Beneficial ownership transparency in Armenia: scoping study

The Context for Reform

Armenia offers a promising political and technical context for advancing BOT reform. This is partly thanks to the centrality of the anti-corruption agenda to the political programme of Prime Minister Nikol Pashinyan and his My Step Alliance party, which came to power following the “Velvet Revolution” in 2018. Pashinyan led the peaceful protests that precipitated the resignation of then Prime Minister Serzh Sargsyan during the revolution, and his party subsequently won a solid legislative majority at elections in December 2018.

The Pashinyan government’s efforts to promote greater transparency over who owns Armenia’s companies have occurred within a broader agenda to foster an “economic revolution” by improving the business environment, fighting corruption, and bolstering the rule of law. It was these aims that led the country to include a commitment to publish information on the BO of companies, along with a number of related reforms, in its OGP National Action Plan for 2018-2020. The government has pursued a commitment to publish BO data for the mining sector that was originally assumed when the country became an EITI member country in March 2017. Under Pashinyan’s administration, the metal mining sector has become the first to be covered by BO disclosure regulations. The industry represents just over 3% of the country’s annual GDP, [4] and under the previous government has been associated with allegations of large-scale corruption.

The cause of BOT in the mining sector has been enthusiastically taken up by civil society organisations involved in campaigns linked to proposed extractive developments, such as the controversial USD480 million Amulsar project. This development has been the subject of a prolonged blockade by demonstrators who fear its potential environmental impact on nearby water supplies and the tourist site at Jermuk. Environmental NGOs, opposed to certain mining projects, have been a key source of ongoing pressure on the government, to advance the reforms, and on the firms to disclose their BO data. Their keen interest in the topic has also led to a number of analysis pieces being published about the mining sector disclosures within days of their publication in April 2020.[5]

CSO engagement with the process has been actively promoted by Armenia’s government. In developing its BO disclosure procedures for the mining sector pilot, Armenia has engaged extensively with a wide variety of stakeholders, including civil society organisations, media representatives, and the private sector, especially via the EITI MultiStakeholder Group (MSG). Such work is commendable, and has helped facilitate buy-in to complex policy choices, including over disclosure threshold levels, which entities are required to declare and for which persons’ information is required. Communication and engagement with stakeholders over the regulations has been facilitated by the development of visual exercises and diagrams to define and explain the precise scope of disclosure requirements; an area of work for which OO has provided significant technical support (see Sufficient detail section below). The expansion of these consultation efforts to include a range of other actors and agencies within the country’s anti-money laundering (AML) system will be key as the country introduces BO disclosure requirements across the rest of the economy.

Outside of the government’s direct efforts to advance BOT, some of its policy reforms in other areas are expected to have indirect advantages for improving transparency over who owns Armenia’s companies. Specifically, a move to expand and upgrade e-government services, primarily with a view to improving citizens’ access to government services via digital platforms, is likely to assist with the eventual verification of submitted BO data. The e-government agenda involves creating common standards and a data interoperability framework that will allow the gradual synchronisation or sharing of information across the various different systems and registries run by government agencies. This work is also a high priority area of action; the Prime Minister’s Office directly supervises the work of Ekeng, the e-Governance infrastructure implementation agency that has responsibility for ensuring the interoperability of government services, and provides cloud-based services to government agencies. This increased interoperability of government systems will later enable the kind of automatic checks that form a vital part of ensuring that submitted BO data reflects a true and up-to-date reality of who owns local companies.[6]

Collectively, these factors mean that Armenia offers a favourable context for advancing BO reform and this has been reflected by the rapid progress the country has made towards this goal. High-level political commitment, alongside intense civil society scrutiny, has translated effectively into concrete and concerted action at the institutional level to advance BOT. During OO’s work with the implementing agencies for the disclosures pilot for the extractive firms (the Ministry of Justice, State Registry, EITI, Ministry for Territorial Administration and Infrastructure), we have found that the agencies all view the work as a priority task and have dedicated significant resources and staff time to further its implementation. As the country moves towards economy-wide disclosure requirements – applying to approximately 60,000 firms rather than a few dozen extractives companies – Armenia will need to expand staff time and resources dedicated to the reform effort to ensure that its rapid progress can be maintained. Amid the evolving challenges associated with the country’s response to the COVID-19 pandemic, resourcing during the next stage of implementation may become more of a concern.

Footnotes

[4] EITI, “EITI Armenia”. 17 July 2020. Available at: https://eiti.org/armenia [Accessed 6 August 2020].

[5] Example articles include: Trace, “The undisclosed owners of Armenia’s gold mines”. 10 May 2020. Available at: https://hetq.am/hy/article/116955 [Accessed 14 May 2020]; and Ecolur, “Revealed Real Owners of Metallic Mining Companies in Armenia - Part 1: ZCMC”. 7 May 2020. Available at: http://ecolur.org/hy/news/mining/---1-/12367/?fbclid=IwAR03ernq0FS6Iyb4JrFIl884YC-m14wU1bYFyYxdHNjPL5YvzsDnKKyaxQg [Accessed 14 May 2020].

[6] For more information on how governments can verify submitted BO data, please see Open Ownership’s May 2020 policy briefing on verification: https://www.openownership.org/uploads/OpenOwnership%20Verification%20Briefing.pdf.

Next page: Armenia’s BO Disclosure Regime