The EITI Board agreed that Armenia has made satisfactory progress in implementing the 2016 EITI Standard.

Outcome of the Validation of Armenia.

Decision reference: 2020-39 / BC-292
Decision basis: EITI Articles of Association 2019-2021, Article 12.1. ix)

9 July 2020

Board decision

The Board came to the following decision:

Following the conclusion of Armenia’s Validation, the EITI Board agrees that Armenia has made satisfactory progress overall in implementing the 2016 EITI Standard.

The Board commends the Government of Armenia and the Multi-Stakeholder Group (MSG) for the exemplary progress in implementing the EITI Standard and for the country’s efforts to expand the scope of EITI reporting to issues of national concern. The Board also notes that the EITI process is robustly embedded in the broader transparency and reform agenda of the mining sector in Armenia. Moreover, the EITI has helped to contribute to a new culture of dialogue in the country by encouraging cooperation between different constituencies and providing input to mining sector reforms.

At the same time, the Board recognises that the broader environment for EITI implementation remains challenging due to opposition to mining, related to the sector’s potential environmental and social impacts. Therefore, the Board stresses the importance of ensuring continued stakeholder engagement and continued use of the EITI as a platform for discussion of topics of particular relevance for Armenia.

The Board also highlights Armenia’s steps to transition to systematic disclosures, including routine disclosures of metal mining contracts and the country’s commitment to establish a beneficial ownership register. The Board encourages further actions on ensuring routine company and government disclosers of extractives data, as well as further work on increasing use of EITI data.

The Board recognises the MSG’s efforts aimed at addressing requirements related to subnational transfers, covering transfers of environmental payments from the state budget to affected communities, and social expenditures. The Board encourages Armenia to continue the ongoing reforms related to subnational transfers in order to ensure systematic and sustainable disclosure of environmental payments.

The Board encourages Armenia to consider strategic recommendations in the Secretariat’s initial assessment and the Validator’s report and welcomes the country’s efforts to go beyond the EITI Standard in order to ensure that EITI activities remain embedded in the national priorities.

The Board has determined that Armenia will be re-Validated in three years, i.e. on 9 July 2023.

Corrective actions and strategic recommendations

The government and the MSG are encouraged to consider the recommendations in the Validation Report and the International Secretariat’s initial assessment that could help Armenia make ever greater use of the EITI as an instrument to support reforms, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

Armenia joined the EITI in March 2017. The first Validation commenced on 9 September 2019. In accordance with the Validation procedures, an initial assessment [English | Armenian] was prepared by the International Secretariat. The draft Validation report [English | Armenian] was submitted to the MSG for comments on 9 April 2020. Due to the Covid-19 outbreak, the MSG requested to extend the deadline for comments. The MSG’s comments [English] were received on 14 May 2020. The comments include new information related to environmental payments (Requirement 5.2) and social expenditures (Requirement 6.1) that was disclosed after the commencement of the Validation.

The Independent Validator reviewed the comments and responded to the MSG, before finalising the Validation report [English | Armenian].

The Validation Committee reviewed the following information disclosed after the commencement of the Validation:

Requirement 5.2: The Validation Committee considers the information provided by the MSG to meet the criteria for considering developments after the commencement of Validation. The new information (1) has the support of the MSG, (2) is specific and verifiable, (3) has potential to materially impact the assessment of the requirement, and (4) was presented in a reasonable timeframe. By agreeing to include all subnational transfers related to environmental payments by metal mining companies in the scope of EITI reporting, the MSG has de facto considered these payments to be material, with a materiality threshold of zero. In line with the proposed corrective action, Armenia has disclosed the basis for calculating the total amount of environmental payments to be redistributed to communities and the resulting amounts by year for 2016-2019 (here – columns R and S). Armenia has also disclosed the proportions reserved for each community (2016, 2017, 2018, 2019). The total amounts assigned for each community, the actual transfers and discrepancies are summarised in a table (here). All of the links above reference documents that are available on the Armenia EITI website. The Validation’s Committee view is that progress on Requirement 5.2 can be considered ‘satisfactory’ if the information published after the commencement of Validation is taken into account.
Requirement 6.1: The Validation Committee considers the information provided by the MSG to meet the criteria for considering developments after the commencement of Validation. The new information (1) has the support of the MSG, (2) is specific and verifiable, (3) has potential to materially impact the assessment of the requirement, and (4) was presented in a reasonable timeframe. By agreeing to include all mandatory social payments by metal mining companies in the scope of EITI implementation, the MSG has de facto agreed that all these expenditures are material, with a materiality threshold of zero. In line with the proposed corrective action, Armenia has disclosed the nature of in-kind social expenditures and information about third-party beneficiaries by year for 2016-2018 (here). This information includes both disclosures by companies and by beneficiary communities. The Validation Committee’s view is that progress on Requirement 6.1 can be considered ‘satisfactory’ if the information published after the commencement of Validation is taken into account.

The Validation Committee reviewed the case on 24 June 2020. Based on the findings above, the Validation Committee agreed to recommend the assessment card outlined below.

The Committee also agreed to recommend an overall assessment of "satisfactory progress" in implementing the 2016 EITI Standard. Requirement 8.3.b of the 2016 EITI Standard states that:

Where Validation verifies that a country has made satisfactory progress on all of the requirements, the EITI Board will designate that country as EITI compliant.

EITI compliant countries must maintain adherence to the EITI Principles and Requirements in order to retain Compliant status.

Assessment of EITI requirements

Not met
Partly met
Mostly met
Fully met
Exceeded

Scorecard by requirement View more	Assessment View more
Overall Progress
MSG oversight
1.1Government engagement
Analysis of MSG meeting minutes and stakeholder consultations confirmed that the government is fully, actively and effectively engaged in the EITI process.
1.2Company engagement
Metal mining companies are fully, actively and effectively engaged in the EITI process. In addition, the government has ensured an enabling environment for company participation by adopting the legislation on mandatory EITI reporting starting from 2017 fiscal year.
1.3Civil society engagement
The government has ensured an enabling environment for civil society and civil society is fully, actively and effectively engaged in all aspects of EITI implementation in Armenia. Stakeholders, including but not limited to members of the MSG, are able to freely express their opinions on transparency and natural resource governance issues, are substantially engaged in the design, implementation, monitoring and evaluation of the EITI process, and have the right to communicate and cooperate with each other.
1.4MSG governance
The MSG has been established to oversee the implementation of the EITI and all constituencies are actively and equally engaged in the EITI process. The invitation to participate in the group was open and transparent, and all constituencies are adequately represented. Clear MSG Terms of Reference were agreed after the establishment of the MSG and are followed in practice.
1.5Work plan
The publicly-accessible Armenia EITI work plans covering 2017-2018 and 2019-2020 reflect the national priorities and provide measurable and time-bound activities. In addition, according to Requirement 1.5.a, the country has gone beyond the minimum requirements by ensuring that national priorities and the work plan extend EITI implementation to responsible mining.
Licenses and contracts
2.2License allocations
Information about the permits for exploration and production awarded in 2016 and 2017 is publicly available. Moreover, the permit register includes historic data starting from 2012. The process for awarding and transferring licenses as well as applicable technical and financial criteria are well described, and no significant non-trivial deviations were noted beyond delays in the permitting process.
2.3License register
All information listed under Requirement 2.3 is publicly available for metal mining exploration and production permits.
2.4Policy on contract disclosure
The EITI Report as well as the legislative and scoping studies provide a detailed review of the relevant legislation and conclude that there is some degree of ambiguity with regard to what information can be considered a commercial secret. Prior to the deadline set by the 2019 EITI Standard, Armenia has systematically disclosed all production metal mining contracts.
2.1Legal framework
In accordance with Requirement 2.1.a, Armenia has comprehensively disclosed all required information related to the fiscal regime and information on the roles and responsibilities of the relevant government agencies. In addition, in accordance with Requirement 2.1.b, Armenia has gone beyond the minimum requirements in the comprehensiveness of its overview of anticipated reforms.
2.5Beneficial ownership
The Validation of Requirement 2.5 in 2021 focused only on assessing the country’s progress in meeting the initial criteria. Armenia has leveraged the EITI to pilot disclosures in the extractive sector. Beneficial ownership data has been requested from all extractive companies, and first disclosures have been published online in PDF format. Beneficial ownership disclosures cover all extractive companies holding or applying for a mining permit.
2.6State participation	Not applicable
This requirement is not applicable in Armenia in the years under review.
Monitoring production
3.1Exploration data
The EITI Report provides a detailed overview of the extractive industries, including any significant exploration activities.
3.2Production data
The EITI Report provides a comprehensive overview of production data reported by the companies and publicly available on government websites. The 2016-2017 EITI Report notes the limitations related to the level of disaggregation of government production data for precious metals. At the same time, the report provides comprehensively disaggregated information as reported by companies.
3.3Export data
The EITI Report provides export volumes and values for all major minerals exported. The report also provides an overview of data provided by different sources of information, is transparent about the limitations of official export data and comments on the possible reasons for differences.
Revenue collection
4.3Barter agreements	Not applicable
This requirement is not applicable in Armenia in the years under review.
4.6Direct subnational payments
The MSG established that rent payments from companies to subnational government entities are material and ensured that these payments and the receipt of these payments are disclosed and reconciled in the EITI Report.
4.7Disaggregation
The EITI data is presented by an individual company, government entity and revenue stream, albeit not consistently by project.
4.9Data quality
Reconciliation was undertaken by a credible Independent Administrator, whose appointment was endorsed by the MSG. The IA’s ToRs for the 2016-2017 EITI Report followed the standard template and was approved by the MSG. Data quality assurances are described in the 2016-2017 EITI Report, and they were followed by the reporting entities. The report includes the IA’s assessment of the reliability of data.
4.1Comprehensiveness
The MSG’s decision on material revenue streams and material companies is clearly justified and resulted in comprehensive disclosures. In addition, the online portal includes disclosures from all metal mining companies disaggregated by company and by revenue stream. Corresponding data is disclosed by the government. Although this data is not reconciled, the disclosures are exceptionally comprehensive and backed by legislation.
4.2In-kind revenues	Not applicable
This requirement is not applicable in Armenia in the years under review.
4.4Transportation revenues	Not applicable
This requirement is not applicable in Armenia in the years under review.
4.5SOE transactions	Not applicable
This requirement is not applicable in Armenia in the years under review.
4.8Data timeliness
The first EITI Report covering 2016 and 2017 was published in January 2019 and before the deadline set in the EITI Board’s extension to Armenia’s EITI reporting deadline.
Revenue allocation
5.1Distribution of revenues
The 2016-2017 EITI Report and the scoping study disclose which revenues are recorded in national and community budgets and which are directed to special extra-budgetary funds, with an explanation of the use of extractives revenues not recorded in the national budget. Revenue streams are classified according to the IMF Government Finance Statistics Manual 2001.
5.2Subnational transfers
Armenia has disclosed the basis for calculating the total amount of environmental payments to be redistributed to communities and the resulting amounts by year for 2016-2019. Armenia has also disclosed the proportions reserved for each community in 2016-2019. The total amounts assigned for each community, the actual transfers and discrepancies are also provided.
5.3Revenue management and expenditures	Not assessed
It is commendable that the MSG has included information about the budgeting and auditing processes in the scoping study and the 2016-2017 EITI Report.
Socio-economic contribution
6.1Mandatory social expenditures
Armenia has disclosed the nature of in-kind social expenditures and information about third-party beneficiaries by year for 2016-2018. This information includes both disclosures by companies and by beneficiary communities.
6.2Quasi-fiscal expenditures	Not applicable
This requirement is not applicable in Armenia in the years under review.
6.3Economic contribution
The information provided by the EITI Report exceeds Requirement 6.3 in scope and detail. The disclosures and the visualisations of data provide the reader with a comprehensive understanding of the contribution of the extractive sector to the Armenian economy.
Outcomes and impact
7.2Data accessibility	Not assessed
It is commendable that Armenia has undertaken activities to ensure that extractives data is accessible.
7.4Outcomes and impact of implementation
The 2018 annual progress report includes all required elements and reflects stakeholder views. Follow-up of recommendations from EITI reporting or Validation is not included, as the first 2016-2017 EITI Report was only published in January 2019. In addition, quarterly progress reports help the national secretariat and the MSG to monitor progress against the work plan.
7.1Public debate
EITI data is easily accessible in an open format and a wide range of both digital and paper-based communications materials have been produced and disseminated. The national secretariat and the MSG are engaging with media across the country, and several outreach events have been organised in key mining regions. EITI implementation is embedded in public debate about the mining sector and contributes to policy-making.
7.3Follow up on recommendations
The 2016-2017 EITI Report was published in January 2019. Its recommendations have been mostly followed up on by the MSG and relevant government agencies. Concrete changes include improvements to the reporting template.