What is ROHMA ?
ROHMA is the supervisory regulatory authority for the commodity sector, known as the Commodity Market Supervisory Authority, or “ROHMA” (after its German name "Rohstoffmarktaufsicht Schweiz"). As of April 1, 2014, ROHMA monitors and regulates the activities of companies in the commodities sector, whether they are active in extraction, production, marketing or distribution. ROHMA’s operations are governed by the Commodity Market Supervisory Authority Act (CMSAA). Its responsibilities include implementing the Commodities Act (CA).
Why should activities in the commodity sector be regulated?
The Swiss commodities sector is one of the largest in the world. Conservative estimates assess the Swiss market share of global commodity trading at 20%. In some countries, particularly on the African continent, Swiss firms play a fundamental role. These companies are also increasingly active in extraction, often in countries of the South. Swiss companies are particularly active in countries where governance is weak, corruption is high, and where the embezzlement of commodity rents is common practice. As the host country for companies in the commodity sector, Switzerland has the responsibility to take proactive measures to combat the resource curse in countries where Swiss companies are present. ROHMA implements the Commodities Act (CA), an act intended to reduce the resource curse. It also clarifies the responsibilities of companies in this sector, placing all companies on the same level, providing them with clear duties. It aims to prevent the problematic behavior of a few actors from tarnishing the sector as a whole, and damaging the international reputation of Switzerland.
Is a supervisory authority really necessary? Are voluntary initiatives by companies not enough?
Companies in the commodities sector fought for a long time against any regulation of their activities, preferring to try to solve the problems inherent to their sector on a voluntary basis. For some companies, it was attractive not to have to account for their poor but very lucrative practices. Others were convinced that their voluntary efforts were sufficient. Sometimes commodity companies even used their participation in these ineffective initiatives as a marketing tool. Generally speaking, voluntary initiatives only enable companies to avoid dealing with their failures. By requiring all companies in this sector to face the same obligations, the Act now prevents the problematic behavior of a few from tarnishing the sector as a whole, and from damaging the international reputation of Switzerland.
Is regulating the commodities sector not likely to scare companies away?
At the international level, the commodities sector is now subject to stricter requirements. In the U.S. and the European Union, for example, specific legal standards now set out particular obligations for companies in this sector to publish all details of payments made to governments. The international trend towards greater regulation of such activities will continue and also expand to other jurisdictions, where companies in this sector may hope to escape to. For the Swiss authorities, it was especially important to prevent Switzerland from becoming a regulation-free oasis, one that attracted companies who sought to evade the rules elsewhere. The creation of ROHMA was due in part to this international constellation. Furthermore, the Swiss authorities practiced a policy that was aimed at obtaining similar regulation to that of other international jurisdictions ("level playing field"). By relocating, Swiss companies may only briefly escape the obligations that the Swiss authorities now place on them. In any event, they will lose the benefits they have gained from the Swiss domicile (e.g. political stability, easy access to credit, to quality financial services or to highly skilled workers).
Is the regulator really capable of changing the problematic aspects of this sector?
Yes. ROHMA has effective regulations that determine what the duties of companies active in the sector are, and ensures through external audits, surveys, polls or other means that these obligations are met. Any deficiencies are corrected under close surveillance, and criminal behavior is punished severely. Companies are also subject to a number of transparency requirements (e.g. when they purchase mining contracts or extractive licenses, or when they make payments to governments). This information facilitates ROHMA’s work as well as that of other equivalent authorities, the media, and civil society organizations that devote their attention to this sector. In addition, as a result of the obligation to report the suspicious transactions of other companies, commodity companies play an important role in the detection of misconduct. The team of ROHMA investigators comprises about fifty highly-qualified serious investigators.
Is the regulator not a bureaucratic monster, one that is too expensive?
No. A central element of the Commodities Act (CA) is the fact that companies are first in line to regulate their activities and to ensure compliance with their legal obligations. Their procedures are then reviewed by external auditors, with the costs of verification being borne by the companies themselves. ROHMA receives the results of these audits and intervenes in principle where irregularities are identified. Consequently, the ROHMA structure remains relatively modest. Moreover, the costs of ROHMA’s activities are in large part borne by the sector itself, as companies are required to pay fees related to their licenses on an annual basis, as well as charges for supervision. Companies that are found to have breached the laws must bear the costs of ROHMA’s investigations.
In the financial sector, FINMA has often been criticized for being too close to the banks and for the ineffectiveness of its sanctions. Does ROHMA suffer from the same problems?
No. ROHMA is strictly independent from companies in the sector. None of the members of the board of directors have links with companies in the sector. ROHMA’s directors have significant expertise in the issues associated with the resource curse and are familiar with the activities of the sector, but are not recruited from the supervised institutions. Furthermore, and in contrast to FINMA, ROHMA has extensive powers to punish companies that commit irregularities. ROHMA reports publicly on its tasks and on the sanctions it adopts. It also publishes extensive information on the business affairs of the companies it oversees. FINMA has been much criticized for its inability to defend the Swiss financial center. ROHMA actively promotes the Swiss commodities sector, nationally and internationally, committing to ensure that companies that are active in the sector adopt responsible and sustainable behavior.