The current legal debate over draft rules on public country-by-country (CBC) reporting has been overshadowed by changes in the legislation at the Council of the EU. NGO Transparency International published an analysis a few days ago, about these changes made by the member states at this stage.
The NGO criticises the Dutch suggestion, which it seems the Slovak Presidency of the Council took up at the end of December, of including a comply-or-explain clause for non-EU multinationals. According to the Dutch proposal, non-EU headquartered companies with subsidiaries or branches in the EU, when filing their CBC reports, would be allowed to say that they can’t disclose information from their parent companies based outside of the EU, but have to explain why.
‘A common concern regarding public CBCR for companies’ operations in all countries is that EU subsidiaries of non-EU multinationals won’t be able to force their parent companies headquartered outside of the EU to disclose their CBC data, making the enforcement of the legislation cumbersome,’ explains Transparency International, adding: ‘This is the official reason for having proposed public CBCR legislation only for multinationals’ operations in the EU and in tax havens. What this means is that for the rest of the world, companies would only be required to publish a global figure.’
The Dutch therefore suggested, in response to the question of extra-territoriality, to include a comply-or-explain clause for foreign multinationals. The NGO says that this is a step in the right direction as it makes it possible to ‘move towards more comprehensive reporting’ in terms of geographical coverage. But the clause was included without extending the duty of reporting to outside the EU, points out Transparency International, explaining that this means that it would allow multinationals to avoid reporting for operations in extra-EU tax havens.
Another clause added to the legislation would allow companies to withhold information “when its nature is such that it would be seriously prejudicial to the commercial position of the undertaking.” However, it is not specified what would be considered as prejudicial. (Original version in French by Élodie Lamer)