In this month's article, we discuss the key provisions of the New Petroleum Regulations on the Corporate Integrity Pledge. The Regulations require all licence holders and contractors undertaking petroleum or gas activities to comply with the integrity pledge.
The Regulations are made under section 223(3) of the Petroleum Act No.21 of 2015 (the Act). The Regulations entered into force on 1 November 2019, following their publication in the Government Gazette of the same date (Government notice number 782 of 2019).
Corporate Integrity Pledge is defined in the Regulations as a formal, unilateral and concrete expression of commitment by contractors, sub-contractors, licensee or any other person conducting petroleum operations to uphold corporate anti-corruption principles, abide by ethical business practices, support a national campaign on ethics and war against corruption.
Covered persons are:
- all owners who are natural persons (other than shareholders who have an ownership interest of less than 5% and acquired the ownership interest through public trading); and
- all officers, directors and employees of the contractor, sub-contractor or licensee with responsibilities relating to petroleum activities and operations.
The Regulations govern corporate integrity pledge programmes related to upstream, midstream and downstream activities in Mainland Tanzania and Zanzibar, and are enforced by the Petroleum Upstream Regulatory Authority (PURA) and the Energy and Water Utilities Regulatory Authority (EWURA).
The corporate integrity pledge
The objectives of the corporate integrity pledge are to:
- ensure that the corporate community promotes integrity, accountability and proper management of anti-corruption programmes;
- ensure that companies reinforce corporate governance, integrity, transparency and accountability in their daily operational processes and procedures;
- facilitate companies putting in place effective preventive measures against corrupt and unethical practices;
- ensure companies have adequate insurance cover against any loss, injury or damage to the environment, community, any individual or property in the course of a company carrying out petroleum operations; and
- complement the Prevention and Combating of Corruption Bureau's (PCCB) efforts to promote best business practice in Tanzania.
On the basis of the above, those conducting petroleum operations must adhere to the following corporate integrity principles, namely to:
- prohibit bribery and corruption of any form in any place of business and all business relationships;
- ensure compliance with the code of ethics;
- strengthen internal systems by developing anti-corruption programmes, training, awareness campaigns and education, risk free reporting channels and a whistle blowing system;
- comply with all laws, policies and procedures relating to anti-corruption, including the avoidance of conflicts of interest, abuse of power and misconduct;
- support the corruption prevention initiatives of the Government of Tanzania; and
- refrain from dealing with un-ethical companies.
Obligations of contractors, sub-contractors, licensees or any other persons conducting petroleum operations
The above named parties are obligated to:
- make their corporate integrity pledge available on their website;
- establish and maintain a compliance programme throughout the term of the licence, that complies with the best international petroleum industry practices and requirements of the Government of Tanzania;
- train new members of their Board of Directors and applicable persons on the relevant policies and procedures;
- fill and submit a corporate integrity pledge checklist, including their policy, implementation plan and monitoring and review procedures, in accordance with the First Schedule of the Regulations;
- sign a corporate integrity pledge form as set out in the Second Schedule of the Regulations;
- ensure that any person engaged to undertake any activity connected to petroleum operations complies with the corporate integrity pledge requirements;
- submit to PURA or EWURA an annual integrity pledge performance report;
- submit to PURA or EWURA a programme to manage and foster a culture of high integrity among their employees;
- engage an Independent Review Organization (IRO) i.e. an accounting, auditing or consulting firm to assess and verify their reporting documents, submit the same in accordance to the Fourth Schedule of the Regulations, and perform such other responsibilities as provided in the Third Schedule of the Regulations;
- appoint a Chief Compliance Officer, and inform PURA or EWURA in writing of any changes to the composition of the Board or Committee responsible for ensuring compliance with the Regulations, within fourteen (14) days; and
- develop, implement, distribute and periodically review a written code of conduct.
Submitting a corporate integrity pledge performance report
Within forty five (45) days of the anniversary of a contractor, sub-contractor or licensee's commencement of its petroleum operations (the Reporting Period) it must submit to PURA or EWURA an annual integrity pledge performance report covering all its projects and activities for the Reporting Period.
The annual integrity pledge performance report shall be in a format prescribed by PURA or EWURA and shall include:
- a detailed description of any systems used to track and respond to requests for information;
- recommendations to improve any of the systems, policies, processes or procedures relating to the reviewed policies and procedures;
- a description of the documentation, including policies reviewed and personnel interviewed; and
- indicative findings and supporting rationale regarding any weaknesses in the systems, processes, policies and procedures relating to the reviewed policies and procedures.
PURA and EWURA aim to assess each corporate integrity pledge performance report within sixty (60) working days.
Powers and functions of PURA or EWURA
PURA and or EWURA have the following powers and functions, namely to:
- enforce the corporate integrity pledge, in accordance with the Act and these Regulations, PURA or EWURA may:
summon any person to submit or provide information deemed necessary in the course of discharging its duties; and
suspend or revoke any licence for a failure to comply with the requirements of the Regulations.
access facilities, documents and information for the purpose of assessing and verifying the corporate integrity pledge information provided.
require a contractor, sub-contractor or licensee to engage an IRO within ninety (90) working days of the Regulations entering into force.
review the corporate integrity programmes in relation to petroleum operations and ensure compliance with the corporate integrity pledge requirements.
inform relevant entity of the outcome of the assessment or review of the corporate integrity programmes within thirty (30) working days of receipt.
initiate an investigation into the activity of a contractor, sub-contractor or licensee, when required.
Board of directors and the Chief Compliance Officer obligations
The Board of Directors of a contractor, sub-contractor, or licensee shall be responsible for:
- compliance with the Regulations;
- making reasonable inquiries into the operations of their organisation's compliance programme; and
- pass a board resolution with regard to the effectiveness of the compliance programme relative to the best international petroleum industry practices, the policies of the Government of Tanzania (implemented from time to time) and the obligations and requirements of the corporate integrity programme.
The Chief Compliance Officer appointed by the contractor, sub-contractor or licensee must:
- develop and implement policies, procedures and practices designed to ensure compliance with the Regulations;
- monitor day-to-day compliance with the Regulations;
- report directly to their Chief Executive Officer; and
- make quarterly reports regarding compliance with the Regulations directly to their Board of Directors.
Breach and Default
It is worth noting that a failure to comply with the Regulations by a contractor, sub-contractor or licensee will amount to a breach of the conditions of their respective licence or permission to engage in petroleum operations (as a regulated activity), resulting in its withdrawal or cancellation, whereby the Government of Tanzania will be entitled to take over operations as provided for under the Act.
The specific penalties for each of the offences outlined in the Regulations are set out below:
|Failure to comply with an obligation under the Regulations||5 million Tanzanian Shillings accruing from the date that the obligation became due.|
|Failure to meet the deadline for submitting the implementation report or annual reports to PURA or EWURA||5 million Tanzanian Shillings accruing from the date that the obligation became due.|
|Failure to submit an IRO review report||5 million Tanzanian Shillings accruing from the date that the obligation became due.|
|Failure to grant access as required||3 million Tanzanian Shillings accruing from the date that the person failed to grant access.|
|False certification on implementation report, annual report or additional documentation to a report requested by PURA or EWURA||10 million Tanzanian Shillings for each false certification submitted by or on behalf of the person.|
|Failure to comply fully and adequately with any obligation of the Regulations||2 million Tanzanian Shillings accruing from fourteen (14) working days after the person receives a notice of non-compliance from PURA or EWURA.|
|Contravening any provision of the Regulations, where no specific penalty is prescribed.||A fine of not less than 10 million Tanzanian Shillings.|
||100 million Tanzanian Shillings and a further 5% for each accruing day.|
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.