São Tomé and Príncipe Enacts oil revenue management law

On Dec. 29, 2004, President Fradrique de Menezes signed a law that establishes a new international standard for transparency and control of oil revenues. The law, adopted unanimously by the National Assembly, governs the receipt, investment, and use by São Tomé and Príncipe of oil payments to best promote the economic and social progress of the country.

It provides for the establishment of an oil fund to be held by an international custodial bank into which all oil payments are to be made. The law limits the amount of annual withdrawals from the fund and restricts expenditures to national development, poverty reduction, and strengthening of good governance. A portion of the monies paid into the fund will be retained to create a permanent reserve to foster development even after oil resources have been exhausted.

The activities of the fund are to be fully transparent with public access to all information regarding payments into and out of the fund, as well as the holdings of the fund. In addition, the law provides for all oil related contracts to be subject to public tender and to be made public. It also prescribes severe penalties for violations.

As an innovation, all of this information including information about the fund is to be available to the general public through Web access as well as through a new public information office. The law mandates certain public integrity and compliance-related contractual provisions, creates a rule against conflicts of interests, and requires internal and external audits of the oil fund.

At the signing, President de Menezes said, "Nothing will be hidden, nothing will be wasted."

Arlindo Carvalho, the Minister of Natural Resources and Environment added, "This law will permit us to manage our petroleum resources in a sustainable way so that not only the current generation, but also future generations, will benefit."

A team of experts from the Earth Institute and Hogan & Hartson LLP, working pro bono, assisted São Tomé and Príncipe in its year-long effort to develop and enact the new law.

"All too often oil resources have been misused. This law, by creating new standards of transparency and accountability, can help São Tomé and Príncipe avoid the pitfalls of being an oil exporter and ensure that its potential oil resources are used for sustainable economic development benefiting the people of São Tomé and Príncipe. I congratulate President de Menezes and the National Assembly on this effort. It will certainly become a model for others," said Jeffrey D. Sachs, Director of the Earth Institute at Columbia University.

The law incorporates the transparency principles adopted by President de Menezes and President Obasanjo of Nigeria in the Abuja Joint Declaration, issued in July 2004, which among other things requires public disclosure of receipts from oil companies in unprecedented detail. It also creates a new Public Oversight Committee that includes representatives of civil society to monitor the government's implementation of the law.

1/7/05