British Prime Minister David Cameron’s hopes of securing at the G-8 summit next week a major anti-corruption agreement that would force companies to reveal who really owns them is hanging by a thread, amid fierce opposition from both the Russian and Canadian governments, as well as from many members of the U.S. Congress.

The prime minister believes new rules to make company ownership transparent are crucial, and has made it a key goal of U.K. diplomacy as he prepares to chair the gathering of world leaders that begins on June 17. However, The Observer understands that the goal is now in jeopardy, opening up the possibility that there will be no deal endorsed by all parties, a potentially embarrassing result for the United Kingdom as summit chair.

Companies that hide their real owners in inscrutable, anonymous trusts and shell companies in tax havens are responsible for moving hundreds of billions of pounds a year around the world, much of which is plundered from developing countries. Often the trusts are used for tax evasion, to pay kickbacks to corrupt officials, to facilitate organized crime and to fund international terrorism. In 2011, the World Bank analyzed 213 grand corruption cases over the past 20 years. In 150, a trust or shell company was used. Many of the trusts used to disguise ownership are based in British overseas territories, such as the Cayman Islands or the British Virgin Islands.

A recent Africa Progress Panel report revealed that between 2010 and 2012, Congo lost at least $1.36 billion from the sale of under-priced mining assets, in deals involving shell companies registered in British overseas territories.

In a determined attempt to tackle the problem before the G-8 summit, the prime minister has been strongly promoting a plan that would make companies legally responsible for keeping a register of their real owners and shareholders. Under one scenario proposed by Cameron, the register would be made public. Another option would be for it to be available only to the relevant authorities.

Outlining his vision at Davos earlier this year, Cameron declared: “We’re going to push for more transparency on who owns companies; on who’s buying up land and for what purpose; on how governments spend money; on how gas, oil and mining companies operate; and on who is hiding stolen assets and how we recover and return them.”

Writing in The Observer, the business secretary, Vince Cable, says the summit offers a once-in-a-generation opportunity to world leaders to show leadership by reforming what he calls a “dysfunctional international tax system.” But he warns that there are limits because of the complexity of the issues and complex international rules.

In April, Cameron wrote to Herman van Rompuy, president of the European Council, saying that he hoped G-8 countries would, by this month, have “set out concrete steps” revealing how they would compel companies to disclose their true owners through “public company registries.”

Cameron nuanced his position weeks later when he wrote to Britain’s tax havens, saying they should provide “fully resourced and properly managed centralized registries that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company.”

His proposals were greeted enthusiastically by anti-corruption groups and aid charities. They point out that Iran has avoided sanctions on its nuclear programme by using shell companies, while Russian gangsters have used similar vehicles in Cyprus to launder millions of euros stolen when its state assets were privatised. Shell companies registered in Britain were also used to export arms to the conflict in South Sudan.

However, aid agencies now fear Cameron’s plan risks being derailed by other G-8 members. Russia is resisting because of its extensive interests in Cyprus. Canada is also opposed, while many U.S. politicians are against the plan because it would have an impact on Delaware, the low-tax, light regulation U.S. state where some 200,000 companies are registered.

The impasse is considered so serious by the British government that Cameron is to discuss the issue with U.S. President Barack Obama in a trans-Atlantic phone call later this week.

It is understood U.K. diplomats have been instructed to continue pushing the proposal right up to the summit, even if it risks the U.K. failing to get a deal. “We are concerned not all countries are going to sign up,” said Robert Palmer of campaign group Global Witness. “This is about the world’s biggest economies saying “we are going to get our houses in order.”

It is likely that if any deal is reached it will be a patchwork solution, with some G-8 members agreeing to a public register, some to a private, and others resisting entirely. The move would be seen in some diplomatic circles as a failure.

A source at the U.K.’s Treasury, which is leading on the plan, acknowledged that the U.K. could end up with little to show for its efforts: “There is a danger that if we push too hard the others will recoil and we’ll come away with nothing.”

Campaigners likened the U.K.’s push for transparency to a “game of chicken” and urged Cameron not to blink. “If the P.M. secures a deal with all G-8 countries committing to public registries, it will be transformative,” said Sol Oyuela, a spokeswoman for IF:

“It would be the biggest assault on tax havens, corruption and money laundering in recent history.”

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.