2. The Exemptions to the Broad Obligation of Disclosure in the AIA Do Not Apply to the PSAs

Even if the burden of proof is applied correctly, the Attorney General cannot show that the PSAs should be withheld because the agreements do not fall under one of the exemptions provided in the AIA. The Applicants have a general right to information held by the state or any public body under section 5 of the AIA. This right does not depend on the reasons given for the request or the governments opinion of those reasons. Access to Information Act, 2005 6. Accordingly, the right to information is broad and is limited in only a few narrow circumstances enumerated within the AIA. If a request for information does not fall within an enumerated exception, it must be granted. In the context of PSAs, there are three exemptions that arguably could apply. These include (i) the protection of commercially sensitive information; (ii) the protection of personal privacy; and (iii) the protection of certain confidential information. AIA, 26-28. With respect to the PSAs at issue, these three exceptions are not applicable and therefore we respectfully request that the Court order the PSAs to be disclosed.

R&G DRAFT 6/7/2010 (a) Section 27: Any Commercially Sensitive Information Contained in the PSAs is Unlikely to Cause the Parties Substantial Harm

The most forceful argument for refusing to disclose the PSAs is that secrecy is necessary to protect commercially sensitive information. The AIA provides that an information officer shall refuse a request for access to a record if the record contains information supplied in confidence by a third party, the disclosure of which could reasonably be expected (i) to put that third party at a disadvantage in contractual or commercial negotiations; or (ii) to prejudice that third party in commercial negotiations. Access to Information Act, 2005 27(1)(c). This reasoning is also codified in many other FOI laws, most of which explicitly exempt from disclosure trade and commercial secrets. Contracts, at 37; see, e.g., U.S. Freedom of Information Act, 5 U.S.C. 552(b)(6) (This section does not apply to matters that are . . . trade secrets and commercial or financial information obtained from a person and privileged or confidential.); Canadas Access to Information Act, R.S., 1985, c. A-1 20(1) ([T]he head of a government institution shall refuse to disclose any record under this act that contains (a) trade secrets of a third party; (b) financial, commercial, scientific or technical information that is confidential information supplied to a government institution by a third party and is treated consistently in a confidential manner by the third party; . . . (c) information the disclosure of which could reasonably be expected to result in material financial loss or gain to, or could reasonably be expected to prejudice the competitive position of, a third party; or (d) information the disclosure of which could reasonably be expected to interfere with contractual or other negotiations of a third party.). With respect to the PSAs at issue, because the bid has already been accepted, there is no commercial disadvantage in disclosing the existing agreement. The third partys rights have already crystallized. Moreover, the Attorney General has not pointed to anything in the PSAs

R&G DRAFT 6/7/2010 that, if released, would prejudice the bidder in future negotiations. However, companies also claim that keeping PSAs confidential is necessary to protect CSI, which, if disclosed to the public, may cause a company economic harm in the future by weakening its competitive advantage or its bargaining position. Contracts, at 33. Although FOI laws do not define CSI, it is generally understood to be any information that has economic value or could cause economic harm if known. Contracts, at 33. CSI commonly encompasses two types of information. First, it includes trade secrets, which are any formula, pattern, device or compilation of information which is used in ones business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. FOIA Book; Restatement of Torts 757 comment b (1938). Examples of trade secrets are customer lists, formulas, and specific marketing strategies. Contracts, at 34. Second, CSI includes certain other commercially material information that, if disclosed, would be likely to cause substantial harm to the competitive position of the owner.2 James T. OReilly, Federal Information Disclosure Vol. 1 14:26-27 (2000). An example of this kind of CSI would be information regarding a potential merger or the quantity and quality of a reserve, which, if released to the public, may cause commercial harm to the company from which the information came. Contracts. at 34-35. These definitions of CSI are consistent with the AIAs exemption for commercial information of third party, which protects commercial information that could potentially disadvantage a company in negotiations or injure the company in commercial competition. Disclosed trade secrets or other commercially material information both could potentially damage a companys competitive and bargaining positions.

In addition, this category of information may also include information that the company voluntarily disclosed to the government and which would not normally be disclosed to the public. James T. OReilly, Federal Information Disclosure Vol. 1 14:26-27 (2000).

R&G DRAFT 6/7/2010 FOI laws are based on principles of disclosure, which means that when a person makes a request for information from the government, the law presumes that the government will release the information to an applicant unless an exemption applies. In the case of CSI, therefore, the government must show that the requested document contains CSI. With respect to the PSA at issue, however, the Attorney General has not shown that the PSA contains CSI. Moreover, because of the nature of PSAs, the PSAs at issue likely do not contain CSI. (i) Primary contracts do not generally contain commercially sensitive information

The Applicants are requesting PSAs between the Ugandan government and certain multinational companies. Although the details of the PSAs at issue are unknown, PSAs are generally structured using multiple levels of contracts. Contracts, at 18-19. The primary contract is the agreement between the government and the company or consortium of companies. Id. In addition to the primary contract, explorative and extractive operations also typically involve numerous other contracts, such as agreements between contractors and agreements between contractors and sub-contractors (ancillary contracts). Id. In general, the ancillary contracts contain most of the CSI related to the project, while the primary contract contains little or no CSI. Id. Primary contracts typically include basic information such as the parties involved, the effective date, the general purpose of the contract, definitions, and the grant of formal legal title. CITE. In addition, primary contracts may provide for methods of oversight, such as how decisions will be made, establishing committees, and procedural matters. CITE. The contract may also discuss the financing structure and resource allocation, including how much of the resource the state will receive in kind in return for granting the contract. Id. at 19-20.

R&G DRAFT 6/7/2010 The primary contract may contain more material provisions, however, such as work obligations or expenditure requirements; infrastructure; local and foreign employment requirements; training, health and safety standards; reporting and accounting standards; environmental standards and harm mitigation measures; how and when public and private land can be acquired; compensation to local communities; and community development obligations. Id. Also, provisions concerning license and area fees, taxes, royalties, signing bonuses, exemptions from taxes and levies; and definitions of the nature and calculation methods of taxes, royalties and other payments, may be included. Id. The contract may also contain other fiscal considerations, including foreign exchange arrangements, dividend and capital repatriation, provisions for debt repayment and debt-to-equity ratios, revenue distribution requirements, and criteria to regulate intercompany transactions. Id. Finally, the contract generally also contains confidentiality clauses, assignment and termination provisions, and provisions regarding dispute resolution. Id. Although a primary contract may contain some CSI, the majority of the information is not commercially sensitive. Regarding information that may be deemed to be CSI, the parties to the contract and financial terms of the deal will almost certainly be included; and terms such as certain payments, work obligations, local content, and employment and training obligations may also be included. Id. at 36. However, primary contracts do not generally contain trade secrets, such as particular processes, technology, formulas, or designs, nor do they typically include information on future transactions. Id. Furthermore, primary contracts rarely contain information regarding employee information, commercial assumptions, costs and expenditures relating to operational and environmental capital, the quality and quantity of the reserve, or

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R&G DRAFT 6/7/2010 operational information and data. Id. The majority of this information is contained in ancillary contracts, which are between two private parties and are not subject to the AIA. This survey of information provided in primary contracts suggests that the PSAs at issue probably do not contain much, if any, CSI, in which case the contracts are not protected under section 27 of the AIA and should be disclosed. With respect to CSI that may be included in PSAs, however, disclosure will typically not cause the company or government economic harm because the terms of the PSAs are already in the public domain. (ii) Commercially sensitive information contained in PSAs is unlikely to cause a party substantial harm if disclosed

Despite the importance of keeping CSI confidential, states recognize there are circumstances under which CSI can be disclosed without harming the parties involved. For CSI to be exempt from disclosure, FOI laws typically require that the information (i) not already be in the public domain or have been publicly disclosed and (ii) be shown to cause substantial harm to the competitive position of the party from whom the information was obtained. Contracts, at 37. These requirements are present in the AIA, which, in addition to requiring that CSI cause substantial harm to the third party, states that a record may not be refused under [section 27] insofar as it consists of information . . . already publicly available. AIA, Part III, 27(2)(a). Accordingly, under both Ugandan law and international FOI principles, if the information in the PSA at issue is either already publicly available or will not put the company at a competitive disadvantage, then the PSA should be disclosed. Because of the wide availability of model and actual PSAs, it is probable that (i) CSI in these particular PSAs is already in the public domain or (ii) the terms of PSAs are similar and well known enough so that companies are not substantially harmed if a particular contract is disclosed.

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R&G DRAFT 6/7/2010 (1) PSAs Are Widely Available to the Public

Much of the CSI included in primary contracts may already exist in the public domain, in which case section 27 of the AIA would not apply. The definition of public domain may vary depending on the country. For example, the United States includes in its definition of public domain information that is commonly known within an industry. See Freeman v. Bureau of Land Management, 526 F. Supp. 2d 1178 (D.Or. 2007) [(noting that the information that companies want to keep confidential is already known within the industry and is therefore in the public domain)]. Although Uganda has not established the scope of public domain, including industry knowledge in the definition of public domain is reasonable given that the purpose of keeping CSI confidential is to allow the parties to maintain a competitive advantage or superior bargaining position. Once the information is available to the industry, the information no longer needs to be kept confidential for competitive purposes. Accordingly, information known throughout an industry should be considered to be in the public domain. Much of the information contained in PSAs generally enters the public domain through securities filings, industry publications and pay-for-access sites, and voluntary or accidental disclosure by one of parties. Such information is therefore in the public domain and should not be protected under section 27 of the AIA. a. Securities Filings

Securities laws generally require certain information to be publicly disclosed, which means that such information is already in the public domain. As part of this information, many securities laws require companies to disclose any material contracts in their annual filings, which, depending on the company, may include PSAs. This means that the PSA would be in the public domain and would not be protected as CSI.

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R&G DRAFT 6/7/2010 In the U.S., Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 requires public companies to disclose certain material contracts as part of a companys annual report filing. CITE. A material contract is any contract other than those made in the ordinary course of business. CITE. Although a large multinational oil company may not have to disclose its PSAs because they are a part of its ordinary business, a smaller company that obtains a large PSA may have to disclose it. A company may also have to disclose a PSA if it involves a kind of exploration or production that is different than the companys ordinary business. Examples of American companies disclosing PSAs in their Reg. S-K filings include Chaparral Resources Inc., an American company whose only operational contract was for the Karakuduk field in Kazakhstan, Contracts, at 53-54, and Freeport McMoRan, an American company that proactively disclosed a PSA with the Democratic Republic of Congo by filing the contract in its annual securities filings, Id. at 27-28. Ugandan securities laws provide for similar disclosure. Part II, section 4 of the Capital Markets Prospectus Requirements Regulations, under 102 of the Capital Markets Authority Statute, requires that [e]very prospectus submitted to a prescribed authority for approval, shall contain the information specified in Parts I and II of the Schedule to these Regulations. Part II, 4. Part II, section (i) of the Schedule requires disclosure of Material Contracts the dates and parties to, all material contracts (not being contracts entered into in the ordinary course of business) entered into within the two years immediately preceding the publication of the
prospectus, together with a summary of the principal contents of each contract including particulars of any consideration passing to or from the issuer or any subsidiary shall be indicated in every prospectus. Ugandan securities laws suggest that the country also believes that disclosure of material contracts is a necessary part of an efficient and transparent securities market.

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R&G DRAFT 6/7/2010 PSAs do not have to expressly acknowledge the authority of applicable legislation for parties to be required to disclose under applicable securities regulations. If an applicable law requires disclosure, the parties must disclose the information regardless of a confidentiality agreement in the contract. However, some PSAs do provide for disclosure under applicable securities regulations. For example, Angolas and Polands PSAs provide for unilateral disclosure to the extent required by applicable Law, Decree, or Regulation and if data is already in the public domain [or] if required by law or rules of an official regulated securities exchange, respectively. Id. at 30, 82. By providing for disclosure if the information is in the public domain and under applicable securities laws, the parties acknowledge the supremacy of legislative disclosure requirements over confidentiality agreements. b. Pay-For-Access Sites & Industry Publications

A second source of public disclosure is industry participants making PSA terms public through pay-for-access sites and industry publications. On the website Real Deal Docs, for example, users can access actual legal documents drafted by top law firms for their clients. RealDealDocs, available at http://agreements.realdealdocs.com/Production-Sharing-Agreement/. The website says to use them for competitive intelligence, drafting documents or to get information about transactions within a particular industry or sector. Id. If the user does a search for production sharing agreements, the site returns 25 records, most of which provide, free of charge, the date of the agreement and the parties involved. The user can then subscribe to the website for US $67 per month to access the complete agreements. Id. at http://www.realdealdocs.com/SearchResults. aspx. Websites and industry publications such as this make the terms of PSAs readily available

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R&G DRAFT 6/7/2010 to both industry participants and the public for the express purpose of gathering and providing competitive intelligence. c. Voluntary and Accidental Disclosure

Some governments unilaterally disclose PSAs, either voluntarily or accidentally. With the support of international organizations such as the World Bank and the IMF, governments are moving in the direction of disclosure. CITE. For example, Congo-Brazzaville, Ecuador, Liberia, Peru, and Timor Leste all have public disclosure polices. The Mexican Government has also moved in the direction of disclosure, ordering the disclosure of (1) the names and addresses of liquefied petroleum gas (LPG) distributors that had purchased LPG from Pemex, a state company in charge of all exploitation and first sale of such products, and (2) Pemexs sales volumes. Right2Info.org, Information About Natural Resources, available at http://right2info.org/information-of-high-public-interest/information-about-natural-resources-1. The Mexican Federal Access to Information Institute (IFAI) determined that because petroleum is national patrimony under the Mexican Constitution and because Pemexs aggregate sales data are indicative of its use of public resources, the IFAI concluded that disclosure of such aggregate data would contribute to the objectives of the Access Law to enhance the transparency and accountability of public administration. Id. In addition to voluntary disclosure by governments, contracts sometimes are released to the public without government consent. For example, the Chad-Cameroon pipeline contracts, which included terms regarding revenue and expenditures, were disclosed by civil societies in Chad who obtained an upstream Chad-Cameroon exploitation contract through government contacts. CITE. In addition, some companies have interpreted a states laws as allowing disclosure, even when government officials opposed disclosure. BP, for example, may have

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R&G DRAFT 6/7/2010 unilaterally disclosed its contract regarding the BTC pipeline, because the company determined that the states laws required it. Although some suggest that BP consulted with high government officials before releasing the contracts, this action suggests that governments will not always have control over whether a contract is disclosed. Id. at 44. Regarding the Applicants request, the possibility of the CSI contained in the PSAs already being in the public domain is particularly relevant. With respect to unilateral disclosure, for example, Tullow and Heritage, two companies with which Uganda primarily deals, have stated that that they are happy to disclose the terms of their contracts . . . if the government allows it. James Herron, Tullow, Heritage face tough choices on Uganda oil. Given this willingness to disclose and the AIAs clear disposition towards disclosure, these companies may follow BPs lead and unilaterally disclose the PSAs if there is enough pressure from external sources. Furthermore, Tullow is a public company incorporated under the laws of the United Kingdom. This means that the company is required to disclose a significant amount of information to its shareholders, both at home and abroad, through its securities filings. As a result, it is possible that much of the potential CSI in the PSAs has already been disclosed. These various methods of disclosure and the public status of Tullow imply that most of the terms of PSAs at issue are already available to competitors. If the information is already in the public domain, then section 27 of the AIA does not protect it and the government must disclose the PSA under Ugandan law. Furthermore, even if the PSAs contain CSI that is not in the public domain, the wide availability of PSAs means that companies will not suffer substantial damage to its commercial or bargaining position if a PSA is disclosed, because industry norms and market forces have already been established.

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R&G DRAFT 6/7/2010 (2) Given the Availability of PSAs, Disclosure Would Probably not Substantially Harm the Companies

Assuming that the terms of the PSA are not in the public domain, the Court should consider whether the information in the contract would substantially harm the companies as contemplated by the AIA and FOI principles. As has been shown, PSAs have been disclosed through multiple channels and the terms of such contracts have become common knowledge in the industry. Since the financial terms of many deals are known within the industry, the argument that contract transparency would cause competitive harm seems weak. Rates for significant repeating payments (such as taxes and royalties, profit oil, etc.) constitute the main terms of the deal. Most one-time or set payments (such as annual contributions to community development funds or per acre fees for land) should be treated as basic contract terms, subject to disclosure. Other less significant payments that are not generally known to the industry would likely not be so significant as to cause competitive harm if disclosed. Contracts, at 39. Accordingly, the market for the extractive industry has become more efficient resulting in fewer opportunities for rent seeking and less disparity between the terms of one PSA and another. Lastly, if the PSA does contain CSI that would cause substantial harm to the companies if disclosed, then the doctrine of severability should be applied rather than prohibiting disclosure altogether. The AIA states that [w]here a request for access is made for a record containing information which is required or authorized or to be refused under [an exemption], then every part of the record, which does not contain any such information shall be disclosed notwithstanding any other provision of this Act. Part II, Section 19(1). In addition to being expressly included in the AIA, the doctrine of severability is an international FOI principle. CITE. Thus, if the PSA at issue does contain CSI that would cause the companies substantial

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R&G DRAFT 6/7/2010 harm, then the Government should nonetheless comply with the AIA and disclose the PSA with any CSI redacted as necessary. (b) Section 26: Companies Do Not Have Privacy Rights Under Ugandan or International Law

In his opinion, the Magistrate Judge stated that a disclosure of the agreements would entail a breach of contract and an infringement of privacy that would have far reaching implications. Magistrate, at 3. The Judge thereby implicitly raised the question of whether, under section 26 of the AIA, a company can claim a right to privacy. Whether a company has a right to privacy under the AIA should depend on the definition of person. The AIA provides that an Information Officer may refuse a request for access if its disclosure would involve the unreasonable disclosure of personal information about a person. Part III, 26(1). The AIA does not define the word person, but the text of the statute suggests that person only includes individuals and does not include legal entities such as companies. First, the section refers to a person who is deceased as well as a person who is or was an official of a public body. 26(3)(d)-(e). Being deceased and holding public office are not capacities that entities other than individuals have. Second, sections 27 and 28 both address privacy concerns that relate to companies such as commercial information and confidential information. 27-28. These sections could be considered to be redundant if section 26 was meant to protect a companys privacy. Based on the text of the statute, therefore, section 26 of the AIA is meant to cover only the privacy of individuals. A textual analysis of the AIA notwithstanding, Uganda has not addressed whether a corporation has a right to privacy outside of confidentiality agreements and commercial information. The international community, however, generally agrees that legal entities do not have privacy rights outside of trade secrets or contractual confidentiality protections. See Kristen

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R&G DRAFT 6/7/2010 Mathews, Since when does a legal entity have privacy rights? (Sept. 30, 2009), available at http://privacylaw.proskauer.com/2009/09/articles/foia/since-when-does-a-legal-entity-haveprivacy-rights/#more (discussing the Third Circuit decision in AT&T v. FCC, No. 084024, which held that a corporation has a privacy claim under the U.S. FOIA based on the statutes specific definition of person). The Australian High Court has noted that a company is endowed with legal personality only as a consequence of the statute law providing for its incorporation. It is a statutory person, a persona ficta created by law which renders it a legal entity as distinct from the personalities of the natural persons who constitute it. . . . But, of necessity, this artificial legal person lacks the sensibilities, offence and injury to which provide a staple value for any developing law of privacy. ABC v. Lenah Game Meats Pty Ltd, HCA 63; 185 ALR 1, para. 126 (2001). Similarly, U.S. and U.K. courts have typically refused to acknowledge a corporate right to privacy outside the context of statutes that specifically provide for a corporate privacy right.3 Lee A. Bygrave, A right to privacy for corporations? Lenah in an international context, Privacy Law & Policy Reporter, vol. 8, pp 130-134, 5-6 (2001). Additionally, corporations are generally not protected under Article 17 of International Covenant on Civil and Political Rights (ICCPR), which protects individuals against an invasion of privacy. ICCPR, Art. 17; see Bygrave, at 6 (As for corporate rights under the international human rights treaties, the bulk of authority on the ICCPR holds that the rights contained therein are for the protection of individuals only.). Given a textual reading of the AIA, as well as the general foreign and international position that corporations do not have a right to privacy as such, interpreting section 26 of the AIA to apply to legal entities would be inconsistent with both the AIA and the common
3

For example, the 3rd Circuit has determined that corporations are protected under FOIA and the UK Court of Appeal has ruled that corporations are covered under the Broadcasting Act of 1996.

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R&G DRAFT 6/7/2010 understanding of privacy rights. Accordingly, with respect to the PSAs at issue, section 26 should not apply to legal entities; the companies therefore cannot seek protection from disclosure under this provision. (c) Section 28: Confidentiality Clauses Cannot Defeat a Court Order

Section 28 of the AIA offers a general protection to information provided in confidence. An analysis under this section has two parts. First, section 28 requires an information officer to refuse access to information if disclosure of the record would constitute an action for breach of a duty of confidence owed to a third party in terms of an agreement. Access to Information Act, 2005 28(1)(a). Chief Magistrate Deo John found, however, that no person can be held in breach of contract where the said breach is occasion [sic] by an enforceable court order. Indeed to hold otherwise would, in situations providing for confidentiality, be to render S.37 [allowing a person to lodge a complaint with the Chief Magistrate against the decision of an information officer to refuse a request for access] of the Access to Information Act redundant. Chief Magistrates Ruling at 4, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010). The Judge therefore quickly dismissed the 28(1)(a) breach of contract claim, saying that [o]nce an order for disclosure is made against an Information Officer under the Access to Information Act I believe this would be a plausible defense to any action brought in the cause of such disclosure even where there is provision for confidentiality and privacy for the information disclosed. Id. The Chief Magistrates reasoning on this point is sound. The legislatures goals of government accountability and transparency cannot be defeated by prudent drafting.4
4

The Chief Magistrates holding raises the question of whether section 28(1)(a) has any application at all. Although the Chief Magistrate is dismissive of this section of the AIA, some weighing of the public interest is implicit in his decision. If there is little public interest in government-held information (for example, in the identifying details of a private citizens medical records), the government should not disclose confidential information. As the Chief Magistrates decision shows, however, a confidentiality clause has no force where the public interest favors disclosure. A prudent information officer might think twice before disclosing an agreement subject to a

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R&G DRAFT 6/7/2010 Second, the Attorney General may withhold a third partys confidential information if disclosure may reasonably be expected to prejudice the supply of future information. Under section 28, an information officer may refuse a request for access to a record of the body if the record consists of information that was supplied in confidence by a third party, the disclosure of which could reasonably be expected to prejudice the future supply of similar information, or information from the same sources and it is in the public interest that similar information, or information from the same source, should continue to be supplied. Access to Information Act, 2005 28(1)(b) [emphasis added]. Since the AIA applies equally to all companies, it is unlikely that disclosing the terms of a successful bid will discourage any company from submitting future bids. Disclosure of contracts under freedom of information laws is standard practice in the worlds most economically advanced nations, including the United Kingdom, the United States, Australia, Canada, and South Africa. CITE. Furthermore, the legislature granted the Attorney General the discretion, but not the obligation, to withhold information under section 28. The governments interest (i.e., promoting the public interest), not the bidders, is therefore paramount. Since there is a strong public interest in disclosing natural resource contracts, only a serious threat to the future supply of information should cause the government to withhold a contract. 3. Even if an Exemption Applies, the Publics Interest Outweighs any Potential Harm

Even if the Attorney General can show that disclosure should be denied under an exemption, then the Applicants still have the opportunity to show that the public interest outweighs any harm prevented by the applicable exemption. Section 34 of the AIA supersedes

confidentiality clause. Once a dispute over information has reached the courts, however, a judge will decide the case on the merits, weighing the public interest against the parties interest in confidentiality. Therefore, the confidentiality clause has no application in this case.

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R&G DRAFT 6/7/2010 the exemptions under Part III, stating that [n]otwithstanding any other provision in this Part, an information officer shall grant a request for access to a record of the public body otherwise prohibited under this Part if . . . the public interest in the disclosure of the record is greater than the harm contemplated in the provision in question. Access to Information Act, 2005 35. Section 34 holds that the public interest can override an applicable exemption where the public interest in disclosure outweighs the harm contemplated in the provision in question. In this case, there is a great deal of public interest in disclosure. Disclosure is necessary to promote transparency and democracy and to ensure continued economic growth. These interests are enough to outweigh the bidders interest in enforcing a confidentiality clause or a general interest in protecting CSI.5 The public interest override is common in international FOI laws, and international jurisprudence consistently supports the override. (a) Information Asymmetry Hampers the Negotiating Power of Ugandas Government

A notable feature of oil contract negotiation is the information asymmetry that exists between oil companies and host governments. Numerous authorities have addressed the curious government argument that disclosure [of contracts] would erode their bargaining power for future contracts. IMF GUIDE ON RESOURCE REVENUE TRANSPARENCY 2007, 11 (2007) [hereinafter IMF GUIDE]; see also PETER ROSENBLUM & SUSAN MAPLES, REVENUE WATCH, CONTRACTS CONFIDENTIAL: ENDING SECRET DEALS IN THE EXTRACTIVE INDUSTRY 38 (2009). As noted above, it is widely known that industrial actors already have access to these contracts shortly after they are signed, via fee-based websites and other industrial intelligence services. See ReadDealDocs website, http://agreements.realdealdocs.com/ Production-Sharing-Agreement (last visited May 21, 2010); see also IMF GUIDE, 11; Oil &
5

Specific CSI could be redacted on a case-by-case basis.

22

R&G DRAFT 6/7/2010 Gas Observer, Contracts & Tenders Newsletter, http://www.oilandgasobserver.com/contracts/ (last visited Apr. 20, 2010). The expert negotiating teams who operate on behalf of oil firms benefit from significant experience in operating in challenging environments, while governments often lack experience and training in such negotiations, especially where oil resources are a new discovery, as in Uganda. See Jenik Radon, How to Negotiate an Oil Agreement, in ESCAPING
THE

RESOURCE CURSE 89, 90-93 (Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz

Eds. 2007). Further, oil firms bring immense financial resources to bear on negotiations. See, e.g., id. at 90 (highlighting the stark differences in ExxonMobils 2007 revenues of $371 billion and the GDP of oil-rich Saudi Arabia, $281 billion). The factors paint a troubling picture of negotiating imbalance. There is a stark contrast between the oil companys resource and experience-rich expert negotiation teams, who are supplied with valuable industrial intelligence benchmarks for contract terms and costs, and the government negotiators, who must rely on limited experience and judgment that is based on incomplete information. Id. at 105-06. Such information asymmetry makes it virtually impossible for governments to objectively benchmark the competitiveness of their contractual terms, see, e.g., Dino Mahtani, Transparency Fears Lead to Review of Congo Mining Contracts, FINANCIAL TIMES, Jan. 3, 2007 (noting that lack of information may have resulted in the sale of natural resources at an extremely undervalued price), an asymmetry that would be vastly diminished by transparency and policies of disclosure of such agreements. (b) Disclosure of Oil Production Sharing Agreements Leverages Governments Negotiating Strengths and Improves Governmental Autonomy

One of the most significant advantages host governments possess is the territorial control over the natural resources. Notwithstanding the considerable financial resources, experience and

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R&G DRAFT 6/7/2010 data that oil companies bring to negotiations, these assets cannot alter the fact that oil and other natural resources are limited in quantity and location. See Jenik Radon, How to Negotiate an Oil Agreement, in ESCAPING THE RESOURCE CURSE 89, 97 (Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz Eds. 2007). Put simply, oil firms face increasing difficulties in locating and extracting such resources and are forced to negotiate with the governments that control access to them. Governments of resource-rich countries thus have a substantial advantage in that oil companies have few alternatives to negotiating with them. Transparency also provides benefits of improved governmental autonomy. As one scholar has noted, interviews with oil executives reveals that oil firms typically tailor their negotiating posture to the perceived political and legal climate. Risks of corruption or authoritarianism normally leads firms to adopt self-protective, uncompromising and feisty posture that frequently excludes critical considerations of environmental, social and other external risks. Radon at 90-91. Research indicates that where transparency is lacking, oil companies perceive risks of corruption, and political and legal instability. Jenik Radon, How to Negotiate an Oil Agreement, in ESCAPING THE RESOURCE CURSE 89, 96 (Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz Eds. 2007). Such risks make it more likely that oil firms press for stability clauses that essentially require the State to compensate the firm for changes in laws or regulations that adversely impact the firms operations. Radon at 96. This effectively means that nations take a risk that they will need to pay a fine if they enact more stringent tax, labor or environmental laws or rules. Radon at 97. Transparency in the negotiation of these oil agreements is one critical method to avoid a subversion of governmental autonomy.

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R&G DRAFT 6/7/2010 (c) Disclosure Combats Corruption and Improves Efficiency of Industry and Oil Resource Revenue Management

As noted above, history is rife with examples of the paradox of plenty, in which resource-rich nations all too frequently experience drastic failures in growth and economic development. See JEFFREY D. SACHS & ANDREW M. WARNER, NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH (1997), available at http://www.cid.harvard.edu/ciddata/ warner_files/natresf5.pdf. Extensive research on the causes of this problem converge on patronage and rent-seeking behavior of government actors as an explanation. Where governments are oil-rich, they depend less on tax revenue from their citizens, uncoupling an economic link of accountability between government actors and their citizens. See Terry Lynn Karl, Ensuring Fairness: The Case for a Transparent Social Contract, in ESCAPING THE RESOURCE CURSE 256, 263-64 (Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz Eds. 2007); Ivar Kolstada & Arne Wiiga, Is Transparency the Key to Reducing Corruption in Resource-Rich Countries?, 37 WORLD DEV. 521, 524 (2009) (noting that larger resource revenue can reduce the need for taxes, a scenario that is associated with lower public demand for government accountability). Extensive scholarship also reveals that, in the absence of this dependence on their citizens for tax revenue, oil revenues are used in corrupt manners, to provide financial benefits and jobs as a form of patronage to woo political support. See, e.g., James A. Robinson et al., Political Foundations of the Resource Curse, 79 J. DEV. ECON. 447, 450 (2006) (noting that resource revenue is frequently spent via corrupt mechanisms such as patronage to remain in power); Halvor Mehlum et al., Institutions and the Resource Curse, 116 ECON. J. 1, 12-16 (2006); Catharina Lindstedt & Daniel Naurin, Transparency Against Corruption. A CrossCountry Analysis (2006) (unpublished manuscript, available at http://www.qog.pol.gu.se/ research/reports/Lindstedt_Naurin.pdf)

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R&G DRAFT 6/7/2010 This corruption often occurs via patronage and bribery, and plagues these economies with mounting inefficiencies. See MENACHEM KATZ ET AL., INTL MONETARY FUND, LIFTING THE OIL CURSE: IMPROVING PETROLEUM REVENUE MANAGEMENT IN SUB-SAHARAN AFRICA 56 (2004); Vito Tanzi & Hamid Davoodi, Corruption, Public Investment, and Growth 13-18 (Intl. Monetary Fund, Working Paper No. WP/97/139, 1997). A notable impact of corrupt patronage is that relevant institutions become staffed ineffective or incompetent clientele of the corrupt actor. Studies have indicated that the quality of institutionsas measured by degree of corruption, accountability and transparency, among other factorsis directly linked to efficient resource management. Mehlum et al. at 12-16; Robinson et al. at 451. Where relevant institutions that would hold politicians accountable are themselves products of corruption, inefficient resource management follows, along with the waste and impairments in economic growth that should otherwise attend natural resource booms, a classic paradox of plenty. See id. As one author put it, opacity in this area means that enormous sums of money are being passed around, both internationally and domestically, without the most basic forms of accountability. Terry Lynn Karl, Ensuring Fairness: The Case for a Transparent Social Contract, in ESCAPING THE RESOURCE CURSE 256, 267 (Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz Eds. 2007). Transparency then, manifest in the instant case by public disclosure of oil production sharing agreements, is one means of attacking such waste. Transparency finds broad scholarly support as a critical component of combating corruption. Disclosure of revenue and terms of oil contracts creates ex ante obstacles to corrupt officials by forcing them to expend ever greater effort and resources in concealing illicit actions, such as finding new ways to unlawful transfers of money and to concoct credible accounts in public records as to where funds have gone. See, e.g., Catharina Lindstedt & Daniel Naurin,

26

R&G DRAFT 6/7/2010 Transparency Against Corruption. A Cross-Country Analysis, manuscript at 9 (2006) (unpublished manuscript, available at http://www.qog.pol.gu.se/research/reports/Lindstedt_ Naurin.pdf). Transparency also impedes corruption by making evidence easier for lawenforcement to obtain, and making it more challenging for corrupt actors to use bribery to offset or avoid punishment. See Ivar Kolstada & Arne Wiiga, Is Transparency the Key to Reducing Corruption in Resource-Rich Countries?, 37 WORLD DEV. 521, 523 (2009). Consistent with the points made above, transparency has worked in Uganda in the context of fighting corruption in educational funding. See Ritva Reinikka & Jakob Svensoon, Fighting Corruption to Improve Schooling: Evidence from a Newspaper Campaign in Uganda, 2 J. EURO. ECON. ASSOC. 1 (2005). Prior to a transparency measure, only 24% of educational grants actually reached schools in the 1990s, the remainder of these grants were taken by local government actors. Id. After the Ugandan government published monthly grants to school districts in newspapers, by 2001 more than 80% of these grants reached the schools. Id. Similarly, a move towards transparency with respect to PSAs could also produce favorable results. As noted above, governments hold natural resources in trust for their citizens, and must ensure the benefits of these resources accrue to their citizens. The risks of waste and inefficiency that resource-rich nations face, often resulting from rent-seeking and corruption, should render obvious the importance of disclosure of oil production sharing agreements in Uganda. (d) Transparency in Extraction Industry Holds Parallel Benefits for Broader Scale of National Development

Transparency in a host government is attractive, not discouraging to investors. Chief Magistrate Deo Johns ruling articulated concern about the possibility of withdrawal by the prospecting companies upon any disclosure and what this could mean for the nation. Chief Magistrates Ruling at 6, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3,

27

R&G DRAFT 6/7/2010 2010). In fact, the enactment and practice of good governance policies, such as transparency, attracts foreign investment. As the Chief Executive of Royal Dutch Shell, Jeroen van der Veer, stated in 2005: Put simply, we prefer to invest and work in countries that are tackling the scourge of corruption; that are instilling good governance and the rule of law; and that are concerned about the health, education and livelihoods of all their people. Jeroen van der Veer, Chief Exec. Officer, Royal Dutch Shell, Speech at the London Extraction Industry Transparency Initiative Conference: Why Transparency is Important (Mar. 17, 2005). Surveys of investing entities indicate that predictability and stability in political and economic arenas stability that is bolstered by factors such as transparency are chief among the concerns of potential investors in countries like Uganda. See WORLD BANK GROUP, SNAPSHOT-UGANDA: BENCHMARKING FDI COMPETITIVENESS 7 (2007) (noting that surveys across six economic sectors including textiles, apparel, and telecom services, revealed that political and economic stability were critical factors in investment decisions); see also Marios B. Obwona, Econ. Poly Research Ctr., Determinants of FDI and Their Impact on Economic Growth in Uganda, 13 AFR. DEV. REV. 46, 63 (2001) ([T]he importance of political stability in creating a climate for investors cannot be underestimated. Political instability, whether perceived or real, constitutes a serious deterrent for FDI as it creates uncertainties and increases risks and hence costs.). Transparency and its role in combating corruption is not only important to investors, but also to international donor organizations. See WORLD BANK: IMPLEMENTATION OF THE MANAGEMENT RESPONSE TO THE EXTRACTIVE INDUSTRIES REVIEW 4 (2008) (noting its support for the Extractive Industry Transparency Initiative and the importance of transparency in extractive industries); IMF GUIDE TO RESOURCE REVENUE TRANSPARENCY 2007, at 7 (noting

28

R&G DRAFT 6/7/2010 the considerable emphasis on revenue transparency as part of World Bank involvement in extractive industry activities); Paolo Mauro, The Effects of Corruption on Growth, Investment and Government Expenditure 7, 11-12 (Intl Monetary Fund, Working Paper No. WP/96/98, 1996) (providing empirical evidence that corruption impairs investment and growth). Compare Kenyas Government: Going Wrong?, ECONOMIST, Oct. 9th 2003 (noting the reluctance of foreign donors to engage in Kenya given an apparent failure to enact anti-corruption policies after the arrival of the administration of President Mwai Kibaki following ouster of former President Daniel arap Moi), with Kenya, Corruption and the IMF: Dirt Out, Cash In, ECONOMIST, Nov. 27th 2003 (noting that eventual reforms by President Mwai Kibaki lead to dramatic reversal in investment and foreign donor activities in Kenya). Industrial actors are also joining in consensus toward disclosure and transparency. For example, more than 46 of the worlds largest oil companies, including ExxonMobil and Royal Dutch Shell, have joined the Extractive Industry Transparency Initiative (EITI). See, e.g., List of EITI Supporters, http://www.eiti.org/supporters/companies (last visited Apr. 15, 2010). The participants in the EITI support several core principles, among these are the wide dissemination of comprehensive and comprehensible material on payments and revenues and active participation by civil society, and that [g]overnments should also lift any confidentiality provisions that would impede reporting of resource revenue payments. IMF GUIDE TO RESOURCE REVENUE TRANSPARENCY 2007, at 45 (2007). Importantly, as of October 31, 2007, Uganda was one of several nations engaged in dialogue regarding participation in EITI. WORLD BANK: IMPLEMENTATION OF THE MANAGEMENT RESPONSE TO THE EXTRACTIVE INDUSTRIES REVIEW annex F (2008). Although EITI is an important factor in promoting good governance practices such as transparency, it addressed only one component of the resource value chain,

29

R&G DRAFT 6/7/2010 revenues and taxes. Nations like Uganda only bolster the impact of their good governance campaigns by extending transparency initiatives to upstream events such as contract negotiations. See Ivar Kolstada & Arne Wiiga, Is Transparency the Key to Reducing Corruption in Resource-Rich Countries?, 37 WORLD DEV. 521, 528 (2009). Lastly, and perhaps most importantly, Tullow Oil, Plc, and Heritage Oil, Ltd., the parties to the oil production sharing agreement in Uganda at issue, have publicly stated that they are willing to disclose these contracts. James Herron, Tullow, Heritage Face Tough Choices on Uganda Oil, INDEPENDENT, June 10, 2009, available at http://www.independent.co.ug/index.php/business/business-news/54business-news/1052-tullow-heritage-face-tough-choices-on-uganda-oil (Tullow and Heritage said they are happy to disclose the terms of their contracts which they described as containing good terms for Uganda if the government allows it.). The preceding facts make it clear that, rather than discouraging investors, disclosure of oil production sharing agreements is promoted by oil companies, international investors and donors, in part because of the benefits such practices have on the political and economic stability of the investment environment. In conclusion, the above analysis illustrates that, under the AIA, the burden of proof is on the Attorney General to show that denying disclosure of the PSAs is warranted under a specific exemption. However, an exemption prescribed in the AIA is unlikely to apply to the Applicants request. Enough of the commercially sensitive information that could realistically be in the PSAs at issue is in the public domain to prevent substantial harm to the parties involved. Furthermore, both the AIA corporations do not have a general right to privacy. These points, coupled with the Chief Magistrates rejection of a claim based on the confidentiality clause, suggest that none of the exemptions in the AIA apply to the request for the PSAs. Lastly, even if

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R&G DRAFT 6/7/2010 the Court finds that an exemption applies, the Applicants have shown that the public interest, both economically and politically, in having access to information regarding the production and disposition of Ugandas resources outweigh any harm that may result from disclosure. B. The Government of Uganda Is Obligated to Disclose the PSA to the Public Because it is a Trustee of Public Resources

Chief Magistrate Deo John unreservedly agreed with the Applicants claim that petroleum and natural resources discovered under any land in Uganda are national treasures vested in the Government to hold in trust for the people of Uganda. Chief Magistrates Ruling at 5, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010). The Chief Magistrates finding is supported by the Constitution, which holds that the State shall protect important natural resources, including land, water, wetlands, minerals, oil, fauna and flora on behalf of the people of Uganda. Constitution of the Republic of Uganda para. XIII. The text of the Constitution suggests that the government of Uganda is a trustee of the peoples interest in their natural resources. The Supreme Court of the United States recently confirmed that the government may hold resources in trust for a people. The majority opinion considered two possible reasons for finding the government is a trustee in its management of natural resources. The first is substantive law setting out specific fiduciary or other duties. (US v. Navajo Nation 129 S. Ct. 1547 at ) [hereinafter Navajo II]. By saying the State holds natural resources on behalf of the people of Uganda, the legislature implies a fiduciary relationship between the government and the people. Second, even without an explicit statutory source establishing a fiduciary relationship, common law courts have found fiduciary duties by applying common law trust principles. Id at *6. In this case, the Ugandan government is in total control of the oil located on its territory. This is sufficient to create a trust under the common law. See The Navajo Nation v.

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R&G DRAFT 6/7/2010 United States 501 F.3d 1327 [hereinafter Navajo] (holding a trust exists where virtually every aspect of the coal located on the Nations land is under the federal governments control.) at 42 (overturned by Navajo II on other grounds). In Navajo, the court considered whether the trust between the government and the Native Americans was sufficient to give the latter a claim for statutory damages against the government. In Navajo II, the claim for damages ultimately failed because the statute under which the plaintiffs sought damages demanded a trust relationship created by statute in order to grant monetary damages. CITE. In this case, however, the applications do not seek damages; they seek only the disclosure of government held information. As such, any trust, or trust-like relationship militates in favor of disclosure. See, e.g., Samson Indian Nation Band v. Canada (where the Federal Court of Appeal for Canada held that there is a special fiduciary relationship between the [government] and the Indians, and attorney-client privilege is abrogated because, as beneficiaries of a variation of a trust in Indian land, the plaintiffs share an interest in that advice with the [government], which is responsible for administration and management of the mineral assets and revenues therefrom for the benefit exclusively for the plaintiff bands and nations.). CITE. The trust relationship between the government and Native Americans has consistently led common law courts to abridge attorney-client privilege. American courts have found that there is a fiduciary relationship between the government and Indian tribes. See Jicarilla Apache Nation v. United States 88 Fed. Cl ([t]hough this relationship is currently founded in statutes that undoubtedly serve to delimit somewhat the governments obligations, it has, nevertheless, historically been measured and evaluated using principles typically applied to common law fiduciary relationships. at *6.). In Jicarilla, the court found this fiduciary relationship was

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R&G DRAFT 6/7/2010 enough to grant the Applicants access to information normally covered by attorney client privilege. Id at *10 (fiduciaries may not shield from their beneficiaries communications between them and their attorneys that relate to fiduciary matters, including the administration of trusts.). The attorney client privilege is more zealously guarded than information protected by a confidentiality clause. CITE. If the fiduciary relationship between the American Indians and the government is sufficient to abrogate the attorney-client privilege, it is certainly enough to compel disclosure of the PSAs. III. INTERNATIONAL LAW ALSO SUPPORTS DISCLOSURE OF THE PSAS A. Under International Law, Duties of the Sovereign Impose a Requirement to Disclose Information Related to the Exploitation of Natural Resources

International consensus recognizes numerous, fundamental sovereign duties. One of these duties requires nations to utilize natural resources in trust for their citizens best interests. Another duty other demands that nations protect the right to information, both in access to information and in expression of opinion. These rights and duties are enshrined in numerous international legal documents. See, e.g., Universal Declaration of Human Rights art. 19, G.A. Res. 217A, at 74, UN GAOR, 3d Sess., 1st plen. mtg., U.N. Doc. A/810 (Dec. 10, 1948) (including Uganda as a party to the Declaration); European Convention on Human Rights and Fundamental Freedoms, art. 10, 1, Nov. 4, 1950, Europ. T.S. No. 5. These rights are also protected under the Constitutions and laws of numerous countries, including Uganda. See Constitution of the Republic of Uganda arts. 4, 29 & 41. African nations have embraced these principles in the drafting and adoption of the African Charter on Human and Peoples Rights, which Uganda has ratified and incorporated into its legal regime, under Article 287 of the Ugandan Constitution. Uganda Constitution art. 287; see Uganda Law Society & Anor v. The Attorney General (Constitutional Petitions Nos. 2 & 8 of 2002) [2009] UGCC 1 (5 Feb. 2009)

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R&G DRAFT 6/7/2010 ([T]he African Charter on Human and Peoples Rights [Banjul Charter] which was adopted on 27th June, 1981 by the OAU and which came into force on 21st October, 1986 is part and parcel of our Constitution.). Article 9 of African Charter establishes informational rights, while Article 21 establishes the rights of the people to their nations natural resources. Parties to the African Charter assume the obligation to enact legislation to give effect to these rights, which, among other principles address below, compel the conclusion that the Government of Uganda is obligated to disclose oil contracts. 1. The Fundamental Rights to Information Guaranteed by Article 9 of the African Charter on Human and Peoples Rights Requires Disclosure the PSAs

The right of access to information is clearly articulated in Article 9 of the African Charter: Every individual has the right to receive information. International legal frameworks to which Uganda is a party (such as the Universal Declaration on Human Rights and the International Covenant on Civil and Political Rights) recognize that this fundamental right to access information is fundamentally intertwined with freedom of expression. See Universal Declaration of Human Rights art. 19 ([T]he right to freedom of opinion and expression . . . includes freedom to hold opinions without interference and to seek, receive and impart information.) (emphasis added); International Covenant on Civil and Political Rights art. 19(1) ([T]he right to freedom of expression . . . shall include freedom to seek, receive and impart information and ideas of all kinds) (emphasis added); see also European Convention on Human Rights and Fundamental Freedoms, art. 10, 1 ([T]he right to freedom of expression . . . shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority.) (emphasis added); Joint Declaration by the UN Special Rapporteur on Freedom of Opinion and Expression, the OSCE Representative on Freedom of the

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R&G DRAFT 6/7/2010 Media, and the OAS Special Rapporteur on Freedom of Expression, Dec. 6, 2004 (declaring that the right of access to information held by public authorities is a fundamental human right, with a presumption that all information is accessible subject only to very narrow limitations). Ugandas Constitution, which incorporates these international treaty obligations via Article 287, reflects this international consensus in its guarantees of freedom of expression and thought, Article 4, freedom of the press, Article 29, and rights to information held by the Government, Article 41. Although the Constitutional guarantees to freedom of expression and access to information are contained in different Articles, the Supreme Court of Uganda has indicated that this distinction is immaterial. See Obbo & Anor v. Attorney General (Constitutional Appeal No.2 of 2002) [2004] UGSC 1, 7 (11 Feb. 2004) (noting that the previous 1962 Independence Constitution of Uganda defined freedom of expression as the freedom to hold opinions and to receive and impart ideas and information without interference and that omission of this definition in the current Constitution did not alter the meaning or character of the freedom as previously drafted) (emphasis in original). In Obbo, the Court cited Article 9 of the African Charter for the proposition that Uganda, as a party to the Charter, had clearly undertaken to protect these fundamental informational rights. Id. (noting that the parties to the Charter guarantee that the right to access information is a fundamental and inalienable human right and an indispensible component of democracy) (citing Declaration of Principles on Freedom of Expression in Africa, Oct. 2002). Obbo thus demonstrates that Ugandas Constitutional guarantees of informational rights are coextensive with the rights guaranteed in Article 9 of the African Charter. Other African courts have joined Ugandas Supreme Court by citing the informational rights established by Article 9 of the African Charter. See, e.g., Laugh It Off Promotions CC v. SAB International (Finance) BV t/a Sabmark International and Another, 2005 (8) BCLR 743

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R&G DRAFT 6/7/2010 (CC), 2005 SACLR LEXIS 9, * 46 (RSA), ([F]reedom of expression is a vital incidence of dignity, equal worth and freedom. It carries its own inherent worth and serves a collection of other intertwined constitutional ends in an open and democratic society.); see also Islamic Unity Convention v. Independent Broadcasting Authority and Others, 2002 (5) BCLR 433 (CC); 2002 SACLR LEXIS 2, *33 (RSA) (South Africa is not alone in its recognition of the right to freedom of expression and its importance to a democratic society.). Notably, South African courts, having clearly affirmed the legal principles embodied in Article 9 of the African Charter, also presume a default of plenary access to government information, subject only to narrow exceptions. Confidentiality clauses in government contracts, for example, are given limited effect that does not prevent disclosure of terms and prices. See, e,g., Transnet Ltd. v. S.A. Metal Machinery Co. (PTY) Ltd., (147/2005) [2005] ZASCA 113 (29 Nov. 2005). As indicated in Part II.A supra, the same considerations articulated by South Africas Supreme Court of Appeal in Transnet support the finding that confidentiality clauses in oil production sharing agreements are of minimal effect. Uganda, as a party to the African Charter, clearly endorses and has undertaken to protect the informational rights articulated in Article 9. Public access to information is critically important when it relates to the use of natural resources that are held in trust by the State for the people of Uganda. Uganda Constitution objective XIII (The State shall protect important natural resources, including land, water, wetlands, minerals, oil, fauna and flora on behalf of the people of Uganda.); see also Chief Magistrates Ruling at 5, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010) (noting that I unreservedly agree with the notion that petroleum [is] a natural resource held by the Government in trust for the people of Uganda). Further, as discussed below, the presumption of access should be subject only to

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R&G DRAFT 6/7/2010 extremely narrowly tailored exceptions that are not relevant to virtually all of the oil production sharing agreements at issue. See Part X.Y, infra. The informational rights guaranteed by Article 9 of the African Charter and incorporated in Articles 4, 29 and 41 of the Ugandan Constitution clearly compel the disclosure of oil production sharing agreements regarding the use of natural resources that are held in trust for the people of Uganda. 2. The Fundamental Rights to Natural Resources Guaranteed by Article 21 of the African Charter on Human Peoples Rights Requires Disclosure of the PSAs

Article 21 of the African Charter provides, among other things, that the rights to the use and benefits of a countrys natural resources shall be exercised in the exclusive interests of the people. African Charter on Human and Peoples Rights art. 21(1). See also Uganda Constitution objective XIII (The State shall protect important natural resources, including land, water, wetlands, minerals, oil, fauna and flora on behalf of the people of Uganda.). Further, the African Charter requires that parties shall undertake to eliminate all forms of foreign exploitation, particularly that practiced by international monopolies so as to enable their peoples to fully benefit from the advantages derived from their natural resources. African Charter art. 21(5). This provision directly relates to the tragic paradox of plenty, where resource-rich nations often paradoxically experience drastic failures in growth and economic development. See JEFFREY D. SACHS & ANDREW M. WARNER, NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH (1997), available at http://www.cid.harvard.edu/ciddata/warner_files/ natresf5.pdf. Enabling citizens to fully benefit from the advantages derived from their natural resources demands that the people be involved in a transparent and meaningful process of discussion regarding the use of such natural resources. Failure to involve citizens in natural resource development has been found to be a direct violation of Article 21, as found by the

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R&G DRAFT 6/7/2010 African Commission on Human and Peoples Rights. Social & Economic Rights Action Center & Center for Economic & Social Rights v. Nigeria, Africa Commission on Human & Peoples Rights, Commn No. 155/96, 55-58 (2001) [hereinafter SERAC]. In SERAC, the African Commission considered the social and environmental devastation of land populated by the Ogoni people that resulted in part from the failure of the Nigerian government to engage the Ogoni people in negotiations over oil extraction contracts. Id. 1-9. The complaint in SERAC stated that the government of Nigeria did not require oil companies to consult communities before beginning operations, even if the operations pose direct threats to community or individual lands. Id. 6. Further, the complaint alleged that the Nigerian government refused to provide access to information about environmental impact and responded with protests about these refusals with violence and executions. Id. 4-5. Not only had the Nigerian Government failed to monitor or regulate the operations, in all their dealings with the Oil Companies, the government did not involve the Ogoni Communities in the decisions that affected the development of Ogoniland. Id. 55. After considering the evidence, the Commission found that the conduct of the Nigerian government was a violation of Article 21 of the African Charter on Human and Peoples Rights: Contrary to its Charter obligations and despite such clearly established international principles, the Nigerian Government has given the green light to private actors, and the oil Companies, in particular, to devastatingly affect the well-being of the Ogonis. By any measure of standards, its practice falls short of the minimum conduct expected of governments, and therefore is in violation of Article 21 of the African Charter.

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R&G DRAFT 6/7/2010 Id. 58; see also Justice C. Nwobike, The African Commission on Human and Peoples Rights and the Demystification of Second and Third Generation Rights under the African Charter: Social and Economic Rights Action (SERAC) and the Center for Economic and Social Rights (CESR) v. Nigeria, 1 AFR. J. LEGAL STUD. 129 (2005) (noting that signatories to the African Charter are obligated to respect, protect, and fulfill the rights guaranteed under the Charter, and that the non-inclusion of the Ogoni people in the oil exploitation process was undoubtedly contrary to Article 21 of the Charter). Yet another international legal body, the Inter-American Commission on Human Rights, has cited Article 21 of the African Charter in finding that the failure to openly engage citizen stakeholders and provide information about the contractual negotiation over oil extraction projects violated fundamental rights to natural resources. Maya Indigenous Communities of the Toledo District Belize, Inter-American Commission on Human Rights, Report No. 40/04, 149-50 & nn. 151, 154 (2004) (citing the Article 21 of the African Charter and the decision of the African Commission on Human and Peoples Rights for the proposition that government development activities must acknowledge, respect and protect the fundamental rights of citizens, such as rights to natural resources and land). Clearly, where immense risks of violations of human rights attend a failure to engage local stakeholders, there is no question that disclosure of agreements that embody these risks must be shared to the greatest possible degree with those citizens whose fundamental rights are at stake. See James Herron, Tullow, Heritage Face Tough Choices on Uganda Oil, INDEPENDENT, June 10, 2009, available at http://www.independent.co.ug/index.php/business/ business-news/54-business-news/1052-tullow-heritage-face-tough-choices-on-uganda-oil (noting that Ugandan citizens in the Lake Albert region are worried about the problems caused in

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R&G DRAFT 6/7/2010 Nigeria, Angola and Chad by the exploitation of oil resources and unchecked flows of petrodollars to governments with a reputation for corruption). Given that Article 21 of the African Charter is part and parcel of the Ugandan Constitution, see Uganda Law Society & Anor v. The Attorney General (Constitutional Petitions Nos. 2 & 8 of 2002) [2009] UGCC 1 (5 Feb. 2009), a failure to provide information about the oil production sharing agreements at issue to Ugandan citizens would surely mirror Nigerias violation of Article 21 and also offend the Ugandan Constitution. Nonetheless, Chief Magistrate Deo Johns ruling included a rather chilling statement that appeared to endorse this very kind of governmental secrecy: government business is not, in its entirety, supposed to be in the public domain. . . . What I believe is required of the public is for them to have the confidence that what their Government are [sic] doing is in the best interests of the people. Chief Magistrates Ruling at 6, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010). This paternalistic view not only evokes a frankly Orwellian dystopia, but it also directly contravenes the principles and rights in the African Charter and Ugandan Constitution that guarantee public access to information about government conduct. These rights exist as an essential check against a panoply of political ills, from mere governmental missteps to the insidious cancer of corruption, acts that thrive in the absence of public scrutiny. As the African Charter and the Constitutions of Uganda and countless other nations decree, citizens have the right to information so that they may evaluate freely and intelligently judge the merit of their representative government. B. International Case Law Holds that the Right to Information Overrides Confidentiality Clauses

By ordering the Government to disclose the PSAs, this Court would not only be adhering to Ugandan and international law, but it would be joining a growing list of countries that support access to information. Recent jurisprudence from countries whose freedom of information laws

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R&G DRAFT 6/7/2010 are similar to Ugandas has held that a confidentiality clause is not sufficient to prevent the release of government contracts under freedom of information laws. In the Chief Magistrates Court, the Attorney General relied upon section 28(1)(a) of Ugandas Access to Information Act, arguing that this provision creates an exemption from access to information rights if the disclosure of the record would constitute an action for breach of a duty of confidence owed to a third party in terms of an agreement. Chief Magistrates Ruling at 3, In re Access to Information Act, 2005, Misc. Cause No. 751 (Feb. 3, 2010). Section 28(1)(a) of the AIA is identical to section 37(1)(a) of South Africas Promotion of Access to Information Act. Moreover, the public interest override in section 34 of the AIA is also identical to section 46 of South Africas Act. It is therefore relevant that, in 2006, South Africas Supreme Court of Appeal considered the argument that a confidentiality clause included in a tender agreement should limit the governments right to disclose a contract under freedom of information laws. The South African court rejected this argument, saying that: the overriding consideration here is that the appellant, being an organ of the state, is bound by a constitutional obligation to conduct its operations transparently and accountably. Once it enters into a commercial agreement of a public character like the one in issue (disclosure of the details of which does not involve any risk, for example, to state security or the safety of the public) the imperative of transparency and accountability entitles members of the public, in whose interest an organ of state operates, to know what expenditure such an agreement entails. (Transnet at 46-47). The South African court explicitly considered the need for confidentiality when private companies bid on government contracts. The court found, however, that once the contract was awarded, the confidentiality clause, certainly in so far as the successful tenderer is

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R&G DRAFT 6/7/2010 concerned, was a spent force and offered Inter Waste no further protection from disclosure as regards its tender price. Ibid at 47. The court took this reasoning further, holding that the parties intention could never have been to maintain confidentiality in respect of the rates after the award. Parties cannot circumvent the terms of the Act by resorting to a confidentiality clause. Ibid at 48. The South African courts reasoning does not depend upon any partys desire to assert confidentiality over a government contract. Instead, the court finds that, regardless of their intent, it is not open to contractors or the government to override the public interest in freedom of information by including a confidentiality clause. Ibid. This decision is in line with both international values and with the stated purposes of the Act. Access to Information Act, 2005 3(b), (d). In its decision, the South African court relied on precedent from other international courts. Canadas Access to Information Act contains virtually identical language to Ugandas and South Africas. The Canadian Act instructs the Canadian government to withhold information that is supplied in confidence to a government institution by a third party and is treated consistently in a confidential manner by the third party. Access to Information Act 20(1)(b). Canadas public interest override provision also parallels Ugandas, permitting disclosure of information where the public interest in disclosure clearly outweighs in importance any financial loss or gain to a third party, any prejudice to its competitive position or any interference with its contractual or other negotiations. Access to Information Act 20(6) (b). The Federal Court of Appeal for Canada applied these provisions of the Canadian Act in an application to disclose the amount of rent being paid by a government agency to the

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R&G DRAFT 6/7/2010 proprietors of an office building, and the option price at which the government could purchase the building. Minister of Public Works v. High Rise 2004 Fed. Ct. Appeal LEXIS 81. In its analysis, the court examined the stated purposes of the Canadian Act. Section 2(1) explains [t]he purpose of this Act is to extend the present laws of Canada to provide a right of access to information ... in accordance with principles that government information should be available to the public, that necessary exemptions to the right of access should be limited and specific. Access to Information Act 2(1). The Canadian court considered whether the parties to the contract could have a reasonable expectation that the terms of the contract would be kept confidential, and whether keeping the information confidential would conform with the requirements of the Act. High Rise at para 32. The court answered both questions in the negative. On the first point, the court found that the publics right to know how government spends public funds as a means of holding government accountable for its expenditures is a fundamental notion of government that is known to all. Id at 20. Similarly, in Coradix Technology Consulting Ltd. v. Canada (Minister of Public Works and Government Services), the Federal Court held that a potential bidder to a government contract knows, or should know that their bidding documents will not remain insulated from the governments obligation to disclose as part of its accountability for the expenditure of public funds. (at para 23, citing to Canada Post Corp. v. Canada (Minister of Public Works and Government Services at para 40). It was therefore impossible for the proprietor to reasonably expect that the rate of rent paid to it would remain confidential. On the second point, the court found that there are good reasons for maintaining confidentiality during the bidding process but different considerations arise once the contract is awarded and public funds are committed to it. Absent special circumstances (national security

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R&G DRAFT 6/7/2010 comes to mind), I fail to see how public benefit could be fostered by maintaining the confidentiality of amounts paid or payable by government pursuant to contractual obligations with third parties. High Rise at 20 [emphasis added]; the court also cited to Societe Gamma v. Canada. In this case, the Attorney General has cited no special circumstances that would justify limiting the right to information. Disclosure would not present a risk to national security. Moreover, since international jurisprudence from economically advanced countries demands disclosure of government contracts, disclosure will not interfere with Ugandas economic progress, but rather accelerate it. Like their South African counterparts, Canadian courts recognize the mere existence of a confidentiality clause is not sufficient to shield government contracts from the people they should benefit. In order to be enforceable, the clause must be accompanied by good reasons to prevent disclosure. In a bidding context, the need for confidentiality is clear. Both Canadian and South African courts have recognized, however, that once a bid is accepted, this reason is moot. High Rise at 20; Transnet at 9. Since there are no compelling reasons to protect the terms of a successful bid, the public interest in disclosure overrides any confidentiality clause. IV. REBUTTALS OF OTHER ARGUMENTS AGAINST DISCLOSURE In addition to the implicit arguments against disclosure that are present in the exemptions of FOI laws, governments and industry offer at least two additional arguments in favor of keeping PSAs confidential. First, government and companies are concerned that disclosing PSAs will negatively affect their respective bargaining power by either (i) forcing a race to the bottom by pressuring governments to agree to more lenient terms, either with respect to regulatory standards or by making concessions, than other countries, or (ii) forcing a race to the top by requiring companies to agree to more favorable terms than their competitors as a result

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R&G DRAFT 6/7/2010 of disclosed contracts negotiated with other countries. Id. at 43. Second, both parties are concerned that disclosure will open them up to criticism from certain constituents, even when the terms of the contract are reasonable, resulting in calls for renegotiation. Id. at 42. These arguments continue to gain momentum because they have not been carefully scrutinized. Despite any merit to these arguments, however, they do not outweigh the publics right and need to access government information on the disposition of public resources. A. Due to Widespread Disclosure of PSAs, Disclosing Additional PSAs Will Not Lead to a Race to the Bottom or to the Top

The Chief Magistrate is concerned that adopting a policy of disclosing PSAs may deter companies from investing in Uganda. See In the Matter of the Minerals Act, Misc. Cause No. 751, at 6 (2009) ([I]t serves better to consider the possibility of a withdrawal by the prospecting companies upon any disclosure and what this could mean for the nation.). This concern has been reinforced because companies claim that disclosing terms such as tax structures and royalty rates along with project-level production and payment data may result in competitors being able to discern their cost structure and pricing strategy. Id. A culture of disclosure will therefore result in a race to the top, meaning that companies will be forced to offer better terms than their competitors in the future. Contracts, 43. Furthermore, if such disclosure is made only sporadically, companies argue, then companies investing in states that do not disclose PSAs will have an advantage over those companies that invest in states that do disclose. Id. In contrast, governments are concerned that a culture of disclosing PSAs will result in increased pressure from companies to lower regulatory standards to attract more investors than other countries, i.e., it will create a race to the bottom. Contracts, at 43. Alternatively, governments may feel the need to increase concessionary terms, either in future contracts or through renegotiations, such as tax holidays and lower tax rates. The government of Ghana, for

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R&G DRAFT 6/7/2010 example, has stated that it fears companies reactions if it adopts a policy of disclosure. Contracts, at 44. These fears are based on the notion that new information from PSA disclosure will affect the bargaining process by giving the other party more leverage. Both governments and companies concerns are unjustified for two reasons. First, as has been shown, the majority of the terms in PSAs are known and already factored into the negotiating process. According to the International Monetary Fund, despite the claim that disclosure would erode bargaining power, contract terms are likely to be widely known within the industry soon after signing. Little by way of strategic advantage thus seems to be lost through publication of contracts. Contracts, at 55; IMF Guide on Resource Revenue Transparency (2007). Thus, the number of PSAs that have been disclosed provides both governments and companies with sufficient information to maximize their bargaining positions. Id. at 43 (the wide availability of contracts for purchase within the industry indicates that most competitors, transparent or not, are already the best informed). Second, assuming that PSA terms are not widely available, states still retain considerable bargaining power. The finite and location-specific supply of natural resources gives governments inherent bargaining power that will prevent any race to the bottom. This is supported by the fact that companies continue to operate and seek opportunities even in states have a policy of transparency. For example, Congo-Brazzaville, Ecuador, Liberia, Peru, and Timor Leste all have public disclosure polices, and each of these countries continues to attract significant extractive and explorative business. In the Democratic Republic of Congo, many companies pushed back against the governments effort to disclose contracts, resulting in the government not disclosing certain companies contracts. CITE. With respect to those companies whose PSAs were disclosed, however, no operational deficiencies occurred and the

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R&G DRAFT 6/7/2010 companies made no legal threats against the DRC. Id. at 50. Also, companies doing business in Peru, a country that also has a policy of disclosure, acknowledge that disclosure is a part of doing business in Peru, but it has not affected companies operations. Id. at 51. These examples illustrate that, despite companies having significant bargaining power, the resources they seek have a finite supply and are generally location specific, which gives governments substantial bargaining power with which to negotiate. Given that companies have limited options with respect to natural resources, increased transparency may even provide states with greater leverage in negotiations, as increased accountability to the people may put more pressure on companies to grant more favorable terms to the state. For example, after the Mittal Steel controversy in Liberia, the government used public discontent with confidentiality clauses as a bargaining chip in later negotiations. Contracts, at 52. If states and companies know that they will be held accountable to the people, then PSAs will become fairer and satisfy a larger number of interests. With respect to the concern that those countries who disclose will be at a disadvantage to those that do not, arguments warning of disparities between transparent and non-transparent companies only further support consistent application of transparency rules. . . . It is unlikely that contract transparency will result in a race to the bottom; nor will it provide a windfall to governments. The most likely long-term outcome is contracts that fall within a flexible and reasonable rate of return for both parties being less susceptible to renegotiation, an outcome that is desirable for serious investors, governments, and citizens. Id. at 43. B. Renegotiations Could be a Positive Result of Disclosure

Governments and companies are concerned that disclosing PSAs will result in criticism of the terms of the contracts and create political pressure to renegotiate the contract. A contract

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R&G DRAFT 6/7/2010 will rarely satisfy all interested groups, which may result in minority constituencies pressuring the government to renegotiate an otherwise reasonable contract, which can be costly and cause negative short-term market reactions. Id. at 42. Indeed, with respect to the BTC pipeline, over 60 regional and international NGOs protested the pipeline, adding significant pressure to the project. Contracts, at 44. Furthermore, changed circumstances may make what were once reasonable terms appear unreasonable. Id. Although transparency may create some incentives to renegotiate, the impact is minimal and often results in stronger and more durable contracts for both sides. Natural resource contracts are already some of the most unstable and renegotiated foreign direct investment contracts largely due to corruption and unaccountability to the people. PSAs are often made during times of war or transitional governments, meaning that the government that originally contracts with a company may not be accountable to the people. National campaigns in Liberia, for example, brought to light opaque contracts agreed to during periods of protracted war and hesitant transitions, which were largely unfavorable to the state of the Liberia. Id. at 52. Foreign investors in infrastructure and extractive industries are among the most widely accused of bribery and corruption. In the oil and mineral sectors, potential revenues that might be dedicated to host country development frequently go unaccounted for. . . . Across all types of FDI, contracts and concessions to foreigners in natural resources and infrastructure have proven to be the most unstable. As a result, foreign firmsto protect themselves before they make large sunk investments have been demanding new and greater kinds of international and multilateral contract protection, shifting new and often unanticipated risks onto host authorities. Theodore Moran, Harnessing Foreign Direct Investment: Policies for Developed and Developing Countries 76 (2006). Unfavorable circumstances surrounding the initial negotiations

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R&G DRAFT 6/7/2010 may make renegotiation desirable. In such a case, transparency puts necessary pressure on both parties to agree to fair terms. Given the numerous benefits to disclosing PSAs, trying to prevent renegotiation by not disclosing unfair contracts regarding public goods does a disservice to Uganda. In addition, despite any initial costs associated with renegotiation, participation by a wider range of constituents will result in more equitable and durable contracts in the long run. For example, the aftermath of the BTC pipeline, which resulted in BP disclosing the contracts, was that the contract satisfied a larger base of constituents. Id. at 44. Making PSAs more transparent will encourage both companies and governments to agree to more equitable and more stable contracts in the first place.

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