International Economic Law: Basic Documents [2nd enl. ed. Reprint 2019] 9783110874822, 9783110134476

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International Economic Law Basic Documents

International Economic Law Basic Documents

Edited by

Philip Kunig / Niels Lau / Werner Meng

W G DE

1989

Walter de Gruyter • Berlin • New York

Philip Küttig, Dr. iur., Professor at the Institute for Theory of the State, Constitutional Law and Administrative Law of the Free University of Berlin Niels

Lau

Fellow at the Institute for International Affairs of the University of Hamburg ferner

Meng,

Dr. iur.,

Research Fellow at the Max Planck Institute for Comparative Public and International Law, Heidelberg

Printed o n acid free paper (ageing resistant - p H 7, neutral)

Library of Congress Cataloging in Publication Data International economic law. 1. International economic relations. I. Kunig, Philip, 1951- . II. Lau, Niels, 1961- . III. Meng, Werner, 1948- . K3820.A35I58 1989 341.7'5 89-1788 ISBN 0-89925-379-2 (U.S.)

CIP-Kurztitelaufnahme

der Deutschen

Bibliothek

International economic law : basic documents / ed. by Philip Kunig . . . - Berlin ; New York : de Gruyter, 1989 ISBN 3-11-011394-5 NE: Kunig, Philip [Hrsg.] © Copyright 1989 by Walter de Gruyter & Co., Berlin. All rights reserved, including those of translation into foreign languages. N o part of this book may be reproduced in any form - by photoprint, microfilm, or any other means - nor transmitted nor translated into a machine language without written permission from the publisher. Printing: Saladruck, Berlin. - Binding: Verlagsbuchbinderei Dieter Mikolai, Berlin. Printed in Germany.

Contents I. Institutions and Cooperation Doc.

Page

A. World-wide 1 2

3 4

5

6 7

8

9

Economic

Institutions

1. Articles of Agreement of the International Monetary Fund (IMF); July 22, 1944; BGBl. 1978 II, 13 (726 U. N. T. S. 266) 3 2. Articles of Agreement of the International Bank for Reconstruction and Development (World Bank); July 22, 1944; BGBl. 1952 II, 664 (2 U. N. T. S. 39,134; 606 U. N. T. S. 295) 31 3. Articles of Agreement of the International Development Association (IDA); January 26,1960; BGBl. 1960 II,2138 ( 4 3 9 U . N . T . S . 249) 39 4. Articles of Agreement of the International Finance Corporation (IFC); May 25, 1955; BGB1.1956 II, 749 (264 U . N . T . S . 117; 439 U . N . T . S . 318; 563 U . N . T . S . 362) 48 5. Constituent Charter of the Bank for International Settlements - Statute of the Bank for International Settlements (BIS); January 20, 1930/June 9, 1969; BGBl. 1970, 766 (104 L . N . T . S . 441) 55 6. Agreement on an International Energy Program; November 18, 1974; BGBl. 1975 II, 702 (UNGA/Res. 2997 X X V I I I ) 67 7. Constitution of the Food and Agriculture Organization of the United Nations (FAO); October 16, 1945; BGBl. 1971 II, 1036 (T. I. A. S. No. 1554, 60 Stat. 1946) 88 8. Constitution of the International Labour Organization (ILO); October 9, 1946; BGBl. 1957 II, 318; 1964 II, 101; 1975 II, 2208 (15 U . N . T . S. 35; 191 U . N . T . S . 143; 466 U. N . T . S. 323; 958 U . N . T . S. 167) . . 97 9. Convention establishing the World Intellectual Property Organization (WIPO); BGBl. 1970 II,295 (828 U . N . T . S . 3) 112 B. Regional Economic

Institutions

1. Organization for Economic Cooperation and Development ( O E C D ) 10 a) Convention on the Organization for Economic Cooperation and Development; December 14,1960; BGBl. 1961II, 1151 (88 U. N. T. S. 179) 11 b) International Energy Agency of the O E C D (IEA); November 15, 1974; BGBl. 1975 II, 739 ( 2 7 U . S . T . 1976) 2. European Economic Community 12 a) Treaty establishing the European Economic Community; March 25, 1957; amended up by the European Single Act of February 17/28, 1986 (298 U . N . T . S . 11; Single Act: O . J . EC 1987, No. L 169,1) 13 b) Third ACP-EEC Convention (Lomé III); December 8, 1984; The Courier No. 89, Jan./Feb. 1985; BGBl. 1986 II, 19 ( O . J . EC 1986, No. L 86,1) 14 3. Convention Establishing the European Free Trade Association (EFTA); January 4,1960 (370 U. N. T. S. 5; Cmnd. 1026 T. S. 30,1960)

124 124 129 131

131 237 290

VI

Contents

Doc.

Page

15 4. Charter of the Council for Mutual Economic Assistance ( C O M E C O N ) ; December 14,1959 (368 U . N . T . S . 264; GBl. D D R 1960 I, 284) 311 C. Cooperation

concerning

Commodities

16 1. International Natural Rubber Agreement (INRA); October 6, 1979; BGBl. 1981II, 462 ( O . J . EC 1980, No. L 213,2) 321 17 2. International Coffee Agreement (ICA); January 1, 1983; BGBl. 1984 II, 354 ( O . J . EC 1983, No. L 308,4) 336 18 3. Statute of the Organization of Petroleum Exporting Countries (OPEC); O P E C Publ. 1983 (Treaty establishing O P E C , November 6, 1962: 443 U . N . T . S . 248) 366 D. Cooperation

in Order to Protect International

Investments

19 1. Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID); March 18, 1965; BGBl. 1969 II, 369 (575 U . N . T . S . 160) 375 20 2. Multilateral Investment Guarantee Agency (MIGA); October 11, 1985; BGBl. 1987II, 454 (Cm. 150 Misc. 6,1987) 389 E. Documents in Order to establish a New International

Economic

Order

21 1. U N G A Res. A/1803 (XVIII) Permanent Sovereignty over Natural Resources; December 14,1962; 2 I. L. M. (1963) 223 (16 Y. U. N. 1962, 503) 403 22 2. U N G A Res. A/3201 (S - VI) Declaration on the Establishment of a New International Economic Order; May 1,1974; 28 Y . U . N . (1974)324 406 23 3. U N G A Res. A/3281 ( X X I X ) Charter of Economic Rights and Duties of States; December 12,1974; 28 Y . U . N . (1974)403 407

II. Regulation of the International Economy A. International

Trade

1. General Agreement on Tariffs and Trade (GATT) 24 a) The General Agreement on Tariffs and Trade; October 30, 1947 (last Revision of 1969, IV BISD) 55 U. N. T. S. 94 (BGBl. 1952 II, Annexed vol. 1,4) . 25 b) Protocol of Provisional Application of the GATT; October 30, 1947; 55 U . N . T . S . 308 (T.I. A.S. No. 1770, 61 Stat. [2] 1947) 2. Agreement and Decisions of the G A T T Tokyo Round 26 a) Agreement on Implementation of Article VI of the G A T T (Antidumping Law); April 12,1979; G A T T Publication 1979 ( O . J . E C 1980, No. L 71, 90) . 27 b) Agreement on Interpretation and Application of Articles VI, XVI and X X I I I of the G A T T (Subsidies and Countervailing Duties); April 12, 1979; G A T T Publication 1979 ( O . J . EC 1980, No L 71, 72) c) Agreements Relating to the Framework for Conduct of International Trade, G A T T Publication 1979

419 419 489 490 490

500 513

Contents

VII

Doc.

28 29 30 31 32 d) 33 3. 34 4.

35 5.

- Differential and more favourable Treatment, Reciprocity and fuller Participation of Developing Countries - Declaration on Trade Measures taken for Balance of Payment Purposes . . . - Safeguard Action for Development Purposes - Understanding regarding Notification, Consultation, Dispute Settlement and Surveillance Agreement on Import Licensing Procedures; April 12, 1979; G A T T Publication 1979 ( O . J . E C 1980, No. L 71,102) G A T T Ministerial Declaration on the Uruguay Round; September 25, 1986; G A T T Press Release 1396 EEC-Council Regulation on Protection against Dumped or Subsidized Imports from Countries not Members of the E E C (No. 2176/84); July 23, 1984; O . J . E C 1984, No. L 201,1 as amended by Regulation No. 1761/87; O . J . E C 1987, No. L 167, 9 EEC-Council Regulation on the Strengthening of the Common Commercial Policy with regard to Protection against Illicit Commercial Practices (No. 2641/84); September 17,1984 ( O . J . E C 1984, No. L 252,1)

513 515 519 523 524 532

540

553

B. Transnational Enterprises 36 1. The O E C D Declaration on International Investment and Multinationl Enterprises; June 21, 1976; O E C D Press Release A (76) 20 37 2. UN-Draft Code of Conduct on Transnational Corporations; September 1986 / May 1987; U N C T C Current Studies Series A No. 4 and U. N. Doc. E/ 1987/73 of May 1987 on Consultations undertaken on the outstanding issues in the Draft Code 38 3. ILO-Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy; November 16, 1977; 171. L. M. (1978) 422 39 4. ICC-Guidelines for International Investments; November 29, 1972; I C C Paris, Publ. No. 272 (1973) C. International

559

565 578 589

Competition

40 1. Set of Multilaterally agreed Equitable Principles and Rules for the Control of Restrictive Business Practices; December 16, 1980; U . N . Doc. T D / R B P / Conf/10/Rev. 1 41 2. U . N. Code of Conduct for Liner Conferences; April 6, 1974; BGBl. 1983 II, 64 (1987 Gr. Brit. T . S . No. 45 Cm 213) 3. O E C D Recommendations 42 a) Revised Recommendation of the Council Concerning Co-operation between Member Countries on Restrictive Business Practices Affecting International Trade; May 21,1986; 25 I . L . M . (1986) 1629 43 b) Council Recommendation for Co-operation between Member Countries in Areas of Potential Conflict between Competition and Trade Policies; October 23,1986; 261. L. M. (1987) 857

599 608 632

632

637

Vili

Contents

Doc.

Page

44 c) Council Recommendation and Resolution Concerning Common Principles of Shipping Policy and Liberalization of Operations Relating to Maritime Transport; February 13, 1987; 261. L . M . (1987)862 640 45 4. GATT-Decision on Arrangements for Consultations on Restrictive Business Practices; November 18,1960; BISD 9 S, 28 644

D. International

Transport

46 1. Convention Concerning International Carriage by Rail (COTIF); May 9, 1980; 1987 Gr. Brit. T. S. No. 76 (Cm 41) 47 2. Convention on International Civil Aviation; December 7, 1944 (as authenticated by the Protocol of September 24, 1968); BGBl. 1971 II, 984; 1972 II, 257; 197811,500; 1983 II, 763 (15 U . N . T . S . 295) 48 3. International Air Services Transit Agreement; December 12, 1944; BGBl. 1956 II, 442 (84 U . N . T.S. 389) 49 4. International Air Transport Agreement (IATA); December 12, 1944; 171 U.N.T.S.388 50 5. Convention on the International Maritime Organization (IMO); May 22, 1982 (formerly IMCO, March 6, 1948), BGBl. 1982 II, 874 (289 U. N. T. S. 3; 607 U . N . T . S . 276; 649 U . N . T . S . 334)

646

662 674 675

680

Introduction

International economic law is a multiform and complex branch of law. It contains rules and regulations, which belong to the private or public law systems of individual states, and others which originated from international legislation. Most norms of international economic law are established by treaties, the bulk of which were concluded by sovereign states as the main subjects of international law and the main actors of international relations. States have created a number of international organizations with competences in the field of international economic relations, which to a certain extent autonomously inspire treaty-making and contribute to the development of international customary law. A number of international organizations is authorized by their respective founding charters to impose normative directions on member states which may be important to state behaviour in the field of international economic relations 1 . Recommendations and decisions of international organizations which are not easy to attribute to one of the traditional sources of international law, as laid down in article 38 of the statute of the International Court of Justice, have played a prominent role in the development of international law after World War II2. Even if nearly all of these acts lack a binding character they influence national economic policies and thereby indirectly impinge upon private participants of international economic relations. Normative acts of international organizations are a stimulus to national legislation, and to a varying degree may become relevant to decisions of national courts and administrations 3 . International Economic law as a whole is constituted by a complex web of (a few) unwritten basic principles 4 , of bilateral and multilateral treaties, and of decisions of international organizations and national enactments 5 . This collection of documents cannot take an undisputed notion of international economic law as its point of departure 6 . The collection is oriented towards relevance to decision-makers on the international and national levels. The needs of those who are interested in the world economy from an academic point of view were taken into account. The selection took a universal, not a national or regional perspective. Therefore the volume includes mainly multilateral international treaties, but also some decisions of international organizations with a different legal character. The collection reflects a period of transition: In the second half of the 20 th century the economic interdependence of the world has grown remarkably - a development

K. Skubiszewski, International Legislation, in: 5 EPIL 97 (1983) I. Seidl-Hohenveldern, International Economic "Soft Law", in: 163 Recueil des Cours 165 (1979 II) 3 Ph. Kunig, The Relevance of Resolutions and Declarations of International Organizations for Municipal Law, in: G.Tunkin/R. Wolfrum (eds.), International Law and Municipal Law (1988) 4 E.U. Petersmann, World Trade, Principles, in: 8 EPIL 530 (1985) 5 For details see P. VerLoren van Themaat, The Changing Structure of International Economic Law (1981) 6 J . H . Jackson, International Economic Law, in: 8 EPIL 149 (1985) 1

2

X

Introduction

which has challenged the traditional structure of international economic law specifically as well as the structure of international law in general. Even if a solid system of international economic law is still lacking, one may already perceive the foundations of a universal order of economic relations. The editors believe that the documents presented here belong to the core of such foundations. The present legal situation in the field of international economic relations is based on developments, which took place during the last years of World War II. After the conference of Bretton Woods (1944) the International Monetary Fund (Doc. 1) as well as the International Bank for Reconstruction and Development (World Bank; D o c . 2) were established 7 . Transcending the area of monetary co-operation, the concept of an international organization dedicated to international trade was sponsored in the context of the evolving United Nations system. These aspirations resulted in the "Havana Charter" of 19488 as the founding statute of an International Trade Organization. It never entered into force. The General Agreement on Tariffs and Trade ( G A T T ; D o c . 24) became the focal framework of international trade. It completed the so-called Bretton Woods system which since the 60' has to be seen in context with the Organization for Economic C o operation and Development ( O E C D ; Doc. 10) as another framework for the economic relationship between leading Western states as well as with the regional system of the European Economic Community ( E E C ; Doc. 14), and the Council for Mutual Economic Assistance ( C O M E C O N ; Doc. 15). A number of special agencies of the United Nations also deal with economic matters (Doc. 3, 4, 7, 8, 50). The drastic differences in economic development and bargaining power between the industrialized parts of the world and the lesser and less developed countries found an expression in the foundation of the United Nations Conference on Trade and Development ( U N C T A D ) 9 in 1964 and the urgent calls to transform international legal structures into a N e w International Economic Order, the concrete features of which still have to be worked out 10 . Essential claims aim at a preferential treatment of developing countries concerning the exploitation of and trade in raw material, be they situated in areas under national sovereignty or outside national jurisdiction, as well as at an easier access for developing countries to products, technology and capital. Other goals are a stricter control of multinational enterprises as well as a reform of existing institutional structures of the world economy. A catalyst of these aspirations may be seen in the proclamation of a right to development, which tries to relate the idea of a basic change of the existing international economic order to the concept of human rights and mechanisms of human rights protection". These developments provided the background to the current mixture of traditional principles, international treaties, and other substantive regulations. The ensemble of all

H . C o i n g , Bretton Woods Conference (1944), in: 5 E P I L 2 (1983) G . Jaenicke, Havana Charter, in: 8 E P I L 260 (1985) 9 G A Res. A/1995 ( X I X ) , 30.12.1964 10 K. Hossain (ed.), Legal Aspects of the N e w International Economic Order (1980); Th. O p p e r m a n n / E . U . Petersmann (ed.), Reforming the International Economic Order (1987) 11 Ph. Kunig, The "Inner Dimension" of the Right to Development: Considerations Concerning the Responsibilities of Developing Countries, in: 36 Law and State 46 (1987) 7

8

Introduction

XI

these principles and other rules constitute the present state of the international economic legal order. Its variety made it necessary to include in this collection rules concerning institutions besides substantive regulations as well as documents which merely reflect tendencies. The material is arranged in two main sections, the first of which deals with Institutions and Cooperation, the second with the regulation of the International Economy. The first part of this volume is designed to give an exemplary overlook over the means of co-operation developed by states in order to find common and appropriate solutions for the increasingly complex and challenging problems of international economic exchange. The main focus is on the international organizations which, nowadays, are the core of an international system of economic co-operation. There are several levels of such co-operation. O n the global level the international financial organizations 12 like the International Monetary Fund and the World Bank with its offsprings (Docs. 1, 2, 3 and 4) are an example of a framework for close co-operation that, on the other hand, has also shown in practice the weakness of international solutions still existing due to a lack of coordination in the economic policies of the several states13. Much more technical, but of crucial importance for the co-operation between central banks is the Bank for International Settlements (Doc. 5). The second important pillar of co-ordination of the international economic relations is trade. The quality of G A T T as an international organization is disputed, but it certainly is the basic framework for the international trading order. This emphasis on substantive law is the reason, why G A T T will here be found in the second part of this collection (Doc. 24). Apart from trade there are various other sectors of transborder activities pertinent to the functioning of an international economy. It was impossible to be exhaustive here. The choice of the sectors energy (Doc. 6), food supply (Doc. 7), protection of the labor force (Doc. 8) and intellectual property (Doc. 9) is aimed at showing how such international economic matters are dealt with in terms of institutional co-operation. One other important sector of global co-operation are the commodities agreements 14 . The particular features of the price mechanism as well as the often erratic fluctuation of supply and demand led to those agreements. They have not always been a success, but some of them have proved to be useful to the contracting parties. Solutions have been different for different commodities. In presenting the International Natural Rubber Agreement (Doc. 16), the International Coffee Agreement (Doc. 17) and the charter of O P E C (Doc. 18), the editors want to show examples of different approaches: buffer stock agreements, mere co-ordination agreements, pure supply-side cartels. The Agree-

12 International Financial Law Lending, Capital Transfers and Institutions (R. S. Rendell ed. 2nd ed. 1983); H. Golsong, International Bank for Reconstruction and Development, in: 5 EPIL 58 (1983); International Development Association id. at 75; International Finance Corporation id. at 83; A. Lowenfeld, The International Monetary System (1977) " B.Tew, The Evolution of the International Monetary System (1985) 14 Chr. Tomuschat, Commodities, International Regulation of Production and Trade, in: 8 EPIL 94 (1985); K. Khan, The Law and Organization of International Commodity Agreements (1982)

XII

Introduction

ment on the Common Fund for Commodities of 1980 has not yet entered into force, thus it is not contained in this collection. Its effectiveness in the future is still disputed15. One important corollary of the international flow of capital is the protection of international investments16. There are many bilateral treaties in the field. At the same time the standards for such protection guaranteed by general customary public international law are more and more disputed. National law standards are not sufficient for reliable protection. This led to the creation of ICSID as a multilateral arbitrary institution for investment disputes between states and between states and private parties (Doc. 19). On the substantive side M I G A is a quite recent attempt to approach the uncertainties of some investment abroad by a multilateral "insurance type solution" (Doc. 20). It still has to prove its usefulness. After the decolonization period development aid has been of paramount concern to the international community. But the increasing conviction of the developing countries that one major obstacle to speedy development is the old, purportedly unjust and biassed international economic order generated the demand for a new international economic order (NIEO). Tons of paper have been produced on the subject. But the resolutions published here (Doc. 21, 22 and 23) still are the cornerstones of the pertinent discussion in international circles. Institutional Co-operation in the field of international economy often may be easier and more effective on a regional level. The most conspicuous examples are the supranational European Communities. The most important of them is the E E C (Doc. 12). E F T A (Doc. 14) is a typical free trade zone, while the Lome-III-Convention between the E E C and the so-called ACP-states (Doc. 13), shows how preferential treatment, commodity price stabilization and trade liberalization can be established on an inter-regional level. C M E A (sometimes also called C O M E C O N ) is the organization of economic cooperation between the Eastern socialist states (Doc. 15). Finally, O E C D (Doc. 10) is a good example how an organization (originally the O E E C ) , that focussed predominantly on problems of the economic development of one region, namely Europe, could become a forum of discussion, negotiation, monitoring and - to a certain extent - legislation between the most important Western industrial powers of the world. The second part contains some prominent examples of how substantive regulation of the international economy has been achieved. It is a narrow choice made from hundreds of economically very important international legal instruments. It is thus inevitable that specialized users may find lacunae (as in international tax law and in the widespread field of the international protection of industrial and intellectual property). But the limitations of such a publication require sacrifices from the editors 17 . This is especially true of the wide range of instruments which serve the unification of private law rules in international economics. The editors have decided not to include them into this collection since one

Chr. Tomuschat, Commodities, Common Fund, in: 8 E P I L 91 (1985) S . A . Riesenfeld, Foreign Investments, in: 8 E P I L 246 (1985); R. Dolzer, Expropriation and Nationalization, in: 8 E P I L 214 (1985) 17 For a more comprehensive overlook see the ten volume loose-leaf collection of L. Lazar, Transnational Economic and Monetary Law. Transactions and Contracts (1978 - ) 15

16

Introduction

XIII

can find them easily in other collections dealing in a more specialized way with certain areas of substantive law18. International trade19 is represented by G A T T (Doc. 24 and 25) and some selected agreements and decisions of the Tokyo Round from 1979 (Doc. 26 et seq.). These legally binding instruments are in fact a clarification, improvement and effectuation of the G A T T rules. But since G A T T itself for political reasons nowadays cannot be formally amended, states use the periodically held multilateral tariff negotiations (so-called "Rounds") to develop such treaties as complements to G A I T 2 0 . The Tokyo Round so far has yielded the most important set of such treaties and binding decisions 21 . Dispute settlement, special treatment for development purposes, important licensing, anti-dumping and countervailing duties measures were chosen here (Doc. 28, 29, 30, 31 and 32). The E E C legislation (Doc. 34) on the two latter fields is added because of its practical importance for individuals. The same is true of the EEC-Regulation concerning the socalled "New Trade Policy Instrument" (Doc. 35), which is an example of so-called "retaliation against illicit practices" - legislation that can be found in some important states. The next Round of multilateral tariff negotiations meanwhile is under way. Doc. 33 is the Ministerial Declaration, the "founding document" of the so-called Uruguay Round. Transborder activities of corporations, transnational structures of enterprises create new and difficult problems of concurring, competing or mutually incompatible jurisdiction of several states22. It furthermore may bring up differences of interest between the enterprise and the policies of its host state. The search for common standards did generate a - non-binding - code of conduct in the O E C D (Doc. 36) and some other documents (Doc.38 and 39), but in the U . N . the struggle still goes on to find common ground (Doc. 37). Another important matter that has gained increasing attention of states, is the socalled extraterritorial jurisdiction over persons and economic entities abroad 23 . There is still much confusion in this area and little convergence in the several states. One area where those problems resulted in clashes between jurisdictions is antitrust law24. Apart from bilateral treaties on mutual assistance between the U. S. A. and some other states so

18 In the trade law area for example Chia-Jui Cheng, Basic Documents on International Trade Law (1986) 19 A good systematic introduction herein and in the domestic U. S. trade legislation provides J . H . Jackson & W.J. Davey, International Economic Relations (1986) 20 About the GATT-system see J. H. Jackson, World Trade and the Law of G A T T (1967); R. Hudec, The G A T T Legal System and World Trade Diplomacy (1975); E.MacGovern, International Trade Regulation: GATT, the United States and the European Community (1986) and Jackson & Davey supra note 19 21 L. A. Glick, Multilateral Trade Negotiations: World Trade after the Tokyo Round (1984) 22 P. Fischer, Transnational Enterprises, in: 8 EPIL 515 (185); C. D. Wallace, Legal Control of the Multinational Enterprise (1982) 23 W. Meng, Extraterritorial Effects of Administrative, Judicial and Legislative Acts, in: 10 EPIL 151 (1987); a good selection of relevant documents is A.V. Lowe, Extraterritorial Jurisdiction (1983) 24 K . M . Meessen, Antitrust Law, International, in: 8 EPIL 29 (1985)

XIV

Introduction

far nothing legally binding has emerged. There are, however, some codes of conduct, general or sectoral, dealing with a minimum of coordination between national jurisdictions (Doc. 40 et seq.). The importance of international transport25 is often not sufficiently acknowledged among lawyers who are not specialized in the field. This is why some of the most important treaties on air and railroad transportation have been added to this collection (Doc. 46, 47 and 48). Commercial Civil air traffic is mostly subject to bilateral treaties. The International Air Transport Agreement of 1944 (Doc. 49) was not successful to provide for a multilateral opening of the airspace. It nevertheless has been chosen for this collection, because it mentions all the "five freedoms" that are nowadays subject of the bilateral treaties. Sea transport as well as the regulation of economic activities on and under the seas is of particular importance, too (see Doc. 50). But the Law of the Sea in its entirety has been omitted in this collection since it is so comprehensive that it deserves a volume of its own. All international treaties in this collection have entered into force, although not necessarily for all states that have signed them. Information about ratification and possible reservations (which may modify a state's obligation) have to be looked up in the yearly updated indexes of the treaty collections of the U N and of the states. The voting patterns of individual states in international organizations may be found in the respective publications of each organization. The editors are grateful to Professor Dr. Jürgen Basedow, Augsburg, Dr. Claus Eiselstein, Stuttgart, Mr. Wolfgang Kessler, Bonn, Dr. Michael Kilian, Tübingen, Professor Dr. Herbert Kronke, Köln, Professor Dr. Costa R. Mahalu, Dar es Salaam, Professor Dr. Ernst-Joachim Mestmäcker, Hamburg, and Professor Dr. Ingo von Münch, Hamburg, for advice and discussions. The library staff of the Institute for International Law of the Free University of Berlin, of the Institute for International Affairs of the University of Hamburg, and of the Max-Planck-Institute for Comparative Public Law and International Law in Heidelberg provided valuable technical help. Numerous international organizations and institutions as well as the Verlag Bundesanzeiger, Bonn, kindly permitted the use of their publications for the production of this book. The editors would welcome any suggestions for improving the future usefulness of the collection to pracitioners and academic lawyers. Berlin, Hamburg, Heidelberg, December 1988

25 G. Mutz, Traffic and Transport, International Regulation, in: 5 EPIL 269 (1983); Transport (M. Schadee ed. 1974 - )

Abbreviations AA ACP AD BGBl. BIS BISD CMEA Cm./Cmnd. COMECON COTIF DK Doc. EC EEC EFTA ESP FAO GATT GB1. IASTA IATA ICA ICC ICSID IDA IEA IFC I.L.M. ILO IMCO IMF IMO INRA IRL L . N . T. S. MIGA NIEO OECD O.J. OPEC PORT Publ.

Act of Accession Asian, Caribbean and Pacific States Accession Documents Bundesgesetzblatt Bank for International Settlements GATT. Basic Instruments and Selected Documents Council for Mutual Economic Assistance Command Papers Council for Mutual Economic Assistance Convention concerning International Carriage by Rail Denmark Document European Communities European Economic Community European Free Trade Area Spain Food and Agriculture Organization General Agreement on Tariffs and Trade Gesetzblatt International Air Services Transit Agreement International Air Transport Agreement International Coffee Agreement International Chamber of Commerce International Center for the Settlement of Investment Disputes between States and Nationals of other States International Development Association International Energy Agency International Finance Corporation International Legal Materials International Labour Organization International Maritime Consultation Organization International Monetary Fund International Maritime Organization International Natural Rubber Agreement Ireland League of Nations Treaty Series Multilateral Investment Guarantee Agency N e w International Economic Order Organization for Economic Cooperation and Development Official Journal of the European Communities Organization of Petroleum Exporting Countries Portugal Publications

XVI Res. SEA Stat. U.S. T. I. A. S. UNCTC U. N . T . S . UNGA vol. WIPO Y.U.N.

Abbreviations Resolution Single European Act Statutes at large, United States Treaty and other International Act Series United Nations Center on Transnational Corporations United Nations Treaties Series United Nations General Assembly volume World Intellectual Property Organization Yearbook of the United Nations

I. Institutions and Cooperation

A. World-wide Economic Institutions 1. Articles of Agreement of the International Monetary Fund (IMF) July 22, 1944 BGB1. 1978 II, 13 (726 U . N . T . S . 266) The Governments on whose behalf the present Agreement is signed agree as follows:

their balance of payments without resorting to measures destructive of national or international prosperity.

Introductory Article (i) The International Monetary Fund is established and shall operate in accordance with the provisions of this Agreement as originally adopted and subsequently amended.

(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

(ii) To enable the Fund to conduct its operations and transactions, the Fund shall maintain a General Department and n Special Drawing Rights Depart* ment. Membership in the Fund shall give the right to participation in the Special Drawing Rights Department.

The Fund shall be guided in all its policies and decisions by the purposes set forth in this Article.

(iii) Operations and transactions authorized by this Agreement shall be conducted through the General Department, consisting in accordance with the provisions of this Agreement of the General Resources Account, the Special Disbursement Account, and the Investment Account; except that operations and transactions involving special drawing rights shall be conducted through thé Special Drawing Rights Department.

Article II Membership Section 1 Original members The original members of the Fund shall be those of the countries represented at the United Nations Monetary and Financial Conference whose governments accept membership before December 31,1945. Section 2 Other members

Article I Purposes The purposes of the International Monetary Fund are: (i) To promote international monetary co-operation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems. (ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy. (iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation. (iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade. (v) To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in

Membership shall be open to other countries at such times and in accordance with such terms as may be prescribed by the Board of Governors. These terms, including the terms for subscriptions, shall be based on principles consistent with those applied to other countries that are already members. Article m Quotas and subscriptions Section 1 Quotas and payment of subscriptions Each member shall be assigned a quota expressed in special drawing rights. The quotas of the members represented at the United Nations Monetary and Einancial Conference which accept membership before December 31, 1945 shall be those set forth in Schedule A. The quotas of other members shall be determined by the Board of Governors. The subscription of each member shall be equal to its quota and shall be paid in full to the Fund at the appropriate depository« Section 2 Adjustment of quotas (a) The Board of Governors shall at intervals of not more than five years conduct a general review, and if it

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deems it appropriate propose an adjustment, of the quotas of the members. It may also, if it thinks fit, consider at any other time the adjustment of any particular quota at the request of the member concerned. (b) The Fund may at any time propose an increase in the quotas of those members of the Fund that were members on August 31, 1975 in proportion to their quotas on that date in a cumulative amount not in excess of amounts transferred under Article V, Section 12 (f) (i) and (j) from the Special Disbursement Account to the General Resources Account. (c) An eighty-five percent majority of the total voting power shall be required for any change in quotas. (d) The quota of a member shall not be changed until the member has consented and until payment has been made unless payment is deemed to have been made in accordance with Section 3 (b) of this Article. Section 3 Payments when quotas are changed (a) Each member which consents to an increase in its quota under Section 2 (a) of this Article shall, within a period determined by the Fund, pay to the Fund twenty-five percent of the increase in special drawing rights, but the Board of Governors may prescribe that this payment may be made, on the same basis for all members, in whole or in part in the currencies of other members specified, with their concurrence, by the Fund, or in the member's own currency, A nonparticipant shall pay in the currencies of other members specified by the Fund, with their concurrence, a proportion of the increase corresponding to the proportion to be paid in special drawing rights by participants. The balance of the increase shall be paid by the member in its own currency. The Fund's holdings of a member's currency shall not be increased above the level at which they would be subject to charges under Article V, Section 8 (b) (ii), as a result of payments by other members under this provision. (b) Each member which consents to an increase in its quota under Section 2 (b) of this Article shall be deemed to have paid to the Fund an amount of subscription equal to such increase. (c) If a member consents to a reduction in its quota, the Fund shall, within sixty days, pay to the member an amount equal to the reduction. The payment shall be made in the member's currency and in such amount of special drawing rights or the currencies of other members specified, with their concurrence, by the Fund as is necessary to prevent the reduction of the Fund's holdings of the currency below the new quota, provided that in exceptional circumstances the Fund may reduce its holdings of the currency below the new quota by payment to the member in its own currency. (d) A seventy percent majority of the total voting power shall be required for any decision under (a) above, except for the determination of a period and the specification of currencies under that provision. Section 4 Substitution of securities for currency The Fund shall accept from any member, in place of any part of the member's currency in the General Resources Account which in the judgment of the Fund is not needed for its operations and transactions, notes or

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similar obligations issued by the member or the depository designated by the member under Article XIII, Section 2, which shall be non-negotiable, non-interest bearing and payable at their face value on demand by crediting the account of the Fund in the designated depository. This Section shall apply not only to currency subscribed by members but also to any currency otherwise due to, or acquired by, the Fund and to be placed in the General Resources Account.

Article IV Obligations regarding exchange arrangements

Section 1 General obligations of members Recognizing that the essential purpose of the international monetary system is to provide a framework that facilitates the exchange of goods, services, and capital among countries, and that sustains sound economic growth, and that a principal objective is the continuing development of the orderly underlying conditions that are necessary for financial and economic stability, each member undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. In particular, each member shall:

(i) endeavor to direct its economic and financial policies toward the objective of fostering orderly economic growth with reasonable price stability, with due regard to its circumstances; (ii) seek to promote stability by fostering orderly underlying economic and financial conditions and a monetary system that does not tend to produce erratic disruptions,(iii) avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members; and (iv) follow exchange policies compatible with the undertakings under this Section. Section 2 General exchange arrangements (a) Each member shall notify the Fund, within thirty days after the date of the second amendment of this Agreement, of the exchange arrangements it intends to apply in fulfillment of its obligations under Section 1 of this Article, and shall notify the Fund promptly of any changes in its exchange arrangements. (b) Under an international monetary system of the kind prevailing on January 1, 1976, exchange arrangements may include (i) the maintenance by a member of a value for its currency in terms of the special drawing right or another denominator, other than gold, selected by the member, or (ii) co-operative arrangements by which members maintain the value of their currencies ii) relation to the value of the currency or currencies of other members, or (iii) other exchange arrangements of a member's choice. (c) To accord with the development of the international monetary system, the Fund, by an eighty-five percent

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IMF majority of the total voting power, may make provision for general exchange arrangements without limiting the right of members to have exchange arrangements of their choice consistent with the purposes of the Fund and the obligations under Section 1 of this Article.

Section 3 Surveillance over exchange arrangements (a) The Fund shall oversee the international monetary system in order to ensure its effective operation, and shall oversee the compliance of each member with its obligations under Section 1 of this Article. (b) In order to fulfill its functions under (a) above, the Fund shall exercise firm surveillance over the exchange rate policies of members, and shall adopt specific principles for the guidance of all members with respect to those policies. Each member shall provide the Fund with the information necessary for such surveillance, and, when requested by the Fund, shall consult with it on the member's exchange rate policies. The principles adopted by the Fund shall be consistent with co-operative arrangements by which members maintain the value of their currencies in relation to the value of the currency or currencies of other members, as well as with other exchange arrangements of a member's choice consistent with the purposes of the Fund and Section 1 of this Article. These principles shall respect the domestic social and political policies of members, and in applying these principles the Fund shall pay due regard to the circumstances of members.

Section 4 Par values The Fund may determine, by an eighty-five percent majority of the total voting power, that international economic conditions permit the introduction of a widespread system of exchange arrangements based on stable but adjustable par values. The Fund shall make the determination on the basis of the underlying stability of the world economy, and for this purpose shall take into account price movements and rates of expansion in the economies of members. The determination shall be made in light of the evolution of the international monetary system, with particular reference to sources of liquidity, and, in order to ensure the effective operation of a system of par values, to arrangements under which both members in surplus and members in deficit in their balances of payments take prompt, effective, and symmetrical action to achieve adjustment, as well as to arrangements for intervention and the treatment of imbalances. Upon making such determination, the Fund shall notify members that the provisions of Schedule C apply. Section 5 Separate currencies within a member's territories (a) Action by a member with respect to its currency under this Article shall be deemed to apply to the separate currencies of all territories in respect of which the member has accepted this Agreement under Article X X X I , Section 2 (g) unless the member declares that its action relates either to the metropolitan currency alone, or only to one or more specified separate currencies, or to the metropolitan currency and one or more specified separate currencies.

(b) Action by the Fund under this Article shall be deemed to relate to all currencies of a member referred to in (a) above unless the Fund declares otherwise.

Article V Operations and transactions of the Fund Section 1 Agencies dealing with the Fund Each member shall deal with the Fund only through its Treasury, central bank, stabilization fund, or other similar fiscal agency, and the Fund shall deal only with or through the same agencies. Section 2 Limitation on the Fund's operations and transactions (a) Except as otherwise provided in this Agreement, transactions on the account of the Fund shall be limited to transactions for the purpose of supplying a member, on the initiative of sudi member, with special drawing rights or the currencies of other members from the general resources of the Fund, which shall be held in the General Resources Account, in exchange for the currency of the member desiring to make the purchase. (b) If requested, the Fund may decide to perform financial and technical services, including the administration of resources contributed by members, that are consistent with the purposes of the Fund. Operations involved in. the performance of such financial services shall not be on the account of the Fund. Services under this subsection shall not impose any obligation on a member without its consent.

Section 3 Conditions governing use of the Fund's general resources (a) The Fund shall adopt policies on the use of its general resources, including policies on stand-by or similar arrangements, and may adopt special policies for special balance of payments problems, that will assist members to solve their balance of payments problems in a manner consistent with the provisions of this Agreement and that will establish adequate safeguards for the temporary use of the general resources of the Fund.

(b) A member shall be entitled to purchase the currencies of other members from the Fund in exchange for an equivalent amount of its own currency subject to the following conditions: (i) the member's use of the general resources of the Fund would be in accordance with the provisions of this Agreement and the policies adopted under them; (ii) the member represents that it has a need to make the purchase because of its balance of payments or its reserve position or developments in its reserves; (iii) the proposed purchase would be a reserve tranche purchase, or would not cause the Fund's holdings of the purchasing member's currency to exceed two hundred percent of its quota;

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(iv) the Fund has not previously declared under Section 5 of this Article, Article VI, Section 1, or Article XXVI, Section 2 (a) that the member desiring to purchase is ineligible to use the general resources of the Fund. (c) The Fund shall examine a request for a purchase to determine whether the proposed purchase would be consistent with the provisions of this Agreement and the policies adopted under them, provided that requests for reserve tranche purchases shall not be subject to challenge. (d) The Fund shall adopt policies and procedures on the selection of currencies to be sold that take into account, in consultation with members, the balance of payments and reserve position of members and developments in the exchange markets, as well as the desirability of promoting over time balanced positions in the Fund, provided that if a member represents that it is proposing to purchase the currency of another member because the purchasing member wishes to obtain an equivalent amount of its own currency offered by the other member, it shall be entitled to purchase the currency of the other member unless the Fund has given notice under Article VII, Section 3 that its holdings of the currency have become scarce. (e)

(i) Each member shall ensure that balances of its currency purchased from the Fund are balances of a freely usable currency or can be exchanged at the time of purchase for a freely usable currency of its choice at an exchange rate between the two currencies equivalent to the exchange rate between them on the basis of Article XIX, Section 7 (a).

Section 5 Ineligibility to use the Fund's general resources Whenever the Fund is of the opinion that any member is using the general resources of the Fund in a manner contrary to the purposes of the Fund, it shall present to the member a report setting forth the views of the Fund and prescribing a suitable time for reply. After presenting such a report to a member, the Fund may limit the use of its general resources by the member. If no reply to the report is received from the member within the prescribed time, or if the reply received is unsatisfactory, the Fund may continue to limit the member's use of the general resources of the Fund or may, after giving reasonable notice to the member, declare it ineligible to use the general resources of the Fund.

Section 6 Other purchases and sales of special drawing rights by the Fund (a) The Fund may accept special drawing rights offered b y a participant in exchange for an equivalent amount of the currencies of other members.

(ii) Each member whose currency is purchased from the Fund or is obtained in exchange for currency purchased from the Fund shall collaborate with the Fund and other members to enable such balances of its currency to be exchanged, at the time of purchase, for the freely usable currencies of other members.

(b) The Fund may provide a participant, at its request, with special drawing rights for an equivalent amount of the currencies of other members. The Fund's holdings of a member's currency shall not b e increased as a result of these transactions above the level at which the holdings would be subject to charges under Section 8 (b) (ii) of this Article.

(iii) An exchange under (i) above of a currency that is not freely usable shall be made by the member whose currency is purchased unless that member and the purchasing member agree on another procedure.

(c) The currencies provided or accepted by the Fund under this Section shall be selected in accordance with policies that take into account the principles of Section 3 (d) o r ' 7 (i) of this Article. The Fund may enter into transactions under this Section only if a member whose currency is provided or accepted b y the Fund concurs in that use of its currency.

(iv) A member purchasing from the Fund the freely usable currency of another member and wishing to exchange it at the time of purchase for another freely usable currency shall make the exchange with the other member if requested by that member. The exchange shall be made for a freely usable currency selected by the other member at the rate of exchange referred to in (i) above. (f) Under policies and procedures which it shall adopt, the Fund may agree to provide a participant making a purchase in accordance with this Section with special drawing rights instead of the currencies of other members.

Section 4 W a i v e r of conditions The Fund may in its discretion, and on terms which safeguard its interests, waive any of the conditions prescribed in Section 3 (b) (iii) and (iv) of this Article, especially in the case of members with a record of

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avoiding large or continuous use of the Fund's general resources. In making a waiver it shall take into consideration periodic or exceptional requirements of the member requesting the waiver. The Fund shall also take into consideration a member's willingness to pledge as collateral security acceptable assets having a value sufficient in the opinion of the Fund to protect its interests and may require as a condition of waiver the pledge of such collateral security.

Section 7 Repurchase by a member of its currency held b y the Fund (a) A member shall be entitled to repurchase at any time the Fund's holdings of its currency that are subject to charges under Section 8 (b) of this Article. (b) A member that has made a purchase under Section 3 of this Article will be expected normally, as its balance of payments and reserve position improves, to repurchase the Fund's holdings of its currency that result from the purchase and are subject to charges under Section 8 (b) of this Article. A member shall repurchase these holdings if, in accordance with policies on repurdiase that the Fund shall adopt and after consultation with the member, the Fund represents to the member that it should repurchase because of an improvement in its balance of payments and reserve position.

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IMF (c) A member that has made a purchase under Section 3 of this Article shall repurchase the Fund's holdings of its currency that result from the purchase and are subject to charges under Section 8 (b) of this Article not later than five years after the date on which the purchase was made. The Fund may prescribe that repurchase shall be made by a member in installments during the period beginning three years and ending five years after the date of a purchase. The Fund, by an eighty-five percent majority of the total voting power, may change the periods for repurchase under this subsection, and any period so adopted shall apply to all members. (d) The Fund, by an eighty-five percent majority of the total voting power, may adopt periods other than those that apply in accordance with (c) above, which shall be the same for all members, for the repurchase of holdings of currency acquired by the Fund pursuant to. a special policy on the use of its general resources. (e) A member shall repurchase, in accordance with policies that the Fund shall adopt by a -seventy percent majority of the total voting power, the Fund's holdings of its currency that are not acquired as a result of purchases and are subject to charges under Section 8 (b) (ii) of this Article. (f) A decision prescribing that under a policy on the use of the general resources of the Fund the period for repurchase under (c) or (d) above shall be shorter than the one in effect under the policy shall apply only to holdings acquired by the Fund subsequent to the effective date of the decision. (g) The Fund, on the request of a member, may postpone the date of discharge of a repurchase obligation, but not beyond the maximum period under (c) or (d) above or under policies adopted by the Fund under (e) above, unless the Fund determines, by a seventy percent majority of the total voting power, that a longer period for repurchase which is consistent with the temporary use of the general resources of the Fund is justified because discharge on the due date would result in exceptional hardship for the member.

(h) The Fund's policies under Section 3 (d) of this Article may be supplemented by policies under which the Fund may decide after consultation with a member to sell under Section 3 (b) of this Article its holdings of the member's currency that have not been repurchased in accordance with this Section 7, without prejudice to any action that the Fund may be authorized to take under any other provision of this Agreement. (i) All repurchases under this Section shall be made with special drawing rights or with the currencies of other members specified by the Fund. The Fund shall adopt policies and procedures with regard to the currencies to be used by members in making repurchases that take into account the principles in Section 3 (d) of this Article. The Fund's holdings of a member's currency that is used in repurchase shall not be increased by the repurchase above the level at which they would be subject to charges under Section 8 (b) (ii) of this Article. (j)

(i) If a member's currency specified by the Fund under (i) above is not a freely usable currency, the member shall ensure that the repurchasing member can obtain it at the time of the repurchase in exchange for a freely usable currency selected by the member whose currency has

been specified. An exchange of currency under this provision shall take place at an exchange rate between the two currencies equivalent to the exchange rate between them on the basis of Article XIX, Section 7 (a). (ii) Each member whose currency is specified by the Fund for repurchase shall collaborate with the Fund and other members to enable xepurchasing members, at the time of the repurchase, to obtain the specified currency in exchange for the freely usable currencies of other members. (iii) An exchange under (j) (i) above shall be made with the member whose currency is specified unless that member and the repurchasing member agree on another procedure. (iv) If a repurchasing member wishes to obtain, at the time of the repurchase, the freely usable currency of another member specified by the Fund under (i) above, it shall, if requested by the other member, obtain the currency from the other member in exchange for a freely usable currency at the rate of exchange referred to in (j) (i) above. The Fund may . adopt regulations on the freely usable currency to be provided in an exchange. Section 8 Charges (a) (i) The Fund shall levy a service charge on the purchase by a member of special drawing rights or the currency of another member held in the General Resources Account in exchange for its own currency, provided that the Fund may levy a lower service charge on reserve tranche purchases than on other purchases. The service charge on reserve tranche purchases shall not exceed one-half of one percent, (ii) The Fund may levy a charge for stand-by or similar arrangements. The Fund may decide that the charge for an arrangement shall be "offset against the service charge levied under (i) above on purchases under the arrangement. (b) The Fund shall levy charges on its average daily balances of a member's currency held in the General Resources Account to the extent that they (i) have been acquired under a policy that has been the subject of an exclusion under Article XXX (c), or (ii) exceed the amount of the member's quota after excluding any balances referred to in (i) above. The rates of charge normally shall rise at intervals during the period in which balances are held. (c) If a member fails to make a repurchase required under Section 7 of this Article, the Fund, after consultation with the member on the reduction of the Fund's holdings of its currency, may impose such charges as the Fund deems appropriate on its holdings of the member's currency that should have been repurchased. (d) A seventy percent majority of the total voting power shall be required for the determination of the rates of charge under (a) and (b) above, which shall be uniform for all members, and under (c) above. (e) A member shall pay all charges in special drawing rights, provided that in exceptional circumstances the Fund may permit a member to pay charges in the currencies of other members specified by the Fund,

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after consultation with them, or in its own currency. The Fund's holdings of a member's currency shall not be increased as a result of payments by other members under this provision above the level at which they would be subject to charges under (b) (ii) above. Section 9 Remuneration (a) The Fund shall pay remuneration on the amount by which the percentage of quota prescribed under (b) or (c) below exceeds the Fund's average daily balances of a member's currency held in the General Resources Account other than balances acquired under a policy that has been the subject of an exclusion under Article XXX (c). The rate of remuneration, which shall be determined by the Fund by a seventy percent majority of the total voting power, shall be the same for all members and shall be not more than, nor less than four-fifths of, the rate of interest under Article XX, Section 3. In establishing the rate of remuneration, the Fund shall take into account the rates of charge under Article V, Section 8 (b).

(b) The. percentage of quota applying for the purposes of (a) above shall be: (i) for each member that became a member before the second amendment of this Agreement, a percentage of quota corresponding to seventyfive percent of its quota on the date of the second amendment of this Agreement, and for each member that became a member after the date of the second amendment of this Agreement, a percentage of quota calculated by dividing the total of the amounts corresponding to the percentages of quota that apply to the other members on the date on which the member became a member by the total of the quotas of the other members on the same date; plus (ii) the amounts it has paid to the Fund in currency or special drawing rights under Article III, Section 3 (a) since the date applicable under (b) (i) above; and minus

(iii) the amounts it has received from the Fund in currency or special drawing rights under Article III, Section 3 (c) since the date applicable under (b) (i) above. (c) The Fund, by a seventy percent majority of the total voting power, may raise the latest percentage of quota applying for the purposes of (a) above to each member to: (i) a percentage, not in excess of one hundred percent, that shall be determined for each member on the basis of the same criteria for all members, or (ii) one hundred percent for all members. (d) Remuneration shall be paid in special drawing rights, provided that either the Fund or the member may decide that the payment to the member shall be made in its own currency. Section 10

Agreement, except Article IV and Schedule C, shall be at the rates at which the Fund accounts for these currencies in accordance with Section 11 of this Article. (c) Computations for the determination of amounts of currency in relation to quota for the purpose of applying the provisions of this Agreement shall not include currency held in the Special Disbursement Account or in the Investment Account.

Section 11 Maintenance of value (a) The value of the currencies General Resources Account terms of the special drawing exchange rates under Article

of members held in the shall be maintained in right in accordance with XIX, Section 7 (a).

(b) An adjustment in the Fund's holdings of a member's currency pursuant to this Section shall be made on the occasion of the use of that currency in an operation or transaction between the Fund and another member and at such other times as the Fund may decide or the member may request. Payments to or by the Fund in respect of an adjustment shall be made within a reasonable time, as determined by the Fund, after the date of adjustment, and at any other time requested by the member.

Section 12 Other operations and transactions (a) The Fund shall be guided in all its policies and decisions under this Section by the objectives set forth in Article VIII, Section 7 and by the objective of avoiding the management of the price, or the establishment of a fixed price, in the gold market. (b) Decisions of the Fund to engage in operations or transactions under (c), (d), and (e) below shall be made by an eighty-five percent majority of the total voting power. (c) The Fund may sell gold for the currency of any member after consulting the member for whose currency the gold is sold, provided that the Fund's holdings of a member's currency held in the General Resources Account shall not be increased by the sale above the level at which they would be subject to charges under Section 8 (b) (ii) of this Article without the concurrence of the member, and provided that, at the request of the member, the Fund at the time of sale shall exchange for the currency of another member such part of the currency received as would prevent such an increase. The exchange of a currency for the currency of another jnember shall be made after consultation with that member, and shall not increase the Fund's holdings of that member's currency above the level at which they would be subject to charges under Section 8 (b) (ii) of this Article. The Fund shall adopt policies and procedures with regard to exchanges that take into account the principles applied under Section 7 (i) of this Article. Sales under this provision to a member shall be at a price agreed for each transaction on the basis of prices in the market.

Computations (a) The value of the Fund's assets held in the accounts of the General Department shall be expressed in terms of the special drawing right. (b) All computations relating to currencies of members for the purpose of applying the provisions of this

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(d) The Fund may accept payments from a member in gold instead of special drawing rights or currency in any operations or transactions under this Agreement. Payments to the Fund undet this provision shall be at a price agreed for each operation or transaction on the basis of prices in the market.

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IMF (e) The Fund may sell gold held by it on the date of the second amendment of this Agreement to those members that were members on August 31, 1975 and that agree to buy it, in proportion to their quotas on that date. If the Fund intends to sell gold under (c) above for the purpose of (f) (ii) below, it may sell to eadi developing member that agrees to buy it that portion of the gold which, if sold under (c) above, would have produced the excess that could have been distributed to it under (f) (iii) below. The gold that would be sold under this provision to a member that has been declared ineligible to use the general resources of the Fund under Section 5 of this Article shall be sold to it when the ineligibility ceases, unless the Fund decides to make the sale sooner. The sale of gold to a member under this subsection (e) shall be made in exchange for its currency and at a price equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold. (f) Whenever under (c) above the Fund sells gold held by it on the date of the second amendment of this Agreement, an amount of the proceeds equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold shall be placed in the General Resources Account and, except as the Fund may decide otherwise under (g) below, any excess shall be held in the Special Disbursement Account. The assets held in the Special Disbursement Account shall be held separately from the other accounts of the General Department, and. may be used at any time: (i) to make transfers to the General Resources Account for immediate use in operations and transactions authorized by provisions of this Agreement other than this Section; (ii) for operations and transactions that are not authorized by other provisions of this Agreement but are consistent with the purposes of the Fund. Under this subsection (f) (ii) balance of payments assistance may be made available on special terms to developing members in difficult circumstances, and for this purpose the Fund shall take into account the level of per capita income; (iii) for distribution to those developing members that were members on August 31, 1975, in proportion to their quotas on that date, of such part of the assets that the Fund decides to use for the purposes of (ii) above as corresponds to the proportion of the quotas of these members on the date of distribution to the total of the quotas of all members on the same date, provided that the distribution under this provision to a member that has been declared ineligible to use the general resources of the Fund under Section 5 of this Article shall be made when the ineligibility ceases, unless the Fund decides to make the distribution sooner. Decisions to use assets pursuant to (i) above shall be taken by a seventy percent majority of the total voting power, and decisions pursuant to (ii) and (iii) above shall be taken by an eighty-five percent majors ity of the total voting power.

member or in marketable obligations of international financial organizations. The income of investment and interest received under (f) (11) above shall be placed in the Special Disbursement Account. No investment shall be made without the concurrence of the member whose currency is used to make the investment. The Fund shall invest only in obligations denominated In special drawing rights or in the currency used for investment.

(i) The General Resources Account shall be reimbursed from time to time in respect of the expenses of administration of the Special Disbursement Account paid from the General Resources Account by transfers from the Special Disbursement Account on the basis of a reasonable estimatè of sudi expenses. (j) The Special Disbursement Account shall be terminated in the event of the liquidation of the Fund and may be terminated prior to liquidation of the Fund by a seventy percent majority of the total voting power. Upon termination of the account because of the liquidation of the Fund, any assets in this account shall be distributed in accordance with the provisions of Schedule K. Upon termination prior to liquidation of the Fund, any assets in this account shall be transferred to the General Resources Account for immediate use in operations and transactions. The Fund, by a seventy percent majority of the total voting power, shall adopt rules and regulations for the administration of the Special Disbursement Account.

Article VI Capital transfers Section 1 Use of the Fund's general resources for capital transfers (a) A member may not use the Fund's general resources to meet a large or sustained outflow of capital except as provided in Section 2 of this Article, and the Fund may request a member to exercise controls to prevent such usé of the general resources of the Fund. If, after receiving such a request, a member fails to exercise appropriate controls, the Fund may declare the member ineligible to use the general resources of the Fund.

(b) Nothing in this Section shall be deemed: '(i) to prevent the use of the general resources of the Fund for capital transactions of reasonable amount required for the expansion of exports or in the ordinary course of trade, banking, or other business; or (ii) to affect capital movements which are met out of a member's own resources, but members undertake that such capital movements will be in accordance with the purposes of the Fund.

Section 2 Special provisions for capital transfers

(g) The Fund may decide, by an eighty-five percent majority of the total voting power, to transfer a part of the excess referred to in (f) above to the Investment Account for use pursuant to the provisions of Article XII, Section 6 (f).

A member shall be entitled to make reserve tranche purchases to meet capital transfers.

(h) Pending uses specified under (f) above, the Fund may invest a member's currency held in the Special Disbursement Account in marketable obligations of that

Controls of capital transfers

Section 3 Members may exercise such controls as are necessary to regulate international capital movements, but no mem-

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ber may exercise these controls in a manner which will restrict payments for current transactions or which will unduly delay transfers of funds in settlement of commitments, except as provided in Article VII, Section 3 (b) and in Article X I V , Section 2.

limit the demand for the scarce currency to the supply held by, or accruing to, the member in question, and they shall be relaxed and removed as rapidly as conditions permit. (c) The authorization under (b) above shall expire whenever the Fund formally declares the currency in question to be no longer scarce.

Article VII Replenishment and scarce currencies Section 1 Measures to replenish the Fund's holdings of currencies The Fund may, if it deems such action appropriate to replenish its holdings of any member's currency in the General Resources Account needed in connection with its transactions, take either or both of the following steps: (i) propose to the member that, on terms and conditions agreed between the Fund and the member, the latter lend its currency to the Fund or that, with the concurrence of the member, the Fund borrow such currency from some other source either within or outside the territories of the member, but no member shall be under any obligation to make such loans to the Fund or to concur in the borrowing of its currency b y the Fund from any other source; (ii) require the member, if it is a participant, to sell its currency to the Fund for special drawing rights held in the General Resources Account, subject to Article X I X , Section 4. In replenishing with special drawing rights, the Fund shall pay due regard to the principles of designation under Article X I X , Section 5.

Section 2 General scarcity of currency If the Fund finds that a general scarcity of a particular currency is developing, thé Fund may so inform members and may issue a report setting forth the causes of the scarcity and containing recommendations designed to bring it to an end. A representative of the member whose currency is involved shall participate in the preparation of the report. Section 3 Scarcity of the Fund's holdings (a) If it becomes evident to the Fund that the demand for a member's currency seriously threatens the Fund's ability to supply that currency, the Fund, whether or not it has issued à report under Section 2 of this Article, shall formally declare such currency scarce and shall thenceforth apportion its existing and accruing.supply of the scarce currency with due regard to the relative needs of members, the general international economic situation, and any other pertinent considerations. The Fund shall also issue a report concerning its action.

(b) A formal declaration under (a) above shall operate as an authorization to any member, after consultation with the Fund, temporarily to impose limitations on the freedom of exchange operations in the scarce currency. Subject to the provisions of Article I V and Schedule C, the member shall have complete jurisdiction in determining the nature of such limitations, but they shall be no more restrictive than is necessary to

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Section 4 Administration of restrictions Any member imposing restrictions in respect of the currency of any other member pursuant to the provisions of Section 3 (b) of this Article shall give sympathetic consideration to any representations b y the other member regarding the administration of such restrictions. Section 5 Effect of other international agreements on restrictions Members agree not to invoke the obligations of any engagements entered into with other members prior to this Agreement in such a manner as will prevent the operation of the provisions of this Article.

Article VIII General obligations of members Section 1 Introduction In addition to the obligations assumed under other articles of this Agreement, each member undertakes the obligations set out in this Article. Section 2 Avoidance of restrictions on current payments (a) Subject to the provisions of Article VII, Section 3 (b) and Article X I V , Section 2, no member shall, without the approval of the Fund, impose restrictions on the making of payments and transfers for current international transactions. (b) Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member. In addition, members may, by mutual accord, co-operate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement. Section 3 Avoidance of discriminatory currency practices No member shall engage in, or permit any of its fiscal agencies referred to in Article V , Section 1 to engage in, any discriminatory currency arrangements or multiple currency practices, whether within or outside margins under Article I V or prescribed by or under Schedule C, except as authorized under this Agreement or approved b y the Fund. If such arrangements and practices are engaged in at the date when this Agreement enters into force, the member concerned shall consult with the Fund as to their progressive removal unless they are maintained or imposed under Article X I V , Section 2, in which case the provisions of Section 3 of that Article shall apply.

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IMF Section 4 Convertibility of foreign-held balances (a) Each member shall buy balances of its currency held b y another member if the latter, in requesting the purchase, represents: (i) that the balances to be bought have been recently acquired as a result of current transactions; or (ii) that their conversion is needed for making payments for current transactions. The buying member shall have the option to pay either in special drawing rights, subject to Article XIX, Section 4, or in the currency of the member making the request. (b) The obligation in (a) above shall not apply when: (i) the convertibility of the balances has been restricted consistently with Section 2 of this Article or Article VI, Section 3? (ii) the balances have accumulated as a result of transactions effected before the removal by a member of restrictions maintained or imposed under Article XIV, Section 2; (iii) the balances have been acquired contrary to the exchange regulations of the member which is asked to buy them; (iv) the currency of the member requesting the purchase has been declared scarce under Article VII, Section 3 (a); or (v) the member requested to make the purchase is for a n y reason not entitled to buy currencies of other members from the Fund for its own currency. Section 5 Furnishing of information (a) The Fund may require members to furnish it with sudi information as it deems necessary for its activities, including,- as the minimum necessary for the effective discharge of the Fund's duties, national data on the following matters: (i) official holdings at home and abroad of (1) gold, (2) foreign exchange; (ii) holdings at home and abroad by banking and financial agencies, other than official agencies, of (1) gold, (2) foreign exchange; (iii) production of gold; (iv) gold exports and imports according to countries of destination and origin; (v) total exports and imports of merchandise, in terms of local currency values, according to countries of destination and origin; (vi) international balance of payments, including (1) trade in goods and services, (2) gold transactions, (3) known capital transactions, and (4) other items; (vii) international investment position, i.e., investments within the territories of the member owned abroad and investments abroad owned b y persons in its territories so far as it is possible to furnish this information; (viii) national income; (ix) price indices, i.e., indices of commodity prices in wholesale and retail markets and of export and import prices; (x) buying and selling rates for foreign currencies; (xi) exchange controls, i.e., a comprehensive statement of exchange controls in effect at the time of assuming membership in the Fund apd details of subsequent changes as they occur; and

(xii) where official clearing arrangements exist, details of amounts awaiting clearance in respect of commercial and financial transactions, and of the length of time during which such arrears have been outstanding. (b) In requesting information the Fund shall take into consideration the varying ability of members to furnish the data requested. Members shall be under no obligation to furnish information in such detail that the affairs of individuals or corporations are disclosed. Members undertake, however, to furnish the desired information in as detailed and accurate a manner as is practicable and, so far as possible, to avoid mere estimates. (c) The Fund may arrange to obtain further information by agreement with members. It shall act as a centre for the collection and exchange of information on monetary and financial problems, thus facilitating the preparation of studies designed to assist members in developing policies which further the purposes of the Fund. Section 6 Consultation between members regarding existing international agreements W h e r e under this Agreement a member is authorized in the special or temporary circumstances specified in the Agreement to maintain or establish restrictions on exchange transactions, and there are other engagements between members entered into prior to this Agreement which conflict with the application of such restrictions, the parties to such engagements shall consult with one another with a view to making such mutually acceptable adjustments as may be necessary. The provisions of this Article shall be without prejudice to the operation of Article VII, Section 5. Section 7 Obligation to collaborate regarding policies on reserve assets Each member undertakes to collaborate with the Fund and with other members in order to ensure that the policies of the member with respect to reserve assets shall be consistent with the objectives of promoting better international surveillance of international liquidity and making the special drawing right the principal reserve asset in the international monetary system.

Article IX Status, immunities, and privileges Section 1 Purposes of Article To enable the Fund to fulfill the functions with which it is entrusted, the status, immunities, and privileges set forth in this Article shall be accorded to the Fund in the territories of each member. Section 2 Status of the Fund The Fund shall possess full juridical personality, and in particular, the capacity: (i) to contract; (ii) to acquire and dispose of immovable and movable property; and (iii) to institute legal proceedings.

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World-wide Economic Institutions Section 3 Immunity from judicial process

The Fund, its property and its assets, wherever located and by whomsoever held, shall enjoy immunity from every form of judicial process except to the extent that it expressly waives its immunity for the purpose of any proceedings or by the terms of any contract. Section 4 Immunity from other action Property and assets of the Fund, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation, or any other form of seizure by executive or legislative action.

(b) No tax shall be levied on or in respect of salaries and emoluments paid by the Fund to Executive Directors, Alternates, officers, or employees of the Fund who are not local citizens, local subjects, or other local nationals. (c) No taxation of any kind shall be levied on any obligation or security issued b y the Fund, including any dividend or interest thereon, by whomsoever held: (i) which discriminates against such obligation or security solely because of its origin; or (ii) if the sole jurisdictional basis for such taxation is the place or currency in which it is issued, made payable or paid, or the location of any office or place of business maintained by the Fund.

Section 5 Immunity of archives The archives of the Fund shall be inviolable. Section 6 Freedom of assets from restrictions To the extent necessary to carry out the activities provided for in this Agreement, all property and assets of the Fund shall be free from restrictions, regulations, controls, and moratoria of any nature. Section 7 Privilege for communications The official communications of the Fund shall be accorded by members the same treatment as the official communications of other members. Section 8

Section 10 Application of Article Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Fund of the detailed action which it has taken. Article X Relations with other International organizations The Fund shall co-operate within the terms of this Agreement with any general international organization and with public international organizations having specialized responsibilities in related fields. Any arrangements for such co-operation which would involve a modification of any provision of this Agreement may be effected only after amendment to this Agreement under Article XXVIII.

Immunities and privileges of officers and employees Article XI All Governors, Executive Directors, Alternates, members of committees, representatives appointed under Article XII, Section 3 (j), advisors of any of the foregoing persons, officers, and employees of the Fund: (i) shall t e immune from legal process with respect to acts performed by them in their official capacity except when the Fund waives this immunity; (ii) not being local nationals, shall be granted the same immunities from immigration restrictions, alien registration requirements, and national service obligations and the same facilities as regards exchange restrictions as are accorded by members to the representatives, officials, and employees of comparable rank of other members; and (iii) shall be granted the same treatment in respect of traveling facilities as is accorded by members to representatives, officials, and employees of comparable rank of other members. Section 9

Relations with non-member countries Section 1 Undertakings regarding relations with non-member countries Each member undertakes: (i) not to engage in, nor to permit any of its fiscal agencies referred to in Article .V, Section 1 to engage in, any transactions with a non-member or with persons in a non-member's territories which would be contrary to the provisions of this Agreement or the purposes of the Fund; (ii) not to co-operate with a non-member or with persons in a non-member's territories in practices which would be contrary to the provisions of this Agreement or the purposes of the Fund; and (iii) to co-operate with the Fund with a view to the application in its territories of appropriate measures to prevent transactions with non-members or with persons in their territories which would be contrary to the provisions of this Agreement or the purposes of the Fund.

Immunities from taxation (a) The Fund, its assets, property, income, and its operations and transactions authorized by this Agreement shall be immune from all taxation and from all customs duties. The Fund shall also be immune from liability for the collection or payment of any tax or duty.

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Section 2 Restrictions on transactions ; with non-member countries Nothing in this Agreement shall affect the right of any member to impose restrictions on exchange transactions

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IMF with non-members 01 with persons in their territories unless the Fund finds that such restrictions prejudice the interests of members and are contrary to the purposes of the Fund.

Article XII Organization and management

Section 3 Executive Board (a) The Executive Board shall be responsible for conducting the business of the Fund, and for this purpose shall exercise all the powers delegated to it by the Board of Governors. (b) The Executive Board shall consist of Executive Directors with tbe Managing Director as chairman. Of the Executive Directors:

Section 1 Structure of the Fund The Fund shall have a Board of Governors, an Executive Board, a Managing Director, and a staff, and a Council if the Board of Governors decides, by an eightyfive percent majority of the total voting power, that the provisions of Schedule D shall be applied. Section 2 Board of Governors (a) All powers under this Agreement not conferred directly on the Board of Governors, the Executive Board, or the Managing Director shall be vested in the Board of Governors. The Board of Governors shall consist of one Governor and one Alternate appointed by each member in such manner as it may determine. Each Governor and each Alternate shall serve until a new appointment is made. No Alternate may vote except in the absence of his principal. The Board of Governors shall select one of the Governors as chairman. (b) The Board of Governors may delegate to the Executive Board authority to exercise any powers of the Board of Governors, except the powers conferred directly by this Agreement on the Board of Governors. (c) The Board of Governors shall hold such meetings as may be provided for b y the Board of Governors or called b y the Executive Board. Meetings of the Board of Governors shall be called whenever requested b y fifteen members or b y members having one-quarter of the total voting power. (d) A quorum for any meeting of the Board of Governors shall be a majority of the Governors having not less than two-thirds of the total voting power. (e) Each Governor shall be entitled to cast the number of votes allotted under Section 5 of this Article to the member appointing him. (f) The Board of Governors may b y regulation establish a procedure whereby the Executive Board, when it deems such action to be in the best interests of the Fund, may obtain a vote of the Governors on a specific question without calling a meeting of the Board of Governors. (g) The Board of Gov.ernors, and the Executive Board to the extent authorized, may adopt such rules and regulations as may be necessary or appropriate to conduct the business of the Fund. (h) Governors and Alternates shall serve as such without compensation from the Fund, but the Fund m a y pay them reasonable expenses incurred in attending meetings. (i) The Board of Governors shall determine the remuneration to be paid to the Executive Directors and their Alternates and the salary and terms of the contract of service of the Managing Director. (j) The Board of Governors and the Executive Board may appoint such committees as they deem advisable. Membership of committees need not be limited to Governors or Executive Directors or their Alternates,

(i) five shall be appointed by the five members having the largest quotas; and (ii) fifteen shall be elected by the other members. For the purpose of each regular election of Executive Directors, the Board of Governors, by an eighty-five percent majority of the total voting power, may increase or decrease the number of Executive Directors in (ii) above. The number of Executive Directors in (ii) above shall be reduced by one or two, as the case may be, if Executive Directors are appointed under (c) below, unless the Board of Governors décidés, by an eighty-five percent majority of the total voting power, that this reduction would hinder the effective discharge of the functions of the Executive Board or of Executive Directors or would threaten to upset a desirable balance in the Executive Board. (c) If, at the second regular election of Executive Directors and thereafter, the members entitled to appoint Executive Directors under (b) (i) above do not include the two members, the holdings of whose currencies by the Fund in the General Resources Account have been, on the average over the preceding two years, reduced below their quotas by the largest absolute amounts in terms of the special drawing right, either one or both of such members, as the case may be, may appoint an Executive Director. (d) Elections of elective Executive Directors shall be conducted at intervals of two years in accordance with the provisions of Schedule E, supplemented by such regulations as the Fund deems appropriate. For each regular election of Executive Directors, the Board of Governors may issue regulations making changes in the proportion of votes required to elect Executive Directors under the provisions of Schedule E. (e) Each Executive Director shall appoint an Alternate with full power to act for him when he is not present. W h e n the Executive Directors appointing them are present, Alternates may participate in meetings but may not vote. (f) Executive Directors shall continue in office until their successors are appointed or elected. If the office of an elected Executive Director becomes vacant more than ninety days before the end of his term, another Executive Director shall be elected for the remainder of the term by the members that elected the former Executive Director. A majority of the votes cast shall be required for election. While the office remains vacant, the Alternate of the former Executive Director shall exercise his powers, except that of appointing an Alternate. (g) The Executive Board shall function in continuous session at the principal office of the Fund and shall meet as often as the business of the Fund may require. (h) A quorum for any meeting of the Executive Board shall be a majority of the Executive Directors having not. less than one-half of the total voting power.

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World-wide Economic Institutions

(i) Each appointed Executive Director shall be entitled to cast the number of v o t e s allotted under Section 5 of this Article to the member appointing him.

(b) W h e n e v e r v o t i n g is required under Article V, Section 4 or 5, each member shall h a v e the number of v o t e s to which it is entitled under (a) a b o v e adjusted

(ii) If the v o t e s allotted to a member that appoints an Executive Director under (c) a b o v e were cast b y an Executive Director together with the votes allotted to other members as a result of the last regular election of Executive Directors, tha member m a y agree with each of the other members that Hie number of v o t e s allotted to it shall be cast by the appointed Executive Director. A member making such an agreement shall not participate in the election of Executive Directors.

(i) b y the addition of one v o t e for the equivalent of each four hundred thousand special drawing rights of net sales of its currency from the general resources of the Fund up to the date w h e n the v o t e is taken, or (ii) b y the subtraction of one v o t e for the equivalent of each four hundred thousand special drawing rights of its net purchases under Article V, Section 3 (b) and (f) up to the date w h e n the v o t e is taken, provided that neither net purchases nor net sales shall be d e e m e d at any time to e x c e e d an amount equal to the quota of the member i n v o l v e d .

(iii) Each e l e c t e d Executive Director shall be entitled to cast the number of v o t e s w h i c h counted towards his election. (iv) W h e n the provisions of Section 5 (b) of this Article are applicable, the v o t e s w h i c h an Executive Director w o u l d otherwise be entitled to cast shall be increased or decreased correspondingly. All the v o t e s w h i c h an Executive Director is entitled to cast shall be cast as a unit. (j) The Board of Governors shall adopt regulations under w h i c h a member not entitled to appoint an Executive Director under (b) a b o v e m a y send a representative to attend any meeting of the Executive Board w h e n a request made by, or a matter particularly affecting, that member is under consideration. Section 4 Managing Director and staff (a) The Executive Board shall select a Managing Director w h o shall not be a Governor or an Executive Director. The Managing Director shall be chairman of the' Executive Board, but shall h a v e no v o t e e x c e p t a deciding v o t e in case of an equal division. He m a y participate in meetings of the Board of Governors, but shall not v o t e at such meetings. The Managing Director shall c e a s e to hold office w h e n the Executive Board so decides. (b) The Managing Director shall be chief of the operating staff of tiie Fund and shall conduct, under the direction of the Executive Board, the ordinary business of the "Fund. Subject to the general control of the Executive Board, he shall be responsible for the organization, appointment, and dismissal of the staff of the Fund. (c) The Managing Director and the staff of the Fund, in the discharge of their functions, shall o w e their duty entirely to the Fund and to no other authority. Each member of the Fund shall respect the international character of this duty and shall refrain from all attempts to influence any of the staff in the discharge of these functions. (d) In appointing the staff the Managing Director shall, subject to the paramount importance of securing the highest standards of e f f i c i e n c y and of technical competence, p a y due regard to the importance of recruiting personnel on as w i d e a geographical basis as possible. Section 5 Voting (a) Each member shall h a v e t w o hundred fifty v o t e s plus one additional v o t e for each part of its quota equivalent to one hundred thousand special drawing rights.

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(c) Except as otherwise specifically provided, all decisions of the Fund shall be made b y a majority of the v o t e s cast.

Section 6 Reserves, distribution of net income, and investment (a) The Fund shall determine annually what part of its net i n c o m e shall be placed to general reserve or special reserve, and what part, if any, shall be distributed. (b) The Fund m a y use the special r e s e r v e for any purpose for w h i c h it m a y use the general reserve, except distribution. (c) If any distribution is made of the net income of any year, it shall be made to all members in proportion to their quotas. (d) The Fund, b y a s e v e n t y percent majority of the total voting power, m a y decide at any time to distribute any part of the general reserve. A n y such distribution shall be made to all members in proportion to their quotas. (e) Payments under (c) and (d) a b o v e shall be made in special drawing rights, provided that either the Fund or the member m a y decide that the payment to the member shall be made in its o w n currency. (f)

(i) The Fund m a y establish an Investment Account for the purposes of this subsection (f). The assets of the Investment A c c o u n t shall be held separately from the other accounts of the General Department. (ii) The Fund m a y decide to transfer to the Investment A c c o u n t a part of the proceeds of the sale of gold in accordance w i t h Article V, Section 12 (g) and, b y a s e v e n t y percent majority of the total voting power, m a y decide to transfer to the Investment Account, for immediate investment, currencies held in the General Resources Account. The amount of these transfers shall not e x c e e d the total amount of the general reserve and the special reserve at the time of the decision. (iii) The Fund m a y i n v e s t a member's currency held in the Investment A c c o u n t in marketable obligations of that member or in marketable obligations of international financial organizations. N o investment shall be made without the concurrence of the member w h o s e currency is used to make the investment. The Fund shall i n v e s t o n l y in obligations denominated in special drawing rights or in the currency used for investment.

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IMF (iv) The income of investment may be invested in accordance with the provisions of this subsection (f). Income not invested shall be held in the Investment Account or may be used for meeting the expenses of conducting the business oi the Fund. (v) The Fund may use a member's currency held in the Investment Account to obtain the currencies needed to meet the expenses of conducting the business of the Fund. {vi) The Investment Account shall be terminated in the event of liquidation of the Fund and may be terminated, or the amount of the investment may be reduced, prior to liquidation of the Fund by a seventy percent majority of the total voting power. The Fund, by a seventy percent majority of the total voting power, shall adopt rules and regulations regarding administration of the Investment Account, which shall be con sistent with (vii), (viii), and (ix) below. (vii) Upon termination of the Investment Account because of liquidation of the Fund, any assets in this account shall be distributed in accordance with the provisions of Schedule K, provided that a portion of these assets corresponding to the proportion of the assets transferred to this account under Article V , Section 12 (g) to the total of the assets transferred to this account shall be deemed to be assets held in the Special Disbursement Account and shall be distributed in accordance with Schedule K, paragraph 2 (a) (ii). (viii) Upon termination of the Investment Account prior to liquidation of the Fund, a portion of the assets held in this account corresponding to the proportion of the assets transferred to this account under Article V, Section 12 (g) to the total of the assets transferred to the account shall be transferred to the Special Disbursement Account if it has not been terminated, and the balance of the assets held in the Investment Account shall be transferred to the General Resources Account for immediate use in operations and transactions. (ix) On a reduction of the amount of the investment by the Fund, a portion of the reduction corre« sponding to the proportion of the assets transferred to the Investment Account under Article V, Section 12 (g) to the total of the assets transferred to this account shall be transferred to the Special Disbursement Account if it has not been terminated, and the balance of the reduction shall be transferred to the General Resources Account for immediate use in operations and transactions.

arising under this Agreement. The Fund may, by a seventy percent majority of the total voting power, decide to publish a report made to a member regarding its monetary or economic conditions and developments which directly tend to produce a serious disequilibrium in the international balance of payments of members. If the member is not entitled to appoint an Executive Director, it shall be entitled to representation in accordance with Section 3 (j) of this Article. The Fund shall not publish a report involving changes in the fundamental structure of the economic organization of members.

Article XIII Offices and depositories Section 1 Location of offices The principal office of the Fund shall be located in the territory of the member having the largest quota, and agencies or branch offices may be established in the territories of other members. Section 2 Depositories (a) Each member shall designate its central bank as a depository for all the Fund's holdings of its currency, or if it has no central bank it shall designate such other institution as may be acceptable to the Fund. (b) The Fund may hold other assets, including gold, in the depositories designated by the five members having the largest quotas and in such other designated depositories as the Fund may select. Initially, at least one-half of the holdings of the Fund shall be held in the depository designated by the member in whose territories the Fund has its principal office and at least forty percent shall be held in the depositories designated by the remaining four members referred to above. However, all transfers of gold by the Fund shall be made with due regard to the costs of transport and anticipated requirements of the Fund. In an emergency the Executive Board may transfer all or any part of the Fund's gold holdings to any place where they can be adequately protected. Section 3 Guarantee of the Fund's assets Each member guarantees all assets of the Fund against loss resulting from failure or default on the part of the depository designated by it.

Section 7 Publication of reports (a) The Fund shall publish an annual report containing an audited statement of its accounts, and shall issue, at intervals of three months or less, a summary statement of its operations and transactions and its holdings of special drawing rights, gold, and currencies of members. (b) The Fund may publish such other reports as it deems desirable for carrying out its purposes.

Section 8 Communication of views to members The Fund shall at all times have the right to communicate its views informally to any member on any matter

Article X I V Transitional arrangements Section 1 Notification to the Fund Each member shall notify the Fund whether it intends to avail itself of the transitional arrangements in Section 2 of this Article, or whether it is prepared to accept the obligations of Article VIII, Sections 2, 3, and 4. A member availing itself of the transitional arrangements shall notify the Fund as soon thereafter as it is prepared to accept these obligations.

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World-wide Economic Institutions Section 2 Exchange restrictions

A member that has notified the Fund that it intends to avail itself of transitional arrangements under this provision may, notwithstanding the provisions of any other articles of this Agreement, maintain and adapt to changing circumstances the restrictions on payments and transfers for current international transactions that were in effect on the date on which it became a member. Members shall, however, have continuous regard in their foreign exchange policies to the purposes of the Fund, and, as soon as conditions permit, they shall take all possible measures to develop such commercial and financial arrangements with other members as will facilitate international payments and the promotion of a stable system of exchange rates. In particular, members shall withdraw restrictions maintained under this Section as soon as they are satisfied that they will be able, in the absence of such restrictions, to settle their balance of payments in a manner which will not unduly encumber their access to the general resources of the Fund. Section 3 Action of the Fund relating to restrictions The Fund shall make annual reports on the restrictions in force under Section 2 of this Article. Any member retaining any restrictions inconsistent with Article VIII, Sections 2, 3, or 4 shall consult the Fund annually as to their further retention. The Fund may, if it deems such action necessary in exceptional circumstances, make representations to any member that conditions are favorable for the withdrawal of any particular restriction, or for the general abandonment of restrictions, inconsistent with the provisions of any other articles of this Agreement. The member shall be given a suitable time to reply to such representations. If the Fund finds that the member persists in maintaining restrictions which are inconsistent with the purposes of the Fund, the member shall be subject to Article XXVI, Section 2 (a).

ing Rights Department. All other operations and transactions on the account of the Fund authorized by or under this Agreement shall be conducted through the General Department. Operations and transactions pursuant to Article XVII, Section 2 shall be conducted through the General Department as well as the Special Drawing Rights Department. Section 2 Separation of assets and property All assets and property of the Fund, except resources administered under Article V, Section 2 (b), shall be held in the General Department, provided that assets and property acquired under Article XX, Section 2 and Articles XXIV and XXV and Schedules H and I shall be held in the Special Drawing Rights Department. Any assets or property held in one Department shall not be available to discharge or meet the liabilities, obligations, or losses of the Fund incurred in the conduct of the operations and transactions of the other Department, except that the expenses of conducting the business of the Special Drawing Rights Department shall be paid by the Fund from the General Department which shall be reimbursed in special drawing rights from time to time by assessments under Article XX, Section 4 made on the basis of a reasonable estimate of such expenses. Section 3 Recording and information All changes in holdings of special drawing rights shall take effect only when recorded by the Fund in the Special Drawing Rights Department. Participants shall notify the Fund of the provisions of this Agreement under which special drawing rights are used. The Fund may require participants to furnish it with such other information as it deems necessary for its functions.

Article X \ Special drawing rights

Article XVII

Section 1

Participants and other holders of special drawing rights

Authority to allocate special drawing rights To meet the need, as and when it arises, for a supplement to existing reserve assets, the Fund is authorized to allocate special drawing rights to members that are participants in the Special Drawing Rights Department. Section 2 Valuation of the special drawing right The method of valuation of the special drawing right shall be determined by the Fund b y a seventy percent majority of the total voting power, provided, however, that an eighty-five percent majority of the total voting power shall be required for a change in the principle of valuation or a fundamental change in the application of the principle in effect. Article XVI General Department and Special Drawing Rights Department Section 1 Separation of operations and transactions All operations and transactions involving special drawing rights shall be conducted through the Special Draw-

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Section 1 Participants Each member of the Fund that deposits with the Fund an instrument setting forth that it undertakes all the obligations of a participant in the Special Drawing Rights Department in accordance with its law and that it has taken all steps necessary to enable it to carry out all of these obligations shall become a participant in the Special Drawing Rights Department as of the date the instrument is deposited, except that no member shall become a participant before the provisions of this Agreement pertaining exclusively to the Special Drawing Rights Department have entered into force and instruments have been deposited under this Section by members that have at least seventy-five percent of the total of quotas. Section 2 Fund as a holder The Fund may hold special drawing rights in the General Resources Account and may accept and use them in operations and transactions conducted through the General Resources Account with participants in accordance with the provisions of this Agreement or with prescribed holders in accordance with the terms and conditions prescribed under Section 3 of this Article.

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IMF Section 3 Other holders The Fund may prescribe: (i) as holders, non-members, members that are non-participants, institutions that perform functions of a central bank for more than one member, and other official entities; (ii) the terms and conditions on which prescribed holders may be permitted to hold special drawing .rights and may accept and use them in operations and transactions with participants and other prescribed holders; and (iii) the terms and conditions on which participants and the Fund through the General Resources Account may enter into operations and transactions in special drawing rights with prescribed holders. An »eighty-five percent majority of the total voting power shall be required for prescriptions under (i) above. The terms and conditions prescribed by the Fund shall be consistent with the provisions of this Agreement and the effective functioning of the Special Drawing Rights Department.

Article XVIII Allocation and cancellation of special drawing rights Section 1 Principles and considerations governing allocation and cancellation (a) In all its decisions with respect to the allocation and cancellation of special drawing rights the Fund shall seek to meet the long-term global need, as and when it arises, to supplement existing reserve assets in such manner as will promote the attainment of its purposes and will avoid economic stagnation and deflation as well as excess demand and inflation in the world. (b) The first decision to allocate special drawing rights shall take into account, as special considerations, a collective judgment that there is a global need to supplement reserves, and the attainment of a better balance of payments equilibrium, as well as the likelihood of a better working of the adjustment process in the future. Section 2

(ii) the allocations or cancellations shall take place at other than yearly intervals; or (iii) the basis for allocations or cancellations shall be the quotas or net cumulative allocations on dates other than the dates of decisions to allocate or cancel. (d) A member that becomes a participant after a basic period starts shall receive allocations beginning with the next basic period in which allocations are made after it becomes a participant unless the Fund decides that the new participant shall start to receive allocations beginning with the next allocation after it becomes a participant. If the Fund decides that a member that becomes a participant during a basic period shall receive allocations during the remainder of that basic period and the participant was not a member on the -dates established under (b) or (c) above, the Fund shall determine the basis on which these allocations to the participant shall be made. (e) A participant sEall receive allocations of special drawing rights made pursuant to any decision to allocate unless: (i) the Governor for the participant did not vote in favor of the decision; and (ii) the participant has notified the Fund in writing prior to the first allocation of special drawing rights under that decision that it does not wish special drawing rights to be allocated to it under the decision. On the request of a participant, the Fund may decide to terminate the effect of the notice with respect to allocations of special drawing rights subsequent to the termination. (f) If on the effective date of any cancellation the amount of special drawing rights held by a participant is less than its share of the special drawing rights that are to be cancelled, the participant shall eliminate its negative balance as promptly as its gross reserve position permits and shall r e n a i n in consultation with the Fund for this purpose. Special drawing rights acquired by the participant after the effective date of the cancellation shall be applied against its negative balance and cancelled.

Section 3 Unexpected major developments The Fund may change the rates or intervals of allocation or cancellation during the rest of a basic period or change the length of a basic period or start a new basic period, if at any time the Fund finds it desirable to do so because of unexpected major developments.

Allocation and cancellation (a) Decisions of the Fund to allocate or cancel special drawing rights shall be made for basic periods which shall run consecutively and shall be five years in duration. The first basic period shall begin on the date of the first decision to allocate special drawing rights or such later date as may be specified in that decision. Any allocations or cancellations shall take place at yearly intervals. (b) The rates at which allocations are to be made shall b e expressed as percentages of quotas on the date of each decision to allocate. The rates at which special drawing rights are to be cancelled shall be expressed as percentages of net cumulative allocations of special drawing rights on the date of each decision to cancel. The percentages shall be the same for all participants. (c) In its decision for any basic period the Fund may provide, notwithstanding (a) and (b) above, that: (i) the duration of the basic period shall be other than five years; or

Section 4 Decisions on allocations and cancellations (a) Decisions under Section 2 (a), (b), and (c) or Section 3 of this Article shall be made by the Board of Governors on the basis of proposals of the Managing Director concurred in by the Executive Board. (b) Before making any proposal, the Managing Director, after having satisfied himself that it will be consistent with the provisions of Section 1 (a) of this Article, shall conduct such consultations as will enable him to ascertain that there is broad support among participants for the proposal. In addition, before making a proposal for the first allocation, the Managing Director shall satisfy himself that the provisions of Section 1 (b) of this Article hâve been met and that there is broad support among participants to begin allocations; he shall make a proposal for the first allocation as soon after the establishment of the Special Drawing Rights Department as he is so satisfied.

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(c) The Managing Director shall make proposals: (i) not later than six months before the end of each basic period; (ii) if no decision has been taken with respect to allocation or cancellation for a basic period, whenever he is satisfied that the provisions of (b) above have been met; (iii) when, in accordance with Section 3 of this Article, he considers that it would be desirable to change the rate or intervals of allocation or cancellation or change the length of a basic period or start a new basic period; or (iv) within six months of a request by the Board of Governors or the Executive Boar.d; provided that, if under (i), (iii), or (iv) above the Managing Director ascertains that there is no proposal which he considers to be consistent with the provisions of Section 1 of this Article that has broad support among participants in accordance with (b) above, he shall report to the Board of Governors and to the Executive Board. (d) An eighty-five percent majority of the power shall be required for decisions tion 2(a), (b), and (c) or Section 3 of except for decisions under Section 3 with decrease in the rates of allocation.

total voting under Secthis Article respect to a

Section 3 Requirement of need (a) In transactions under Section 2 (a) of this Article, except as otherwise provided in (c) below, a participant will b e expected to use its special drawing rights only if it has a need because of its balance of payments or its reserve position or developments in its reserves, and not for the sole purpose of changing the composition of its reserves. (b) The use of special drawing rights shall not be subject to challenge on the basis of the expectation in (a) above, but the Fund may make representations to a participant that fails to fulfill this expectation. A participant that persists in failing to fulfill this expectation shall be subject to Article XXIII, Section 2(b). (c) The Fund may waive the expectation in (a) above in any transactions in which a participant uses special drawing rights to obtain an equivalent amount of currency from a participant designated under Section 5 of this Article that would promote reconstitution by the other participant under Section 6 (a) of this Article; prevent or reduce a negative balance of the other participant; or offset the effect of a failure b y the other participant to fulfill the expectation in (a) above.

Section 4 Obligation to provide currency

Article XIX Operations and transactions in special drawing rights

Section 1 Use of special drawing rights Special drawing rights may be used in the operations and transactions authorized by or under this Agreement. Section 2 Operations and transactions between participants (a) A participant shall be entitled to use itr special drawing rights to obtain an equivalent amount of currency from a participant designated under Section 5 of this Article. (b) A participant, in agreement with another participant, may use its special drawing rights to obtain an equivalent amount of currency from the other participant. (c) The Fund, by a seventy percent majority of the total voting power, may prescribe operations in which a participant is authorized to engage in agreement with another participant on such terms and conditions as the Fund deems appropriate. The terms and conditions shall be consistent with the effective functioning of the Special Drawing Rights Department and the proper use of special drawing rights in accordance with this Agreement. (d) The Fund may make representations to a participant that enters into any operation or transaction under (b) or (c) above that in the judgment of the Fund may be prejudicial to the process of designation according to the principles of Section 5 of this Article or is otherwise inconsistent with Article XXII. A participant that persists in entering into such operations or transactions shall t>e subject to Article XXIII, Section 2 (b).

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(a) A participant designated by the Fund under Section 5 of this Article shall provide on demand a freely usable currency to a participant using special drawing rights under Section 2 (a) of this Article. A participant's obligation to provide currency shall not extend beyond the point at which its holdings of special drawing rights in excess of its net cumulative allocation are equal to twice its net cumulative allocation or such higher limit as may be agreed between a participant and the Fund. (b) A participant may provide currency in excess of the obligatory limit or any agreed higher limit. Section 5 Designation of participants to provide currency (a) The Fund shall ensure that a participant will be able to use its special drawing rights by designating participants to provide currency for specified amounts of special drawing rights for the purposes of Sections 2 (a) and 4 of this Article. Designations shall be made in accordance with the following general principles supplemented b y such other principles as the Fund may adopt from time to time: (i) A participant shall be subject to designation if its balance of payments and gross reserve position is sufficiently strong, but this will not preclude the possibility that a participant with a strong reserve position will be designated even though it has a moderate balance of payments deficit. Participants shall be designated in such manner as will promote over time a balanced distribution of holdings of special drawing rights among them. (ii) Participants shall be subject to designation in order to promote reconstitution under Section 6 (a) of this Article, to reduce negative balances in holdings of special drawing rights, or to offset the effect of failures to fulfill the expectation in Section 3 (a) of this Article.

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IMF (iii) In designating participants the Fund normally shall give priority to those that need to acquire special drawing rights to meet the objectives of designation under (ii) above. (b) In order to promote over time a balanced distribution of holdings of special drawing rights under (a) (i) above, the Fund shall apply the rules for designation in Schedule F or such rules as may be adopted under (c) below. (c) The rules for designation may be reviewed at any time and new rules shall be adopted if necessary. Unless new rules are adopted, the rules in force at the time of the review shall continue to apply.

Section 2 Charges Charges at the same rate for all participants shall be paid to the Fund by each participant on the amount of its net cumulative allocation of special drawing rights plus any negative balance of the participant or unpaid charges. Section 3 Rate of interest and charges The Fund shall determine the rate of interest by a seventy percent majority of the total voting power. The rate of charges shall be equal to the rate of interest.

Section 6

Section 4

Reconstitution

Assessments

(a) Participants that use their special drawing rights shall reconstitute their holdings of them in accordance with the rules for reconstitution in Schedule G or such rules as may be adopted under (b) below.

W h e n it is decided under Article XVI, Section 2 that reimbursement shall be made, the Fund shall levy assessments for this purpose at the same rate for all participants on their net cumulative allocations.

(b) The rules for reconstitution may be reviewed at any time and new rules shall be adopted if necessary. Unless new rules are adopted or a decision is made to abrogate rules for reconstitution, the rules in force at the time of review shall continue to apply. A seventy percent majority of the total voting power shall be required for decisions to adopt, modify, or abrogate the rules for reconstitution. Section 7 Exchange rates (a) Except as otherwise provided in (b) below, the exchange rates for transactions between participants under Section 2 (a) and (b) of this Article shall be such that participants using special drawing rights shall receive the same value whatever currencies might be provided and whichever participants provide those currencies, and the Fund shall adopt regulations to give effect to this principle.

Section 5 Payment of interest, charges, and assessments Interest, charges, and assessments shall be paid in special drawing rights. A participant that needs special drawing rights to pay any charge or assessment shall be obligated and entitled to obtain them, for currency acceptable to the Fund, in a transaction with the Fund conducted through the General Resources Account. If sufficient special drawing rights cannot be obtained in this way, the participant shall be obligated and entitled to obtain them with a freely usable currency from a participant which the Fund shall specify. Special drawing rights acquired by a participant after the date for payment shall be applied against its unpaid charges and cancelled.

Article XXI Administration of the General Department and the Special Drawing Rights Department

(b) The Fund, by an eighty-five percent majority of the total voting power, may adopt policies under which in exceptional circumstances the Fund, by a seventy percent majority of the total voting power, may authorize participants entering into transactions under Section 2 (b) of this Article to agree on exchange rates other than those applicable under (a) above. (c) The Fund shall consult a participant on the procedure for determining rates of exchange for its currency. (d) For the purpose of this provision the term participant includes a terminating participant.

Article XX Special Drawing Rights Department, Interest and diarge« Section 1 Interest Interest at the same rate for all holders shall be paid b y the Fund to each holder on the amount of its holdings of special drawing rights. The Fund shall pay the amount due to each holder whether or not sufficient charges are received to meet the payment of interest.

(a) The General Department and the Special Drawing Rights Department shall be administered in accordance with the provisions of Article XII, subject to the following provisions: (i) For meetings of or decisions by the Board of Governors on matters pertaining exclusively to the Special Drawing Rights Department only requests by, or the presence and the votes of, Governors appointed by members that are participants shall be counted for the purpose of calling meetings and determining whether a quorum exists or whether a decision is made by the required majority. (ii) For decisions by the Executive Board on matters pertaining exclusively to the Special Drawing Rights Department only Executive Directors appointed or elected by at least one member that is a participant shall be entitled to vote. Each of these Executive Directors shall be entitled to cast the number of votes allotted to the member which is a participant that appointed him or to the members that are participants whose votes counted towards his election. Only the presence of Executive Directors appointed or elected b y members that are participants and the votes allotted to members that are participants shall be counted for the purpose of determining whether

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a quorum exists or whether a decision is made by the required majority. For the purposes of this provision, an agreement under Article XII, Section 3 (i) (ii) by a member that is a participant shall entitle an appointed Executive Director to vote and cast the number of votes allotted to the member. (iii) Questions of the general administration of the Fund, including reimbursement under Article XVI, Section 2, and any question whether a matter pertains to both Departments or exclusively to the Special Drawing Rights Department shall be decided as if they pertained exclusively to the General Department. Decisions with re* spect to the method of valuation of the special drawing right, the acceptance and holding of special drawing rights in the General Resources Account of the General Department and the use of them, and other decisions affecting the operations and transactions conducted through both the General Resources Account of the General Department and the Special Drawing Rights Department shall be made by the majorities required for decisions on matters pertaining exclusively to each Department. A decision on a matter pertaining to the Special Drawing Rights Department shall so indicate.

(b) In addition to the privileges and immunities that are accorded under Article IX of this Agreement, no tax of any kind shall be levied on special drawing rights or on operations or transactions in special drawing rights. ( c ) A question of interpretation of the provisions of this Agreement on matters pertaining exclusively to the Special Drawing Rights Department shall be submitted to the Executive Board pursuant to Article XXIX (a) only on the request of a participant. In any case where the Executive Board has given a decision on a question of interpretation pertaining exclusively to the Special Drawing Rights Department only a participant may require that the question be referred to the Board of Governors under Article XXIX (b). The Board of Governors shall decide whether a Governor appointed by a member that is not a participant shall be entitled to vote in the Committee on Interpretation on questions pertaining exclusively to the Special Drawing Rights Department. (d) Whenever a disagreement arises between the Fund and a participant that has terminated its participation in the Special Drawing Rights Department or between the Fund and any participant during the liquidation of the Special Drawing Rights Department with respect to any matter arising exclusively from participation in the Special Drawing Rights Department, the disagreement shall be submitted to arbitration in accordance with the procedures in Article XXIX (c).

Article XXII

Article XXIII Suspension of operations and transactions in special drawing rights Section 1 Emergency provisions In the event of an emergency or the development of unforeseen circumstances threatening the activities of the Fund with respect to the Special Drawing Rights Department, the Executive Board, by an eighty-five percent majority of the total voting power, may suspend for a period of not more than one year the operation of any of the provisions relating to operations and transactions in special drawing rights, and the provisions of Article XXVII, Section 1 (b), (c), and (d) shall then apply. Section 2 Failure to fulfill obligations (a) If the Fund finds tfiat a participant has failed to fulfill its obligations under Article XIX, Section 4, the right of the participant to use its special drawing rights shall be suspended unless the Fund otherwise decides. (b) If the Fund finds that a participant has failed to fulfill any other obligation with respect to special drawing rights, the Fund may suspend the right of the participant to use special drawing rights it acquires after the suspension. (c) Regulations shall be adopted to ensure that before action is taken against any participant under (a) or (b) above, the participant shall be informed immediately of the complaint against it and given an adequate opportunity for stating its case, both orally and in writing. Whenever the participant is thus informed of a complaint relating to (a) above, it shall not use special drawing rights pending the disposition of the complaint. (d) Suspension under (a) or (b) above or limitation under (c) above shall not affect a participant's obligation to provide currency in accordance with Article XIX, Section 4. (e) The Fund may at any time terminate a suspension under (a) or (b) above, provided that a suspension imposed on a participant under (b) above for failure to fulfill the obligations under Article XIX, Section 6 (a) shall not be terminated until one hundred eighty days after the end of the first calendar quarter during which the participant complies with the rules for reconstitution. (f) The right of a participant to use its special drawing rights shall not be suspended because it has become ineligible to use the Fund's general resources under Article V, Section 5, Article VI, Section 1, or Article XXVI, Section2 (a). Article XXVI, Section 2 shall not apply because a participant has failed to fulfill any obligations with respect to special drawing rights.

General obligations of participants In addition to the obligations assumed with respect to special drawing rights under other articles of this Agreement, each participant undertakes to collaborate with the Fund and with other participants in order to facilitate the effective functioning of the Special Drawing Rights Department and the proper use of special drawing rights in accordance with this Agreement and with the objective of making the special drawing right the principal reserve asset in the international monetary system.

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Article XXIV Termination of participation Section 1 Right to terminate participation (a) Any participant may terminate its participation in the Special Drawing Rights Department at any time by

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IMF transmitting a notice in writing to the Fund at its principal office. Termination shall become effective on the date the notice is received. (b) À participant that withdraws from membership in the Fund shall be deemed to have simultaneously terminated its participation in the Special Drawing Rights Department.

agreement on settlement or under Schedule H and set off against that installment shall be cancelled. Section 5 Settlement of obligation to a terminating participant

Whenever the Fund is required to redeem special drawing rights held by a terminating participant, redemption shall be made with currency provided by participants specified by the Fund. These participants shall be Settlement on termination specified in accordance with the principles in Ar(a) When a participant terminates its participation in the ticle XIX, Section 5. Each specified participant shall proSpecial Drawing Rights Department, all operations vide at its option the currency of the terminating particiand transactions by the terminating participant in pant or a freely usable currency to the Fund and shall respecial drawing rights shall cease except as other- ceive an equivalent amount of special drawing rights. wise permitted under an agreement made pursuant to However, a terminating participant may use its special (c) below in order to facilitate a settlement or as' drawing rights to obtain its own currency, a freely usable provided in Sections 3, 5, and 6 of this Article or in currency, or any other asset from any holder, if the Fund Schedule H. Interest and charges that accrued^to the so permits. date of termination and assessments levied before that date but not paid shall be paid in special drawing Section 6 rights. General Resources Account transactions Section 2

(b) The Fund shall be obligated to redeem all special drawing rights held by the terminating participant, and the terminating participant shall be obligated to pay to the Fund an amount equal to its net cumulative allocation and any other amounts that may be due and payable because of its participation in the Special Drawing Rights Department. These obligations shall be set off against each other and the amount of special drawing rights held by the terminating participant that is used in the set off to extinguish its obligation to the Fund shall be cancelled. (c) A settlement shall b e made with reasonable despatch by agreement between the terminating participant and the Fund with respect to any obligation of the terminating participant or the Fund after the setoff in (b) above. If agreement on a settlement is not reached promptly the provisions of Schedule H shall apply

In order to facilitate settlement with a terminating participant, the Fund may decide that a terminating participant shall (i) use any special drawing rights held b y if after the setoff in Section 2 (b) of this Article, when they are to be redeemed, in a transaction with the Fund conducted through the General Resources Account to obtain its own currency or a freely usable currency at the option of the Fund; or (ii) obtain special drawing rights in a transaction with the Fund conducted through the General Resources Account for a currency acceptable to the Fund to meet any charges or installment due under an agreement or the provisions of Schedule H.

Article XXV Liquidation of the Special Drawing Rights Department

Section 3 Interest and charges After the date of termination the Fund shall pay interest on any outstanding balance of special drawing rights held by a terminating participant and the terminating participant shall pay charges on any outstanding obligation owed to the Fund at the times and rates prescribed under Article XX. Payment shall be made in special drawing rights. A terminating participant shall be entitled to obtain special drawing rights with a freely usable currency to pay charges or assessments in a transaction with a participant specified b y the Fund or by agreement from any other holder, or to dispose of special drawing rights received as interest in a transaction with any participant designated under Article XIX, Section 5 or by agreement with any other holder.

Section 4 Settlement of obligation to the Fund Currency received by the Fund from a terminating participant shall be used by the Fund to redeem special drawing rights held by participants in proportion to the amount by which each participant's holdings of special drawing rights exceed its net cumulative allocation at the time the currency is received by the Fund. Special drawing rights so redeemed and special drawing rights obtained b y a terminating participant under the provisions of this Agreement to meet any installment due under an

(a) The Special Drawing Rights Department may not be liquidated except by decision of the Board of Governors. In an emergency, if the Executive Board decides that liquidation of the Special Drawing Rights Department may be necessary, it may temporarily suspend allocations or cancellations and all operations and transactions in special drawing rights pending decision by the Board of Governors. A decision by the Board of Governors to liquidate the Fund shall be a decision to liquidate both the General Department and the Special Drawing Rights Department. (b) If the Board of Governors decides to liquidate the Special Drawing Rights Department, all allocations or cancellations and all operations and transactions in special drawing rights and the activities of the Fund with respect to the Special Drawing Rights Department shall cease except those incidental to the orderly discharge of the obligations of participants and of the Fund with respect to special drawing rights, and all obligations of the Fund and of participants under this Agreement with respect to special drawing rights shall cease except those set out in this Article, Article XX, Article XXI (d), Article XXIV, Article XXIX {c), and Schedule H, or any agreement reached under Article XXIV subject to paragraph 4 of Schedule H, and Schedule I. (c) Upon liquidation of the Special Drawing Rights Department, interest and charges that accrued to the date of liquidation and assessments levied before that

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d a t e b u t not paid s h a l l b e paid in s p e c i a l d r a w i n g rights. T h e F u n d s h a l l b e o b l i g a t e d to r e d e e m all s p e c i a l d r a w i n g r i g h t s h e l d b y h o l d e r s , and e a c h p a r t i c i p a n t shall b e o b l i g a t e d to p a y t h e F u n d a n a m o u n t e q u a l to its net c u m u l a t i v e a l l o c a t i o n of special drawing rights and such other amounts as m a y b e due a n d p a y a b l e b e c a u s e of its p a r t i c i p a t i o n in t h e S p e c i a l D r a w i n g R i g h t s D e p a r t m e n t . (d) L i q u i d a t i o n of t h e S p e c i a l D r a w i n g R i g h t s D e p a r t m e n t s h a l l b e a d m i n i s t e r e d in a c c o r d a n c e w i t h t h e p r o v i s i o n s of S c h e d u l e I.

(ii) A r t i c l e V I , S e c t i o n 2; (iii) A r t i c l e X I , S e c t i o n 1 ; (iv) S c h e d u l e C, p a r a g r a p h 5. (b) A s u s p e n s i o n of t h e o p e r a t i o n of a p r o y i s i o n u n d e r (a) above may not be extended beyond one year except b y t h e B o a r d of G o v e r n o r s w h i c h , b y a n e i g h t y - f i v e p e r c e n t m a j o r i t y of t h e t o t a l v o t i n g p o w e r , m a y e x t e n d a s u s p e n s i o n f o r an a d d i t i o n a l p e r i o d of not m o r e t h a n t w o y e a r s if it finds t h a t t h e e m e r g e n c y or u n f o r e s e e n c i r c u m s t a n c e s r e f e r r e d t o in (a) a b o v e c o n t i n u e to e x i s t . (c) T h e E x e c u t i v e B o a r d m a y , b y a m a j o r i t y of t h e t o t a l v o t i n g p o w e r , t e r m i n a t e s u c h s u s p e n s i o n at a n y t i m e .

Article X X V I

(d) T h e F u n d m a y adopt r u l e s w i t h r e s p e c t t o t h e s u b j e c t m a t t e r of a p r o v i s i o n during t h e p e r i o d in w h i c h its o p e r a t i o n is s u s p e n d e d .

W i t h d r a w a l from membership Section 1 R i g h t of m e m b e r s to w i t h d r a w

Section 2

A n y m e m b e r m a y w i t h d r a w f r o m t h e F u n d at a n y t i m e b y t r a n s m i t t i n g a n o t i c e in w r i t i n g t o t h e F u n d at its p r i n c i p a l office. W i t h d r a w a l s h a l l b e c o m e e f f e c t i v e on the d a t e s u c h n o t i c e is r e c e i v e d .

L i q u i d a t i o n of t h e F u n d

Section 2 Compulsory withdrawal (a) If a m e m b e r fails to fulfill a n y of its o b l i g a t i o n s u n d e r this A g r e e m e n t , t h e F u n d m a y d e c l a r e t h e m e m b e r i n e l i g i b l e t o use t h e g e n e r a l r e s o u r c e s of t h e F u n d . N o t h i n g in this S e c t i o n s h a l l b e d e e m e d to limit t h e p r o v i s i o n s of A r t i c l e V , S e c t i o n 5 or A r t i c l e V I , S e c t i o n 1. (b) If, a f t e r t h e e x p i r a t i o n of a r e a s o n a b l e p e r i o d t h e m e m b e r p e r s i s t s in its f a i l u r e to fulfill a n y of its o b l i g a t i o n s u n d e r this A g r e e m e n t , t h a t m e m b e r m a y b e r e q u i r e d to w i t h d r a w f r o m m e m b e r s h i p in t h e F u n d b y a d e c i s i o n of t h e B o a r d of G o v e r n o r s c a r r i e d b y a m a j o r i t y of t h e G o v e r n o r s h a v i n g e i g h t y - f i v e p e r c e n t of t h e t o t a l v o t i n g p o w e r . (c) R e g u l a t i o n s s h a l l b e a d o p t e d to e n s u r e t h a t b e f o r e a c t i o n is t a k e n a g a i n s t a n y m e m b e r u n d e r (a) or (b) a b o v e , t h e m e m b e r s h a l l b e i n f o r m e d in r e a s o n a b l e t i m e of t h e c o m p l a i n t a g a i n s t it a n d g i v e n a n ade q u a t e o p p o r t u n i t y for s t a t i n g its c a s e , b o t h o r a l l y a n d in w r i t i n g . Section 3 S e t t l e m e n t of a c c o u n t s w i t h m e m b e r s w i t h d r a w i n g W h e n a m e m b e r withdraws from the Fund, normal o p e r a t i o n s a n d t r a n s a c t i o n s of t h e F u n d in its c u r r e n c y s h a l l c e a s e a n d s e t t l e m e n t of all a c c o u n t s b e t w e e n it a n d the Fund shall b e made with reasonable despatch b y a g r e e m e n t b e t w e e n it a n d t h e Fund. If a g r e e m e n t is n o t r e a c h e d p r o m p t l y , t h e p r o v i s i o n s of S c h e d u l e J s h a l l a p p l y to the s e t t l e m e n t of a c c o u n t s .

Emergency provisions

Temporary suspension (a) In t h e e v e n t of a n e m e r g e n c y or t h e d e v e l o p m e n t of u n f o r e s e e n c i r c u m s t a n c e s t h r e a t e n i n g t h e a c t i v i t i e s of Fund,

the

Executive

majority

of

the

Board, total

by

an

voting

eighty-five power,

may

s u s p e n d for a p e r i o d of n o t m o r e t h a n o n e y e a r t h e o p e r a t i o n of a n y of t h e f o l l o w i n g p r o v i s i o n s : (i) A r t i c l e V , S e c t i o n s 2, 3, 7, 8 (a) (i) a n d (e);

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(c) L i q u i d a t i o n s h a l l b e a d m i n i s t e r e d in a c c o r d a n c e t h e p r o v i s i o n s of S c h e d u l e K.

with

Article X X V I I I Amendments (a) A n y p r o p o s a l to i n t r o d u c e m o d i f i c a t i o n s in this Agreement, whether emanating from a member, a G o v e r n o r , or t h e E x e c u t i v e B o a r d , s h a l l b e c o m m u n i c a t e d to t h e c h a i r m a n of t h e B o a r d of G o v e r n o r s w h o s h a l l b r i n g t h e p r o p o s a l b e f o r e t h e B o a r d of G o v e r n o r s . If t h e p r o p o s e d a m e n d m e n t is a p p r o v e d b y t h e B o a r d of G o v e r n o r s , t h e F u n d shall, b y c i r c u l a r l e t t e r or t e l e g r a m , a s k all m e m b e r s w h e t h e r t h e y a c c e p t t h e p r o p o s e d a m e n d m e n t . W h e n t h r e e - f i f t h s of t h e m e m b e r s , h a v i n g e i g h t y - f i v e p e r c e n t of t h e t o t a l v o t i n g power, have accepted the proposed amendment, the Fund shall certify the fact b y a formal communication a d d r e s s e d to all m e m b e r s .

(i) t h e right t o w i t h d r a w t i c l e X X V I , S e c t i o n 1);

Section 1

percent

(b) If t h e B o a r d of G o v e r n o r s d e c i d e s t o l i q u i d a t e t h e Fund, t h e F u n d s h a l l f o r t h w i t h c e a s e t o e n g a g e in a n y a c t i v i t i e s e x c e p t t h o s e i n c i d e n t a l t o t h e o r d e r l y coll e c t i o n a n d l i q u i d a t i o n of its a s s e t s a n d t h e s e t t l e m e n t of its l i a b i l i t i e s , a n d all o b l i g a t i o n s o f m e m b e r s u n d e r t h i s A g r e e m e n t s h a l l c e a s e e x c e p t t h o s e s e t out in t h i s A r t i c l e , in A r t i c l e X X I X (c), in S d i e d u l e J , p a r a g r a p h 7, and in S c h e d u l e K.

(b) N o t w i t h s t a n d i n g (a) a b o v e , a c c e p t a n c e b y all m e m b e r s is r e q u i r e d in t h e c a s e of a n y a m e n d m e n t modifying:

Article X X V I I

the

(a) T h e F u n d m a y n o t b e l i q u i d a t e d e x c e p t b y d e c i s i o n of t h e B o a r d of G o v e r n o r s . In a n e m e r g e n c y , if t h e E x e c u t i v e B o a r d d e c i d e s t h a t l i q u i d a t i o n of t h e F u n d m a y b e n e c e s s a r y , it m a y t e m p o r a r i l y s u s p e n d all operations and transactions, pending decision b y the B o a r d of G o v e r n o r s .

from

the

Fund

(Ar-

(ii) t h e p r o v i s i o n that no c h a n g e in a m e m b e r ' s q u o t a s h a l l b e m a d e w i t h o u t its c o n s e n t (Art i c l e III, S e c t i o n 2 (d)); a n d (iii) t h e p r o v i s i o n that no c h a n g e m a y b e m a d e in t h e p a r v a l u e of a m e m b e r ' s c u r r e n c y e x c e p t on t h e p r o p o s a l of t h a t m e m b e r ( S c h e d u l e C, p a r a g r a p h 6).

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IMF (c) Amendments shall enter into force for all members three months after the date of the formal communication unless a Shorter period is specified in the circular letter or telegram.

Article XXIX Interpretation (a) Any question of interpretation of the provisions of this Agreement arising between any member and the Fund or between any members of the Fund shall be submitted to. the Executive Board for its decision. If the question particularly affects any member not entitled to appoint an Executive Director, it shall be entitled to representation in accordance with Article XII, Section 3 (j). (b) In any cas? where the Executive Board has given a decision under (a) above, any member may require, within three months from the date of the decision, that the question be referred to the Board of Governors, whose decision shall be final. Any question referred to the Board of Governors shall be considered by a Committee on Interpretation of the Board of Governors. Each Committee member shall have one vote. The Board of Governors shall establish the membership, procedures, and voting majorities of the Committee. A decision of the Committee shall be the decision of the Board of Governors unless the Board of Governors, by an eighty-five percent majority of the total voting power, decides otherwise. Pending the result of the reference to the Board of Governors the Fund may, so far as it deems necessary, act on the basis of the decision of the Executive Board. (c) Whenever a disagreement arises between the Fund and a member which has withdrawn, or between the Fund and any member during liquidation of the Fund, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators, one appointed by the Fund, another by the member or withdrawing member, and an umpire who, unless the parties otherwise agree, shall be appointed by the President of the International Court of Justice or such other authority as may have been prescribed by regulation adopted by the Fund. The umpire shall have full power to settle all questions of procedure in any case where the parties are in disagreement with respect thereto.

(i) policies on the use of its general resources for compensatory financing of export fluctuations; (ii) policies on the use of its general resources in connection with the financing of contributions to international buffer stocks of primary products? and (iii) other policies on the use of its general resources in respect of which the Fund decides, b y an eighty-five percent majority of the total voting power, that an exclusion shall be made. (d) Payments for current transactions means payments which are not for the purpose of transferring capital, and includes, without limitation: (1) all payments due in connection with foreign trade, other current business, including services, and normal short-term banking and credit facilities; (2) payments due as interest on loans and as net income from other investments; (3) payments of moderate amount for amortization of loans or for depreciation of direct investments; and (4) moderate remittances for family living expenses. The Fund may, after consultation with the members concerned, determine whether certain specific transactions are to be considered current transactions or capital transactions. (e) Net cumulative allocation of special drawing rights means the total amount of special drawing rights allocated to a participant less its share of special drawing rights that have been cancelled under Article XVIII, Section 2 (a). (f) A freely usable currency means a member's currency that the Fund determines (i) is, in fact, widely used to make payments for international transactions, and (ii) is widely traded in the principal exchange markets. (g) Members that were members on August 31, 1975 shall be deemed to include a member that accepted membership after that date pursuant to a resolution of the Board of Governors adopted before that date.

Article XXX Explanation o! terms In interpreting the provisions of this Agreement the Fund and its members shall be guided by the following provisions: (a) The Fund's holdings of a member's currency in the General Resources Account shall include any securities accepted by the Fund under Article III, Section 4. (b) Stand-by arrangement means a decision of the Fund by which a member is assured that it will be able to make purchases from the General Resources Account in accordance with the terms of the decision during a specified period and up to a specified amount. (c) Reserve tranche purchase means a purchase by a member of special drawing rights or the currency of another member in exchange for its own currency which does not cause the Fund's holdings of the member's currency in the General Resources Account to exceed its quota, provided that for the purposes of this definition the Fund may exclude purchases and holdings under:

(h) Transactions of the Fund means exchanges of monetary assets by the Fund for other monetary assets. Operations of the Fund means other uses or receipts of monetary assets by the Fund. (i) Transactions in special drawing rights means exchanges of special drawing rights for other monetary assets. Operations in special drawing rights means other uses of special drawing rights.

Article XXXI Final provisions Section 1 Entry into force This Agreement shall enter into force when it has been signed on behalf of governments having sixty-five percent of the total of the quotas set forth in Schedule A and when the instruments referred to in Section 2 (a) of this Article have been deposited on their behalf, but in

23

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World-wide Economic Institutions Schedule A

no event shall this Agreement enter into force before M a y 1, 1945.

Quotas

Section 2

(In millions of United States dollars)

Signature (a) Each government on whose behalf this Agreement is signed shall deposit with the Government of the United States of America an instrument setting forth that it has accepted this Agreement in accordance with its law and has taken all steps necessary to enable it to carry out all of its obligations under this Agreement. (b) Each country shall become a member of the Fund as from the date of the deposit on its behalf of the instrument referred to in (a) above, except that no country shall become a member before this Agreement enters into force under Section 1 of this Article. (c) The Government of the United States of America shall inform the governments of all countries whose names are set forth in Schedule A, and the governments of all countries whose membership is approved in accordance with Article II, Section 2, of all signatures of this Agreement and of the deposit of all instruments referred to in (a) above. (d) At the time this Agreement is signed on its behalf, each government shall transmit to the Government of the United States of America one-hundredth of one percent of its total subscription in gold or United States dollars for the purpose of meeting administrative expenses of the Fund. The Government of the United States of America shall hold such funds in a special deposit account and shall transmit them to the Board of Governors of the Fund when the initial meeting has been called. If this Agreement has not come into force by December 31, 1945, the Government of the United States of America shall return such funds to the governments that transmitted them. (e) This Agreement shall remain open for signature at Washington on behalf of the governments of the countries whose names are set forth in Schedule A until December 31, 1945. (f) After December 31, 1945, this Agreement shall be open for signature on behalf of the government of any country whose membership has been approved in accordance with Article II, Section 2. (g) B y their signature of this Agreement, all governments accept it both on their own behalf and in respect of all their colonies, overseas territories, all territories under their protection, suzerainty, or authority, and all territories in respect of which they exercise a mandate. (h) Subsection (d) above shall come into force with regard to each signatory government as from the date of its signature. (The signature and depositary clause reproduced below followed the text of Article X X in the original Articles of Agreenient.)

Australia

200

Belgium

225

Bolivia

10

Brazil

150

Canada

300

Chile China Colombia Costa Rica Cuba Czechoslovakia Denmark

50 550 50 5 50 125 •)

Dominican Republic

5

Ecuador

5

Egypt El Salvador Ethiopia

45 2.5 6

France

450

Greece

40

Guatemala

5

Haiti

5

Honduras

2.5

Iceland

1

India

400

Iran

25

Iraq

8

Liberia Luxembourg Mexico Netherlands New Zealand Nicaragua Norway

5 10 90 275 50 2 50

Panama Paraguay Peru Philippine Commonwealth Poland Union of South Africa Union of Soviet Socialist Republics

5 2 25 15 125 100 1200

United Kingdom

1300

United States

2750

Uruguay

15

Venezuela

15

Yugoslavia

60

Done at Washington, in a single copy which shall remain deposited in the archives of the Government of the United States of America, which shall transmit certified copies to all governments whose names are set forth in Schedule A and to all governments whose membership is approved in accordance with Article II, Section 2.

*) The quota of Denmark «hall be determined by the Fund after the Danish Government has declared Its readiness to sign this Agree* ment but before signature takes place.

24

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IMF Schedule B Transitional provisions with respect to repurchase, payment of additional subscriptions, gold, and certain operational matters 1. Repurchase obligations that have accrued pursuant to Article V, Section 7 (b) before the date of the second amendment of this Agreement and that remain undischarged at that date shall be discharged not later than the date or dates at which the obligations had to be discharged in accordance with the provisions of this Agreement before the second amendment. 2. A member shall discharge with special drawing rights any obligation to pay gold to the Fund in repurchase or as a subscription that is outstanding at the date of the second amendment of this Agreement, but the Fund may prescribe that these payments may be made in whole or in part in the currencies of other members specified by the Fund. A non-participant shall discharge an obligation that must be paid in special drawing rights pursuant to this provision with the currencies of other members specified by the Fund. 3. For the purposes of 2 above 0.888 671 gram of fine gold shall be equivalent to one special drawing right, and the amount of currency payable under 2 above shall b e determined on that basis and on the basis of the value of the currency in terms of the special drawing right at the date of discharge. 4. A member's currency held by the Fund in excess of seventy-five percent of the member's quota at the date of the second amendment of this Agreement arid not subject to repurchase under 1 above shall be repurchased in accordance with the following rules: (i) Holdings that resulted from a purchase shall b e repurchased in accordance with the policy on the use of the Fund's general resources under which the purchase was made. (ii) Other holdings shall be repurchased not later than four years after the date of the second amendment of this Agreement. 5. Repurchases under 1 above that are not subject to 2 above, repurchases under 4 above, and any specification of currencies under 2 above shall b e in accordance with Article V, Section 7 (i). 6. All rules and regulations, rates, procedures, and decisions in effect at the date of the second amendment of this Agreement shall remain in effect until they are changed in accordance with the provisions of this Agreement. 7. To the extent that arrangements equivalent in effect to (a) and (b) below have not been completed before the date of the second amendment of this Agreement, the Fund shall (a) sell up to 25 million ounces of fine gold held by it on August 31, 1975 to those members that were members on that date and that agree to buy it, in proportion to their quotas on that date. The sale to a member under this subparagraph (a) shall be made in exchange for its currency and at a price equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold, and (b) sell up to 25 million ounces of fine gold held by it on August 31, 1975 for the benefit of developing members that were members on that date, provided, however, that the part of any profits or surplus value of the gold that corresponds to the proportion of such a member's quota on August 31,

1975 to the total of the quotas of all members on that date shall be transferred directly to each such member. The requirements under Article V, Section 12 (c) that t h e Fund consult a member, obtain a member's concurrence, or exchange a member's currency for the currencies of other members in certain circumstances shall apply with respect to currency received by the Fund as a result of sales of gold under this provision, other than sales to a member in return for its own currency, and placed in the General Resources Account. Upon the sale of gold under this paragraph 7, an amount of the proceeds in the currencies received equivalent at the time of sale to one special drawing right per 0.888 671 gram of fine gold shall be placed in the General Resources Account and other assets held by the Fund under arrangements pursuant to (b) above shall b e held separately from the general resources of the Fund. Assets that remain subject to disposition b y the Fund upon termination of arrangements pursuant to (b) above shall be transferred to the Special Disbursement Account.

Schedule C Par values 1. The Fund shall notify members that par values may be established for the purposes of this Agreement, in accordance with Article IV, Sections 1, 3, 4, and 5 and this Schedule, in terms of the special drawing right, or in terms of such other common denominator as is prescribed by the Fund. The common denominator shall not be gold or a currency. 2. A member that intends to establish a par value for its currency shall propose a par value to the Fund within a reasonable time after notice is given under 1 above. 3. Any member that does not intend to establish a par value for its currency under 1 above shall consult with the Fund and ensure that its exchange arrangements are consistent with the purposes of the Fund and are adequate to fulfill its obligations under Article IV, Section 1. 4. The Fund shall concur in or object to a proposed par value within a reasonable period after receipt of the proposal. A proposed par value shall not take effect for the purposes of this Agreement if the Fund objects to it, and the member shall be subject to 3 above. The Fund shall not object because of the domestic social or political policies of the member proposing the par value. 5. Each member that has a par value for its currency undertakes to apply appropriate measures consistent with this Agreement in order to ensure that the maximum and the minimum rates for spot exchange transactions taking place within its territories between its currency and the currencies of other members maintaining par values shall not differ from parity by more than four and one-half percent or by such other margin or margins as the Fund may adopt by an eighty-five percent majority of the total voting power. 6. A member shall not propose a change in the par value of its currency except to correct, or prevent the emergence of, a fundamental disequilibrium. A change may be made only on the proposal of the member and only after consultation with the Fund. 7. W h e n a change is proposed, the Fund shall concur in or object to the proposed par value within a reasonable period after receipt of the proposal. The Fund

25

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World-wide Economic Institutions

shall concur if it is satisfied that the change is necessary to correct, or prevent the emergence of, a fundamental disequilibrium. The Fund shall not object because of the domestic social or political policies of the member proposing the change. A proposed change in par value shall not take effect for the purposes of this Agreement if the Fund objects to it. If a member changes the par value of its currency despite the objection of the. Fund, the member shall be subject to Article XXVI, Section 2. Maintenance of an unrealistic par value by a member shall be discouraged by the Fund. 8. The par value of a member's currency established under this Agreement shall cease to exist for the purposes of this Agreement if the member informs the Fund that it intends to terminate the par value. The Fund may object to the termination of a par value by a decision taken by an eighty-five percent majority of the total voting power. If a member terminates a par value for its currency despite the objection of the Fund, the member shall be subject to Article XXVI, Section 2. A par value established under this Agreement shall cease to exist for the purposes of this Agreement if the member terminates the par value despite the objection of the Fund, or if the Fund finds that the member does not maintain rates for a substantial volume of exchange transactions in accordance with 5 above, provided that the Fund may not make such finding unless it has consulted the member and given it sixty days notice of the Fund's intention to consider whether to make a finding. 9. If the par valufi of the currency of a member has ceased to exist under 8 above, the member shall consult with the Fund and ensure that its exchange arrangements are consistent with the purposes of the Fund and are adequate to fulfill its obligations under Article IV, Section 1. 10. A member for whose currency the par value has ceased to exist under 8 above may, at any time, propose a new par value for its currency. 11. Notwithstanding 6 above, the Fund, by a seventy percent majority of the total voting power, may make uniform proportionate changes in all par values if the special drawing right is the common denominator and the changes will not affect the value of the special drawing right. The par value of a member's currency shall, however, not be changed under this provision if, within seven days after the Fund's action, the member informs the Fund that it does not wish the par value of its currency to be changed b y such action.

Sdiedule D Council 1. (a) Each member that appoints an Executive Director and each group of members that has the number of votes allotted to them cast by an elected Executive Director shall appoint to the Council one Councillor, who shall be a Governor, Minister in the government of a member, or person of comparable rank, and may appoint not more than seven Associates. The Board of Governors may change, by an eighty-five percent majority of the total voting power, the number of Associates who may be appointed. A Councillor or Associate shall serve until a new appointment is made or until the next regular election of Executive Directors, whichever shall occur sooner.

26

(b) Executive Directors, or in their absence their Alternates, and Associates shall be entitled to attend meetings of the Council, unless thè Council decides to hold a restricted session. Each member and each group of members that appoints a Councillor shall appoint an Alternate who shall be entitled to attend a meeting of the Council when the Councillor is not present, and sball have full power to act for the Councillor. 2. (a) The Council shall supervise the management and adaptation of the international monetary system, including the continuing operation of the adjustment process and developments in global liquidity, and in this connection shall review developments in the transfer of real resources to developing countries. (b) The Council shall consider proposals pursuant to Article XXVIII (a) to amend the Articles of Agreement. 3. (a) The Board of Governors may delegate to the Council authority to exercise any powers of the Board of Governors except the powers conferred directly by this Agreement on the Board of Governors. (b) Each Councillor shall be entitled to cast the number of votes allotted under Article XII, Section 5 to the member or group of members appointing him. A Councillor appointed by a group of members may cast separately the votes allotted to each member in the group. If the number of votes allotted to a member cannot be cast by an Executive Director, the member may make arrangements with a Councillor for casting the number of votes allotted to the member. (c) The Council shall not take any action pursuant to powers delegated by the Board of Governors that is inconsistent with any action taken by the Board of Governors and the Executive Board shall not take any action pursuant to powers delegated by the Board of Governors that is inconsistent with any action taken by either the Board of Governors or the Council. 4. The Council shall select a Councillor as chairman, shall adopt regulations as may be necessary or appropriate to perform its functions, and shall determine any aspect of its procedure. The Council shall hold such meetings as may be provided for by the Council or called by the Executive Board. 5. (a) The Council shall have powers corresponding to those of the Executive Board under the following provisions: Article XII, Section 2 (c), (f), (g), and (j); Article XVIII, Section 4 (a) and Section 4 (c) (iv); Article XXIII, Section 1¡ and Article XXVII, Section 1 (a). (b) For decisions by the Council on matters pertaining exclusively to the Special Drawing Rights Department only Councillors appointed by a member that is a participant or a group of members at least one member of which is a participant shall be entitled to vote. Each of these Councillors shall be entitled to cast the number of votes allotted to the member which is a participant that appointed him or to the members that are participants in the group of members that appointed him, and may cast the votes allotted to a participant with which arrangements have been made pursuant to the last sentence of 3 (b) above. (c) The Council may b y regulation establish a procedure whereby the Executive Board may obtain a vote of the Councillors on a specific question without a meeting of the Council when in the

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IMF j u d g m e n t of t h e E x e c u t i v e B o a r d a n a c t i o n m u s t b e taken by the Council which should not be postp o n e d until t h e n e x t m e e t i n g of t h e C o u n c i l a n d w h i c h d o e s n o t w a r r a n t t h e calling of a s p e c i a l meeting. (d) A r t i c l e IX, ' S e c t i o n 8 shall a p p l y t o C o u n c i l l o r s , t h e i r A l t e r n a t e s , a n d A s s o c i a t e s , a n d to a n y o t h e r p e r s o n e n t i t l e d t o a t t e n d a m e e t i n g of t h e C o u n c i l . (e) For t h e p u r p o s e s of (b) a n d 3 (b) a b o v e , a n a g r e e m e n t u n d e r A r t i c l e XII, S e c t i o n 3 (i) (ii) b y a m e m b e r , o r b y a m e m b e r t h a t is a p a r t i c i p a n t , shall e n t i t l e a C o u n c i l l o r t o v o t e a n d c a s t t h e n u m b e r of v o t e s a l l o t t e d to t h e m e m b e r . 6. T h e first s e n t e n c e of A r t i c l e XII, S e c t i o n 2 (a) shall b e d e e m e d to i n c l u d e a r e f e r e n c e to t h e Council.

Sdiedule E Election of Executive Directors

Schedule F Designation D u r i n g the first b a s i c p e r i o d the r u l e s f o r d e s i g n a t i o n shall b e as f o l l o w s : (a) P a r t i c i p a n t s subject to designation under Article XIX f S e c t i o n 5 (a) (i) s h a l l b e d e s i g n a t e d for s u d i a m o u n t s a s will p r o m o t e o v e r t i m e e q u a l i t y in t h e r a t i o s of t h e p a r t i c i p a n t s ' h o l d i n g s of s p e c i a l d r a w i n g r i g h t s in e x c e s s of t h e i r n e t c u m u l a t i v e a l l o c a t i o n s t o t h e i r official h o l d i n g s of gold and f o r e i g n e x c h a n g e . (b) T h e f o r m u l a t o g i v e e f f e c t to (a) a b o v e shall be such t h a t p a r t i c i p a n t s s u b j e c t t o d e s i g n a t i o n shall b e designated: (i) in p r o p o r t i o n to t h e i r official h o l d i n g s of gold a n d f o r e i g n e x c h a n g e w h e n t h e r a t i o s d e s c r i b e d in (a) above are equal; and (ii) in s u c h m a n n e r a s g r a d u a l l y to r e d u c e t h e d i f f e r e n c e b e t w e e n t h e r a t i o s d e s c r i b e d in (a) a b o v e that are low and the ratios that are high.

Sdiedule G Reconstitution

1. T h e e l e c t i o n of t h e e l e c t i v e E x e c u t i v e D i r e c t o r s shall be by b a l l o t of t h e G o v e r n o r s eligible to v o t e . 2. In b a l l o t i n g f o r t h e E x e c u t i v e D i r e c t o r s t o b e e l e c t e d , e a c h of t h e G o v e r n o r s eligible t o v o t e shall c a s t for o n e p e r s o n all of t h e v o t e s to w h i c h h e is e n t i t l e d u n d e r A r t i c l e XII, S e c t i o n 5 (a). T h e f i f t e e n p e r s o n s r e c e i v i n g t h e g r e a t e s t n u m b e r of v o t e s shall b e E x e c u t i v e Directors, p r o v i d e d t h a t n o p e r s o n w h o r e c e i v e d less t h a n f o u r p e r c e n t of t h e t o t a l n u m b e r of v o t e s t h a t c a n b e c a s t (eligible v o t e s ) shall b e c o n s i d e r e d e l e c t e d . 3. W h e n f i f t e e n p e r s o n s a r e n o t e l e c t e d in t h e f i r s t b a l l o t , a s e c o n d b a l l o t shall b e h e l d in w h i c h t h e r e shall v o t e o n l y (a) t h o s e G o v e r n o r s w h o v o t e d in t h e f i r s t b a l l o t for a p e r s o n n o t e l e c t e d , a n d (b) t h o s e G o v e r n o r s w h o s e v o t e s for a p e r s o n e l e c t e d a r e d e e m e d u n d e r 4 b e l o w to h a v e r a i s e d t h e v o t e s c a s t for t h a t p e r s o n a b o v e n i n e p e r c e n t of t h e e l i g i b l e v o t e s . If in t h e s e c o n d ballot t h e r e a r e m o r e c a n d i d a t e s t h a n t h e n u m b e r of E x e c u t i v e D i r e c t o r s to b e e l e c t e d , t h e p e r s o n w h o r e c e i v e d t h e l o w e s t n u m b e r of v o t e s in t h e first ballot shall b e ineligible f o r e l e c t i o n . 4. In d e t e r m i n i n g w h e t h e r t h e v o t e s c a s t b y a G o v e r n o r a r e to b e d e e m e d to h a v e r a i s e d t h e t o t a l of a n y p e r s o n a b o v e n i n e p e r c e n t of t h e eligible v o t e s t h e n i n e p e r c e n t s h a l l b e d e e m e d to i n c l u d e , first, t h e v o t e s of t h e G o v e r n o r c a s t i n g t h e l a r g e s t n u m b e r of v o t e s for s u c h p e r s o n , t h e n t h e v o t e s of t h e G o v e r n o r c a s t i n g t h e n e x t l a r g e s t n u m b e r , a n d so on until n i n e p e r c e n t is r e a c h e d .

5. A n y G o v e r n o r p a r t of w h o s e v o t e s m u s t b e c o u n t e d in o r d e r t o r a i s e t h e t o t a l of a n y p e r s o n a b o v e four p e r c e n t shall b e c o n s i d e r e d a s c a s t i n g all of h i s v o t e s for s u c h p e r s o n e v e n if t h e t o t a l v o t e s for s u c h p e r s o n thereby exceed nine percent. 6. If, a f t e r t h e s e c o n d b a l l o t , f i f t e e n p e r s o n s h a v e n o t b e e n e l e c t e d , f u r t h e r b a l l o t s shall b e h e l d on t h e s a m e p r i n c i p l e s u n t i l f i f t e e n p e r s o n s .have b e e n e l e c t e d , provided that after fourteen persons are elected, the f i f t e e n t h m a y b e e l e c t e d b y a simple m a j o r i t y of the r e m a i n i n g v o t e s a n d shall b e d e e m e d to h a v e b e e n e l e c t e d b y all s u c h v o t e s .

1. D u r i n g t h e f i r s t b a s i c p e r i o d t h e r u l e s for r e c o n s t i t u tion shall b e a s f o l l o w s : (a)

(i) A p a r t i c i p a n t shall so u s e a n d r e c o n s t i t u t e its h o l d i n g s of s p e c i a l d r a w i n g r i g h t s t h a t , f i v e y e a r s a f t e r t h e f i r s t a l l o c a t i o n a n d at t h e e n d of e a c h c a l e n d a r q u a r t e r t h e r e a f t e r , t h e a v e r a g e of its t o t a l d a i l y h o l d i n g s of s p e c i a l d r a w ing rights over the most recent five-year p e r i o d will b e n o t l e s s t h a n t h i r t y p e r c e n t of t h e a v e r a g e of i t s d a i l y n e t c u m u l a t i v e a l l o c a t i o n of s p e c i a l d r a w i n g r i g h t s o v e r t h e s a m e period. (ii) T w o y e a r s a f t e r t h e first a l l o c a t i o n a n d at t h e e n d of e a c h c a l e n d a r m o n t h t h e r e a f t e r t h e Fund shall m a k e calculations for each particip a n t so a s t o a s c e r t a i n w h e t h e r a n d to w h a t extent the participant would need to acquire s p e c i a l d r a w i n g r i g h t s b e t w e e n t h e d a t e of t h e c a l c u l a t i o n a n d t h e e n d of a n y f i v e - y e a r p e r i o d in o r d e r t o c o m p l y w i t h t h e r e q u i r e m e n t in (a) (i) a b o v e . T h e F u n d s h a l l a d o p t r e g u l a t i o n s w i t h r e s p e c t to t h e b a s e s o n w h i c h t h e s e c a l c u l a t i o n s shall b e m a d e a n d w i t h r e s p e c t t o t h e t i m i n g of t h e d e s i g n a t i o n of p a r t i c i p a n t s u n d e r A r t i c l e XIX, S e c t i o n 5 (a) (ii), in o r d e r t o assist t h e m t o c o m p l y w i t h t h e r e q u i r e m e n t in (a) (i) a b o v e . (iii) T h e F u n d s h a l l g i v e s p e c i a l n o t i c e t o a p a r t i c i p a n t w h e n t h e c a l c u l a t i o n s u n d e r (a) (ii) a b o v e i n d i c a t e t h a t it is u n l i k e l y t h a t t h e p a r t i c i p a n t will b e a b l e t o c o m p l y w i t h t h e r e q u i r e m e n t in (a) (i) a b o v e u n l e s s it c e a s e s to u s e s p e c i a l d r a w i n g r i g h t s for t h e r e s t of t h e p e r i o d for w h i c h t h e c a l c u l a t i o n w a s m a d e u n d e r (a) (ii) a b o v e . (iv) A p a r t i c i p a n t t h a t n e e d s t o a c q u i r e s p e c i a l d r a w i n g r i g h t s to fulfill this o b l i g a t i o n s h a l l b e o b l i g a t e d a n d e n t i t l e d to o b t a i n t h e m , f o r c u r r e n c y a c c e p t a b l e t o t h e F u n d , in a t r a n s a c tion with the Fund conducted through the G e n e r a l R e s o u r c e s A c c o u n t . If s u f f i c i e n t s p e cial d r a w i n g r i g h t s to fulfill this o b l i g a t i o n c a n n o t b e o b t a i n e d in this w a y , t h e p a r t i c i p a n t shall b e o b l i g a t e d a n d e n t i t l e d to o b t a i n them with a freely usable currency from a p a r t i c i p a n t w h i c h t h e F u n d shall s p e c i f y .

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World-wide Economic Institutions

(b) Participants shall also p a y due regard to the desirability of pursuing over time a balanced relationship b e t w e e n their holdings of special drawing rights and their other reserves. 2. If a participant fails to c o m p l y with the rules for reconstitution, the Fund shall determine whether or not the circumstances justify suspension under Art i d e XXIII, Section 2 (b).

Schedule H Termination of participation 1. If the obligation remaining after the set off under Art i d e XXIV, Section 2 (b) is to the terminating participant and agreement on settlement b e t w e e n the Fund and the terminating participant is not reached within six months of the date of termination, the Fund shall redeem this balance of special drawing rights in equal half-yearly installments within a maximum of f i v e y e a r s of the date of termination. The Fund shall redeem this balance as it m a y determine, either (a) b y the p a y m e n t to the terminating participant of the amounts provided b y the remaining participants to the Fund in accordance with Article XXIV, Section 5, or (b) b y permitting the terminating participant to use its special drawing rights to obtain its o w n currency or a f r e e l y usable currency from a participant specified b y the Fund, the General Resources Account, or any other holder. 2. If the obligation remaining after the set off under Article XXIV, Section 2 (b) is to the Fund and agreement on settlement is not reached within six months of the date of termination, the terminating participant shall discharge this obligation in equal half-yearly installments within three y e a r s of the date of termination or within such longer period as m a y be fixed b y the Fund. The terminating participant shall discharge this obligation, as the Fund m a y determine, either (a) b y the payment to the Fund of a f r e e l y usable currency, or (b) b y obtaining special drawing rights, in accordance w i t h Article XXIV, Section 6, from-the General Resources Account or in agreement with a participant specified b y the Fund or from any other holder, and the setoff of these special drawing rights against the installment due. 3. Installments under either 1 or 2 above shall fall due six months after the date of termination and at interv a l s of six months thereafter. « 4. In the e v e n t of the Special Drawing Rights Department going into liquidation under Article X X V within six months of the date a participant terminates its participation, the settlement b e t w e e n the Fund and that government shall be made in accordance w i t h Article X X V and Schedule I.

Schedule I Administration of liquidation of the Special Drawing Rights Department 1. In the e v e n t of liquidation of the Special Drawing Rights Department, participants shall discharge their obligations to the Fund in ten half-yearly installments, or in such longer period as the Fund m a y decide is needed, in a freely usable currency and the currencies of participants holding special drawing rights to be redeemed in any installment to the extent of such

28

redemption, as determined b y the Fund. The first half-yearly payment shall be made six months after the decision to liquidate the Special Drawing Rights Department. 2. If it is decided to liquidate the Fund within six of the date of t h e decision to liquidate the Drawing Rights Department, the liquidation Special Drawing Rights Department shall not until special drawing rights h e l d in the Resources A c c o u n t h a v e b e e n distributed in ance with the following rule:

months Special of the proceed General accord-

After the distributions made under 2 (a) and (b) of Schedule K, the Fund shall apportion its special drawing rights held in the General Resources A c c o u n t among all members that are participants in proportion to the amounts due to each participant after the distribution under 2 (b). To determine the amount due to each member for the purpose of apportioning the remainder of its holdings of each currency under 2 (d) pf Schedule K, the Fund shall deduct the distribution of special drawing rights made under this rule. 3. With the amounts r e c e i v e d under 1 above, the Fund shall redeem special drawing rights held b y holders in the following manner and order: (a) Special drawing rights held b y g o v e r n m e n t s that h a v e terminated their participation more than six months before the date the Board of Governors decides to liquidate the Special Drawing Rights Department shall be redeemed in accordance w i t h the terms of any agreement under Article X X I V or Schedule H. (b) Special drawing rights held b y holders that are not participants shall be r e d e e m e d before t h o s e held b y participants, and shall be redeemed in proportion to the amount held b y e a c h holder. (c) The Fund shall determine the proportion of special drawing rights held b y each participant in relation to its net cumulative allocation. The Fund shall first redeem special drawing rights from the participants w i t h the highest proportion until this proportion is reduced to that of the s e c o n d highest proportion; the Fund shall then redeem the special drawing rights held b y t h e s e participants in accordance w i t h their net cumulative allocations until the proportions are reduced to that of the third highest proportion; and this p r o c e s s shall be continued until the amount available for redemption is exhausted. 4. A n y amount that a participant will be entitled to receive in redemption under 3 a b o v e shall be set off against any amount to be paid under 1 above. 5. During liquidation the Fund shall p a y interest on the amount of special drawing rights held b y holders, and each participant shall pay charges on the net cumulati v e allocation of sj-scial drawing rights to it less amount of any p a y m e n t s made in accordance w i t h 1 a b o v e . The rates of interest and charges and the time of p a y m e n t shall be determined b y the Fund. Payments of interest and charges shall b e m a d e in special drawing rights to the extent possible. A participant that d o e s not hold sufficient special drawing rights t o m e e t any charges shall make the p a y m e n t w i t h a currency specified b y the Fund. Special drawing rights r e c e i v e d as charges in amounts n e e d e d for administrative e x p e n s e s shall not be u s e d for the p a y m e n t of interest, but shall be transferred to the Fund and shall be redeemed first and w i t h the currencies used b y the Fund to m e e t its e x p e n s e s . 6. W h i l e a participant is in default w i t h respect to a n y p a y m e n t required b y 1 or 5 above, no amounts shall be paid to it in accordance w i t h 3 or 5 a b o v e .

IMF 7. If after the final payments have been made to participants each participant not In default does not hold special drawing rights in the same proportion to its net cumulative allocation, those participants holding a lower proportion shall purchase from those holding a higher proportion such amounts in accordance with arrangements made b y the Fund as will make the proportion of their holdings of special drawing rights the same. Each participant in default shall p a y to the Fund its own currency in an amount equal to its default. The Fund shall apportion this currency and a n y residual claims among participants in proportion to the amount of special drawing rights held b y each and these special drawing rights shall be cancelled. The Fund shall then close the books of the Special Drawing Rights Department and all of « the Fund's liabilities arising from the allocations of special draw« ing rights and the administration of the Special Drawing Rights Department shall cease. 8. Each participant whose currency is distributed to other participants under this SAedule guarantees the unrestricted use of such currency at all times for the purchase of goods or for payments of sums due to it or to persons in its territories. Each participant so obligated agrees to compensate other participants for any loss resulting from the difference between the value at which the Fund distributed its currency under this Schedule and the value realized by such participants on disposal of its currency.

Schedule J Settlement of accounts with members withdrawing 1. The settlement of accounts with respect to the General Resource Account shall b e made according to 1 to 6 of this S&edule. The Fund shall be obligated to p a y to a member withdrawing an amount equal to its quota, plus any other amounts due to it from the Fund, less any amounts due to the Fund, including charges accruing after the date of its withdrawal; but no payment shall be made until six months after the date of withdrawal. Payments shall be made in the currency of the withdrawing member, and for this purpose the Fund may transfer to the General Resources Account holdings of the member's currency in the Special Disbursement Account or in the Investment Account in exchange for an equivalent amount of the currencies of other members in the General Resources Account selected by the Fund with their concurrence. 2. If the Fund's holdings of the currency of the withdrawing member are not sufficient to pay the net amount due from the Fund, the balance shall be paid in a freely usable currency, or in such other manner as may be agreed. If the Fund and the withdrawing member do not reach agreement within six months of the date of withdrawal, the currency in question held by the Fund shall be paid forthwith to the withdrawing member. Any balance due shall be paid in ten half-yearly installments during the ensuing five years. Each such installment shall be paid, at the option of the Fund, either in the currency of the withdrawing member acquired after its withdrawal or in a freely usable currency.

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4. If the Fund's holdings of the currency of a withdrawing member exceed the amount due to it, and if agreement on the method of settling accounts is not reached within six months of the date of withdrawal, the former member shall be obligated to redeem such excess currency in a freely usable currency. Redemption shall be made at the rates at which the Fund would sell such currencies at the time of withdrawal from the Fund. The withdrawing member shall complete redemption within five years of the date of withdrawal, or within such longer period as may be fixed by the Fund, but shall not be required to redeem in any half-yearly period more than one-tenth of the Fund's excess holdings of its currency at the date of withdrawal plus further acquisitions of the currency during such half-yearly period. If the withdrawing member does not fulfill this obligation, the Fund may in an orderly manner liquidate in any market the amount of currency which should have been redeemed. 5. Any member desiring to obtain the currency of a member which has withdrawn shall acquire it by purchase from the Fund, to the extent that such member has access to the general resources of the Fund and that such currency is available under 4 above. 6. The withdrawing member guarantees the unrestricted use at all times of the currency disposed of under 4 and 5 above for the purchase of goods or for payment of sums due to it or to persons within its territories. It shall compensate the Fund for any loss resulting from the difference between the value of its currency in terms of the special drawing right on the date of withdrawal and the value realized in terms of the special drawing right by the Fund on disposal under 4 and 5 above. 7. If the withdrawing member is indebted to the Fund as the result of transactions conducted through the Special Disbursement Account under Article V, Section 12 (f) (ii), the indebtedness shall be discharged in accordance with the terms of the indebtedness. 8. If the Fund holds the withdrawing member's currency in the Special Disbursement Account or in the Investment Account, the Fund may in an orderly manner exchange in any market for the currencies of members the amount of the currency of the withdrawing member remaining in each account after use under 1 above, and the proceeds of the exchange of the amount in each account shall be kept in that account. Paragraph 5 above and the first sentence of 6 above shall apply to the withdrawing member's currency. 9. If the Fund holds obligations of the withdrawing member in the Special Disbursement Account pursuant to Article V, Section 12 (h), or in the Investment Account, the Fund may hold them until the date of maturity or dispose of them sooner. Paragraph 8 above shall apply to the proceeds of such disinvestment. 10. In the event of the Fund going into liquidation under Article XXVII, Section 2 within six months of the date on which the member withdraws, the accounts between the Fund and that government shall b e settled in accordance with Article XXVII, Section 2 and Schedule K.

3. If the Fund fails to meet any installment which is due in accordance with the preceding paragraphs, the withdrawing member shall be entitled to require the Fund to pay the installment in any currency held by the Fund with the exception of any currency which has been declared scarce under Article VII, Section 3.

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World-wide Economic Institutions Schedule K Administration of liquidation

1. In the event of liquidation the liabilities of the Fund other than the repayment of subscriptions shall have priority in the distribution of the assets of the Fund. In meeting each such liability the Fund shall use its assets in the following order: (a) the currency in which the liability is payable; (b) gold; (c) all other currencies in proportion, so far as may be practicable, to the quotas of the members. 2. After the discharge of the Fund's liabilities in accordance with 1 above, the balance of the Fund's assets shall be distributed and apportioned as follows: (a)

(i) The Fund shall calculate the value of gold held on August 31, 1975 that it continues to hold on the date of the decision to liquidate. The calculation shall be made in accordance with 9 below and also on the basis of one special drawing right per 0.688 671 gram of fine gold on the date of liquidation. Goldequivalent to the excess of the former value over the latter shall be distributed to those members that were members on August 31, 1975 in proportion to their quotas on that date, (ii) The Fund shall distribute any assets held in the Special Disbursement Account on the date of the decision to liquidate to those members that were members on August 31, 1975 in proportion to their quotas on that date. Bach type of asset shall be distributed proportionately to members.

(b) The Fund shall distribute its remaining holdings of gold among the members whose currencies are held by the Fund in amounts less than their quotas in the proportions, but not in excess, of the amounts b y which their quotas exceed the Fund's holdings of their currencies. (c) The Fund shall distribute to each member, one-half the Fund's holdings of its currency but such distribution shall not exceed fifty percent of its quota. (d) The Fund shall apportion the remainder of its holdings of gold and each currency (i) among all the members in proportion to, but not in excess of, the amounts due to each member after the distributions under (b) and (c) above, provided that distribution under 2 (a) above shall not be taken into account for determining the amounts due, and (ii) any excess holdings of gold and currency among all the members in proportion to their quotas. 3. Each member shall redeem the holdings of its currency apportioned to other members under 2 (d)

30

above, and shall agree with the Fund within three months after a decision to liquidate upon an orderly procedure for such redemption. 4. If a member has not reached agreement with the Fund within the three-month period referred to in 3 above, the Fund shall use the currencies of other members apportioned to that member under 2 (d) above to redeem the currency of that member apportioned to other members. Each currency apportioned to a member which has not reached agreement shall be used, so far as possible, to redeem its currency apportioned to the members which have made agreements with the Fund under 3 above. 5. If a member has reached agreement with the 'Fund in accordance with 3 above, the Fund shall use the currencies of other members apportioned to that member under 2 (d) above to redeem the currency of that member apportioned to other members which have made agreements with the Fund under 3 above. Each amount so redeemed shall be redeemed in the currency of the member to which it was apportioned. 6. After carrying out the steps in the preceding paragraphs, the Fund shall pay to e a c h member the remaining currencies held for its account. 7. Each member whose currency has been distributed to other members under 6 above shall redeem such currency in the currency of the member requesting redemption, or in such other manner as may be agreed between them. If the members involved do not otherwise agree, the member obligated to redeem shall complete redemption within five years of the date of distribution, but shall not b e required to redeem in any half-yearly period more than one-tenth of the amount distributed to each other member. If the member does not fulfill this obligation, the amount of currency which should have been redeemed may be liquidated in an orderly manner in any market. 8. Each member whose currency has been distributed to other members under 6 above guarantees the unrestricted use of such currency at all times for the purchase of goods or for payment of sums due to it or to persons in its territories. Each member so obligated agrees to compensate other members for any loss resulting from the difference between the value of its currency in terms of the special drawing right on the date of the decision to liquidate the Fund and the value in terms of the special drawing right realized by such members on disposal of its currency. 9. The Fund shall determine the value of gold under this Schedule on the basis of prices in the market. 10. For the purposes of this Schedule, quotas shall be deemed to have been increased to the full extent to which they could have been increased in accordance with Article III, Section 2 (b) of this Agreement."

2. Articles of Agreement of the International Bank for Reconstruction and Development (World Bank) July 22, 1944 BGBl. 1952 II, 664 (2 U . N . T . S . 39, 134; 606 U . N . T . S . 295)

The Goverments on whose behalf Is signed agree as follows: INTRODUCTORY

the present

Agreement

ARTICLE

The International Bank for Reconstruction a n d Development is established und shall operate in accordance with the follow* Jnq provisions; ARTICLE I

Purposes The purposes of the Bank are: (i) To assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war, the reconversion of productive facilities to peacetime needs and the encouragement of the development of productive facilities and resources in less developed countries. (ii) To promote private foreign investment by means of g u a r a n t e e s or participations in loans and other investments made by private investors! and when private capital is not available on reasonable terms, to supplement private investment by providing, on suitable conditions, finance for productive purposes out of its own capital funds raised by it and its other resources. (iii)

(iv)

To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of p a y m e n t s by encouraging international investment for the development of the productive resources of members, thereby assisting in raising productivity, the standard of living and conditions of labor in their territories. To arrange the loans made or guaranteed by it in relation to international loans through other channels so that the more useful and urgent projects, large and small alike, will be dealt with first.

(v) To conduct its operations with due regard to the effect of international investment on business conditions in the territories of members and, in the immediate postwar years, to assist in bringing about a smooth transition from a wartime to a peacetime economy. The Bank shall be guided in all its decisions by the purposes set forth above. A R T I C L E II

Membership in and capital of the Bank Section 1. Membership (a) The original members of the Bank shall be those members of the International M o n e t a r y Fund which accept membership in the Bank before the date specified in Article XI, Section 2(e). (b) Membership shall be open to other members of the Fund, at such times and in accordance with such terms as may be prescribed by the Bank Section 2. Authorized capital (a) The authorized capital stock of the Bank shall be $10,000,000,000, in terms of United States dollars of the weight and fineness in effect on July 1. 1944. The capital stock shall be divided into 100,000 shares having a par value of $100,000 each, which shall be available for subscription only by members. (b) The capital stodc may be increased when the Bank deems it advisable by a three-fourths majority of the total voting power. Section 3. Subscription of shares (a) Each member shall subscribe shares of the capital stock of the Bank. The minimum number of shares to be subscribed b y the original members shall be those set forth in Schedule A.

The minimum number of shares to be subscribed b y other members shall be determined by the Bank, which shall reserve a sufficient portion of its capital stock for subscription by such members. (b) The Bank shall prescribe rules laying down the conditions under which members m a y subscribe s h a r e s of the authorized capital stodc of the Bank in addition to their minimum subscriptions. (c) If the authorized capital stodc of the Bank is increased, each member shall have a reasonable o p p o r t u n i t y to subscribe, under such conditions as the Bank shall decide, a proportion of the increase of stock equivalent to the proportion which its stodc theretofore subscribed bears to the total capital stodc of the Bank, but no member shall be obligated to subscribe a n y part of the increased capital. Section 4. Issue price oi shares Shares included in the minimum subscriptions of original m e m b e r s shall be issued at. par. O t h e r shares shall be issued at par unless the Bank by a m a j o r i t y of the total voting power decides in special circumstances to issue them on other terms. Section 5. Division and calls of subscribed capital The subscription of each member shall be divided into two parts as follows: (i) t w e n t y percent - shall be paid or s u b j e c t to call under Section 7 (i) of this Article as needed b y the Bank for its operations] (ii) the remaining eighty percent shall b e subject to call by the Bank only w h e n required to meet obligations of the Bank created under Article IV, Sections 1 (a) (ii) and (iii). Calls on unpaid subscriptions shall be uniform on all shares. Section 6. Limitation on /¿abiJ//y Liability on s h a r e s shall be limited to the unpaid portion of t h e issue price of the shares. Section 7. Method oi payment ol subscriptions for shares Payment of subscriptions for shares shall be m a d e in gold or United States dollars and in the currencies of the m e m b e r s as follows: (i) under Section 5 (i) of this Article, two percent of the price of each share shall be p a y a b l e in gold or United States dollars, and, when calls are made, the remaining eighteen percent shall be paid in the currency of the member; (ii) w h e n a call is m a d e under Section 5 (ii) of this Article, p a y m e n t m a y be made at the option of t h e member either in gold, in United States dollars or in the currency required to discbarge the obligations of t h e Bank for the purpose for which the call is m a d e ; (Hi) w h e n a member m a k e s p a y m e n t s in any currency under (i) a n d (ii) above, such p a y m e n t s shall be made in a m o u n t s equal in value to the member's liability u n d e r the call. This liability shall be a p r o p o r t i o n a t e part of t h e subscribed capital stodc of the Bank as authorized and defined in Section 2 of this Article. Section 8. Time of p a y m e n t oi subscriptions (a) The two percent p a y a b l e on each share in gold or United States dollars under Section 7 (i) of this Article, shall be paid within sixty d a y s of the date on which the Bank begins operations, provided that (i) any original member of t h e Bank whose metropolitan territory has suffered from enemy occupation or hostilities during the present war shall be granted the right to p o s t p o n e p a y m e n t of one-half percent until five y e a r s a f t e r that date; (ii) an original member w h o cannot m a k e such a p a y m e n t because it has not recovered possession of its gold reserves which are still seized or immobilized as a result of the war m a y p o s t p o n e all p a y m e n t until s u d i date as the Bank shall decide. (b) The remainder of the price of e a d i share p a y a b l e under Section 7 |i) of this Article shall be paid as and w h e n called by the Bank, provided that

31

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World-wide Economic Institutions

(I) the Bank shall, within one year of its beginning operations, call not less than eight percent of the price of the share in addition to the payment of two percent referred to in (a) above;

(lii)

(II) not more than five percent of the price of the share shall be called in any'period of three months.

fiv)

Section 9. Maintenance of the Bank

oi value oi certain currency

holdings

(a) Whenever (i) the par value of a member's currency Is reduced, or (ii) the foreign exchange value of a member's currency has, in the opinion of the Bank, depreciated to a significant extent within that member's territories, the member shall pay to the Bank within a reasonable time an additional amount of its own currency sufficient to maintain the value, as of the- time of initial subscription, of the amount of the currency of sucii member whidi is held by the Bank and derived from currency originally paid in to the Bank by the member under Article II, Section 7 (i), from currency referred to In Article IV. Section 2 (b), or from any additional currency furnished under the provisions of the present paragraph, and which has not been repurchased by the member for gold or for the currency of any member which is acceptable to the Bank. (b) Whenever the par value of a member's currency is Increased, the Bank shall return to such member within a reasonable time an amount of that member's currency equal to the increase in the value of the amount of such currency described in (a) above (c) The provisions of the preceding paragraphs may be waived by the Bank when a uniform proportionate change in the par values of the currencies of all its members is made by the International Monetary Fund. Section 10. Restriction on disposal oi shares Shares shall not be pledged or ««cumbered In any manner whatever and they shall be transferable only to the Bank.

(v)

(vi) (vii)

A competent committee, as provided for in Article V, Section 7. has submitted a written report recommending the project after a careful study of the merits of the proposal. In the opinion of the Bank the rate of interest and other charges are reasonable and such rate, charges and the schedule for repayment of principal are appropriate to the project. In making or guaranteeing a loan, the Bank shall pay due reqard to the prospects tbat the borrower, and, if the borrower is not a member, that the guarantor, will be in position to meet its obligations under the loan; and the Bank shall act prudently in the interests both of the particular member in whose territories the project is located and of the members as a whole. In guaranteeing a loan *made by other investors, the Bank receives suitable compensation for its risk. Loans made or guaranteed by the Bank shall, except in special circumstances, be for the purpose of specific projects of reconstruction or development.

Section 5.

Use oI loans guaranteed, by the Bank

participated

in or made

(a) The Bank shall impose no conditions that the proceeds of a loan shall be -spent in the territories of any particular member or members. (b) The Bank shall make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted, with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations. (c) In the case of loans made by the Bank, it shall open an account in the name of the borrower and the amount of the loan shall be credited to this account in the currency or currencies in which the loan is made. The borrower shall be permitted by the Bank to draw on this account only to meet expenses in connection with the project as they are actually incurred.

ARTICLE III

General provisions relating to loans and guarantees Section I. Use oi resources (a) The resources and the facilities of the Bank shall be used exclusively for the benefit of members with equitable consideration to projects for development and projects for reconstruction alike. (b) For the purpose of facilitating the restoration and re» construction of the economy of members whose metropolitan territories have suffered qreat devastation from enemy occupation or hostilities, the Bank, in determining the conditions and terms of loans made to such members, shail pay special regard to lighteninq the financial burden and expediting the completion of such restoration and reconstruction. Section 2.

Dea/ings between members and the Bank

Each member shall deal with the Bank only through its Treasury, central bank stabilization fund or other similar fiscal agency, and the Bank shall deal with members only by or through the same agencies. Section 3,

Limitations on guarantees and borrowings oi the Bank The total amount outstanding of guarantees, participations in loans and direct loans made by the Bank shall not be increased at any time, if by such increase the total would exceed one hundred percent of the unimpaired subscribed capital, reserves and surplus of the Bank. Section 4.

Conditions on which the Bank may guarantee or make loans The Bank may quarantee, participate in, or make loans to any member or any political sub-division thereof and any business, industrial, and agricultural enterprise in the territories of a member, subject to the following conditions: (1) When the member in whose territories the project is located is not itself the borrower, the member or the central bank or some comparable agency of the member which is acceptable to the Bank, fully guarantees the repayment of the principal and the payment of interest and other charges on the loan. tfi) The Bank is satisfied that in the prevailing market con* dititons the borrower would be unable otherwise to obtain the loan under conditions which in the opinion of the Bank are reasonable for the borrower.

32

ARTICLE IV

Operations Section 1. Methods oi making or facilitating

loans

(a) The Bank may make or facilitate loans which satisfy the general conditions of Article III in any of the following ways: (i) By making or participating in direct loans out of its own funds corresponding to its unimpaired paid-up capital and surplus and, subject to Section 6 of this Article, to its reserves. (ii) By making or participating in direct loans out of funds raised in the market of a member, or otherwise borrowed by the Bank. (lii) By' guaranteeing in whole or in part loans made by private investors through the usual investment channels. (b) The Bank may borrow funds under (a) (ii) above or guarantee loans under (ai (iii) above only with the approval oi the member in whose markers the funds are raised and the member in whose currency the loan is denominated, and only If those members agree that the proceeds may be exchanged for the currency of'any other member without restriction. Section 2,

Availability

and transferability

of currencies

(a) Currencies paid into the Bank under Article II, Section 7 (i), shall be loaned only with the approval in each case of the member whose currency is involved: provided, however, that if necessary, after the Bank's subscribed capital has been entirely called, such currencies shall, without restriction by the members whose currencies are offered, be used or exchanged foT the currencies required to meet contractual payments of interest, other charges or amortization on the Bank's own borrowings, or to meet the Bank's liabilities with respect to such contractual payments on loans guaranteed by the Bank. (b) Currencies received by the Bank from borrowers or guarantors in payment on account of principal of direct loans made with currencies referred to in (a) above shall be exchanged for the currencies of other members or reloaned only with the

World Bank approval in each case of the members whose currencies are Involved; provided, however that if necessary, after the Bank's subscribed capita) has been entirely called, sudi currencies shall, without restriction by the members whose currencies are offered, be used or exchanged for the currencies required to meet contractual payments of interest, other charges or amortization on the Bank's own borrowings, or to meet the Bank's liabilities with respect to such contractual payments on loans guaranteed by the Bank. (c) Currencies received by the Bank from borrowers or guarantors in payment on account of principal of direct loans made by the Bank under Section 1 (a) (ii) of this Article, shall be held and used, without restriction by the members, to make amortization payments, or to anticipate payment of or repurchase part or all of the Bank's own obligations. (d) All other currencies available to the Bank, Including those raised in the market or otherwise borrowed under Section 1 (a) (ii) of this Article, those obtained by the sale of qold, those received as payments of interest and other charges for direct loans made under Sections 1 (a) (i) and (ii), and those received as payments of commisions and other charges under Section 1 (a) (iii), shall be used or exchanged for other currencies or qold required in the operations ol the Bank without restriction by the members whose currencies are offered. (e) Currencies raised in the markets of members by borrowers on loans guaranteed by the Bank under Section 1 (a) (Hi) of this Article, shall also be used or exchanged for other currencies without restriction by such members. Section 3.

Provision of currencies ioi direct loans

The following provisions shall apply to direct loans under Sections 1 (a) (i) and (ii) of this Article: (a) The Bank shall furnish the borrower with such currencies of members, other than the member in whose territories the project is located, as are needed by the borrower for expend)* tu res to be made in the territories of such other members to carry out the purposes of the loan. (b) The Bank may, in exceptional circumstances when local currency required for the purposes of the loan cannot be raised by the borrower on reasonable terms, provide the borrower as part of the loan with an appropriate amount of that currency. (c) The Bank, if the project gives rise indirectly to an increased need for foreign exchange by the member in whose territories the project is located, may in exceptional circumstances provide the borrower as part of the loan with an appropriate amount of gold or foreign exchange not in excess of the borrower's local expenditure in connection with the purposes of the loan. (d) The Bank may, in exceptional circumstances, at the request of a member in whose territories a portion of the loan Is spent, repurchase with gold or foreign exchange a part of that member's currency thus spent but in no case shall the part so repurchased exceed the amount by which the expends ture of the loan in those territories gives rise to an increased need for foreign exdiange. Section 4. Payment provisions /or direct Joans Loan contracts under Section 1 (a) (i) or (ii) of this Article shall be made in accordance with the following payment provisions: (a) The terms and conditions of interest and amortization payments, maturity and dates of payment of each loan shall be determined by the Bank. The Bank shall also determine the rate and any other terms and conditions of commission to be charged in connection with such loan. In the case of loans made under Section 1 (a) (ii) of this Article during the first ten years of the Bank's operations, this rate of .commission shall be not less than one percent per annum and not greater than one and one-half percent per annum, and shall be charged on the outstanding portion of any such loan. At the end of this period of ten years, the rate of commission may be reduced by the Bank with respect both to the outstanding' portions of loans already made and to future loans, if the reserves accumulated by the Bank under Section 6 of this Article and out of other earnings are considered by it sufficient to justify a reduction. In the case of future loans the Bank shall also have discretion to increase the rate of commission beyond the above limit, if experience indicates that an increase is advisable. (b) All loan contracts shall stipulate the currency or currencies in which payments under the contract shall be made to the Bank. At the option of the borrower, however, such payments may be made in-gold, or subject to the agreement of the Bank, in the currency of a member other than that prescribed in the contract.

Doc. 2

(i) In the case of loans made under Section 1 (a) (i) of this Article, the loan contracts shall provide that payments to the Bank of interest, other charges and amortization shall be made in the currency loaned, unless the member whose currency is loaned agrees that such payments shall be made in some other specified currency or currencies. These payments, subject to the provisions of Article II, Section 9 (c), shall be equivalent to the value of such contractual payments at the time the loans were made, in terms of a currency specified for the purpose by the Bank by a three-fourth majority of the total voting power. (Ii) In the case of loans made under Section 1 (a) (ii) of this Article, the total amount outstanding and payable to the Bank in any one currency shall at no time exceed the total amount of the outstanding borrowings made by the Bank under Section 1 (a) (ii) and payable in the same currency. (c) If a member suffers from an acute exchange stringency, so that the service of any loan contracted by that member or guaranteed by it or by one of its agencies cannot be provided In the stipulated manner, the member concerned may apply to the Bank for a relaxation of the conditions of payment. If the Bank is satisfied that some relaxation is in the interests of the particular member and of the operations of the Bank and of its members as a whole, it may take action under either, or both, of the following paragraphs with respect to the whole, or part, of the annual service: 0) The Bank may, in its discretion, make arrangements with the member concerned to accept service payments on the loan in the member's currency for periods not to exceed three years upon appropriate terms regarding the use of such currency and the ma.otenance of its foreign exchange value; ahd for the repurchase of such currency on appropriate terms. (11) The Bank may modify the terms of amortization or extend the life of the loan, or both. Section 5. Guarantees (a) In guaranteeing a loan placed through the usual investment channels, the Bank shall charge a guarantee commission payable periodically on the amount of the loan outstanding at a rate determined by the Bank. During the first ten years of the Bank's operations, this rate shall be not less than one percent per annum and not greater than one and one-half percent peT annum. At the end of this period of ten years, the rate of commission may be reduced by the Bank with respect both to the outstanding portions of loans already guaranteed and to future loans if the reserves accumulated by the Bank under Section 6 of this Article and out of other earnings are considered by it sufficient to justify a reduction. In the case of future loans the Bank shall also have discretion to increase the rate of commission beyond the above limit, if experience indicates that an increase is advisable. (b) Guarantee commissions shall be paid directly to the Bank by the borrower. (c) Guarantees by the Bank shall provide that the may terminate its liability with respect to interest if, default by the borrower and by the guarantor, if any, the offers to purchase, at par and interest accrued, to a designated in the offer, the bonds or other obligations ranteed.

Bank upon Bank dale gua-

(dj The Bank shall have power to determine any terms and conditions of the guarantee.

other

Section 6. Special reserve The amount of commissions received by the Bank under Sections 4 and 5 of this Article shall be set aside as a special reserve which shall be kept available for meeting liabilities of the Bank in accordance with Section 7 of this Article. The special reserve shall be held in such liquid form, permitted unter this Agreement, as the Executive Directors may decide. Section 7.

Methods oi meeting ¡¡abilities ol the Bank in case ol defaults In cases of default on loans made, participated in, or guaranteed by the Bank: (a) The Bank shall make such arrangements as may be feasible to adjust the obligations under the loans, including arrangements under or analogous to those provided in Section 4 (c) of this Article. (b) The payments in discharga^>f the Bank's liabilities on borrowings or guarantees under Section 1 (a) (ii) und (iii) of this Article shall be charged: (1) first, against the special reserve provided in Section 6 of this "Article.

33

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World-wide Economic Institutions

(ii) then, to the e x t e n t n e c e s s a r y a n d at tbe discretion of the Bank, a g a i n s t the o t h e r reserves, s u r p l u s a n d capital a v a i l a b l e to t h e Bank. (c) W h e n e v e r n e c e s s a r y to m e e t c o n t r a c t u a l p a y m e n t s of Interest, other charges or a m o r t i z a t i o n on t h e B a n k ' s o w n borrowings, or to m e e t t h e B a n k ' s liabilities with r e s p e c t to similar p a y m e n t s on l o a n s g u a r a n t e e d b y it, t b e Bank m a y call a n a p p r o p r i a t e a m o u n t of t h e unpaid s u b s c r i p t i o n s of m e m b e r s in a c c o r d a n c e with A r t i c l e II, S e c t i o n s 5 and 7. M o r e o v e r , if It b e l i e v e s t h a t a d e f a u l t m a y b e of long d u r a t i o n , t h e Bank m a y call a n a d d i t i o n a l a m o u n t of such u n p a i d s u b s c r i p t i o n s n o t to e x c e e d in a n y o n e y e a r o n e p e r c e n t of the total s u b s c r i p t i o n s of the m e m b e r s for t h e following p u r p o s e s : |i) T o r e d e e m prior to m a t u r i t y , or o t h e r w i s e discharge its liability on, all or p a r t of the o u t s t a n d i n g principal of a n y loan g u a r a n t e e d by it in respect of which the d e b t o r is in default. (ii) To repurchase, or o t h e r w i s e discharge its liability all or part of its o w n o u t s t a n d i n g b o r r o w i n g s .

on,

Section 8. M/sceJ/aneous operations In addition to the o p e r a t i o n s specified e l s e w h e r e in this A g r e e m e n t , the Bank shall h a v e the p o w e r : (i) To b u y and sell securities it h a s issued a n d to b u y and sell securities w h i d i it h a s g u a r a n t e e d or in which it h a s invested, p r o v i d e d t h a t the Bank shall o b t a i n t h e a p p r o v a l of the m e m b e r in w h o s e t e r r i t o r i e s the securities a r e to be b o u g h t or sold. (ii) To g u a r a n t e e securities in w h i d i it h a s i n v e s t e d for the p u r p o s e of facilitating their sale. (iii) To b o r r o w the c u r r e n c y of a n y m e m b e r with t h e a p p r o v a l of that m e m b e r . (iv) To b u y and sell such o t h e r securities as the D i r e c t o r s by a t h r e e - f o u r t h s m a j o r i t y of t h e total v o t i n g p o w e r m a y deem p r o p e r for the i n v e s t m e n t of all or p a r t of the special r e s e r v e under Section 6 of this Article. In e x e r c i s i n g the p o w e r s c o n f e r r e d b y this Section, the Bank m a y deal with a n y person, p a r t n e r s h i p , association, c o r p o r a t i o n or o t h e r legal e n t i t y in t h e t e r r i t o r i e s of a n y m e m b e r . Section 9. W a r n i n g to be placed on securities E v e r y s e c u r i t y g u a r a n t e e d or issued b y t h e Bank shall b e a r on its face a c o n s p i c u o u s s t a t e m e n t to the effect t h a t it is n o t a n obligation of a n y g o v e r n m e n t u n l e s s e x p r e s s l y stated on t h e security. Section 10. Poiiticai activity prohibited T h e Bank and its officers shall n o t i n t e r f e r e in the political affairs of ony m e m b e r ; nor shall t h e y be influenced in their decisions by the political character of the m e m b e r or m e m b e r s conc e r n e d . O n l y e c o n o m i c c o n s i d e r a t i o n s shall b e r e l e v a n t to their decisions, a n d t h e s e c o n s i d e r a t i o n s shall b e w e i g h e d impartially in order to achieve the p u r p o s e s s t a t e d in A r t i c l e I. .ARTICLE V

Organization and management Section 1. Structure of the Bank T h e Bank shall h a v e a Board of G o v e r n o r s , E x e c u t i v e Directors, a President a n d s u d i o t h e r officers a n d staff to p e r f o r m such d u t i e s a s the Bank m a y d e t e r m i n e . Section 2. Board of Governors (a) All the p o w e r s of t h e Bank shall b e v e s t e d in the Board of G o v e r n o r s consisting of o n e g o v e r n o r a n d o n e a l t e r n a t e app o i n t e d by each m e m b e r in such m a n n e r as it m a y d e t e r m i n e . Each g o v e r n o r and each a l t e r n a t e shall s e r v e for five y e a r s , subj e c t to the p l e a s u r e of t h e m e m b e r a p p o i n t i n g him, a n d m a y be r e a p p o i n t e d . N o a l t e r n a t e m a y v o t e e x c e p t in the a b s e n c e of his principal. T h e Board shall select o n e of the g o v e r n o r s as Chairman. (b) T h e Board of G o v e r n o r s m a y d e l e g a t e to the E x e c u t i v e D i r e c t o r s a u t h o r i t y to e x e r c i s e a n y p o w e r s of the Board, e x c e p t the p o w e r to: (i) A d m i t n e w m e m b e r s a n d d e t e r m i n e the c o n d i t i o n s of their admission; (ii) I n c r e a s e or d e c r e a s e the capital stock; (iii) S u s p e n d a m e m b e r ; (iv) Decide a p p e a l s f r o m i n t e r p r e t a t i o n s of this A g r e e m e n t g i v e n b y the E x e c u t i v e Directors; (v) M a k e a r r a n g e m e n t s to c o o p e r a t e w i t h other I n t e r n a t i o n a l o r g a n i z a t i o n s (other t h a n i n f o r m a l a r r a n g e m e n t s of a temporary and administrative character);

34

(vi) (•ii)

Decide to s u s p e n d p e r m a n e n t l y Bank and to d i s t r i b u t e its a s s e t s ;

the o p e r a t i o n s of

the

D e t e r m i n e the distribution of the n e t i n c o m e of t h e Bank.

(c) The Board of G o v e r n o r s shall hold a n a n n u a l m e e t i n g a n d such o t h e r m e e t i n g s a s may b e p r o v i d e d for b y the Board or called b y the E x e c u t i v e Directors. M e e t i n g s of the Board shall b e called by the Directors w h e n e v e r r e q u e s t e d b y five m e m b e r s or b y m e m b e r s h a v i n g o n e - q u a r t e r of the total v o t i n g p o w e r . (d) A q u o r u m for a n y m e e t i n g of the Board of G o v e r n o r s shall b e a m a j o r i t y of the G o v e r n o r s , e x e r c i s i n g not less than t w o - t h i r d s of the total voting p o w e r . (e) The Board of G o v e r n o r s m a y b y r e g u l a t i o n establish a p r o c e d u r e w h e r e b y the E x e c u t i v e Directors, w h e n they d e e m such action to be in the best i n t e r e s t s of t h e Bank, may o b t a i n a v o t e of the G o v e r n o r s on a specific q u e s t i o n w i t h o u t calling a m e e t i n g of the Board. (f) The Board of G o v e r n o r s , a n d the E x e c u t i v e Directors to the e x t e n t a u t h o r i z e d , m a y a d o p t such rules a n d r e g u l a t i o n s as may b e n e c e s s a r y o r a p p r o p r i a t e to c o n d u c t the b u s i n e s s of the Bank. (g) G o v e r n o r s a n d a l t e r n a t e s shall s e r v e a s such w i t h o u t c o m p e n s a t i o n f r o m the Bank, b u t the Bank shall pay t h e m reas o n a b l e e x p e n s e s incurred in a t t e n d i n g m e e t i n g s . (h) The Board of G o v e r n o r s shall d e t e r m i n e the r e m u n e r a tion to b e paid to t h e E x e c u t i v e Directors a n d the s a l a r y a n d t e r m s of the c o n t r a c t of s e r v i c e of the P r e s i d e n t . S e c t i o n 3. Voting (a) Each m e m b e r shall h a v e t w o h u n d r e d fifty v o t e s plus o n e a d d i t i o n a l v o t e for each s h a r e of stock held. (b) Except a s o t h e r w i s e specifically p r o v i d e d , all m a t t e r s b e f o r e the Bank shall b e d e c i d e d b y a m a j o r i t y of the v o t e s cast. Section 4. Executive Directors (a) T h e E x e c u t i v e Directors shall b e responsible, for the c o n d u c t of t h e g e n e r a l o p e r a t i o n s of the Bank, and for this purpose, shall e x e r c i s e all the p o w e r s d e l e g a t e d to t h e m b y tbe Board of G o v e r n o r s . (b) T h e r e shall be t w e l v e E x e c u t i v e Directors, w h o n e e d n o t b e g o v e r n o r s , and of w h o m : (i) five shall be a p p o i n t e d , o n e b y e a d i of the five m e m b e r s h a v i n g the largest n u m b e r of s h a r e s ; (ii) s e v e n shall b e elected a c c o r d i n g to Schedule B b y all the G o v e r n o r s o t h e r than t h o s e a p p o i n t e d b y the five m e m b e r s r e f e r r e d to in (i) a b o v e . For t i e p u r p o s e of this p a r a g r a p h , " m e m b e r s " m e a n s g o v e r n m e n t s of c o u n t r i e s w h o s e n a m e s are set forth in Schedule A, w h e t h e r t h e y are original m e m b e r s or b e c o m e m e m b e r s in a c c o r d a n c e with A r t i c l e II, Section I (b). W h e n g o v e r n m e n t s of o t h e r c o u n t r i e s b e c o m e m e m b e r s , the Board of G o v e r n o r s m a y , b y a four-fifths m a j o r i t y of the total v o t i n g p o w e r , i n c r e a s e the total n u m b e r of d i r e c t o r s b y i n c r e a s i n g the n u m b e r of d i r e c t o r s t o be elected. E x e c u t i v e directors shall be a p p o i n t e d o r e l e c t e d e v e r y t w o years. (c) Each e x e c u t i v e director shall a p p o i n t a n a l t e r n a t e with full p o w e r to act for him when he is not p r e s e n t . W h e n the e x e c u t i v e d i r e c t o r s a p p o i n t i n g t h e m are p r e s e n t , a l t e r n a t e s m a y p a r t i c i p a t e in m e e t i n g s but shall n o t vote. (dj Directors shall c o n t i n u e in office until their s u c c e s s o r s are a p p o i n t e d or elected. If the office of an e l e c t e d d i r e c t o r becomes v a c a n t m o r e t h a n n i n e t y d a y s b e f o r e the end of his term, a n o t h e r d i r e c t o r shall b e e l e c t e d for the r e m a i n d e r of the term b y the g o v e r n o r s w h o elected the former director. A m a j o r i t y of the v o t e s cast shall be required for election. W h i l e the o f f i c e rem a i n s v a c a n t , t h e a l t e r n a t e of the former d i r e c t o r shall e x e r c i s e his powers, e x c e p t t h a t of a p p o i n t i n g an a l t e r n a t e . fe) The E x e c u t i v e Directors shall f u n c t i o n in c o n t i n u o u s session at the principal office of the Bank and shall m e e t as often a s the b u s i n e s s of the Bank m a y r e q u i r e . (f) A q u o r u m for a n y m e e t i n g of t h e E x e c u t i v e D i r e c t o r s shall be a m a j o r i t y of the Directors, e x e r c i s i n g n o t less t h a n one-half of the total v o t i n g p o w e r . (g) Each a p p o i n t e d director shall b e e n t i t l e d t o cast t h e n u m b e r of v o t e s allotted u n d e r Section 3 of this A r t i c l e to t h e m e m b e r a p p o i n t i n g him. Each e l e c t e d d i r e c t o r shall b e e n t i t l e d t o cast the number- of v o t e s which c o u n t e d t o w a r d his e l e c t i o n . All tne v o t e s which a d i r e c t o r is entitled to c a s t shall b e cast a s a unit. (h) T h e Board of G o v e r n o r s shall a d o p t r e g u l a t i o n s u n d e r w h i d i a m e m b e r not entitled to appoint a d i r e c t o r under (b) a b o v e m a y s e n d a r e p r e s e n t a t i v e to a t t e n d a n y m e e t i n g of t h e E x e c u t i v e Directors w h e n a r e q u e s t m a d e by, or a m a t t e r partic u l a r l y affecting, t h a t m e m b e r is u n d e r c o n s i d e r a t i o n .

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World Bank (i) The Executive Directors may appoint such committees as they deem advisable. Membership of such committees need not be limited to governors or directors or their alternates. Section 5. President and staff fa) The Executive Directors shall select a President who shall not be a governor or an executive director or an alternate for either. The President shall be Chairman of the Executive Directors, but shall have no vote except a deciding vote In case of an equal division. He may participate in meetings of the Board of Governors, but shall not vote at such meetings. The President shall cease to hold office when the Executive Directors so decide. ib) The President shall be diief of the operating staff of the Bank, and shall conduct, under the direction of the Executive Directors, the ordinary business of the Bank. Subject to the general control of the Executive Directors, he shall be responsible for the organization, appointment and dismissal of the officers and staff. (c) The President, officers and staff of the Bank, in the discharge of their offices, owe their duty «entirely to the Bank and to no other authority. Each member of the Bank shall respect the international character of this duty and shall refrain from all attempts to influence any of thera in the discharge of thfcir duties. (d) In appointing the officers and staff the President shall, subject to the paramount importance of securing the highest standards of efficiency and of technical competence, pay due regard to the importance of recruiting personnel on as wide a geographical basis as possible. Section 6. Advisory Council (a) There shall be an Advisory Council of not less than seven persons selected by the Board of Governors including representatives of banking, commercial, industrial, labor, and aqricultural interests, and with as wide a national representation as possible. In those fields where specialized international organizations exist, the members of the Council representative of those fields shall be selected in agreement with such organizations. The Council shall advise the Bank on matters of general policy. The Council shall meet annually and on such other occasions as the Bank may request. (b) Councillors shall serve for two years and may be reappointed. They shall be paid their reasonable expenses incurred on behalf of the Bank. Section 7. Loan Committees The committees required to report on loans under Article III, Section 4, shall be appointed by the Bank. Each such committee shall include an expert selected by the governor representing the member in whose territories the project is located and one or more members of the technical staff of the Bank.

Section 8.

Relationship

to other international

organizations

(a) The Bank, within the terms of this Agreement, shall cooperate with any general international organization and with public international organizations having specialized responsibilities in related fields. Any arrangements for such cooperation which would involve a modification of any provision of this Agreement may be affected only after amendment to this Agreement under Article VIII. ib) In making decisions on applications for loans or guarantees relating to matters directly within the competence of any international organization of the types specified in the preceding paragraph and participated in primarily by members of the Bank, the Bank shall give consideration to the views and recommendations of such organization. Section 9. Location ot offices (a) Thf- principal office of the Bank shall be located in the territorv of the member holdinq the greatest number of shares. (bl The Bank may establish agencies or branch offices In the territories of any member of the Bank. Section 10. Regional offices and councils (a) The Bank may establish regional offices and determine the location of, and the areas to be covered by, each regional office fb) Each regional office shall be advised by a regional council representative of the entire area and selected in such manner as the Bank may decide. Section 11. Depositories (a) Each member shall designate its central bank as a depository for all the Banks holdings of its currency or, if it has no central bank, it shall designate such other institution as may be acceptable to the Bank

(bl The Bank may hold other assets, including gold, in depositories designated by the five members having the largest number of shares and in such other designated depositories as the Bank may select Initially, at least one-half of the gold holdings of the Bank shall be held in the depository designated by the member in whose territory the Bank' has its principal office, and at least forty percent shall be held in the depositories designated by the remaining IOUT members referred to above, each of such depositories to hold, initially, not less than the amount of gold paid on the shares of the member designating it. However, all transfers of gold by the Bank shall be made with due regard to the costs of transport and anticipated requirements of the Bank. In an emergency the Executive Directors may transfer all or any part of the Bank's gold holdings to 'any place where they can be adequately protected. Section 12. Form of holdings of currency The Bank shall accept from any member, in place of any part of the member's currency, paid in to the Bank under Article II, Section 7 (i), or to meet amortization payments on loans made with such currency, and not needed by the Bank in its operations,-notes or similar obligations issued by the Government of the member or the depository designated by such member, which shall be non-negotiable, non-interest-bearing and payable at their par value on demand by credit to the account of the Bank in the designated depository. Section 13. Publication of reports and provision of Information (a) The Bank shall publish an annual report containing an audited statement of its accounts and shall circulate to members at intervals of three months or less a summary statement of its financial position and a profit and loss statement showing the results of its operations. ib) The Bank may publish such other reports as it deems desirable to carry out its purposes. (c) Copies of all reports, statements and publications made under this section shall be distributed to members. Section 14. Allocation oi net income (a) The Board of Governors shall determine annually what part of the Bank's net income, after making provision for reserves. shall be allocated to surplus and what part, if any, shall be distributed. (bl If any part is distributed, up to two percent non-cumultative snail be paid, as a first charge against the distribution for any year, to each member on the basis of the average amount of the loans outstanding during the year made under Article IV, Section 1 (a) |1), out of currency corresponding to its subscription If two percent is paid as a first charge, any balance remaining to be distributed shall be paid to all members in proportion to their shares Payments to eadi member shall be made in its own currency, or if that currency is not available in other currency acceptable to the member If such payments are made in currencies other than the member's own currency, the transfer of the currency and its use by the receiving member after payment shall be without restriction by the members.

ARTICLE VI

Withdrawal and suspension of membership Suspension of operations Section 1. Right oi members to withdraw Any member may withdraw from the Bank at any time by transmitting a notice, in writing to the Bank at its principal office. Withdrawal shall become effective on the date such notice is received. Section 2. Suspension of membership If a member fails to fulfill any of its obligations to the Bank, the Bank may suspend its membership by decision of a majority of the Governors, exercising a majority of the total voting power. The member so suspended shall automatically cease to be a member one year from the date of its suspension unless a decision is taken by the same majority to restore the member to good standing. While under suspension, a member shall not be entitled to exercise any rights under this Agreement, except the right of withdrawal, but shall remain subject to ail obligations. Section 3. Cesaa/ion o/ membership in International Monetary Pund Any member which ceases to be a member of the International Monetary Fund shall automatically cease after three months to be a member of the Bank unless the Bank by threefourths of the total voting power has agreed to allow it to remain a member.

35

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World-wide Economic Institutions

Section 4.

S e t t l e m e n t of accounts with governments ceasing to be members (a) W h e n a g o v e r n m e n t c e a s e s to be a m e m b e r , it shall r e m a i n liable for its direct o b l i g a t i o n s to t h e Bank a n d for its c o n t i n g e n t liabilities t o the Bank so long a s a n y p a r t of t h e l o a n s o r g u a r a n t e e s c o n t r a c t e d b e f o r e it c e a s e d to b e a m e m b e r a r e o u t s t a n d i n g ; b u t it shall c e a s e t o incur liabilities with r e s p e c t to l o a n s and g u a r a n t e e s e n t e r e d into t h e r e a f t e r b y t h e B a n k a n d t o s h a r e e i t h e r in t h e i n c o m e o r t h e e x p e n s e s of t h e Bank. (b) At t h e t i m e a g o v e r n m e n t c e a s e s to be a m e m b e r , t h e B a n k shall a r r a n g e f o r t h e r e p u r c h a s e of its s h a r e s a s a p a r t of t h e s e t t l e m e n t of a c c o u n t s w i t h such g o v e r n m e n t in a c c o r d a n c e w i t h t h e p r o v i s i o n s of (c) a n d (d) b e l o w . For this p u r p o s e t h e r e p u r c h a s e p r i c e of t h e s h a r e s shall b e t h e v a l u e s h o w n b y t h e b o o k s of t h e Bank o n the d a y t h e g o v e r n m e n t c e a s e s to be a member. (c) The p a y m e n t for s h a r e s r e p u r c h a s e d b y t h e Bank u n d e r t h i s s e c t i o n shall b e g o v e r n e d b y t h e f o l l o w i n g c o n d i t i o n s : (i)

A n y a m o u n t d u e to t h e g o v e r n m e n t for its s h a r e s shall b e w i t h h e l d so long a s t h e g o v e r n m e n t , its central b a n k o r a n y of its a g e n c i e s r e m a i n s liable, a s b o r r o w e r o r g u a r a n t o r , t o t h e Bank a n d such a m o u n t m a y , at t h e o p t i o n of t h e Bank, b e applied on a n y s u d i liability as it m a t u r e s . N o a m o u n t shall b e w i t h h e l d o n a c c o u n t of t h e liability of the g o v e r n m e n t r e s u l t i n g f r o m its subs c r i p t i o n for s h a r e s u n d e r A r t i c l e II, Section 5 (ii). In a n y e v e n t , n o a m o u n t d u e t o a m e m b e r for its s h a r e s shall b e p a i d until six m o n t h s a f t e r t h e d a t e u p o n which the g o v e r n m e n t c e a s e s to b e a m e m b e r .

(ii)

P a y m e n t s for s h a r e s m a y b e m a d e f r o m t i m e t o time, u p o n t h e i r s u r r e n d e r by t h e g o v e r n m e n t , t o t h e e x t e n t b y which the a m o u n t d u e a s t h e r e p u r c h a s e p r i c e in (b) a b o v e e x c e e d s t h e a g g r e g a t e of liabilities o n l o a n s a n d g u a r a n t e e s in (c) (i) a b o v e until the f o r m e r m e m b e r h a s r e c e i v e d t h e f u l l r e p u r c h a s e price.

(lii)

P a y m e n t s shall be m a d e in the c u r r e n c y of the c o u n t r y receiving p a y m e n t or at the option of t h e Bank in gold.

(iv)

If losses a r e sustained b y the Bank on a n y g u a r a n t e e s , p a r t i c i p a t i o n s in l o a n s or l o a n s which w e r e o u t s t a n d ing on the d a t e when the g o v e r n m e n t c e a s e d to b e a member, and t h e a m o u n t of such losses e x c e e d s the a m o u n t of the r e s e r v e p r o v i d e d a g a i n s t l o s s e s on t h e d a t e w h e n the g o v e r n m e n t c e a s e d to b e a m e m b e r , such g o v e r n m e n t shall b e o b l i g a t e d to r e p a y u p o n demand the a m o u n t by w h i c h - t h e r e p u r c h a s e price of its s h a r e s w o u l d h a v e b e e n r e d u c e d , if t h e losses had b e e n t a k e n into a c c o u n t w h e n t h e r e p u r c h a s e p r i c e w a s determined. In addition, the f o r m e r m e m b e r g o v e r n m e n t shall remain liable an any call for unpaid s u b s c r i p t i o n s undei Article II, Section 5 (ii), to t h e e x t e n t that it would h a v e b e e n required to r e s p o n d if the impairment of capital had o c c u r r e d and the call had b e e n m a d e at the time the repurchase price of its s h a r e s w a s determined

(d) II the Bank s u s p e n d s p e r m a n e n t l y its o p e r a t i o n s under Section 5 lb) of this Article within six m o n t h s of the d a t e upon which any g o v e r n m e n t ceases to b e a m e m b e r , all rights of sudi g o v e r n m e n t shall be d e t e r m i n e d b y the p r o v i s i o n s of Section 5 of this Article. Section 5.

Suspension of operations and settlement oi obligations (a) In an e m e r g e n c y the E x e c u t i v e Directors may s u s p e n d t e m p o r a r i l y o p e r a t i o n s in respect of n e w l o a n s and g u a r a n t e e s p e n d i n g an o p p o r t u n i t y for f u r t h e r c o n s i d e r a t i o n and action b y the Board of G o v e r n o r s (b) The Bank may s u s p e n d p e r m a n e n t l y its o p e r a t i o n s in r e s p e c t of new loans and g u a r a n t e e s by v o t e of a m a j o r i t y of the Governors, exercising a m a j o r i t y of the total v o t i n g p o w e r . A f t e r such s u s p e n s i o n of o p e r a t i o n s t h e Bank shall f o r t h w i t h c e a s e all activities, except t h o s e incident to t h e o r d e r l y realization, c o n s e r v a t i o n , and p r e s e r v a t i o n of its a s s e t s and s e t t l e m e n t of its obligations. (c) The liability of all m e m b e r s for uncalled s u b s c r i p t i o n s t o the capital stock of the Bank and in respect of the d e p r e c i a t i o n of their own c u r r e n c i e s shall c o n t i n u e until all claims of creditors including all c o n t i n g e n t claims, shall h a v e b e e n discharged

(d) All creditors holding direct claims shall be paid out of the assets of the Bank, and t h e n out of p a y m e n t s to the Bank o n Before m a k i n g a n y p a y m e n t s to calls on u n p a i d s u b s c r i p t i o n s c r e d i t o r s holding direct claims the E x e c u t i v e D i r e c t o r s shall m a k e such a r r a n g e m e n t s as are n e c e s s a r y , in t h e i r j u d g m e n t , to i n s u r e a distribution to holders of c o n t i n g e n t claims r a t a b l y with creditors holding direct claims.

36

(e) N o distribution shall be m a d e to m e m b e r s o n a c c o u n t of their s u b s c r i p t i o n s to the capital stock of t h e Bank until (i)

all liabilities to creditors h a v e b e e n discharged or p r o v i d e d for and a m a j o r i t y oi the G o v e r n o r s , e x e r c i s i n g a m a j o r i t y of the total voting power, h a v e decided to m a k e a distribution (f) A f t e i a decision to m a k e a d i s t r i b u t i o n has b e e n t a k e n under (e) a b o v e , the E x e c u t i v e D i r e c t o r s m a y by a t w o - t h i r d s m a j o r i t y v o t e m a k e s u c c e s s i v e d i s t r i b u t i o n s of t h e a s s e t s of t h e Bank to m e m b e r s until all of the assets h a v e b e e n d i s t r i b u t e d . This distribution shall be s u b j e c t to the prior s e t t l e m e n t of all o u t s t a n d i n g claims of the Bank a g a i n s t each m e m b e r . (ii)

(g) Before a n y d i s t r i b u t i o n of a s s e t s is m a d e , the E x e c u t i v e Directors shall fix the p r o p o r t i o n a t e s h a r e of each m e m b e r a c c o r d i n o to the ratio of its s h a r e h o l d i n g to the total o u t s t a n d i n g s h a r e s of the Bank. (h) The E x e c u t i v e Directors shall v a l u e the a s s e t s to b e distributed a s at the d a t e of distribution a n d then p r o c e e d to d i s t r i b u t e in the following m a n n e r : (i) T h e r e shall be paid to each m e m b e r in its o w n obligations or t h o s e of its official a g e n c i e s or legal entities within its territories, insofar a s they are a v a i l a b l e for distribution, an a m o u n t e q u i v a l e n t in value t o its prop o r t i o n a t e s h a r e of the total a m o u n t to b e distributed. (ii)

A n y b a l a n c e d u e to a m e m b e r a f t e r p a y m e n t h a s b e e n m a d e u n d e r (i) a b o v e shall be paid, in its o w n c u r r e n c y , insofar a s it is held b y the Bank, up to an a m o u n t equivalent in v a l u e to such b a l a n c e .

(iii)

A n y b a l a n c e d u e to a m e m b e r a f t e r p a y m e n t h a s b e e n m a d e u n d e r (i) and (ii) a b o v e shall be paid in gold or c u r r e n c y a c c e p t a b l e t o the m e m b e r , insofar as they a r e held b y the Bank, u p to an a m o u n t e q u i v a l e n t in v a l u e to such b a l a n c e

(iv)

A n v r e m a i n i n a j*ssets held by the Bank a f t e r p a y m e n t s h a v e b e e n m a d e to m e m b e r s u n d e r (i), (ii), and (iii) a b o v e shall be d i s t r i b u t e d pro rata a m o n g the m e m b e r s .

(1) A n y m e m b e r r e c e i v i n g a s s e t s distributed b y the Bank in a c c o r d a n c e w i t h (h) a b o v e , shall e n j o y the s a m e rights w i t h , r e s p e c t to such assets as the Bank e n j o y e d prior to their distribution.

ARTICLE VII Status,-Immunities and privileges Section 1. Purposes ot Article T o e n a b l e t h e Bank to fulfill the f u n c t i o n s with which it Is e n t r u s t e d , the status, i m m u n i t i e s and p r i v i l e g e s set f o r t h in this A r t i c l e shall b e a c c o r d e d to the Bank in the t e r r i t o r i e s of each member. Section 2. S t a t u s ot the Bank T h e Bank shall p o s s e s s full j u r i d i c a l p e r s o n a l i t y , and, in particular. the capacity: (i) to c o n t r a c t ; (ii) to a c q u i r e and d i s p o s e of i m m o v a b l e a n d m o v a b l e property; (iii) t o i n s t i t u t e legal p r o c e e d i n g s . Section 3,

Position

of the Bank with

regard

to judicial

process

A c t i o n s m a y b e b r o u g h t a g a i n s t the Bank o n l y in a court of c o m p e t e n t jurisdiction in t h e t e r r i t o r i e s of a m e m b e r in which t h e Bank h a s an office, h a s a p p o i n t e d a n a g e n t for t h e p u r p o s e of a c c e p t i n g s e r v i c e or n o t i c e of process, or h a s issued or g u a r a n t e e d s e c u r i t i e s N o actions shall, h o w e v e r , b e b r o u g h t b y m e m b e r s or p e r s o n s acting for or d e r i v i n g claims f r o m m e m bers. The p r o p e r t y and a s s e t s of t h e Bank shall, w h e r e s o e v e r l o c a t e d and b y w h o m s o e v e r held, b e i m m u n e f r o m all f o r m s of seizure, a t t a c h m e n t or e x e c u t i o n b e f o r e t h e d e l i v e r y of final j u d g m e n t a g a i n s t the Bank. Section 4.

i m m u n i t y of assets

from

seizure

P r o p e r t y , and a s s e t s of t h e Bank, w h e r e v e r l o c a t e d a n d b y w h o m s o e v e r held, shall be i m m u n e f r o m search, requisition, confiscation, e x p r o p r i a t i o n or a n y o t h e r form of s e i z u r e b y e x e c u t i v e or l e g i s l a t i v e action. Section 5. i m m u n i t y of archives T h e archives of the Bank shall be inviolable.

Doc. 2

World Bank Section 6. F r e e d o m of ossela from restrictions T o the e x t e n t n e c e s s a r y to c a r r y o u t t h e o p e r a t i o n s p r o v i d e d for in this A g r e e m e n t and s u b j e c t to the p r o v i s i o n s of this A g r e e m e n t , all p r o p e r t y a n d a s s e t s of the Bank shall b e f r e e f r o m restrictions, regulations, c o n t r o l s and m o r a t o r i a of a n y n a t u r e . Section 7. Privilege tor communications T h e official c o m m u n i c a t i o n s of t h e Bank shall b e accorded b y each m e m b e r t h e s a m e t r e a t m e n t t h a t it a c c o r d s to the official c o m m u n i c a t i o n s of o t h e r m e m b e r s . Section 8. I m m u n i t i e s a n d privilege s oi officers and employees Ali g o v e r n o r s , e x e c u t i v e e m p l o y e e s of t h e Bank (i) shall be i m m u n e from p e r f o r m e d by t h e m in t h e Bank w a i v e s t h i s

directors, a l t e r n a t e s , o f f i c e r s a n d legal p r o c e s s with r e s p e c t to acts their official c a p a c i t y e x c e p t w h e n immunity;

(it)

n o t b e i n g local n a t i o n a l s , shall b e a c c o r d e d t h e s a m e i m m u n i t i e s f r o m i m m i g r a t i o n restrictions, a l i e n registration requirements and national service obligations a n d t h e s a m e facilities a s r e g a r d s e x c h a n g e r e s t r i c t i o n s a s are a c c o r d e d b y m e m b e r s to the r e p r e s e n t a t i v e s , officials, a n d e m p l o y e e s of c o m p a r a b l e r a n k of o t h e r members; (iii) shall b e g r a n t e d t h e s a m e t r e a t m e n t in r e s p e c t of t r a v elling facilities a s is a c c o r d e d b y m e m b e r s t o r e p r e s e n t a t i v e s . o f f i c i a l s and e m p l o y e e s of c o m p a r a b l e r a n k of other members. Section 9. I m m u n i t i e s f r o m t a x a t i o n (a) The Bank, its assets, p r o p e r t y , i n c o m e a n d its o p e r a t i o n s a n d t r a n s a c t i o n s a u t h o r i z e d by this A g r e e m e n t , shall be i m m u n e f r o m all t a x a t i o n and f r o m all c u s t o m s duties. T h e Bank shall a l s o be i m m u n e f r o m liability f o r t h e collection o r p a y m e n t of a n y tax or d u l y . (b) N o t a x shall b e l e v i e d e m o l u m e n t s paid by t h e Bank o f f i c i a l s o r e m p l o y e e s ot t h e local s u b j e c t s , o r o t h e r local

o n o r in r e s p e c t of s a l a r i e s a n d . to e x e c u t i v e directors, a l t e r n a t e s , Bank w h o a r e n o t local citizens, nationals.

(i) (ii) (iii)

the VI, the the

right to w i t h d r a w f r o m the Bank p r o v i d e d in Article Section 1; right s e c u r e d by A r t i c l e II, Section 3 (c); limitation on liability p r o v i d e d in A r t i c l e II, Section 6.

(c) A m e n d m e n t s shall e n t e r into f o r c e for all m e m b e r s t h r e e m o n t h s a f t e r t h e d a t e of the f o r m a l c o m m u n i c a t i o n u n l e s s a s h o r t e r p e r i o d is s p e c i f i e d in t h e circular l e t t e r or t e l e g r a m .

ARTICLE IX Interpretation (a) A n y q u e s t i o n of i n t e r p r e t a t i o n of the p r o v i s i o n s of this A g r e e m e n t arising b e t w e e n a n y m e m b e r and t h e Bank o r b e t w e e n a n y m e m b e r s of the Bank shall be s u b m i t t e d to the E x e c u t i v e Directors for their decision. If t h e q u e s t i o n partic u l a r l y a f f e c t s a n y m e m b e r not e n t i t l e d to a p p o i n t an e x e c u t i v e director, it shall be e n t i t l e d to r e p r e s e n t a t i o n in a c c o r d a n c e w i t h A r t i c l e V, Section 4 (h). (b) In a n y c a s e w h e r e t h e E x e c u t i v e D i r e c t o r s h a v e g i v e n a decision u n d e r (a) a b o v e , a n y m e m b e r m a y r e q u i r e t h a t tbe q u e s t i o n be r e f e r r e d to t h e Board of G o v e r n o r s , w h o s e decision shall b e final. P e n d i n g the result of the r e f e r e n c e to the Board, t h e Bank m a y , so far a s it d e e m s n e c e s s a r y , act o n t h e b a s i s of t h e d e c i s i o n of the E x e c u t i v e Directors. (c) W h e n e v e r a d i s a g r e e m e n t a r i s e s b e t w e e n the Bank a n d a c o u n t r y w h i d i h a s c e a s e d to b e a m e m b e r , o r b e t w e e n the Bank a n d a n y m e m b e r d u r i n g the p e r m a n e n t s u s p e n s i o n of t h e Bank, such d i s a g r e e m e n t shall b e s u b m i t t e d to a r b i t r a t i o n b y a t r i b u n a l of t h r e e a r b i t r a t o r s , o n e a p p o i n t e d b y t h e Bank, a n o t h e r b y t h e c o u n t r y i n v o l v e d a n d a n u m p i r e who, u n l e s s t h e p a r t i e s o t h e r w i s e a g r e e , shall b e a p p o i n t e d b y the P r e s i d e n t of t h e P e r m a n e n t C o u r t of I n t e r n a t i o n a l J u s t i c e or such o t h e r a u t h o r i t y as may h a v e been prescribed by regulation adopted by the Bank. T h e u m p i r e shall h a v e full p o w e r to s e t t l e all q u e s t i o n s of p r o c e d u r e in a n y c a s e w h e r e the p a r t i e s a r e in d i s a g r e e m e n t with respect thereto.

(c) N o t a x a t i o n of a n y k i n d shall be levied on a n y obligation o r s e c u r i t y i s s u e d b y t h e Bank (including a n y d i v i d e n d or Int e r e s t t h e r e o n ) by w h o m s o e v e r held— (i) (H)

which d i s c r i m i n a t e s a g a i n s t such o b l i g a t i o n or solely b e c a u s e it is i s s u e d b y t h e Bank; o r

security

if t h e sole jurisdictional b a s i s for such t a x a t i o n is t h e p l a c e o r c u r r e n c y in which it is i s s u e d , m a d e p a y a b l e o r paid, o r t h e location of a n y o f f i c e o r p l a c e of b u s i n e s s m a i n t a i n e d b y t h e Bank.

ARTICLE X Approval deemed given W h e n e v e r the a p p r o v a l of a n y m e m b e r is r e q u i r e d b e f o r e a n y act m a y be d o n e b y the Bank, e x c e p t in A r t i c l e VIII, a p p r o v a l shall b e d e e m e d to h a v e b e e n g i v e n u n l e s s t h e m e m b e r p r e s e n t s an o b j e c t i o n within such r e a s o n a b l e p e r i o d a s the Bank m a y fix in n o t i f y i n g the m e m b e r of t h e p r o p o s e d act.

(d) N o t a x a t i o n of a n y k i n d shall b e l e v i e d o n any obligation or s e c u r i t y g u a r a n t e e d b y the Bank (including a n y d i v i d e n d or interest thereon) by whomsoever held— (i)

which d i s c r i m i n a t e s a g a i n s t such o b l i g a t i o n o r s e c u r i t y solely b e c a u s e it is g u a r a n t e e d b y the B a n k ; o r

(ii)

if t h e sole j u r i s d i c t i o n a l b a s i s for such t a x a t i o n is t h e l o c a t i o n of a n y office or p l a c e of b u s i n e s s m a i n t a i n e d by t h e Bank. Section 10. Appiication oi Article Each m e m b e r shall t a k e such action a s is n e c e s s a r y in its own t e r r i t o r i e s for t h e p u r p o s e of m a k i n g e f f e c t i v e in t e r m s of Its own law t h e p r i n c i p l e s set f o r t h in this A r t i c l e and shall i n f o r m the Bank of t h e d e t a i l e d a c t i o n which it h a s t a k e n .

ARTICLE VIII Amendments (a) A n y p r o p o s a l to i n t r o d u c e m o d i f i c a t i o n s in this A g r e e m e n t w h e t h e r e m a n a t i n g f r o m a m e m b e r , a g o v e r n o r or the E x e c u t i v e Directors, shall be c o m m u n i c a t e d to the C h a i r m a n of the Board of G o v e r n o r s w h o shall bring t h e p r o p o s a l b e f o r e the Board If t h e proposed a m e n d m e n t is a p p r o v e d by the Board the Bank shall, by c i r c u l a r letter or t e l e g r a m , ask all m e m b e r s w h e t h e r they a c c e p t the p r o p o s e d a m e n d m e n t . W h e n t h r e e - f i f t h s of the m e m b e r s , h a v i n q f o u r - f i f t h s of the t o t a l v o t i n g p o w e r , h a v e a c c e p t e d t h e p r o p o s e d a m e n d m e n t s , the Bank shall c e r t i f y the fact b y formal c o m m u n i c a t i o n a d d r e s s e d to all m e m b e r s . (b) N o t w i t h s t a n d i n g (a) a b o v e , a c c e p t a n c e b y all m e m b e r s is r e q u i r e d in the c a s e of a n y a m e n d m e n t m o d i f y i n g

ARTICLE XI Final provisions Section 1. E n t r y i n f o f o r c e T h i s A g r e e m e n t shall e n t e r into f o r c e w h e n it h a s b e e n s i g n e d o n behalf of g o v e r n m e n t s w h o s e m i n i m u m s u b s c r i p t i o n s c o m p r i s e n o t less t h a n s i x t y - f i v e p e r c e n t of the total s u b s c r i p t i o n s set forth in Schedule A a n d w h e n t h e i n s t r u m e n t s r e f e r r e d to in Section 2 (a) of this A r t i c l e h a v e b e e n d e p o s i t e d o n their b e h a l f , b u t in no e v e n t shall this A g r e e m e n t e n t e r into f o r c e b e f o r e M a y 1,1945. Section 2. Signature (a) Each g o v e r n m e n t o n w h o s e behalf this A g r e e m e n t is signed shall d e p o s i t with t h e G o v e r n m e n t of t h e United S t a t e s of A m e r i c a an i n s t r u m e n t s e t t i n g forth t h a t it h a s a c c e p t e d t h i s A g r e e m e n t in a c c o r d a n c e with its law a n d h a s t a k e n all s t e p s n e c e s s a r y to e n a b l e it to c a r r y o u t all of its o b l i g a t i o n s u n d e r this A g r e e m e n t . (b) Each g o v e r n m e n t shall b e c o m e a m e m b e r of t h e Bank as f r o m the d a t e of the d e p o s i t on its behalf of t h e i n s t r u m e n t r e f e r r e d to in (a) a b o v e , e x c e p t t h a t no g o v e r n m e n t shall b e c o m e a m e m b e r b e f o r e this A g r e e m e n t e n t e r s into f o r c e u n d e r Section 1 of this Article. (c) The G o v e r n m e n t of the United S t a t e s of A m e r i c a shall i n f o r m the g o v e r n m e n t s of all c o u n t r i e s w h o s e n a m e n s a r e s e t f o r t h in Schedule A, a n d all g o v e r n m e n t s w h o s e m e m b e r s h i p is a p p r o v e d in a c c o r d a n c e with A r t i c l e II, S e c t i o n 1 (b), of all s i g n a t u r e s of this A g r e e m e n t and of t h e d e p o s i t of all instrum e n t s r e f e r r e d to in (a) a b o v e .

37

Doc. 2

W o r l d - w i d e E c o n o m i c Institutions

(d| A t t h e t i m e this A g r e e m e n t is s i g n e d o n its b e h a l f , each g o v e r n m e n t shall transmit t o the G o v e r n m e n t of the U n i t e d S t a t e s of A m e r i c a o n e one-hundredth of o n e percent of t h e p r i c e of each s h a r e in g o l d or U n i t e d S t a t e s d o l l a r s f o r the p u r p o s e of m e e t i n g a d m i n i s t r a t i v e e x p e n s e s of t h e Bank. T h i s p a y m e n t shall b e c r e d i t e d on a c c o u n t of t h e p a y m e n t to b e m a d e in a c c o r d a n c e w i t h A r t i c l e II, S e c t i o n 8 (a). T h e G o v e r n m e n t of t h e United States o f A m e r i c a shall hold such funds in a s p e c i a l d e p o s i t account and shall transmit them to the Board of G o v e r n o r s of the Bank w h e n t h e initial m e e t i n g has b e e n c a l l e d u n d e i S e c t i o n 3 of this A r t i c l e . If this A g r e e m e n t has not c o m e into f o r c e b y D e c e m b e r 31, 1945, the G o v e r n m e n t of t h e U n i t e d S t a t e s of A m e r i c a shall return such funds to the g o v e r n m e n t s that transmitted them.

SCHEDULE A Subscriptions ( m i l l i o n s of d o l l a r s ) Australia

200

Belgium

225

Iran

7

Iraq

Bolivia

ff| A f t e r D e c e m b e r 31, 1945, this A g r e e m e n t shall b e o p e n f o r s i q n a t u r e on b e h a l f of the g o v e r n m e n t of a n y c o u n t r y - w h o s e m e m b e r s h i p has b e e n a p p r o v e d in a c c o r d a n c e w i t h A r t i c l e II, S e c t i o n 1 (b|.

Canada

325

Luxembourg

Chile

35

China

600

Costa

35

Rica

2

Cuba Czechoslovakia

2

members

when

it

is

ready to

0.2 0.8

Peru

17.5

Ecuador

3.2

Philippine Commonwealth

Egypt

40

Ethiopia

15

Poland

125

1

U n i o n o i South A l r i c a

100

3

U n i o n of S o v i e t Socialist

2

notify

0.8 50

Paraguay

D o m i n i c a n Republic

Haiti

D O N E at W a s h i n g t o n , in a s i n g l e c o p y which shall r e m a i n d e p o s i t e d in the a r c h i v e s of the G o v e r n m e n t of t h e U n i t e d States of A m e r i c a , which shall transmit c e r t i f i e d c o p i e s to all g o v e r n m e n t s w h o s e n a m e s a r e set forth in Schedule A and to all g o v e r n m e n t s w h o s e m e m b e r s h i p Is a p p r o v e d in a c c o r d a n c e w i t h A r t i c l e II, S e c t i o n 1 (b).

50

Nicaragua Norway

2

(d) T h e Bank shall commence operations.

275

N e w Zealand

Panama

Guatemala

( c ) T h e Board of G o v e r n o r s m a y d e l e g a t e to the p r o v i s i o n a l e x e c u t i v e d i r e c t o r s a n y p o w e r s e x c e p t t h o s e which m a y not b e d e l e g a t e d to t h e E x e c u t i v e D i r e c t o r s .

65

Netherlands

35

D e n m a r k 'I

0.5 10

Mexico

125

(h) In t h e c a s e of g o v e r n m e n t s w h o s e m e t r o p o l i t a n territ o r i e s h a v e b e e n under e n e m y o c c u p a t i o n , the deposit of the instrument r e f e r r e d to in (a) a b o v e m a y b e d e l a y e d until o n e h u n d r e d and e i g h t y d a y s a f t e r the d a t e on w h i d i these territ o r i e s *iave b e e n l i b e r a t e d . If, h o w e v e r , it is not d e p o s i t e d b y a n y such g o v e r n m e n t b e f o r e the e x p i r a t i o n of this period, the s i g n a t u r e a f f i x e d on b e h a l f of that g o v e r n m e n t shall b e c o m e v o i d and t h e p o r t i o n of its subscripticn p a i d under id) a b o v e shall b e returned to it.

(b) A t the first m e e t i n g of t h e B o a r d of G o v e r n o r s , a r r a n g e m e n t s snail b e m a d e f o r the s e l e c t i o n of p r o v i s i o n a l e x e c u t i v e d i r e c t o r s . T h e g o v e r n m e n t s of t h e f i v e countries, to which t h e l a r g e s t number of shares a r e a l l o c a t e d in Schedule A , shall appoint p r o v i s i o n a l e x e c u t i v e directors. If o n e or m o r e of such g o v e r n m e n t s h a v e not b e c o m e m e m b e r s , t h e e x e c u t i v e d i r e c t o r ships w h i c h t h e y w o u l d b e e n t i t l e d to fill shall r e m a i n v a c a n t until t h e y b e c o m e M e m b e r s , o r until J a n u a r y 1, 1946. w h i c h e v e r is t h e e a r l i e r . S e v e n p r o v i s i o n a l e x e c u t i v e d i r e c t o r s shall b e e l e c t e d in a c c o r d a n c e w i t h the p r o v i s i o n s of S c h e d u l e B and shall r e m a i n in o f f i c e until t h e date of t h e first r e g u l a r e l e c t i o n of e x e c u t i v e d i r e c t o r s which shall b e h e l d as s o o n as practic a b l e a f t e r J a n u a r y 1, 1946.

«

Liberia

El S a l v a d o r

(a) A s s o o n as this A g r e e m e n t e n t e r s into f o r c e u n d e r S e c t i o n 1 of this A r t i c l e , each m e m b e r shall appoint a g o v e r n o r and the m e m b e r to w h o m the l a r g e s t number of shares is a l l o c a t e d in Schedule A shall call the first m e e t i n g of the Board of Governors.

24

105

( g ) By their signature of this A g r e e m e n t , all g o v e r n m e n t s a c c e p t it b o t h o n their o w n b e h a l f and in r e s p e c t of all their c o l o n i e s , o v e r s e a s territories, all t e r r i t o r i e s under their p r o t e c tion. s u z e r a i n t y , or a u t h o r i t y and all t e r r i t o r i e s in r e s p e c t of which t h e v exercise a mandate.

(i) P a r a g r a p h s (d| and (h) shall c o m e into f o r c e w i t h r e g a r d t o each s i g n a t o r y g o v e r n m e n t as f r o m the date of its signature. S e c t i o n 3. Inauguration ol the Bank

400

Brazil

Colombia ( e ) T h i s A g r e e m e h t shall r e m a i n o p e n f o r signature at W a s h i n g t o n on b e h a l f of t h e g o v e r n m e n t s of the C o u n t r i e s w h o s e n a m e s are s e t f o r t h in Schedule A until D e c e m b e r 31, 1945.

India

France

450

Greece

25

Republics United

Kingdom

United States

1200 1300 3175

Uruguay

10.5

Honduras

1

Venezuela

10.5

Iceland

1

Yugoslavia

40

Total

9100

*) The quota of Denmark shall be determined by the Bank atter Denmark accepts membership in accordainee with these Articles of Agreement.

SCHEDULE B Election of executive directors 1. T h e e l e c t i o n of the e l e c t i v e e x e c u t i v e d i r e c t o r s shall b y b a l l o t of the G o v e r n o r s e l i g i b l e to v o t e u n d e r A r t i c l e S e c t i o n 4 fb>

be V.

2. In balloting iot the e l e c t i v e e x e c u t i v e d i r e c t o r s , e a c h g o v e r n o r e l i g i b l e to v o t e shall cast f o r o n e p e r s o n all of t h e v o t e s to w h i c h the m e m b e r a p p o i n t i n g h i m is e n t i t l e d under S e c t i o n 3 of A r t i c l e V . T h e s e v e n p e r s o n s r e c e i v i n g the g r e a t e s t number of v o t e s shall b e e x e c u t i v e d i r e c t o r s , e x c e p t that no person w h o r e c e i v e s less than f o u r t e e n p e r c e n t of the total of the v o t e s w h i c h can b e cast ( e l i g i b l e v o t e s ) shall b e considered elected. 3. W h e n s e v e n p e r s o n s a r e not e l e c t e d on t h e first ballot, a s e c o n d ballot shall b e held in w h i c h t h e p e r s o n w h o r e c e i v e d t h e l o w e s t number of v o t e s shall b e i n e l i g i b l e for e l e c t i o n and in w h i c h t h e r e shall v o t e o n l y fa) those g o v e r n o r s w h o v o t e d in the first ballot for a p e r s o n not e l e c t e d and (b) t h o s e g o v e r n o r s w h o s e v o t e s f o r a person e l e c t e d a r e d e e m e d under 4 b e l o w to h a v e raised the v o t e s cast f o r that person a b o v e f i f t e e n percent of the e l i g i b l e v o t e s . 4. In d e t e r m i n i n g w h e t h e r the v o t e s cast b y a g o v e r n o r are to b e d e e m e d to h a v e raised the total of a n y person a b o v e f i f t e e n p e r c e n t of the e l i g i b l e v o t e s , the f i f t e e n percent shall b e d e e m e d to Include, first, the v o t e s of the q o v e r n o r casting t h e larqest n u m b e r of v o t e s f o r such p e r s o n , then the v o t e s of the g o v e r n o r casting the n e x t l a r g e s t number, ond so on until f i f t e e n percent is r e a c h e d . 5'. A n y g o v e r n o r , part of w h o s e v o t e s must b e c o u n t e d in o r d e r to raise t h e total of a n y p e r s o n a b o v e f o u r t e e n percent shall b e c o n s i d e r e d aS c a s t i n g all of his v o t e s f o r such person e v e n if I h e total v o t e s f o r such p e r s o n t h e r e b y e x c e e d f i f t e e n percent. 6. If, a f t e r the s e c o n d ballot, s e v e n p e r s o n s h a v e not b e e n e l e c t e d , f u r t h e r b a l l o t s shall b e held o n t h e s a m e p r i n c i p l e s until s e v e n persons h a v e b e e n elected- p r o v i d e d that a f t e r six p e r s o n s a r e e l e c t e d , the s e v e n t h m a y b e e l e c t e d b y a s i m p l e m a j o r i t y of the r e m a i n i n g v o t e s and shall b e d e e m e d to h a v e b e e n e l e c t e d b y all such v o t e s .

38

3. Articles of Agreement of the International Development Association (IDA) January 26, 1960 BGBl. 1960 II, 2138 (439 U . N . T . S . 249) THE GOVERNMENTS on whose behalf this Agreement is signed, CONSIDERING: That mutual cooperation for constructive economic purposes, healthy development of the world economy and balanced growth of international trade foster international relationships conducive to the maintenance of peace and world prosperity!

which, on or before the date specified in Article XI, Section 2 (c), accept membership in the Association. (b) Membership shall be open to other members of the Bank at such times and in accordance with such terms as the Association may determine.

Section 2 Initial Subscriptions

That an acceleration of economic development which will promote higher standards of living and economic and social progress in the less-developed countries is desirable not only in the interests of those countries but also in the interests of the international community as a whole;

(a) Upon accepting membership, each member shall subscribe funds in the amount assigned to it. Such subscriptions are herein referred to as initial subscriptions.

That achievement of these objectives would be facilitated by an increase in the international flow of capital, public and private, to assist in the development of the resources of the less-developed countries,

(b) The initial subscription assigned to each original member shall be in the amount set forth opposite its name in Schedule A, expressed in terms of United States dollars of the weight and fineness in' effect on January 1, 1960.

DO HEREBY AGREE AS FOLLOWS:

I n t r o d u c t o r y Article The International Development Association (hereinafter called "the Association") is established and shall operate in accordance with the following provisions:

Article I

Purposes The purposes of the Association are to promote economic development, increase productivity and thus raise standards of living in the less-developed areas of the world included within the Association's membership, in particular by providing finance to meet their important developmental requirements on terms which are more flexible and bear less heavily on the balance of payments than those of conventional loans, thereby furthering the developmental objectives of the International Bank for Reconstruction and Development (hereinafter called "the Bank") and supplementing its activities.

The Association shall be guided in all its decisions by the provisions of this Article.

Article II

Membership; Initial Subscriptions Section 1 Membership (a) The original members oi the Association shall be those members of the Bank listed in Schedule A hereto

(c) Ten percent of the initial subscription of each original member shall be payable in gold or freely convertible currency as follows: fifty percent within thirty days after the date on which the Association shall begin operations pursuant to Article XI, Section 4, or on the date on which the original member becomes a member, whichever shall be later; twelve and one-half percent one year after the beginning of operations of the Association; and twelve and one-half percent each year thereafter at annual intervals until the ten percent por» tion of the initial subscription shall have been paid in full. (d) The remaining ninety percent of the initial subscription of each original member shall be payable in gold or freely convertible currency in the case of members listed in Part I of Schedule A, and in the currency of the subscribing member in the case of members listed in Part II of Schedule A. This ninety percent portion of initial subscriptions of original members shall be payable in five equal annual instalments as follows: the first such instalment within thirty days after the date on which the Association shall begin operations pursuant to Article XI, Section 4, or on the date on wliich the original member becomes a member, whichever shall be later; the second instalment one year after the beginning of operations of the Association, and succeeding instalments each year thereafter at annual intervals until the ninety percent portion of the initial subscription shall have been paid in full. (e) The Association shall accept from any member, in place of any part of the member's currency paid in or payable by the member under the preceding subsection (d) or under Section 2 of Article IV and not needed by the Association in its operations, notes or similar obligations issued by the government of the member or the depository designated by such member, which shall be non-negotiable, non-interest-bearing and payable at their par value on demand to the account of the Association in the designated depository. (f) For the purposes of this Agreement the Association shall regard as "freely convertible currency":

39

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World-wide Economic Institutions

(i) currency of a member whicb the Association determines, after consultation with the International Monetary Fund, is adequately con» vertible into the currencies of other members for the purposes of the Association's operations; or (ii) currency of a member which such member agrees, on terms satisfactory to the Association, to exchange for the currencies of other members for the purposes of the Association's operations. (g) Except as the Association may otherwise agree, each member listed in Part I of Schedule A shall maintain, in respect of its currency paid in by it as freely convertible currency pursuant to subsection (d) of this Section, the same convertibility as existed at the time of payment. (h) The conditions on which the initial subscriptions of members other than original members may be made, and the amounts and the terms of payment thereof, shall be determined by the Association pursuant to Section 1 (b) of this Article. Section 3 Limitation on Liability No member shall be liable, by reason of its membership, for obligations of the Association.

Article III

Additions to Resources Section 1 Additional Subscriptions (a) The Association shall at sudi time as it deems appropriate in the light of the schedule for completion of payments on initial subscriptions of original members, and at intervals of approximately five years thereafter, review the adequacy of its resources and, if it deems desirable, shall authorize a general increase in subscriptions. Notwithstanding the foregoing, general or individual increases in subscriptions may be authorized at any time, provided that an individual increase shall be considered only at the request of the member involved. Subscriptions pursuant to this Section are herein referred to as additional subscriptions.

(b) Subject to the provisions of paragraph (c) bçlow, when additional subscriptions are authorized, the amounts authorized for subscription and the terms and conditions relating thereto shall be as determined by the Association. (c) When any additional subscription is authorized, eadi member shall be given an opportunity to subscribe, under such conditions as shall be reasonably determined by the Association, an amount which will enable it to maintain its relative voting power, but no member shall be obligated to subscribe. (d) All decisions under this Section shall be made by a two-thirds majority of the total voting power. Section 2 Supplementary Resources Provided by a Member In the Currency of Another Member (a) The Association may enter into arrangements, on such terms and conditions consistent with the provisions of this Agreement as may be agreed upon, to receive from any member, in addition to the amounts payable by such member on account of its initial or any additional subscription, supplementary resources in the currency of another member, provided that the Association shall not enter into any such arrangement unless the Association is satisfied that the member whose

40

currency is involved agrees to the use of such currency as supplementary resources and to the terms and conditions governing such use. The arrangements under which any such resources are received may include provisions regarding the disposition of earnings on the resources and regarding the disposition of the resources in the event that the member providing them ceases to be a member or the Association permanently suspends its operations. (b) The Association shall deliver to the contributing member a Special Development Certificate setting forth the amount and currency of the resources so contributed and the terms and conditions of the arrangement relating to such resources. A Special Development Certificate shall not carry any voting rights and shall be transferable only to the Association. (c) Nothing in this Section shall preclude the Association from accepting resources from a member in its own currency on sudi terms as may be agreed upon.

Article IV

Currencies Section 1 Use of Currencies (a) Currency of any member listed in Part II of Sdiedule A, whether or not freely convertible, received by the Association pursuant to Article II, Section 2 (d), in payment of the ninety percent portion payable thereunder in the currency of such member, and currency of such member derived therefrom as principal, interest or other charges, may be used by the Association for administrative expenses incurred by the Association in the territories of sudi member and, insofar as consistent with sound monetary policies, in payment for goods and services produced in the territories of sudi member and required for projects financed by the Association and located in sudi territories; and in addition when and to the extent justified by the economic and financial situation of the member concerned as determined by agreement between the member and the Association, such currency shall be freely convertible or otherwise usable for projects financed" by the Association and located outside the territories of the member. (b) The usability of currencies received by the Association in payment of subcriptions other than initial subscriptions of original members, and currencies derived therefrom as principal, interest or other charges, shall be governed by the terms and conditions on which such subscriptions are authorized. (c) The usability of currencies received by the Association as supplementary resources other than subscriptions, and currencies derived therefrom as principal, interest or other charges, shall be governed by the terms of the arrangements pursuant to which sudi currencies are received. (d) All other currencies received by the Association may be freely used and exchanged by the Association and shall not be subject to any restriction by the member whose currency is used or exchanged? provided that the foregoing shall not preclude the Association from entering into any arrangements with the member in whose territories any project financed by the Association is located restricting the use by the Association of such member's currency received as principal, interest or other charges in connection with such financing. (e) The Association shall take appropriate steps to ensure that, over reasonable intervals of time, the portions of the subscriptions paid under Article II, Section 2 (d) by members listed in Part I of Schedule A shall be

Doc. 3

IDA used by the Association on an approximately pro rata basis, provided, however, that such portions of such subscriptions as are paid in gold or in a currency other than that of the subscribing member may be used more rapidly. Section 2 Maintenance of Value of Currency Holdings (a) Whenever the par value of a member's currency is reduced or the foreign exchange value of a member's currency has, in the opinion of the Association, depreciated to a significant extent within that member's territories, the member shall pay to the Association within a reasonable time an additional amount of its own currency sufficient to maintain the value, as of the time of subscription, of the amount of the currency of such member paid in to the Association by the member under Article II, Section 2 (d), and currency furnished under the provisions of the present paragraph, whether or not such currency is held in the form of notes accepted pursuant to Article II, Section 2 (e), provided, however, that the foregoing shall apply only so long as and to the extent that such currency shall not have been initially disbursed or exchanged for the currency of another member. (b) Whenever the par value of a member's currency is increased, or the foreign exchange value of a member's currency has, in the opinion of the Association, appreciated to a significant extent within that member's territories, the Association shall return to such member within a reasonable time an amount of that member's currency equal to the increase in the value of the amount of such currency to which the provisions of paragraph (a) of this Section are applicable. (c) The provisions of the preceding paragraphs may be waived by the Association when a uniform proportionate change in the par value of the currencies of all its members is. made by the International Monetary Fund. (d) Amounts furnished under the provisions of paragraph (a) of this Section to maintain the value of any currency shall be convertible and usable to the same extent as such currency. Article V Operations

(e) The Association shall not provide financing for any project if the member in whose territories the project is located objects to sudi financing, except that it shall not be necessary for the Association to assure itself that individual members do not object in the case of financing provided to a public international or regional organization. (f) The Association shall impose no conditions that the proceeds of its financing shall be spent in the territories of any particular member or members. The foregoing shall not preclude the Association from complying with any restrictions on the use of funds imposed in accordance with the provisions of these Articles, including restrictions attached to supplementary resources pursuant to agreement between the Association and the contributor. (g) The Association shall make arrangements to ensure that the proceeds of any financing are used only for the purposes for which the financing was provided, with due attention to considerations of economy, efficiency and competitive international trade and without regard to political or other non-economic influences or considerations. (h) Funds to be provided under any financing operation shall be made available, to the recipient only to meet expenses in connection with the project as they are actually incurred.

Section 2 Form and Terms of Financing (a) Financing by the Association shall take the form of loans. The Association may, however, provide other financing, either (i) out of funds subscribed pursuant to Article III, Section 1, and funds derived therefrom as principal. interest or other charges, if the authorization for such subscriptions expressly provides for such financing; or (ii) in special circumstances, out of supplementary resources furnished to the Association, and funds derived therefrom as principal, interest or other charges, if the arrangements under whidi sudi resources are furnished expressly authorize sudi financing.

Section 1 Use of Resources and Conditions of Financing (a) The Association shall provide financing to further 'development in the less-developed areas of the world included within the Association's membership.

(b) Subject to the foregoing paragraph, the Association may provide financing in such forms and on such terms as it may deem appropriate, having regard to the economic position and prospects of the area or areas concerned and to the nature and requirements of the project.

(b) Financing provided by the Association shall be for purposes which in the opinion of the Association are of high developmental priority in the light of the needs of the area or areas concerned and, except in special circumstances, shall be for specific projects.

(c) The Association may provide financing to a member, the government of a territory included within the Association's membership, a political subdivision of any of the foregoing, a public or private entity in the territories of a member or members, or to a public international or regional organization.

•

(c) The Association shall not provide financing if in its opinion such financing is available from private sources on terms which are reasonable for the recipient or could be provided by a loan of the type made by the Bank. (d) The Association shall not provide financing except upon the recommendation of a competent committee, made after a careful study of the merits of the proposal. Each sudi committee _ shall be appointed by the Association and shall include a nominee of the Governor or Governors representing the member or members in whose territories the project under consideration is located and one or more members of the technical staff of the Association. The requirement that the committee include the nominee of a Governor or Governors shall not apply in the case of financing provided to a public international or regional organization.

(d) In the case of a loan to an entity other than a member, the Association may, in its discretion, require a suitable governmental or other guarantee or guarantees. (e) The Association, in special cases, may make foreign exchange available for local expenditures.

Section 3 Modifications of Terms of Financing The Association may, when and to the extent it deems appropriate in the light of all relevant circumstances, including the financial and economic situation and prospects of the member concerned, and on such con-

41

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World-wide Economic Institutions

ditions a s it m a y d e t e r m i n e , a g r e e to a r e l a x a t i o n or o t h e r modification of t h e t e r m s on which a n y of its financing shall h a v e b e e n p r o v i d e d .

Section 4 Cooperation with Other Internatiodal Organizations and Members Providing Development Assistance T h e A s s o c i a t i o n shall c o o p e r a t e with t h o s e public i n t e r n a t i o n a l o r g a n i z a t i o n s and m e m b e r s which p r o v i d e financial a n d technical a s s i s t a n c e to t h e l e s s - d e v e l o p e d a r e a s of t h e w o r l d . Section 5 Miscellaneous Operations In a d d i t i o n to t h e o p e r a t i o n s specified e l s e w h e r e this A g r e e m e n t , t h e A s s o c i a t i o n m a y :

in

(i) b o r r o w f u n d s with the a p p r o v a l of the m e m b e r in w h o s e c u r r e n c y t h e l o a n is d e n o m i n a t e d ! (ii) g u a r a n t e e s e c u r i t i e s in which it h a s i n v e s t e d in order to facilitate t h e i r sale¡ (iii) b u y a n d sell s e c u r i t i e s it h a s issued or g u a r a n t e e d o r in which it h a s i n v e s t e d ; (iv) in special cases, g u a r a n t e e loans f r o m o t h e r s o u r c e s f o r p u r p o s e s n o t inconsistent w i t h t h e p r o v i s i o n s of t h e s e Articles; (v) p r o v i d e technical a s s i s t a n c e and a d v i s o r y s e r v ices at t h e r e q u e s t of a m e m b e r ; a n d (vi) e x e r c i s e such o t h e r p o w e r s incidental to its o p e r a t i o n s a s shall b e n e c e s s a r y or d e s i r a b l e in f u r t h e r a n c e of its p u r p o s e s .

Section 6 Political A c t i v i t y Prohibited T h e A s s o c i a t i o n a n d its officers shall n o t i n t e r f e r e in t h e political a f f a i r s of a n y m e m b e r , n o r shall t h e y b e influenced in t h e i r d e c i s i o n s b y t h e political c h a r a c t e r of t h e m e m b e r or m e m b e r s c o n c e r n e d . O n l y e c o n o m i c cons i d e r a t i o n s shall b e r e l e v a n t t o t h e i r decisions, a n d t h e s e c o n s i d e r a t i o n s shall b e w e i g h e d i m p a r t i a l l y in o r d e r to achieve t h e p u r p o s e s s t a t e d in this A g r e e m e n t .

Article VI Organization and Management Section 1 Structure of the Association T h e A s s o c i a t i o n shall h a v e a Board of G o v e r n o r s , Execu t i v e Directors, a P r e s i d e n t a n d s u d i o t h e r officers a n d staff to p e r f o r m such d u t i e s a s the A s s o c i a t i o n m a y determine. Section 2 Board of Governors (a) All t h e p o w e r s of t h e A s s o c i a t i o n shall b e v e s t e d in t h e Board of G o v e r n o r s . (b) Each G o v e r n o r a n d A l t e r n a t e G o v e r n o r of t h e Bank a p p o i n t e d b y a m e m b e r of t h e Bank which is also a m e m b e r of t h e A s s o c i a t i o n shall e x officio b e a G o v e r n o r and A l t e r n a t e G o v e r n o r , r e s p e c t i v e l y , of t h e Association. N o A l t e r n a t e G o v e r n o r m a y v o t e e x c e p t in t h e a b s e n c e of his p r i n c i p a l . T h e C h a i r m a n of t h e Board of G o v e r n o r s of t h e Bank shall ex officio b e C h a i r m a n of t h e Board of G o v e r n o r s of the A s s o c i a t i o n e x c e p t t h a t

42

if t h e C h a i r m a n of t h e Board of G o v e r n o r s of the B a n k shall r e p r e s e n t a s t a t e which is not a m e m b e r of t h e A s s o c i a t i o n , t h e n t h e Board of G o v e r n o r s shall select o n e of the G o v e r n o r s a s C h a i r m a n of t h e Board of G o v e r n o r s . A n y G o v e r n o r or A l t e r n a t e G o v e r n o r shall c e a s e to hold office if t h e m e m b e r b y which h e w a s a p p o i n t e d shall c e a s e to b e a m e m b e r of the A s s o c i a t i o n . (c) T h e Board of G o v e r n o r s m a y d e l e g a t e to t h e Execu t i v e Directors a u t h o r i t y to e x e r c i s e a n y of its p o w e r s , e x c e p t the p o w e r to: (i) admit n e w m e m b e r s a n d d e t e r m i n e d i t i o n s of their admission;

the

con-

(ii) a u t h o r i z e a d d i t i o n a l s u b s c r i p t i o n s a n d d e t e r m i n e the t e r m s a n d c o n d i t i o n s r e l a t i n g t h e r e t o ; (iii) s u s p e n d a m e m b e r ; (iv) decide a p p e a l s f r o m i n t e r p r e t a t i o n s of this A g r e e m e n t g i v e n b y the E x e c u t i v e D i r e c t o r s ; (v) m a k e a r r a n g e m e n t s p u r s u a n t to S e c t i o n 7 of this A r t i c l e to c o o p e r a t e w i t h o t h e r i n t e r n a t i o n a l o r g a n i z a t i o n s {other t h a n i n f o r m a l arr a n g e m e n t s of a t e m p o r a r y a n d a d m i n i s t r a t i v e character); (vi) d e c i d e to s u s p e n d p e r m a n e n t l y t h e o p e r a t i o n s of t h e A s s o c i a t i o n a n d to d i s t r i b u t e its a s s e t s ; (vii) d e t e r m i n e t h e d i s t r i b u t i o n of t h e A s s o c i a t i o n ' s n e t i n c o m e p u r s u a n t to Section 12 of this Article; a n d (viii) a p p r o v e p r o p o s e d a m e n d m e n t s to this A g r e e ment. (d) T h e Board of G o v e r n o r s shall h o l d a n a n n u a l m e e t i n g .and such o t h e r m e e t i n g a s m a y b e p r o v i d e d for b y the Board of G o v e r n o r s or c a l l e d b y t h e E x e c u t i v e Directors. (e) T h e a n n u a l m e e t i n g of t h e Board of G o v e r n o r s shall b e h e l d in c o n j u n c t i o n w i t h t h e a n n u a l m e e t i n g of t h e Board of G o v e r n o r s of t h e Bank. (f) A q u o r u m for a n y m e e t i n g of t h e B o a r d of G o v e r n o r s shall b e a m a j o r i t y of t h e G o v e r n o r s , e x e r c i s i n g n o t less t h a n t w o - t h i r d s of the t o t a l v o t i n g p o w e r . (g) T h e A s s o c i a t i o n m a y b y r e g u l a t i o n e s t a b l i s h a procedure whereby the Executive Directors may obtain a v o t e of t h e G o v e r n o r s on a specific q u e s t i o n w i t h o u t calling a m e e t i n g of t h e Board of G o v e r n o r s . . (h) T h e Board of G o v e r n o r s , a n d t h e E x e c u t i v e Dir e c t o r s to the e x t e n t a u t h o r i z e d , m a y a d o p t such r u l e s and r e g u l a t i o n s a s m a y b e n e c e s s a r y o r a p p r o p r i a t e to c o n d u c t the b u s i n e s s of t h e A s s o c i a t i o n . (i) G o v e r n o r s a n d A l t e r n a t e G o v e r n o r s shall s e r v e a s such w i t h o u t c o m p e n s a t i o n f r o m t h e A s s o c i a t i o n .

Section 3 Voting (a) Each original m e m b e r shall, .in r e s p e c t of its initial subscription, h a v e 500 v o t e s p l u s o n e a d d i t i o n a l v o t e f o r each $5,000 of its initial subscription. S u b s c r i p t i o n s o t h e r t h a n initial s u b s c r i p t i o n s of original m e m b e r s shall c a r r y such v o t i n g r i g h t s a s t h e Board of G o v e r n o r s shall d e t e r m i n e p u r s u a n t to t h e p r o v i s i o n s of A r t i c l e II, S e c t i o n 1 (b) or A r t i c l e III, Section 1 (b) a n d (c), a s t h e c a s e m a y be. A d d i t i o n s to r e s o u r c e s o t h e r t h a n s u b s c r i p t i o n s u n d e r A r t i c l e II, S e c t i o n 1 (b) a n d a d d i t i o n a l s u b s c r i p t i o n s u n d e r A r t i c l e III, S e c t i o n 1, s h a l l n o t c a r r y v o t i n g rights.

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IDA (b) Except a s o t h e r w i s e s p e c i f i c a l l y p r o v i d e d , all m a t t e r s b e f o r e t h e A s s o c i a t i o n shall b e d e c i d e d b y a m a j o r i t y of t h e v o t e s cast.

Section 4 Executive Directors (a) T h e E x e c u t i v e D i r e c t o r s shall b e r e s p o n s i b l e for t h e c o n d u c t of t h e g e n e r a l o p e r a t i o n s of t h e Association, a n d for this p u r p o s e shall e x e r c i s e all t h e p o w e r s g i v e n t o t h e m b y this A g r e e m e n t or d e l e g a t e d to t h e m b y t h e Board of G o v e r n o r s . (b) T h e E x e c u t i v e Directors of t h e A s s o c i a t i o n s h a l l b e c o m p o s e d e x officio of each E x e c u t i v e Director of t h e B a n k w h o shall h a v e b e e n (i) a p p o i n t e d b y a m e m b e r of t h e Bank which is a l s o a m e m b e r of t h e A s s o c i a t i o n , or (ii) e l e c t e d in an e l e c t i o n in whidb t h e v o t e s of a t l e a s t o n e m e m b e r of t h e Bank w h i d i is a l s o a m e m b e r of t h e A s s o c i a t i o n shall h a v e c o u n t e d t o w a r d h i s election. T h e A l t e r n a t e t o e a d i such E x e c u t i v e Director of t h e B a n k shall e x otficio b e an A l t e r n a t e Director of t h e Association. A n y Director shall c e a s e to hold office if t h e m e m b e r b y which h e w a s a p p o i n t e d , o r if all the m e m b e r s w h o s e v o t e s c o u n t e d t o w a r d his election, shall c e a s e to b e m e m b e r s of t h e Association. (c) Each Director w h o is a n a p p o i n t e d E x e c u t i v e Dir e c t o r of t h e Bank shall b e entitled tp c a s t t h e n u m b e r of v o t e s which t h e m e m b e r b y w h i d i h e w a s a p p o i n t e d is e n t i t l e d to cast in the A s s o c i a t i o n . E a d i Director w h o is a n e l e c t e d E x e c u t i v e Director of t h e Bank shall b e e n titled to c a s t t h e n u m b e r of v o t e s which t h e m e m b e r or m e m b e r s of t h e A s s o c i a t i o n w h o s e v o t e s c o u n t e d tow a r d h i s e l e c t i o n in t h e Bank a r e e n t i t l e d t o c a s t in t h e A s s o c i a t i o n . All t h e v o t e s which a Director is e n t i t l e d t o cast shall b e c a s t a s a unit. (d) A n A l t e r n a t e Director shall h a v e full p o w e r t o a c t in t h e a b s e n c e of t h e Director w h o shall h a v e app o i n t e d him. W h e n a Director is p r e s e n t , h i s A l t e r n a t e m a y p a r t i c i p a t e in m e e t i n g s b u t shall not v o t e . (e) A q u o r u m for a n y m e e t i n g of t h e E x e c u t i v e Dir e c t o r s shall be a m a j o r i t y of t h e Directors e x e r c i s i n g n o t less t h a n one-half of t h e t o t a l voting p o w e r . (f) T h e E x e c u t i v e D i r e c t o r s shall m e e t a s o f t e n a s t h e b u s i n e s s of t h e A s s o c i a t i o n m a y r e q u i r e . (g) T h e Board of G o v e r n o r s shall a d o p t r e g u l a t i o n s u n d e r which a m e m b e r of t h e A s s o c i a t i o n n o t e n t i t l e d t o a p p o i n t an E x e c u t i v e Director of t h e Bank m a y s e n d a r e p r e s e n t a t i v e t o a t t e n d a n y m e e t i n g of t h e E x e c u t i v e D i r e c t o r s of t h e A s s o c i a t i o n w h e n a r e q u e s t m a d e by, o r a m a t t e r p a r t i c u l a r l y a f f e c t i n g , t h a t m e m b e r is u n d e r consideration.

Section 5 President and Staff (a) T h e P r e s i d e n t of t h e Bank shall b e e x officio Presi d e n t of t h e A s s o c i a t i o n . T h e P r e s i d e n t shall b e Chairm a n of t h e E x e c u t i v e Directors of t h e A s s o c i a t i o n b u t shall h a v e n o v o t e e x c e p t a deciding v o t e in c a s e of a n e q u a l division. H e m a y p a r t i c i p a t e in m e e t i n g s of t h e B o a r d of G o v e r n o r s b u t shall n o t v o t e a t such m e e t i n g s . (b) T h e P r e s i d e n t shall b e chief of t h e o p e r a t i n g staff of t h e A s s o c i a t i o n . U n d e r t h e direction of t h e E x e c u t i v e D i r e c t o r s h e shall c o n d u c t t h e o r d i n a r y b u s i n e s s of t h e A s s o c i a t i o n a n d u n d e r their g e n e r a l c o n t r o l shall b e r e s p o n s i b l e for t h e o r g a n i z a t i o n , a p p o i n t m e n t and dismissal of t h e officers a n d staff. T o t h e e x t e n t p r a c t i c a b l e , officers a n d staff of t h e B a n k shall be a p p o i n t e d to s e r v e c o n c u r r e n t l y a s officers a n d staff of t h e Association. (c) T h e President, officers a n d staff of t h e A s s o c i a t i o n , in t h e discharge of t h e i r offices, o w e t h e i r d u t y e n t i r e l y t o the A s s o c i a t i o n and to n o o t h e r a u t h o r i t y . Each m e m b e r of the A s s o c i a t i o n shall respect t h e intern a t i o n a l c h a r a c t e r of this d u t y a n d shall r e f r a i n from all

a t t e m p t s to i n f l u e n c e a n y of t h e m in t h e d i s d i a r g e of their duties. (d) In a p p o i n t i n g officers a n d staff t h e P r e s i d e n t shall, s u b j e c t t o t h e p a r a m o u n t i m p o r t a n c e of s e c u r i n g t h e h i g h e s t s t a n d a r d s of efficiency a n d of technical c o m p e t e n c e , p a y d u e r e g a r d t o t h e i m p o r t a n c e of r e c r u i t i n g p e r s o n n e l o n a s w i d e a g e o g r a p h i c a l b a s i s a s possible.

Section 6 Relationship to the Bank (a) T h e A s s o c i a t i o n shall b e a n e n t i t y s e p a r a t e a n d distinct f r o m t h e Bank a n d the f u n d s of t h e A s s o c i a t i o n shall b e k e p t s e p a r a t e a n d a p a r t f r o m t h o s e of the Bank. T h e A s s o c i a t i o n shall n o t b o r r o w f r o m or l e n d to t h e Bank, e x c e p t t h a t this shall not p r e c l u d e t h e A s s o c i a t i o n f r o m i n v e s t i n g f u n d s not n e e d e d in its financing o p e r a t i o n s in o b l i g a t i o n s of t h e Bank. (b) T h e A s s o c i a t i o n m a y m a k e a r r a n g e m e n t s with the Bank r e g a r d i n g facilities, p e r s o n n e l a n d s e n i- • . r a n g e m e n t s f o r r e i m b u r s e m e n t of a d m i n i s t r a t i v e e x p e n s e s p a i d in t h e first i n s t a n c e b y e i t h e r organization on behalf of t h e o t h e r . (c) N o t h i n g in this A g r e e m e n t shall m a k e t h e A s s o - ' ciation liable f o r t h e acts o r obligations of t h e Bank o r t h e Bank liable for t h e acts o r o b l i g a t i o n s of t h e A s s o ciation. Section 7 Relations with Other International Organizations T h e A s s o c i a t i o n shall e n t e r into f o r m a l a r r a n g e m e n t s w i t h t h e U n i t e d N a t i o n s a n d m a y e n t e r into such arr a n g e m e n t s w i t h o t h e r public i n t e r n a t i o n a l o r g a n i z a t i o n s h a v i n g specialized responsibilities in r e l a t e d fields. Section 8 Location of Offices T h e p r i n c i p a l office of t h e A s s o c i a t i o n shall b e t h e p r i n c i p a l office of t h e Bank. T h e A s s o c i a t i o n m a y e s t a b lish o t h e r o f f i c e s in t h e t e r r i t o r i e s of a n y m e m b e r .

Section 9 Depositories Each m e m b e r shall d e s i g n a t e its c e n t r a l b a n k a s a d e p o s i t o r y in w h i d i t h e A s s o c i a t i o n m a y k e e p h o l d i n g s of such m e m b e r ' s c u r r e n c y or o t h e r a s s e t s of t h e Association, or, if it h a s n o c e n t r a l b a n k , it shall d e s i g n a t e for such p u r p o s e such o t h e r institution a s m a y b e acc e p t a b l e to t h e Association. In t h e a b s e n c e of a n y different designation, the depository designated for the B a n k shall b e the d e p o s i t o r y for t h e A s s o c i a t i o n . Section 10 Channel of Communication Each m e m b e r shall d e s i g n a t e an a p p r o p r i a t e a u t h o r i t y w i t h which t h e A s s o c i a t i o n m a y c o m m u n i c a t e in conn e c t i o n w i t h a n y m a t t e r arising u n d e r this A g r e e m e n t . In t h e a b s e n c e of a n y d i f f e r e n t designation, t h e channel of c o m m u n i c a t i o n d e s i g n a t e d for the Bank shall b e t h e channel f o r t h e A s s o c i a t i o n .

Section 11 Publication of Reports and Provision of Information (a) T h e A s s o c i a t i o n shall p u b l i s h an a n n u a l r e p o r t cont a i n i n g a n a u d i t e d s t a t e m e n t of its a c c o u n t s a n d shall

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World-wide Economic Institutions

circulate t o m e m b e r s at a p p r o p r i a t e i n t e r v a l s a s u m m a r y s t a t e m e n t of its financial p o s i t i o n a n d of t h e r e s u l t s of its o p e r a t i o n s .

m e m b e r g o v e r n m e n t shall for the p u r p o s e s of this A r t i c l e b e d e e m e d t o include b o t h t h e initial s u b s c r i p t i o n a n d a n y a d d i t i o n a l subscription of such m e m b e r g o v e r n m e n t .

(b) T h e A s s o c i a t i o n m a y p u b l i s h such o t h e r r e p o r t s a s It d e e m s d e s i r a b l e t o c a r r y out its p u r p o s e s .

(c) If n o such a g r e e m e n t is r e a d i e d w i t h i n six m o n t h s from the date when the government ceased to be a member, o r s u d i o t h e r time a s m a y b e a g r e e d u p o n b y t h e A s s o c i a t i o n a n d t h e g o v e r n m e n t , t h e f o l l o w i n g provisions shall a p p l y :

(c) Copies of all r e p o r t s , s t a t e m e n t s a n d p u b l i c a t i o n s m a d e u n d e r this Section shall b e d i s t r i b u t e d t o m e m b e r s .

Section 12 Disposition of N e t Income T h e Board of G o v e r n o r s shall d e t e r m i n e f f o m time t o time the disposition of t h e A s s o c i a t i o n ' s n e t income, h a v i n g d u e r e g a r d t o p r o v i s i o n f o r r e s e r v e s a n d contingencies.

Article VII

Withdrawal; Suspension of Membership; Suspension o! Operations Section 1 Withdrawal by Members A n y m e m b e r m a y w i t h d r a w f r o m m e m b e r s h i p in t h e A s s o c i a t i o n at a n y time b y t r a n s m i t t i n g a notice in w r i t i n g t o t h e A s s o c i a t i o n at its p r i n c i p a l office. W i t h d r a w a l shall b e c o m e e f f e c t i v e u p o n t h e d a t e s u d i n o t i c e is r e c e i v e d . Section 2 Suspension of Membership (a) If a m e m b e r fails to fulfill a n y of its obligations t o the Association, t h e A s s o c i a t i o n m a y s u s p e n d its m e m b e r s h i p b y decision of a m a j o r i t y of t h e G o v e r n o r s , e x e r cising a m a j o r i t y of t h e total v o t i n g p o w e r . T h e m e m b e r so s u s p e n d e d shall a u t o m a t i c a l l y c e a s e to b e a m e m b e r o n e y e a r f r o m the d a t e of its s u s p e n s i o n u n l e s s a decision is t a k e n b y t h e s a m e m a j o r i t y t o r e s t o r e t h e m e m b e r to good s t a n d i n g . (b) W h i l e u n d e r s u s p e n s i o n , -a m e m b e r shall not b e entitled to e x e r c i s e a n y r i g h t s u n d e r t h i s A g r e e m e n t e x c e p t t h e right of w i t h d r a w a l , but shall r e m a i n s u b j e c t t o all obligations. Section 3 Suspension or Cessation of Membership In the Bank A n y m e m b e r w h i d i is s u s p e n d e d f r o m m e m b e r s h i p in, o r c e a s e s t o b e a m e m b e r of, t h e Bank shall a u t o m a t ically b e s u s p e n d e d f r o m m e m b e r s h i p in, o r c e a s e t o b e a m e m b e r of, t h e A s s o c i a t i o n , a s t h e c a s e m a y be. Section 4 Rights and Duties of Governments Ceasing to be Members (a) W h e n a g o v e r n m e n t c e a s e s t o b e a m e m b e r , it shall h a v e n o rights u n d e r this A g r e e m e n t e x c e p t a s p r o v i d e d in this Section a n d in A r t i c l e X (c), but it shall, e x c e p t a s in this Section o t h e r w i s e p r o v i d e d , r e m a i n liable for all f i n a n c i a l o b l i g a t i o n s u n d e r t a k e n b y it to the Association, w h e t h e r a s a m e m b e r , b o r r o w e r , g u a r a n t o r or o t h e r w i s e . (b) W h e n a g o v e r n m e n t c e a s e s t o b e a m e m b e r , t h e Association a n d the g o v e r n m e n t shall.proceed to a settlem e n t of accounts. A s p a r t of such s e t t l e m e n t of a c c o u n t s , t h e Association a n d the g o v e r n m e n t m a y a g r e e on t h e a m o u n t s to b e p a i d to t h e g o v e r n m e n t on a c c o u n t of its subscription and on t h e time a n d c u r r e n c i e s of p a y m e n t . T h e t e r m "subscription" w h e n u s e d in r e l a t i o n to a n y

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(i) T h e g o v e r n m e n t shall b e r e l i e v e d of a n y f u r t h e r liability t o t h e A s s o c i a t i o n on a c c o u n t of its subscription, e x c e p t t h a t the g o v e r n m e n t shall p a y to the A s s o c i a t i o n f o r t h w i t h a m o u n t s d u e and u n p a i d on t h e d a t e w h e n t h e g o v e r n m e n t c e a s e d to b e a m e m b e r a n d w h i d i in t h e opinion of t h e A s s o c i a t i o n a r e n e e d e d b y it t o m e e t its c o m m i t m e n t s a s of t h a t d a t e u n d e r its f i n a n c i n g operations. (ii) T h e A s s o c i a t i o n shall r e t u r n to t h e g o v e r n m e n t f u n d s p a i d in b y t h e g o v e r n m e n t on a c c o u n t of its subscription or d e r i v e d t h e r e f r o m a s principal r e p a y n l e n t s a n d held by t h e A s s o c i a t i o n on t h e d a t e w h e n t h e g o v e r n m e n t ceased to be a m e m b e r , e x c e p t to t h e e x t e n t t h a t in t h e opinion of the A s s o c i a t i o n s u d i f u n d s will b e n e e d e d b y it t o m e e t its c o m m i t m e n t s a s of t h a t d a t e u n d e r its f i n a n c i n g o p e r a t i o n s . (iii) T h e A s s o c i a t i o n shall p a y o v e r to t h e g o v e r n m e n t a p r o rata s h a r e of all p r i n c i p a l r e p a y m e n t s r e c e i v e d by t h e A s s o c i a t i o n a f t e r t h e d a t e on which t h e g o v e r n m e n t c e a s e s to be a m e m b e r on l o a n s c o n t r a c t e d prior t h e r e t o , e x c e p t t h o s e m a d e out of s u p p l e m e n t a r y r e s o u r c e s p r o v i d e d to t h e A s s o c i a t i o n u n d e r a r r a n g e m e n t s specif y i n g special l i q u i d a t i o n rights. S u d i s h a r e shall b e such p r o p o r t i o n of t h e t o t a l , p r i n c i p a l a m o u n t of s u d i loans a s t h e t o t a l a m o u n t paid by t h e g o v e r n m e n t on a c c o u n t of its subscription a n d n o t r e t u r n e d to it p u r s u a n t to c l a u s e (ii) a b o v e shall b e a r t o t h e total a m o u n t paid by all m e m b e r s on a c c o u n t of their s u b s c r i p t i o n s w h i d i shall h a v e b e e n used or iii t h e opinion of the A s s o c i a t i o n will b e n e e d e d by it to m e e t its c o m m i t m e n t s urider its f i n a n c i n g o p e r a t i o n s a s of t h e d a t e on which t h e g o v e r n m e n t c e a s e s t o b e a m e m b e r . Such p a y m e n t b y t h e A s s o c i a t i o n shall b e m a d e in i n s t a l m e n t s w h e n and a s s u d i p r i n c i p a l r e p a y m e n t s a r e r e c e i v e d by t h e Association, b u t not m o r e f r e q u e n t l y t h a n a n n u a l l y . Such i n s t a l m e n t s shall b e p a i d in the c u r r e n c i e s received by the Association except that the A s s o c i a t i o n m a y in its discretion m a k e p a y m e n t in t h e c u r r e n c y of t h e g o v e r n m e n t c o n c e r n e d . (iv) A n y a m o u n t d u e t o t h e g o v e r n m e n t on a c c o u n t of its s u b s c r i p t i o n m a y b e w i t h h e l d so long a s t h a t g o v e r n m e n t , or t h e g o v e r n m e n t of a n y t e r r i t o r y i n c l u d e d w i t h i n its m e m b e r s h i p , or a n y political s u b d i v i s i o n or a n y a g e n c y of a n y of t h e f o r e g o i n g r e m a i n s liable, a s b o r r o w e r or g u a r a n t o r , t o t h e Association, a n d such a m o u n t m a y , at t h e o p t i o n of t h e Association, b e a p p l i e d a g a i n s t a n y such liability as it m a t u r e s . (v) In n o e v e n t shall t h e g o v e r n m e n t r e c e i v e u n d e r this p a r a g r a p h (c) an a m o u n t e x c e e d i n g , in t h e a g g r e g a t e , t h e lesser of t h e t w o f o l l o w i n g : (a) t h e a m o u n t p a i d b y t h e g o v e r n m e n t on a c c o u n t of its subscription, or (b) such p r o p o r t i o n of the n e t a s s e t s of t h e A s s o c i a t i o n , a s s h o w n on t h e b o o k s of t h e A s s o c i a t i o n a s of t h e d a t e on which t h e g o v e r n m e n t c e a s e d t o b e a m e m b e r , a s t h e a m o u n t of its s u b s c r i p t i o n shall bear to t h e a g g r e g a t e a m o u n t of t h e s u b s c r i p t i o n s of all members.

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IDA (vi) All calculations required hereunder shall be made on such basis as shall be reasonably determined by the Association. (d) In no event shall any amount due to a government under this Section be paid until six months after the date upon which the government ceases to be a member. If within six months of the date upon which any govern« ment ceases to be a member the Association suspends operations under Section 5 of this Article, all rights of such government shall be determined by the provisions of such Section 5 and such government shall be con* sidered a member of the Association for purposes of such Section 5, except that it shall have no voting rights. Section 5 Suspension of Operations and Settlement of Obligations (a) The Association may permanently suspend its operations by vote of a majority of the Governors exercising a majority of the total voting power. After such suspension of operations the Association shall forthwith cease all activities, except those incident to the orderly realization, conservation and preservation of its assets and settlement of its obligations. Until final settlement of such obligations and distribution of such assets, the Association shall remain in existence and all mutual rights and obligations of the Association and its members under this Agreement shall continue unimpaired, except that no member shall be suspended or shall withdraw and that no distribution shall be made to members except as in this Section provided. (b) No distribution shall be made to members on account of their subscriptions until all liabilities to creditors shall have been discharged or provided for and until the Board of Governors, by vote of a majority of the Governors exercising a majority of the total voting power, shall have decided to make such distribution. (c) Subject to the foregoing, and to any special arrangements for the disposition of supplementary resources agreed upon in connection with the provision of such resources to the Association, the Association shall distribute its assets to members pro rata in proportion to amounts paid in by them on account of their subscriptions. Any distribution pursuant to the foregoing provision of this paragraph (c) shall be subject, in the case of any member, to prior settlement of all outstanding claims by the Association against such member. Such distribution shall be made at such times, in such currencies, and in cash or other assets as the Association shall deem fair and equitable. Distribution to the several members need not be uniform in respect of the type of assets distributed or of the currencies in which they are expressed. (d) Any member receiving assets distributed by the Association pursuant to this Section or Section 4 shall enjoy the same rights with respect to such assets as the Association enjoyed prior to their distribution.

Article VIII

Status, Immunities and Privileges Section 1 Purposes of Article To enable the Association to fulfill the functions with which it is entrusted, the status, immunities and privileges provided in this Article shall be accorded to the Association in the territories of each member. Section 2 Status of the Association The Association shall possess full juridical personality and, in particular, the capacity: (i) to contract;

(ii) to acquire and dispose of immovable and movable property; (iii) to institute legal proceedings. Section 3 Position of the Association with Regard to Judicial Process Actions may be brought against the Association only in a court of competent jurisdiction in the territories of a member in which the Association has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. No actions shall, however, he brought by members or persons acting for or deriving from members. The property and assets of the Association shall, wheresoever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of final judgment against the Association. Section 4 Immunity of Assets from Seizure Property and assets of the Association, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation or any other form of seizure by executive or legislative action. Section 5 Immunity of Archives The archives of the Association shall be inviolable. Section 6 Freedom of Assets from Restrictions To the extent necessary to carry out the operations provided for in this Agreement and subject to the provisions of this Agreement, all property and assets of the Association shall be free from restrictions, regulations, controls and moratoria of any nature. Section 7 Privilege for Communications The official communications of the Association shall be accorded by each member the same treatment that it accords to the official communications of other members. Section 8 Immunities and Privileges of Officers and Employees All Governors, Executive Directors, Alternates, officers and employees of the Association (i) shall be immune from legal process with respect to acts performed by them in their official capacity except when the Association waives this immunity; (ii) not being local nationals, shall be accorded the same immunities from immigration restrictions, alien registration requirements and national service obligations and the same facilities as regards exchange restrictions as are accorded by members to the representatives, officials, and employees of comparable rank of other members; (iii) shall be granted the same treatment in respect of travelling facilities as is accorded by members to representatives, officials and employees of comparable rank of other menjbers.

45

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World-wide Economic Institutions Section 9 Immunities from Taxation

(a) The Association, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Association shall also be immune from liability for the collection or payment of any tax or duty. (b) No tax shall be levied on or in respect of salaries and emoluments paid by the Association to Executive Directors, Alternates, officials or employees of the Association who are not local citizens, local subjects, or other local nationals. (c) No taxation of any kind shall be levied on any obligation or security issued by the Association (including any dividend or interest thereon) by whomsoever held (i) which discriminates against such obligation or security solely because it is issued by the Association; or (ii) if the sole jurisdictional basis for sudi taxation is the place or currency in which it is issued, made payable or paid, or the location of any office or place of business maintained by the Association. (d) No taxation of any kind shall be levied on any obligation or security guaranteed, by the Association (including any dividend or interest thereon) by whomsoever held (i) which discriminates against such obligation or security solely because it is guaranteed by the Association; or (ii) if the sole jurisdictional basis for sudi taxation is the location of any office or place of business maintained by the Association. Section 10 Application of Article Each member shall take such action as is necessary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Association of the detailed action which it has taken.

Article IX Amendments (a) Any. proposal to introduce modifications in this Agreement, whether emanating from a member, a Governor or the Executive Directors, shall be communicated to the Chairman of the Board of Governors who shall bring the proposal before the Board. If the proposed amendment is approved by the Board, the Association shall, by circular letter or telegram, ask all members whether they accept the proposed amendment. When three-fifths of the members, having four-fifths of the total voting power, have accepted the proposed amendments, the Association shall certify the fact by formal communication addressed to all members. (b) Notwithstanding (a) above, acceptance by all members is required in the case of any amendment modifying (i) the right to withdraw from the Association provided in Article VII, Section 1; (ii) the right secured by Article III, Section 1 (c) ; (iii) the limitation on liability provided in Article II, Section 3.

46

(c) Amendments shall enter into force for all members three months after the date of the formal communication unless a shorter period is specified in the circular letter or telegram. Article X Interpretation and Arbitration (a) Any question of interpretation of the provisions of this Agreement arising between any member and the Association or between any members of the Association shall be submitted to the Executive Directors for their decision. If the question particularly affects any member of the Association not entitled to appoint an Executive Director of the Bank, it shall be entitled to representation in accordance with Article VI, Section 4 (g). (b) In any case where the Executive Directors have given a decision under (a) above, any member may require that the question be referred to the Board of Governors, whose decision shall be final. Pending the result of the reference to the Board of Governors, the Association may, so far as it deems necessary, act on the basis of the decision of the Executive Directors. (c) Whenever a disagreement arises between the Association and a country whidi has ceased to be a member, or between the Association and any member during the permanent suspension of the Association, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators, one appointed by the Association, another by the country involved and an umpire who, unless the parties otherwise agree, shall be appointed by the President of the International Court of Justice or such other authority as may have been prescribed by regulation adopted by the Association. The umpire shall have full power to settle all questions of procedure in any case where the parties are in disagreement with respect thereto. Article XI Final Provisions Section 1 Entry into Force This Agreement shall enter into force when it has been signed on behalf of governments whose subscriptions comprise not less than sixty-five percent of the total subscriptions set forth in Schedule A and when the instruments referred to in Section 2 (a) of this Article have been deposited on their behalf, but in no event shall this Agreement enter into force before September 15, 1960. Section 2 Signature (a) Each government on whose behalf this Agreement is signed shall deposit with the Bank an instrument setting forth that it has accepted this Agreement in accordance with its law and has taken all steps necessary to enable it to carry out all of its obligations under this Agreement. (b) Each government shall become a member of the Association as from the date of the deposit on its behalf of the instrument referred to in paragraph (a) above except that no government shall become a member before this Agreement enters into force under Section 1 of this Article. (c) This Agreement shall remain open for signature until the close of business on December 31, 1960, at the principal office of the Bank, on behalf of the governments of the states whose names are set forth in Schedule A, provided that, if this Agreement shall not have entered into force by that date, the Executive Directors of the Bank may extend the period during which this

Doc. 3

IDA Agreement shall remain open for signature by not more than six months. (d) After this Agreement shall have entered into force, it shall be open for signature on behalf of the government of any state whose membership shall have been approved pursuant to Article II, Section 1 (b). Section 3 Territorial Application By its signature of this Agreement, each government accepts it both on its own behalf and in respect of all territories for whose international relations such government is responsible except those which are excluded by such government by written notice to the Association. Section 4 Inauguration of tbe Association (a) As soon as this Agreement enters into force under Section 1 of this Article the President shall call a meeting of the Executive Directors. (b) The Association shall begin operations on the date when such meeting is held. (c) Pending the first meeting of the Board of Governors, the Executive Directors may exercise all the powers of the Board of Governors except those reserved to the Board of Governors under this Agreement. Section 5 Registration The Bank is authorized to register this Agreement with the Secretariat of the United Nations in accordance with Article 102 of the Charter of the United Nations and the Regulations thereunder adopted by the General Assembly. DONE at Washington, in a single copy which shall remain deposited in the archives of the International Bank for Reconstruction and Development, which has indicated by its signature below its agreement to act as depository of this Agreement, to register this Agreement with the Secretariat of the United Nations and to notify all governments whose names are set forth in Schedule A of the date when this Agreement shall have entered into force under Article XI, Section 1 hereof.

Schedule A

Part II Afghanistan Argentina Bolivia Brazil Burma Ceylon Chile China Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Ethiopia Ghana Greece Guatemala Haiti Honduras Iceland India Indonesia Iran Iraq Ireland Israel Jordan Korea Lebanon Libya Malaya Mexico Morocco Nicaragua Pakistan Panama Paraguay Peru Philippines Saudi Arabia Spain Sudan Thailand Tunisia Turkey United Arab Republic Uruguay Venezuela Viet-Nam Yugoslavia

1.01 18.83 1.06 18.83 2.02 3.03 3.53 30.26 3.53 0.20 4.71 0.40 0.65 0.30 0.50 2.36 2.52 0.40 0.76 0.30 0.10 40.35 11.10 4.54 0.76 3.03 1.68 0.30 1.26 0.45 1.01 2.52 8.74 3.53 0.30 10.09 0.02 0.30 1.77 5.04 3.70 10.09 1.01 3.03 1.51 5.80 6.03 1.06 7.06 1.51 4.04 236.93

Initial Subscriptions (US $ Millions)'

Total

1000.00

Part I Australia Austria Belgium Canada Denmark Finland France Germany Italy Japan Luxembourg Netherlands Norway Sweden Union of South Africa United Kingdom United States

20.18 5.04 22.70 37.83 8.74 3.83 52.96 52.96 18.16 33.59 1.01 27.74 6.72 10.09 10.09 131.14 320.39 763.07

•) In terms of U n i t e d S t a l e s dollars e f f e c t of J a n u a r y 1. 1960.

of t h e vreiqht and

fineness

is

47

4. Articles of Agreement of the International Finance Corporation (IFC) May 25, 1955 BGBl. 1956 II, 749 (264 U.N.T.S. 117; 439 U.N.T.S. 318; 563 U.N.T.S. 362)

The Governments on whose behalf this Agreement is signed agree as follows: I n t r o d u c t o r y Article The International Finance Corporation (hereinafter called the Corporation) is established and shall operate in accordance with the following provisions: ARTICLE I Purpose The purpose of the Corporation Is to further economic development by encouraging the growth of productive private enterprise in member countries, particularly in the less developed areas, thus supplementing the activities of the International Bank for Reconstruction and Development (hereinafter called the Bank). In carrying out this purpose, the Corporation shall: (i) in association with private investors, assist In financing the establishment, improvement and expansion of productive private enterprises which would contribute to the development of its member countries by making Investments, without guarantee of repayment by the member government concerned, in cases where sufficient private capita] is not available on reasonable terms: (ii) seek to bring together investment opportunities, domestic and foreign private capital, and experienced management; and (iii) seek to stimulate, and to help create conditions conducive to, the flow of private capital, domestic and foreign, into productive investment in member countries. The Corporation shall be guided in all its decisions by the provisions of this Article.

ARTICLE II M e m b e r s h i p aod Capital Section 1 Membership (a) The original members of the Corporation shall be those members of the Bank listed in Schedule A hereto which shall, on or before the date specified in Article IX, Section 2 (c), accept membership in the Corporation. (b) Membership shall be open to other members of the Bank at such times and in accordance with such terms as may be prescribed by the Corporation. Section 2 Capital Stock J^! authorized capital stock of the Corporation shall be $100,000,000, in terms of United States dollars. i J S L P t a u t h o r i 2 e d capital stock shall be divided into 100,000 shares having a par value of one thousand United States dollars each. Any such shares not initially subscribed by original members shall be available for subsequent subscription in accordance with Section 3 (d) of this Article.

48

(c) The amount of capital stock at any time authorized may be increased by the Board of Governors as follows: (i) by a majority of the votes cast, in case such increase is necessary for the purpose of issuing shares of capital stock on initial subscription by members other than original members, provided that the aggregate of any increases authorized pursuant to this subparagraph shall not exceed 10,000 shares; (ii) in any other case, by a three-fourths majority ol the total voting power. (d> In case of an increase authorized pursuant to paragraph (c) (ii) above, each member shall have a reasonable opportunity to subscribe, under such conditions as the Corporation shall decide, to a proportion of the increase of stodc equivalent to the proportion which it! stock theretofore subscribed bears to the total capital stock of the Corporation, but no member shall be obligated to subscribe to any part of the increased capital (c) Issuance of shares of stock, other than those subscribed either on initial subscription or pursuant to paragraph (d) above, shall require a three-fourths majority of the total voting power. (f) Shares of stock of the Corporation shall b€ available for subscription only by, and shall be issuec only to, members. Section 3 Subscriptions (a) Each original member shall subscribe to the numbei of shares of stock set forth opposite its name lo Schedule A. The number of shares of stock to be subscribed by other members shall be determined by the Corporation. (b) Shares of stodc initially subscribed by original members shall be issued at par. (c) The initial subscription of each original membei shall be payable in full within 30 days after either the date on which the Corporation shall begin operations pursuant to Article IX, Section 3 (b), or the date on which sud) original member becomes a member, which* ever shall be later, or at such date thereafter as ihe Corporation shall determine. Payment shall be made in gold or United States dollars in response to a call by the Corporation which shall specify the place or places of payment. (d) The price and other terms of subscription of shares of stodc to be subscribed, otherwise than on initial subscription by original members, shall be determined by the Corporation. Section 4 Limitation on Liability No member shall be liable, by reason of its membership, for obligations of the Corporation. Section 5 Restriction on Transfers and Pledges of Shares Shares of stock shall not be pledged or encumbered in any manner whatever, and shall be transferable only to the Corporation.

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IFC ARTICLE III Operations Section

1

Financing Operations The Corporation may make investments of its funds in productive private enterprises in the territories of its members. The existence of a government or other public interest in sudi an enterprise shall not necessarily preclude the Corporation from making an investment therein. Section

2

Forms of Financing (a) The Corporation s financing shall not take the form of investments in capital stock. Subject to the foregoing, the Corporation may make investments of its funds in sudi form or forms as it may deem appropriate in the circumstances, including (but without limitation) Investments according to the holder thereof the right to participate in earnings and the right to subscribe to, or to convert the investment into, capital stock.

(b) The Corporation shall not itself exercise any right to subscribe to, or to convert any investment into, capital stock. Section

3

Operational Principles The operation*-, of the Corporation shall be conducted in accordance with the following principles: (i) the Corporation shall not undertake any financing for which in its opinion sufficient private capital could be obtained on reasonable terms; (ii) the Corporation shall not finance an enterprise in the territories of any member if the member objects to such financing; (iii) the Corporation shall impose no conditions that the proceeds of any financing by it shall be spent in the territories of any particular country; (iv) the Corporation shall not assume responsibility for managing any enterprise in which it has invested; (v) the Corporation shall undertake its financing on terms and conditions which it considers appropriate, taking into account the requirements of the enterprise, the risks being undertaken by the Corporation and the terms and conditions normally obtained by private investors for similar financing; (vi) the Corporation shall seek to revolve its funds by selling its investments to private investors whenever it can appropriately do so on satisfactory terms; (vii) the Corporation shall seek to maintain a reasonable diversification in its investments. Section

4

Protection ol Interests Nothing in this Agreement shall prevent the Corporation, in the event of actual or threatened default on any of its investments, actual or threatened insolvency of the enterprise in which such investment shall have been made, or other situations which, in the opinion of the Corporation, threaten to jeopardize such investment, from taking such action and exercising such rights as it may deem necessary for the protection of its interests.

Section

5

member's territories pursuant to Section 1 of this Article shall not be free, solely by reason of any provision of this Agreement, from generally applicable foreign exchange restrictions, regulations and controls in force in the territories of thai member. Section 6 Miscellaneous Operations In addition to the operations specified elsewhere in this Agreement, the Corporation shall have the power to: (i) borrow funds, and in that connection to furnish such collateral or other security therefor as it shall determine; provided, however, that before making a public sale of its obligations in the markets, of a member, the Corporation shall have obtained the approval of that member and of the member in whose currency the obligations are to be denominated; (ii) invest funds not needed in its financing operations in such obligations as it may determine and Invest funds held by it for pension or similar purposes In any marketable securities, all without being subject to the restrictions imposed b y other sections of this Article; (iii) guarantee securities in which it has invested in order to facilitate their sale; (iv) buy and sell securities it has issued or guaranteed or in which it has invested: (v) exercise such other powers incidental to its business as shall be necessary or desirable in furtherance of its purposes. Section 7 Valuation of Currencies Whenever it shall become necessary under this Agreement to value any currency in terms of the value of another currency, such valuation shall be as reasonably determined by the Corporation after consultation with the International Monetary Fund. Section 8 Warning to be placed on Securities Every security • issued or guaranteed by the Corporation shall bear on its face a conspicuous statement to the effect that it is not an obligation of the Bank or, unless expressly stated on the security, of any government. Section 9 Political Activity Prohibited The Corporation and its officers shall not interfere in the political affairs of any member; nor shall they be Influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in this Agreement.

ARTICLE IV Organization and Management Section 1 Structure ol the Corporation The Corporation shall have a Board of Governors, a Board of Directors, a Chairman of the Board of Directors, a President and sudi other officers and staff to perform sudi duties as the Corporation may determine. Section

2

Applicability oi Certain Foreign Exchange Restrictions

Board of Governors

Funds received by or payable to the Corporation in respect of an investment of the Corporation made in any

(a) All the powers of the Corporation shall be vested in the Board of Governors.

49

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World-wide Economic Institutions

(b) Each Governor and Alternate Governor of the Bank appointed by a member of the Bank whidi is also a member of the Corporation shall ex oliicio be a Governor or Alternate Governor, respectively, of the Corporation. No Alternate Governor may vote except in the absence of his principal. The Board of Governors shall select one of the Governors as Chairman of the Board of Governors. Any Governor or Alternate Governor shall cease to hold office if the member by which he was appointed shall cease to be a member of the Corporation. (c) The Board of Governors may delegate to the Board of Directors authority to exercise any of its powers, except the power to: (i) admit new members and determine the conditions of their admission; (ii) increase or decrease the capital stock; (iii) suspend a member; (iv) decide appeals from interpretations of this Agreement given by the Board of Directors; (v) make arrangements to cooperate with other International organizations (other than informal arrangements of a temporary and administrative character); (vi) decide to suspend permanently the operations of the Corporation and to distribute its assets; (vii) declare dividends; (viii) amend this Agreement. (d) The Board of Governors shall hold an annual meeting and such other meetings as may be provided for by the Board of Governors or called by the Board of Directors. (e) The annual meeting of the Board of Governors shall be held in conjunction with the annual meeting of the Board of Governors of the Bank. (f) A quorum for any meeting of the Board of Governors shall be a majority of the Governors, exercising not less than two-thirds of the total voting power. (g) The Corporation may by regulation establish a procedure whereby the Board of Directors may obtain a vote of the Governors on a specific question without calling a meeting of the Board of Governors. (h) The Board of Governors, and the Board of Directors to the extent authorized, may adopt suds rules and regulations as may be necessary or appropriate to conduct the business of the Corporation. (i) Governors and Alternate Governors shall serve as such without compensation from the Corporation. Section 3 Voting (a) Each member shall have two hundred fifty votes plus one additional vote for each share of stodc held. (b) Except as otherwise expressly provided, all matters before the Corporation shall be decided by a majority of the votes cast.

Section 4 Board oi Directors (a) The Board of Directors shall be responsible for the conduct of the general operations of the Corporation, and for this purpose shall exercise all the powers given to it by this Agreement or delegated to it by the Board of Governors. (b) The Board of Directors of the Corporation shall be composed ex oiiicio of each Executive Director of the Bank who shall have been either

50

(i) appointed by a member of the Bank which is also a member of the Corporation, or (ii) elected in an election in which the votes of at least one member of the Bank whidi is also a member of the Corporation shall have counted toward his election, The Alternate to each such Executive Director of the Bank shall ex officio be an Alternate Director of the Corporation. Any Director shall cease to hold office if the member by whidi he was appointed, or if all the members whose votes counted toward his election, shall cease .to be members of the Corporation. (c) Each Director who is an appointed Executive Director of the Bank shall be entitled to cast the number of votes which the member by which he was so appointed is entitled to cast in the Corporation. Each Director who is an elected Executive Director of the Bank shall be entitled to cast the number of votes which the member or members of the Corporation whose votes counted toward his election in the Bank are entitled to cast in the Corporation. All the votes whidi a Director is entitled to cast shall be cast as a unit. (d) An Alternate Director shall have full power to act in the absence of the Director who shall have appointed him. When a Director is present, his Alternate may participate in meetings but shall not vote. (e) A quorum for any meeting ol the Board of Directors shall be a majority of the Directors exercising not less than one-half of the total voting power. (f) The Board of Directors shall meet as often as the business of the Corporation may require. (g) The Board of Governors shall adopt regulations under whidi a member of the Corporation not entitled to appoint an Executive Director of the Bank may send a representative to attend any meeting of the Board of Directors of the Corporation when a request made by, or a matter particularly affecting, that member is under consideration. Section 5 Chairman, President and Staff (a) The President of the Bank shall be ex oliicio Chairman of the Board of Directors of the Corporation, but shall have no vote except a deciding vote in case of an equal division. He may participate in meetings of the Board of Governors but shall not vote at such meetings. (b) The President of the Corporation shall be appointed by the Board of Directors on the recommendation of the Chairman. The President shall be chief of the operating staff of the Corporation. Under the direction of the Board of Directors and the general supervision of the Chairman, he shall conduct the ordinary business of the Corporation and under their general control shall be responsible for the organization, appointment and dismissal of the officers and staff. The President may participate in meetings of the Board of Directors but shall not vote at such meetings. The President shall cease to hold office by decision of the Board of Directors in which the Chairman concurs. (c) The President, officers and staff of the Corporation, in the discharge of their offices, owe their duty entirely to the Corporation and to no other authority. Each member of the Corporation shall respect the international character of this duty and shall refrain from all attempts to influence any of them in the discharge of their duties. (d) Subject to the paramount importance of securing the highest standards of efficiency and of technical competence, due regard shall be paid, in appointing the officers and staff of the Corporation, to the importance of recruiting personnel on as wide a geographical basis as possible.

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IFC Section 6 Relationship to the Bank (a) The Corporation shall be an entity separate and distinct from the Bank and the funds of the Corporation shall be kept separate and apart from those of the Bank. The Corporation shall not lend to or borrow from the Bank. The provisions of this Section shall not prevent the Corporation from making arrangements with the Bank regarding facilities, personnel and services and arrangements for reimbursement of administrative expenses paid in the first instance by either organization on behalf of the other. (b) Nothing in this Agreement shall make the Corporation liable for the acts or obligations of the Bank, or the Bank liable for the acts or obligations of the Corporation Section 7 Relations with other International Organizations The Corporation, acting through the Bank, shall enter into formal arrangements with the United Nations and may enter into sudi arrangements with other public international organizations having specialized responsibilities in related fields. Section 8 Location of Offices The principal office of the Corporation shall be in the same locality as the principal office of the Bank. The Corporation may establish other offices in the territories of any member.

(c) Dividends shall be paid in sudi manner and in such currency or currencies as the Corporation shall determine.

ARTICLE V

Withdrawal; Suspension o! Membership; Suspension of Operations Section 1 Withdrawal by Members Any member may withdraw from membership in the Corporation at any time by transmitting a notice in writing to the Corporation at its principal office. Withdrawal shall become effective upon the date such notice Is received. Section 2 Suspension of Membership (a) If a member fails to fulfill any of its obligations to the Corporation, the Corporation may suspend Its. membership by decision of a majority of the Governors, exercising a mayority of the total voting power. The member so suspended shall automatically cease to be a member one year from the date of its suspension unless a decision is taken by the same majority to restore the member to good standing. (b) While under suspension, a member shall not be entitled to exercise any rights under this Agreement except the right of withdrawal, but shall remain subject to all obligations. Section 3

Section 9 Depositories Each member shall designate its central bank as a depository in which the Corporation may keep holdings of sudi member's currency or other assets of the Corporation or, if it has no central bank, it shall designate for such purpose such other institution as may be acceptable to the Corporation. S e c t i o n 10 Channel of Communication Each member shall designate an appropriate authority with whidi the Corporation may communicate in connection with any matter arising under this Agreement. Section

U

Publication of Reports and Provision of Information (a) The Corporation shall publish an annual report containing an audited statement of its accounts and shall circulate to members at appropriate intervals a summary statement of its financial position and a profit and loss statement showing the results of its operations. (b) The Corporation may publish sudi other reports as it deems desirable to carry out its purposes. (c) Copies of all reports, statements and publications made under this Section shall be distributed to members.

S e c t i o n 12 Dividends (a) The Board of Governors may determine from time to time what part of the Corporation's net income and surplus, after making appropriate provision for reserves, shall be distributed as dividends. (b) Dividends shall be distributed pro rata in proportion to capital stock held by members.

Suspension or Cessation of Membership in the Bank Any member whidi is suspended from membership in, or ceases to be a member of, the Bank shall automatically be suspended from membership in, or cease to be a member of, the Corporation, as the case may be. Section 4 Rights and Duties of Governments ceasing to be Members (a) When a government ceases to be a member it shall remain liable for all amounts due from it to the Corporation. The Corporation shall arrange for the repurchase of sudi government's capital stock as a part of the settlement of accounts with it in accordance with the provisions of this Section, but the government shall have no other rights under this Agreement except as provided in this Section and in Article VIII (c). (b) The Corporation and the government .may agree on the repurchase of the capital stock of the government on such terms as may be appropriate under the circumstances, without regard to the provisions of paragraph (c) below. Sudi agreement may provide, among other things, for a final settlement of all obligations of the government to the Corporation. (c) If such agreement shall not have been made within six months after the government ceases to be a member or such other time as the Corporation and sudi government may agree, the repurchase price of the government's capital stock shall be the value thereof shown by the books of the Corporation on the day when the government ceases to be a member. The repurchase of the capital stock shall be subject to the following conditions: (i) payments for shares of stock may be made from time to time, upon their surrender by the government, in sudi instalments, at sudi times and in such available currency or currencies as the Corporation reasonably determines, taking into account the financial position of the Corporation; (ii) any amount due to the government for its capital stock shall be withheld so long as the

51

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World-wide Economic Institutions

government or any of its agencies remains liable to the Corporation for payment of any amount and such amount may, at the option ol the Corporation, be set off, as it becomes payable, against the amount due from the Corporation; (iii) if the Corporation sustains a net loss on the investment made pursuant to Article III, Sec* tion 1, and held by it on the date when the government ceases to be a member, and the amount of sudi loss exceeds the amount of the reserves provided therefor on such date, such government shall repay on demand the amount by which the repurchase price of its shares of stock would have been reduced if such loss had been taken into account when the repurchase price was determined. (d) In no events shall any amount due to a government for its capital stock under this Section be paid until six months after the date upon which the government ceases to be a member. If within six months of the date upon which any government ceases to be a member the Corporation suspends operations under Section 5 of this Article, all rights of such government shall be determined by the provisions of such Section 5 and such government shall be considered still a member of the Corporation for purposes of such Section 5, except that it shall have no voting rights. Section 5 Suspension of Operations and Settlement of Obligations (a) The Corporation may permanently suspend its operations by vote of a majority of the Governors exercising a majority of the total voting power. After such suspension of operations the Corporation shall forthwith cease all activities, except those incident to the orderly realization, conservation and preservation of its assets and settlement of its obligations. Until final settlement of such obligations and distribution of such assets, the Corporation shall remain in existence and all mutual rights and obligations of the Corporation and its members under this Agreement shall continue unimpaired, except that no member shall be suspended or withdraw and that no distribution shall be made to members except as in this Section provided. (b) No distribution shall be made to members on ac; count of their subscriptions to the capital stock of the Corporation until all liabilities to creditors shall have been discharged or provided for and until the Board of Governors, by vote of a majority of the Governors exercising a majority of the total voting power, shall have decided to make such distribution. (c) Subject to the foregoing, the Corporation shall distribute the assets of the Corporation to members pro rata in proportion to capital stock held by them, subject, In the case of any member, to prior settlement of all outstanding claims by the Corporation against such member. Such distribution shall be made at such times, in such currencies, and in cash or other assets as the Corporation shall deem fair and equitable. The shares distributed to the several members need not necessarily be uniform in respect of the type of assets distributed or of the currencies in which they are expressed. (d) Any member receiving assets distributed by the Corporation pursuant to this Section shall enjoy the same rights with respect to such assets as the Corporation enjoyed prior to their distribution.

ARTICLE VI Status, Immunities and Privileges Section 1 Purposes of Article To enable the Corporation to fulfill the functions with which it is entrusted ,the status, immunities and privileges set forth in this Article shall be accorded to the Corporation in the territories of each member.

52

Section 2 Status o! the Corporation The Corporation shall possess full juridical personality and, in particular, the capacity: (i) to contract; (ii) to acquire and dispose of immovable and movable property} (iii) to institute legal proceedings. Section 3 Position of the Corporation with regard to Judicial Process Actions may be brought against the Corporation only In a court of competent jurisdiction in the territories of a member in which the Corporation has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities. No actions shall, however, be brought by members or persons acting for or deriving claims from members. The property and assets of the Corporation shall, wheresoever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of final judgment against the Corporation. Section 4 Immunity of Assets from Seizure Property and assets of the Corporation, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation or any other form of seizure by executive or legislative action. Section 5 Immunity of Archives The archives of the Corporation shall be inviolable. Section 6 Freedom ol Assets from Réstrictions To the extent necessary to carry out the operations provided for in this Agreement and subject to the provisions of Article III, Section 5, and the other provisions of this Agreement, all property and assets of the Corporation shall be free from restrictions, regulations, controls and moratoria of any nature. Section 7 Privilege for Communications The official communications of the Corporation shall be accorded by each member the same treatment that it accords to the official communications of other members. Section 8 Immunities and Privileges of Officers and Employees All Governors, Directors, Alternates, employees of the Corporation:

officers

and

(1) shall be immune from legal process with respect to acts performed by them in their official capacity} (ii) not being local nationals, shall be accorded the same immunities from immigration restrictions, alien registration requirements and national service obligations and the same facilities as regards exchange restrictions as are accorded by members to the representatives, officials, and employees of comparable rank of other members; (iii) shall be granted the same treatment in respect of travelling facilities as is accorded by members to representatives, officials and employees of comparable rank of other members.

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IFC Section 9 Immunities from Taxation (a) The Corporation, its assets, property, income and its operations and transactions authorized by this Agree* ment, shall be immune from all taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty. (b) No tax shall be levied on or in respect of salaries and emoluments paid by the Corporation to Directors, Alternates, officials or employees of the Corporation who are not local citizens, local subjects, or other local nationals. (c) No taxation of any kind shall be levied on any obligation or security issued by the Corporation (including any dividend or interest thereon) by whomsoever held: (i) which discriminates against such obligation or security solely because it is issued by the Corporation; or (il) if the sole jurisdictional basis for sudi taxation is the place or currency in which it is issued, made payable or paid, or the location of any office or place of business maintained by the Corporation. (d) No taxation of any kind shall be levied on any obligation or security guaranteed by the Corporation (including any dividend or interest thereon) by whomsoever held: (i) whidi discriminates against sudi obligation or security solely because it is guaranteed by the Corporation; or

been duly adopted, the Corporation shall so certify b y formal communication addressed to all members. Amendments shall enter into force for all members three months after the date of the formal communication unless the Board of Governors shall specify a shorter period. ARTICLE VIII

Interpretation and Arbitration (a) Any question of interpretation of the provisions of this Agreement arising between any member and the Corporation or between any members of the Corporation shall be submitted to the Board of Directors for its decision. If the question particularly affects any member of the Corporation not entitled to appoint an Executive Director of the Bank, it shall be entitled to representation in accordance with Article IV, Section 4 (g). (b) In any case where the Board of Directors has given a decision under (a) above, any member may require that the question be referred to the Board of Governors, whose decision shall be final. Pending the result of the reference to the Board of Governors, the Corporation may, so far as it deems necessary, act on the basis of the decision of the Board of Directors. (c) Whenever a disagreement arises between the Corporation and a country whidi has ceased to be a member, or between the Corporation and any member during the permanent suspension of the Corporation, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators, one appointed by the Corporation, another by the country involved and an umpire who, unless the parties otherwise agree, shall be appointed by the President of the International Court of Justice or such other authority as may have been prescribed by regulation adopted by the Corporation. The umpire shall have full power to settle all questions of procedure in any case where the parties are in disagreement with respect thereto.

(ii) if the sole jurisdictional basis for such taxation is the location of any office or place of business maintained by the Corporation. S e c t i o n 10

ARTICLE IX

Application of Article

Final Provisions

Each member shall take sudi action as is neccssary in its own territories for the purpose of making effective in terms of its own law the principles set forth in this Article and shall inform the Corporation of the detailed action whidi it has taken.

Section 1 Entry Into Force This Agreement shall enter into force when it has been signed on behalf of not less than 30 governments whose subscriptions comprise not less than 75 percent of the total subscriptions set forth in Schedule A and when the instruments referred to in Section 2(a) of this Article have been deposited on their behalf, but in no event shall this Afircement enter into force before October 1, 1955.

S e c t i o n 11 Waiver The Corporation in its dicretion may waive any of the privileges and immunities conferred under this Article to sudi extent and upon such conditions as it may determine.

ARTICLE VII

Amendments (a) This Agreement may be amended by vote of threefifths of the Governors exercising four-fifths of the total voting power. (b) Notwithstanding paragraph (a) above, the affirmative vote of all Governors is required in the case of any amendment modifying: (i) the right to withdraw from the Corporation provided in Article V, Section 1? (ii) the pre-emptive right secured by Article II, Section 2 (d); (iii) the limitation on liability provided in Article II, Section 4. (c) Any emanating Directors, the Board before the

proposal to amend this Agreement, whether from a member, a Governor or the Board of shall be communicated to the Chairman of of Governors who shall bring the proposal Board of Governors. When an amendment has

Section 2 Signature (a) Each government on whose behalf this Agreement is signed shall deposit with the Bank an instrument setting forth that it has accepted this Agreement without reservation in accordance with its law and has taken all steps necessary to enable it to carry out all of its obligations under this Agreement. (b) Each government shall become a member of the Corporation as from the date of the deposit on its behalf of the instrument referred to in paragraph (a) above except that no government shall become a member before this Agreement enters into force under Section 1 of this Article. (c) This Agreement shall remain open for signature until the close of business on December 31, 1956, at the principal office of the Bank on behalf of the Governments of the countries whose names are set forth in Schedule A. (d) After this Agreement shall have entered into force, it shall be open for signature on behalf of the government of any country whose membership has been approved pursuant to Article II, Section 1 (b).

53

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Section 3 Inauguration of the Corporation (a) As soon as this Agreement enters into force under Section 1 of this Article the Chairman of thè Board of Directors shall call a meeting of the Board of Directors. (b) The Corporation shall begin operations on the date when such meeting is held. (c) Pending the first meeting of the Board of Governors, the Board of Directors may exercise all the powers of the Board of Governors except those reserved to the Board of Governors under this Agreement. DONE at Washington, in a single copy which shall remain deposited in the archives of the International Bank for Reconstruction and Development, which has indicated by its signature below its agreement to act as depository of this Agreement and to notify all governments whose names are set forth in Schedule A of the date when this Agreement shall enter into force under Article IX, Section 1 hereof. SCHEDULE A

Subscriptions to Capital Stock of the International Finance Corporation Country Australia Austria Belgium Bolivia Brazil Burma Canada Ceylon Chile China Colombia Costa Rica Cuba Denmark Dominican Republic Ecuador Egypt El Salvador Ethiopia Finland France Germany Greece Guatemala Haiti Honduras Iceland India Indonesia Iran Iraq Israel Italy Japan Jordan Lebanon Luxembourg Mexico Netherlands Nicaragua Norway Pakistan Panama Paraguay Peru Philippines Sweden Syria Thailand Turkey Union of South Africa United Kingdom United States Uruguay Venezuela Yugoslavia Total:

54

Number of Shares

Amount (in United States dollars)

2,215 554 2,492 78 1,163 166 3,600 166 388 6,646 388 22 388 753 22 35 590 11 33 421 5,815 3,655 277 22 22 11 11 4,431 1,218 372 67 50 1,994 2,769 33 50 111 720 3,046 9 554 1,108 2 16 194 166 1,108 72 139 476 1,108 14,400 35,168 116 116 443

2,215,000 554,000 2,492,000 78,000 1,163,000 166,000 3,600,000 166,000 388,000 6,646,000 388,000 22,000 388,000 753,000 22,000 35,000 590,000 11,000 33,000 421,000 5,815,000 3,655,000 277,000 22,000 22,000 11,000 11,000 4,431,000 1,218,000 372,000 67,000 50,000 1,994,000 2,769,000 33,000 50,000 111,000 720,000 3,046,000 9,000 554,000 1,108,000 2,000 16,000 194,000 166.000 1,108,000 72,000 139,000 476,000 1,108,000 14,400,000 35,168,000 116,000 116,000 443,000

100,000

$ 100,000,000

5. Constituent Charter of the Bank for International Settlements - Statute of the Bank for International Settlements (BIS) January 20, 1930/June 8, 1969 BGBl. 1970 II, 766 (104 L . N . T . S . 441)

Whereas the Powers signatory to the Hague Agreement of January, 1930, have adopted a Plan which contemplates the founding by the Central Banks of Belgium, France, Germany, Great Britain, Italy and Japan and by a financial institution of the United States of America of an International Bank to be called the Bank for International Settlements; And whereas the said central banks and a banking group including Messrs. J. P. Morgan & Company of New York, the First National Bank of New York, New York, and the First National Bank of Chicago, Chicago, have undertaken to found the said Bank and have guaranteed or arranged for the guarantee of the subscription of its authorised capital amounting to five hundred million Swiss francs equal to 145,161,290.32 gr. fine gold, divided into 200,000 shares; And whereas the Swiss Federal Government has entered into a treaty with the Governments of Germany, Belgium, France, Great Britain, Italy and Japan whereby the said Federal Government has agreed to grant the present Constituent Charter of the Bank for International Settlements and not to repeal, amend or supplement the said Charter and not to sanction amendments to the Statutes of the Bank referred to in Paragraph 4 of the present Charter except in agreement with the said Powers;

3. Amendment of Articles of the said Statutes other than those enumerated in Paragraph 4 hereof may be made and shall be put into force as provided in Article 57 of the said Statutes and not otherwise. 4. Articles 2, 3, 8, 14, 19, 24, 27, 44, 51, 54, 57 and 58 of the said Statutes shall not be amended except subject to the following conditions: the amendment must be adopted by a two-thirds majority'of the Board, approved b y a majority of the General Meeting and sanctioned by a law supplementing the present Charter. 5. The said Statutes and any amendments which may be made thereto in accordance with Paragraph 3 or 4 hereof respectively shall be valid and operative notwithstanding any inconsistency therewith in the provisions of any present or future Swiss law. 6. The Bank shall be exempt and immune from all taxation included in the following categories:— (a) stamp, registration and other duties on all deeds or other documents relating to the incorporation or liquidation of the Bank;

1. The Bank for International Settlements (hereinafter called the Bank) is hereby incorporated.

(b) stamp and registration duties on any first issue of its shares by the Bank to a central bank, financial institution, banking group or underwriter at or before the time of incorporation or in pursuance of Articles 5, 6, 8 or 9 of the Statutes;

2. Its constitution, operations and activities are defined and governed by the annexed Statues which are hereby sanctioned.

(c) all taxes on the Bank's capital, reserves or profits, whether distributed or not, and whether assessed on the profits of the Bank before 55

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distribution or imposed at the time of distribution under the form of a coupon tax payable or deductible by the Bank. This provision is without prejudice to the State's right to tax the residents of Switzerland other than the Bank as it thinks fit; (d) all taxes upon any agreements which the Bank may make in connection with the issue of loans for mobilising the German annuities and upon the bonds of such loans issued on a foreign market; (e) all taxes on the remunerations and salaries paid by the Bank to members of its administration or its employees of non-Swiss nationality. 7. All funds deposited with the Bank by any Government in pursuance of the Plan adopted by the Hague Agreement of January, 1930, shall be exempt and immune from taxation whether by way of deduction by the Bank on behalf of the authority imposing the same or otherwise. 8. The foregoing exemptions and immunities shall apply to present and future taxation by whatsoever name it may be described, and whether imposed by the Confederation, or by the cantonal, communal or other public authorities. 9. Moreover, without prejudice to the exemptions specified above, there may not be levied on the Bank, its operation or its personnel any taxation other than that of a general character

and to which other banking establishments established at Basle or in Switzerland, their operations and their personnel, are not subjected de lacto and de jure. 10. The Bank, its property and assets and all deposits and other funds entrusted to it shall be immune in time of peace and in time of war from any measure such as expropriation, requisition, seizure, confiscation, prohibition or restriction of gold or currency export or import, and any other similar measures. 11. Any dispute between the Swiss Government and the Bank as to the interpretation or application of the present Charter shall be referred to the Arbitral Tribunal provided for by the Hague Agreement of January, 1930. The Swiss Government shall appoint a member to sit on the occasion of such dispute, the President having a casting vote. In having recourse to the said Tribunal the Parties may nevertheless agree to submit their dispute to the President or to a member of the Tribunal chosen to act as sole arbiter. Done at The Hague, the 20th January, 1930.*)

*) Text a m e n d e d on a c c o u n t of the r e n u m b e r ing of the Articles of the S t a t u t e s a n d sanctioned on 10th D e c e m b e r , 1969, in accordance with the c o n d i t o n s laid d o w n in Article 1 of the C o n v e n t i o n r e s p e c t i n g the Bank for I n t e r n a t i o n a l S e t t l e m e n t s .

Statutes of the Bank for International Settlements *) Chapter I Name, Seat and Objects Article 1 There is constituted under the name of the Bank for International Settlements (hereinafter referred to as the Bank) a Company limited by shares. 56

•) T e x t with a m e n d m e n t s as a p p r o v e d b y the E x t r a o r d i n a r y G e n e r a l M e e t i n g held on 9th J u n e , 1969, and s a n c t i o n e d on 10th December, 1969, in a c c o r d a n c e with t h e conditions laid d o w n in Article 1 of the Convention respecting the Bank for I n t e r n a t i o nal Settlements. Earlier a m e n d m e n t s to the original text of 20th J a n u a r y , 1930, w e r e m a d e by E x t r a o r d i n a r y G e n e r a l M e e t i n g s held on 3rd M a y , 1937, 12th J u n e , 1950 a n d 9th O c t o b e r , 1961.

Doc. 5

BIS Article 2 The registered office of the Bank shall be situated at Basle, Switzerland. Article 3 The objects of the Bank are: to promote the co-operation of central banks and to provide additional facilities for international financial operations; and to act as trustee or agent in regard to international financial settlements entrusted to it under agreements with the parties concerned.

Chapter II Capital Article 4 (1) The authorised capital of the Bank shall be one thousand five hundred million gold francs, equivalent to 435, 483, 870.96 gr. fine gold.

visions of Article 14, exercise the rights of voting and of representation at the General Meeting that pertain to shares issued under the present Article and shall be competent to authorise the transfer of these shares in accordance with the terms and conditions laid down in Article 12. Article 6 The Board, upon a decision taken b y a two-thirds majority, may, when it considers it advisable, issue on one or more occasions a third tranche of 200,000 shares and distribute them in accordance with the provisions of Article 8. Shares thus issued may be subscribed or acquired only by central banks or financial institutions appointed by the Board in accordance with the terms and conditions laid down in Article 14. Article 7

(2) It shall be divided into 600,000 shares of equal gold nominal value. A first tranche of 200,000 shares has already been issued; the other two tranches, of 200,000 shares each, shall be issued on the terms and conditions laid down in Articles 5 and 6.

(1) Twenty-five per cent only of the value of each share shall be paid up at the time of subscription. The balance may be called up at a later date or dates at the discretion of the Board. Three months' notice shall be given of any such calls.

(3) The nominal value of eadi share and the amount remaining to be paid up shall be stated on the face of the share certificates.

(2) If a shareholder fails to pay any call on a share on the day appointed for payment thereof the Board may, after giving reasonable notice to such shareholder, forfeit the share in respect of which the call remains unpaid. A forfeited share may be sold on such terms and in such manner as the Board may think fit; and the Board may execute a transfer in favour of the person or corporation to whom the share is sold. The proceeds of sale may be received by the Bank, which will pay to the defaulting shareholder any part of the net proceeds over and obove the amount of the call due and unpaid.

Article 5 (1) The subscription of the whole of the second tranche of 200,000 shares has been guaranteed by a group of central banks. Notwithstanding the provisions of Article 8, each shareholder shall be entitled to subscribe for one share in respect of each share registered in his name in the Bank's books at the time when the shares are offered for subscription. The Board of Directors of the Bank (hereinafter referred to as the Board) shall set the timelimit for subscription. (2) The central banks or financial institutions of countries in which the shares of the first tranche were subscribed shall, notwithstanding the pro-

Article 8 (1) The capital of the Bank may be increased or reduced on the proposal of the Board acting by a two-thirds majority and adopted by a two-thirds majority of the General Meeting. 57

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(2) In the eyent of an increase in the authorised capital of the Bank and of a further issue of shares the distribution among countries shall be decided by a two-thirds majority of the Board. The central banks of Belgium, England, France, Germany, Italy and the United States of America, or some other financial institution of the last-named country acceptable to the foregoing central banks, shall be entitled to subscribe or arrange for the subscription in equal proportions of at least 55 per cent of such additional shares. (3) In extending invitations to subscribe for the amount of the increase in capital not taken up by the banks referred to in clause (2), consideration shall be given by the Board to the desirability of associating with the Bank the largest possible number of central banks that make a substantial contribution to international monetary co-operation and to the Bank's activities.

Article 9 Shares subscribed in pursuance of Article 8 by the banks referred to in clause (2) of that Article may be placed at the Bank's disposal at any time for the purposes of cancellation and the issue of an equivalent number of shares. The necessary measures shall be taken by the Board by a twothirds majority.

shall be issued

A r t i c l e 13 The shares shall carry equal rights to participate in the profits of the Bank and in any distribution of assets under Articles 51, 52 and 53 of the Statutes. A r t i c l e 14 The ownership of shares of the Bank carries no right of voting or representation at the General Meeting. The right of representation and of voting, in proportion to the number of shares subscribed in each country, may be exercised by the central bank of that country or by its nominee. Should the central bank of any country not desire to exercise these rights they may be exercised by a financial institution of widely recognised standing and of the same nationality, appointed by the Board, and not objected to by the central bank of the country in question. In cases where there is no central bank, these rights may be exercised, if the Board thinks fit, by an appropriate financial institution of the country in question appointed by the Board. A r t i c l e 15

A r t i c l e 10 No shares par.

The Bank shall be entitled without assigning any reason to decline to accept any person or corporation as the transferee of a share. It shall not transfer shares without the prior consent of the central bank, or the institution acting in lieu of a central bank, by or through whom the shares in question were issued.

below

Any subscribing institution or banking group may issue, or cause to be issued to the public the shares for which it has subscribed.

A r t i c l e 11

A r t i c l e 16

The liability of shareholders is limited to the nominal value of their shares.

Any subscribing institution or banking group may issue to the public certificates against shares of the Bank owned by it. The form, details and terms of issue of such certificates shall be determined by the bank issuing them, in agreement with the Board.

A r t i c l e 12 The shares shall be registered and transferable in the books of the Bank. 58

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BIS A r t i c l e 17 The receipt or ownership of shares of the Bank or of certificates issued in accordance with Article 16 implies acceptance of the Statutes of the Bank and a statement to that effect shall be embodied in the text of such shares 'and certificates. A t i d e 18 The registration of the name of a holder of shares in the books of the Bank establishes the title to ownership of the shares so registered. Chapter III Powers of the Bank A r t i c l e 19 The operations of the Bank shall be in conformity with the monetary policy of the central banks of the countries concerned. Before any financial operation is carried out by or on behalf of the Bank on a given market or in a given currency thè Board shall afford to the central bank or central banks directly concerned an opportunity to dissent. In the event of disapproval being expressed within such reasonable time as the Board shall specify, the proposed operation shall not take place. A central bank may make its concurrence subject to conditions and may limit its assent to a specific operation, or enter into a general arrangement permitting the Bank to carry on its operations within such limits as to time, character and amount as may be specified. This Article shall not be read as requiring the assent of any central bank to the withdrawal from its market of funds to the introduction of which no objection had been raised by it, in the absence of stipulations to the contrary by the central bank concerned at the time the original operation was carried out. Any Governor of a central bank, or his alternate or any other Director specially authorised by the central bank of the country of which he is a national to act on its behalf in this

matter, shall, if he is present at the meeting of the Board and does not vote against any such proposed operation, be deemed to have given the valid assent of the central bank in question. If the representative of the central bank in question is absent or if a central bank is not directly represented on the Board, steps shall be taken to afford the central bank or banks concerned an opportunity to express dissent.

A r t i c l e 20 The operations of the Bank for its own account shall only be carried out in currencies which in the opinion of the Board satisfy the practical requirements of the gold or gold exchange standard.

A r t i c l e 21 The Board shall determine the nature of the operations to be undertaken b y the Bank. The Bank may in particular: (a) buy and sell gold coin or bullion for its own account or for the account of central banks; (b) hold gold for its own account under earmark in central banks; (c) accept the custody of gold for the account of central banks; (d) make advances to or borrow from central banks against gold, bills of exchange and other short-term obligations of prime liquidity or other approved securities; (e) discount, rediscount, purchase or sell with or without its endorsement bills of exchange, cheques and other short-term obligations of prime liquidity, including Treasury Bills and other such government short-term securities as are currently marketable; 59

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(f) buy and sell exchange for its own account or for the account of central banks; (g) buy and sell negotiable securities other than shares for its own account or for the account of central banks; (h) discount for central banks bills taken from their portfolio and rediscount with central banks bills taken from its own portfolio;

carry out the various opera! ions laid down therein. A r t i c l e 22 Any of the operations which the Bank is authorised to carry out with central banks under the preceding Article may be carried out with banks, bankers, corporations or individuals of any country provided that the central bank of that country does not object. A r t i c l e 23

(i) open and maintain current or deposit accounts with central, banks;

(j) accept: (i) deposits from central banks on current or deposit account; (ii) deposits in connection with trustee agreements that may be made between the Bank and Governments in connection with international settlements; (iii) such other deposits as in the opinion o f the Board come within the scope of the Bank's functions. The Bank may also: (k) act as agent or correspondent of any central bank; (1) arrange with any central bank for the latter to act as its agent or correspondent. If a central bank is unable or unwilling to act in this capacity, the Bank may make other arrangements, provided that the central bank concerned does not object. If in such circumstances it should be deemed advisable that the Bank should establish its own agency, the sanction of a twothirds majority of the Board will be required;

(m) enter into agreements to act as trustee or agent in connection with international settlements, provided that such agreements shall not encroach on the obligations of the Bank towards third parties; and 60

The Bank may enter into special agreements with central banks to facilitate the settlement of international transactions between them. For this purpose it may arrange with central banks to have gold earmarked for their account and transferable on their order, to open accounts through which central banks can transfer their assets from one currency to another and to take such other measures as the Board may think advisable within the limits of the powers granted by these Statutes. The principles and rules governing such accounts shall be fixed by the Board. A r t i c l e 24 The Bank may not: (a) issue notes payable at sight to bearer; (b) "accept" bills of exchange; (c) make advances to Governments; (d) open current accounts in the name of Governments; (e) acquire a predominant interest in any business concern; (f) except so far as is necessary for the conduct of its own business, remain the owner of real property for any longer period than is required in order to realist to proper advantage such real property as may come into the possession of the Bank in satisfaction of claim due to it. A r t i c l e 25 The Bank shall be administered with particular regard to maintaining its

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BIS liquidity, and for this purpose shall retain assets appropriate to the maturity and character of its liabilities. Its short-term liquid assets may include bank-notes, cheques payable on sight drawn on first-class banks, claims in course of collection, deposits at sight or at short notice in first-class banks, and prime bills of exchange of not more than ninety days' usance, of a kind usually accepted for rediscount by central banks. The proportion of the Bank's assets held in any given currency shall be determined by the Board with due regard to the liabilities of the Bank.

Chapter IV

institutions referred to or a majority of them may invite to become members of the Board two nationals of the country of the Governor in question, not objected to by the central bank of that country. Directors appointed as aforesaid, other than ex-oiiicio Directors, shall hold office for three years but shall be eligible for reappointment. (3) Not more than nine persons to be elected by the Board by a twothirds majority from among the Governors of the central banks of countries in which shares have been subscribed but of which the central bank does not delegate ex-oiiicio Directors to the Board. The Directors so elected shall remain in office for three years but may be re-elected.

Management A r t i c l e 26 The administration of the Bank shall be vested in the Board. A r t i c l e 27 The Board shall be composed follows:

as

(1) The Governors for the time being of the central banks of Belgium, France, Germany, Great Britain, Italy and the United States of America (hereinafter referred to as ex-oííicio Directors). Any ex-oííicio Director may appoint one person as his alternate who shall be entitled to attend and exercise the powers of a Director at meetings of the Board if the Governor himself is unable to be present. (2) Six persons representative of finance, industry or commerce, appointed one each by the Governors of the central banks mentioned in clause (1), and being of the same nationality as the Governor who appoints him. If for any reason the Governor of any of the six institutions above mentioned is unable or unwilling to serve as Director, or to make an appointment under the preceding paragraph, the Governors of the other

A r t i c l e 28 In the event of a vacancy occurring on the Board for any reason other than the termination of a period of office in accordance with the preceding Article the vacancy shall be filled in accordance with the procedure by which the member to be replaced was selected. In the case of Directors other than ex-oiiicio Directors, the new Director shall hold office for the unexpired period only of his predecessor's term of office. He shall, however, be eligible for re-election at the expiration of that term.

A r t i c l e 29 Directors must be ordinarily resident in Europe or in a position to attend regularly at meetings of the Board.

A r t i c l e 30 No person shall be appointed or hold office as a Director who is a member or an official of a Government or a member of a legislative body, unless he is the Governor of a central bank.

61

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World-wide Economic Institutions A r t i c l e 31

A r t i c l e 36

Meetings of the Board shall be held not less than ten times a year. At least four of these shall be held at the registered office of the Bank.

A member of the Board who is not present in person at a meeting of Directors may give a proxy to any other member authorising him to vote at that meeting on his behalf.

The Board shall represent the Bank in its dealings with third parties arid shall have the exclusive right of entering into engagements on behalf of the Bank. It may, however, delegate this right to the Chairman of the Board, to another member or other members of the Board, to the President of the Bank or to a member or members of the permanent staff of the Bank, provided that it defines the powers of each person to whom it delegates this right.

A r t i c l e 33

A r t i c l e 37

Unless otherwise provided by the Statutes, decisions of the Board shall be taken by a simple majority of those present or represented by proxy. In the case of an equality of votes, the Chairman shall have a second or casting vote. The Board shall not be competent to act unless a quorum Directors is present. This quorum shall be laid down in a regulation adopted by a two-thirds majority of the Board.

The Bank shall be legally committed vis-à-vis third parties either by the signature of the President of the Bank, or by the signatures of two members of the Board or of two members of the staff of the Bank who have been duly authorised by the Board to sign on its behalf.

A r t i c l e 32

A r t i c l e 34 The members of the Board may receive, in addition to out-of-pocket expenses, a fee for attendance at meetings and/or a remuneration, the amounts of which will be fixed by the Board, subject to the approval of the General Meeting.

A r t i c l e 35 The proceedings of the Board shall be summarised in minutes which shall be signed by the Chairman.

A r t i c l e 38 The Board shall elect from among its members a Chairman and one or more Vice-Chairmen, one of whom shall preside at meetings of the Board in the absence of the Chairman. The Board shall elect a President of the Bank. If the President of the Bank is not Chairman of the Board nor a member thereof, he shall nevertheless be entitled to attend all meetings of the Board, to speak, to make proposals to the Board and, if he so desires, to have his opinions specially recorded in the minutes. The appointments referred to in this Article shall be made for a maximum of three years and may be renewed.

Copies of or extracts from these minutes for the purpose of production in a Court of Justice must be certified by the General Manager of the Bank.

The President of the Bank will carry out the policy decided upon by the Board and will control the administration of the Bank.

A record of decisions taken at each meeting shall be sent within eight days of the meeting to every member.

He shall not hold any other office which, in the judgment of the Board, might interfere with his duties as President.

62

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BIS A r t i c l e 39 At the meeting at which the Board elects its Chairman, the Chair shall be taken by the oldest member of the Board present. A r t i c l e 40 A General Manager and an Assistant General Manager shall be appointed by the Board on the proposal of the Chairman of the Board. The General Manager will be responsible to the President of the Bank for the operations of the Bank and will be the chief of its operating staff. The Heads of Departments and any other officers of similar rank shall be appointed by the Board on recommendations made by the President of the Bank after consultation with the General Manager. The remainder of the staff shall be appointed by the General Manager with the approval of the President of the Bank. A r t i c l e 41 The departmental organisation of the Bank shall be determined by the Board. A r t i c l e 42 The Board may, if it thinks appoint from among its members Executive Committee to assist President of the Bank in the ministration of the Bank. The President of the Bank shall a member of this Committee.

fit, an the adbe

A r t i c l e 43 The Board may appoint advisory committees chosen wholly or partly from persons not concerned in the Bank's management. Chapter V General Meeting

Voting rights shall be in proportion to the number of shares subscribed in the country of each institution represented at the meeting. The Chair shall be taken at General Meetings by the Chairman of the Board or in his absence by a ViceChairman. At least three weeks' notice of General Meetings shall be given to those entitled to be represented. Subject to the provisions of these Statutes, the General Meeting shall decide upon its own procedure. A r t i c l e 45 Within three months after the end of each financial year of the Bank, an Annual General Meeting shall be held upon such date as the Board may decide. The meeting shall take place at the registered office of the Bank. Voting by proxy will be permitted in such manner as the Board may have provided in advance by regulation. A r t i c l e 46 The Annual General Meeting shall be invited: (a) to approve the Annual Report, the Balance Sheet upon the Report of the Auditors, and the Profit and Loss Account, and any proposed changes in the remuneration, fees or allowances of the members of the Board; (b) to make appropriations to Reserve and to special funds,- and to consider the declaration of a dividend and its amount; (c) to elect the auditors for the ensuing year and to fix their remuneration; and (d) to discharge the Board from all personal responsibility in respect of the past financial year.

A r t i c l e 44 General Meetings of the Bank may be attended by nominees of the central banks or other financial institutions referred to in Article 14.

A r t i c l e 47 Extraordinary General Meetings shall be summoned to decide upon any proposals of the Board: 63

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(a) to amend the Statutes; (b) to increase or decrease the capital of the Bank; (c) to liquidate the Bank.

Chapter V I Accounts and Profits A r t i c l e 48 The financial year of the Bank will begin on 1st April and end on 31st March. The first financial period will end on 31st March, 1931. A r t i c l e 49 The Bank shall publish an Annual Report, and at least once a month a Statement of Account in such form as the Board may prescribe. The Board shall cause to be prepared a Profit and Loss Account and Balance Sheet of the Bank for each financial year in time for submission to the Annual General Meeting. A r t i c l e 50 The Accounts and Balance Sheet shall be audited by independent auditors. The auditors shall have full power to examine all books and accounts of the Bank and to require full information as to all its transactions. The auditors shall report to the Board and to the General Meeting and shall state in their Report; (a) whether they have obtained all the information and explanations they have required; and (b) whether, in their opinion, the Balance Sheet and the Profit and Loss Account dealt with in the Report are properly drawn up so as to exhibit a true and fair view of the state of the Bank's affairs according to the best of their information and the explanations given to them, and as shown by the books of the Bank. A r t i c l e 51 The yearly net profits of the Bank shall be applied as follows:

64

(1) Five per cent of such net profits, or such proportion of five per cent as may be required for the purpose, shall be paid to a reserve fund called the Legal Reserve Fund until that Fund reaches an amount equal in value to ten per cent of the amount of the paid-up capital of the Bank for the time being. (2) Thereafter such net profits shall be applied in or towards the payment of a dividend of six per cent per annum on the amount of the paid-up capital of the Bank. (3) As to the residue (if any) of such net profits, twenty per cent shall be paid to the shareholders until a maximum further dividend of three per cent is readied, provided that the Board may in any year withhold all or any part of this additional payment and place it to the credit of a special dividend reserve fund for use in maintaining the six per cent dividend provided for in the preceding clause or for subsequent distribution to the shareholders. (4) After making provision for the foregoing, one-half of the yearly net profits then remaining shall be paid into the General Reserve Fund of the Bank until it equals the paid-up capital. Thereafter forty per cent shall be so applied until the General Reserve Fund equals twice the paid-up capital; thirty per cent until it equals three times the paid-up capital; twenty per cent until it equals four times the paid-up capital; ten per cent until it equals five times the paid-up capital; and from that point onward, five per cent. In case the General Reserve Fund, by reason of losses or by reason of an increase in the paid-up capital, falls below the amounts provided for above after having once attained them, the appropriate proportion of the yearly net profits shall again be applied until the position is restored. (5) The disposal of the remainder of the net profits shall b e determined by the General Meeting on the proposal of the Board, provided that a portion not exceeding forty per cent of such remainder may be allotted

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BIS to the shareholders by way of a transfer to the special dividend reserve fund referred to in clause (3) until that fund equals one quarter of the paidup capital. A r t i c l e 52 Reserve Funds The General Reserve Fund shall be available for meeting any losses incurred by the Bank. In case it is not adequate for this purpose, recourse may be had to the Legal Reserve Fund provided for in clause (1) of Article 51. These reserve funds, in the event of liquidation, and after the discharge of the liabilities of the Bank and the costs of liquidation, shall be divided among the shareholders.

Chaper VII General Provisions A r t i c l e 53 The Bank may not be liquidated except by a three-fourths majority of the General Meeting. A r t i c l e 54 (1) If any dispute shall arise between the Bank, on the one side, and any central bank, financial institution, or other bank referred to in the present Statutes, on the other side, or between the Bank and its shareholders, with regard to the interpretation or application of the Statutes of the Bank, the same shall be referred for final decision to the Tribunal provided for by the Hague Agreement of January, 1930. (2) In the absence of agreement as to the terms of submission either party to a dispute under this Article may refer the same to the Tribunal, which shall have power to decide all questions (including the question of its own jurisdiction) even in default of appearance by the other party. (3) Before giving a final without prejudice to the issue, the President of the if he is unable to act in

decision and questions at Tribunal, or, any case, a

member of the Tribunal to be designated by him forthwith, may, on the request of the first party applying therefor, order any appropriate provisional measures in order to safeguard the respective rights of the parties. (4) The provisions of this Article shall not prejudice the right of the parties to a dispute to refer the same by common consent to the President or a member of the Tribunal as sole arbitrator. A r t i c l e 55 In all cases not covered by the preceding Article, or by some other provision for arbitration, the Bank may proceed or be proceeded against in any court of competent jurisdiction. The assets of the Bank may be subject to measures of compulsory execution for enforcing monetary claims. On the other hand, all deposits entrusted to the Bank, all claims against the Bank and the shares issued by the Bank shall, without the prior agreement of the Bank, be immune from seizure or other measures of compulsory execution and sequestration, particularly of attachment within the meaning of Swiss law. A r t i c l e 56 For the purposes of these Statutes: (1) Central bank means the bank in any country to which has been entrusted the duty of regulating the volume of currency and credit in that country; or, where a banking system has been so entrusted, the bank forming part of such system which is situated and operating in the principal financial market of that country. (2) The Governor of a central bank means the person who, subject to the control of his Board or ôther competent authority, has the direction of the policy and administration of the Bank. (3) A two-thirds majortiy of the Board means not less than two-thirds of the votes (whether given in person or by proxy) of the whole directorate. 65

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A r t i c l e 58

Amendments of -any Articles of these Statutes other than those enumerated in Article 58 may be proposed b y a two-thirds majority of the Board to the General Meeting and if adopted by a majority of the General Meeting shall come into force, provided that such amendments are not inconsistent with the provisions of the Articles enumerated in Article 58.

Articles 2, 3, 8, 14, 19, 24, 27, 44, 51, 54, 57 and 58 cannot be amended except subject to the following conditions: the amendment must be adopted by a two-thirds majority of the Board, approved by a majority of the G e n eral Meeting and sanctioned b y a law supplementing the Charter of the Bank.

6. Agreement on an International Energy Program November 18, 1974 BGBl. 1975 II, 702 (UNGA/Res. 2997 XXVIII)

The Governments of the Republic of Austria, the Kingdom of Belgium, Canada, the Kingdom of Denmark, the Federal Republic of Germany, Ireland, the Italian Republic, Japan, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, Spain, the Kingdom of Sweden, the Swiss Confederation, the Republic of Turkey, the United Kingdom of Great Britain and Northern Ireland, and the United States of America, DESIRING to promote secure oil supplies on reasonable and equitable terms, DETERMINED to take common effective measures to meet oil supply emergencies by developing an emergency self-sufficiency in oil supplies, restraining demand and allocating available oil among their countries on an equitable basis, DESIRING to promote co-operative relations with oil producing countries and with other oil consuming countries, including those of the developing world, through a purposeful dialogue, as well as through other forms of co-operation, to further the opportunities for a better understanding between consumer and producer countries, MINDFUL of the interests of other oil consuming countries, including those of the developing world, DESIRING to play a more active role in relation to the oil industry by establishing a comprehensive international information system and a permanent framework for consultation with oil companies,

DETERMINED to reduce their dependence on imported oil by undertaking long term co-operative efforts on conservation of energy, on accelerated development of alternative sources of energy, on research and development in the energy field and on uranium enrichment, CONVINCED that these objectives can only be reached through continued co-operative efforts within effective organs, EXPRESSING the intention that such organs be created within the framework of the Organisation for Economic Co-operation and Development, RECOGNISING that other Member countries of the Organisation for Economic Co-operation and Development may desire to join in their efforts, CONSIDERING the special responsibility of governments for energy supply, CONCLUDE that it is necessary to establish an International Energy Program to be implemented through an International Energy Agency, and to that end, HAVE AGREED as follows: Article 1 1. The Participating Countries shall implement the International Energy Program as provided for in this Agreement through the International Energy Agency, described in Chapter IX, hereinafter referred to as the "Agency". 67

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2. The term "Participating Countries" means States to which this Agreement applies provisionally and States for which the Agreement has entered into and remains in force. 3. The term "group" means the Participating Countries as a group.

Chapter I

— stand-by oil production, in accordance with the provisions of the Annex which forms an integral part of this Agreement. 2. The Governing Board shall, acting by majority, not later than 1st July, 1975, decide the extent to which the emergency reserve commitment may be satisfied by the elements mentioned in paragraph 1.

Emergency Self-Sufficiency Article 4 Article 2 1. The Participating Countries shall establish a common emergency selfsufficiency in oil supplies. To this end, each Participating Country shall maintain emergency reserves sufficient to sustain consumption for at least 60 days with no net oil imports. Both consumption and net oil imports shall be reckoned at the average daily level of the preceding calendar year. 2. The Governing Board shall, acting by special majority, not later than 1st July, 1975, decide the date from which the emergency reserve commitment of each Participating Country shall, for the purpose of calculating its supply right referred to in Article 7, be deemed to be raised to a level of 90 days. Each Participating Country shall increase its actual level of emergency reserves to 90 days and shall endeavour to do so by the date so decided. 3. The term "emergency reserve commitment" means the emergency reserves equivalent to 60 days of net oil imports as set out in paragraph 1 and, from the date to be decided according to paragraph 2, to 90 days of net oil imports as set out in paragraph 2. Article

3

1. The emergency reserve commitment set out in Article 2 may be satisfied by: — oil stocks, — fuel switching capacity, 68

1. The Standing Group on Emergency Questions shall, on a continuing basis, review the effectiveness of the measures taken by each Participating Country to meet its emergency reserve commitment. 2.- The Standing Group on Emergency Questions shall report to the Management Committee, which shall make proposals, as appropriate, to the Governing Board. The Governing Board may, acting by majority, adopt recommendations to Participating Countries.

Chapter II Demand Restraint Article

5

1. Each Participating Country shall at all times have ready a program of contingent oil demand restraint measures enabling it to reduce its rate of final consumption in accordance with Chapter IV. 2. The Standing Group on Emergency Questions shall, on a continuing basis, review and assess: — each Participating Country's program of demand restraint measures, — the effectiveness of measures actually taken by each Participating Country. 3. The Standing Group on Emergency Questions shall report to the Management Committee, which shall make proposals, as appropriate, to the Governing Board. The Governing

International Energy Program Board may, acting by majority, adopt recommendations to Participating Countries.

Chapter III Allocation Article 6 1. Each Participating Country shall take the necessary measures in order that allocation of oil will be carried out pursuant to this Chapter and Chapter IV. 2. The Standing Group on Emergency Questions shall, on a continuing basis, review and assess: — each Participating Country's measures in order that allocation of oil will be carried out pursuant to this Chapter and Chapter IV, — the effectiveness of measures actually taken by each Participating Country. 3. The Standing Group on Emergency Questions shall report to the Management Committee, which shall make proposals, as appropriate, to the Governing Board. The Governing Board may, acting by majority, adopt recommendations to Participating Countries. 4. The Governing Board shall, acting by majority, decide promptly on the practical procedures for the allocation of oil and on the procedures and modalities for the participation of oil companies therein within the framework of this Agreement. Article 7 1. W h e n allocation of oil is carried out pursuant to Article 13, 14, or 15, each Participating Country shall have a supply right equal to its permissible consumption less its emergency reserve drawdown obligation. 2. A Participating Country whose supply right exceeds the sum of its normal domestic production and actual net imports available during an emergency shall have an allocation

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right which entitles it to additional net imports equal to that excess. 3. A Participating Country in which the sum of normal domestic production and actual net imports available during an emergency exceeds its supply right shall have an allocation obligation which requires it to supply, directly or indirectly, the quantity of oil equal to that excess to other Participating Countries. This would not preclude any Participating Country from maintaining exports of oil to nonparticipating countries. 4. The term "permissible consumption" means the average daily rate of final consumption allowed when emergency demand restraint at the applicable level has been activated; possible further voluntary demand restraint by any Participating Country shall not affect its allocation right or obligation. 5. The term "emergency reserve drawdown obligation" means the emergency reserve commitment of any Participating Country divided by the total emergency reserve commitment of the group and multiplied by the group supply shortfall. 6. The term "group supply shortfall" means the shortfall for the group as measured by the aggregate permissible consumption for the group minus the daily rate of oil supplies available to the group during an emergency. 7. The term "oil supplies available to the group" means — all crude oil available to the group, — all petroleum products imported from outside the group, and — all finished products and refinery feedstocks which are produced in association with natural gas and crude oil and are available to the group. 8. The term "final consumption" means total domestic consumption of all finished petroleum products. 69

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8

1. W h e n allocation of oil to a Participating C o u n t r y is carried out p u r s u a n t to Article 17, that Participating C o u n t r y shall — sustain from its final consumption the reduction in its oil supplies up to a level equal to 7 per cent of its final consumption during the base period, — h a v e an allocation right equal to t h e reduction in its oil supplies which results in a reduction of its final consumption over and a b o v e that level. 2. The obligation to allocate this a m o u n t of oil is shared a m o n g t h e other Participating Countries on t h e basis of their final consumption during the base period. 3. The Participating Countries m a y meet their allocation obligations b y a n y m e a s u r e s of their o w n choosing, including demand restraint measures or u s e of e m e r g e n c y reserves.

b e t w e e n crude oil and products and among different categories of crude oil and products. 4. W h e n allocation takes place, an objective of the Program shall be that available crude oil and products shall, insofar as possible, be shared within the refining and distributing industries as well as b e t w e e n refining and distributing companies in acc o r d a n c e with historical supply patterns. Article

1. The objectives of the Program shall include ensuring fair t r e a t m e n t for all Participating Countries and basing the price for allocated oil on the price conditions prevailing for comparable commercial transactions. 2. Questions relating to the price of oil allocated during an e m e r g e n c y shall be examined b y t h e Standing Group on Emergency Questions. Article

Article

9

1. For purposes of satisfying allocation rights and allocation obligations, t h e following elements will b e included: — all crude oil, — all petroleum products, — all refinery feedstocks, and — all finished products produced in association with n a t u r a l gas and crude oil. 2. To calculate a Participating Country's allocation right, petroleum products normally imported by that Participating Country, w h e t h e r from other Participating Countries or from non-participating countries, shall b e expressed in crude oil equivalents and treated as though they w e r e imports of crude oil to that Participating Country. 3. Insofar as possible, normal channels of supply will b e maintained as well as the normal supply proportions 70

10

11

1. It is not an o b j e c t i v e of the Program to seek to increase, in an emergency, t h e s h a r e of world oil supply that t h e g r o u p h a d under normal m a r k e t conditions. Historical oil trade p a t t e r n s should be p r e s e r v e d as far as is reasonable, and due account should b e t a k e n of the position of individual non-participating countries. 2. In order to maintain the principles set out in p a r a g r a p h 1, the M a n a g e ment Committee shall m a k e proposals, as appropriate, to t h e Governing Board, which, acting by m a j o r i t y , shall decide on such proposals.

Chapter IV Activation Activation Article

12

W h e n e v e r the group as a whole or a n y Participating C o u n t r y sustains or can r e a s o n a b l y be expected to

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International Energy Program sustain a reduction in its oil supplies, the emergency measures, which are the mandatory demand restraint referred to in Chapter II and the allocation of available oil referred to in Chapter III, shall be activated in accordance with this Chapter. Article

13

W h e n e v e r the group sustains or can reasonably be expected to sustain a reduction in the daily rate of its oil supplies at least equal to 7 per cent of the average daily rate of its final consumption during the base period, each Participating Country shall implement demand restraint measures sufficient to reduce its final consumption by an amount equal to 7 per cent of its final consumption during the base period, and allocation of available oil among the Participating Countries shall take place in accordance with Articles 7, 9, 10 and 11.

Article

14

W h e n e v e r the group sustains or can reasonably be expected to sustain a reduction in the daily rate of its oil supplies at least equal to 12 per cent of the average daily rate of its final consumption during the base period, each Participating Country shall implement demand restraint measures sufficient to reduce its final consumption by an amount equal to 10 per cent of its final consumption during the base period, and allocation of available oil among the Participating Countries shall take place in accordance with Articles 7, 9, 10 and 11. Article

15

W h e n cumulative daily emergency reserve drawdown obligations as defined in Article 7 have reached 50 per cent of emergency reserve commitments and a decision has been taken in accordance with Article 20, each Participating Country shall take the measures so decided, and allocation of available oil among the Participating Countries shall take place in

accordance and 11.

with

Articles

Article

7, 9,

10

16

When demand restraint is activated in accordance with this Chapter, a Participating Country may substitute for demand restraint measures use of emergency reserves held in excess of its emergency reserve commitment as provided in the Program. Article

17

1. Whenever any Participating Country sustains or can reasonably be expected to sustain a reduction in the daily rate of its oil supplies which results in a reduction of the daily rate of its final consumption by an amount exceeding 7 per cent of the average daily rate of its final consumption during the base period, allocation of available oil to that Participating Country shall take place in accordance with Articles 8 to 11. 2. Allocation of available oil shall also take place when the conditions in paragraph 1 are fulfilled in a major region of a Participating Country whose oil market is incompletely integrated. In this case, the allocation obligation of other Participating Countries shall be reduced by the theoretical allocation obligation of any other major region or regions of the Participating Country concerned. A r t i c l e 18 1. The term "base period" means the most recent four quarters with a delay of one quarter necessary to collect information. While emergency measures are applied with regard to the group or to a Participating Country, the base period shall remain fixed. 2. The Standing Group on Emergency Questions shall examine the base period set out in paragraph 1, taking into account in particular such factors as growth, seasonal variations in consumption and cyclical changes and shall, not later than 1st April, 1975, report to the Management Committee. The Management Committee shall 71

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make proposals, as appropriate, to the Governing Board, which, acting by majority, shall decide on these proposals not later than 1st July, 1975. Article

19

1. The Secretariat shall make a finding when a reduction of oil supplies as mentioned in Article 13, 14 or 17 has occurred or can reasonably be expected to occur, and shall establish the amount of the reduction or expected reduction for each Participating Country and for the group. The Secretariat shall keep the Management Committee informed of its deliberations, and shall immediately report its finding to the members of the Committee and inform the Participating Countries thereof. The report shall include information on the nature of the reduction. 2. Within 48 hours of the Secretariat's reporting a finding, the Committee shall meet to review the accuracy of the data compiled and the information provided. The Committee shall report to the Governing Board within a further 48 hours. The report shall set out the views expressed by the members of the Committee, including any views regarding the handling of the emergency. 3. Within 48 hours of receiving the Management Committee's report, the Governing Board shall meet to review the finding of the Secretariat in the light of that report. The activation of emergency measures shall be considered confirmed and Participating Countries shall implement such measures within 15 days of such confirmation unless the Governing Board, acting by special majority, decides within a further 48 hours not to activate the emergency measures, to activate them only in part or to fix another time limit for their implementation. 4. If, according to the finding of the Secretariat, the conditions of more than one of the Articles 14, 13 and 17 are fulfilled, any decision not to activate emergency measures shall be taken separately for each Article and in the above order. If the conditions in Article 17 are fulfilled with regard 72

to more than one Participating Country any decision not to activate allocation shall be taken separately with respect to each Country. 5. Decisions pursuant to paragraphs 3 and 4 may at any time be reversed by the Governing Board, acting by majority. 6. In making its finding under this Article, the Secretariat shall consult with oil companies to obtain their views regarding the situation and the appropriateness of the measures to be taken. 7. An international advisory board from the oil industry shall be convened, not later than the activation of emergency measures, to assist the Agency in ensuring the effective operation of such measures. A r t i c l e 20 1. The Secretariat shall make a finding when cumulative daily emergency reserve drawdown obligations have reached or can reasonably be expected to reach 50 per cent of emergency reserve commitments. The Secretariat shall immediately report its finding to the members of the Management Committee and inform the Participating Countries thereof. The report shall include information on the oil situation. 2. Within 72 hours of the Secretariat's reporting such a finding, the Management Committee shall meet to review the data compiled and the information provided. On the basis of available information the Committee shall report to the Governing Board within a further 48 hours proposing measures required for meeting the necessities of the situation, including the increase in the level of mandatory demand restraint that may be necessary. The report shall set out the views expressed b y the members of the Committee. 3. The Governing Board shall meet within 48 hours of receiving the Committee's report and proposal. The Governing Board shall review the finding of the Secretariat and the report of the Management Committee

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International Energy Program and shall within a further 48 hours, acting b y special majority, decide on the measures required for meeting the necessities of the situation, including the increase in the level of mandatory demand restraint that may be necessary. Article

21

1. A n y Participating Country may request the Secretariat to make a finding under Article 19 or 20. 2. If, within 72 hours of such request, the Secretariat does not make such a finding, the Participating Country m a y request the Management Committee to meet and consider the situation in accordance with the provisions of this Agreement. 3. The Management Committee shall meet within 48 hours of such request in order to consider the situation. It shall, at the request of any Participating Country, report to the Governing Board within a further 48 hours. The report shall set out the views expressed by the members of the Committee and b y the Secretariat, including any views regarding the handling of the situation. 4. The Governing Board shall meet within 48 hours of receiving the Management Committee's report. If it finds, acting by majority, that the conditions set out in Article 13, 14, 15 or 17 are fulfilled, emergency measures shall be activated accordingly. Article

22

The Governing Board may at any time decide b y unanimity to activate any appropriate e m e r g e n c y measures not provided for in this Agreement, if the situation so requires.

Deactivation Article

23

referred to in the relevant Article. T h e Secretariat shall keep the Management Committee informed of its deliberations and shall immediately report its finding to the members of the Committee and inform the Participating Countries thereof. 2. Within 72 hours of the Secretariat's reporting a finding, the Management Committee shall meet to review the data compiled and the information provided. It shall report to the Governing Board within a further 48 hours. The report shall set out the views expressed b y the members of the Committee, including any views regarding the handling of the emergency. 3. Within 48 hours of receiving the Committee's report, the Governing Board shall meet to review the finding of the Secretariat in the light of the report from the Management Committee. The deactivation of emergency measures or the applicable reduction of the demand restraint level shall be considered confirmed unless the Governing Board, acting b y special majority, decides within a further 48 hours to maintain the emergency measures or to deactivate them only in part. 4. In making its finding under this Article, the Secretariat shall consult with the international advisory board, mentioned in Article 19, paragraph 7, to obtain its views regarding the situation and the appropriateness of the measures to be taken. 5. A n y Participating Country may request the Secretariat to make a finding under this Article. Article

24

W h e n emergency measures are in force, and the Secretariat has not made a finding under Article 23, the Governing Board, acting b y special majority, m a y at any time decide to deactivate the measures either wholly or in part.

1. The Secretariat shall make a finding when a reduction of supplies as mentioned in Article 13, 14 or 17 has decreased or can reasonably be expected to decrease below the level 73

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World-wide Economic Institutions

Chapter V Information System on the International Oil Market A r t i c l e 25 1. The Participating Countries shall establish an Information System consisting of two sections: — a General Section on the situation in the international oil market and activities of oil companies, — a Special Section designed to ensure the efficient operation of the measures described in Chapters I to IV. 2. The System shall be operated on a permanent basis, both under normal conditions and during emergencies, and in a manner which ensures the confidentiality of the information made available. 3. The Secretariat shall be responsible for the operation of the Information System and shall make the information compiled available to the Participating Countries. A r t i c l e 26 The term "oil companies" means international companies, national companies, non-integrated companies and other entities which play a significant role in the international oil industry.

General Section A r t i c l e 27 1. Under the General Section of the Information System, the Participating Countries shall, on a regular basis, make available to the Secretariat information on the precise data identified in accordance with Article 29 on the following subjects relating to oil companies operating within their respective jurisdictions: (a) Corporate structure; (b) Financial structure, including balance sheets, profit and loss accounts, and taxes paid; 74

(c) Capital investments realised; (d) Terms of arrangements for access to major sources of crude oil; (e) Current rates of production anticipated changes, therein;

and

(f) Allocations of available crude supplies to affiliates and other customers (criteria and realisations); (g) Stocks; (h) Cost of crude oil and oil products ; (i) Prices, including to affiliates;

transfer

prices

(j) Other subjects, as decided by the Governing Board, acting by unanimity. 2. Each Participating Country shall take appropriate measures to ensure that all oil companies operating within its jurisdiction make such information available to it as is necessary to fulfil its obligations under paragraph 1, taking into account such relevant information as is already available to the public or to Governments. 3. Each Participating Country shall provide information on a nonproprietary basis and on a company a n d / o r country basis as appropriate, and in such a manner and degree as will not prejudice competition or conflict with the legal requirements of any Participating Country relating to competition. 4. No Participating Country shall be entitled to obtain, through the General Section, any information on the activities of a company operating within its jurisdiction which could not be obtained by it from that company b y application of its laws or through its institutions and customs if that company were operating solely within its jurisdiction. A r t i c l e 28 Information provided on a "nonproprietary basis" means information which does not constitute or relate to patents, trademarks, scientific or

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International Energy Program manufacturing processes or developments, individual sales, tax returns, customer lists or geological and geophysical information, including maps. Article

29

1. Within 60 days of the first day of the provisional application of this Agreement, and as appropriate thereafter, the Standing Group on the Oil Market shall submit a report to the Management Committee identifying the precise data within the list of subjects in Article 27, paragraph 1, which are required for the efficient operation of the General Section, and specifying the procedures for obtaining such data on a regular basis. 2. The Management Committee shall review the report and make proposals to the Governing Board which, within 30 days of the submission of the report to the Management Committee, and acting by majority, shall take the decisions necessary for the establishment and efficient operation of the General Section. A r t i c 1 e 30 In preparing its reports under Article 29, the Standing Group on the Oil Market shall — consult with oil companies to ensure that the System is compatible with industry operations; — identify specific problems and issues which are of concern to Participating Countries; — identify specific data which are useful and necessary to resolve such problems and issues; — work out precise standards for the harmonization of the required information in order to ensure comparability of the data; — work out procedures to ensure the confidentiality of the information. A r t i c l e 31 1. The Standing Group on the Oil Market shall on a continuing basis review the operation of the General Section.

2. In the event of changes in the conditions of the international oil market, the Standing Group on the Oil Market shall report to the Management Committee. The Committee shall make proposals on appropriate changes to the Governing Board which, acting by majority, shall decide on such proposals.

Special Section Article

32

1. Under the Special Section of the Information System, the Participating Countries shall make available to the Secretariat all information which is necessary to ensure the efficient operation of emergency measures. 2. Each Participating Country shall take appropriate measures to ensure that all oil companies operating within its jurisdiction make such information available to it as is necessary to enable it to fulfil its obligations under paragraph 1 and under Article 33. 3. The Secretariat shall, on the basis of this information and other information available, continuously survey the supply of oil to and the consumption of oil within the group and each Participating Country. Article

33

Under the Special Section, the Participating Countries shall, on a regular basis, make available to the Secretariat information on the precise data identified in accordance with Article 34 on the following subjects: (a) Oil consumption and supply; (b) Demand restraint measures; (c) Levels of emergency reserves; (d) Availability and utilisation transportation facilities;

of

(e) Current and projected levels of international supply and demand; (f) Other subjects, as decided by the Governing Board, acting by unanimity. 75

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World-wide Economic Institutions A r t i c l e 34

Chapter VI

1. Within 30 days of the first day of the provisional application of this Agreement, the Standing Group on Emergency Questions shall submit a report to the Management Committee identifying the precise data within the list of subjects in Article 33 which are required under the Special Section to ensure the efficient operation of emergency measures and specifying the procedures for obtaining such data on a regular basis, including accelerated procedures in times of emergency. 2. The Management Committee shall review the report and make proposals to the Governing Board which, within 30 days of the submission of the report to the Management Committee, and acting by majority, shall take the decisions necessary for the establishment and efficient operation of the Special Section.

Framework lor Consultation with Oil Companies

A r t i c l e 35 In preparing its report under Article 34, the Standing Group on Emergency Questions shall — consult with oil companies to ensure that the System is compatible with industry operations; — work out precise standards for the harmonization of the required information in order to ensure comparability of the data,— work out procedures to ensure the confidentiality of the information. A r t i c l e 36 The Standing Group on Emergency Questions shall on a continuing basis review the operation of the Special Section and shall, as appropriate, report to the Management Committee. The Committee shall make proposals on appropriate changes to the Governing Board, which, acting by majority, shall decide on such proposals.

Article

37

1. The Participating Countries shall establish within the Agency a permanent framework for consultation within which one or more Participating Countries may, in an appropriate manner, consult with and request information from individual oil companies on all important aspects of the oil industry, and within which the Participating Countries may share among themselves on a co-operative basis the results of such consultations. 2. The framework for consultation shall be established under the auspices of the Standing Group on the Oil Market. 3. Within 60 days of the first day of the provisional application of this Agreement, and as appropriate thereafter, the Standing Group on the Oil Market, after consultation with oil companies, shall submit a report to the Management Committee on the procedures for such consultations. The Management Committee shall review the report and make proposals to the Governing Board, which, within 30 days of the submission of the report to the Management Committee, and acting by majority, shall decide on such procedures. A r t i c l e 38 1. The Standing Group on the Oil Market shall present a report to the Management Committee on consultations held with any oil company within 30 days thereof. 2. The Management Committee shall consider the report and may make proposals on appropriate cooperative action to the Governing Board, which shall decide on such proposals. Article

39

1. The Standing Group on the Oil Market shall, on a continuing basis, 76

International Energy Program

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evaluate the results of the consultations with and the information collected from oil companies.

— exchange of national experiences and information on energy conservation;

2. On the basis of these evaluations, the Standing Group may examine and assess the international oil situation and the position of the oil industry and shall report to the Management Committee.

— ways and means for reducing the growth of energy consumption through conservation.

3. The Management Committee shall review such reports and make proposals on appropriate co-operative action to the Governing Board, which shall decide on such proposals. Article

40

The Standing Group on the Oil Market shall submit annually a general report to the Management Committee on the functioning of the framework for consultation with oil companies.

(b) Development of alternative sources of energy such as domestic oil, coal, natural gas, nuclear energy and hydro-electric power, including co-operative programs on — exchange of information on such matters as resources, supply and demand, price and taxation; — ways and means for reducing the growth of consumption of imported oil through the development of alternative sources of energy; — concrete projects, including jointly financed projects;

Chapter VII Long Term Co-operation on Energy A r t i c l e 41 1. The Participating Countries are determined to reduce over the longer term their dependence on imported oil for meeting their total energy requirements. 2. To this end, the Participating Countries will undertake national programs and promote the adoption of co-operative programs, including, as appropriate, the sharing of means and efforts, while concerting national policies, in the areas set out in Article 42. Article

42

1. The Standing Group on Long Term Co-operation shall examine and report to the Management Committee on co-operative action. The following areas shall in particular be considered: (a) Conservation of energy, including co-operative programs on

—• criteria, quality objectives and standards for environmental protection. (c) Energy research and development, including as a matter of priority co-operative programs on — coal technology; — solar energy; — radioactive waste management; — controlled thermonuclear fusion; — production of hydrogen from water; — nuclear safety; — waste heat utilisation; —• conservation of energy; — municipal and industrial waste utilisation for energy conservation; — overall energy system analysis and general studies. (d) Uranium enrichment, including cooperative programs 77

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— to monitor developments in natural and enriched uranium supply; — to facilitate development of natural uranium resources and enrichment services; — to encourage such consultations as may be required to deal with international issues that may arise in relation to the expansion of enriched uranium supply; — to arrange for the requisite collection, analysis and dissemination of data related to the planning of enrichment services. 2. In examining the areas of cooperative action, the Standing Group shall take due account of ongoing activities elsewhere. 3. Programs developed under paragraph 1 may be jointly financed. Such joint financing may take place in accordance with Article 64, paragraph 2. Article

43

1. The Management Committee shall review the reports of the Standing Group and make appropriate proposals to the Governing Board, which shall decide on these proposals not later than 1st July, 1975. 2. The Governing Board shall take into account possibilities for cooperation within a broader framework.

Chapter VIII Relations with Producer Countries and with Other Consumer Countries A r t i c l e 44 The Participating Countries will endeavour to promote co-operative relations with oil producing countries and with other oil consuming countries, including developing countries. 78

They will keep under review developments in the energy field with a view to identifying opportunities for and promoting a purposeful dialogue, as well as other forms of co-operation, with producer countries and with other consumer countries. Article

45

To achieve the objectives set out in Article 44, the Participating Countries will give full consideration to the needs and interests of other oil consuming countries, particularly those of the developing countries. Article

46

The Participating Countries will, in the context of the Program, exchange views on their relations with oil producing countries. To this end, the Participating Countries should inform each other of co-operative action on their part with producer countries which is relevant to the objectives of the Program. Article

47

The Participating Countries will, in the context of the Program — seek, in the light of their continuous review of developments in the international energy situation and its effect on the world economy, opportunities and means of encouraging stable international trade in oil and of promoting secure oil supplies on reasonable and equitable terms for each Participating Country; — consider, in the light of work going on in other international organisations, other possible fields of co-operation including the prospects for co-operation in accelerated industrialisation and socio-economic development in the principal producing areas and the implications of this for international trade and investment; — keep under review the prospects for co-operation with oil producing countries on energy questions' of mutual interest, such as con-

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International Energy Program servation of energy, the development of alternative sources, and research and development. A r t i c l e 48 1. The Standing Group on Relations with Producer and other Consumer Countries will examine and report to the Management Committee on the matters described in this Chapter. 2. The Management Committee may make proposals on appropriate cooperative action regarding these matters to the Governing Board, which shall decide on such proposals.

Chapter IX Institutional and General Provisions A r t i c l e 49 1. The Agency shall have the following organs: — a Governing Board — a Management Committee — Standing Groups on — Emergency Questions — The Oil Market — Long Term Co-operation — Relations with Producer and other Consumer Countries. 2. The Governing Board or the Management Committee may, acting by majority, establish any other organ necessary for the implementation of the Program. 3. The Agency shall have a Secretariat to assist the organs mentioned in paragraphs 1 and 2.

Governing Board A r t i c l e 50 1. The Governing Board shall be composed of one or more ministers or their delegates from each Participating Country.

2. The Governing Board, acting by majority, shall adopt its own rules of procedure. Unless otherwise decided in the rules of procedure, these rules shall also apply to the Management Committee and the Standing Groups. 3. The Governing Board, acting by majority, shall elect its Chairman and Vice-Chairmen. A r t i c l e 51 1. The Governing Board shall adopt decisions and make recommendations which are necessary for the proper functioning of the Program. 2. The Governing Board shall review periodically and take appropriate action concerning developments in the international energy situation, including problems relating to the oil supplies of any Participating Country or Countries, and the economic and monetary implications of these developments. In its activities concerning the economic and monetary implications of developments in the international energy situation, the Governing Board shall take into account the competence and activities of international institutions responsible for overall economic and monetary questions. 3. The Governing Board, acting by majority, may delegate any of its functions to any other organ of the Agency. A r t i c 1 e 52 1. Subject to Article 61, paragraph 2, and Article 65, decisions adopted pursuant to this Agreement by the Governing Board or by any other organ by delegation from the Board shall be binding on the Participating Countries. 2. Recommendations binding.

shall not

be

Management Committee A r t i c l e 53 1. The Management Committee shall be composed of one or more 79

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senior representatives of the Government of each Participating Country. 2. The Management Committee shall carry out the functions assigned to it in this Agreement and any other function delegated to it by the Governing Board. 3. The Management Committee may examine and make proposals to the Governing Board, as appropriate, on any matter within the scope of this Agreement. 4. The Management Committee shall be convened upon the request of any Participating Country. 5. The Management Committee, acting by majority, shall elect its Chairman and Vice-Chairmen. Standing Groups

2. The Standing Group may review and report to the Management Committee on any matter within the scope of Chapters V and VI. 3. The Standing Group may consult with oil companies on any matter within its competence. A r t i c l e 57 1. The Standing Group on Long Term Co-operation shall carry out the functions assigned to it in Chapter VII and any other function delegated to it by the Governing Board. 2. The Standing Group may review and report to the Management Committee on any matter within the scope of Chapter VII. A r t i c l e 58

1. Each Standing Group shall be composed of one or more representatives of the Government of each Participating Country.

1. The Standing Group on Relations with Producer and other Consumer Countries shall carry out the functions assigned to it in Chapter VIII and any other function delegated to it by the Governing Board.

2. The Management Committee, acting by majority, shall elect the Chairmen and Vice-Chairmen of the Standing Groups.

2. The Standing Group may review and report to the Management Committee on any matter within the scope of Chapter VIII.

A r t i c 1 e 55

3. The Standing Group may consult with oil companies on any matter within its competence.

A r t i c l e 54

1. The Standing Group on Emergency Questions shall carry out the functions assigned to it in Chapters I to V and the Annex and any other function delegated to it by the Governing Board. 2. The Standing Group may review and report to the Management Committee on any matter within the scope of Chapters I to V and the Annex. 3. The Standing Group may consult with oil companies on any matter within its competence. A r t i c l e 56 1. The Standing Group on the Oil Market shall carry out the functions assigned to it in Chapters V and VI and any other function delegated to it by the Governing Board. 80

Secretariat A r t i c l e 59 1. The Secretariat shall be composed of an Executive Director and such staff as is necessary. 2. The Executive Director shall be appointed by the Governing Board. 3. In the performance of their duties under this Agreement the Executive Director and the staff-shall be responsible to and report to the organs of the Agency. 4. The Governing Board, acting by majority, shall take all decisions necessary for the establishment and the functioning of the Secretariat.

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International Energy Program

Voting A r t i c l e 61 1. The Governing Board shall adopt decisions and recommendations for which no express voting provision is made in this Agreement, as follows: (a) by majority: — decisions on the management of the Program, including decisions applying provisions of this Agreement which already impose specific obligations on Participating Countries

Combined voting i weights

General voting weights

The Secretariat shall carry out the functions assigned to it in this Agreement and any other function assigned to it by the Governing Board.

Oil consumption voting weights

A r t i c l e 60

Austria

3

1

4

Belgium

3

2

5

Canada

3

5

8

Denmark

3

1

4

8

11

Germany

3

Ireland

3

0

3

Italy

3

6

9

Japan

3

15

18

Luxembourg

3

0

3

The Netherlands Spain

3

2

5

3

2

5 5

Sweden

3

2

— decisions on procedural questions

Switzerland

3

1

4

Turkey

3

1

4

— recommendations

United Kingdom

3

6

9

United States

3

48

51

48

100

148

(b) by unanimity: — all other decisions, including in particular decisions which impose on Participating Countries new obligations not already specified in this Agreement. 2. Decisions mentioned graph 1 (b) may provide:

in

para-

(a) that they shall not be binding on one or more Participating Countries; (b) that they shall be binding only under certain conditions. A r t i c l e 62 1. Unanimity shall require all of the votes of the Participating Countries present and voting. Countries abstaining shall be considered as not voting. 2. W h e n majority or special majority is required, the Participating Countries shall have the following voting weights: 3. Majority shall require 60 per cent of the total combined voting

Totals

weights and 50 per cent of the general voting weights cast. 4. Special majority shall require: (a) 60 per cent of the total combined voting weights and 36 general voting weights for: — the decision under Article 2, paragraph 2, relating to the increase in the emergency reserve commitment; — decisions under Article 19, paragraph 3, not to activate the emergency measures referred to in Articles 13 and 14; — decisions under Article 20, paragraph 3, on the measures required for meeting the necessities of the situation; — decisions under Article 23, paragraph 3, to maintain the emergency measures referred to in Articles 13 and 14; 81

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— decisions under Article 24 to deactivate the emergency measures referred to in Articles 13 and 14. (b) 42 general voting weights for: — decisions under Article 19, paragraph 3, not to activate the emergency measures referred to in Article 17; — decisions under Article 23, paragraph 3, to maintain the emergency measures referred to in Article 17; — decisions under Article 24 to deactivate the emergency measures referred to in Article 17. 5. The Governing Board, acting by unanimity, shall decide on the necessary increase, decrease, and redistribution of the voting weights referred to in paragraph 2, as well as on amendment of the voting requirements set out in paragraphs 3 and 4 in the event that — a Country accedes to this Agreement in accordance with Article 71, or — a Country withdraws from this Agreement in accordance with Article 68, paragraph 2, or Article 69, paragraph 2.

establish appropriate relations with non-participating countries, international organisations, whether governmental or non-governmental, other entities and individuals.

Financial Arrangements A r t i c l e 64 1. The expenses of the Secretariat and all other common expenses shall be shared among all Participating Countries according to a scale of contributions elaborated according to the principles and rules set out in the Annex to the "OECD Resolution of the Council on Determination of the Scale of Contributions by Member Countries to the Budget of the Organisation" oY 10th December, 1963. After the first year of application of this Agreement, the Governing Board shall review this scale of contributions and, acting by unanimity, shall decide upon any appropriate changes in accordance with Article 73. 2. Special expenses incurred in connection with special activities carried out pursuant to Article 65 shall be shared by the Participating Countries taking part in such special activities in such proportions as shall" be determined by unanimous agreement between them.

6. The Governing Board shall review annually the number and distribution of voting weights specified in paragraph 2, and, on the basis of such review, acting by unanimity, shall decide whether such voting weights should be increased or decreased, or redistributed, or both, because a change in any Participating Country's share in total oil consumption has occurred or for any other reason.

3. The Executive Director shall, in accordance with the financial regulations adopted by the Governing Board and not later than 1st October of each year, submit to the Governing Board a draft budget including personnel requirements. The Governing Board, acting by majority, shall adopt the budget.

7. Any change in paragraph 2, 3 or 4 shall be based on the concepts underlying those paragraphs and paragraph 6.

4. The Governing Board, acting by majority, shall take all other necessary decisions regarding the financial administration of the Agency.

R e l a t i o n s w i t h O t h e r Entities

5. The financial year shall begin on 1st January and end on 31st December of each year. At the end of each financial year, revenues and expenditures shall be submitted to audit.

A r t i c l e 63 of 82

In order to achieve the objectives the Program, the Agency may

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International Energy Program Special Activities A r t i c l e 65 1. Any two or more Participating Countries may decide to carry out within the scope of this Agreement special activities, other than activities which are required to be carried out by all Participating Countries under Chapters I to V. Participating Countries which do not wish to take part in such special activities shall abstain from taking part in such decisions and shall not be bound by them. Participating Countries carrying out such activities shall keep the Governing Board informed thereof. 2. For the implementation of such special activities, the Participating Countries concerned may agree upon voting procedures other than those provided for in Articles 61 and 62. Implementation of the A g r e e m e n t A r t i c l e 66 Each Participating Country shall take the necessary measures, including any necessary legislative measures, to implement' this Agreement and decisions taken by the Governing Board.

3. For each Signatory State which deposits its notification thereafter, this Agreement shall enter into force on the tenth day following the day of deposit. 4. The Governing Board, acting by majority, may upon request from any Signatory State decide to extend, with respect to that State, the time limit for notification beyond 1st May, 1975.

A r t i c l e 68 1. Notwithstanding the provisions of Article 67, this Agreement shall be applied provisionally by all Signatory States, to the extent possible not inconsistent with their legislation, as from 18th November, 1974 following the first meeting of the Governing Board. 2. Provisional application of the Agreement shall continue until: — the Agreement enters into force for the State concerned in accordance with Article 67, or — 60 days after the Government of the Kingdom of Belgium receives notification that the State concerned will not consent to be bound by the Agreement, or — the time limit for notification of consent by the State concerned referred to in Article 67 expires.

Chapter X Final Provisions A r t i c l e 67 1. Each Signatory State shall, not later than 1st May, 1975, notify the Government of the Kingdom of Belgium that, having complied with its constitutional procedures, it consents to be bound by this Agreement. 2. On the tenth day following the day on which at least six States holding at least 60 per cent of the combined voting weights mentioned in Article 62 have deposited a notification of consent to be bound or an instrument of accession, this Agreement shall enter into force for such States.

A r t i c l e 69 1. This Agreement shall remain in force for a period of ten years from the date of its entry into force and shall continue in force thereafter unless and until the Governing Board, acting by majority, decides on its termination. 2. Any Participating Country may terminate the application of this Agreement for its part upon twelve months' written notice to the Government of the Kingdom of Belgium to that effect, given not less than three years after the first day of the provisional application of this Agreement. 83

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World-wide Economic Institutions Article

70

1. Any State may, at the time of signature, notification of consent to be bound in accordance with Article 67, accession or at any later date, declare by notification addressed to the Government of the Kingdom of Belgium that this Agreement shall apply to all or any of the territories for whose international relations it is responsible, or to any territories within its frontiers for whose oil supplies it is legally responsible. 2. Any declaration made pursuant to paragraph 1 may, in respect of any territory mentioned in such declaration, be withdrawn in accordance with the provisions of Article 69, paragraph 2. A r t i c l e 71 1. This Agreement shall be open for accession by any Member of the Organisation for Economic Co-operation and Development which is able and willing to meet the requirements of the Program. The Governing Board, acting by majority, shall decide on any request for accession.

Article

73

This Agreement may at any time be amended by the Governing Board, acting by unanimity. Such amendment shall come into force in a manner determined by the Governing Board, acting by unanimity and making provision for Participating Countries to comply with their respective constitutional procedures. A r t i c l e 74 This Agreement shall be subject to a general review after 1st May, 1980. Article

75

The Government of the Kingdom of Belgium shall notify all Participating Countries of the deposit of each notification of consent to be bound in accordance with Article 67, and of each instrument of accession, of the entry into force of this Agreement or any amendment thereto, of any denunciation thereof, and of any other declaration or notification received. A r t i c l e 76

2. This Agreement shall enter into force for any State whose request for accession has been granted on the tenth day following the deposit of its instrument of accession with the Government of the Kingdom of Belgium, or on the date of entry into force of the Agreement pursuant to Article 67, paragraph 2, whichever is the later.

The original of this Agreement, of which the English, French and German texts are equally authentic, shall be deposited with the Government of the Kingdom of Belgium, and a certified copy thereof shall be furnished to each other Participating Country by the Government of the Kingdom of Belgium.

3. Until 1st May, 1975, accession may take place on a provisional basis under the conditions set out in Article 68.

IN WITNESS WHEREOF the undersigned, being duly authorised thereto by their respective Governments, have signed this Agreement.

A r t i c l e 72

DONE at Paris this eighteenth day of November, Nineteen Hundred and Seventy Four.

1. This Agreement shall be open for accession by the European Communities. 2. This Agreement shall not in any way impede the further implementation of the treaties establishing the European Communities.

84

Annex Emergency Reserves Article 1 1. Total oil stocks are measured according to the OECD and EEC definitions, revised as follows:

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International Energy Program A. Stocks included: crude oil, m a j o r products and unfinished oils held — in refinery tanks — in bulk terminals

of

absolutely

un-

3. Until a decision has been taken on this matter, each Participating Country shall subtract 10 per cent from its total stocks in measuring its emergency reserves. 4. The Standing Group on Emergency Questions shall examine and report to the Management Committee on:

— in pipeline tankage — in barges

a) the modalities of including naphtha for uses other than motor and aviation gasoline in the consumption against which stocks are measured,

— in intercoastal tankers — in oil tankers in port — in inland ship bunkers — in storage tank bottoms — in working stocks — b y large consumers as required b y law or otherwise controlled by Governments. B. Stocks excluded: a) crude oil not yet produced b) crude oil, major products unfinished oils held

the measurement available stocks.

and

— in pipelines — in rail tank cars — in truck tank cars — in seagoing ships' bunkers — in service stations and retail stores — by other consumers — in tankers at sea — as military stocks. 2. That portion of oil stocks which can be credited toward each Participating Country's emergency reserve commitment is its total oil stocks under the above definition minus those stocks which can be technically determined as being absolutely unavailable in even the most severe emergency. The Standing Group on Emergency Questions shall examine this concept and report on criteria for

b) the possibility of creating common rules for the treatment of marine bunkers in an emergency, and of including marine bunkers in the consumption against which stocks are measured, c) the possibility of creating common rules concerning demand restraint for aviation bunkers, d) the possibility of crediting towards emergency reserve commitments some portion of oil at sea at the time of activation of emergency measures, e) the possibility of increasing supplies available in an emergency through savings in the distribution system.

Article

2

1. Fuel switching capacity is defined as normal oil consumption that may be replaced by other fuels in an emergency, provided that this capacity is subject to government control in an emergency, can be brought into operation within one month, and that secure supplies of the alternative fuel are available for use. 2. The supply of alternative fuel shall be expressed in terms of oil equivalent 3. Stocks of an alternative fuel reserved for fuel switching purposes may be credited towards emergency reserve commitments insofar as they 85

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can be used during the period of selfsufficiency. 4. Stand-by production of an alternative fuel reserved for fuel switching purposes will be credited towards emergency reserve commitments on the same basis as stand-by oil production, subject to the provisions of Article 4 of this Annex. 5. The Standing Group on Emergency Questions shall examine and report to the Management Committee on a) the appropriateness of the time limit of one month mentioned in paragraph 1, b) the basis of accounting for the fuel switching capacity based on stocks of an alternative fuel, subject to the provisions of paragraph 3. Article

3

A Participating Country may credit towards its emergency reserve commitment oil stocks in another country, provided that the Government of that other country has an agreement with the Government of the Participating Country that it shall impose no impediment to the transfer of those stocks in an emergency to the Participating Country. Article 4 1. Stand-by oil production is defined as a Participating Country's potential oil production in excess of normal oil production within its jurisdiction — which is subject to government control, and — which can be brought into use during an emergency within the period of self-sufficiency. 2. The Standing Group on Emergency Questions shall examine and report to the Management Committee on á) the concept of and methods of measurement of stand-by oil production as referred to in paragraph 1, b) the appropriateness of "the period of self-sufficiency" as a time limit, 86

c) the question of whether a given quantity of stand-by oil production is of greater value for purposes of emergency self-sufficiency than the same quantity of oil stocks, the amount of a possible credit for stand-by production, and the method of its calculation. Article 5 Stand-by oil production available to a Participating Country within the jurisdiction of another country may be credited towards its emergency reserve commitment on the same basis as stand-by oil production within its own jurisdiction, subject to the provisions of Article 4 of this Annex provided that the Government of that other country has an agreement with the Government of the Participating Country that it shall impose no impediment to the supply of oil from that stand-by capacity to the Participating Country in an emergency. Article 6 The Standing Group on Emergency Questions shall examine and report to the Management Committee on the possibility of crediting towards a Participating Country's emergency reserve commitment mentioned in Article 2, paragraph 2, of the Agreement, long term investments which have the effect of reducing the Participating Country's dependence on imported oil. Article 7 1. The Standing Group on Emergency Questions shall examine and report to the Management Committee regarding the reference period set out in Article 2, paragraph 1, of the Agreement, in particular taking into account such factors as growth, seasonal variations in consumption and cyclical changes. 2. A decision by the Governing Board to change the definition of the reference period mentioned in paragraph 1 shall be taken b y unanimity.

International Energy Program Article 8 The Standing Group on Emergency Questions shall examine and report to the Management Committee on all elements of Chapters I to IV of the Agreement to eliminate possible mathematical and statistical anomalies. Article 9 The reports from the Standing Group on Emergency Questions on the matters mentioned in this Annex shall be submitted to the Management Committee by 1st April, 1975. The Management Committee shall make proposals, as appropriate, to the Governing Board, which, acting by majority, not later than 1st July, 1975, shall decide on these proposals, except as provided for in Article 7, paragraph 2, of this Annex.

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7. Constitution of the Food and Agriculture Organization of the United Nations (FAO) October 16, 1945 BGBl. 1971 II, 1036 (T. I. A. S. No. 1554, 60 Stat. 1946)

Preamble The Nations accepting this Constitution, being determined to promote the common welfare by furthering separate and collective action on their part for the purpose of: raising levels of nutrition and standards of living of the peoples under their respective jurisdictions; securing improvements in the efficiency of the production and distribution of all food and agricultural products; bettering the condition of rural populations; and thus contributing toward an expanding world economy and ensuring humanity's freedom from hunger; hereby establish the Food and Agriculture Organization of the United Nations, hereinafter referred to as the "Organization", through which the Members will report to one another on the measures taken and the progress achieved in the fields of action set forth above. Article I Functions of the Organization 1. The Organization shall collect, analyse, interpret and disseminate information relating to nutrition, food and agriculture. In this Constitution, the term "agriculture" and its derivatives include fisheries, marine products, forestry and primary forestry products. 2. The Organization shall promote and, where appropriate, shall recommend national and international action with respect to: (a) scientific, technological, social and economic research relating to nutrition, food and agriculture; 88

(b) the improvement of education and administration relating to nutrition, food and agriculture, and the spread of public knowledge of nutritional and agricultural science and practice; (c) the conservation of natural resources and the adoption of improved methods of agricultural production; (d) the improvement of the processing, marketing and distribution of food and agricultural products; (e) the adoption of policies for the provision of adequate agricultural credit, national and international; (f) the adoption of international policies with respect to agricultural commodity arrangements. 3. It shall also be the function of the Organization: (a) to furnish such technical assistance as governments may request; (b) to organize, in cooperation with the governments concerned, such missions as may be needed to assist them to fulfil the obligation arising from their acceptance of the recommendations of the United Nations Conference on Food and Agriculture and of this Constitution; and (c) generally to take all and appropriate action ment the purposes of the tion as set forth in the

necessary to impleOrganizaPreamble.

Article n Membership and Associate Membership 1. The original Member Nations of the Organization shall be such of the nations specified in Annex I as accept this Constitution, in accordance with the provisions of Article XXI.

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FAO 2. The Conference may by a twothirds majority of the votes cast, provided that a majority of the Member Nations of the Organization is present, decide to admit as an additional Member of the Organization any nation which has submitted an application for membership and a declaration made in a formal instrument that it will accept the obligations of the Constitution as in force at the time of admission. 3. The Conference may, under the same conditions regarding the required majority and quorum as prescribed in paragraph 2 above, decide to admit as an Associate Member of the Organization any territory or group of territories which is not responsible for the conduct of its international relations upon application made on its behalf by the Member Nation or authority having responsibility for its international relations, provided that such Member Nation or authority has submitted a declaration made in a formal instrument that it will accept on behalf of the proposed Associate Member the obligations of the Constitution as in force at the time of admission, and that it will assume responsibility for ensuring the observance of the provisions of paragraph 4 of Article VIII, paragraphs 1 and 2 of Article XVI, and paragraphs 2 and 3 of Article XVIII of this Constitution with regard to the Associate Member. 4. The nature and extent of the rights and obligations of Associate Members are defined in the relevant provisions of this Constitution and the Rules and Regulations of the Organization. 5. Membership and Associate Membership shall become effective on the date on which the Conference approves the application.

Article III The Conference 1. There shall be a Conference of the Organization in which each Member Nation and Associate Member shall be represented by one delegate.

Associate Members shall have the right to participate in the deliberations of the Conference but shall not hold office nor have the right to vote. 2. Each Member Nation and Associate Member may appoint alternates, associates and advisers to its delegate. The Conference may determine the conditions for the participation of alternates, associates and advisers in its proceedings, but'any such participation shall be without the right to vote, except in the case of an alternate, associate, or adviser participating in the place of a delegate. 3. No delegate may represent more than one Member Nation or Associate Member. 4. Each Member Nation shall have only one vote. A Member Nation which is in arrears in the payment of its financial contributions to the Organization shall have no vote in the Conference if the amount of its arrears equals or exceeds the amount of the contributions due from it for the two preceding calendar years. The Conference may, nevertheless, permit such a Member Nation to vote if it is satisfied that the failure to pay is due to conditions beyond the control of the Member Nation. 5. The Conference may invite any international organization which has responsibilities related to those of the Organization to be represented at its meetings on the conditions prescribed by the Conference. No representative of such an organization shall have the right to vote. 6. The Conference shall meet once in every two years in regular session. It may meet in special session: (a) if at any regular session the Conference decides, by a majority of the votes cast, to meet in the following year; (b) if the Council so instructs the Director-General, or if at least one third of the Member Nations so request. 7. The Conference own officers.

shall

elect

its

89

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8. Except as otherwise expressly provided in this Constitution or by rules made by the Conference, all decisions of the Conference shall be taken by a majority of the votes cast. Article IV Functions of the Conference 1. The Conference shall determine the policy and approve the budget of the Organization and shall exercise the other powers conferred upon it by this Constitution. 2. The Conference shall adopt Rules of Procedure and Financial Regulations for the Organization. 3. The Conference may, by a twothirds majority of the votes cast, make recommendations to Member Nations and Associate Members concerning questions relating to food and agriculture, for consideration by them with a view to implementation by national action. 4. The Conference may make recommendations to any international organization regarding any matter pertaining to the purposes of the Organization. 5. The Conference may review any decision taken by the Council or by any commission or committee of the Conference or Council, or by any subsidiary body of such commissions or committees. Article V Council of the Organization 1. A Council of the Organization consisting of thirty-four Member Nations shall be elected by the Conference. Each Member Nation on the Council shall have one representative and shall have only one vote. Each Member of the Council may appoint alternates, associates and advisers to its representative. The Council may determine the conditions for the participation of alternates, associates and advisers in its proceedings, but any such participation shall be without the right to vote, except in the case of an alternate, associate or ad90

viser participating in the place of a representative. No representative may represent more than one Member of the Council. The tenure and other conditions of office of the Members of the Council shall be subject to rules made by the Conference. 2. The Conference shall, in addition, appoint an independent Chairman of the Council. 3. The Council shall have such powers as the Conference may delegate to it, but the Conference shall not delegate the powers set forth in paragraphs 2 and 3 of Article II, Article IV, paragraph 1 of Article VII, Article XII, paragraph 4 of Article XIII, paragraphs 1 and 6 of Article XIV and Article XX of this Constitution. 4. The Council shall appoint its officers other than the Chairman and, subject to any decisions of the Conference, shall adopt its own Rules of Procedure. 5. Except as otherwise expressly provided in this Constitution or by rules made by the Conference or Council, all decisions of the Council shall be taken by a majority of the votes cast. 6. To assist the Council in performing its functions, the Council shall appoint a Programme Committee, a Finance Committee, a Committee on Commodity Problems, a Committee on Fisheries and a Committee on Constitutional and Legal Matters. These committees shall report to the Council and their composition and terms of reference shall be governed by rules adopted by the Conference. Article VI Commissions, committees, conferences, working parties and consultations 1. The Conference or Council may establish commissions, the membership of which shall be open to all Member Nations and Associate Members, or regional commissions open to all Member Nations and Associate Members whose territories are situated wholly or in part in one or more

FAO regions, to advise on the formulation and implementation of policy and to coordinate the implementation of policy. The Conference or Council may also establish, in conjunction with other intergovernmental organizations, joint commissions open to all Member Nations and Associate Members of the Organization and of the other organizations concerned, or joint regional commissions open to Member Nations and Associate Members of the Organization and of the other organizations concerned, whose territories are situated wholly or in part in the region. 2. The Conference, the Council, or the Director-General on the authority of the Conference or Council may establish committees and working parties to study and report on matters pertaining to the purpose of the Organization and consisting either of selected Member Nations and Associate Members, or of individuals appointed in their personal capacity because of their special competence in technical matters. The Conference, the Council, or the Director-General on the authority of the Conference or Council may, in conjunction with other intergovernmental organizations, also establish joint committees and working parties, consisting either of selected Member Nations and Associate Members of the Organization and of the other organizations concerned, or of individuals appointed in their personal capacity. The selected Member Nations and Associate Members shall, as regards the Organization, be designated either by the Conference or the Council, or by the DirectorGeneral if so decided by the Conference or Council. The individuals appointed in their personal capacity shall, as regards the Organization, be designated either by the Conference, the Council, selected Member Nations or Associate Members, or by the Director-General, as decided by the Conference or Council. 3. The Conference, the Council, or the Director-General on the authority of the Conference or Council, shall determine the terms of reference and

Doc. 7 reporting procedures, as appropriate, of commissions, committees and working parties established by the Conference, the Council, or the DirectorGeneral as the case may be. Such commissions and committees may adopt their own rules of procedure and amendments thereto, which shall come into force upon approval by the Director-General subject to confirmation by the Conference or Council, as appropriate. The terms of. reference and reporting procedures of joint commissions, committees and working parties established in conjunction with other intergovernmental organizations shall be determined in consultation with the other organizations concerned. 4. The Director-General may establish, in consultation with Member Nations, Associate Members and National FAO Committees, panels of experts, with a view to developing consultation with leading technicians in the various fields of activity of the Organization. The Director-General may convene meetings of some or all of these experts for consultation on specific subjects. 5. The Conference, the Council, or the Director-General on the authority of the Conference or Council may convene general, regional, technical or other conferences, or working parties or consultations of Member Nations and Associate Members, laying down their terms of reference and reporting procedures, and may provide for participation in such conferences, working parties and consultations, in such manner as they may determine, of national and international bodies concerned with nutrition, food and agriculture. 6. When the Director-General is satisfied that urgent action is required, he may establish the committees and working parties and convene the conferences, working parties and consultations provided for in paragraphs 2 and 5 above. Such action shall be notified by the Director-General to Member Nations and Associate Members and reported to the following session of the Council. 91

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7. Associate Members included in the membership of the commissions, committees or working parties, or attending the conferences, working parties or consultations referred to in paragraphs 1, 2 and 5 above, shall have the right to participate in the deliberations of such commissions, committees, conferences,' working parties and consultations, but shall not hold office nor have the right to vote.

Article VII The Director-General 1. There shall be a Director-General of the Organization who shall be appointed by the Conference for a term of four years. 2. Upon expiry of the term of four years the Director-General may be reappointed for a term of two years. Upon expiry of this term of two years, the Director-General may be reappointed for a further term of two years, after which he shall not be eligible for reappointment. 3. Appointments and reappointments under this Article shall be made by such procedures and on such other terms as the Conference may determine. 4. Should the office of DirectorGeneral become vacant during any one of the above-mentioned terms of office, the Conference may appoint a successor to serve for the then unexpired portion of that term of office. Such successor may again be appointed or reappointed in accordance with the provisions of paragraphs 1, 2 and 3 of this Article, provided that the total of his terms of office does not exceed eight years. 5. Subject to the general supervision of the Conference and the Council, the Director-General shall have full power and authority to direct the work of the Organization. 6. The Director-General or a representative designated by him shall participate, without the right to vote, in all meetings of the Conference and of the Council and shall formulate for 92

consideration by the Conference and the Council proposals for appropriate action in regard to matters coming before them. Article VIII Staff 1. The staff of the Organization shall be appointed by the DirectorGeneral in accordance with such procedure as may be determined by rules made by the Conference. 2. The staff of the Organization shall be responsible to the DirectorGeneral. Their responsibilities shall be exclusively international in character and they shall not seek or receive instructions in regard to the discharge thereof from any authority external to the Organization. The Member Nations and Associate Members undertake fully to respect the international character of the responsibilities of the staff and not to seek to influence any of their nationals in the discharge of such responsibilities. 3. In appointing the staff, the Director-General shall, subject to the paramount importance of securing the highest standards of efficiency and of technical competence, pay due regard to the importance of selecting personnel recruited on as wide a geographical basis as is possible. 4. Each Member Nation and Associate Member undertakes, in so far as it may be possible under its constitutional procedure, to accord to the Director-General and senior staff diplomatic privileges and immunities and to accord to other members of the staff all facilities and immunities accorded to non-diplomatic personnel attached to diplomatic missions, or alternatively, to accord to such other members of the staff immunities and facilities which may hereafter be accorded to equivalent members of the staffs of other public international organizations. Article IX Seat The seat of the Organization shall be determined by the Conference.

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FAO Article X Regional and liaison offices 1. There shall be offices and subregional Director-General, with of the Conference, may

such regional offices as the the approval decide.

2. The Director-General may appoint officials for liaison with particular countries or areas, subject to the agreement of the government concerned. Article XI Reports by Member Nations and Associate Members 1. Each Member Nation and Associate Member shall communicate periodically to the Organization reports on the progress made toward achieving the purpose of the Organization set forth in the Preamble and on the action taken on the basis of recommendations made and conventions submitted by the Conference. 2. These reports shall be made at sudi times and in such forms and shall contain such particulars as the Conference may request.

specialized agency within the meaning of Article 57 of the Charter of the United Nations. 2. Agreements defining the relations between the Organization and the United Nations shall be subject to the approval of the Conference. Article XIII Cooperation with organizations and persons 1. In order to provide for close cooperation between the Organization and other international organizations with related responsibilities, the Conference may enter into agreements with the competent authorities of such organizations, defining the distribution of responsibilities and methods of cooperation. 2. The Director-General may, subject to any decision of the Conference, enter into agreements with other intergovernmental organizations for the maintenance of common services, for common arrangements in regard to recruitment, training, conditions of service and other related matters, and for interchanges of staff.

3. The Director-General shall submit these reports, together with analyses thereof, to the Conference and shall publish such reports and analyses as may be approved for publication by the Conference, together with any reports relating thereto adopted by the Conference.

3. The Conference may approve arrangements placing other international organizations dealing with questions relating to food and agriculture under the general authority of the Organization on such terms as may be agreed with the competent authorities of the organization concerned.

4. The Director-General may request any Member Nation or Associate Member to submit information relating to the purpose of the Organization.

4. The Conference shall make rules laying down the procedure to be followed to secure proper consultation with governments in regard to relations between the Organization and national institutions or private persons.

5. Each Member Nation and Associate Member shall, on request, communicate to the Organization, on publication, all laws and regulations and official reports and statistics concerning nutrition, food and agriculture. Article XII Relations with the United Nations 1. The Organization shall maintain relations with the United Nations as a

Article XIV Conventions and agreements 1. The Conference may, by a twothirds majority of the votes cast and in conformity with rules adopted by the Conference, approve and submit to Member Nations conventions and agreements concerning questions relating to food and agriculture. 93

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2. The Council, under rules to be adopted by the Conference, may, by a vote concurred in by at least two thirds of the membership of the Council, approve and submit to Member Nations: (a) agreements concerning questions relating to food and agriculture which are of particular interest to Member Nations of geographical areas specified in such agreements and are designed to apply only to such areas; (b) supplémentary conventions or agreements designed to implement any convention or agreement which has come into force under paragraphs 1 or 2 (a). 3. Conventions, agreements, and supplementary conventions and agreements shall: (a) be submitted to the Conference or Council through the DirectorGeneral on behalf of a technical meeting or conference comprising Member Nations, which has assisted in drafting the convention or I ' i r e e m e n t and has suggested that it be submitted to Member Nations concerned for acceptance; (b) contain provisions concerning the Member Nations of the Organization, and such non-member nations as are members of the United Nations, which may become parties thereto and the number of acceptances by Member Nations necessary to bring such convention, agreement, supplementary convention or agreement into force, and thus ensure that it will constitute a real contribution to the achievement of its objectives. In the case of conventions, agreements, supplementary conventions and agreements establishing commissions or committees, participation by non-member nations of the Organization that are members of the United Nations shall in addition be subject to prior approval by at least two thirds of the membership of such commissions or committees; (c) not entail any financial obligations for Member Nations not parties to 94

it other than their contributions to the Organization provided for in Article XVIII, paragraph 2 of this Constitution. 4. Any convention, agreement, supplementary convention or agreement approved by the Conference or Council for submission to Member Nations shall come into force for each contracting party as the convention, agreement, supplementary convention or agreement may prescribe. 5. As regards an Associate Member, conventions, agreements, supplementary conventions and agreement, shall be submitted to the authority having responsibility for the international relations of the Associate Member. 6. The Conference shall make rules laying down the procedure to be fol-' lowed to secure proper consultation with governments and adequate technical preparations prior to consideration by the Conference or the Council of proposed conventions, agreements, supplementary conventions and agreements. 7. Two copies in the authentic language or languages of any convention, agreement, supplementary convention or agreement approved by the Conference or the Council shall be certified by the Chairman of the Conference or of the Council respectively and by the Director-General. One of these copies shall be deposited in the archives of the Organization. The other copv shall be transmitted to the Secretary-General of the United Nations for registration once the convention, agreement, supplementary convention or agreement has come into force as a result of action taken under this Article. In addition, the Director-General shall certify copies of those conventions, agreements, supplementary conventions or agreements and transmit one copy to each Member Nation of the Organization and to such non-member nations as may become parties to the conventions, agreements, supplementary conventions or agreements.

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FAO Article X V Agreements between the Organization and Member Nations 1. The Conference may authorize the Diréctor-General to enter into agreements with Member Nations for the establishment of international institutions dealing with questions relating to food and agriculture. 2. In pursuance of a policy decision taken by the Conference by a twothirds majority of the votes cast, the Director-General may negotiate and enter into such agreements with Member Nations, subject to the provisions of paragraph 3 below. 3. The signature of such agreements by the Director-General shall be subject to the prior approval of the Conference by a two-thirds majority of the votes cast. The Conference may, in a particular case or cases, delegate the authority of approval to the Council, requiring a vote concurred in by at least two thirds of the membership of the Council. Article XVI Legal status 1. The Organization shall have the capacity of a legal person to perform any legal act appropriate to its purpose which is not beyond the powers granted to it by this Constitution. 2. Each Member Nation and Associate Member undertakes, in so far as it may be possible under its constitutional procedure, to accord to the Organization all the immunities and facilities which it accords to diplomatic missions, including inviolability of premises and archives, immunity from suit and exemptions from taxation. 3. The Conference shall make provision for the determination by an administrative tribunal of disputes relating to the conditions and terms of appointment of members of the staff. Article XVII Interpretation of the Constitution and settlement of legal questions

1. Any question or dispute concerning the interpretation of this Constitution, if not settled by the Conference, shall be referred to the International Court of Justice in conformity with the Statute of the Court or to such other body as the Conference may determine. 2. Any request by the Organization to the International Court of Justice for an advisory opinion on legal questions arising within the scope of its activities shall be in accordance with any agreement between the Organization and the United Nations. 3. The reference of any question or dispute under this Article, or any request for an advisory opinion, shall be subject to procedures to be prescribed by the Conference.

Article XVIII Budget and contributions 1. The Director-General shall submit to each regular session of the Conference the budget of the Organization for approval. 2. Each Member Nation and Associate Member undertakes to contribute annually to the Organization its share of the budget, as apportioned by the Conference. When determining the contributions to be paid by Member Nations and Associate Members, the Conference shall take into account the difference in status between Member Nations and Associate Members. 3. Each Member Nation and Associate Member shall, upon approval of its application, pay as its first contribution a proportion, to be determined by the Conference, of the budget for the current financial period. 4. The financial period of the Organization shall be the two calendar years following the normal date for the regular session of the Conference, unless the Conference should otherwise determine. 5. Decisions on the level of the budget shall be taken by a two-thirds majority of the votes cast. 95

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World-wide Economic Institutions Article XIX Withdrawal

Any Member Nation may give notice of withdrawal from the Organization at any time after the expiration of four years from the date of its acceptance of this Constitution. The notice of withdrawal of an Associate Member shall be given by the Member Nation or authority having responsibility for its international relations. Such notice shall take effect one year after the date of its communication to the Director-General. The financial obligation to the Organization of a Member Nation which has given notice of withdrawal, or of an Associate Member on whose behalf notice of withdrawal has been given, shall include the entire calendar year in which the notice takes effect. Article XX Amendment of Constitution 1. The Conference may amend this Constitution by a two-thirds majority of the votes cast, provided that such majority is more than one half of the Member Nations of the Organization. 2. An amendment not involving new obligations for Member Nations or Associate Members shall take effect forthwith, unless the resolution by which it is adopted provides otherwise. Amendments involving new obligations shall take effect for each Member Nation and Associate Member accepting the amendment on acceptance by two thirds of the Member Nations of the Organization and thereafter for each remaining Member Nation or Associate Member on acceptance by it. As regards an Associate Member, the acceptance of amendments involving new obligations shall be given on its behalf by the Member Nation or authority having responsibility for the international relations of the Associate Member. 3. Proposals for the amendment of the Constitution may be made either by the Council or by a Member Nation in a communication addressed to the Director-General. The Director-General 96

shall immediately inform all Member Nations and Associate Members of all proposals for amendments. 4. No proposal for the amendment of the Constitution shall be included in the agenda of any session of the Conference unless notice thereof has been dispatched by the Director-General to Member Nations and Associate Members at least 120 days before the opening of the session. Article XXI Entry into force of Constitution 1. This Constitution shall be open to acceptance by the nations specified in Annex I. 2. The instruments of acceptance shall be transmitted by each government to the United Nations Interim Commission on Food and Agriculture, whidi shall notify their receipt to the governments of the nations specified in Annex I. Acceptance may be notified to the Interim Commission through a diplomatic representative, in which case the instrument of acceptance must be transmitted to the Commission as soon as possible thereafter. 3. Upon the receipt by the Interim Commission of 20 notifications of acceptance, the Interim Commission shall arrange for this Constitution to be signed in a single copy by the diplomatic representatives duly authorized thereto of the nations who shall have notified their acceptance, and upon being so signed on behalf of not less than 20 of the nations specified in Annex I, this Constitution shall come into force immediately. 4. Acceptances, the notification of which is received after the entry into force of this Constitution, shall become effective upon receipt by the Interim Commission or the Organization. Article XXII Authentic texts of Constitution The Arabic, English, French and Spanish texts of this Constitution shall be equally authoritative.

8. Constitution of the International Labour Organization (ILO) October 9, 1946 BGBl. 1957 II, 318; 1964 II, 101; 1975 II, 2208 (15 U.N.T.S. 35; 191 U.N.T.S. 143; 466 U.N.T.S. 323; 958 U.N.T.S. 167)

Preamble

CHAPTER I

W h e r e a s universal and lasting peace can be established only if it is based upon social justice;

Organisation

And whereas conditions of labour exist involving such injustice, hardship and privation to large numbers of people as to produce unrest so great that the peace and harmony of the world are imperilled; and an improvement of those conditions is urgently required: as, for example, by the regulation of the hours of work, including the establishment of a maximum working day and week, the regulation of the labour supply, the prevention of unemployment, the provision of an adequate living wage, the protection of the worker against sickness, disease and injury arising out of his employment, the protection of children, young persons and women, provision for old age and injury, protection of the interests of workers when employed in countries other than their own, recognition of the principle of equal remuneration for work of equal value, recognition of the principle of freedom of association, the organisation of vocational and technical education and other measures; W h e r e a s also the failure of any nation to adopt humane conditions of labour is an obstacle in the w a y of other nations which desire to improve the conditions in their own countries; The High Contracting Parties, moved by sentiments of justice and humanity as well as by the desire to secure the permanent peace of the world, and with a view to attaining the objectives set forth in this Preamble, agree to the following Constitution of the International Labour Organisation:

Article 1 Establishment

1. A permanent organisation is hereby established for the promotion of the objects set forth in the Preamble to this Constitution a n d in the Declaration concerning the aims and purposes of the International Labour Organisation adopted at Philadelphia on 10 May 1944 the text of which is annexed to this Constitution. Membership

2. The Members of the International Labour Organisation shall be the States which were Members of the Organisation on 1 November 1945, and such other States as may become Members in pursuance of the provisions of paragraphs 3 and 4 of this article. 3. A n y original Member of the United Nations and any State admitted to membership of the United Nations b y a decision of the General Assembly in accordance with the provisions of the Charter may become a Member of the International Labour Organisation by communicating to the Director-General of the International Labour Office its formal a c c e p t a n c e of the obligations of the Constitution of the International Labour Organisation. 4. The General Conference of the International Labour Organisation may also admit Members to the Organisation by a vote concurred in by twothirds of the delegates attending the session, including two-thirds of the Government delegates present and voting. Such admission shall take effect on t h e communication to t h e Di97

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redtor-General of the International Labour Office by the government of the new Member of its formal acceptance of the obligations of the Constitution of the Organisation. Withdrawal

5. No Member of the International Labour Organisation may withdraw from the Organisation without giving notice of its intention so to do to the Director-General of the International Labour Office. Such notice shall take effect two years after the date of its reception by the Director-General, subject to the Member having at that time fulfilled all financial obligations arising out of its membership. When a Member has ratified any International Labour Convention, such withdrawal shall not affect the continued validity for the period provided for in the Convention of all obligations arising thereunder or relating thereto. Readmission

6. In the event of any State having ceased to be a Member of the Organisation, its readmission to membership shall be governed by the provisions of paragraph 3 or paragraph 4 of this article as the case may be. Article 2 Organs

The permanent organisation shall consist of— (a) a General Conference of representatives of the Members; (b) a Governing Body composed as described in article 7; and (c) an International Labour Office controlled by the Governing Body. Article 3 Conference Meetings and delegates

1. The meetings of the General Conference of representatives of the Members shall be held from time to time as occasion may require, and at least once in every year. It shall be composed of four representatives of each of the Members, of whom two shall be Government delegates and the two others shall be delegates rep98

resenting respectively the employers and the workpeople of each of the Members. Advisers

2. Each delegate may be accompanied by advisers, who shall not exceed two in number for each item on the agenda of the meeting. When questions specially affecting women are to be considered by the Conference, one at least of the advisers should be a woman. Advisers from non-metropolitan territories

3. Each Member which is responsible for the international relations of nonmetropolitan territories may appoint as additional advisers to each of its delegates— (a) persons nominated by it as representatives of any such territory in regard to matters within the self-governing powers of that territory; and (b) persons nominated by it to advise its delegates in regard to matters concerning non-self-governing territories. 4. In the case of a territory under the joint authority of two or more Members, persons may be nominated to advise the delegates of such Members. Nomination of non-governmental representatives

5. The Members undertake to nominate non-Government delegates and advisers chosen in agreement with the industrial organisations, if such organisations exist, which are most representative of employers or workpeople, as the èase may be, in their respective countries. Status of advisers

6. Advisers shall not speak except on a request made by the delegate whom they accompany and by the special authorisation of the President of the Conference, and may not vote. 7. A delegate may by notice in writing addressed to the President appoint one of his advisers to act as his deputy, and the adviser, while so acting, shall be allowed to speak and vote.

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ILO Article 7

Credentials

8. The names of the delegates and their advisers will be communicated to the International Labour Office by the government of each of the Members. 9. The credentials of delegates and their advisers shall be subject to scrutiny by the Conference, which may, by two-thirds of the votes cast by the delegates present, refuse to admit any delegate or adviser whom it deems not to have been nominated in accordance with this article. Article 4 Voting rlghU

1. Every delegate shall be entitled to vote individually on all matters which are taken into consideration by the Conference. 2. If one of the Members fails to nominate one of the non-Government delegates whom it is entitled to nominate, the other non-Government delegate shall be allowed to sit and speak at the Conference, but not to vote. 3. If in accordance with article 3 the Conference refuses admission to a delegate of one of the Members, the provisions of the present article shall apply as if that delegate had not been nominated. Article 5 Place of meetings of the Conference

The meetings of the Conference shall, subject to any decisions which may have been taken by the Conference itself at a previous meeting, be held at such place as may be decided by the Governing Body. Article 6 Seat of the International Labour Office

Any change in the seat of the International Laibour Office shall be decided by the Conference by a two-thirds, majority of the votes cast by the delegates present.

Governing Body Composition

1. The Governing Body shall consist of forty persons— Twenty representing governments, Ten representing the employers, and Ten representing the workers. Government Representatives

2. Of the twenty persons representing governments, ten shall be appointed by the Members of chief industrial importance, and ten shall be appointed by the Members selected for that purpose by the Government delegates to the Conference, excluding the delegates of the ten Members mentioned above. States of chief industrial importance

3. The Governing Body shall as occasion requires determine which are the Members of the Organisation of chief industrial importance and shall make rules to ensure that all questions relating to the selection of the Members of chief industrial importance are considered by an impartial committee before being decided by the Governing Body. Any appeal made by a Member from the declaration of the Governing Body as to which are the Members of chief industrial importance shall be decided by the Conference, but an appeal to the Conference shall not suspend the application of the declaration until such time as the Conference decides the appeal. Employers' and W o r k e r s ' representatives.

4. The persons representing the employers and the persons representing the workers shall be elected respectively by the Employers' delegates and the Workers' delegates to the Conference. Two Employers' representatives and two Workers' representatives shall belong to nonEuropean States. Term of office

5. The period of office of the Governing Body shall be three years. 99

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If for any reason the Governing Body elections do not take place on the expiry of this period, the Governing Body shall remain in office until sudi elections are held. Vacancies, substitutes, etc.

6. The method of filling vacancies and of appointing substitutes and other similar questions may be decided by the Governing Body subject to the approval of the Conference. Officers

7. The Governing Body shall, from time to time, elect from its number a chairman and two vice-chairmen, of whom one shall be a person representing a government, one a person representing the employers, and one a person representing the workers. Procedure

8. The Governing Body shall regulate its own procedure and shall fix its own times of meeting. A special meeting shall be held if a written request to that effect is made by at least sixteen of the representatives on the Governing Body.

of the Office, the Director-General shall select persons of different nationalities. 3. A certain number of these persons shall be women. International character of responsibilities

4. The responsibilities of the Director-General and the staff shall be exclusively international in character. In the performance of their duties, the Director-General and the staff shall not seek or receive instructions from any government or from any other authority external to the Organisation. They shall refrain from any action which might reflect on their position as international officials responsible only to the Organisation. 5. Each Member of the Organisation undertakes to respect the exclusively international character of the responsibilities of the Director-General and the staff and not to seek to influence them in the discharge of their responsibilities. A r t i c l e 10 Functions of the Office

Article 8 Director-General

1. There shall be a Director-General of the International Labour Office, who shall be appointed by the Governing Body, and, subject to the instructions of the Governing Body, shall be responsible for the efficient conduct of the International Labour Office and for such other duties as may be assigned to him. 2. The Director-General or his deputy shall attend all meetings of the Governing Body. Article 9 Staff Appointment

1. The staff of the International Labour Office shall be appointed by the Director-General under regulations approved by the Governing Body. 2. So far as is possible with due regard to the efficiency of the work

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1. The functions of the International Labour Office shall include the collection and distribution of information on all subjects relating to the international adjustment of conditions of industrial life and labour, and particularly the examination of subjects which it is proposed to bring before the Conference with a view to the conclusion of international Conventions, and the conduct of such special investigations as may be ordered by the Conference or by the Governing Body. 2. Subject to such directions as the Governing Body may give, the Office shall— (a) prepare the documents on the various items of the agenda for the meetings of the Conference; (b) accord to governments at their request all appropriate assistance within its power in connection with the framing of laws and regulations on the basis of the

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ILO decisions of the Conference and the improvement of administrative practices and systems of inspection; (c) carry out the duties required of it by the provisions of this Constitution in connection with the effective observance of Conventions; (d) edit and issue, in such languages as the Governing Body may think desirable, publications dealing with problems of industry and employment of international interest. 3. Generally, it shall have such other powers and duties as may be assigned to it by the Conference or by the Governing Body. A r t i c l e 11 Relations with governments

The government departments of any of the Members which deal with questions of industry and employment may communicate directly with the Director-General through the representative of their government on the Governing Body of the International Labour Office or, failing any such representative, through such other qualified official as the government may nominate for the purpose. A r t i c l e 12 Relations with international organisations

1. The International Labour Organisation shall coroperate within the terms of this Constitution with any general international organisation entrusted with the co-ordination of the activities of public international organisations having specialised responsibilities and with public international organisations having specialised responsibilities in related fields. 2. The International Labour Organisation may make appropriate arrangements for the representatives of public international organisations to participate without vote in its deliberations. 3. The International Labour Organisation may make suitable arrange-

ments for such consultation as it may think desirable with recognised nongovernmental international organisations, including international organisations of employers, workers, agriculturists and co-operators. A r t i c l e 13 Financial and budgetary arrangements

1. The International Labour Organisation may make such financial and budgetary arrangements with the United Nations as may appear appropriate. 2. Pending the conclusion of such arrangements or if at any time no such arrangements are in force— (a) each of the Members will pay the travelling and subsistence expenses of its delegates and their advisers and of its representative? attending the meetings of the Conference or the Governing Body, as the case may be; (b) all other expenses of the International Labour Office and of the meetings of the Conference or Governing Body shall be paid by the Director-General of the International Labour Office out of the general funds of the International Labour Organisation; (c) the arrangements for the approval, allocation and collection of the budget of the International Labour Organisation shall be determined by the Conference by a two-thirds majority of the votes cast by the delegates present, and shall provide for the approval of the budget and of the arrangements for the allocation of expenses among the Members of the Organisation by a committee of Government representatives. 3. The expenses of the International Labour Organisation «hall be borne by the Members in accordance with the arrangements in force in virtue of paragraph 1 or paragraph 2 (c) of this article.

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Arrears In payment of contributions

4. A Member of the Organisation which is in arrears in the payment of its financial contribution to the Organisation shall h a v e no vote in the Conference, in the Governing Body, in any committee, or in the elections of members of the Governing Body, if the amount of its arrears equals or exceeds the amount of the contributions due from it for the preceding two full years: Provided that the Conference may by a two-thirds majority of the votes cast by the delegates present permit such a Member to vote if it is satisfied that the failure to »pay is due to conditions beyond the control of the Member. Financial responsibility of Director-General

5. The Director-General of the International Labour Office shall be responsible to the Governing Body for the proper expenditure of the funds of the International Labour Organisation. CHAPTER II Procedure A r t i c l e 14 Agenda for Conference

1. The agenda for all meetings of the Conference will be settled by the Governing Body, which shall consider any suggestion as to the agenda that may be made by the government of any of the Members or by any representative organisation recognised for the purpose of article 3, or by any public international organisation. Preparation for Conference

2. The Governing Body shall m a k e rules to ensure thorough technical preparation and a d e q u a t e consultation of the Members primarily concerned, by means of a preparatory conference or otherwise, prior to the adoption of a Convention or Recommendation by the Conference. Article

15

Transmission of agenda and reports for Conference

1. The Director-General shall act as 102

the Secretary-General of the Conference, and shall transmit the agenda so as to r e a d i the Members four months before the meeting of the Conference, and, through them, the non-Government delegates w h e n appointed. 2. The reports on each item of the agenda shall be despatched so as to reach the Members in time to permit adequate consideration before t h e meeting of the Conference. The Governing Body shall m a k e rules for the application of this provision. A r t i c l e 16 Objections to agenda

1. Any of the governments of the Members may formally object to the inclusion of any item or items in the agenda. The grounds for such objection shall be set forth in a statement addressed to the Director-General who «hall circulate it to all the Members of the Organisation. 2. Items to whidi such objection has been made shall not, however, be excluded from the agenda, if at the Conference a majority of two-thirds of the votes cast by the delegates present is in favour of considering them. Inclusion of new Items by Conference

3. If the Conference decides (otherwise than under the preceding paragraph) by two-thirds of the votes cast b y the delegates present that any subject shall be considered b y t h e Conference, that subject shall be included in the agenda for the following meeting. A r t i c l e 17 Officers of Conference, procedure and committees

1. The Conference shall elect a president and three vice-presidents. One of the vice-presidents shall be a Government delegate, one an Employers' delegate and one a W o r k e r s ' delegate. The Conference shall regulate its own procedure and may appoint committees to consider and report on any matter.

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ILO Voting

2. Except as otherwise expressly provided in this Constitution or by the terms of any Convention or other instrument conferring powers on the Conference or of the financial and budgetary arrangements adopted in virtue of article 13, all matters shall be decided by a simple majority of the votes cast by the delegates present. Quorum

3. The voting is void unless the total number of votes cast is equal to half the number of the delegates attending the Conference. Article

18

Technical experts

The Conference may add to any committees which it appoints technical experts without power to vote. Article

19

Conventions and Recommendations Decisions of the Conference

1. W h e n the Conference has decided on the adoption of proposals with regard to an item on the agenda, it will rest with the Conference to determine whether these proposals should take the form: (a) of an international Convention, or (b) of a Recommendation to meet circumstances where the subject, or aspect of it, dealt with is not considered suitable or appropriate at that time for a Convention. Vote required

2. In either case a majority of twothirds of the votes cast by the delegates present shall be necessary on the final vote for the adoption of the Convention or Recommendation, as the case may be, by the Conference. Modifications for special local conditions

3. In framing any Convention or Recommendation of general application the Conference shall have due regard to those countries in which climatic conditions, the imperfect development of industrial organisation, or other special circumstances

make the industrial conditions substantially different and shall suggest the modifications, if any, which it considers may be required to meet the case of such countries. Authentic texts

4. Two copies of the Convention or Recommendation shall be authenticated by the signatures of the President of the Conference and of the DirectorGeneral. Of these copies one shall be deposited in the archives of the International Labour Office and the other with the Secretary-General of the United Nations. The Director-General will communicate a certified copy of the Convention or Recommendation to each of the Members. Obligations of Members in respect of Conventions

5. In the case of a Convention— (a) the Convention will be communicated to all Members for ratification; (b) each of the Members undertakes that it will, within the period of one year at most from the closing of the session of the Conference, or if it is impossible owing to exceptional circumstances to do so within the period of one year, then at the earliest practicable moment and in no case later than 18 months from the closing of the session of the Conference, bring the Convention before the authority or authorities within whose competence the matter lies, for the enactment of legislation or other action; (c) Members shall inform the Director-General of the International Labour Office of the measures taken in accordance with this article to bring the Convention before the said competent authority or authorities, with particulars of the authority or authorities regarded as competent, and of the action taken by them; (d) if the Member obtains the consent of the authority or authorities within whose competence the matter lies, it will com-

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municate the formal ratification of the Convention to the Director-General and will take such action as may be necessary to make effective the provisions of such Convention; (e) if the Member does not obtain the consent of the authority or authorities within whose competence the matter lies, no further obligation shall rest upon the Member except that it shall report to the Director-General of the International Labour Office, at appropriate intervals as requested by the Governing Body, the position of its law and practice in regard to the matters dealt with in the Convention, showing the extent to which effect has been given, or is proposed to be given, to any of the provisions of the Convention by legislation, administrative action, collective agreement or otherwise and stating the difficulties which prevent or delay the ratification of such Convention. Obligations of Members In respect oi Recommendations

6. In the case of a Recommendation— (a) the Recommendation will be communicated to all Members for their consideration with a view to effect being given to it by national legislation or otherwise; (b) each of the Members undertakes that it will, within a period of one year at most from the closing of the session of the Conference, or if it is impossible owing to exceptional circumstances to do so within the period of one year, then at the earliest practicable moment and in no case later than 18 months after the closing of the Conference, bring the Recommendation before the authority or authorities within whose competence the matter lies for the enactment of legislation or other action; (c) the Members shall inform the 104

Director-General of the International Labour Office of the measures taken in accordance with this article to bring the Recommendation before the said competent authority or authorities with particulars of the authority or authorities regarded as competent, and of the action taken by them; (d) apart from bringing the Recommendation before the said competent authority or authorities, no further obligation shall rest upon the Members, except that they shall report to the Director-General of the International Labour-Office, at appropriate intervals as requested by the Governing Body, the position of the law and practice in their country in regard to the matters dealt with in the Recommendation, showing the extent to which effect has been given, or is proposed to be given, to the provisions of the Recommendation and such modifications of these provisions as it has been found or may be found necessary to make in adopting or applying them. Obligations of federal States

7. In the case of a federal State, the following provisions shall apply: (a) in respect of Conventions and Recommendations which the federal government regards as appropriate under its constitutional system for federal action, the obligations of the federal State shall be the same as those of Members which are not federal States; (b) in respect of Conventions and Recommendations which the federal government regards as appropriate under its constitutional system, in whole or in part, for action by the constituent states, provinces, or cantons rather than for federal action, the federal government shall— (i) make, in accordance with its Constitution and the Constitutions of the states, prov-

ILO inces or cantons concerned, effective arrangements for the reference of sudi Conventions and Recommendations not later than 18 months from the closing of the session of the Conference to the appropriate federal, state, provincial or cantonal authorities for the enactment of legislation or other action; (ii) arrange, subject to the concurrence of the state, provincial or cantonal governments concerned, for periodical consultations between the federal and the state, provincial or cantonal authorities with a view to promoting within the federal State co-ordinated action to give effect to the provisions of such Conventions and Recommendations; (iii) inform the Director-General of the International Labour Office of the measures taken in accordance with this article to bring such Conventions and Recommandations before the appropriate federal, state, provincial or cantonal authorities with particulars of the authorities regarded as appropriate and of the action taken by them,(iv) in respect of each such Convention which it has not ratified, report to the DirectorGeneral of the International Labour Office, at appropriate intervals as requested by the Governing Body, the position of the law and practice of the federation and its constituent states, provinces or cantons in regard to the Convention, showing the extent to which effect has been given, or is proposed to be given, to any of the provisions of the Convention by legislation, administrative action, collective agreement, or otherwise;

Doc. 8 (v) in respect of each such Recommendation, report to the Director-General of the International Labour Office, at appropriate intervals as requested by the Governing Body, the position of the law and practice of the federation and its constituent states, provinces or cantons in regard to the Recommendation, showing the extent to which effect has been given, or is proposed to be given, to the provisions of the Recommendation and such modifications of these provisions as have been found or may be found necessary in adopting or applying them. Effect of Conventions and Recommendations on more favourable existing provisions

8. In no case shall the adoption of any Convention or Recommendation by the Conference, or the ratification of any Convention by any Member, be deemed to affect any law, award, custom or agreement which ensures more favourable conditions to the workers concerned than those provided for in the Convention or Recommendation. A r t i c l e 20 Registration with the United Nations

Any Convention so ratified shall be communicated by the DirectorGeneral of the International Labour Office to the Secretary-General of the United Nations for registration in accordance with the provisions of article 102 of the Charter of the United Nations but shall only be binding upon the Members which ratify it. A r t i c l e 21 Conventions not adopted by the Conierence

1. If any Convention coming before the Conference for final consideration fails to secure the support of twothirds of the votes cast by the delegates present, it shall nevertheless be within the right of any of the Members of the Organisation to agree 105

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among

them-

2. Any Convention so agreed to shall be communicated by the governments concerned to the DirectorGeneral of the International Labour Office and to the Secretary-General of the United Nations for registration in accordance with the provisions of article 102 of the Charter of the United Nations. A r t i c l e 22 Annual reports on ratified Conventions

Each of the Members agrees to make an annual report to the International Labour Office on the measures which it has taken to give effect to the provisions of Conventions to which it is a party. These reports shall be made in such form and shall contain sudi particulars as the Governing Body may request. A r t i c l e 23 Examination and communication of reports

1. The Director-General shall lay before the next meeting of the Conference a summary of the information and reports communicated to him by Members in pursuance of articles 19 and 22. 2. Each Member shall communicate to the representative organisations recognised for the purpose of article 3 copies of the information and reports communicated to the Director-General in pursuance of articles 19 and 22. A r t i c l e 24 Representations of non-observance of Conventions

In the event of any representation being made to the International Labour Office by an industrial association of employers or of workers that any of the Members has failed to secure in any respect the effective observance within its jurisdiction of any Convention to which it is a party, the Governing Body may communicate this representation to the government against which it is made, and may invite that government to make 106

such statement .on the subject as it may think fit. A r t i c l e 25 Publication of representation

If no statement is received within a reasonable time from the government in question, or if the statement when received is not deemed to be satisfactory by the Governing Body, the latter shall have the right to publish the representation and the statement, if any, made in reply to it. A r t i c l e 26 Complaints of non-observance

1. Any of the Members shall have the right to file a complaint with the International Labour Office if it is not satisfied that any other Member is securing the effective observance of any Convention which both have ratified in accordance with the foregoing articles. 2. The Governing Body may, if it thinks fit, before referring such a complaint to a Commission of Inquiry, as hereinafter provided for, communicate with the government in question in the manner described in article 24. 3. If the Governing Body does not think it necessary to communicate the complaint to the government in question, or if, when it has made such communication, no statement in reply has been received within a reasonable time which the Governing Body considers to be satisfactory, the Governing Body may appoint a Commission of Inquiry to consider the complaint and to report thereon. 4. The Governing Body may adopt the same procedure either of its own motion or on receipt of a complaint from a delegate to the Conference. 5. When any matter arising out of article 25 or 26 is being considered by the Governing Body, the government in question shall, if not already represented thereon, be entitled to send a representative to take part in the proceedings of the Governing Body while the matter is under considera-

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ILO tion. Adequate notice of the date on which the matter will be considered shall be given to the government in question. A r t i c l e 27 Co-operation with Commission of Inquiry

The Members agree that, in the event of the reference of a complaint to a Commission of Inquiry under article 26, they will each, whether directly concerned in the complaint or not, place at the disposal of the Commission all the information in their possession which bears upon the subject-matter of the complaint. A r t i c l e 28 Report of Commission of Inquiry

When the Commission of Inquiry has fully considered the complaint, it shall prepare a report embodying its findings on all questions of fact relevant to determining the issue between the parties and containing such recommendations as it may think proper as to the steps which should be taken to meet the complaint and the time within which they should be taken. A r t i c l e 29 Action on report of Commission of Inquiry

1. The Director-General of the International Labour Office shall communicate the report of the Commission of Inquiry to the Governing Body and to eadi of the governments concerned in the complaint, and shall cause it to be published. 2. Each of these governments shall within three months inform the Director-General of the International Labour Office whether or not it accepts the recommendations contained in the report of the Commission; and if not, whether it proposes to refer the complaint to the International Court of Justice. A r t i c l e 30 Failure to submit Conventions or Recommendations to competent authorities

In the event of any Member failing to take the action required by para-

graphs 5 (b), 6 (b) or 7 (b) (i) of article 19 with regard to a Convention or Recommendation, any other Member shall be entitled to refer the matter to the Governing Body. In the event of the Governing Body finding that there has been such a failure, it shall report the matter to the Conference. A r t i c l e 31 Decisions of International Court ol Justice

The decision of the International Court of Justice in regard to a complaint or matter which has been referred to it in pursuance of article 29 shall be final. A r t i c l e 32 The International Court of Justice may affirm, vary or reverse any of the findings or recommendations of the Commission of Inquiry, if any. A r t i c l e 33 Failure to carry out recommendations of Commission of Inquiry or I.C.J.

In the event of any Member failing to carry out within the time specified the recommendations, if any, contained in the report of the Commission of Inquiry, or in the decision of the International Court of Justice, as the case may be, the Governing Body may recommend to the Conference such action as it may deem wise and expedient to secure compliance therewith. A r t i c l e 34 Compliance with recommendations of Commission of Inquiry or I.C.J.

The defaulting government may at any time inform the Governing Body that it has taken the steps necessary to comply with the recommendations of the Commission of Inquiry or with those in the decision of the International Court of Justice, as the case may be, and may request it to constitute a Commission of Inquiry to verify its contention. In this case the provisions of articles 27, 28, 29, 31 107

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and 32 shall apply, and if the report of the Commission of Inquiry or the decision of the International Court of Justice is in favour of the defaulting government, the Governing Body shall forthwith recommend the discontinuance of any action taken in pursuance of article 33. CHAPTER III General A r t i c l e 35 Application of Conventions to non-metropolitan territories

1. The members u n d e r t a k e that Conventions which they h a v e ratified in accordance with the provisions of this Constitution shall be applied to the non-metropolitan territories for whose international relations they a r e responsible, including any trust territories for which they are the administering authority, except w h e r e the subject-matter of the Convention is within the self-governing powers of the territory or the Convention is inapplicable owing to the local con-, ditions or subject to such modifications as may be necessary to adapt the Convention to local conditions. 2. Each Member which ratifies a Convention shall as soon as possible after ratification communicate to the Director-General of the International Labour Office a declaration stating in respect of the territories other than those referred to in p a r a g r a p h s 4 and 5 below the extent to which it undertakes that the provisions of the Convention shall be applied and giving such particulars as may be prescribed by the Convention. 3. Each Member which has communicated a declaration in virtue of the preceding p a r a g r a p h may from time to time, in accordance with t h e terms of the Convention, communicate a further declaration modifying the terms of any former declaration and stating the present position in respect of such territories. 4. W h e r e the subject-matter of the Convention is within the self-governing powers of any non-metropolitan

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territory the Member responsible for the international relations of that territory shall bring the Convention to the notice of the government of the territory as soon as possible with a view to the enactment of legislation or other action by such government. Thereafter the Member, in agreement with the government of the territory, m a y communicate to t h e DirectorGeneral of the International Labour Office a declaration, accepting the obligations of the Convention on behalf of such territory. 5. A declaration accepting the obligations of any Convention may be communicated to the Director-General of the International Labour Office— (a) by two or more Organisation in territory which joint authority;

Members of the respect of any is under their or

(b) b y any international authority responsible for the administration of any territory, in virtue of the Charter of the United Nations or otherwise, in respect of any such territory. 6. Acceptance of the obligations of a Convention in virtue of p a r a g r a p h 4 or paragraph 5 shall involve the acceptance on behalf of t h e territory concerned of the obligations stipulated by the terms of the Convention and the obligations under the Constitution of the Organisation which apply to ratified Conventions. A declaration of acceptance may specify such modification of the provisions of t h e Conventions as may be necessary to adapt the Convention to local conditions. 7. Each Member ' or international authority which h a s communicated a declaration in virtue of paragraph 4 or paragraph 5 of this article m a y from time to time, in accordance with the terms of the Convention, communicate a further declaration modifying the terms of any former declaration or terminating the acceptance of t h e obligations of the Convention on behalf of the territory concerned. 8. If the obligations of a Convention

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ILO are not accepted on behalf of a territory to which paragraph 4 or paragraph 5 of this article relates, the Member or Members or international authority concerned shall report to the Director-General of the International Labour Office the position of the law and practice of that territory in regard to the matters dealt with in the Convention and the report shall show the extent to which effect has been given, or is proposed to be given, to any of the provisions of the Convention by legislation, administrative action, collective agreement or otherwise and shall state the difficulties which prevent or delay the acceptance of such Convention. A r t i c l e 36 Amendments to Constitution

Amendments to this Constitution which are adopted by the Conference by a majority of two-thirds of the votes cast by the delegates present shall take effect when ratified or accepted by two-thirds of the Members of the Organisation including five of the ten Members which are represented on the Governing Body as Members of chief industrial importance in accordance with the provisions of paragraph 3 of article 7 of this Constitution. A r t i c l e 37 Interpretation of Constitution and Conventions

1. Any question or dispute relating to the interpretation of this Constitution or of any subsequent Convention concluded by the Members in pursuance of the provisions of this Constitution shall be referred for decision to the International Court of Justice. 2. Notwithstanding the provisions of paragraph 1 of this article the Governing Body may make and submit to the Conference for approval rules providing for the appointment of a tribunal for the expeditious determination of any dispute or question relating to the interpretation of a Convention which may be referred thereto by the Governing Body or in

accordance with the terms of the Convention. Any applicable judgment or advisory opinion of the International Court of Justice shall be binding upon any tribunal established in virtue of this paragraph. Any award made by such a tribunal shall be circulated to the Members of the Organisation and any observations which they may make thereon shall be brought before the Conference. A r t i c l e 33 Regional Conferences

1. The International Labour Organisation may convene such regional conference and establish such regional agencies as may be desirable to promote the aims and purposes of the Organisation. 2. The powers, functions and procedure of regional conferences shall be governed by rules drawn up by the Governing Body and submitted to the General Conference for confirmation.

CHAPTER IV Miscellaneous Provisions A r t i c l e 39 Legal status of Organisation

The International Labour Organisation shall possess full juridical personality and in particular the capacity— (a) to contract; (b) to acquire and dispose of immovable and movable property; (c) to institute legal proceedings. A r t i c l e 40 Privileges and Immunities

1. The International Labour Organisation shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfilment of its purposes. 2. Delegates to the Conference, members of the Governing Body and the Director-General and officials of the Office shall likewise enjoy such privileges and immunities as are neces109

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sary for the indépendant exercise of their functions in connection with the Organisation. 3. Such privileges and immunities shall be defined in a separate agreement to be prepared by the Organisation with a view to its acceptance by the States Members.

Annex Declaration concerning the Aims and Purposes of the International Labour Organisation The General Conference of the International Labour Organisation, meeting in its Twenty-sixth Session in Philadelphia, hereby adopts, this tenth day of May in the year nineteen hundred and forty-four, the present Declaration of the aims and purposes of the International Labour Organisation and of the principles which should inspire the policy of its Members. I The Conference reaffirms the fundamental principles on which the Organisation is based and, in particular, that— (a) labour is not a commodity; (b) freedom of expression and of association are essential to sustained progress; (c) poverty anywhere constitutes a danger to prosperity everywhere; (d) the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare. II Believing that experience has fully demonstrated the truth of the state-

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ment in the Constitution of the International Labour Organisation that lasting peace can be established only if it is based on social justice, the Conference affirms that— (a) all human beings, irrespective of race, creed or sex, have the right to pursue both their material well-being and their spiritual development in conditions of freedom and dignity, of economic security and equal opportunity; (b) the attainment of the conditions in which this shall be possible must constitute the central aim of national and international policy; (c) all national and international policies and measures, in particular those of an economic and financial character, should be judged in this light and accepted only in so far as they may be held to promote and not to hinder the achievement of this fundamental objective; (d) it is a responsibility of the International Labour Organisation to examine and consider all international economic and financial policies and measures in the light of this fundamental objective; (e) in discharging the tasks entrusted to it the International Labour Organisation, having considered all relevant economic and financial factors, may include in its decisions and recommendations any provisions which it considers appropriate. Ill The Conference recognises the solemn obligation of the International Labour Organisation to further among the nations of the world programmes which will achieve: (a) full employment and the raising of standards of living; (b) the employment of workers in the occupations in which they can have the satisfaction of

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ILO giving the fullest measure of their skill and attainments and make their greatest contribution to the common well-being; (c) the provision, as a means to the attainment of this end and under adequate guarantees for all concerned, of facilities for training and the transfer of labour, including migration for employment and settlement; (d) policies in regard to wages and earnings, hours and other conditions of work calculated to ensure a just share of the fruits of progress to all, and a minimum living wage to all employed and in need of such protection; (e) the effective recognition of the right of collective bargaining, the co-operation of management and labour in thè continuous improvement of productive efficiency, and the collaboration of workers and employers in the preparation and application of social and economic measures; (f) the extension of social security measures to provide a basic income to all in need of such protection and comprehensive medical care; (g) adequate protection for the life and health of workers in all occupations; (h) provision for child welfare and maternity protection; (i) the provision of adequate nutrition, housing and facilities for recreation and culture;

(j) the assurance of equality of educational and vocational opportunity. IV Confident that the fuller and broader utilisation of the world's productive resources necessary for the achievement of the objectives set forth in this Declaration can be secured by effective international and national action-, including measures to expand production and consumption, to avoid severe economic fluctuations, to promote the economic and social advancement of the less developed regions of the world, to assure greater stability in world prices of primary products, and to promote a high and steady volume of international trade, the Conference pledges the full co-operation of the International Labour Organisation with such international bodies as may be entrusted with a share of the responsibility for this great task and for the promotion of the health, education and well-being of all peoples.

V The Conference affirms that the principles set forth in this Declaration are fully applicable to all peoples everywhere and that, while the manner of their application must be determined with due regard to the stage of social and economic development reached by each people, their progressive application to peoples who are still dependent, as well as to those who have already achieved selfgovernment, is a matter of concern to the whole civilised world.

Ill

9. Convention establishing the World Intellectual Property Organization (WIPO) B G B l . 1970 II, 295 (828 U . N . T . S . 3)

The Contracting Parties, Desiring to contribute to better understanding and cooperation among States for their mutual benefit on the basis of respect for their sovereignty and equality, Desiring, in order to encourage creative activity, to promote the protection of intellectual property throughout the world, Desiring to modernize and render more efficient the administration of the Unions established in the fields of the protection of industrial property and the protection of literary and artistic works, while fully respecting the independence of each of the Unions, Agree as follows:

Article 1 Establishment of the Organization The World Intellectual Property Organization is hereby established.

Article 2 Definitions For the purposes of this Convention: (i) "Organization" shall mean the World Intellectual Property Organization (WIPO); (ii) "International Bureau" shall mean the International Bureau of Intellectual Property; (iii) "Paris Convention" shall mean the Convention for the Protection of Industrial Property signed on Mardi 20, 1883, including any of its revisions;

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(iv) "Berne Convention" shall mean the Convention for the Protection of Literary and Artistic Works signed on September 9, 1886, including any of its revisions; (v) "Paris Union" shall mean the International Union established by the Paris Convention; (vi) "Berne Union" shall mean the International Union established by the Berne Convention; (vii) "Unions" shall mean the Paris Union, the Special Unions and Agreements established in relation with that Union, the Berne Union, and any other international agreement designed to promote the protection of intellectual property whose administration is assumed by the Organization according to Article 4 (iii). (viii) "intellectual property" shall include the rights relating to: — literary, artistic and scientific works, — performances of performing artists, phonograms, and broadcasts, — inventions in all human endeavor,

fields

of

— scientific discoveries, — industrial designs, — trademarks, service marks, and commercial names and designations, against — protection competition,

unfair

and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.

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WIPO Article 3 Objectives of the Organization The objectives of the Organization are: (i) to promote the protection of intellectual property throughout the world through cooperation among States and, where appropriate, in collaboration with any other international organization, (ii) to ensure administrative cooperation among the Unions. Article 4 Functions In order to attain the objectives described in Article 3, the Organization, through its appropriate organs, and subject to the competence of each of the Unions: (i) shall promote the development of measures designed to facilitate the efficient protection of intellectual property throughout the world and to harmonize national legislation in this field; (ii) shall perform the administrative tasks of the Paris Union, the Special Unions established in relation with that Union, and the Berne Union; (iii) may agree to assume, or participate in, the administration of any other international agreement designed to promote the protection of intellectual property; (iv) shall encourage the conclusion of international agreements designed to promote the protection of intellectual property; (v) shall offer its cooperation to States requesting legal-technical assistance in the field of intellectual property; (vi) shall assemble and disseminate information concerning the protection of intellectual property, carry out and promote studies in this field, and publish the results of such studies; (vii) shall maintain services facilitating the international protection

of intellectual property and, where appropriate, provide for registration in this field and the publication of the data concerning the registrations; (viii) shall take all other appropriate action. Article 5 Membership (1) Membership in the Organization shall be open to any State which is a member of any of the Unions as defined in Article 2 (vii). (2) Membership in the Organization shall be equally open to any State not a member of any of the Unions, provided that: (i) it is a member of the United Nations, any of the Specialized Agencies brought into relationship with the United Nations, or the International Atomic Energy Agency, or is a party to the Statute of the International Court of Justice, or (ii) it is invited by the General Assembly to become a party to this Convention. Article 6 General Assembly (1) (a) There shall be a General Assembly consisting of the States party to this Convention which are members of any of the Unions. (b) The Government of each State shall be represented by one delegate, who may be assisted by alternate delegates, advisors, and experts. (c) The expenses of each delegation shall be borne by the Government which has appointed it. (2) The General Assembly shall: (i) appoint the Director General upon nomination by the Coordination Committee; (ii) review and approve reports of the Director General concerning 113

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the Organization and g i v e him all necessary instructions; (iii) review and approve the reports and activities of the Coordination Committee and give instructions to such Committee! (iv) adopt the triennial budget of expenses common to the Unions; (v) approve the measures proposed by the Director General concerning the administration of the international agreements referred to in Article 4 (iii); (vi) adopt the financial regulations of the Organization; (vii) determine the working languages of the Secretariat, taking into consideration the practice of the United Nations; (viii) invite States referred to under Article 5 (2) (ii) to become party to this Convention; (ix) determine which States not Members of the Organization and which intergovernmental and international n o n - g o v e m mental organizations shall be admitted to its meetings as observers; (x) exercise such other functions as are appropriate under this Convention. (3) (a) Each State, whether member of one or more Unions, shall have one vote in the General Assembly. (b) One-half of the States members of the General Assembly shall constitute a quorum. (c) Notwithstanding the provisions of subparagraph (b), if, in any session, the number of States represented is less than one-half but equal to or more '..han one-third of the States members of the General Assembly, the General A s s e m b l y may make decisions but, with the exception of decisions concerning its own procedure, all such

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decisions shall take effect only if the following conditions are fulfilled. The International Bureau shall communicate the said decisions to the States members of the General Assembly which were not represented and shall invite them to express in writing their vote or abstention within a period of three months from the date of the communication. If, at the expiration of this period, the number of States having thus expressed their vote or abstention attains the number of States which was lacking for attaining the quorum in the session itself, such decisions shall take effect provided that at the same time the required majority still obtains. (d) Subject to the provisions of subparagraphs (e) and (f), the General Assembly shall make its decisions by a majority of two-thirds of the v o t e s cast. (e) The approval of measures concerning the administration of international agreements referred to in Article 4 (iii) shall require a majority of three-fourths of the votes cast. (f) The approval of an agreement with the United Nations under Articles 57 and 63 of the Charter of the United Nations shall require a majority of nine-tenths of the votes cast. (g) For the appointment of the Director General (paragraph (2) (i)), the approval of measures proposed by the Director General concerning the administration of international agreements (paragraph (2) (v)), and the transfer of headquarters (Article 10), the required majority must be attained not only in the General Assembly but also in

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WIPO the Assembly of the Paris Union and the Assembly of the Berne Union. (h) Abstentions shall not be considered as votes. (i) A delegate may represent, and vote in the name of, one State only. (4) (a) The General Assembly shall meet once in every third calendar year in ordinary session, upon convocation by the Director General. (b) The General Assembly shall meet in extraordinary session upon convocation by the Director General either at the request of the Coordination Committee or at the request of one-fourth of the States members of the General Assembly. (c) Meetings shall be held at the headquarters of the Organization. (5) States party to this Convention which are not members of any of the Unions shall be admitted to the meetings of the General Assembly as observers. (6) The General Assembly shall adopt its own rules of procedure.

Article 7 Conference (1) (a) There shall be a Conference consisting of the States party to this Convention whether or not they are members of any of the Unions. (b) The Government of each State shall be represented by one delegate, who may be assisted by alternate delegates, advisors, and experts. (c) The expenses of each delegation shall be borne by the Government which has appointed it. (2) The Conference shall: (i) discuss matters of general interest in the field of intellectual

property and may adopt recommendations relating to such matters, having regard for the competence and autonomy of the Unions; (ii) adopt the triennial budget of the Conference; (iii) within the limits of the budget of the Conference, establish the triennial program of legaltechnical assistance; (iv) adopt amendments to this Convention as provided in Article 17; (v) determine which States not Members of the Organization and which intergovernmental and international non-governmental organizations shall be admitted to its meetings as observers; (vi) exercise such other functions as are appropriate under this Convention. (3) (a) Each Member State shall h a v e one vote in the Conference. (b) One-third of States shall quorum.

the Member constitute a

(c) Subject to the provisions of Article 17, the Conference shall make its decisions by a majority of two-thirds of the votes cast. (d) The amounts of the contributions of States party to this Convention not members of any of the Unions shall be fixed by a vote in which only the delegates of such States shall have the right to vote. (e) Abstentions shall not considered as votes.

be

(f) A delegate may represent, and vote in the name of, one State only. (4) (a) The Conference shall meet in ordinary session, upon convocation by the Director General, during the same period and at the same place as the General Assembly. 115

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(b) The C o n f e r e n c e shall meet in extraordinary session, u p o n convocation b y t h e Director General, at t h e request of t h e m a j o r i t y of t h e M e m b e r States. (5) T h e C o n f e r e n c e shall adopt its own rules of p r o c e d u r e . Article 8 Coordination Committee (1) (a) There shall b e a Coordination Committee consisting of the States party to this Convention which a r e members of t h e Executive Committee of t h e Paris Union, or t h e Executive Committee of the Berne Union, or both. However, if either of these Executive Committees is composed of more than one-fourth of the number of the countries members of the Assembly which elected it, then such Executive Committee shall designate from among its members t h e States which will be members of the Coordination Committee, in such a way that their number shall not exceed the onefourth referred to above, it being understood that the country on the territory of which the Organization has its h e a d q u a r t e r s shall not be included in the computation of the said one-fourth. (b) The G o v e r n m e n t of each State member of the Coordination Committee shall be represented by one delegate, w h o may be assisted by alternate delegates, advisors, and exports. (c) W h e n e v e r the Coordination Committee considers either matters of direct interest to t h e program or budget of the C o n f e r e n c e and its agenda, or proposals for the a m e n d m e n t of this Convention which would affect the rights or obligations of 116

States p a r t y to this Convention not members of any of the Unions, one-fourth of such States shall participate in t h e meetings of the Coordination Committee with t h e s a m e rights as members of that Committee. The Conf e r e n c e shall, at each of its ordinary sessions, designate these States, (d) The e x p e n s e s of each delegation shall be b o r n e by the G o v e r n m e n t which has appointed it. (2) If the other Unions administered by the Organization wish to b e represented as such in t h e Coordination Committee, their r e p r e s e n t a t i v e s must be appointed from among the States members of the Coordination Committee. (3) The shall:

Coordination

Committee

(i) give advice to the o r g a n s of t h e Unions, t h e General Assembly, the Conference, and the Director General, on all administrative, financial and other matters of common interest either to t w o or m o r e of t h e Unions, or to one or more of t h e Unions and t h e Organization, and in particular on t h e b u d g e t of exp e n s e s common to t h e Unions; (ii) p r e p a r e t h e draft a g e n d a of the General Assembly; (iii) p r e p a r e the d r a f t agenda and t h e d r a f t program and budget of t h e Conference; (iv) on t h e basis of the triennial b u d g e t of e x p e n s e s common to the Unions and t h e triennial budget of t h e Conference, as well as on the basis of t h e triennial program of legal-technical assistance, establish t h e corresponding annual budgets and programs; (v) when t h e term of office of t h e Director General is about to expire, or when t h e r e is a vacancy in the post of the Director General, nominate a candid a t e for appointment to such position by the General Assem-

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WIPO bly; if the General Assembly does not appoint its nominee, the Coordination Committee shall nominate another candidate; this procedure shall be repeated until the latest nominee is appointed by the General Assembly! (vi) if the post of the Director General becomes vacant between two sessions of the General Assembly, appoint an Acting Director General for the term preceding the assuming of office by the new Director General; (vii) perform such other functions as are allocated to it under this Convention. (4) (a) The Coordination Committee shall meet once every year in ordinary session, upon convocation by the Director General. It shall normally meet at the headquarters of the Organization, (b) The Coordination Committee shall meet in extraordinary session, upon convocation by the Director General, either on his own initiative, or at the request of its Chairman or one-fourth of its members. (5) (a) Each State, whether a member of one or both of the Executive Committees referred to in paragraph (1) (a), shall have one vote in the Coordination Committee. (b) One-half of the members of the Coordination Committee shall constitute a quorum. (c) A delegate may represent, and vote in the name of, one State only. (6) (a) The Coordination Committee shall express its opinions and make its decisions by a simple majority of the votes cast. Abstentions shall not be considered as votes. (b) Even if a simple majority is obtained, any member of the Coordination Committee

may, immediately after the vote, request that the votes be the subject of a special recount in the following manner: two separate lists shall be prepared, one containing the names of the States members of the Executive Committee of the Paris Union and the other the names of the States members of the Executive Committee of the Berne Union; the vote of each State shall be inscribed opposite its name in each list in which it appears. Should this special recount indicate that a simple majority has not been obtained in each of those lists, the proposal shall not be considered as carried. (7) Any State Member of the Organization which is not a member of the Coordination Committee may be represented at the meetings of the Committee by observers having the right to take part in the debates but without the right to vote. (8) The Coordination Committee shall establish its own rules of procedure. Article 9 International Bureau (1) The International Bureau shall be the Secretariat of the Organization. (2) The International Bureau shall be directed by the Director General, assisted by two or more Deputy Directors General. (3) The Director General shall be appointed for a fixed term, which shall be not less than six years. He shall be eligible for reappointment for fixed terms. The periods of the initial appointment and possible subsequent appointments, as well as all other conditions of the appointment, shall be fixed by the General Assembly. (4) (a) The Director General shall be the chief executive of the Organization. 117

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(b) He shall represent the Organization. (c) He shall report to, and conform to the instructions of, the General Assembly as to the internal and.external affairs of the Organization. (5) The Director General shall prepare the draft programs and budgets and periodical reports on activities. He shall transmit them to the Governments of the interested States and to the competent organs of the Unions and the Organization. (6) The Director General and any staff member designated by him shall participate, without the right to vote, in all meetings of the General Assembly, the Conference, the Coordination Committee, and any other committee or working group. The Director General or a staff member designated by him shall be ex officio secretary of these bodies. (7) The Director General shall appoint the staff necessary for the efficient performance of the tasks of the International Bureau. He shall appoint the Deputy Directors General after approval by the Coordination Committee. The conditions of employment shall be fixed by the staff regulations to be approved by the Coordination Committee on the proposal of the Director General. The paramount consideration in the employment of the staff and in the determination of the conditions of service shall be the necessity of securing the highest standards of efficiency, competence, and. integrity. Due regard shall be paid to the importance of recruiting the staff on as wide a geographical basis as possible. (8) The nature of the responsibilities of the Director General and of the staff shall be exclusively international. In the discharge of their duties they shall not seek or receive instructions from any Government or from any authority external to the Organization. They shall refrain from any action which might prejudice their position as international officials. Each Member State undertakes to respect 118

the exclusively international character of the responsibilities of the Director General and the staff, and not to seek to influence them in the discharge of their duties. Article

10

Headquarters (1) The headquarters of the ganization shall be at Geneva.

Or-

(2) Its transfer may be decided as provided for in Article 6 (3) (d) and (g). A r t i c l e 11 Finances (1) The Organization shall have two separate budgets: the budget of expenses common to the Unions, and the budget of the Conference. (2) (a) The budget of expenses common to the Unions shall include provision for expenses of interest to several Unions, (b) This budget shall be financed from the following sources: (i) contributions of the Unions, provided that the amount of the contribution of each Union shall be fixed by the Assembly of that Union, having regard to the interest the Union has in the common expenses! (ii) charges due for services performed by the International Bureau not in direct relation with any of the Unions or not received for services rendered by the International Bureau in the field of legal-technical assistance; (iii) sale of, or royalties the publications of International Bureau directly concerning of the Unions;

on, the not any

(iv) gifts, bequests, and subventions, given to the Organization, except those referred to in paragraph (3) (b) (iv);

WIPO (v) rents, interests, and other miscellaneous income, of the Organization. (3) (a) The budget of the Conference shall include provision for the expenses of ho.lding sessions of the Conference and for the cost of the legaltechnical assistance program. (b) This budget shall be financed from the following sources: (i) contributions of States party to this Convention not members of any of the Unions; (ii) any sums made available to this budget by the Unions, provided that the amount of the sum made available by each Union shall be fixed by the Assembly of that Union and that each Union shall be free to abstain from contributing to the said budget; (iii) sums received for services rendered by the International Bureau in the field of legal-technical assistance; (iv) gifts, bequests, and subventions, given to the Organization for the purposes referred to in sub-paragraph (a). (4) (a) For the purpose of establishing its contribution towards the budget of the Conference, each State party to this Convention not member of any of the Unions shall belong to a class, and shall pay its annual- contributions on the basis of a number of units fixed as follows: Class A 10 Class B 3 Class C 1 (b) Each such State shall, concurrently with taking action

Doc. 9 as provided in Article 14 (1), indicate the class to which it wishes to belong. Any such State may change class. If it chooses a lower class, the State must announce it to the Conference at one of its ordinary sessions. Any such change shall take effect at the beginning of the calendar year following the session. (c) The annual contribution of each such State shall be an amount in the same proportion to the total sum to be contributed to the budget of the Conference by all such States as the number of its units is to the total of the units of all the said States. (d) Contributions shall become due on the first of January of each year. (e) If the budget is not adopted before the beginning of a new financial period, the budget shall be at the same level as the budget of the previous year, in accordance with the financial regulations. (5) Any State party to this Convention not member of any of the Unions which is in arrears in the payment of its financial contributions under the present Article, and any State party to this Convention member of any of the Unions which is in arrears in the payment of its contributions to any of the Unions, shall have no vote in any of the bodies of the Organization of which it is a member, if the amount of its arrears equals or exceeds the amount of the contributions due from it for the preceding two full years. However, any of these bodies may allow such a State to continue to exercise its vote in that body if, and as long as, it is satisfied that the delay in payment arises from exceptional and unavoidable circumstances. (6) The amount of the fees and charges due for services rendered by the International Bureau in the field of legal-technical assistance shall be 119

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established, and shall be reported to the Coordination Committee, by the Director General.

vances, such State shall have an ex officio seat on the Coordination Committee.

(7) The Organization, with the approval of the Coordination Committee, may receive gifts, bequests, and subventions, directly from Governments, public or private institutions, associations or private persons.

(b) The State referred to in subparagraph (a) and the Organization shall each have the right to denounce the obligation to grant advances, by written notification. Denunciation shall take effect three years after the end of the year in which it has been notified.

(8) (a) The Organization shall have a working capital fund which shall be constituted by a single payment made by the Unions and by each State party to this Convention not member ot any Union. If the fund becomes insufficient, it shall be increased. (b) The amount of the single payment of each Union and its possible participation in any increase shall be decided by its Assembly. (c) The amount of the single payment of each State party to this Convention not member of any Union and its part in any increase shall be a proportion of the contribution of that State for the year in which the fund is established or the increase decided. The proportion and the terms of payment shall be fixed by the Conference on the proposal of the Director General and after it has heard the advice of the Coordination Committee. (9) (a) In the headquarters agreement concluded with the State on the territory of which the Organization has its headquarters, it shall be provided that, whenever the working capital fund is insufficient, such State shall grant advances. The amount of these advances and the conditions on which they are granted shall be the subject of separate agreements, in each case, between such State and the Organization. As long as it remains under the obligation to grant ad120

(10) The auditing of the accounts shall be effected by one or more Member States, or by external auditors, as provided in the financial regulations. They shall be designated, with their agreement, by the General Assembly.

A r t i c l e 12 Legal Capacity; Privileges and Immunities (1) The Organization shall enjoy on the territory of each Member State, in conformity with the laws of that State, such legal capacity as may be necessary for the fulfilment of the Organization's objectives and for the exercise of its functions. (2) The Organization shall conclude a headquarters agreement with the Swiss Confederation and with any other State in which the headquarters may subsequently be located. (3) The Organization may conclude bilateral or multilateral agreements with the other Member States with a view to the enjoyment by the Organization, its officials, and representatives of all Member States, of such privileges and immunities as may be necessary for the fulfilment of its objectives and for the exercise of its functions. (4) The Director General may negotiate and, after approval by the Coordination Committee, shall conclude and sign on behalf of the Organization the agreements referred to in paragraphs (2) and (3).

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WIPO A r t i c l e 13 Relations with other Organizations (1) The Organization shall, where appropriate, establish working relations and cooperate with other intergovernmental organizations. Any general agreement to such effect entered into with such organizations shall be concluded by the Director General after approval by the Coordination Committee. (2) The Organization may, on matters within its competence, make suitable arrangements for consultation and cooperation with international non-governmental organizations and, with the consent of the Governments concerned, with national organizations, governmental or non-governmental. Such arrangements shall be made by the Director General after approval by the Coordination Committee. A r t i c l e 14 Becoming Party to the Convention (1) States referred to in Article 5 may become party to this Convention and Member of the Organization by: (1) signature without reservation as to ratification, or (ii) signature subject to ratification followed by the deposit of an instrument of ratification, or (iii) deposit of an instrument of accession. (2) Notwithstanding any other provision of this Convention, a State party to the Paris Convention, the Berne Convention, or both Conventions, may become party to this Convention only if it concurrently ratifies or accedes to, or only after it has ratified or acceded to: either the Stockholm Act of the Paris Convention in its entirety or with only the limitation set forth in Article 20 (1) (b) (i) thereof, or the Stockholm Act of the Berne Convention in its entirety or with only the limitation set forth in Article 28 (1) (b) (i) thereof. (3) Instruments of ratification or ac-

cession shall be deposited with the Director General. A r t i c l e 15 Entry into Force of the Convention (1) This Convention shall enter into force three months after ten States members of the Paris Union and seven States members of the Berne Union have taken action as provided in Article 14 (1), it oeing understood that, if a State is a member of both Unions, it will be counted in both groups. On that date, this Convention shall enter into force also in respect of States which, not being members of either of the two Unions, have taken action as provided in Article 14 (1) three months or more prior to that date. (2) In respect to any other State, this Convention shall enter into force three months after the date on which such State takes action as provided.in Article 14 (1). A r t i c l e 16 Reservations No reservations to this Convention are permitted. A r t i c l e 17 Amendments (1) Proposals for the amendment of this Convention may be initiated by any Member State, by the Coordination Committee, or by the Director General. Such proposals shall be communicated by the Director General to the Member States at least six months in advance of their consideration by the Conference. (2) Amendments shall be adopted by the Conference. Whenever amendments would affect the rights and obligations of States party to this Convention not members of any of the Unions, such States shall also vote. On all other amendments proposed, only States party to this Convention members of any Union shall vote. Amendments shall be adopted by a simple majority of the votes cast, provided that the Conference shall vote only on such proposals for

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a m e n d m e n t s as h a v e p r e v i o u s l y b e e n a d o p t e d by t h e A s s e m b l y of t h e Paris U n i o n and t h e A s s e m b l y of the Berne Union according to the rules applicable in each of them r e g a r d i n g t h e adoption of a m e n d m e n t s to the adm i n i s t r a t i v e p r o v i s i o n s of their respective C o n v e n t i o n s . (3) A n y a m e n d m e n t shall enter into f o r c e o n e month after written notific a t i o n s of a c c e p t a n c e , effected in acc o r d a n c e with their r e s p e c t i v e constitutional processes, h a v e been received by t h e Director G e n e r a l from threef o u r t h s of t h e States m e m b e r s of t h e Organization, entitled to v o t e on t h e p r o p o s a l for a m e n d m e n t p u r s u a n t to p a r a g r a p h (2), at t h e time t h e Conf e r e n c e adopted the a m e n d m e n t . A n y a m e n d m e n t s t h u s a c c e p t e d shall bind all the States which a r e M e m b e r s of t h e O r g a n i z a t i o n at the time t h e a m e n d m e n t e n t e r s into force or which b e c o m e M e m b e r s at a s u b s e q u e n t date, p r o v i d e d that any a m e n d m e n t inc r e a s i n g t h e financial obligations of M e m b e r States shall bind only t h o s e States which h a v e notified their acc e p t a n c e of such a m e n d m e n t . A r t i c l e 18 Denunciation (1) A n y M e m b e r State may den o u n c e this C o n v e n t i o n by notification a d d r e s s e d to t h e Director G e n e r a l . (2) Denunciation shall t a k e effect six m o n t h s a f t e r t h e d a y on which the Director G e n e r a l h a s received t h e notification.

(iv) d e n u n c i a t i o n s tion.

of

this

Conven-

A r t i c 1 e 20 Final Provisions (1) (a) This C o n v e n t i o n shall b e signed in a single copy in English, French, Russian and Spanish, all texts being e q u a l l y a u t h e n t i c , and shall b e deposited with t h e Gove r n m e n t of S w e d e n , (b) This C o n v e n t i o n shall remain open for s i g n a t u r e at Stockholm until J a n u a r y 13, 1968. (2) Official t e x t s shall b e established by t h e Director G e n e r a l , after c o n s u l t a t i o n with t h e i n t e r e s t e d Gove r n m e n t s , in German, Italian and P o r t u g u e s e , and such other l a n g u a g e s as the C o n f e r e n c e m?,y d e s i g n a t e . (3) T h e Director G e n e r a l shall transmit t w o d u l y certified c o p i e s of this C o n v e n t i o n and of each a m e n d m e n t a d o p t e d by the C o n f e r e n c e to t h e G o v e r n m e n t s of t h e S t a t e s m e m b e r s of the Paris or Berne Unions, to t h e G o v e r n m e n t of a n y other S t a t e w h e n it a c c e d e s to this C o n v e n t i o n , and, on request, to the G o v e r n m e n t of a n y other State. T h e copies of t h e signed t e x t of t h e C o n v e n t i o n t r a n s m i t t e d to t h e G o v e r n m e n t s shall b e certified b y t h e G o v e r n m e n t of S w e d e n . (4) T h e Director General shall register this C o n v e n t i o n with t h e S e c r e t a r i a t of t h e United N a t i o n s .

A r t i c l e 19 Notifications T h e Director G e n e r a l shall notify t h e G o v e r n m e n t s of all M e m b e r States of: (i) t h e d a t e of e n t r y into f o r c e of the Convention, (ii) s i g n a t u r e s and deposits of inst r u m e n t s of ratification or accession, (iii) a c c e p t a n c e s of an a m e n d m e n t to this C o n v e n t i o n , and t h e d a t e upon whidi the amendment e n t e r s into force,

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A r t i c l e 21 Transitional Provisions (1) Until t h e first Director G e n e r a l a s s u m e s office, r e f e r e n c e s in this Conv e n t i o n to t h e I n t e r n a t i o n a l Bureau or to t h e Director G e n e r a l shall b e d e e m e d to b e r e f e r e n c e s to t h e United I n t e r n a t i o n a l Bureaux for t h e Protection of Industrial, Literary and Artistic P r o p e r t y (also called t h e United Intern a t i o n a l Bureaux for t h e Protection of Intellectual P r o p e r t y (BIRP1)), or its Director, r e s p e c t i v e l y .

WIPO (2) (a) States which are members of any of the Unions but which h a v e not b e c o m e party to this Convention may, for five y e a r s from the date of entry into force of this Convention, e x e r c i s e , if they so desire, the same rights as if they had b e c o m e party to this Convention. Any S t a t e desiring to e x e r c i s e such rights shall g i v e written notification to this effect to the Director G e n e r a l ; this notification shall be effective on the date of its receipt. Sudi States shall be deemed to be members of the G e n e r a l Assembly and the C o n f e r e n c e until the expiration of the said period. (b) Upon expiration of this fiveyear period, such States shall h a v e no right to vote in the G e n e r a l Assembly, the Conference, and the Coordination Committee. (c) Upon becoming party to this Convention, such States shall regain sudi right to vote. (3) (a) As long as there are States members of the Paris or B e r n e Unions which h a v e not b e c o m e party to this Convention, the International Bureau and the Director General shall also function as the United International Bu-

Doc. 9 reaux for the Protection of Industrial, Literary and Artistic Property, and its Director, respectively. (b) T h e staff in the employment of the said B u r e a u x on the date of entry into force of this Convention shall, during the transitional period referred to in sub-paragraph (a), be considered as also employed by the International Bureau. (4) (a) O n c e all the States members of the Paris Union h a v e bec o m e M e m b e r s of the Organization, the rights, obligations, and property, of the B u r e a u of that Union shall d e v o l v e on the International B u r e a u of the Organization. (b) O n c e all the States members of the Berne Union h a v e become M e m b e r s of the Organization, the rights, obligations, and property, of t h e Bureau of that Union shall d e v o l v e on the International B u r e a u of the Organization.

I N W I T N E S S W H E R E O F , the undersigned, being duly authorized thereto, h a v e signed this Convention.

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B. Regional Economic Institutions 1. Organization for Economic Cooperation and Development (OECD) a) Convention on the Organization for Economic Cooperation and Development December 14, 1960 BGBl. 1961 II, 1151 (88 U . N . T . S . 179)

T H E G O V E R N M E N T S of t h e Republic of A u s t r i a , t h e Kingdom of Belgium, C a n a d a , t h e Kingdom of D e n m a r k , t h e French Republic, t h e F e d e r a l Republic of G e r m a n y , the K i n r d i m of G r e e c e , the Republic of Iceland, Ireland, the Italian Republic, the G r a n d Duchy of L u x e m b o u r g , the Kingdom of the N e t h e r l a n d s , the Kingdom of N o r w a y , t h e P o r t u g u e s e Republic, Spain, the Kingdom of Sweden, the Swiss C o n f e d e r a t i o n , t h e Turkish Republic, t h e United Kingdom of G r e a t Britain and N o r t h e r n Ireland, and the United S t a t e s of America: CONSIDERING that economic strength and p r o s p e r i t y a r e e s s e n t i a l for the a t t a i n m e n t of the p u r p o s e s of t h e United N a t i o n s , the p r e s e r v a t i o n of individual l i b e r t y a n d t h e i n c r e a s e of g e n e r a l w e l l - b e i n g ; B E L I E V I N G that t h e y c a n further these aims most effectively by strengthening t h e tradition o l c o o p e r a t i o n which h a s e v o l v e d a m o n g them; R E C O G N I S I N G that t h e e c o n o m i c r e c o v e r y a n d p r o g r e s s of E u r o p e to which their p a r t i c i p a t i o n in t h e O r ganisation for E u r o p e a n Economic Co-operation has made a major contribution, h a v e o p e n e d n e w p e r s p e c t i v e s for s t r e n g t h e n i n g that t r a d i t i o n a n d applying it t o n e w t a s k s a n d broader objectives; CONVINCED that broader coo p e r a t i o n will m a k e a v i t a l c o n t r i b u tion to peaceful and harmonious

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relations world;

among

the

peoples

of

the

R E C O G N I S I N G t h e i n c r e a s i n g int e r d e p e n d e n c e of t h e i r e c o n o m i e s ; DETERMINED by consultation and c o - o p e r a t i o n to u s e m o r e e f f e c t i v e l y their c a p a c i t i e s a n d p o t e n t i a l i t i e s s o as to promote the highest sustainable g r o w t h of their e c o n o m i c s a n d imp r o v e the e c o n o m i c anrl s o c i a l w e l l b e i n g of their p e o p l e s ; B E L I E V I N G that the e c o n o m i c a l l y more a d v a n c e d nations should coo p e r a t e in a s s i s t i n g to the best of t h e i r a b i l i t y t h e c o u n t r i e s in p r o c e s s of e c o n o m i c d e v e l o p m e n t ; R E C O G N I S I N G that the further e x p a n s i o n of w o r l d t r a d e is o n e of t h e most i m p o r t a n t f a c t o r s f a v o u r i n g the e c o n o m i c d e v e l o p m e n t of c o u n t r i e s a n d t h e i m p r o v e m e n t of i n t e r n a t i o n a l e c o n o m i c r e l a t i o n s ; and D E T E R M I N E D to p u r s u e t h e s e purp o s e s in a m a n n e r c o n s i s t e n t with t h e i r o b l i g a t i o n s in o t h e r international o r g a n i s a t i o n s or i n s t i t u t i o n s in which they participate or under agreements to which they are a party; HAVE THEREFORE A G R E E D on t h e f o l l o w i n g p r o v i s i o n s for the rec o n s t i t u t i o n of t h e O r g a n i s a t i o n for European Economic Co-operation as t h e O r g a n i s a t i o n for E c o n o m i c C o operation and D e v e l o p m e n t :

OECD Article 1 T h e a i m s of the O r g a n i s a t i o n for Economic Co-operation and Development ( h e r e i n a f t e r c a l l e d the " O r g a n i s a t i o n " ) s h a l l b e to p r o m o t e p o l i c i e s designed: (a) to a c h i e v e the h i g h e s t s u s t a i n a b l e e c o n o m i c g r o w t h a n d employment and a rising standard of l i v i n g in M e m b e r c o u n t r i e s , while maintaining financial stability, a n d thus to c o n t r i b u t e to the development of the world e c o n o m y ; (b) to c o n t r i b u t e to s o u n d e c o n o m ic e x p a n s i o n in M e m b e r as well a s n o n - m e m b e r c o u n t r i e s in t h e p r o c e s s of economic development; and (c) to c o n t r i b u t e to t h e e x p a n s i o n of w o r l d t r a d e on a m u l t i l a t e r a l , n o n - d i s c r i m i n a t o r y b a s i s in a c c o r d a n c e with i n t e r n a t i o n a l obligations. Article

D o c . 10 ment by appropriate means nnd, in p a r t i c u l a r , b y t h e flow ol c a p i t a l to t h o s e c o u n t r i e s , h a v i n g r e g a r d to the i m p o r t a n c e to their e c o n o m i e s of receiving technical assistance a n d of s e c u r i n g e x p a n d i n g e x port m a r k e t s . Article

3

W i t h a v i e w to a c h i e v i n g t h e a i m s set out in A r t i c l e 1 a n d to f u l f i l l i n g t h e u n d e r t a k i n g s c o n t a i n e d in A r t i c l e 2, t h e M e m b e r s a g r e e that t h e y w i l l : (a) k e e p e a d i o t h e r i n f o r m e d a n d f u r n i s h the O r g a n i s a t i o n with the i n f o r m a t i o n n e c e s s a r y for the a c c o m p l i s h m e n t of its t a s k s ; (b) c o n s u l t t o g e t h e r o n a c o n t i n u ing b a s i s , c a r r y out studies a n d p a r t i c i p a t e in a g r e e d projects; and (c) c o - o p e r a t e c l o s e l y a n d w h e r e appropriate take co-ordinated action.

2

In the p u r s u i t of t h e s e a i m s , the M e m b e r s a g r e e that t h e y will, both individually and jointly: (a) p r o m o t e the e f f i c i e n t u s e their e c o n o m i c r e s o u r c e s ;

of

(b) in t h e s c i e n t i f i c a n d technol o g i c a l field, p r o m o t e the d e v e l o p m e n t of their r e s o u r c e s , enc o u r a g e r e s e a r c h and p r o m o t e v o c a t i o n a l training,(c) p u r s u e policies designed to achieve economic growth and internal and external financial s t a b i l i t y a n d to a v o i d d e v e l o p m e n t s which m i g h t endanger their e c o n o m i e s or t h o s e of other c o u n t r i e s ; (d) p u r s u e their e f f o r t s to r e d u c e or a b o l i s h o b s t a c l e s to t h e e x c h a n g e of g o o d s a n d s e r v i c e s and current payments and m a i n t a i n a n d e x t e n d the libera l i s a t i o n of c a p i t a l m o v e m e n t s ; and (e) c o n t r i b u t e to the e c o n o m i c dev e l o p m e n t of b o t h M e m b e r a n d non-member c o u n t r i e s in the p r o c e s s of e c o n o m i c d e v e l o p -

Article

4

T h e C o n t r a c t i n g P a r t i e s to this C o n v e n t i o n s h a l l b e M e m b e r s of t h e Organisation. Article In o r d e r t o a c h i e v e Organisation may:

5 its

aims,

the

(a) t a k e d e c i s i o n s which, e x c e p t a s otherwise provided, shall be b i n d i n g on all t h e M e m b e r s ; (b) m a k e recommendations Members; and

to

(c) e n t e r Into agreements with Members, non-member States and international organisations. Article

6

1. U n l e s s the O r g a n i s a t i o n otherw i s e a g r e e s u n a n i m o u s l y for s p e c i a l c a s e s , d e c i s i o n s shall b e t a k e n a n d r e c o m m e n d a t i o n s shall b e m a d e by m u t u a l a g r e e m e n t of all the M e m bers. 2. Each M e m b e r s h a l l h a v e one v o t e . If a M e m b e r a b s t a i n s f r o m voti n g on a d e c i s i o n or r e c o m m e n d a t i o n ,

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such abstention shall not invalidate the decision 01 recommendation, which shall be applicable to the other Members but not to the abstaining Member. 3. N o decision shall be binding on any Member until it has complied with the requirements of its own constitutional procedures. The other Members may agree that sych a decision shall apply provisionally to them Article 7 A Council composed of all the Members shall be the body from which all acts of the Organisation derive. The Council may meet in sessions of Ministers or of Permanent Representatives Article 8 The Council shall designate each year a Chairman, who shall preside at its ministerial sessions, and two Vice-Chairmen. The Chairman may be designated to serve, one additional consecutive term. Article 9 The Council may establish an Executive Committee and such subsidiary bodies as may be required for the achievement of the aims of the Organisation. A r t i c l e 10 1. A Secretary-General responsible to the Council shall be appointed by the Council for a term of five years. He shall be assisted by one or more Deputy Secretaries-General or Assistant Secretaries-General appointed by the Council on the recommendation of the Secretary-General. 2. The Secretary-General shall serve as Chairman of the Council meeting at sessions of Permanent Representatives. He shall assist the Council in all appropriate w a y s and may submit proposals to the Council or to any other body of the Organisation.

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A r t i c l e 11 1. The Secretary-General shall appoint such staff as the Organisation may require in accordance with plans of organisation a p p r o v e d by the Council. Staff regulations shall be subject to approval by the Council. 2. Having regard to t h e international character of the O r g a n i s a t i o n , the Secretary-General, t h e Deputy or Assiilant Secretaries-General and the staff shall neither seek nor receive instructions from a n y of the M e m b e r s or from any G o v e r n m e n t or a u t h o r i t y e x t e r n a l to the Organisation. A r t i c l e 12 Upon such terms and conditions as the Council may determine, the Organisation m a y : (a) a d d r e s s c o m m u n i c a t i o n s to nonm e m b e r S t a t e s or o r g a n i s a t i o n s ; (b) establish and m a i n t a i n relations with non-member S t a t e s or organisations; and non-member Govern(c) invite m e n t s or o r g a n i s a t i o n s to participate in activities of the Organisation. A r t i c l e 13 Representation in the O r g a n i s a t i o n of the European C o m m u n i t i e s established by t h e T r e a t i e s of Paris and Rome of 18th April, 1951, und 25th March, 1957, shall be as defined in S u p p l e m e n t a r y Protocol No. 1 to this Convention. A r t i c l e 14 1. This C o n v e n t i o n shall be ratified or accepted by the Signatories in a c c o r d a n c e with their r e s p e c t i v e constitutional r e q u i r e m e n t s 2. I n s t r u m e n t s of ratification or a c c e p t a n c e shall b e deposited with the G o v e r n m e n t of t h e French Republic, hereby d e s i g n a t e d as d e p o s i t a r y Government. 3. This C o n v e n t i o n shall come into force: (a) before 30th September, 1961,

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OECD upon the deposit of instruments Of ratification or acc e p t a n c e by all the Signatories; or (b) on 30th September, 1961, if by that d a t e fifteen Signatories or m o r e h a v e deposited such i n s t r u m e n t s as r e g a r d s those Signatories, and thereafter as regards any other Signatory upon the deposit of its instrument of ratification or a c c e p t a n c e ; 'c) a f t e r 30th September, 1961, but not later than two y e a r s from t h e s i g n a t u r e of this C o n v e n t i o n , u p o n the deposit of such i n s t r u m e n t s by fifteen Signatories, as r e g a r d s those Signatories; and t h e r e a f t e r as regards any other S i g n a t o r y upon the deposit of its instrument of ratification or acceptance. 4. A n y Signatory which has not deposited its instrument of ratification or a c c e p t a n c e when the C o n v e n t i o n comes into force may. t a k e part in the activities of the Organisation upon conditions to be d e t e r m i n e d by agreement b e t w e e n the Organisation and such Signatory. A r t i c l e 15 W h e n this C o n v e n t i o n comes into force the reconstitution of the Organisation for European Economic Cooperation shall t a k e effect, and its aims, organs, pov.ers and n a m e shall thereupon be as provided herein. T h e legal personality possessed by the O r g a n i s a t i o n for European Economic Co-operation shall c o n t i n u e in the Organisation, but decisions, recomm e n d a t i o n s and resolutions of the O r g a n i s a t i o n for European Economic Co-operation shall r e q u i r e a p p r o v a l of the Council to b e e f f e c t i v e after the coming in»o force of this Convention.

sions shall be unanimous, p r o v i d e d that for a n y p a r t i c u l a r c a s e t h e Council m a y u n a n i m o u s l y decide to permit "abstention, in which case, notwithstanding t h e p r o v i s i o n s of Article 6, t h e decision shall be applicable to all t h e M e m b e r s . Accession shall t a k e effect upon the deposit of a n instrument of accession with t h e d e p o s i t a r y Government. A r t i c l e 17 A n y C o n t r a c t i n g P a r t y m a y term i n a t e t h e application of this C o n v e n tion to itself by giving t w e l v e m o n t h s ' n o t i c e to that effect to t h e d e p o s i t a r y Government. A r t i c l e 18 T h e H e a d q u a r t e r s of t h e O r g a n i s a tion shall be in Paris, u n l e s s t h e Council a g r e e s o t h e r w i s e . A r t i c l e 19 T h e legal c a p a c i t y of t h e O r g a n i s a tion and the privileges, e x e m p t i o n s , and i m m u n i t i e s of t h e O r g a n i s a t i o n , its officials and r e p r e s e n t a t i v e s to it of t h e M e m b e r s shall b e as p r o v i d e d in S u p p l e m e n t a r y Protocol No. 2 to this C o n v e n t i o n . A r t i c l e 20 1. Each year, in a c c o r d a n c e with Financial Regulations adopted by the Council, the Secretary-General shall present to the Council for a p p r o v a l an annual budget, accounts, and such subsidiary budgets as the Council shall request. 2. General e x p e n s e s ot the Organisation, as agreed by the Council, shall be apportioned in a c c o r d a n c e with a scale to be decided upon by the Council. O t h e r e x p e n d i t u r e shall be financed on such basis as t h e Council may decide.

A r t i c l e 16

A r t i c l e 21

T h e Council m a y decide to invite a n y G o v e r n m e n t p r e p a r e d to a s s u m e t h e obligations of m e m b e r s h i p to acc e d e to this C o n v e n t i o n . Such deci-

Upon the receipt of a n y i n s t r u m e n t of ratification, a c c e p t a n c e or accession, or of any notice of termination, the depositary G o v e r n m e n t shall give 127

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n o t i c e thereof to all t h e C o n t r a c t i n g Parties a n d to the S e c r e t a r y - G e n e r a l of t h e O r g a n i s a t i o n .

IN W I T N E S S WHEREOF, t h e u n d e r signed P l e n i p o t e n t i a r i e s , d u l y e m p o w ered, h a v e a p p e n d e d their s i g n a t u r e s to this C o n v e n t i o n .

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DONE in Paris, this f o u r t e e n t h d a y of D e c e m b e r , N i n e t e e n H u n d r e d a n d Sixty, in t h e English a n d French l a n g u a g e s , both t e x t s being e q u a l l y a u t h e n t i c , in a single copy which shall be d e p o s i t e d with t h e d e p o s i t a r y G o v e r n m e n t , by w h o m certified c o p i e s will be c o m m u n i c a t e d to all t h e Signatories.

b) International Energy Agency of the OECD (IEA) November 15, 1974 BGBl. 1975 II, 739 (27 U.S.T. 1976)

Article 4

The Council, Having regard to the Convention on the Organisation for Economic Co-operation and Development of 14th December, 1960 (hereinafter called the "Convention") and, in particular, Articles 5 (a), 6, 9, 12, 13 and 20 of the Convention; Having regard to the Financial Regulations of the Organisation and, in particular, to Articles 5, 10, 14 (b) and 16 (b) thereof; Having regard to the Regulations, Rules and Instructions for Council Experts and Consultants of the Organisation;

A Governing Board composed of all the Participating Countries of the Agency shall be the body from which all acts of the Agency derive, and shall have the power to make recommendations and to take decisions which shall, except as otherwise provided, be binding upon Participating Countries, and to delegate its powers to other organs of the Agency. The Governing Board shall adopt its own rules of procedure and voting rules. Article 5 The Governing Board shall establish such organs and procedures as may be required for the proper functioning of the Agency.

Noting that the Governments of certain Member countries have declared their intention to enter into a separate Agreement on an International Energy Program which is attached to document C (74) 204 of 6th November, 1974, and Corrigendum 1 thereto, which is circulated for reference and is hereinafter referred to as the "Agreement";

(a) The Governing Board shall decide upon and carry out an International Energy Program for co-operation in the field of energy, the aims of which are:

Having regard to the Recommendation of the Council of 29th June, 1971 on Oil Stockpiling [C (71) 113 (Final)];

(i) development of a common level of emergency selfsufficiency in oil supplies;

Having regard to the Decision of the Council of 14th November, 1972 on Emergency Plans and Measures and Apportionment of Oil Supplies in an Emergency in the OECD European Area [C (72) 201 (Final)];

(ii) establishment of common demand restraint measures in an emergency; (iii) establishment and implementation of measures for the allocation of available oil in time of emergency;

Having regard to the Recommendation of the Council of 10th January, 1974 on the Supply of Bunker Fuels for Shipping and Fishing [C (73) 257 (Final)];

(iv) development of a system of information on the international oil market and a framework for consultation with international oil companies;

Having regard to the Recommendation of the Council of 10th January, 1974 on the Supply of Fuel for Civil Aircraft [C (73) 258 (Final)];

(v) development and implementation of a long-term cooperation programme to reduce dependence on imported oil, including: conservation of energy, development of alternative sources of energy, energy research and development, and supply of natural and enriched uranium;

Having regard to the Note by the Secretary-General of 6th November, 1974 concerning the International Energy Program [C (74) 203 and Corrigendum 1];

Article 6

An International Energy Agency (hereinafter called the "Agency") is hereby established as an autonomous body within the framework of the Organisation.

(vi) promotion of co-operative relations with oil producing countries and with other oil consuming countries, particularly those of the developing world. The Governing Board may adopt other mesures of cooperation in the energy field which it may deem necessary and otherwise amend the Program by unanimity, taking into account the constitutional procedures of the Participating Countries.

Article 2

(b) Upon the proposal of the Governing Board of the Agency, the Council may confer additional responsibilities upon the Agency.

DECIDES: Article 1

Participating Countries of the Agency are: (a) Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States; (b) other Member countries of the- Organisation which accede to this Decision and to the Agreement in accordance with its terms. Article 3 This Decision will be open for accession -by the European Communities upon their accession to the Agreement in accordance with its terms.

Article 7 (a) The organs of the Agency shall be assisted by an Executive Director and such staff as is necessary who shall form part of the Secretariat of the Organisation and who shall, in performing their duties under the International Energy Program, be responsible to and report to the organs of the Agency. (b) The Executive Director shall be appointed by the Governing Board on the proposal or with concurrence of the Secretary-General. (c) Consultants to the Agency may be appointed for a period exceeding that provided in Regulation 2 (b) of the Regulations and Rules for Council Experts and Consultants of the Organisation.

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The Governing Board Council on the activities Board shall submit, upon upon its own initiative, Council.

8

shall report annually to the of the Agency. The Governing the request of the Council or other communications to the

Article

9

The Agency shall co-operate with other competent bodies of the Organisation in areas of common interest. These bodies and the Agency shall consult with one another regarding their respective activities.

Article

10

(a) The budget of the Agency shall form part of the Budget of the Organisation and expenditure of the Agency shall be charged against the appropriations authorised for it under Part II of the Budget which shall include appropriate Budget estimates and provisions for all expenditure necessary for the operation of the Agency. Each Participating Country's share in financing such expenditure shall be fixed by the Governing Board. Special expenses incurred by the Agency in connection with activities referred to in Article 11 shall be shared by the Participating Countries in such proportions as shall be determined by unanimous agreement of those countries. The Governing Board shall designate an organ of the Agency to advise the Governing Board as required on the financial administration of the Agency and to give its opinion on the annual and other budget proposals submitted to the Governing Board. (b) The Governing Board shall submit the annual and other budget proposals of the Agency to the Council for adoption by agreement of those Participating Countries of the Agency which voted in the Governing Board to submit the proposals to the Council. (c) Notwithstanding the provisions of Article 14 (b) of the Financial Regulations, the Governing Board may accept voluntary contributions and grants as well as payments for services rendered by the Agency. (d) Notwithstanding the provisions of Article 16 (b) of the Financial Regulations of the Organisation, appropriations in respect of the special activities referred to in .Article 11 of this Decision, for which no commitment has been entered into before the end of the Financial Year for which they were appropriated, shall be automa-

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tically carried forward to the budget for the ensuing year. Article

11

Any two or more Participating Countries may decide to carry out within the scope of the Program special activities, other than activities which are required to be carried out by all Participating Countries under the Agreement. .Participating Countries who do not wish to take part in such activities shall abstain from taking part in such decisions and shall not be bound by them. Participating Countries carrying out such activities shall keep the Governing Board informed thereof. Article

12

In order to achieve the objectives of the Program, the Agency may establish appropriate relationships with countries which are not Participating Countries, international organisations, whether Governmental or nonGovernmental, other entities and individuals. Article

13

(a) A Participating Country for which the Agreement shall have ceased to be in force or to apply provisionally shall be deemed to have withdrawn from the Agency. (b) Notwithstanding the provisions of paragraph (a), a Country whose Government shall have signed the Agreement may, upon written notice to the Governing Board and to the Government of Belgium to the effect that the adoption of the Program by the Governing Board is binding on it pursuant to this Decision, remain a Participating Country of the Agency after the Agreement shall have ceased to apply for it, unless the Governing Board decides otherwise. Such a Country shall have the same obligations and the same rights as a Participating Country of the Agency for which the Agreement shall have entered definitively into force. Article

14

The present Decision shall enter into force on 15th November, 1974.

2. European Economic Community a) Treaty establishing the European Economic Community March 25, 1957; amended up by the European Single Act of February 17/28, 1986 298 U . N . T . S . 11; Single Act: O . J . E C 1987, N o . L169, 1

H i s MAJESTY TOE K I N G OF TOE BELGIANS, TOE PRESIDENT O F TOE FEDERAL REPUBLIC OF GERMANY, TOE PRESIDENT O F TOE F R E N C H PUBLIC, THE PRESIDENT O F TOE ITALIAN REPUBLIC, H E R ROYAL

RE-

HIGH-

NESS THE G R A N D DUCHESS O F LUXEMBOURG, H E R MAJESTY THE Q U E E N O F THE NETHERLANDS,

DETERMINED to lay the foundations of an ever closer union among the peoples of Europe,

RESOLVED to ensure the economic and social progress of their countries by common action to eliminate the barriers which divide Europe,

A F F I R M I N G as the essential objective of their efforts the constant improvement of the living and working conditions of their peoples,

RECOGNIZING that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition,

ANXIOUS to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions,

DESIRING to contribute, by means of a common commercial policy, to the progressive abolition of restrictions on international trade,

INTENDING to confirm the solidarity which binds Europe and the overseas countries and desiring to ensure the development of their prosperity, in accordance with the principles of the Charter of the United Nations,

RESOLVED by thus pooling their resources to preserve and strengthen peace and liberty, and calling upon the other peoples of Europe who share their ideal to join in their efforts,

HAVE DECIDED to create a European Economic Community and to this end have designated as their Plenipotentiaries:

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Regional Economic Institutions H i s MAJESTY THE KING OF THE BELGIANS:

Mr Paul-Henri SPAAK, Minister for Foreign Affairs, Baron J. Ch. SNOY ET DOPPUERS, Secretary-General of the Ministry of Economic Affairs, Head of the Belgian Delegation to the Intergovernmental Conference; THE PRESIDENT OF THE FEDERAL REPUBLIC OF GERMANY:

Dr Konrad ADENAUER, Federal Chancellor, Professor Dr Walter HALLSTEIN, State Secretary of the Federal Foreign Office; THE PRESIDENT OF THE FRENCH REPUBLIC:

Mr Christian PINEAU, Minister for Foreign Affairs, Mr Maurice FAURE, Under-Secretary of State for Foreign Affairs; THE PRESIDENT OF THE ITALIAN REPUBLIC:

Mr Antonio SEGNI, President of the Council of Ministers, Professor Gaetano MARTINO, Minister for Foreign Affairs; HER ROYAL HIGHNESS THE GRAND DUCHESS OF LUXEMBOURG:

Mr Joseph BECH, President of the Government, Minister for Foreign Affairs, Mr Lambert SCHAUS, Ambassador, Head of the Luxembourg Delegation to the Intergovernmental Conference; HER MAJESTY THE QUEEN OF THE NETHERLANDS:

Mr Joseph LUNS, Minister for Foreign Affairs, Mr J. LINTHORST HOMAN, Head of the Netherlands Delegation to the Intergovernmental Conference; WHO, having exchanged their Full Powers, found in good and due form, have agreed as follows.

PART

ONE

PRINCIPLES Article 1 By this Treaty, the HIGH CONTRACTING PARTIES establish among themselves a E U R O P E A N

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ECONOMIC

COMMUNITY.

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Article 2 The Community shall have as its task, by establishing a common market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it. Article 3 For the purposes set out in Article 2, the activities of the Community shall include, as provided in this* Treaty and in accordance with the timetable set out therein (a) the elimination, as between Member States, of customs duties and of quantitative restrictions on the import and export of goods, and of all other measures having equivalent effect; (b) the establishment of a common customs tariff and of a common commercial policy towards third countries; (c) the abolition, as between Member States, of obstacles to freedom of movement for persons, services and capital; (d) the adoption of a common policy in the sphere of agriculture; (e) the adoption of a common policy in the sphere of transport; ( f ) the institution of a system ensuring that competition in the common market is not distorted; (g) the application of procedures by which the economic policies of Member States can be coordinated and disequilibria in their balances of payments remedied; (h) the approximation of the laws of Member States to the extent required for the proper functioning of the common market; (i) the creation of a European Social Fund in order to improve employment opportunities for workers and to contribute to the raising of their standard of living; (j) the establishment of a European Investment Bank to facilitate the economic expansion of the Community by opening up fresh resources; (k) the association of the overseas countries and territories in order to increase trade and to promote jointly economic and social development. Article 4 I. The tasks entrusted to the Community shall be carried out by the following institutions: a EUROPEAN PARLIAMENT, a COUNCIL, a COMMISSION,

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Regional Economic Institutions a COURT OF JUSTICE.

Each institution shall act within the limits of the powers conferred upon it by this Treaty. 2. The Council and the Commission shall be assisted by an Economic and Social Committee acting in an advisory capacity. 3. The audit shall be carried out by a Court of Auditors acting within the limits of the powers conferred upon it by this Treaty.* Article 5 Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community's tasks. They shall abstain from any measure which could jeopardize the attainment of the objectives of this Treaty. Article 6 1. Member States shall, in close cooperation with the institutions of the Community, coordinate their respective economic policies to the extent necessary to attain the objectives of this Treaty. 2. The institutions of the Community shall take care not to prejudice the internal and external financial stability of the Member States. Article 7 Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. The Council may, on a proposal from the Commission and in cooperation with the European Parliament, adopt, by a qualified majority, rules designed to prohibit such discrimination.* Article 8 I. The common market shall be progressively established during a transitional period of twelve years. This transitional period shall be divided into three stages of four years each; the length of each stage may be altered in accordance with the provisions set out below.

* Paragraph 3 added by Article 11 of the Treaty amending Certain Financial Provisions. * Second paragraph as amended by . Article 6 (2) of the SEA.

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2. To each stage there shall be assigned a set of actions to be initiated and carried through concurrently. 3. Transition from the first to the second stage shall be conditional upon a finding that the objectives specifically laid down in this Treaty for the first stage have in fact been attained in substance and that, subject to the exceptions and procedures provided for in this Treaty, the obligations have been fulfilled. This finding shall be made at the end of the fourth year by the Council, acting unanimously on a report from the Commission. A Member State may not, however, prevent unanimity by relying upon the non-fulfilment of its own obligations. Failing unanimity, the first stage shall automatically be extended for one year. At the end of the fifth year, the Council shall make its finding under the same conditions. Failing unanimity, the first stage shall automatically be extended for a further year. At the end of the sixth year, the Council shall make its finding, acting by a qualified majority on a report from the Commission. 4. Within one month of the last-mentioned vote any Member State which voted with the minority or, if the required majority was not obtained, any Member State shall be entitled to call upon the Council to appoint an arbitration board whose decision shall be binding upon all Member States and upon the institutions of the Community. The arbitration board shall consist of three members appointed by the Council acting unanimously on a proposal from the Commission. If the Council has not appointed the members of the arbitration board within one month of being called upon to do so, they shall be appointed by the Court of Justice within a further period of one month. The arbitration board shall elect its own Chairman. The board shall make its award within six months of the date of the Council vote referred to in the last subparagraph of paragraph 3. 5. The second and third stages may not be extended or curtailed except by a decision of the Council, acting unanimously on a proposal from the Commission. 6. Nothing in the preceding paragraphs shall cause the transitional period to last more than fifteen years after the entry into force of this Treaty. 7. Save for the exceptions or derogations provided for in this Treaty, the expiry of the transitional period shall constitute the latest date by which all the rules laid down must enter into force and all the measures required for establishing the common market must be implemented. 135

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Regional Economic Institutions Article 8a* The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 8b, 8c, 28, 57 (2), 59, 70 (1), 84, 99, 100a and 100b and without prejudice to the other provisions of this Treaty. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.

Article 8b*

The Commission shall report to the Council before 31 December 1988 and again before 31 December 1990 on the progress made towards achieving the internal market within the time limit fixed in Article 8a. The Council, acting by a qualified majority on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.

Article 8c**

When drawing up its proposals with a view to achieving the objectives set out in Article 8a, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain during the period of establishment of the internal market and it may propose appropriate provisions. If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the common market

• Anide added by Anide 13 of the SEA. • Aitide added by Aitide 14 of the SEA. •• Artide added by Aitide 15 of the SEA.

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PART TWO

FOUNDATIONS OF THE COMMUNITY

TITLE I

Free movement of goods Article 9 1. The Community shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries. 2. The provisions of Chapter 1, Section 1, and of Chapter 2 of this Title shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.

Article 10 1. Products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State, and if they have not benefited from a total or partial drawback of such duties or charges. 2. The Commission shall, before the end of the first year after the entry into force of this Treaty, determine the methods of administrative cooperation to be adopted for the purpose of applying Article 9 (2), taking into account the need to reduce as much as possible formalities imposed on trade. Before the end of the first year after the entry into force of this Treaty, the Commission shall lay down the provisions applicable, as regards trade between Member States, to goods originating in another Member State in whose manufacture products have been used on which the exporting Member State has not levied the appropriate customs duties or charges having equivalent effect, or which have benefited from a total or partial drawback of such duties or charges. In adopting these provisions, the Commission shall take into account the rules for the elimination of customs duties within the Community and for the progressive application of the common customs tariff.

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Regional Economic Institutions Article 11 Member States shall take all appropriate measures to enable Governments to cany out, within the periods of time laid down, the obligations with regard to customs duties which devolve upon them pursuant to this Treaty.

CHAPTER

THE CUSTOMS

1

UNION

Section 1

Elimination of customs duties between Member States

Article 12 Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other.

Article 13 1. Customs duties on imports in force between Member States shall be progressively abolished by them during the transitional period in accordance with Articles 14 and 15. 2. Charges having an effect equivalent to customs duties on imports, in force between Member States, shall be progressively abolished by them during the transitional period. The Commission shall determine by means of directives the timetable for such abolition. It shall be guided by the rules contained in Article 14(2) and (3) and by the directives issued by the Council pursuant to Article 14(2).

Article 14 1. For each product, the basic duty to which the successive reductions shall be applied shall be the duty applied on 1 January 1957. 2. The timetable for the reductions shall be determined as follows: (a) during the first stage, the first reduction shall be made one year after the date when this Treaty enters into force; the second reduction, eighteen 138

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months later; the third reduction, at the end of the fourth year after the date when this Treaty enters into force; (b) during the second stage, a reduction shall be made eighteen months after that stage begins; a second reduction, eighteen months after the preceding one; a third reduction, one year later; (c) any remaining reductions shall be made during the third stage; the Council shall, acting by a qualified majority on a proposal from the Commission, determine the timetable therefor by means of directives. 3. At the time of the first reduction, Member States shall introduce between themselves a duty on each product equal to the basic duty minus 10%.

At the time of each subsequent reduction, each Member State shall reduce its customs duties as a whole in such manner as to lower by 10% its total customs receipts as defined in paragraph 4 and to reduce the duty on each product by at least 5 % of the basic duty. In the case, however, of products on which the duty is still in excess of 30 %, each reduction must be at least 10 % of the basic duty.

4. The total customs receipts of each Member State, as referred to in paragraph 3, shall be calculated by multiplying the value of its imports from other Member States during 1956 by the basic duties.

J. Any special problems raised in applying paragraphs 1 to 4 shall be settled by directives issued by the Council acting by a qualified majority on a proposal from the Commission.

6. Member States shall report to the Commission on the manner in which effect has been given to the preceding rules for the reduction of duties. They shall endeavour to ensure that the reduction made in the duties on each product shall amount: — at the end of the first stage, to at least 25 % of the basic duty; — at the end of the second stage, to at least 50 % of the basic duty. If the Commission finds that there is a risk that the objectives laid down in Article 13, and the percentages laid down in this paragraph, cannot be attained, it shall make all appropriate recommendations to Member States.

7. The provisions of this Article may be amended by the Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament. 139

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Article 15 1. Irrespective of the provisions of Article 14, any Member State may, in the course of the transitional period, suspend in whole or in part the collection of duties applied by it to products imported from other Member States. It shall inform the other Member States and the Commission thereof. 2. The Member States declare their readiness to reduce customs duties against the other Member States more rapidly than is provided for in Article 14 if their general economic situation and the situation of the economic sector concerned so permit. To this end, the Commission shall make recommendations to the Member States concerned. Article 16 Member States shall abolish between themselves customs duties on exports and charges having equivalent effect by the end of the first stage at the latest. Article 17 1. The provisions of Articles 9 to IS (1) shall also apply to customs duties of a fiscal nature. Such duties shall not, however, be taken into consideration for the purpose of calculating either total customs receipts or the reduction of customs duties as a whole as referred to in Article 14 (3) and (4). Such duties shall, at each reduction, be lowered by not less than 10 % of the basic duty. Member States may reduce such duties more rapidly than is provided for in Article 14. 2. Member States shall, before the end of the first year after the entry into force of this Treaty, inform the Commission of their customs duties of a fiscal nature. 3. Member States shall retain the right to substitute for these duties an internal tax which complies with the provisions of Article 95. 4. If the Commission finds that substitution for any customs duty of a fiscal nature meets with serious difficulties in a Member State, it shall authorize that State to retain the duty on condition that it shall abolish it not later than six years after the entry into force of this Treaty. Such authorization must be applied for before the end of the first year after the entry into force of this Treaty.

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Section 2 Setting up of the common customs tariff Article 18 The Member States declare their readiness to contribute to the development of international trade and the lowering of barriers to trade by entering into agreements designed, on a basis of reciprocity and mutual advantage, to reduce customs duties below the general level of which they could avail themselves as a result of the establishment of a customs union between them. Article 19 1. Subject to the conditions and within the limits provided for hereinafter, duties in the common customs tariff shall be at the level of the arithmetical average of the duties applied in the four customs territories comprised in the Community. 2. The duties taken as the basis for calculating this average shall be those applied by Member States on 1 January 1957. In the case of the Italian tariff, however, the duty applied shall be that without the temporary 10% reduction. Furthermore, with respect to items on which the Italian tariff contains a conventional duty, this duty shall be substituted for the duty applied as defined above, provided that it does not exceed the latter by more than 10%. Where the conventional duty exceeds the duty applied as defined above by more than 10%, the latter duty plus 10 % shall be taken as the basis for calculating the arithmetical average.

With regard to the tariff headings in List A, the duties shown in that List shall, for the purpose of calculating the arithmetical average, be substituted for the duties applied.

3. The duties in the common customs tariff shall not exceed: (a) 3 % for products within the tariff headings in List B; (b) 10 % for products within the tariff headings in List C; (c) 15 % for products within the tariff headings in List D; (d) 25 % for products within the tariff headings in List E; where in respect of such products, the tariff of the Benelux countries contains a duty not exceeding 3 %, such duty shall, for the purpose of calculating the arithmetical average, be raised to 12 %.

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Regional Economic Institutions 4.

List F prescribes the duties applicable to the products listed therein.

5. The Lists of tariff headings referred to in this Article and in Article 20 are set out in Annex I to this Treaty.

Article 20 The duties applicable to the products in List G shall be determined by negotiation between the Member States. Each Member State may add further products to this List to a value not exceeding 2 % of the total value of its imports from third countries in the course of the year 1956. The Commission shall take all appropriate steps to ensure that such negotiations shall be undertaken before the end of the second year after the entry into force of this Treaty and be concluded before the end of the first stage. If, for certain products, no agreement can be reached within these periods, the Council shall, on a proposal from the Commission, acting unanimously until the end of the second stage and by a qualified majority thereafter, determine the duties in the common customs tariff.

Article 21 1. Technical difficulties which may arise in applying Articles 19 and 20 shall be resolved, within two years of the entry into force of this Treaty, by directives issued by the Council acting by a qualified majority on a proposal from the Commission. 2. Before the end of the first stage, or at latest when the duties are determined, the Council shall, acting by a qualified majority on a proposal from the Commission, decide on any adjustments required in the interests of the internal consistency of the common customs tariff as a result of applying the rules set out in Articles 19 and 20, taking account in particular of the degree of processing undergone by the various goods to which the common tariff applies.

Article 22 The Commission shall, within two years of the entry into force of this Treaty, determine the extent to which the customs duties of a fiscal nature referred to in Article 17 (2) shall be taken into account in calculating the arithmetical average provided for in Article 19 (1). The Commission shall take account of any protective character which such duties may have. Within six months of such determination, any Member State may request that the procedure provided for in Article 20 should be applied to the product in question, but in this event the percentage limit provided in that Article shall not be applicable to that State. 142

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Article 23 1. For the purpose of the progressive introduction of the common customs tariff, Member States shall amend their tariffs applicable to third countries as follows: (a) in the case of tariff headings on which the duties applied in practice on 1 January 1957 do not differ by more than 15 % in either direction from the duties in the common customs tariff, the latter duties shall be applied at the end of the fourth year after the entry into force of this Treaty; (b) in any other case, each Member State shall, as from the same date, apply a duty reducing by 30 % the difference between the duty applied in practice on 1 January 1957 and the duty in the common customs tariff; (c) at the end of the second stage this diffefeAce shall again be reduced by 30%; (d) in the case of tariff headings for which the 1 duties in the common customs tariff are not yet available at the end of the first stage, each Member State shall, within six months of the Council's action in accordance with Article 20, apply such duties as would result from application of the rules contained in this paragraph. 2. Where a Member State has been granted an authorization under Article 17 (4), it need not, for as long as that authorization remains valid, apply the preceding provisions to the tariff headings to which the authorization applies. When such authorization expires, the Member State concerned shall apply such duty as would have resulted from application of the rules contained in paragraph 1. 3. The common customs tariff shall be applied in its entirety by the end of the transitional period at the latest. Article 24 Member States shall remain free to change their duties more rapidly than is provided for in Article 23 in order to bring them into line with the common customs tariff. Article 25 1. If the Commission finds that the production in Member States of particular products contained in Lists B, C and D is insufficient to supply the demands of one of the Member States, and that such supply traditionally depends to a considerable extent on imports from third countries, the Council shall, acting by a qualified majority on a proposal from the Commission, grant the Member State concerned tariff quotas at a reduced rate of duty or duty free. Such quotas may not exceed the limits beyond which the risk might arise of activities being transferred to the detriment of other Member States. 2. In the case of the products in List E, and of those in List G for which the rates of duty have been determined in accordance with the procedure 143

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Regional Economic Institutions provided for in the third paragraph of Article 20, the Commission shall, where a change in sources of supply or shortage of supplies within the Community is such as to entail harmful consequences for the processing industries of a Member State, at the request of that Member State, grant it tariff quotas at a reduced rate of duty or duty free. Such quotas may not exceed the limits beyond which the risk might arise of activities being transferred to the detriment of other Member States. 3. In the case of the products listed in Annex II to this Treaty, the Commission may authorize any Member State to suspend, in whole or in part, collection of the duties applicable or may grant such Member State tariff quotas at a reduced rate of duty or duty free, provided that no serious disturbance of the market of the products concerned results therefrom. 4. The Commission shall periodically examine tariff quotas granted pursuant to this Article. Article 26 The Commission may authorize any Member State encountering special difficulties to postpone the lowering or raising of duties provided for in Article 23 in respect of particular headings in its tariff. Such authorization may only be granted for a limited period and in respect of tariff headings which, taken together, represent for such State not more than 5 % of the value of its imports from third countries in the course of the latest year for which statistical data are available. Article 27 Before the end of the first stage, Member States shall, in so far as may be necessary, take steps to approximate their provisions laid down by law, regulation or administrative action in respect of customs matters. To this end, the Commission shall make all appropriate recommendations to Member States. Article 28 Any autonomous alteration or suspension of duties in the common customs tariff shall be decided by the Council acting by a qualified majority on a proposal from the Commission.*

Article 29 In carrying out the tasks entrusted to it under this Section the Commission shall be guided by:

* Article as replaced by Article 16 (1) of the SEA.

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(a) the need to promote trade between Member States and third countries; (b) developments in conditions of competition within the Community in so far as they lead to an improvement in the competitive capacity of undertakings; (c) the requirements o f the Community as regards the supply o f raw materials and semi-finished goods; in this connection the Commission shall take care to avoid distorting conditions of competition between Member States in respect of finished goods; (d) the need to avoid serious disturbances in the economies of Member States and to ensure rational development o f production and an expansion o f consumption within the Community.

CHAPTER 2 ELIMINATION OF QUANTITATIVE RESTRICTIONS BETWEEN MEMBER STATES Article 30 Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.

Article 31 Member States shall refrain from introducing between themselves any new quantitative restrictions or measures having equivalent effect. This obligation shall, however, relate only to the degree o f liberalization attained in pursuance of the decisions of the Council of the Organization for European Economic Cooperation of 14 January 1955. Member States shall supply the Commission, not later than six months after the entry into force o f this Treaty, with lists o f the products liberalized by them in pursuance of these decisions. These lists shall be consolidated between Member States.

Article 32 In their trade with one another Member States shall refrain from making more restrictive the quotas and measures having equivalent effect existing at the date o f the entry into force of this Treaty. 145

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Regional Economic Institutions These quotas shall be abolished by the end of the transitional period at the latest. During that period, they shall be progressively abolished in accordance with the following provisions. Article 33 1. One year after the entry into force of this Treaty, each Member State shall convert any bilateral quotas open to any other Member States into global quotas open without discrimination to all other Member States. On the same date, Member States shall increase the aggregate of global quotas so established in such a manner as to bring about an crease of not less than 20% in their total value as compared with preceding year. The global quota for each product, however, shall be creased by not less than 10%.

the inthe in-

The quotas shall be increased annually in accordance with the same rules and in the same proportions in relation to the preceding year. The fourth increase shall take place at the end of the fourth year after the entry into force of this Treaty; the fifth, one year after the beginning of the second stage. 2. Where, in the case of a product which has not been liberalized, the global quota does not amount to 3 % of the national production of the State concerned, a quota equal to not less than 3 % of such national production shall be introduced not later than one year after the entry into force of this Treaty. This quota shall be raised to 4 % at the end of the second year, and to 5 % at the end of the third. Thereafter, the Member State concerned shall increase the quota by not less than 15 % annually. Where there is no such national production, the Commission shall take a decision establishing an appropriate quota. 3. At the end of the tenth year, each quota shall be equal to not less than 20 % of the national production. 4. If the Commission finds by means of a decision that during two successive years the imports of any product have been below the level of the quota opened, this global quota shall not be taken into account in calculating the total value of the global quotas. In such case, the Member State shall abolish quota restrictions on the product concerned. 5. In the case of quotas representing more than 20% of the national production of the product concerned, the Council may, acting by a qualified majority on a proposal from the Commission, reduce the minimum percentage of 10% laid down in paragraph 1. This alteration shall not, however, affect the obligation to increase the total value of global quotas by 20 % annually. 6. Member States which have exceeded their obligations as regards the degree of liberalization attained in pursuance of the decisions of the Council of the Organization for European Economic Cooperation of 146

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14 January 1955 shall be entitled, when calculating the annual total increase of 20% provided for in paragraph 1, to take into account the amount of imports liberalizd by autonomous action. Such calculation shall be submitted to the Commission for its prior approval. 7. The Commission shall issue directives establishing the procedure and timetable in accordance with which Member States shall abolish, as between themselves, any measures in existence when this Treaty enters into force which have an effect equivalent to quotas. 8. If the Commission finds that the application of the provisions of this Article, and in particular of the provisions concerning percentages, makes it impossible to ensure that the abolition of quotas provided for in the second paragraph of Article 32 is carried out progressively, the Council may, on a proposal from the Commission, acting unanimously during the first stage and by a qualified majority thereafter, amend the procedure laid down in this Article and may, in particular, increase the percentages fixed.

Article 34

1. Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States. 2. Member States shall, by the end of the first stage at the latest, abolish all quantitative restrictions on exports and any measures having equivalent effect which are in existence when this Treaty enters into force.

Article 35

The Member States declare their readiness to abolish quantitative restrictions on imports from and exports to other Member States more rapidly than is provided for in the preceding Articles, if their general economic situation and the situation of the economic sector concerned so permit. To this end, the Commission shall make recommendations to the Member States concerned. Article 36

The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

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Regional Economic Institutions Article 37 1. Member States shall progressively adjust any State monopolies of a commercial charactèr so as to ensure that when the transitional period has ended no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States. The provisions of this Article shall apply to any body through which a Member State, in law or in fact, either directly or indirectly supervises, determines or appreciably influences imports or exports between Member States. These provisions shall likewise apply to monopolies delegated by the State to others. 2. Member States shall refrain from introducing any new measure which is contrary to the principles laid down in paragraph 1 or which restricts the scope of the Articles dealing with the abolition of customs duties and quantitative restrictions between Member States. 3. The timetable for the measures referred to in paragraph 1 shall be harmonized with the abolition of quantitative restrictions on the same products provided for in Articles 30 to 34. If a product is subject to a State monopoly of a commercial character in only one or some Member States, the Commission may authorize the other Member States to apply protective measures until the adjustment provided for in paragraph 1 has been effected; the Commission shall determine the conditions and details of such measures. 4. If a State monopoly of a commercial character has rules which are designed to make it easier to dispose of agricultural products or obtain for them the best return, steps should be taken in applying the rules contained in this Article to ensure equivalent safeguards for the employment and standard of living of the producers concerned, account being taken of the adjustments that will be possible and the specialization that will be needed with the passage of time. 5. The obligations on Member States shall be binding only in so far as they are compatible with existing international agreements. 6. With effect from the first stage the Commission shall make recommendations as to the manner in which and the timetable according to which the adjustment provided for in this Article shall be carried out.

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TITLE II

Agriculture

Article 38 1. The common market shall extend to agriculture and trade in agricultural products. 'Agricultural products' means the products of the soil, of stockfamiing and of fisheries and products of first-stage processing directly related to these products.

2. Save as otherwise provided in Articles 39 to 46, the rules laid down for the establishment o f the common market shall apply to agricultural products.

3. The products subject to the provisions o f Articles 39 to 46 are listed in Annex II to this Treaty. Within two years of the entry into force of this Treaty, however, the Council shall, acting by a qualified majority on a proposal from the Commission, decide what products are to be added to this list.

4. The operation and development of the common market for agricultural products must be accompanied by the establishment of a common agricultural policy among the Member States.

Article 39 1.

The objectives of the common agricultural policy shall be:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development o f agricultural production and the optimum utilization of the factors of production, in particular labour; (b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; (c) to stabilize markets; (d) to assure the availability of supplies; (e) to ensure that supplies reach consumers at reasonable prices. 2. In working out the common agricultural policy and the special methods for its application, account shall be taken of : 149

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Regional Economic Institutions (a) the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions; (b) the need to effect the appropriate adjustments by degrees; (c) the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole.

Article 40 1. Member States shall develop the common agricultural policy by degrees during the transitional period and shall bring it into force by the end of that period at the latest. 2. In order to attain the objectives set out in Article 39 a common organization of agricultural markets shall be established. This organization shall take one of the following forms, depending on the product concerned: (a) common rules on competition; (b) compulsory coordination of the various national market organizations; (c) a European market organization. 3. The common organization established in accordance with paragraph 2 may include all measures required to attain the objectives set out in Article 39, in particular regulation of prices, aids for the production and marketing of the various products, storage and canyover arrangements and common machinery for stabilizing imports or exports. The common organization shall be limited to pursuit of the objectives set out in Article 39 and shall, exclude any discrimination between producers or consumers within the Community. Any common price policy shall be based on common criteria and uniform methods of calculation. 4. In order to enable the common organization referred to in paragraph 2 to attain its objectives, one or more agricultural guidance and guarantee funds may be set up. Article 41 To enable the objectives' set out in Article 39 to be attained, provision may be made within the framework of the common agricultural policy for measures such as:

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(a) an effective coordination of efforts in the spheres o f vocational training, of research and o f the dissemination o f agricultural knowledge; this may include joint financing o f projects or institutions; (b) joint measures to promote consumption o f certain products.

Article 42 The provisions of the Chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the Council within the framework of Article 43 (2) and (3) and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 39. The Council may, in particular, authorize the granting o f aid: (a) for the protection o f enterprises handicapped by structural or natural conditions; (b) within the framework o f economic development programmes.

Article 43 1. In order to evolve the broad lines of a common agricultural policy, the Commission shall, immediately this Treaty enters into force, convene a conference of the Member States with a view to making a comparison of their agricultural policies, in particular by producing a statement o f their resources and needs. 2. Having taken into account the work of the conference provided for in paragraph 1, after consulting the Economic and Social Committee and within two years of the entry into force of this Treaty, the Commission shall submit proposals for working out and implementing the common agricultural policy, including the replacement of the national organizations by one o f the forms of common organization provided for in Article 40 (2), and for implementing the measures specified in this Title. These proposals shall take account of the interdependence o f the agricultural matters mentioned in this Title. The Council shall, on a proposal from the Commission and after consulting the European Parliament, acting unanimously during the first two stages and by a qualified majority thereafter, make regulations, issue directives, or take decisions, without prejudice to any recommendations it may also make.

3. The Council may, acting by a qualified majority and in accordance with paragraph 2, replace the national market organizations by the common organization provided for in Article 40 (2) if: 151

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Regional Economic Institutions fa) the common organization offers Member States which are opposed to this measure and which have an organization of their own for the production in question equivalent safeguards for the employment and standard of living of the producers concerned, account being taken of the adjustments that will be possible and the specialization that will be needed with the passage of time; (b) such an organization ensures conditions for trade within the Community similar to those existing in a national market.

4. If a common organization for certain raw materials is established before a common organization exists for the corresponding processed products, such raw materials as are used for processed products intended for export to third countries may be imported from outside the Community.

Article 44

1. In so far as progressive abolition of customs duties and quantitative restrictions between Member States may result in prices likely to jeopardize the attainment of the objectives set out in Article 39, each Member State shall, during the transitional period, be entitled to apply to particular products, in a non-discriminatory manner and in substitution for quotas and to such an extent as shall not impede the expansion of the volume of trade provided for in Article 45 (2), a system of minimum prices below which imports may be either: — temporarily suspended or reduced; or — allowed, but subjected to the condition that they are made at a price higher than the minimum price for the product concerned. In the latter case the minimum prices shall not include customs duties. 2. Minimum prices shall neither cause a reduction of the trade existing between Member States when this Treaty enters into force nor form an obstacle to progressive expansion of this trade. Minimum prices shall not be applied so as to form an obstacle to the development of a natural preference between Member States. 3. As soon as this Treaty enters into force the Council shall, on a proposal from the Commission, determine objective criteria for the establishment of minimum price systems and for the fixing of such prices. These criteria shall in particular take account of the average national production costs in the Member State applying the minimum price, of the position of the various undertakings concerned in relation to such average production costs, and of the need to promote both the progressive improvement of agricultural practice and the adjustments and specialization needed within the common market. 152

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The Commission shall further propose a procedure for revising these criteria in order to allow for and speed up technical progress and to approximate prices progressively within the common market These criteria and the procedure for revising them shall be determined by the Council acting unanimously within three years of the entry into force of this Treaty. 4. Until the decision of the Council takes effect, Member States may fix minimum prices on condition that these are communicated beforehand to the Commission and to the other Member States so that they may submit their comments. Once the Council has taken its decision, Member States shall fix minimum prices on the basis of the criteria determined as above. The Council may, acting by a qualified majority on a proposal from the Commission, rectify any decisions taken by Member States which do not conform to the criteria defined above. 5. If it does not prove possible to determine the said objective criteria for certain products by the beginning of the third stage, the Council may, acting by a qualified majority on a proposal from the Commission, vary the minimum prices applied to these products. 6. At the end of the transitional period, a table of minimum prices still in force shall be drawn up. The Council shall, acting on a proposal from the Commission and by a majority of nine votes in accordance with the weighting laid down in the first subparagraph of Article 148 (2), determine the system to be applied within the framework of the common agricultural policy.

Article 45 1. Until national market organizations have been replaced by one of the forms of common organization referred to in Article 40 (2), trade in products in respect of which certain Member States: — have arrangements designed to guarantee national producers a market for their products; and — are in need of imports, shall î>e developed by the conclusion of long-term agreements or contracts between importing and exporting Member States. These agreements or contracts shall be directed towards the progressive abolition of any discrimination in the application of these arrangements t o j the various producers within the Community. 153

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Regional Economic Institutions Such agreements or contracts shall be concluded during the first stage; account shall be taken of the principle or reciprocity.

2. As regards quantities, these agreements or contracts shall be based on the average volume of trade between Member States in the products concerned during the three years before the entry into force of this Treaty a n d shall provide for an increase in the volume of trade within the limits of existing requirements, account being taken of traditional patterns of trade.

As regards prices, these agreements or contracts shall enable producers to dispose of the agreed quantities at prices which shall be progressively approximated to those paid to national producers on the domestic market of the purchasing country.

This approximation shall proceed as steadily as possible a n d shall be completed by the end of the transitional period at the latest.

Prices shall be negotiated between the parties concerned within the framework of directives issued by the Commission for the purpose of implementing the two preceding subparagraphs.

If the first stage is extended, these agreements or contracts shall continue to be carried out in accordance with the conditions applicable at the end of the fourth year after the entry into force of this Treaty, the obligation to increase quantities a n d to approximate prices being suspended until the transition to the second stage.

Member States shall avail themselves of any opportunity open to them under their legislation, particularly in respect of import policy, to ensure the conclusion and carrying out of these agreements or contracts.

3. To the extent that Member States require raw materials for the manufacture of products to be exported outside the Community in competition with products of third countries, the above agreements or contracts shall not form an obstacle to the importation of raw materials for this purpose from third countries. This provision shall not, however, apply if the C o u n cil unanimously decides to make provision for payments required to compensate for the higher price paid on goods imported for this purpose o n the basis of these agreements or contracts in relation to the delivered price of the same goods purchased on the world market.

Article 46

Where in a Member State a product is subject to a national market organization or to internal rules having equivalent effect which affect the competitive position of similar production in another Member State, a countervailing charge shall be applied by Member States to imports of this 154

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EEC product coming from the Member State where such organization or rules exist, unless that State applies a countervailing charge on export.

The Commission shall fix the amount of these charges at the level required to redress the balance; it may also authorize other measures, the conditions and details of which it shall determine.

Article 47

As to the functions to be performed by the Economic a n d Social Committee in pursuance of this Title, its agricultural section shall hold itself at the disposal of the Commission to prepare, in accordance with the provisions of Articles 197 and 198, the deliberations of the Committee.

TITLE III

Free movement of persons, services and capital

CHAPTER

1

WORKERS

Article 48 1. Freedom of movement for workers shall be secured within the Community by the end of the transitional period at the latest.

2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.

3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health: (a) to accept offers of employment actually m a d e ; (bj to move freely within the territory of Member States for this purpose;

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Regional Economic Institutions (c) to stay in a Member State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid d o w n by law, regulation or administrative action ; (d) to remain in the territory of a Member State after having been employed in that State, subject to conditions which shall be embodied in implementing regulations to be drawn u p by the Commission. 4. The provisions of this Article shall not apply to employment in the public service.

Article 49 As soon as this Treaty enters into force, the Council shall, acting by a qualified majority on a proposal from the Commission, in cooperation with the European Parliament a n d after consulting the Economic and Social Committee, issue directives or make regulations setting out the measures required to bring about, by progressive stages, freedom of movement for workers, as defined in Article 48, in particular:* (a) by ensuring close cooperation between national employment services; (b) by systematically and progressively abolishing those administrative procedures and practices a n d those qualifying periods in respect of eligibility for available employment, whether resulting from national legislation or from agreements previously concluded between Member States, the maintenance of which would form an obstacle to liberalization of the movement of workers; (c) by systematically and progressively abolishing all such qualifying periods a n d other restrictions provided for either under national legislation or under agreements previously concluded between Member States as imposed on workers of other Member States conditions regarding the free choice of employment other than those imposed on workers of the State concerned; (d) by setting u p appropriate machinery to bring offers of employment into touch with applications for employment and to facilitate the achievement of a balance between supply and d e m a n d in the employment market in such a way as to avoid serious threats to the standard of living and level of employment in the various regions a n d industries.

Article 50 Member States shall, within the framework of a joint programme, encourage the exchange of young workers.

* First sentence as amended by Article 6 (3) of the SEA.

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EEC Article 51 The Council shall, acting unanimously on a proposal from the Commission, adopt such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependants: (a) aggregation, for the purpose of acquiring a n d retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries; (b) payment of benefits to persons resident in the territories of Member States.

CHAPTER

2

RIGHT OF ESTABLISHMENT Article 52 Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be abolished by progressive stages in the course of the transitional period. Such progressive abolition shall also apply to restrictions on the setting u p of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take u p and pursue activities as self-employed persons and to set u p and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.

Article 53 Member States shall not introduce any new restrictions o n the right of establishment in their territories of nationals of other Member States, save as otherwise provided in this Treaty.

Article 54 I. Before the end of the first stage, the Council shall, acting unanimously from the Commission and after consulting the Economic and Social Committee and the European Parliament, draw u p a general programme for the abolition of existing restrictions on freedom of establishment within the Community. The Commission shall submit its proposal to the Council during the first two years of the first stage. 157

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The programme shall set out the general conditions under which freedom of establishment is to be attained in the case of each type of activity and in particular the stages by which it is to be attained. 2. In order to implement this general programme or, in the absence of such programme, in order to achieve a stage in attaining freedom of establishment as regards a particular activity, the Council shall, acting on a proposal from the Commission, in cooperation with the European Parliament and after consulting the Economic and Social Committee, issue directives, acting unanimously until the end of the first stage and by a qualified majority thereafter.* 3. The Council and the Commission shall carry out the duties devolving upon them under the preceding provisions, in particular: (a) by according, as a general rule, priority treatment to activities where freedom of establishment makes a particularly valuable contribution to the development of production and trade; (b) by ensuring close cooperation between the competent authorities in the Member States in order to ascertain the particular situation within the Community of the various activities concerned; (c) by abolishing those administrative procedures and practices, whether resulting from national legislation or from agreements previously concluded between Member States, the maintenance of which would form an obstacle to freedom of establishment; id) by ensuring that workers of one Member State employed in the territory of another Member State may remain in that territory for the purpose of taking up activities therein as self-employed persons, where they satisfy the conditions which they would be required to satisfy if they were entering that State at the time when they intended to take up such activities;

(e) by enabling a national of one Member State to acquire and use land and buildings situated in the territory of another Member State, in so far as this does not conflict with the principles laid down in Article 39 (2); ( f ) by effecting the progressive abolition of restrictions on freedom of establishment in every branch of activity under consideration, both as regards the conditions for setting up agencies, branches or subsidiaries in the territory of a Member State and as regards the subsidiaries in the territory of a Member State and as regards the conditions governing the entry of personnel belonging to the main establishment into managerial or supervisory posts in such agencies, branches or subsidiaries;

* Paragraph 2 as amended by Article 6 (4) of the SEA.

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(g) by coordinating to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms within the meaning of the second paragraph of Article 58 with a view to making such safeguards equivalent throughout the Community; (h) by satisfying themselves that the conditions of establishment are not distorted by aids granted by Member States. Article 55 The provisions of this Chapter shall not apply, so far as any given Member State is concerned, to activities which in that State are connected, even occasionally, with the exercise of official authority. The Council may, acting by a qualified majority on a proposal from the Commission, rule that the provisions of this Chapter shall not apply to certain activities. Article 56 1. The provisions of this Chapter and measures taken in pursuance thereof shall not prejudice the applicability of provisions laid d o w n by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of public policy, public security or public health. 2. Before the end of the transitional period, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, issue directives for the coordination of the aforementioned provisions laid down by law, regulation or administrative action. After the end of the second stage, however, the Council shall, acting by a qualified majority on a proposal from the Commission and in cooperation with the European Parliament, issue directives for the coordination of such provisions as, in each Member State, are a matter for regulation or administrative action.* Article 57 1. In order to make it easier for persons to take u p and pursue activities as self-employed persons, the Council shall, on a proposal from the Commission and in cooperation with the European Parliament, acting unanimously during the first stage and by a qualified majority thereafter, issue directives for the mutual recognition of diplomas, certificates a n d other evidence of formal qualifications.* 2. For the same purpose, the Council shall, before the end of the transitional period, acting on a proposal from the Commission and after consulting the European Parliament, issue directives for the coordination of the provisions laid down by law, regulation or administrative action in Member States concerning the taking u p and pursuit of activities as self-

* Second sentence of paragraph 2 as amended by Article 6 (5) of the SEA. * Paragraph 1 as amended by Article 6 (6) of the SEA.

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Regional Economic Institutions ¡employed persons. Unanimity shall be required for directives the implementation of which involves in at least one Member State amendment of the existing principles laid down by law governing the professions with respect to training and conditions of access for natural persons.** In other cases the Council shall act by a qualified majority, in cooperation with the European Parliament.*** 3. In the case of the medical and allied and pharmaceutical professions, the progressive abolition of restrictions shall be dependent upon coordination of the conditions for their exercise in the various Member States. Article 58 i

Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States. 'Companies or firms' means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profitmaking.

CHAPTER

3

SERVICES Article 59 Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be progressively abolished during the transitional period in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended. The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.* Article 60 Services shall be considered to be 'services' within the meaning of this Treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.

* * Second sentence of paragraph 2 as amended by Article 16 (2) of the SEA. Third sentence of paragraph 2 as amended by Article 6 (7) of the SEA. * Second paragraph as amended by Article 16 (3) of the SEA.

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'Services' shall in particular include: (a) activities of an industrial character; (b) activities of a commercial character; (c) activities of craftsmen; (d) activities of the professions. Without prejudice to the provisions of the Chapter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the State where the service is provided, under the same conditions as are imposed by that State on its own nationals.

Article 61 1. Freedom to provide services in the field of transport shall be governed by the provisions of the Title relating to transport. 2. The liberalization of banking and insurance services connected with movements of capital shall be effected in step with the progressive liberalization of movement of capital.

Article 62 Save as otherwise provided in this Treaty, Member States shall not introduce any new restrictions on the freedom to provide services which have in fact been attained at the date of the entry into force of this Treaty.

Article 63 1. Before the end of the first stage, the Council shall, acting unanimously on a proposal from the Commission and after consulting the Economic and Social Committee and the European Parliament, draw up a general programme for the abolition of existing restrictions on freedom to provide services within the Community. The Commission shall submit its proposal to the Council during the first two years of the first stage. The programme shall set out the general conditions under which and the stages by which each type of service is to be liberalized. 2. In order to implement this general programme or, in the absence of such programme, in order to achieve a stage in the liberalization of a specific service, the Council shall, on a proposal from the Commission and after consulting the Economic and Social Committee and the European Parliament, issue directives acting unanimously until the end of the first stage and by a qualified majority thereafter. J. As regards the proposals and decisions referred to in paragraphs 1 and 2, priority shall as a general rule be given to those services which directly affect production costs or the liberalization of which helps to promote trade in goods.

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Regional Economic Institutions Article 64 The Member States declare their readiness to undertake the liberalization of services beyond the extent required by the directives issued pursuant to Article 63 (2), if their general economic situation and the situation of the economic sector concerned so permit. To this end, the Commission shall make recommendations to the Member States concerned.

Article 65 As long as restrictions on freedom to provide services have not been abolished, each Member State shall apply such restrictions without distinction on grounds of nationality or residence to all persons providing services within the meaning of the first paragraph of Article 59.

Article 66 The provisions of Articles 55 to 58 shall apply to the matters covered by this Chapter.

CHAPTER

4

CAPITAL Article 67 1. During the transitional period and to the extent necessary to ensure the proper functioning of the common market, Member States shall progressively abolish between themselves all restrictions on the movement of capital belonging to persons resident in Member States and any discrimination based on the nationality or on the place of residence of the parties or on the place where such capital is invested. 2. Current payments connected with the movement of capital between Member States shall be freed from all restrictions by the end of the first stage at the latest.

Article 68 I. Member States shall, as regards the matters dealt with in this Chapter, be as liberal as possible in granting such exchange authorizations as are still necessary after the entry into force of this Treaty.

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2. Where a Member State applies to the movements of capital liberalized in accordance with the provisions of this Chapter the domestic rules governing the capital market and the credit system, it shall do so in a non-discriminatory manner. 3. Loans for the direct or indirect financing of a Member State or its regional or local authorities shall not be issued or placed in other Member States unless the States concerned have reached agreement thereon. This provision shall not preclude the application of Article 22 of the Protocol on the Statute of the European Investment Bank.

Article 69

The Council shall, on a proposal from the Commission, which for this purpose shall consult the Monetary Committee provided for in Article 105, issue the necessary directives for the progressive implementation of the provisions of Article 67, acting unanimously during the first two stages and by a qualified majority thereafter.

Article 70

1. The Commission shall propose to the Council measures for the progressive coordination of the exchange policies of Member States in respect of the movement of capital between those States and third countries. For this purpose the Council shall issue directives, acting by a qualified majority. It shall endeavour to attain the highest possible degree of liberalization. Unanimity shall be required for measures which constitute a step back as regards the liberalization of capital movements.* 2. Where the measures taken in accordance with paragraph 1 do not permit the elimination of differences between the exchange rules of Member States and where such differences could lead persons resident in one of the Member States to use the freer transfer facilities within the Community which are provided for in Article 67 in order to evade the rules of one of the Member States concerning the movement of capital to or from third countries, that State may, after consulting the other Member States and the Commission, take appropriate measures to overcome these difficulties. Should the Council find that these measures are restricting the free movement of capital within the Community to a greater extent than is required for the purpose of overcoming the difficulties, it may, acting by a qualified majority on a proposal from the Commission, decide that the State concerned shall amend or abolish these measures.

* Paragraph 1, excepting the fust sentence, as amended by Article 16 (4) of the SEA.

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Regional Economic Institutions Article 71 Member States shall endeavour to avoid introducing within the Community any new exchange restrictions on the movement of capital and current payments connected with such movements, and shall endeavour not to make existing rules more restrictive. They declare their readiness to go beyond the degree of liberalization of capital movements provided for in the preceding Articles in so far as their economic situation, in particular the situation of their balance of payments, so permits. The Commission may, after consulting the Monetary Committee, make recommendations to Member States on this subject. Article 72 Member States shall keep the Commission informed of any movements of capital to and from third countries which come to their knowledge. The Commission may deliver to Member States any opinions which it considers appropriate on this subject. Article 73 1. If movements of capital lead to disturbances in the functioning of the capital market in any Member State, the Commission shall, after consulting the Monetary Committee, authorize that State to take protective measures in the field of capital movements, the conditions and details of which the Commission shall determine. The Council may, acting by a qualified majority, revoke this authorization or amend the conditions or details thereof. 2. A Member State which is in difficulties may, however, on grounds of secrecy or urgency, take the measures mentioned above, where this proves necessary, on its own initiative. The Commission and the other Member States shall be informed of such measures by the date of their entry into force at the latest. In this event the Commission may, after consulting the Monetary Committee, decide that the State concerned shall amend or abolish the measures.

TITLE IV

Transport Article 74 The objectives of this Treaty shall, in matters governed by this Title, be pursued by Member States within the framework of a common transport policy. 164

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Article 75 /. For the purpose of implementing Article 74, and taking into account the distinctive features of transport, the Council shall, acting unanimously until the end of the second stage and by a qualified majority thereafter, lay down, on a proposal from the Commission and after consulting the Economic and Social Committee and the European Parliament: (a) common rules applicable to international transport to or from the territory of a Member State or passing across the territory of one or more Member States; (b) the conditions under which non-resident carriers may operate transport services within a Member State; (c) any other appropriate provisions. 2. The provisions referred to in (a) and (b) of paragraph 1 shall be laid down during the transitional period. 3. By way of derogation from the procedure provided for in paragraph 1, where the application of provisions concerning the principles of the regulatory system for transport would be liable to have a serious effect on the standard of living and on employment in certain areas and on the operation of transport facilities, they shall be laid down by the Council acting unanimously. In so doing, the Council shall take into account the need for adaptation to the economic development which will result from establishing the common market.

Article 76 Until the provisions referred to in Article 75 (1) have been laid down, no Member State may, without the unanimous approval of the Council, make the various provisions governing the subject when this Treaty enters into force less favourable in their direct or indirect effect on carriers of other Member States as compared with carriers who are nationals of that State.

Article 77 Aids shall be compatible with this Treaty if they meet the needs of coordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service.

Article 78 Any measures taken within the framework of this Treaty in respect of transport rates and conditions shall take account of the economic circumstances of carriers.

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Regional Economic Institutions Article 79 1. In the case of transport within the Community, discrimination which takes the form of carriers charging different rates and imposing different conditions for the carriage of the same goods over the same transport links on grounds of the country of origin or of destination of the goods in question, shall be abolished, at the latest, before the end of the second stage. 2. Paragraph 1 shall not prevent the Council from adopting other measures in pursuance of Article 75 (1). 3. Within two years of the endy into force of this Treaty, the Council shall, acting by a qualified majority on a proposal from the Commission and after consulting the Economic and Social Committee, lay down rules for implementing the provisions of paragraph 1. The Council may in particular lay down the provisions needed to enable the institutions of the Community to secure compliance with the rule laid down in paragraph 1 and to ensure that users benefit from it to the full. 4. The Commission shall, acting on its own initiative or on application by a Member State, investigate any cases of discrimination falling within paragraph 1 and, after consulting any Member State concerned, shall take the necessary decisions within the framework of the rules laid down in accordance with the provisions of paragraph 3.

Article 80 1. The imposition by a Member State, in respect of transport operations carried out within the Community, of rates and conditions involving any element of support or protection in the interest of one or more particular undertakings or industries shall be prohibited as from the beginning of the second stage, unless authorized by the Commission. 2. The Commission shall, acting on its own initiative or on application by a Member State, examine the rates and conditions referred to in paragraph 1, taking account in particular of the requirements of an appropriate regional economic policy, the needs of underdeveloped areas and the problems of areas seriously affected by political circumstances on the one hand, and of the effects of such rates and conditions on competition between the different modes of transport on the other. After consulting each Member State concerned, the Commission shall take the necessary decisions. 3. The prohibition provided for in paragraph 1 shall not apply to tariffs fixed to meet competition. 166

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Article 81 Charges or dues in respect of the crossing of frontiers which are charged by a carrier in addition to the transport rates shall not exceed a reasonable level after taking the costs actually incurred thereby into account. Member States shall endeavour to reduce these costs progressively. The Commission may make recommendations to Member States for the application of this Article.

Article 82 The provisions of this Title shall not form an obstacle to the application of measures taken in the Federal Republic of Germany to the extent that such measures are required in order to compensate for the economic disadvantages caused by the division of Germany to the economy of certain areas of the Federal Republic affected by that division.

Article 83 An Advisory Committee consisting of experts designated by the Governments of Member States, shall be attached to the Commission. The Commission, whenever it considers it desirable, shall consult the Committee on transport matters without prejudice to the powers of the transport section of the Economic and Social Committee.

Article 84 1. The provisions of this Title shall apply to transport by rail, road and inland waterway. 2. The Council may, acting by a qualified majority, decide whether, to what extent and by what procedure appropriate provisions may be laid down for sea and air transport.* The procedural provisions of Article 75 (1) and (3) shall apply.**

* First subparagraph of paragraph 2 as amended by Article 16 (5) of the SEA. ** Second subparagraph of paragraph 2 as amended by Article 16 (6) of the SEA.

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Regional Economic Institutions PART

THREE

POLICY OF THE COMMUNITY

TITLE I

Common rules CHAPTER

I

RULES O N COMPETITION Section I Rules applying to undertakings Article 85 1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; i

(b) limit or control production, markets, technical development, or investment; (cj share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of : — any agreement or category of agreements between undertakings; — any decision or category of decisions by associations of undertakings;

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— any concerted practice or category of concerted practices; which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

Article 86 Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers ; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; Id) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. Article 87 1. Within three years of the entry into force of this Treaty the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, adopt any appropriate regulations or directives to give effect to the principles set out in Articles 85 and 86. If such provisions have not been adopted within the period mentioned, they shall be laid down by the Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament. 2. The regulations or directives referred to in paragraph 1 shall be designed in particular: (a) to ensure compliance with the prohibitions laid down in Article 85 (1) and in Article 86 by making provision for fines and periodic penalty payments;

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Regional Economic Institutions (b) to lay down detailed rules for the application of Article 85 (3), taking into account the need to ensure effective supervision on the one hand, and to simplify administration to the greatest possible extent on the other; (c) to define, if need be, in the various branches of the economy, the scope of the provisions of Articles 85 and 86; (d) to define the respective functions of the Commission and of the Court of Justice in applying the provisions laid down in this paragraph; (e) to determine the relationship between national laws and the provisions contained in this Section or adopted pursuant to this Article. Article 88 Until the entry into force of the provisions adopted in pursuance of Article 87, the authorities in Member States shall rule on the admissibility of agreements, decisions and concerted practices and on abuse of a dominant position in the common market in accordance with the law of their country and with the provisions of Article 85, in particular paragraph 3, and of Article 86.

Article 89 1. Without prejudice to Article 88, the Commission shall, as soon as it takes up its duties, ensure the application of the principles laid down in Articles 85 and 86. On application by a Member State or on its own initiative, and in cooperation with the competent authorities in the Member States, who shall give it their assistance, the Commission shall investigate cases of suspected infringement of these principles. If it finds that there has been an infringement, it shall propose appropriate measures to bring it to an end. 2. If the infringement is not brought to an end, the Commission shall record such infringement of the principles in a reasoned decision. The Commission may publish its decision and authorize Member States to take the measures, the conditions and details of which it shall determine, needed to remedy the situation.

Article 90 1. In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 7 and Articles 85 to 94. 2. Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks 170

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EEC assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community. 3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.

Section

2

Dumping Article 91 1. If during the transitional period, the Commission, on application by a Member State or by any other interested party, finds that dumping is being practised within the common market, it shall address recommendations to the person or persons with whom such practices originate for the purpose of putting an end to them. Should the practices continue, the Commission shall authorize the injured Member State to take protective measures, the conditions and details of which the Commission shall determine. 2. As soon as this Treaty enters into force, products which originate in or are in free circulation in one Member State and which have been exported to another Member State shall, on reimportation, be admitted into the territory of the first-mentioned State free of all customs duties, quantitative restrictions or measures having equivalent effect. The Commission shall lay down appropriate rules for the application of this paragraph.

Section

3

Aids granted by States

Article 92 1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market. 2.

The following shall be compatible with the common market:

fa) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

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Regional Economic Institutions (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. 3. The following may be considered to be compatible with the common market: la) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. However, the aids granted to shipbuilding as of 1 January 1957 shall, in so far as they serve only to compensate for the absence of customs protection, be progressively reduced under the same conditions as apply to the elimination of customs duties, subject to the provisions of this Treaty concerning common commercial policy towards third countries; Id) such other categories of aid as may be specified by decision of the Council acting by a qualified majority on a proposal from the Commission.

Article 93 1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market. 2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the common market having regard to Article 92, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission. If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 169 and 170, refer the matter to the Court of Justice direct. On application by a Member State, the Council, may, acting unanimously, decide that aid which that State is granting or intends to grant 172

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shall be considered to be compatible with the common market, in derogation from the provisions of Article 92 or from the regulations provided for in Article 94, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known. If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case. 3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 92, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. Article 94 The Council may, acting by a qualified majority on a proposal from the Commission, make any appropriate regulations for the application of Articles 92 and 93 and may in particular determine the conditions in which Article 93 (3) shall apply and the categories of aid exempted from this procedure.

CHAPTER 2 TAX PROVISIONS Article 95 No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products. Member States shall, not later than at the beginning of the second stage, repeal or amend any provisions existing when this Treaty enters into force which conflict with the preceding rules. Article 96 Where products are exported to the territory of any Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or indirectly. 173

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Article 97 Member States which levy a turnover tax calculated on a cumulative multi-stage tax system may, in the case of internal taxation imposed by them on imported products or of repayments allowed by them on exported products, establish average rates for products or groups of products, provided that there is no infringement of the principles laid down in Articles 95 and 96. Where the average rates established by a Member State do not conform to these principles, the Commission shall address appropriate directives or decisions to the State concerned. Article 98 In the case of charges other than turnover taxes, excise duties and other forms of indirect taxation, remissions and repayments in respect of exports to other Member States may not be granted and countervailing charges in respect of imports from Member States may not be imposed unless the measures contemplated have been previously approved for a limited period by the Council acting by a qualified majority on a proposal from the Commission.

Article 99* The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, adopt provisions for the harmonization of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonization is necessary to ensure the establishment and the functioning of the internal market within the time-limit laid down in Article 8a.

CHAPTER 3

APPROXIMATION OF LAWS

Article 100 The Council shall, acting unanimously on a proposal from the Commission, issue directives for the approximation of such provisions laid down by law, regulation or administrative action in Member States as directly affect the establishment or functioning of the common market.

* Article as replaced by Article 17 of the SEA.

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The European Parliament and the Economic and Social Committee shall be consulted in the case of directives whose implementation would, in one or more Member States, involve the amendment of legislation.

Article 100a*

I. By way of derogation from Article 100 and save where otherwise provided in this Treaty, the following provisions shall apply for the achievement of the objectives set out in Article 8a. The Council shall, acting by a qualified majority on a proposal from the Commission in cooperation with the European Parliament and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.

2. Paragraph 1 shall not apply to fiscal provisions, to those relating to the free movement of persons nor to those relating to the rights and interests of employed persons.

3. The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection.

4. If, after the adoption of a harmonization measure by the Council acting by a qualified majority, a Member State deems it necessary to apply national provisions on grounds of major needs referred to in Article 36, or relating to protection of the environment or the working environment, it shall notify the Commission of these provisions. The Commission shall confirm the provisions involved after having verified that they are not a means of arbitrary discrimination or a disguised restriction on trade between Member States.

By way of derogation from the procedure laid down in Articles 169 and 170, the Commission or any Member State may bring the matter directly before the Court of Justice if it considers that another Member State is making improper use of the powers provided for in this Article.

5. The harmonization measures referred to above shall, in appropriate cases, include a safeguard clause authorizing the Member States to take, for one or more of the non-economic reasons referred to in Article 36, provisional measures subject to a Community control procedure.

» Article added by Article 18 of the SEA.

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Regional Economic Institutions Article 100b*

I. During 1992, the Commission shall, together with each Member State, draw up an inventory of national laws, regulations and administrative provisions which fall under Article 100a and which have not been harmonized pursuant to that Article.

The Council, acting in accordance with the provisions of Article 100a, may decide that the provisions in force in a Member State must be recognized as being equivalent to those applied by another Member State.

2.

The provisions of Article 100a (4) shall apply by analogy.

3. The Commission shall draw up the inventory referred to in the first subparagraph of paragraph 1 and shall submit appropriate proposals in good time to allow the Council to act before the end of 1992.

Article 101

Where the Commission finds that a difference between the provisions laid down by law, regulation or administrative action in Member States is distorting the conditions of competition in the common market and that the resultant distortion needs to be eliminated, it shall consult the Member States concerned.

If such consultation does not result in an agreement eliminating the distortion in question, the Council shall, on a proposal from the Commission, acting unanimously during the first stage and by a qualified majority thereafter, issue the necessary directives. The Commission and the Council may take any other appropriate measures provided for in this Treaty.

Article 102

I. Where there is reason to fear that the adoption or amendment of a provision laid down by law, regulation or administrative action may cause distortion within the meaning of Article 101, a Member State desiring to proceed therewith shall consult the Commission. After consulting the Member States, the Commission shall recommend to the States concerned such measures as may be appropriate to avoid the distortion in question.

* Article added by Article 19 of the SEA.

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2. If a State desiring to introduce or amend its own provisions does not comply with the recommendation addressed to it by the Commission, other Member States shall not be required, in pursuance of Article 101, to amend their own provisions in order to eliminate such distortion. If the Member State which has ignored the recommendation of the Commission causes distortion detrimental only to itself, the provisions of Article 101 shall not apply.

TITLE II

Economic policy CHAPTER 1* COOPERATION IN ECONOMIC A N D MONETARY POLICY (ECONOMIC A N D MONETARY U N I O N ) Article 102a 1. In order to ensure the convergence of economic and monetary policies which is necessary for the further development of the Community, Member States shall cooperate in accordance with the objectives of Article 104. In so doing, they shall take account of the experience acquired in cooperation within the framework of the European Monetary System (EMS) and in developing the ECU, and shall respect existing powers in this field. 2. Insofar as further development in the field of economic and monetary policy necessitates institutional changes, the provisions of Article 236 shall be applicable. The Monetary Committee and the Committee of Governors of the Central Banks shall also be consulted regarding institutional changes in the monetary area.

CHAPTER 2** CONJUNCTURAL POLICY Article 103 1. Member States shall regard their conjunctural policies as a matter of common concern. They shall consult each other and the Commission on the measures to be taken in the light of the prevailing circumstances.

* Chapter as inserted in Title 11 of Pait Three of the Treaty by Article 20 of the SEA. ** Renumbering of the Chapter as established by Article 20 (2) of the SEA.

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Regional Economic Institutions 2. Without prejudice to any other procedures provided for in this Treaty, the Council may, acting unanimously on a proposal from the Commission, decide upon the measures appropriate to the situation. 3. Acting by a qualified majority on a proposal from the Commission, the Council shall, where required, issue any directives needed to give effect to the measures decided upon under paragraph 2. 4. The procedures provided for in this Article shall also apply if any difficulty should arise in the supply of certain products.

CHAPTER

3*

BALANCE OF PAYMENTS

Article 104 Each Member State shall pursue the economic policy needed to ensure the equilibrium of its overall balance of payments and to maintain confidence in its currency, while taking care to ensure a high level of employment and a stable level of prices.

Article 105 1. In order to facilitate attainment of the objectives set out in Article 104, Member States shall coordinate their economic policies. They shall for this purpose provide for cooperation between their appropriate administrative departments and between their central banks. The Commission shall submit to the Council recommendations on how to achieve such cooperation. 2. In order to promote coordination of the policies of Member States in the monetary field to the full extent needed for the functioning of the common market, a Monetary Committee with advisory status is hereby set up. It shall have the following tasks: — to keep under review the monetary and financial situation of the Member States and of the Community and the general payments system of the Member States and to report regularly thereon to the Council and to the Commission;

* Renumbering of the Chapter as established by Article 20 (2) of the SEA.

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— to deliver opinions at the request of the Council or of the Commission or on its own initiative, for submission to these institutions. The Member States a n d the Commission shall each appoint two members of the Monetary Committee. Article 106 1. Each Member State undertakes to authorize, in the cuiTency of the Member State in which the creditor or the beneficiary resides, any payments connected with the movement of goods, services or capital, a n d any transfers of capital a n d earnings, to the extent that the movement of goods, services, capital and persons between Member States has been liberalized pursuant to this Treaty. The Member States declare their readiness to undertake the liberalization of payments beyond the extent provided in the preceding subparagraph, in so far as their economic situation in general and the state of their balance of payments in particular so permit. 2. In so far as movements of goods, services, and capital are limited only by restrictions on payments connected therewith, these restrictions shall be progressively abolished by applying, mutatis mutandis, the provisions of the Chapters relating to the abolition of quantitative restrictions, to the liberalization of services a n d to the free movement of capital. 3. Member States undertake not to introduce between themselves any new restrictions on transfers connected with the invisible transactions listed in Annex III to this Treaty. The progressive abolition of existing restrictions shall be effected in accordance with the provisions of Articles 63 to 65, in so far as such abolition is not governed by the provisions contained in paragraphs 1 and 2 or by the Chapter relating to the free movement of capital. 4. If need be, Member States shall consult each other on the measures to be taken to enable the payments a n d transfers mentioned in this Article to be effected; such measures shall not prejudice the attainment of the objectives set out in this Chapter.

Article 107 1. Each Member State shall treat its policy with regard to rates of exchange as a matter of c o m m o n concern. 2. If a Member State makes an alteration in its rate of exchange which is inconsistent with the objectives set out in Article 104 a n d which seriously distorts conditions of competition, the Commission may, after consulting the Monetary Committee, authorize other Member States to take for a strictly limited period the necessary measures, the conditions a n d details of which it shall determine, in order to counter the consequences of such alteration. 179

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Regional Economic Institutions Article 108 1. Where a Member State is in difficulties or is seriously threatened with difficulties as regards its balance of payments either as a result of an overall disequilibrium in its balance of payments, or as a result of the type of currency at its disposal, and where such difficulties are liable in particular to jeopardize the functioning of the common market or the progressive implementation of the common commercial policy, the Commission shall immediately investigate the position of the State in question and the action which, making use of all the means at its disposal, that State has taken or may take in accordance with the provisions of Article 104. The Commission shall state what measures it recommends the State concerned to take. If the action taken by a Member State and the measures suggested by the Commission do not prove sufficient to overcome the difficulties which have arisen or which threaten, the Commission shall, after consulting the Monetary Committee, recommend to the Council the granting of mutual assistance and appropriate methods therefor. The Commission shall keep the Council regularly informed of the situation and of how it is developing.

2. The Council, acting by a qualified majority, shall grant such mutual assistance; it shall adopt directives or decisions laying down the conditions and details of such assistance, which may take such forms as: (a) a concerted approach to or within any other international organizations to which Member States may have recourse; (b) measures needed to avoid deflection of trade where the State which is in difficulties maintains or reintroduces quantitative restrictions against third countries; (c) the granting of limited credits by other Member States, subject to their agreement. During the transitional period, mutual assistance may also take the form of special reductions in customs duties or enlargements of quotas in order to facilitate an increase in imports from the State which is in difficulties, subject to the agreement of the States by which such measures would have to be taken.

J. If the mutual assistance recommended by the Commission is granted by the Council or if the mutual assistance granted and measures taken are insufficient, the Commission shall authorize State which is in difficulties to take protective measures, the conditions details of which the Commission shall determine.

not the the and

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EEC Article 109 1. Where a sudden crisis in the balance of payments occurs and a decision within the meaning of Article 108 (2) is not immediately taken, the Member State concerned may, as a precaution, take the necessary protective measures. Such measures must cause the least possible disturbance in the functioning of the c o m m o n market and must not be wider in scope than is strictly necessary to remedy the sudden difficulties which have arisen.

2. The Commission a n d the other Member States shall be informed of such protective measures not later than when they enter into force. The Commission may recommend to the Council the granting of mutual assistance under Article 108. 3. After the Commission has delivered an opinion and the Monetary Committee has been consulted, the Council may, acting by a qualified majority, decide that the State concerned shall amend, suspend or abolish the protective measures referred to above.

CHAPTER

4*

COMMERCIAL

POLICY

Article 110 By establishing a customs union between themselves Member States aim to contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and the lowering of customs barriers. The c o m m o n commercial policy shall take into account the,favourable effect which the abolition of customs duties between Member States may have on the increase in the competitive strength of undertakings in those States. Article 111 The following provisions shall, without prejudice to Articles 115 and 116, apply during the transitional period: 1. Member States shall coordinate their trade relations with third countries so as to bring about, by the end of the transitional period, the conditions needed for implementing a common policy in the field of external trade.

* Renumbering of the Chapter as established by Article 20 (2) of the SEA.

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Regional Economic Institutions The Commission shall submit to the Council proposals regarding the procedure for common action to be followed during the transitional period and regarding the achievement of uniformity in their commercial policies. 2. The Commission shall submit to the Council recommendations for tariff negotiations with third countries in respect of the common customs tariff. The Council shall authorize the Commission to open such negotiations. The Commission shall conduct these negotiations in consultation with a special committee appointed by the Council to assist the Commission in this task and within the framework of such directives as the Council may issue to it. 3. In exercising the powers conferred upon it by this Article, the Council shall act unanimously during the first two stages and by a qualified majority thereafter. 4. Member States shall, in consultation with the Commission, take all necessary measures, particularly those designed to bring about an adjustment of tariff agreements in force with third countries, in order that the entry into force of the common customs tarifT shall not be delayed. 5. Member States shall aim at securing as high a level of uniformity as possible between themselves as regards their liberalization lists in relation to third countries or groups of third countries. To this end, the Commission shall make all appropriate recommendations to Member States. If Member States abolish or reduce quantitative restrictions in relation to third countries, they shall inform the Commission beforehand and shall accord the same treatment to other Member States.

Article 112 1. Without prejudice to obligations undertaken by them within the framework of other international organizations, Member States shall, before the end of the transitional period, progressively harmonize the systems whereby they grant aid for exports to third countries, to the extent necessary to ensure that competition between undertakings of the Community is not distorted. On a proposal from the Commission, the Council, shall, acting unanimously until the end of the second stage and by a qualified majority thereafter, issue any directives needed for this purpose. 2. The preceding provisions shall not apply to such drawback of customs duties or charges having equivalent effect nor to such repayment of indirect taxation including turnover taxes, excise duties and other indirect taxes as is allowed when goods are exported from a Member State to a third country, in so far as such drawback or repayment does not exceed the amount imposed, directly or indirectly, on the products exported. 182

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Article 113 1. After the transitional period has ended, the common commercial policy shall be based on uniform principles, particularly in regard to changes in tariff rates, the conclusion of tariff and trade agreements, the achievement of uniformity in measures of liberalization, export policy and measures to protect trade such as those to be taken in case of d u m p i n g or subsidies. 2. The Commission shall submit proposals to the Council for implementing the c o m m o n commercial policy. 3. Where agreements with third countries need to be negotiated, the Commission shall make recommendations to the Council, which shall authorize the Commission to open the necessary negotiations. The Commission shall conduct these negotiations in consultation with a special committee appointed by the Council to assist the Commission in this task and within the framework of such directives as the Council may issue to it. 4. In exercising the powers conferred u p o n it by this Article, the Council shall act by a qualified majority.

Article 114 The agreements referred to in Article 111 (2) a n d in Article 113 shall be concluded by the Council on behalf of the Community, acting unanimously during the first two stages a n d by a qualified majority thereafter.

Article 115 In order to ensure that the execution of measures of commercial policy taken in accordance with this Treaty by any Member State is not obstructed by deflection of trade, or where differences between such measures lead to economic difficulties in one or more of the Member States, the Commission shall recommend the methods for the requisite cooperation between Member States. Failing this, the Commission shall authorize Member States to take the necessary protective measures, the conditions a n d details of which it shall determine. In case of urgency during the transitional period, Member States may themselves take the necessary measures a n d shall notify them to the other Member States and to the Commission, which may decide that the States concerned shall amend or abolish such measures. In the selection of such measures, priority shall be given to those which cause the least disturbance to the functioning of the common market and which take into account the need to expedite, as far as possible, the introduction of the common customs tariff. 183

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Article 116 From the end of the transitional period onwards, Member States shall, in respect of all matters of particular interest to the common market, proceed within the framework of international organizations of an economic character only by common action. To this end, the Commission shall submit to the Council, which shall act by a qualified majority, proposals concerning the scope and implementation of such common action. During the transitional period, Member States shall consult each other for the purpose of concerting the action they take and adopting as far as possible a uniform attitude.

TITLE 111

Social policy CHAPTER

1

SOCIAL PROVISIONS Article 117 Member States agree upon the need to promote improved working conditions and an improved standard of living for workers, so as to make possible their harmonization while the improvement is being maintained. They believe that such a development will ensue not only from the functioning of the common market, which will favour the harmonization of social systems, but also from the procedures provided for in this Treaty and from the approximation of provisions laid down by law, regulation or administrative action. Article 118 Without prejudice to the other provisions of this Treaty and in conformity with its general objectives, the Commission shall have the task of promoting close cooperation between Member States in the social field, particularly in matters relating to: — employment; — labour law and working conditions; — basic and advanced vocational training; — social security; — prevention of occupational accidents and diseases; ' — occupational hygiene; — the right of association, and collective bargaining between employers and workers.

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To this end, the Commission shall act in close contact with Member States by making studies, delivering opinions and arranging consultations both on problems arising at national level and on those of concern to international organizations.

Before delivering the opinions provided for in this Article, the Commission shall consult the Economic and Social Committee.

Article 118a*

1. Member States shall pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers, and shall set as their objective the harmonization of conditions in this area, while maintaining the improvements made.

2. In order to help achieve the objective laid down in the first paragraph, the Council, acting by a qualified majority on a proposal from the Commission, in cooperation with the European Parliament and after consulting the Economic and Social Committee, shall adopt, by means of directives, minimum requirements for gradual implementation, having regard to the conditions and technical rules obtaining in each of the Member States.

Such directives shall avoid imposing administrative, financial and legal •constraints in a way which would hold back the creation and development of small and medium-sized undertakings.

3. The provisions adopted pursuant to this Article shall not prevent any Member State from maintaining or introducing more stringent measures for the protection of working conditions compatible with this Treaty.

Article 118b* The Commission shall endeavour to develop the dialogue between management and labour at European level which could, if the two sides consider it desirable, lead to relations based on agreement. Article 119 Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work. For the purpose of this Article, 'pay' means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in

• Article added by Article 21 of the SEA. * Article added by Article 22 of the SEA.

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Regional Economic Institutions kind, which the worker receives, directly or indirectly, in respect of his employment from his employer. Equal pay without discrimination based on sex means: (a) that pay for the same work at piece rates shall be calculated on the basis of the same unit of measurement; (b) that pay for work at time rates shall be the same for the same job. Article 120 Member States shall endeavour to maintain the existing equivalence between paid holiday schemes. Article 121 The Council may, acting unanimously and after consulting the Economic and Social Committee, assign to the Commission tasks in connection with the implementation of common measures, particularly as regards social security for the migrant workers referred to in Articles 48 to 51. Article 122 The Commission shall include a separate chapter on social developments within the Community in its annual report to the European Parliament. The European Parliament may invite the Commission to draw up reports on any particular problems concerning social conditions.

CHAPTER

2

THE EUROPEAN SOCIAL F U N D Article 123 In order to improve employment opportunities for workers in the common market and to contribute thereby to raising the standard of living, a European Social Fund is hereby established in accordance with the provisions set out below; it shall have the task of rendering the employment of workers easier and of increasing their geographical and occupational mobility within the Community. Article 124 The Fund shall be administered by the Commission. 186

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The Commission shall be assisted in this task by a Committee presided over by a member of the Commission and composed of representatives of Governments, trade unions and employers' organizations. Article 125 1. On application by a Member State the Fund shall, within the framework of the rules provided for in Article 127, meet 50 % of the expenditure incurred after the entry into force of this Treaty by that State or by a body governed by public law for the purposes of: (a) ensuring productive re-employment of workers by means of: — vocational retraining; — resettlement allowances; (b) granting aid for the benefit of workers whose employment is reduced or temporarily suspended, in whole or in part, as a result of the conversion of an undertaking to other production, in order that they may retain the same wage level pending their full re-employment. 2. Assistance granted by the Fund towards the cost of vocational retraining shall be granted only if the unemployed workers could not be found employment except in a new occupation and only if they have been in productive employment for at least six months in the occupation for which they have been retrained. Assistance towards resettlement allowances shall be granted only if the unemployed workers have been caused to change their home within the Community and have been in productive employment for at least six months in their new place of residence. Assistance for workers in the case of the conversion of an undertaking shall be granted only if: (a) the workers concerned have again been fully employed in that undertaking for at least six months; (b) the Government concerned has submitted a plan beforehand, drawn up by the undertaking in question, for that particular conversion and for financing it; (c) the Commission has given its prior approval to the conversion plan.

Article 126 When the transitional period has ended, the Council, after receiving the opinion of the Commission and after consulting the Economic and Social Committee and the European Parliament, may:

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Regional Economic Institutions (a) rule, by a qualified majority, that all or part of the assistance referred to in Article 125 shall no longer be granted; or (b) unanimously determine what new tasks may be entrusted to the Fund within the framework of its terms of reference as laid down in Article 123.

Article 127 The Council shall, acting by a qualified majority on a proposal from the Commission and after consulting the Economic and Social Committee and the European Parliament, lay down the provisions required to implement Articles 124 to 126; in particular it shall determine in detail the conditions under which assistance shall be granted by the Fund in accordance with Article 125 and the classes of undertakings whose workers shall benefit from the assistance provided for in Article 125 (1) (b).

Article 128 The Council shall, acting on a proposal from the Commission and after consulting the Economic and Social Committee, lay down general principles for implementing a common vocational training policy capable of contributing to the harmonious development both of the national economies and of the common market.

TITLE IV

The European Investment Bank Article 129 A European Investment Bank is hereby established; it shall have legal personality. The members of the European Investment Bank shall be the Member States. The Statute of the European Investment Bank is laid down in a Protocol annexed to this Treaty.

Article 130 The task of the European Investment Bank shall be to contribute, by having recourse to the capital market and utilizing its own resources, to the balanced and steady development of the common market in the interest of the Community. For this purpose the Bank shall, operating on a nonprofit-making basis, grant loans and give guarantees which facilitate the financing of the following projects in all sectors of the economy:

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(a) projects for developing less-developed regions; (b) projects for modernizing or converting undertakings or for developing fresh activities called for by the progressive establishment of the common market, where these projects are of such a size or nature that they cannot be entirely financed by the various means available in the individual Member States; (c) projects of common interest to several Member States which are of such a size or nature that they cannot be entirely financed by the various means available in the individual Member States.

TITLE V*

Economic and social cohesion Article 130a In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion. In particular the Community shall aim at reducing disparities between the various regions and the backwardness of the least-favoured regions. Article 130b Member States shall conduct their economic policies, and shall coordinate them, in such a way as, in addition, to attain the objectives set out in Article 130a. The implementation of the common policies and of the internal market shall take into account the objectives set out in Article 130a and in Article 130c and shall contribute to their achievement. The Community shall support the achievement of these objectives by the action it takes through the structural Funds (European Agricultural Guidance and Guarantee Fund, Guidance Section, European Social Fund, European Regional Development Fund), the European Investment Bank and the other existing financial instruments. Article 130c The European Regional Development Fund is intended to help redress the principal regional imbalances in the Community through participating in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions. * Title V consisting of Articles 130a, 130b, 130c, 130d and 130e as added to Pan Three of the Treaty by Article 23 of the SEA.

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Regional Economic Institutions Article I30d

Once the Single European Act enters into force the Commission shall submit a comprehensive proposal to the Council, the purpose of which will be to make such amendments to the structure and operational rules of the existing structural Funds (European Agricultural Guidance a n d Guarantee Fund, Guidance Section, European Social Fund, European Regional Development Fund) as are necessary to clarify a n d rationalize their tasks in order to contribute to the achievement of the objectives set out in Article 130a and Article 130c, to increase their efficiency a n d to coordinate their activities between themselves and with the operations of the existing financial instruments. The Council shall art unanimously on this proposal within a period of one year, after consulting the European Parliament and the Economic and Social Committee.

Article 130e

After adoption of the decision referred to in Article 130d, implementing decisions relating to the European Regional Development F u n d shall be taken by the Council, acting by a qualified majority on a proposal from the Commission a n d in cooperation with the European Parliament.

With regard to the European Agricultural Guidance and Guarantee Fund, Guidance Section and the European Social Fund, Articles 43, 126 a n d 127 remain applicable respectively.

TITLE VI*

Research and technological development Article I30f 1. The Community's aim shall be to strengthen the scientific a n d technological basis of European industry and to encourage it to become more competitive at international level. 2. In order to achieve this, it shall encourage undertakings including small and medium-sized undertakings, research centres and universities in their research and technological development activities; it shall support their efforts to cooperate with one another, aiming, notably, at enabling undertakings to exploit the Community's internal market potential to the full, in particular through the opening u p of national public contracts, the definition of c o m m o n standards and the removal of legal a n d fiscal barriers to that cooperation.

» Title VI consisting of Articles 130f, 130g, I30h, 130i, 130k,l 301, 130m, 130n, 130o, 130p and 130q, as added to Part Three of the Treaty by Article 24 of the SEA.

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3. In the achievement of these aims, special account shall be taken of the connection between the common research and technological development effort, the establishment of the internal market and the implementation of c o m m o n policies, particularly as regards competition and trade.

Article 130g In pursuing these objectives the Community shall carry out the following activities, complementing the activities carried out in the Member States: (a) implementation of research, technological development a n d demonstration programmes, by promoting cooperation with undertakings, research centres and universities; (b) promotion of cooperation in the field of Community research, technological development, and demonstration with third countries and international organizations; (c) dissemination and optimization of the results of activities in Community research, technological development, and demonstration; (d) stimulation of the training and mobility of researchers in the Community. Article 130h

Member States shall, in liaison with the Commission, coordinate among themselves the policies and programmes carried out at national level. In close contact with the Member States, the Commission may take any useful initiative to promote such coordination. Article I30i

1. The Community shall adopt a multiannual framework programme setting out all its activities. The framework programme shall lay down the scientific and technical objectives, define their respective priorities, set out the main lines of the activities envisaged a n d fix the a m o u n t deemed necessary, the detailed rules for financial participation by the Community in the programme as a whole and the breakdown of this a m o u n t between the various activities envisaged.

2. The framework programme may be adapted or supplemented, as the situation changes.

Article 130k The framework programme shall be implemented through specific programmes developed within each activity. Each specific programme shall

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Regional Economic Institutions define the detailed rules for implementing it, fix its duration a n d provide for the means deemed necessary. The Council shall define the detailed arrangements for the dissemination of knowledge resulting from the specific programmes.

Article 1301 In implementing the multiannual framework programme, supplementary programmes may be decided on involving the participation of certain Member States only, which shall finance them subject to possible Community participation.

The Council shall adopt the rules applicable to supplementary programmes, particularly as regards the dissemination of knowledge and the access of other Member States.

Article 130m In implementing the multiannual framework programme, the Community may make provision, with the agreement of the Member States concerned, for participation in research and development programmes undertaken by several Member States, including participation in the structures created for the execution of those programmes.

Article I30n

In implementing the multiannual framework programme, the Community may make provision for cooperation in Community research, technological development and demonstration with third countries or international organizations.

The detailed aiTangements for such cooperation may be the subject of international agreements between the Community and the third parties concerned which shall be negotiated and concluded in accordance with Article 228.

Article I30o

The Community may set u p joint undertakings or any other structure necessary for the efficient execution of programmes of Community research, technological development and demonstration. 192

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Article I30p /. The detailed arrangements for financing each programme, including any Community contribution, shall be established at the time of the adoption of the programme. 2. The amount of the Community's annual contribution shall be laid down under the budgetary procedure, without prejudice to other possible methods of Community financing. The estimated cost of the specific programmes must not in aggregate exceed the financial provision in the framework programme. Article 130q 1. The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, adopt the provisions referred to in Articles 130i and 130o. 2. The Council shall, acting by a qualified majority on a proposal from the Commission, after consulting the Economic and Social Committee, and in cooperation with the European Parliament, adopt the provisions referred to in Articles 130k, 1301, 130m, 130n and 130p (1). The adoption of these supplementary programmes shall also require the agreement of the Member States concerned.

TITLE VII*

Environment Article 130r /. Action by the Community relating to the environment shall have the following objectives: (i) to preserve, protect and improve the quality of the environment; (ii) to contribute towards protecting human health; (iii) to ensure a prudent and rational utilization of natural resources. 2. Action by the Community relating to the environment shall be based on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source, and that the polluter should pay. Environmental protection requirements shall be a component of the Community's other policies.

« Title VII consisting of Articles I30r, 130B and I30t, as added to Part Three of the Treaty by Article 25 of the SEA.

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Regional Economic Institutions 3. In preparing its action relating to the environment, the Community shall take account of: (i) available scientific and technical data; (ii) environmental conditions in the various regions of the Community; (iii) the potential benefits and costs of action or of lack of action; (iv) the economic and social development of the Community as a whole and the balanced development of its regions. 4. The Community shall take action relating to the environment to the extent to which the objectives referred to in paragraph 1 can be attained better at Community level than at the level of the individual Member States. Without prejudice to certain measures of a Community nature, the Member States shall finance and implement the other measures. 5. Within their respective spheres of competence, the Community and the Member States shall cooperate with third countries and with the relevant international organizations. The arrangements for Community cooperation may be the subject of agreements between the Community and the third parties concerned, which shall be negotiated and concluded in accordance with Article 228. The previous paragraph shall be without prejudice to Member States' competence to negotiate in international bodies and to conclude international agreements.

Article 130s The Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee, shall decide what action is to be taken by the Community. The Council shall, under the conditions laid down in the preceding subparagraph, define those matters on which decisions are to be taken by a qualified majority.

Article 130t The protective measures adopted in common pursuant to Article 130s shall not prevent any Member State from maintaining or introducing more stringent protective measures compatible with this Treaty.

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FOUR

ASSOCIATION OF THE OVERSEAS COUNTRIES A N D TERRITORIES Article 131 The Member States agree to associate with the Community the nonEuropean countries and territories which have special relations with Belgium, Denmark,* France, Italy, the Netherlands and the United Kingdom.** These countries and territories (hereinafter called the 'countries and territories') are listed in Annex IV to this Treaty. The purpose of association shall be to promote the economic and social development of the countries and territories and to establish close economic relations between them and the Community as a whole. In accordance with the principles set out in the Preamble to this Treaty, association shall serve primarily to further the interests and prosperity of the inhabitants of these countries and territories in order to lead them to the economic, social and cultural development to which they aspire. Article 132 Association shall have the following objectives: 1. Member States shall apply to their trade with the countries and territories the same treatment as they accord each other pursuant to this Treaty. 2. Each country or territory shall apply to its trade with Member States and with the other countries and territories the same treatment as that which it applies to the European State with which it has special relations. 3. The Member States shall contribute to the investments required for the progressive development of these countries and territories. 4. For investments financed by the Community, participation in tenders and supplies shall be open on equal terms to all natural and legal persons who are nationals of a Member State or of one of the countries and territories. 5. In relations between Member States and the countries and territories the right of establishment of nationals and companies or firms shall be re-

* "The term 'Denmark' was added by Article 2 of the Greenland Treaty. ** First sentence, with the exception of the term 'Denmark', as amended by Article 24 (1) of the Act of Accession D K / I R L / U K in the version resulting from Article 13 of the A D AA D K / I R L / UK.

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Regional Economic Institutions gulated in accordance with the provisions and procedures laid down in the Chapter relating to the right of establishment and on a non-discriminatory basis, subject to any special provisions laid down pursuant to Article 136. Article 133

1. Customs duties on imports into the Member States of goods originati n g in the countries and territories shall be completely abolished in conformity with the progressive abolition of customs duties between Member States in accordance with the provisions of this Treaty.

2. Customs duties on imports into each country or territory from Member States or from the other countries or territories shall be progressively abolished in accordance with the provisions of Articles 12, 13, 14, 15 and 17.

3. The countries and territories may, however, levy customs duties which meet the needs of their development and industrialization or produce revenue for their budgets. The duties referred to in the preceding subparagraph shall nevertheless be progressively reduced to the level of those imposed on imports of products from the Member State with which each country or territory has special relations. The percentages and the timetable of the reductions provided for under this Treaty shall apply to the difference between the duty imposed on a product coming from the Member State which has special relations with the country or territory concerned and the duty imposed on the same product coming from within the Community on entry into the importing country or territory. 4. Paragraph 2 shall not apply to countries and territories which, by reason of the particular international obligations by which they are bound, already apply a non-discriminatory customs tariff when this Treaty enters into force. 5. The introduction of or any change in customs duties imposed on goods imported into the countries and territories shall not, either in law or in fact, give rise to any direct or indirect discrimination between imports from the various Member States. Article 134 If the level of the duties applicable to goods from a third country on entry into a country or territory is liable, when the provisions of Article 133 (1) have been applied, to cause deflections of trade to the detriment of any Member State, the latter may request the Commission to propose to the other Member States the measures needed to remedy the situation.

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EEC public policy, freedom of movement within Member States for workers from the countries and territories, and within the countries and territories for workers from Member States, shall be governed by agreements to be concluded subsequently with the unanimous approval of Member States. Article 136 For an initial period of five years after the entry into force of this Treaty, the details of and procedure for the association of the countries and territories with the Community shall be determined by an Implementing Convention annexed to this Treaty. Before the Convention referred to in the preceding paragraph expires, the Council shall, acting unanimously, lay down provisions for a further period, on the basis of the experience acquired and of the principles set out in this Treaty. Article 136a* The provisions of Articles 131 to 136 shall apply to Greenland, subject to the specific provisions for Greenland set out in the Protocol on special arrangements for Greenland, annexed to this Treaty.

PART FIVE

INSTITUTIONS OF THE COMMUNITY TITLE I

Provisions governing the institutions CHAPTER

THE

1

INSTITUTIONS

Section 1

The European Parliament

Article 137 The European Parliament, which shall consist of representatives of the peoples of the States brought together in the Community, shall exercise the advisory and supervisory powers which are conferred upon it by this Treaty* Article added by Article 3 of the Greenland Treaty.

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Regional Economic Institutions Article 138 (Paragraphs I and 2 lapsed on 17 July 1979 in accordance with Article 14 of the Act concerning the election of the representatives of the European Parliamentj [See Article I of that Act which reads as follows: 1. The representatives in the European Parliament of the peoples of the States brought together in the Community shall be elected by direct universal suffrage.] [See Article 2 of that Act which reads as follows: 2. The number of representatives elected in each Member State is as follows: Belgium

24

Denmark

16

Germany

81

Greece

24

Spain

60

France

81

Ireland

15

Italy

81

Luxembourg

6

Netherlands

25

Portugal

24

United Kingdom

81 .]*

3. The European Parliament shall draw up proposals for elections by direct universal suffrage in accordance with a uniform procedure in all Member States.** The Council shall, acting unanimously, lay down the appropriate provisions, which it shall recommend to Member States for adoption in accordance with their respective constitutional requirements.

* Number of representatives as fixed by Article 10 of the Act of Accession ESP/PORT. ** See also Article 7 (I) and (2) of the Act concerning the election of the representatives of the European Parliament.

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Article 139 The European Parliament shall hold an annual session. It shall meet, without requiring to be convened, on the second Tuesday in March.* ** The European Parliament may meet in extraordinary session at the request of a majority of its members or at the request of the Council or of the Commission.

Article 140 The European Parliament shall elect its President and its officers from a m o n g its members. Members of the Commission may attend all meetings a n d shall, at their request, be heard on behalf of the Commission. The Commission shall reply orally or in writing to questions put to it by the European Parliament or by its members. The Council shall be heard by the European Parliament in accordance with the conditions laid down by the Council in its rules of procedure.

Article 141 Save as otherwise provided in this Treaty, the European Parliament shall act by an absolute majority of the votes cast. The rules of procedure shall determine the quorum.

Article 142 The European Parliament shall adopt its rules of procedure, acting by a majority of its members. The proceedings of the European Parliament shall be published in the manner laid down in its rules of procedure.

Article 143 The European Parliament shall discuss in open session the annual general report submitted to it by the Commission.

* First paragraph as amended by Article 27 (1) of the Merger Treaty. ** As regards the second sentence of this Article see also Article 10 (3) of the Act concerning the election of the representatives of the European Parliament.

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Article 144

If a motion of censure on the activities of the Commission is tabled before it, the European Parliament shall not vote thereon until at least three days after the motion has been tabled and only by open vote.

If the motion of censure is carried by a two-third majority of the votes cast, representing a majority of the members of the European Parliament, the members of the Commission shall resign as a body. TTiey shall continue to deal with current business until they are replaced in accordance with Article 158.

Section 2 The Council Article 145 To ensure that the objectives set out in this Treaty are attained, the Council shall, in accordance with the provisions of this Treaty: — ensure coordination of the general economic policies of the Member States; — have power to take decisions. — confer on the Commission, in the acts which the Council adopts, powers for the implementation of the rules which the Council lays down. The Council may impose certain requirements in respect of the exercise of these powers. The Council may also reserve the right, in specific cases, to exercise directly implementing powers itself. The procedures referred to above must be consonant with principles and rules to be laid down in advance by the Council, acting unanimously on a proposal from the Commission and after obtaining the Opinion of the European Parliament.* Article 146 (Article repealed by Article 7 of the Merger Treatyj [See Article 2 of the Merger Treaty, which reads as follows: The Council shall consist of representatives of the Member States. Each Government shall delegate to it one of its members. The office of President shall be held for a term of six months by each member of the Council in turn, in the following order of Member States: — for a first cycle of six years: Belgium, Denmark, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Portugal, United Kingdom,

* Third indent added by Article 10 of the SEA.

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EEC — for the following cycle of six years: Denmark, Belgium, Greece, Germany, France, Spain, Italy, Ireland, Netherlands, Luxembourg, United Kingdom, Portugal.]* Article 147 (Article repealed by Article 7 of the Merger Treaty) [See Article 3 of the Merger Treaty, which reads as follows: The Council shall meet when convened by its President on his own initiative or at the request of one of its members or of the Commission.] Article 148 1. Save as otherwise provided in this Treaty, the Council shall act by a majority of its members. 2. Where the Council is required to act by a qualified majority, the votes of its members shall be weighted as follows: Belgium

5

Denmark

3

Germany

10

Greece

5

Spain

8

France

10

Ireland

3

Italy

10

Luxembourg

2

Netherlands

5

Portugal United Kingdom

5 10

For their adoption, acts of the Council shall require at least: — fifty-four votes in favour where this Treaty requires them to be adopted on a proposal from the Commission, — fifty-four votes in favour, cast by at least eight members, in other cases.* 3. Abstentions by members present in person or represented shall not prevent the adoption by the Council of acts which require unanimity.

* Second paragraph as amended by Article 11 of the Act of Accession ESP/PORT. * Paragraph 2 as amended by Article 14 of the Act of Accession ESP/PORT.

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Regional Economic Institutions Article 149** 1. Where, in pursuance of this Treaty, the Council acts on a proposal from the Commission, unanimity shall be required for an act constituting an amendment to that proposal. 2. Where, in pursuance of this Treaty, the Council acts in cooperation with the European Parliament, the following procedure shall apply: (a) The Council, acting by a qualified majority under the conditions of paragraph 1, on a proposal from the Commission and after obtaining the Opinion of the European Parliament, shall adopt a common position. (b) The Council's common position shall be communicated to the European Parliament. The Council and the Commission shall inform the European Parliament fully of the reasons which led the Council to adopt its common position and also of the Commission's position. If, within three months of such communication, the European Parliament approves this common position or has not taken a decision within that period, the Council shall definitively adopt the act in question in accordance with the common position. (c) The European Parliament may within the period of three months referred to in point (b), by an absolute majority of its component members, propose amendments to the Council's common position. The European Parliament may also, by the same majority, reject the Council's common position. The result of the proceedings shall be transmitted to the Council and the Commission. If the European Parliament has rejected the Council's common position, unanimity shall be required for the Council to act on a second reading. (d) The Commission shall, within a period of one month, re-examine the proposal on the basis of which the Council adopted its common position, by taking into account the amendments proposed by the European Parliament. The Commission shall forward to the Council, at the same time as its re-examined proposal, the amendments of the European Parliament which it has not accepted, and shall express its opinion on them. The Council may adopt these amendments unanimously. (e) The Council, acting by a qualified majority, shall adopt the proposal as re-examined by the Commission. Unanimity shall be required for the Council to amend the proposal as re-examined by the Commission. tf) In the cases referred to in points (c), (d) and (e), the Council shall be required to act within a period of three months. If no decision is taken ** Article as replaced by Article 7 of the SEA.

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within this period, the Commission proposal shall be deemed not to have been adopted. (g) The periods referred to in points (b) and ( f ) may be extended by a maximum of one month by common accord between the Council and the European Parliament. 3. As long as the Council has not acted, the Commission may alter its proposal at any time during the procedures mentioned in paragraphs 1 and 2. Article 150 Where a vote is taken, any member of the Council may also act on behalf of not more than one other member. Article 151 (Article repealed by Article 7 of the Merger Treaty) [See Articles 5 and 4 of the Merger Treaty, which read as follows: Article 5: The Council shall adopt its rules of procedure. Article 4: A committee consisting of the Permanent Representatives of the Member States shall be responsible for preparing the work of the Council and for carrying out the tasks assigned to it by the Council.] Article 152 The Council may request the Commission to undertake any studies the Council considers desirable for the attainment of the common objectives, and to submit to it any appropriate proposals. Article 153 The Council shall, after receiving an opinion from the Commission, determine the rules governing the committees provided for in this Treaty. Article 154 (Article repealed by Article 7 of the Merger Treaty) [See Article 6 of the Merger Treaty, which reads as follows: The Council shall, acting by a qualified majority, determine the salaries, allowances and pensions of the President and members of the Commission, and of the President, Judges, Advocates-General 203

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Regional Economic Institutions and Registrar of the Court of Justice. It shall also, again by a qualified majority, determine any payment to be made instead of remuneration.]

Section 3 The Commission Article 155 In order to ensure the proper functioning and development of the common market, the Commission shall: — ensure that the provisions of this Treaty and the measures taken by the institutions pursuant thereto are applied; — formulate recommendations or deliver opinions on matters dealt with in this Treaty, if it expressly so provides or if the Commission considers it necessary; — have its own power of decision and participate in the shaping of measures taken by the Council and by the European Parliament in the manner provided for in this Treaty; — exercise the powers conferred on it by the Council for the implementation of the rules laid down by the latter. Article 156 (Article repealed by Article 19 of the Merger Treaty) [See Article 18 of the Merger Treaty, which reads as follows: The Commission shall publish annually, not later than one month before the opening of the session of the European Parliament, a general report on the activities of the Communities.] Article 157 (Article repealed by Article 19 of the Merger Treaty) [See Article 10 of the Merger Treaty, which reads as follows: 1. The Commission shall consist of seventeen members, who shall be chosen on the grounds of their general competence and whose independence is beyond doubt.* The number of members of the Commission may be altered by the Council, acting unanimously.

* First subparagraph of paragraph 1 as amended by Article 15 of the Act of Accession ESP/ PORT.

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Only nationals of Member States may be members of the Commission. The Commission must include at least one national of each of the Member States, but may not include more than two members having the nationality of the same State. 2. The members of the Commission shall, in the general interest of the Communities, be completely independent in the performance of their duties. In the performance of these duties, they shall neither seek nor take instructions from any Government or from any other body. They shall refrain from any action incompatible with their duties. Each Member State undertakes to respect this principle and not to seek to influence the members of the Commission in the performance of their tasks. The members of the Commission may not, during their term of office, engage in any other occupation, whether gainful or not. When entering upon their duties they shall give a solemn undertaking that, both during and after their term of office, they will respect the obligations arising therefrom and in particular their duty to behave with integrity and discretion as regards the acceptance, after they have ceased to hold office, of certain appointments or benefits. In the event of any breach of these obligations, the Court of Justice may, on application by the Council or the Commission, rule that the member concerned be, according to the circumstances, either compulsorily retired in accordance with the provisions of Article 13* or deprived of his right to a pension or other benefits in its stead.]

Article 158 (Article repealed by Article 19 of the Merger Treaty) [See Article II of the Merger Treaty, which reads as follows: The members of the Commission shall be appointed by common accord of the Governments of the Member States. Their term of office shall be four years. It shall be renewable.]

Article 159 (Article repealed by Article 19 of the Merger Treaty) [See Article 12 of the Merger Treaty, which reads as follows: Apart from normal replacement, or death, the duties of a member of the Commission shall end when he resigns or is compulsorily retired. The vacancy thus caused shall be filled for the remainder of the member's term of office. The Council may, acting unanimously, decide that such a vacancy need not be filled.

* Article 13 of the Merger Treaty. See Article 160 below.

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Regional Economic Institutions

Save in the case of compulsory retirement under the provisions of Article 13,* members of the Commission shall remain in office until they have been replaced.] Article 160 (Article repealed by Article 19 of the Merger Treaty) [See Article 13 of the Merger Treaty, which reads as follows: If any member of the Commission no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct, the Court of Justice may, on application by the Council or the Commission, compulsorily retire him.] Article 161 (Article repealed by Article 19 of the Merger Treaty) [See Article 14 of the Merger Treaty, which reads as follows: The President and the six Vice-Presidents of the Commission shall be appointed from among its members for a term of two years in accordance with the same procedure as that laid down for the appointment of members of the Commission. Their appointments may be renewed.** The Council, acting unanimously, may amend the provisions concerning Vice-Presidents.*** Save where the entire Commission is replaced, such appointments shall be made after the Commission has been consulted. In the event of retirement or death, the President and the VicePresidents shall be replaced for the remainder of their term of office in accordance with the preceding provisions.] Article 162 (Article repealed by Article 19 of the Merger Treaty) [See Articles 15 and 16 of the Merger Treaty, which read as follows: Article 15: The Council and the Commission shall consult each other and shall settle by common accord their methods of cooperation. Article 16: The Commission shall adopt its rules of procedure so as to ensure that both it and its departments operate in accordance with the * Article 13 of the Merger Treaty. See Article 160 below. ** First paragraph as amended by Article 16 of the Act of Accession ESP/PORT. *•* Second paragraph added by Article 16 of that Act.

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provisions of the Treaties establishing the European Coal and Steel Community, the European Economic Community and the European Atomic Energy Community, and of this Treaty. It shall ensure that these rules are published.]

Article 163 (Article repealed by Article 19 of the Merger Treaty) [See Article 17 of the Merger Treaty, which reads as follows: The Commission shall act by a majority of the number of members provided for in Article 10.* A meeting of the Commission shall be valid only if the number of members laid down in its rules of procedure is present.]

Section 4

The Court of Justice

Article 164 The Court of Justice shall ensure that in the interpretation and application of this Treaty the law is observed.

Article 165 The Court of Justice shall consist of thirteen Judges.* The Court of Justice shall sit in plenary session. It may, however, form Chambers, each consisting of three or five Judges, either to undertake certain preparatory inquiries or to adjudicate on particular categories of cases in accordance with rules laid down for these purposes. Whenever the Court of Justice hears cases brought before it by a Member State or by one of the institutions of the Community or, to the extent that the Chambers of the Court do not have the requisite jurisdiction under the Rules of Procedure, has to give preliminary rulings on questions submitted to it pursuant to Article 177, it shall sit in plenary session.**

* Article 10 of the Merger Treaty. See Article 157 above. * First paragraph as amended by Article 17 of the Act of Accession ESP/PORT. * * Third paragraph as amended by Article 1 of the Council Decision of 26 November 1974 (Official Journal of the European Communities. No L 318, 28 November 1974).

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Regional Economic Institutions Should the Court of Justice so request, the Council may, acting unanimously, increase the number of Judges and make the necessary adjustments to the second and third paragraphs of this Article and to the second paragraph of Article 167.

Article 166

The Court of Justice shall be assisted by six Advocates-General.*

It shall be the duty of the Advocate-General, acting with complete impartiality and independence, to make, in open court, reasoned submissions on cases brought before the Court of Justice, in order to assist the Court in the performance of the task assigned to it in Article 164.

Should the Court of Justice so request, the Council may, acting unanimously, increase the number of Advocates-General and make the necessary adjustments to the third paragraph of Article 167.

Article 167

The Judges and Advocates-General shall be chosen from persons whose independence is beyond doubt and who possess the qualifications required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognized competence; they shall be appointed by common accord of the Governments of the Member States for a term of six years.

Every three years there shall be a partial replacement of the Judges. Seven and six Judges shall be replaced alternately.**

Every three years there shall be a partial replacement of the AdvocatesGeneral. Three Advocates-General shall be replaced on each occasion.** Retiring Judges and Advocates-General shall be eligible for reappointment. The Judges shall elect the President of the Court of Justice from among their number for a term of three years. He may be re-elected.

* First paragraph as amended by Article 18 of the Act of Accession ESP/PORT. * * Second and third paragraphs as amended by Aiticle 19 of the Act of Accession ESP/PORT.

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Article 168 The Court of Justice shall appoint its Registrar and lay down the rules governing his service.

Article 168a* 1. At the request of the Court of Justice and after consulting the Commission and the European Parliament, the Council may, acting unanimously, attach to the Court of Justice a court with jurisdiction to hear and determine at first instance, subject to a right of appeal to the Court of Justice on points of law only and in accordance with the conditions laid down by the Statute, certain classes of action or proceeding brought by natural or legal persons. That court shall not be competent to hear and determine actions brought by Member States or by Community institutions or questions referred for a preliminary ruling under Article 177.

2. The Council, following the procedure laid down in paragraph 1, shall determine the composition of that court and adopt the necessary adjustments and additional provisions to the Statute of the Court of Justice. Unless the Council decides otherwise, the provisions of this Treaty relating to the Court of Justice, in particular the provisions of the Protocol on the Statute of the Court of Justice, shall apply to that court. 3. The members of that court shall be chosen from persons whose independence is beyond doubt and who possess the ability required for appointment to judicial office; they shall be appointed by common accord of the Governments of the Member States for a term of six years. The membership shall be partially renewed every three years. Retiring members shall be eligible for reappointment. 4. That court shall establish its rules of procedure in agreement with the Court of Justice. Those rules shall require the unanimous approval of the Council. Article 169 If the Commission considers that a Member State has failed to fulfil an obligation under this Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice. Article 170 A Member State which considers that another Member State has failed • Article added by Article 11 of the SEA.

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Regional Economic Institutions to fulfil an obligation under this Treaty may bring the matter before the Court of Justice. Before a Member State brings an action against another Member State for an alleged infringement of an obligation under this Treaty, it shall bring the matter before the Commission. The Commission shall deliver a reasoned opinion after each of the States concerned has been given the opportunity to submit its own case a n d its observations on the other party's case both orally and in writing. If the Commission has not delivered an opinion within three months of the date on which the matter was brought before it, the absence of such opinion shall not prevent the matter from being brought before the Court of Justice.

Article 171

If the Court of Justice finds that a Member State has failed to fulfil an obligation under this Treaty, the State shall be required to take the necessary measures to comply with the judgment of the Court of Justice.

Article 172

Regulations m a d e by the Council pursuant to the provisions of this Treaty may give the Court of Justice unlimited jurisdiction in regard to the penalties provided for in such regulations.

Article 173

The Court of Justice shall review the legality of acts of the Council a n d the Commission other than recommendations or opinions. It shall for this purpose have jurisdiction in actions brought by a Member State, the C o u n cil or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of this Treaty or of any rule of law relating to its application, or misuse of powers.

Any natural or legal person may, under the same conditions, institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.

The proceedings provided for in this Article shall be instituted within two months of the publication of the measure, or of its notification to the plaintiff, or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be. 210

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Article 174 If the action is well founded, the Court of Justice shall declare the act concerned to be void. In the case of a regulation, however, the Court of Justice shall, if it considers this necessary, state which of the effects of the regulation which it has declared void shall be considered as definitive.

Article 175 Should the Council or the Commission, in infringement of this Treaty, fail to act, the Member States and the other institutions of the Community may bring an action before the Court of Justice to have the infringement established. The action shall be admissible only if the institution concerned has first been called upon to act. If, within two months of being so called upon, the institution concerned has not defined its position, the action may be brought within a further period of two months. Any natural or legal person may, under the conditions laid down in the preceding paragraphs, complain to the Court of Justice that an institution of the Community has failed to address to that person any act other than a recommendation or an opinion.

Article 176 The institution whose act has been declared void or whose failure to act has been declared contrary to this Treaty shall be required to take the necessary measures to comply with the judgment of the Court of Justice. This obligation shall not affect any obligation which may result from the application of the second paragraph of Article 215. Article 177 The Court of Justice shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of this Treaty; (b) the validity and interpretation of acts of the institutions of the Community; (c) the interpretation of the statutes of bodies established by an act of the Council, where those statutes so provide. Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the

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Regional Economic Institutions question is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon. Where any such question is raised in a case pending before a court or tribunal of a Member State, against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court of Justice.

Article 178 The Court of Justice shall have jurisdiction in disputes relating to compensation for damage provided for in the second paragraph of Article 215.

Article 179 The Court of Justice shall have jurisdiction in any dispute between the Community and its servants within the limits and under the conditions laid down in the Staff Regulations or the Conditions of Employment.

Article 180

The Court of Justice shall, within the limits hereinafter laid down, have jurisdiction in disputes concerning: (a) the fulfilment by Member States of obligations under the Statute of the European Investment Bank. In this connection, the Board of Directors of the Bank shall enjoy the powers conferred upon the Commission by Article 169; (b) measures adopted by the Board of Governors of the Bank. In this connection, any Member State, the Commission or the Board of Directors of the Bank may institute proceedings under the conditions laid d o w n in Article 173; (c) measures adopted by the Board of Directors of the Bank. Proceedings against such measures may be instituted only by Member States or by the Commission, under the conditions laid down in Article 173, a n d solely o n the grounds of non-compliance with the procedure provided for in Article 21 (2), (5), (6) and (7) of the Statute of the Bank.

Article 181

The Court of Justice shall have jurisdiction to give judgment pursuant to any arbitration clause contained in a contract concluded by or on behalf of the Community, whether that contract be governed by public or private law.

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Article 182 The Court of Justice shall have jurisdiction in any dispute between Member States which relates to the subject matter of this Treaty if the dispute is submitted to it under a special agreement between the parties.

Article 183 Save where jurisdiction is conferred on the Court of Justice by this Treaty, disputes to which the Community is a party shall not on that ground be excluded from the jurisdiction of the courts or tribunals of the Member States.

Article 184 Notwithstanding the expiry of the period laid down in the third paragraph of Article 173, any party may, in proceedings in which a regulation of the Council or of the Commission is in issue, plead the grounds specified in the first paragraph of Article 173, in order to invoke before the Court of Justice the inapplicability of that regulation.

Article 185 Actions brought before the Court of Justice shall not have suspensory effect. The Court of Justice may, however, if it considers that circumstances so require, order that application of the contested act be suspended.

Article 186 The Court of Justice may in any cases before it prescribe any necessary interim measures.

Article 187 The judgments of the Court of Justice shall be enforceable under the conditions laid down in Article 192.

Article 188 The Statute of the Court of Justice is laid down in a separate Protocol. The Council may, acting unanimously at the request of the Court of

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CHAPTER

2

PROVISIONS COMMON TO SEVERAL INSTITUTIONS Article 189 In order to carry out their task the Council a n d the Commission shall, in accordance with the provisions of this Treaty, make regulations, issue directives, take decisions, make recommendations or deliver opinions. A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. A directive shall be binding, as to the result to be achieved, u p o n each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods. A decision shall be binding in its entirety upon those to whom it is addressed. Recommendations and opinions shall have n o binding force.

Article 190 Regulations, directives and decisions of the Council a n d of the C o m mission shall state the reasons on which they are based a n d shall refer to any proposals or opinions which were required to be obtained pursuant to this Treaty.

Article 191 Regulations shall be published in the Official Journal of the C o m munity. They shall enter into force on the date specified in them or, in the absence thereof,' on the twentieth day following their publication.

* Second paragraph as inserted by Article 12 of the SEA.

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Directives and decisions shall be notified to those to whom they are addressed and shall take effect upon such notification.

Article 192 Decisions of the Council or of the Commission which impose a pecuniary obligation on persons other than States,"shall be enforceable. Enforcement shall be governed by the rules of civil procedure in force in the State in the territory of which it is carried out. The order for its enforcement shall be appended to the decision, without other formality than verification of the authenticity of the decision, by the national authority which the Government of each Member State shall designate for this purpose and shall make known to the Commission and to the Court of Justice. When these formalities have been completed on application by the party concerned, the latter may proceed to enforcement in accordance with the national law, by bringing the matter directly before the competent authority. Enforcement may be suspended only by a decision of the Court of Justice. However, the courts of the country concerned shall have jurisdiction over complaints that enforcement is being carried out in an irregular manner.

CHAPTER 3 THE ECONOMIC AND SOCIAL COMMITTEE Article 193 An Economic and Social Committee is hereby established. It shall have advisory status. The Committee shall consist of representatives of the various categories of economic and sociaf activity, in particular, representatives of producers, farmers, carriers, workers, dealers, craftsmen, professional occupations and representatives of the general public.

Article 194 The number of members of the Committee shall be as follows: Belgium

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9

Germany

24

Greece

12

Spain

21

France

24

Ireland Italy

9 24

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Portugal

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United Kingdom

24*

The members of the Committee shall be appointed by the Council, acting unanimously, for four years. Their appointments shall be renewable. The members of the Committee shall be appointed in their personal capacity and may not be bound by any mandatory instructions. Article 195 1. For the appointment of the members of the Committee, each Member State shall provide the Council with a list containing twice as many candidates as there are seats allotted to its nationals. The composition of the Committee shall take account of the need to ensure adequate representation of the various categories of economic and social activity. 2. The Council shall consult the Commission. It may obtain the opinion of European bodies which are representative of the various economic and social sectors to which the activities of the Community are of concern. Article 196 The Committee shall elect its chairman and officers from among its members for a term of two years. 9

It shall adopt its rules of procedure and shall submit them to the Council for its approval, which must be unanimous. The Committee shall be convened by its chairman at the request of the Council or of the Commission.

TITLE II

Financial provisions Article 197 The Committee shall include specialized sections for the principal fields covered by this Treaty. In particular, it shall contain an agricultural section and a transport section, which are the subject of special provisions in the Titles relating to agriculture and transport.

* First paragraph as amended by Article 21 of the Act of Accession ESP/PORT.

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Doc. 12 These specialized sections shall operate within the general terms of reference of the Committee. They may not be consulted independently of the Committee. Sub-committees may also be established within the Committee to prepare on specific questions or in specific fields, draft opinions to be submitted to the Committee for its consideration. The rules of procedure shall lay down the methods of composition and the terms of reference of the specialized sections and of the sub-committees.

Article 198 The Committee must be consulted by the Council or by the Commission where this Treaty so provides. The Committee may be consulted by these institutions in all cases in which they consider it appropriate. The Council or the Commission shall, if it considers it necessary, set the Committee, for the submission of its opinion, a time limit which may not be less than ten days from the date which the chairman receives notification to this effect. Upon expiry of the time limit, the absence of an opinion shall not prevent further action. The opinion of the Committee and that of the specialized section, together with a record of the proceedings, shall be forwarded to the Council and to the Commission.

Article 199 All items of revenue and expenditure of the Community, including those relating to the European Social Fund, shall be included in estimates to be drawn up for each financial year and shall be shown in the budget. The revenue and expenditure shown in the budget shall be in balance.

Article 200 I. The budget revenue shall include, irrespective of any other revenue, financial contributions of Member States on the following scale: Netherlands Germany France Italy Luxembourg Netherlands

7.9 28 28 28 0.2 7.9

2. The financial contributions of Member States to cover the expenditure of the European Social Fund, however, shall be determined on the following scale: 217

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Regional Economic Institutions Belgium Germany . . France . . . . Italy Luxembourg Netherlands 3.

8..8 32 32 20 0.2 7

The scales may be modified by the Council, acting unanimously.

Article 201 The Commission shall examine the conditions under which the financial contributions of Member States provided for in Article 200 could be replaced by the Community's own resources, in particular by revenue accruing from the common customs tariff when it has been finally introduced. To this end, the Commission shall submit proposals to the Council. After consulting the European Parliament on these proposals the C o u n cil may, acting unanimously, lay down the appropriate provisions, which it shall recommend to the Member States for adoption in accordance with their respective constitutional requirements.

Article 202 The expenditure shown in the budget shall be authorized for one financial year, unless the regulations m a d e pursuant to Article 209 provide otherwise. In accordance with conditions to be laid down pursuant to Article 209, any appropriations, other than those relating to staff expenditure, that are unexpended at the end of the financial year may be carried forward to the next financial year only. Appropriations shall be classified under different chapters grouping items of expenditure according to their nature or purpose a n d subdivided, as far as may be necessary, in accordance with the regulations m a d e pursuant to Article 209. The expenditure of the European Parliament, the Council, the Commission and the Court of Justice shall be set out in separate parts of the budget, without prejudice to special arrangements for certain c o m m o n items of expenditure.

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Article 203* /.

The financial year shall run from 1 January to 31 December.

2. Each institution of the Community shall, before 1 July, draw up estimates of its expenditure. The Commission shall consolidate these estimates in a preliminary draft budget. It shall attach thereto an opinion which maycontain different estimates. The preliminary draft budget shall contain an estimate of revenue and an estimate of expenditure. 3. The Commission shall place the preliminary draft budget before the Council not later than 1 September of the year preceding that in which the budget is to be implemented. The Council shall consult the Commission and, where appropriate, the other institutions concerned whenever it intends to depart from the preliminary draft budget. The Council, acting by a qualified majority, shall establish the draft budget and forward it to the European Parliament. 4. The draft budget shall be placed before the European Parliament not later than 5 October of the year preceding that in which the budget is to be implemented. The European Parliament shall have the right to amend the draft budget, acting by a majority of its members, and to propose to the Council, acting by an absolute majority of the votes cast, modifications to the draft budget relating to expenditure necessarily resulting from this Treaty or from acts adopted in accordance therewith.

If, within 45 days of the draft budget being placed before it, the European Parliament has given its approval, the budget shall stand as finally adopted. If within this period the European Parliament has not amended the draft budget nor proposed any modifications thereto, the budget shall be deemed to be finally adopted.

If within this period the European Parliament has adopted amendments or proposed modifications, the draft budget together with the amendments or proposed modifications shall be forwarded to the Council.

5. After discussing the draft budget with the Commission and, where appropriate, with the other institutions concerned, the Council shall act under the following conditions:

* Text as amended by Article 12 of the Treaty amending Certain Financial Provisions.

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(a) The Council may, acting by a qualifed majority, modify any of the amendments adopted by the European Parliament;

(h) With regard to the proposed modifications: — where a modification proposed by the European Parliament does not have the effect of increasing the total amount of the expenditure of an institution, owing in particular to the fact that the increase in expenditure which it would involve would be expressly compensated by one or more proposed modifications correspondingly reducing expenditure, the Council may, acting by a qualified majority, reject the proposed modification. In the absence of a decision to reject it, the proposed modification shall stand as accepted; — where a modification proposed by the European Parliament has the effect of increasing the total amount of the expenditure of an institution, the Council may, acting by a qualified majority, accept this proposed modification. In the absence of a decision to accept it, the proposed modification shall stand as rejected; — where, in pursuance of one of the two preceding subparagraphs, the Council has rejected a proposed modification, it may, acting by a qualified majority, either retain the amount shown in the draft budget or fix another amount.

The draft budget shall be modified on the basis of the proposed modifications accepted by the Council.

If, within 15 days of the draft being placed before it, the Council has not modified any of the amendments adopted by the European Parliament and if the modifications proposed by the latter have been accepted, the budget shall be deemed to be finally adopted. The Council shall inform the European Parliament that it has not modified any of the amendments and that the proposed modifications have been accepted.

If within this period the Council has modified one or more of the amendments adopted by the European Parliament or if the modifications proposed by the latter have been rejected or modified, the modified draft budget shall again be forwarded to the European Parliament. The Council shall inform the European Parliament of the results of its deliberations.

6. Within 15 days of the draft budget being placed before it, the European Parliament, which shall have been notified of the action taken on its proposed modifications, may, acting by a majority of its members and three-fifths of the votes cast, amend or reject the modifications to its amendments made by the Council and shall adopt the budget accordingly. If within this period the European Parliament has not acted, the budget shall be deemed to be finally adopted. 220

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7. When the procedure provided for in this Article has been completed, the President of the European Parliament shall declare that the budget has been finally adopted.

8. However, the European Parliament, acting by a majority of its members and two-thirds of the votes cast, may, if there are important reasons, reject the draft budget and ask for a new draft to be submitted to it.

9. A maximum rate of increase in relation to the expenditure of the same type to be incurred during the current year shall be fixed annually for the total expenditure other than that necessarily resulting from this Treaty or from acts adopted in accordance therewith. The Commission shall, after consulting the Economic Policy Committee, declare what this maximum rate is as it results from: — the trend, in terms of volume, of the gross national product within the Community; — the average variation in the budgets of the Member States; and — the trend of the cost of living during the preceding financial year. The maximum rate shall be communicated, before 1 May, to all the institutions of the Community. The latter shall be required to conform to this during the budgetary procedure, subject to the provisions of the fourth and fifth subparagraphs of this paragraph. If, in respect of expenditure other than that necessarily resulting from this Treaty or from acts adopted in accordance therewith, the actual rate of increase in the draft budget, established by the Council is over half the maximum rate, the European Parliament may, exercising its right of amendment, further increase the total amount of that expenditure to a limit not exceeding half the maximum rate.

Where the European Parliament, the Council or the Commission consider that the activities of the Communities require that the rate determined according to the procedure laid down in this paragraph should be exceeded, another rate may be fixed by agreement between the Council, acting by a qualified majority, and the European Parliament, acting by a majority of its members and three-fifths of the votes cast.

10. Each institution shall exercise the powers conferred upon it by this Article, with due regard for the provisions of the Treaty and for acts adopted in accordance therewith, in particular those relating to the Communities' own resources and to the balance between revenue and expenditure. 221

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Article 204* If at the beginning of a financial year, the budget has not yet been voted, a sum equivalent to not more than one-twelfth of the budget appropriations for the preceding financial year may be spent each month in respect of any chapter or other subdivision of the budget in accordance with the provisions of the Regulations made pursuant to Article 209; this arrangement shall not, however, have the effect of placing at the disposal of the Commission appropriations in excess of one-twelfth of those provided for in the draft budget in course of preparation.

The Council may, acting by a qualified majority, provided that the other conditions laid down in the first subparagraph are observed, authorize expenditure in excess of one-twelfth. If the decision relates to expenditure which does not necessarily result from this Treaty or from acts adopted in accordance therewith, the Council shall forward it immediately to the European Parliament: within 30 davs the European Parliament, acting by a majority of its members and threefifths of the votes cast, may adopt a different decision on the expenditure in excess of the one-twelfth referred to in the first subparagraph. This part of the decision of the Council shall be suspended until the European Parliament has taken its decision. If within the said period the European Parliament has not taken a decision which differs from the decision of the Council, the latter shall be deemed to be finally adopted. The decisions referred to in the second and third subparagraphs shall lay down the necessary measures relating to resources to ensure application of this Article.

Article 205 The Commission shall implement the budget, in accordance with provisions of the regulations made pursuant to Article 209, on its own responsibility and within the limits of the appropriations. The regulations shall lay down detailed rules for each institution concerning its part in effecting its own expenditure. Within the budget, the Commission may, subject to the limits and conditions laid down in the regulations made pursuant to Article 209, transfer appropriations from one chapter to another or from one sub-division to another.

* Text as amended by Article 13 of the Treaty amending Certain Financial Provisions.

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Article 205a* The Commission shall submit annually to the Council and to the European Parliament the accounts of the preceding financial year relating to the implementation of the budget. The Commission shall also forward to them a financial statement of the assets and liabilities of the Community.

Article 206* 1. A Court of Auditors is hereby established. 2. The Court of Auditors shall consist of twelve members.** 3. The members of the Court of Auditors shall be chosen from among persons who belong or have belonged in their respective countries to external audit bodies or who are especially qualified for this office. Their independence must be beyond doubt. 4. The members of the Court of Auditors shall be appointed for a term of six years by the Council, acting unanimously after consulting the European Parliament. However, when the first appointments are made, four members of the Court of Auditors, chosen by lot, shall be appointed for a term of office of four years only. The members of the Court of Auditors shall be eligible for reappointment. They shall elect the President of the Court of Auditors from among their number for a term of three years. The President may be re-elected. 5. The members of the Court of Auditors shall, in the general interest of the Community, be completely independent in the performance of their duties. In the performance of these duties, they shall neither seek nor take instructions from any government or from any other body. They shall refrain from any action incompatible with their duties. 6. The members of the Court of Auditors may not, during their term of office, engage in any other occupation, whether gainful or not. When entering upon their duties they shall give a solemn undertaking that, both during and after their term of office, they will respect the obligations arising therefrom and in particular their duty to behave with integrity and discretion as regards the acceptance, after they have ceased to hold office, of certain appointments or benefits. * Article added by Article 14 of the Treaty amending Certain Financial Provisions. * Text, excepting paragraph 2, as amended by Article IS of the Treaty amending Certain Financial Provisions. " Paragraph 2 as amended by Article 20 of the Act of Accession ESP/PORT.

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Regional Economic Institutions 7. Apart from normal replacement, or death, the duties of a member of the Court of Auditors shall end when he resigns, or is compulsorily retired by a ruling of the Court of Justice pursuant to paragraph 8.

The vacancy thus caused shall be filled for the remainder of the member's term of office.

Save in the case of compulsory retirement, members of the Court of Auditors shall remain in office until they have been replaced.

8. A member of the Court of Auditors may be deprived of his office or of his right to a pension or other benefits in its stead only if the Court of Justice, at the request of the Court of Auditors, finds that he no longer fulfils the requisite conditions or meets the obligations arising from his office.

9. The Council, acting by a qualified majority, shall determine the conditions of employment of the President and the members of the Court of Auditors and in particular their salaries, allowances and pensions. It shall also, by the same majority, determine any payment to be made instead of remuneration.

10. The provisions of the protocol on the Privileges and Immunities of the European Communities applicable to the Judges of the Court of Justice shall also apply to the members of the Court of Auditors.

Article 206a* 1. The Court of Auditors shall examine the accounts of all revenue and expenditure of the Community. It shall also examine the accounts of all revenue and expenditure of all bodies set up by the Community in so far as the relevant constituent instrument does not preclude such examination. 2. The Court of Auditors shall examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. The audit of revenue shall be carried out on the basis both of the amounts established as due and the amounts actually paid to the Community. The audit of expenditure shall be carried out on the basis both of commitments undertaken and payments made.

* Article added by Article 16 of the Treaty amending Certain Financial Provisions.

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These audits may be canied out before the closure of accounts for the financial year in question. 3. The audit shall be based on records and, if necessary, performed on the spot in the institutions of the Community and in the Member States. In the Member States the audit shall be carried out in liaison with the national audit bodies or, if these do not have the necessary powers, with the competent national departments. These bodies or departments shall inform the Court of Auditors whether they intend to take part in the audit. The institutions of the Community and the national audit bodies or, if these do not have the necessary powers, the competent national departments, shall forward to the Court of Auditors, at its request, any document or information necessary to cany out its task. 4. The Court of Auditors shall draw up an annual report after the close of each financial year. It shall be forwarded to the institutions of the Community and shall be published, together with the replies of these institutions to the observations of the Court of Auditors, in the Official Journal of the European Communities. The Court of Auditors may also, at any time, submit observations on specific questions and deliver opinions at the request of one of the institutions of the Community. It shall adopt its annual reports or opinions by a majority of its members. It shall assist the European Parliament and the Council in exercising their powers of control over the implementation of the budget. Article 206b* The European Parliament, acting on a recommendation from the Council which shall act by a qualified majority, shall give a discharge to the Commission in respect of the implementation of the budget. To this end, the Council and the European Parliament in turn shall examine the accounts and the financial statement referred to in Article 205a and the annual report by the Court of Auditors together with the replies of the institutions under audit to the observations of the Court of Auditors. Article 207 The budget shall be drawn up in the unit of account determined in accordance with the provisions of the regulations made pursuant to Article 209. The financial contributions provided for in Article 200 (1) shall be placed at the disposal of the Community by the Member States in their national currencies.

* Article added by Aitide 17 of the Treaty amending Certain Financial (Revisions.

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Regional Economic Institutions The available balances of these contributions shall be deposited with the Treasuries of Member States or with bodies designated by them. While on deposit, such f u n d s shall retain the value corresponding to the parity, at the date of deposit, in relation to the unit of account referred to in the first paragraph. The balances may be invested on terms to be agreed between the C o m mission and the Member State concerned. The regulations m a d e pursuant to Article 209 shall lay down the technical conditions under which financial operations relating to the European Social Fund shall be carried out. Article 208 The Commission may, provided it notifies the competent authorities of the Member States concerned, transfer into the currency of one of the Member States its holdings in the currency of another Member State, to the extent necessary to enable them to be used for purposes which come within the scope of this Treaty. The Commission shall as far as possible avoid making such transfers if it possesses cash or liquid assets in the currencies which it needs. The Commission shall deal with each Member State through the authority designated by the State concerned. In carrying out financial operations the Commission shall employ the services of the bank of issue of the Member State concerned or of any other financial institution approved by that State. Article 209* The Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament and obtaining the opinion of the Court of Auditors, shall: (a) make Financial Regulations specifying in particular the procedure to be adopted for establishing and implementing the budget a n d for presenting and auditing accounts; (b) determine the methods and procedure whereby the budget revenue provided under the arrangements relating to the Communities' own resources shall be made available to the Commission, and determine the measures to be applied, if need be, to meet cash requirements; (c) lay down rules concerning the responsibility of authorizing officers a n d accounting officers and concerning appropriate arrangements for inspection.

* Text as amended by Article 18 of the Treaty amending Certain Financial Provisions.

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PART SIX

GENERAL AND FINAL PROVISIONS Article 210 The Community shall have legal personality. Article 211 In each of the Member States, the Community shall enjoy the most extensive legal capacity accorded to legal persons under their laws; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings. To this end, the Community shall be represented by the Commission.

Article 212 (Article repealed by Article 24 of the Merger Treaty) [See Article 24(1) of the Merger Treaty, which reads as follows: 1. The officials and other servants of the European Coal and Steel Community, the European Economic Community and the European Atomic Energy Community shall, at the date of entry into force of this Treaty, become officials and other servants of the European Communities and form part of the single administration of those Communities. The Council shall, acting by a qualified majority on a proposal from the Commission and after consulting the other institutions concerned, lay down the Staff Regulations of officials of the European Communities and the Conditions of Employment of other servants of those Communities.]

Article 213 The Commission may, within the limits and under conditions laid down by the Council in accordance with the provisions of this Treaty, collect any information and carry out any checks required for the performance of the tasks entrusted to it.

Article 214 The members of the institutions of the Community, the members of committees, and the officials and other servants of the Community shall be required, even after their duties have ceased, not to disclose information of 227

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Article 215 The contractual liability of the Community shall be governed by the law applicable to the contract in question.

In the case of non-contractual liability, the Community shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties.

The personal liability of its servants towards the Community shall be governed by the provisions laid down in their Staff Regulations or in the Conditions of Employment applicable to them.

Article 216 The seat of the institutions of the Community shall be determined by common accord of the Governments of the Member States.

Article 217 The rules governing the languages of the institutions of the Community shall, without prejudice to the provisions contained in the rules of procedure of the Court of Justice, be determined by the Council, acting unanimously.

Article 218 (Article repealed by the second paragraph of Article 28 of the Merger Treaty)

[See the first paragraph of Article 28 of the Merger Treaty, which reads as follows :

The European Communities shall enjoy in the territories of the Member States such privileges and immunities as are necessary for the performance of their tasks, under the conditions laid down in the Protocol annexed to this Treaty. The same shall apply to the European Investment Bank.] 228

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Article 219 Member States undertake not to submit a dispute concerning the interpretation or application of this Treaty to any method of settlement other than those provided for therein. Article 220 Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: — the protection of persons and the enjoyment and protection of rights under the same conditions as those accorded by each State to its own nationals; — the abolition of double taxation within the Community; — the mutual recognition of companies or firms within the meaning of the second paragraph of Article 48, the retention of legal personality in the event of transfer of their seat from one country to another, and the possibility of mergers between companies or firms governed by the laws of different countries; — the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and of arbitration awards. Article 221 Within three years of the entry into force of this Treaty, Member States shall accord nationals of the other Member States the same treatment as their own nationals as regards participation in the capital of companies or firms within the meaning of Article 58, without prejudice to the application of the other provisions of this Treaty. Article 222 This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership. Article 223 1. The provisions of this Treaty shall not preclude the application of the following rules: (a) No Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security; (b) Any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material ; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes.

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Regional Economic Institutions 2. During the first year after the entry into force of this Treaty, the Council shall, acting unanimously, draw up a list of products to which the provisions of paragraph 1 (b) shall apply. 3. The Council may, acting unanimously on a proposal from the Commission, make changes in this list.

Article 224 Member States shall consult each other with a view to taking together the steps needed to prevent the functioning of the common market being affected by measures which a Member State may be called upon to take in the event of serious internal disturbances affecting the maintenance of law and order, in the event of war, serious international tension constituting a threat of war, or in order to carry out obligations it has accepted for the purpose of maintaining peace and international security.

Article 225 If measures taken in the circumstances referred to in Articles 223 and 224 have the effect of distorting the conditions of competition in the common market, the Commission shall, together with the State concerned, examine how these measures can be adjusted to the rules laid down in this Treaty. By way of derogation from the procedure laid down in Articles 169 and 170, the Commission or any Member State may bring the matter directly before the Court of Justice if it considers that another Member State is making improper use of the powers provided for in Articles 223 and 224. The Court of Justice shall give its ruling in camera.

Article 226 1. If, during the transitional period, difficulties arise which are serious and liable to persist in any sector of the economy or which could bring about serious deterioration in the economic situation of a given area, a Member State may apply for authorization to take protective measures in order to rectify the situation and adjust the sector concerned to the economy of the common market. 2. On application by the State concerned, the Commission shall, by emergency procedure, determine without delay the protective measures which it considers necessary, specifying the circumstances and the manner in which they are to be put into effect. 3. The measures authorized under paragraph 2 may involve derogations from the rules of this Treaty, to such an extent and for such periods as are strictly necessary in order to attain the objectives referred to in paragraph 1. Priority shall be given to such measures as will least disturb the functioning of the common market. 230

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Article 227 1. This Treaty shall apply to the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Portuguese Republic and the United Kingdom of Great Britain and Northern Ireland.* 2. With regard to Algeria and the French overseas departments, the general and particular provisions of this Treaty relating to: — the free movement of goods; — agriculture, save for Article 40 (4); — the liberalization of services; — the rules on competition; — the protective measures provided for in Articles 108, 109 and 226; — the institutions, shall apply as soon as this Treaty enters into force. The conditions under which the other provisions of this Treaty are to apply shall be determined, within two years of the entry into force of this Treaty, by decisions of the Council, acting unanimously on a proposal from the Commission. The institutions of the Community will, within the framework of the procedures provided for in this Treaty, in particular Article 226, take care that the economic and social development of these areas is made possible. 3. The special arrangements for association set out in Part Four of this Treaty shall apply to the overseas countries and territories listed in Annex IV to this Treaty. This Treaty shall not apply to those overseas countries and territories having special relations with the United Kingdom of Great Britain and Northern Ireland which are not included in the aforementioned list.* 4. The provisions of this Treaty shall apply to the European territories for whose external relations a Member State is responsible. 5.

* Notwithstanding the preceding paragraphs:

(a) This Treaty shall not apply to the Faeroe Islands. The Government of the Kingdom of Denmark may, however, give notice, by a declaration

* Paragraph (1) as amended by Article 24 of the Act of Accession ESP/PORT. * Second subparagraph of paragraph 3 added by Article 26 (2) of the Act of Accession D K / I R L / UK. * Paragraphs added by Article26 (3) of the Act of Accession DK/1RL/UK, modified by Article 15 (2) of the AD AA DK/1RL/UK.

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Regional Economic Institutions deposited by 31 December 1975 at the latest with the Government of the Italian Republic, which shall transmit a certified copy thereof to each of the Governments of the other Member States, that this Treaty shall apply to those Islands. In that event, this Treaty shall apply to those Islands from the first day of the second month following the deposit of the declaration. (b) This Treaty shall not apply to the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus. (c) This Treaty shall apply to the Channel Islands and the Isle of Man only to the extent necessary to ensure the implementation of the arrangements for those islands set out in the Treaty concerning the accession of new Member States to the European Economic Community and to the European Atomic Energy Community signed on 22 January 1972. Article 228

1. Where this Treaty provides for the conclusion of agreements between the Community and one or more States or an international organization, such agreements shall be negotiated by the Commission. Subject to the powers vested in the Commission in this field, such agreements shall be concluded by the Council, after consulting the European Parliament where required by this Treaty.

The Council, the Commission or a Member State may obtain beforehand the opinion of the Court of Justice as to whether an agreement envisaged is compatible with the provisions of this Treaty. Where the opinion of the Court of Justice is adverse, the agreement may enter into force only in accordance with Article 236. 2. Agreements concluded under these conditions shall be binding on the institutions of the Community and on Member States. Article 229 It shall be for the Commission to ensure the maintenance of all appropriate relations with the organs of the United Nations, of its specialized agencies and of the General Agreement on Tariffs and Trade. The Commission shall also maintain such relations as are appropriate with all international organizations. Article 230 The Community shall establish all appropriate forms of cooperation with the Council of Europe. Article 231 The Community shall establish close cooperation with the Organization for European Economic Cooperation, the details to be determined by common accord. 232

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Article 232

1. The provisions of this Treaty shall not affect the provisions of the Treaty establishing the European Coal and Steel Community, in particular as regards the rights and obligations of Member States, the powers of the institutions of that Community and the rules laid down by that Treaty for the functioning of the common market in coal and steel. 2. The provisions of this Treaty shall not derogate from those of the Treaty establishing the European Atomic Energy Community. Article 233

The provisions of this Treaty shall not preclude the existence or completion of regional unions between Belgium and Luxembourg, or between Belgium, Luxembourg and the Netherlands, to the extent that the objectives of these regional unions are not attained by application of this Treaty.

Article 234

The rights and obligations arising from agreements concluded before the entry into force of this Treaty between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this Treaty. To the extent that such agreements are not compatible with this Treaty, the Member State or States concerned shall take all appropriate steps to eliminate the incompatibilities established. Member States shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude. In applying the agreements referred to in the first paragraph, Member States shall take into account the fact that the advantages accorded under this Treaty by each Member State form an integral part of the establishment of the Community and are thereby inseparably linked with the creation of common institutions, the conferring of powers upon them and the granting of the same advantages by all the other Member States.

Article 235

If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.

Article 236

The Government of any Member State or the Commission may submit to the Council proposals for the amendment of this Treaty. 233

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Article 237 Any European State may apply to become a member o f the C o m munity. It shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent o f the European Parliament which shall act by an absolute majority o f its component members.* The conditions o f admission and the adjustments to this Treaty necessitated thereby shall be the subject o f an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the Contracting States in accordance with their respective constitutional requirements.

Article 238 The Community may conclude with a third State, a union o f States or an international organization agreements establishing an association involving reciprocal rights and obligations, common action and special procedures. These agreements shall be concluded by the Council, acting unanimously and after receiving the assent o f the European Parliament which shall act by an absolute majority o f its component members.* Where such agreements call for amendments to this Treaty, these amendments shall first be adopted in accordance with the procedure laid down in Article 236.

Article 239 The Protocols annexed to this Treaty by common accord o f the Member States shall form an integral part thereof.

Article 240 This Treaty is concluded for an unlimited period.

* First paragraph as replaced by Article 8 of the SEA. * Second paragraph as replaced by Article 9 of the SEA.

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Setting up of the institutions Article 241 The Council shall meet within one month of the entry into force of this Treaty. Article 242 The Council shall, within three months of its first meeting, take all appropriate measures to constitute the Economic and Social Committee. Article 243 The Assembly* shall meet within two months of the first meeting of the Council, having been convened by the President of the Council, in order to elect its officers and draw up its rules of procedure. Pending the election of its officers, the oldest member shall take the chair. Article 244 The Court of Justice shall take up its duties as soon as its members have been appointed. Its first President shall be appointed for three years in the same manner as its members. The Court of Justice shall adopt its rules of procedure within three months of taking up its duties. No matter may be brought before the Court of Justice until its rules of procedure have been published. The time within which an action must be brought shall run only from the date of this publication. Upon his appointment, the President of the Court of Justice shall exercise the powers conferred upon him by this Treaty. Article 245 The Commission shall take up its duties and assume the responsibilities conferred upon it by this Treaty as soon as its members have been appointed. Upon taking up its duties, the Commission shall undertake the studies and arrange the contacts needed for making an overall survey of the economic situation of the Community.

* EDITORIAL NOTE: Notwithstanding the provisions of Article 3 of the SEA, and for historical reasons, the term 'Assembly' has not been replaced by the term 'European Parliament'.

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Regional Economic Institutions Article 246 1. The first financial year shall run from the date on which this Treaty enters into force until 31 December following. Should this Treaty, however, enter into force during the second half of the year, the first financial year shall run until 31 December of the following year. 2. Until the budget for the first financial year has been established, Member States shall make the Community interest-free advances which shall be deducted from their financial'contributions to the implementation of the budget. 3. Until the Staff Regulations of officials and the Conditions of Employment of other servants of the Community provided for in Article 212 have been laid down, each institution shall recruit the Staff it needs and to this end conclude contracts of limited duration. Each institution shall examine together with the Council any question concerning the number, remuneration and distribution of posts.

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b) Third ACP-EEC Convention (Lomé III) December 8, 1984 The Courier No. 89, Jan./Feb. 1985 (BGB1. 1986 II, 19; O.J. EC 1986, No. L86, 1)

PART ONE General provisions of ACP-EEC co-operation CHAPTER 1 Objectives and principles of co-operation

economic potential in order to promote the A C P States' social and economic progress and the well-being of their population through the satisfaction of their basic needs, the recognition of the role of women and the enhancement of people's capacities, with respect for their dignity.

Article 5 Article 1 T h e C o m m u n i t y and its M e m b e r States, of the one part, and the A C P States, of the other part (hereinafter referred to as the Contracting Parties), hereby conclude this co-operation Convention in order to p r o m o t e and expedite the economic, cultural and social development of the A C P States and to consolidate and diversify their relations in a spirit of solidarity and mutual interest. T h e Contracting Parties thereby affirm their undertaking to continue, strengthen and render more effective the system of co-operation established under the first and second ACP-EEC Conventions and confirm the special character of their relations, based on their reciprocal interest, and the specific nature of their co-operation. T h e Contracting Parties hereby express their resolve to intensify their effort to create, with a view to a more just and balanced international economic order, a model for relations between developed and developing states and to work together to affirm in the international context the principles underlying their co-operation.

With a view to attaining more balanced and more selfreliant economic development in the A C P States, special efforts shall be made under this Convention to promote rural development, food security for the people and the revival and strengthening of agricultural production potential in the A C P States.

Article 6 In order to strengthen the A C P States' collective selfreliance, this Convention shall constitute support for their efforts to organize themselves into regional groupings and to step up their co-operation at regional and inter-regional level. In this context of co-operation, special attention shall be paid to the implementation of operations which are particularly suited to the regional dimension and require a long-term effort.

Article 7 Article 2 ACP-EEC co-operation, underpinned by a legally binding system and the existence of joint institutions, shall be exercised on the basis.of the following fundamental principles: — equality between partners, respect for their sovereignty, mutual interest and interdependence; — the right of each State to determine its own political, social, cultural and economic policy options; — security of their relations based on the " a c q u i s " of their system of co-operation.

Article 3 T h e A C P States shall determine the development principles, strategies and models for their economies and societies in all sovereignty.

Article 4 Support shall be provided in ACP-EEC co-operation for the A C P States' own efforts to achieve more self-reliant and selfsustained development based on their cultural and social values, their human capacities, their natural resources and their

The Contracting Parties acknowledge the need to accord special treatment to the least-developed A C P States and to take account of the specific difficulties confronting the landlocked and island A C P States. They shall pay special attention to improving the living conditions of the poorest sections of the population. Co-operation shall comprise, inter alia, special treatment when determining the volume of financial resources and the conditions attached thereto in order to enable the least-developed A C P States to overcome structural and other obstacles to their development. For the landlocked and island A C P States, co-operation shall be aimed at devising and encouraging specific operations to deal with development problems caused by their geographical situations.

Article 8 In order to step up the effectiveness of the instruments of this Convention, the Contracting Parties shall adopt, in the framework of their respective responsibilities, guidelines, priorities and measures conducive to attaining the objectives set out in this Convention and to the implementation of financial

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and technical assistance and the other co-operation ments in a co-ordinated manner.

instru-

With this in mind, they agree to pursue the dialogue, notably within the joint institutions, to seek ways and means of rendering those instruments ever more effective.

Article 9 Within the scope of their respective responsibilities, the institutions of this Convention shall examine periodically the results of the application thereof, provide any necessary impetus and take any relevant decision or measure for the attainment of its objectives. Any question that might directly hamper the effective attainment of the objectives of this Convention may be raised in the context of the institutions. Consultations shall take place within the Council of Ministers at the request of either Contracting Party in cases provided for in this Convention or where difficulties arise with the application or interpretation thereof. Where the Community intends, in the exercise of its powers, to take a measure which might affect the interests of the ACP States as far as this Convention's objectives are concerned, it shall inform the said Slates of its intentions. Where necessary, the exchange of information may also lake place on the initiative of the A C P States. At their request, consultations shall be held in good time so that account may be taken of their concerns before any final decision.

Article 13 Co-operation in the fields of mining and energy shall be directed at promoting and expediting, in the mutual interest, diversified economic development, deriving full benefit from the A C P States' h u m a n potential and natural resources, and at fostering better integration of these and other sectors and their complementarity with the rest of the economy. Co-operation shall be aimed at creating and consolidating the cultural, social and economic environment and the infrastructure required to achieve that objective. Support shall be provided for the A C P States' efforts to devise and implement energy policies suited to their situation, notably the gradual reduction of the dependence of the majority of them on imported petroleum products and the development of new and renewable sources of energy. Co-operation shall be aimed at encouraging improved exploitation of energy and mining resources by taking account of the energy component in development of the different economic and social sectors and thus helping to improve living conditions and the environment, leading to the better conservation of biomass resources, particularly fuelwood.

Article 14 The Contracting Parties, acknowledging the crucial role of industry as a driving force in economic and social development, are determined to ensure a balanced, self-reliant development in the A C P States based on those States' own priorities. They agree to foster industrial development in the A C P States with a view to strengthening those States' efforts to promote their collective self-reliance and increase their share of world trade.

CHAPTER 2

Article 15

Objectives and guidelines of the Convention in the main areas of co-operation

The aim of co-operation in fisheries shall be to help the A C P States to develop their fishery resources in order to expand production for domestic consumption as part of their efforts to achieve increased food security and increase production for export. Such co-operation shall be designed to serve the m u tual interests of the Parties, in accordance with their fishery policies.

Article 10 Co-operation shall be aimed at supporting development in the A C P States, a process centred on man himself and rooted in each people's culture. It shall back up the policies and measures adopted by those States to enhance their h u m a n resources, increase their own creative capacities and promote their cultural identities. Co-operation shall also encourage participation by the population in the design and execution of development operations. Account shall be taken, in the various fields of co-operation, and at all the different stages of the operations executed, of the cultural dimension and social implications of such operations.

Article 11 In the framework of efforts to protect the environment and restore natural balances, co-operation shall contribute in particular towards the control of drought and desertification and the implementation of other campaigns to that end.

Article 12 Agricultural co-operation shall be aimed at the pursuit of food self-sufficiency and food security in the A C P States, developing and organizing their productive systems, improving the living standards and conditions and the life styles of the rural population and achieving the balanced development of rural areas. Operations in this field shall be designed and executed to support the agricultural and food policies or strategies adopted by the A C P States.

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CHAPTER 3 Principles governing the instruments of co-operation Article 16 In order to contribute towards achieving the aims of this Convention, the Contracting Parties shall deploy co-operation instruments that correspond to the principles of solidarity and mutual interest, adapted to the economic, cultural and social situation in the A C P States and in the C o m m u n i t y and to developments in their international environment. These instruments shall be directed mainly, by strengthening the established mechanisms and systems, a t : — increasing trade between the Parties; — supporting the A C P States' efforts to achieve self-reliant development by stepping up their capacity to innovate and to adapt and transform technology; — helping the A C P States to gain access to the capital markets and encouraging direct private European investment to contribute towards the development of the A C P States; — remedying the instability of export earnings from the A C P States' agricultural commodities and helping those countries to cope with serious disruptions affecting their mining industries.

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Lomé III Article 17 In order to promote and diversify trade between the Contracting Parties, the C o m m u n i t y and the A C P States are agreed on:

mutual dependence in that sector, the Contracting Parties confirm the importance of the system established to help A C P States confronted with serious disruptions in that sector to restore it to a viable state and remedy the consequences of such disruptions for their development.

— general trade provisions; — special arrangements for Community import of certain A C P products; — arrangements to promote the development of the A C P States' trade and services, including tourism; — a system of reciprocal information and consultation designed to help apply the trade co-operation provisions of this Convention effectively.

CHAPTER 4 Institutions

Article 18 T h e aim of the general trade arrangements, which are based on the Contracting Parties' international obligations, shall be to provide a firm and solid foundation for trade co-operation between the A C P States and the C o m m u n i t y . They shall be based on the principle of free access to the C o m m u n i t y market for products originating in the A C P States, with special provisions for agricultural products and a safeguard clause. In view of the A C P States' present development needs, the arrangements shall not comprise any element of reciprocity for those States as regards free access. They shall also be based on the principle of non-discrimination by the A C P States between the M e m b e r States and the according to the C o m m u n i t y of treatment no less favourable than the most-favoured-nation treatment.

Article 19

Article 22 The institutions of this Convention shall be the Council of Ministers, the Committee of Ambassadors and the Joint Assembly.

Article 23 1. The Council of Ministers shall be composed, on the one hand, of the members of the Council of the European C o m m u nities and of members of the Commission of the European Communities and. on the other hand, of a member of the government of each of the A C P States. 2.

T h e functions of the Council of Ministers shall be to:

(a) establish the broad lines of the work to be undertaken in the context of the application of this Convention, notably in helping to solve problems fundamental to the joint and several development of the Contracting Parties;

T h e C o m m u n i t y shall contribute towards the A C P States' own development efforts by providing adequate financial resources and appropriate technical assistance aimed at stepping up those States' capacities for self-reliant and integrated economic. social and cultural development and also at helping to raise their population's standard of living and well-being.

(b) take any political decision for the attainment of the objectives of this Convention;

Such contribution shall be made on predictable and regular bases. They shall be accorded on the most liberal terms possible for the C o m m u n i t y . Particular account shall be taken of the situation of the least-developed A C P States.

(e) deal with problems of interpretation of this Convention; (0 settle procedural questions and arrangements for the implementation of this Convention; (g) examine, at the request of one of the Contracting Parties, any question directly liable to hinder or promote the effective and efficient implementation of this Convention or any other issue likely to obstruct attainment of its objectives;

Article 20 The Contracting Parlies agree to facilitate greater, more stable flows of resources from the private sector to the A C P States by taking measures to improve the access of A C P States to capital markets and to encourage European private investment in A C P States. T h e Contracting Parties underline the need to provide equitable and stable conditions for the treatment of such investment.

(d) ensure efficient performance of the consultation mechanisms provided for in this C o n v e n t i o n :

(h) take all necessary measures to establish ongoing contacts between the economic and social sectors in the C o m m u n i t y and in the A C P States and to arrange regular consultations with their representatives on matters of mutual interest, given the importance, acknowledged by the Contracting Parties, of establishing an effective dialogue between these sectors and of securing their contribution to the co-operation and development effort.

Article 24

Article 21 Given the extreme dependence of the economics of the vast majority of A C P States on their exports of agricultural commodities. the Contracting Parties agree to pay particular attention to their co-operation in this sector with a view to supporting A C P government policies or strategics designed to restore and improve production and marketing conditions and local processing. T h e Contracting Parties also agree to confirm tance of the system for the stabilization of export well as of intensifying the process of consultation A C P States and the C o m m u n i t y in international organizations which aim to stabilize agricultural markets.

(c) take decisions in the specific areas provided for in this Convention:

the imporearnings, as between the forums and commodity

Given the role played by the mining industry in the development efforts of numerous A C P States and the ACP-EEC

1. T h e Committee of Ambassadors shall be composed, on the one hand, of each Member State's Permanent Representative to the European Communities and one representative of the Commission and, on the other, of the head of each A C P State's mission to the European Communities. 2. T h e Committee of Ambassadors shall assist the Council of Ministers in the performance of its functions and shall carry out any brief given to it by the Council. It shall monitor implementation of this Convention and progress towards achieving the objectives set therein.

Article 25 1. The Joint Assembly shall be composed of equal numbers of, on the one hand, members of the European Parliament on the C o m m u n i t y side and of. on the other, members of parlia-

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mcnt or, failing this, of representatives designated by the A C P States. 2. (a) T h e Joint Assembly shall be a consultative body, which shall seek, through dialogue, debate and concerted action, to: — promote better understanding between the peoples of the Member States and the A C P States; — promote public awareness of the interdependence of the peoples and of their interests as well as of the need for solidarity in development; — reflect upon all matters pertaining to ACP-EEC co-operalion. particularly the fundamental problems of development;

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— encourage research and initiative, and formulate proposals with a view to improving and reinforcing A C P - E E C co-operation; — urge the relevant authorities of the Contracting Parties to implement this Convention in the most efficient m a n n e r possible so as to ensure the full attainment of its objectives; (b) T h e Joint Assembly shall organize regular contacts and consultations with representatives of economic and social sectors in the A C P States and in the C o m m u n i t y in order to obtain their views on the attainment of the objectives of this Convention.

PART TWO The areas of ACP-EEC co-operation TITLE I Agricultural and rural development and conservation of natural resources CHAPTER 1 Agricultural co-operation and food security Article 26 Co-operation in the agricultural and rural sector, that is arable farming, livestock production, fisheries and forestry, shall be aimed, inter alia, at: — supporting that A C P States' efforts to increase their degree of self-sufficiency in food, in particular by strengthening the capacity of the A C P States to provide their population with sufficient food and ensure a satisfactory level of nutrition: — reinforcing food security at national, regional and interregional level; — guaranteeing the rural population incomes that will significantly improve their standard of living; — promoting the active participation of the rural population in their own development by organizing small farmers into associations and integrating them more effectively into national and international economic activity; — creating satisfactory living conditions and a satisfactory life style in the rural environment, notably by developing social and cultural activities; — improving rural productivity, notably by transfers of appropriate technology and the rational exploitation of plant and animal resources; — reducing post-harvest losses: — diversifying job-creating rural activities and expanding activities that back up production: — improving production by on-the-spot processing of the products of agriculture, including livestock farming, and fisheries and forestry: — ensuring a balance between food crops and export crops: — developing agricultural research tailored to the natural and human environment of the country and the region and meeting extension service needs; — in the context of the above objective, protecting the natural environment, particularly through specific operations to control drought and desertification.

Article 27 1. Operations to attain the objectives referred to in Article 26 shall be as varied and practical as possible, at national, regional and inter-regional level. 2. They shall, furthermore, be designed and deployed to implement the policies and strategies established by the A C P States and respect their priorities. 3. Support shall be provided for such policies and strategies in the context of agricultural co-operation in accordance with the provisions of this Convention.

Article 28 1. Development of production calls for increased animal and crop production and involves: — improving farming methods for rain-fed crops while conserving soil fertility; — developing irrigated crops, inter alia through different of agricultural water schemes (village water engineering, lation of watercourses and soil improvement) ensuring m u m use and thrifty management of water which can be tered by farmers and by local communities; operations also consist in the rehabilitation of existing schemes;

types reguoptimasshall

— improving and modernizing cultivation techniques and making better use of factors of production (improved varieties and breeds, agricultural equipment, fertilizers, plant treatment preparations); — in the sphere of livestock farming, improving animal feed (more effective management of pasture, increased fodder production, more new water-points and repair of existing ones) and health, including the development of the infrastructure required for that purpose; — better integration of arable and livestock farming: — in the sphere of fisheries, modernizing developing aquaculture.

fish-farming

and

2. Other prerequisites for the development of production are: — the extension of secondary and tertiary back-up activities for agriculture, such as the manufacture, modernization and promotion of agricultural and rural equipment and other inputs and, where necessary, their importation: — the establishment or consolidation of agricultural credit facilities adapted to local conditions in order to promote access to production factors for farmers; — the encouragement of all those policies and incentives for producers which are appropriate to local conditions with a view to greater productivity and to improving farmers' incomes.

Article 29 In order to ensure a return on output, agricultural co-operation shall contribute to: — adequate means of preservation and suitable storage facilities for producers; — effective control of disease, pests and other factors causing production losses: — basic marketing arrangements underpinned by suitable organization of producers, with the necessary material and financial resources, and by adequate means of c o m m u n i c a t i o n : — flexible operation of marketing channels, taking account of every form of public o r private initiative, to enable local markets. areas of the country with shortfalls and urban markets to be supplied, in order to cut down dependence on outside sources; — facilities to prevent breaks in supplies (security storage) and guard against erratic price fluctuations (intervention storage);

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— processing, packaging and marketing of products, particularly by developing artisanal and agro-industrial units, in order to adapt them to the trend of the market.

Article 30 Rural promotion measures shall involve: — the organization of producers within associations or c o m munities in order to enable them to derive more benefit from joint contracts and investment and jointly owned equipment; — the development of social and cultural activities (such as health, education and culture) essentia! for improving rural life styles;

Article 33 1. C o m m u n i t y measures aimed at food security in the A C P States shall be conducted in the context of the food strategies or policies of the A C P States concerned and of the development objectives which they lay down. They shall be implemented, in co-ordination with the instruments of the Convention, in the framework of C o m m u n i t y policies and the measures resulting therefrom with due regard for the C o m m u n i t y ' s international c o m m i t m e n t s . 2. In this context, multiannua! indicative programming may be carried out with the A C P States which so wish, so that their food supplies can be better forecast.

— suitable extension services to train farmers; — improving the training of instructors at all levels.

Article 31 Co-operation in agricultural research shall contribute: — to the development, in the A C P States, of domestic and regional research capacities suited to the local natural, social and economic conditions of crop and animal production, with special attention being paid to arid and semi-arid regions: — in particular, to improving varieties and breeds, the nutritional quality of products and their packaging, and developing technology and processes accessible to the producers; — to better dissemination of the results of research undertaken in an A C P or n o n - A C P State and applicable in other A C P States: — to extension work in order to inform the greatest possible number of users of the results of such research.

Article 32 Agricultural co-operation schemes shall be carried out in accordance with the detailed provisions and procedures laid down for financial and technical co-operation and in this context they may also cover the following: 1) under the heading of technical co-operation: — exchange of information between the C o m m u n i t y and the A C P States and a m o n g the A C P States themselves (on. for example, water use. intensive production techniques and the results of research): — exchange of experience between professionals working in such areas as credit and savings, co-operatives, mutual insurance. artisanal activities and small-scale industry in rural areas: 2) under the heading of financial co-operation: — supply of factors of production; — support for market regulation bodies, on the basis of a coordinated approach to production and marketing problems: — participation in the constitution of funds for agricultural credit facilities: — opening of credit lines for trade organizations representing farmers, artisans and small-scale industrial operators in rural areas, geared to their activities (such as supplies, primary marketing and storage), and also for associations implementing the campaigns on specific themes; — support for measures to combine industrial and trade skills in the A C P Stales and the C o m m u n i t y within artisanal or industrial units, for the manufacture of inputs and equipment and for such purposes as maintenance, packaging, storage, transport and processing of products.

242

Article 34 1. With regard to available agricultural products, the C o m munity undertakes to ensure that export refunds can be fixed further in advance for all A C P States in respect of a range of products drawn up in the light of the food requirements expressed by those States. Advance each year understood accordance mission.

fixing shall be for one year and shall be applied throughout the life of this Convention, it being that the level of the refund will be determined in with the methods normally followed by the C o m -

2. Specific agreements may be concluded with those A C P States which so request in the context of their food security policies.

Article 35 1. Food aid operations shall be decided on the basis of the rules and criteria adopted by the C o m m u n i t y for all recipients of this type of aid. Subject to those rules and to the C o m m u n i t y ' s freedom of decision in this matter, food aid operations shall be governed by the following guidelines: (a) except in urgent cases. Community food aid. which shall be a transitional measure, must be integrated with the A C P States* development policies. This calls for consistency between food aid and other co-operation measures: (b) where products supplied as food aid are sold, they must be sold at a price which will not disrupt the domestic market. T h e resulting counterpart funds shall be used to finance the execution or running of projects or programmes with a m a j o r rural development c o m p o n e n t : (c) where the products supplied are distributed free of charge, they must form part of nutrition programmes aimed in particular at vulnerable sections of the population or be delivered as remuneration for work; (d) food aid operations that form part of development projects or programmes or nutrition programmes may be planned on a multiannual basis; (e) as a matter of priority, the products supplied must meet the needs of the recipients. In the selection of such products, account should be taken in particular of the ratio of cost to specific nutritive value and of the effect the choice might have on consumer habits; (f) where in a recipient A C P State, the trend of the food situation is such as to make it desirable for food aid to be replaced in whole or in part by operations designed to consolidate the current trend, alternative operations may be implemented in the form of financial and technical assistance, in accordance with the relevant C o m m u n i t y rules. These operations shall be decided upon at the request of the A C P State concerned.

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Lomé III Article 36 In implementing this Chapter, special attention shall be paid, at the request of the countries concerned, to: — the specific difficulties of the least-developed A C P States in carrying out the policies or strategies they have established to strengthen their food self-sufficiency and security. In this context, co-operation shall bear in particular on the productive sectors (including the supply of inputs), transport, marketing, packaging and the setting-up of storage infrastructure; — establishing a security stock system in landlocked States in order to avoid the risk of breaks in supply; — diversifying agricultural commodities production and improving food security in the island States.

Article 37 1. T h e Technical Centre for Agricultural and Rural Co-operation shall be at the disposal of the A C P States in order to provide them with better access to information, research, training and innovations in the spheres of agricultural and rural development and extension. Within the framework of its responsibilities it shall operate in close co-operation with the institutions and bodies referred to in this Convention. 2.

The tasks of the Centre shall be to:

(a) ensure, where so requested by the A C P Slates, the dissemination of scientific and technical information on methods and means of encouraging agricultural production and rural development (including the planning of agricultural and rural development and the preparation, implementation and evaluation of agricultural and rural development operations); ) or (c) of paragraph 1 shall be examined. (ii) As the implementation of the provisions of sub-paragraph (a), (b) or (c) of paragraph 1 by individual contracting parties may in some cases be more readily achieved where action is taken jointly with other developed contracting parties, such consultation might, where appropriate, be directed towards this end. (iii) The consultations by the CONTRACTING PARTIES might also, in appropriate cases, be directed towards agreement on joint action designed to further the objectives of this Agreement as envisaged in paragraph 1 of Article XXV. 3.

The developed contracting parties shall:

(a) make every effort, in cases where a government directly or indirectly determines the resale price of products wholly or mainly produced in the territories of less-developed contracting parties, to maintain trade margins at equitable levels; (b) give active consideration to the adoption of other measures * designed to provide greater scope for the development of imports from less-developed contracting parties and collaborate in appropriate international action to this end; (c) have special regard to the trade interests of less-developed contracting parties when considering the application of other measures permitted under this Agreement to meet particular problems and explore all possibilities of constructive remedies before applying such measures where they would affect essential interests of those contracting parties. 4. Less-developed contracting parties agree to take appropriate action in implementation of the provisions of Part IV for the benefit of the trade of other less-developed contracting parties, in so far as such action is consistent with their individual present and future development, financial and trade needs taking into account past trade developments as well as the trade interests of less-developed contracting parties as a whole. 5. In the implementation of the commitments set forth in paragraphs 1 to 4 each contracting party shall afford to any other interested contracting party or contracting parties full and prompt opportunity for consultations under the normal procedures of this Agreement with respect to any matter or difficulty which may arise. 469

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Article X X X V m Joint Action 1. The contracting parties shall collaborate jointly, within the framework of this Agreement and elsewhere, as appropriate, to further the objectives set forth in Article XXXVI. 2.

In particular, the

CONTRACTING PARTIES

shall:

(a) where appropriate, take action, including action through international arrangements, to provide improved and acceptable conditions of access to world markets for primary products of particular interest to less-developed contracting parties and to devise measures designed to stabilize and improve conditions of world markets in these products including measures designed to attain stable, equitable and remunerative prices for exports of such products; (A) seek appropriate collaboration in matters of trade and development policy with the United Nations and its organs and agencies, including any institutions that may be created on the basis of recommendations by the United Nations Conference on Trade and Development; (c) collaborate in analysing the development plans and policies of individual less-developed contracting parties and in examining trade and aid relationships with a view to devising concrete measures to promote the development of export potential and to facilitate access to export markets for the products of the industries thus developed and, in this connexion, seek appropriate collaboration with governments and international organizations, and in particular with organizations having competence in relation to financial assistance for economic development, in systematic studies of trade and aid relationships in individual less-developed contracting parties aimed at obtaining a clear analysis of export potential, market prospects and any further action that may be required; (d) keep under continuous review the development of world trade with special reference to the rate of growth of the trade of less-developed contracting parties and make such recommendations to contracting parties as may, in the circumstances, be deemed appropriate ; (e)

collaborate in seeking feasible methods to expand trade for the purpose of economic development, through international harmonization and adjustment of national policies and regulations, through technical and commercial standards affecting production, transportation and marketing, and through export promotion by the establishment of facilities for the increased flow of trade information and the development of market research; and

( / ) establish such institutional arrangements as may be necessary to 470

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further the objectives set forth in Article X X X V I and to give effect to the provisions of this Part. ANNEX A LIST OF TERRITORIES REFERRED TO IN PARAGRAPH 2

(a)

OF ARTICLE I

United Kingdom of Great Britain and Northern Ireland Dependent territories of the United Kingdom of Great Britain and Northern Ireland Canada Commonwealth of Australia Dependent territories of the Commonwealth of Australia New Zealand Dependent territories of New Zealand Union of South Africa including South West Africa Ireland India (as on April 10, 1947) Newfoundland Southern Rhodesia Burma Ceylon Certain of the territories listed above have two or more preferential rates in force for certain products. Any such territory may, by agreement with the other contracting parties which are principal suppliers of such products at the most-favoured-nation rate, substitute for such preferential rates a single preferential rate which shall not on the whole be less favourable to suppliers at the most-favoured-nation rate than the preferences in force prior to such substitution. The imposition of an equivalent margin of tariff preference to replace a margin of preference in an internal tax existing on April 10, 1947 exclusively between two or more of the territories listed in this Annex or to replace the preferential quantitative arrangements described in the following paragraph, shall not be deemed to constitute an increase in a margin of tariff preference. The preferential arrangements referred to in paragraph 5 (b) of Article XIV are those existing in the United Kingdom on April 10, 1947, under contractual agreements with the Governments of Canada, Australia and New Zealand, in respect of chilled and frozen beef and veal, frozen mutton and lamb, chilled and frozen pork, and bacon. It is the intention, without prejudice to any action taken under sub-paragraph (h) f of Article XX, that these arrangements shall be eliminated or replaced by tariff preferences, and that negotiations to this end shall take place as soon as practicable among the countries substantially concerned or involved. The film hire tax in force in New Zealand on April 10, 1947, shall, for the purposes of this Agreement, be treated as a customs duty under Article I. The t The authentic text erroneously reads " part I (h) ". 471

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renters' film quota in force in New Zealand on April 10, 1947, shall, for the purposes of this Agreement, be treated as a screen quota under Article IV. The Dominions of India and Pakistan have not been mentioned separately in the above list since they had not come into existence as such on the base date of April 10, 1947. ANNEX

B

LIST OF TERRITORIES OF THE FRENCH U N I O N REFERRED TO IN PARAGRAPH 2 (¿>) OF ARTICLE I

France French Equatorial Africa (Treaty Basin of the Congo 1 and other territories) French West Africa Cameroons under French Trusteeship 1 French Somali Coast and Dependencies French Establishments in Oceania French Establishments in the Condominium of the New Hebrides 1 Indo-China Madagascar and Dependencies Morocco (French zone) 1 New Caledonia and Dependencies Saint-Pierre and Miquelon Togo under French Trusteeship 1 Tunisia ANNEX

C

LIST OF TERRITORIES REFERRED TO IN PARAGRAPH 2 ( b ) OF ARTICLE I AS RESPECTS THE CUSTOMS U N I O N OF BELGIUM, LUXEMBURO A N D THE NETHERLANDS

The Economic Union of Belgium and Luxemburg Belgian Congo Ruanda Urundi Netherlands New Guinea Surinam Netherlands Antilles Republic of Indonesia For imports into the territories constituting the Customs Union only. ANNEX

D

LIST OF TERRITORIES REFERRED TO IN PARAGRAPH 2 ( 6 ) OF ARTICLE I AS RESPECTS THE U N I T E D STATES OF AMERICA

United States of America (customs territory) Dependent territories of the United States of America Republic of the Philippines

1

472

For imports into Metropolitan France a n d Territories o f the French U n i o n .

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The imposition of an equivalent margin of tariff preference to replace a margin of preference in an internal tax existing on April 10, 1947, exclusively between two or more of the territories listed in this Annex shall not be deemed to constitute an increase in a margin of tariff preference. ANNEX E L I S T OF TERRITORIES COVERED BY PREFERENTIAL ARRANGEMENTS BETWEEN C H I L E AND N E I G H B O U R I N G COUNTRIES REFERRED TO IN PARAGRAPH 2 ( d ) OF A R T I C L E I

Preferences in force exclusively between Chile on the one hand, and 1. 2. 3. on the

Argentina Bolivia Peru other hand. ANNEX F

L I S T OF TERRITORIES COVERED BY PREFERENTIAL ARRANGEMENTS BETWEEN LEBANON AND SYRIA AND NEIGHBOURING

COUNTRIES REFERRED TO IN P A R A G R A P H

2(d)

OF ARTICLE I

Preferences in force exclusively between the Lebano-Syrian Customs Union, on the one hand, and 1. Palestine 2. Transjordan on the other hand. ANNEX G D A T E S ESTABLISHING MAXIMUM M A R G I N S OF PREFERENCE REFERRED TO IN PARAGRAPH 4 f OF ARTICLE I

Australia Canada. . France Lebano-Syrian Customs Union Union of South Africa Southern Rhodesia

October 15, 1946 July 1, 1939 January 1, 1939 November 30, 1938 July 1, 1938 May 1, 1941 ANNEX H

PERCENTAGE SHARES OF T O T A L EXTERNAL T R A D E TO BE U S E D FOR THE PURPOSE OF M A K I N G THE DETERMINATION REFERRED TO IN A R T I C L E X X V I

(based on the average of

1949-1953)

If, prior to the accession of the Government of Japan to the General Agreement, the present Agreement has been accepted by contracting parties the external

t The authentic text erroneously reads " Paragraph 3 ". 473

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trade of which under column I accounts for the percentage of such trade specified in paragraph 6 of Article XXVI, column I shall be applicable for the purposes of that paragraph. If the present Agreement has not been so accepted prior to the accession of the Government of Japan, column II shall be applicable for the purposes of that paragraph.

Australia Austria Belgium-Luxemburg Brazil Burma Canada Ceylon Chile Cuba Czechoslovakia Denmark Dominican Republic . Finland France Germany, Federal Republic of Greece Haiti India Indonesia Italy Netherlands, Kingdom of the New Zealand Nicaragua Norway Pakistan Peru Rhodesia and Nyasaland Sweden Turkey Union of South Africa United Kingdom United States of America Uruguay Japan

Column I

Column II

(Contracting parties on 1 March I9S5)

(Contracting parties on 1 March 1955 and Japan)

3.1 0.9 4.3 2.5 0.3 6.7 0.5 0.6 1.1 1.4 1.4 0.1 1.0 8.7 5.3 0.4 0.1 2.4 1.3 2.9 4.7 1.0 0.1 1.1 0.9 0.4 0.6 2.5 0.6

3.0 0.8 4.2 2.4 0.3 6.5 0.5 0.6 1.1 1.4 1.4 0.1 1.0 8.5 5.2 0.4 0.1 2.4 1.3 2.8 4.6 1.0 0.1 1.1 0.8 0.4 0.6 2.4 0.6 1.8 19.8 20.1 0.4 2.3

1.8

20.3 20.6 0.4 100.0

100.0

Note: These percentages have been computed taking into account the trade of all territories in respect of which the General Agreement on Tariffs and Trade is applied. 474

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ANNEX I NOTES AND SUPPLEMENTARY PROVISIONS

Ad Article I Paragraph 1 The obligations incorporated in paragraph 1 of Article I by reference to paragraphs 2 and 4 of Article III and those incorporated in paragraph 2 (6) of Article II by reference to Article VI shall be considered as falling within Part II for the purposes of the Protocol of Provisional Application. The cross-references, in the paragraph immediately above and in paragraph 1 of Article I, to paragraphs 2 and 4 of Article III shall only apply after Article III has been modified by the entry into force of the amendment provided for in the Protocol Modifying Part II and Article XXVI of the General Agreement on Tariffs and Trade, dated September 14, 1948. 1 Paragraph 4 The term " margin of preference " means the absolute difference between the most-favoured-nation rate of duty and the preferential rate of duty for the like product, and not the proportionate relation between those rates. As examples: (1) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were 24 per cent ad valorem, the margin of preference would be 12 per cent ad valorem, and not one-third of the most-favourednation rate; (2) If the most-favoured-nation rate were 36 per cent ad valorem and the preferential rate were expressed as two-thirds of the most-favoured-nation rate, the margin of preference would be 12 per cent ad valorem-, (3) If the most-favoured-nation rate were 2 francs per kilogramme and the preferential rate were 1.50 francs per kilogramme, the margin of preference would be 0.50 franc per kilogramme. The following kinds of customs action, taken in accordance with established uniform procedures, would not be contrary to a general binding of margins of preference: (i) The re-application to an imported product of a tariff classification or rate of duty, properly applicable to such product, in cases in which the application of such classification or rate to such product was temporarily suspended or inoperative on April 10, 1947; and (ii) The classification of a particular product under a tariff item other than that under which importations of that product were classified on April 10, 1947, in cases in which the tariff law clearly contemplates that such product may be classified under more than one tariff item. Ad Article II Paragraph 2 (a) The cross-reference, in paragraph 2 (a) of Article II, to paragraph 2 of Article III shall only apply after Article III has been modified by the entry into 1

This Protocol entered into force on 14 December 1948. 475

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force of the amendment provided for in the Protocol Modifying Part II and Article XXVI of the General Agreement on Tariffs and Trade, dated September 14, 1948. 1 Paragraph 2 (b) See the note relating to paragraph 1 of Article I. Paragraph 4 Except where otherwise specifically agreed between the contracting parties which initially negotiated the concession, the provisions of this paragraph will be applied in the light of the provisions of Article 31 of the Havana Charter. Ad Article III Any internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1 which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Article III. Paragraph 1 The application of paragraph 1 to internal taxes imposed by local governments and authorities within the territory of a contracting party is subject to the provisions of the final paragraph of Article XXIV. The term " reasonable measures " in the last-mentioned paragraph would not require, for example, the repeal of existing national legislation authorizing local governments to impose internal taxes which, although technically inconsistent with the letter of Article III, are not in fact inconsistent with its spirit, if such repeal would result in a serious financial hardship for the local governments or authorities concerned. With regard to taxation by local governments or authorities which is inconsistent with both the letter and spirit of Article III, the term " reasonable measures " would permit a contracting party to eliminate the inconsistent taxation gradually over a transition period, if abrupt action would create serious administrative and financial difficulties. Paragraph 2 A tax conforming to the requirements of the first sentence of paragraph 2 would be considered to be inconsistent with the provisions of the second sentence only in cases where competition was involved between, on the one hand, the taxed product and, on the other hand, a directly competitive or substitutable product which was not similarly taxed. Paragraph 5 Regulations consistent with the provisions of the first sentence of paragraph 5 shall not be considered to be contrary to the provisions of the second sentence in 1

476

This Protocol entered into force on 14 December 1948.

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D o c . 24

any case in which all of the products subject to the regulations are produced domestically in substantial quantities. A regulation cannot be justified as being consistent with the provisions of the second sentence on the ground that the proportion or amount allocated to each of the products which are the subject of the regulation constitutes an equitable relationship between imported and domestic products. Ad Article V Paragraph 5 With regard to transportation charges, the principle laid down in paragraph 5 refers to like products being transported on the same route under like conditions. Ad Article VI Paragraph 1 1. Hidden dumping by associated houses (that is, the sale by an importer at a price below that corresponding to the price invoiced by an exporter with whom the importer is associated, and also below the price in the exporting country) constitutes a form of price dumping with respect to which the margin of dumping may be calculated on the basis of the price at which the goods are resold by the importer. 2. It is recognized that, in the case of imports from a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State, special difficulties may exist in determining price comparability for the purposes of paragraph 1, and in such cases importing contracting parties may find it necessary to take into account the possibility that a strict comparison with domestic prices in such a country may not always be appropriate. Paragraphs 2 and 3 1. As in many other cases in customs administration, a contracting party may require reasonable security (bond or cash deposit) for the payment of antidumping or countervailing duty pending final determination of the facts in any case of suspected dumping or subsidization. 2. Multiple currency practices can in certain circumstances constitute a subsidy to exports which may be met by countervailing duties under paragraph 3 or can constitute a form of dumping by means of a partial depreciation of a country's currency which may be met by action under paragraph 2. By " multiple currency practices " is meant practices by governments or sanctioned by governments. Paragraph 6 (b) Waivers under the provisions of this sub-paragraph shall be granted only on application by the contracting party proposing to levy an anti-dumping or countervailing duty, as the case may be.

477

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Ad Article VII Paragraph 1 The expression " or other charges " is not to be regarded as including internal taxes or equivalent charges imposed on or in connexion with imported products. Paragraph 2 1. It would be in conformity with Article VII to presume that " actual value " may be represented by the invoice price, plus any non-included charges for legitimate costs which are proper elements of " actual value " and plus any abnormal discount or other reduction from the ordinary competitive price. 2. It would be in conformity with Article VII, paragraph 2 (b), for a contracting party to construe the phrase " in the ordinary course of trade . . . under fully competitive conditions ", as excluding any transaction wherein the buyer and seller are not independent of each other and price is not the sole consideration. 3. The standard of " fully competitive conditions " permits a contracting party to exclude from consideration prices involving special discounts limited to exclusive agents. 4. The wording of sub-paragraphs (a) and (b) permits a contracting party to determine the value for customs purposes uniformly either (1) on the basis of a particular exporter's prices of the imported merchandise, or (2) on the basis of the general price level of like merchandise. Ad Article VIII 1. While Article VIII does not cover the use of multiple rates of exchange as such, paragraphs 1 and 4 condemn the use of exchange taxes or fees as a device for implementing multiple currency practices; if, however, a contracting party is using multiple currency exchange fees for balance of payments reasons with the approval of the International Monetary Fund, the provisions of paragraph 9 (a) of Article XV fully safeguard its position. 2. It would be consistent with paragraph 1 if, on the importation of products from the territory of a contracting party into the territory of another contracting party, the production of certificates of origin should only be required to the extent that is strictly indispensable. Ad Articles XI, XII, XIII, XIV and

XVIII

Throughout Articles XI, XII, XIII, XIV and XVIII, the terms " i m p o r t restrictions " or " export restrictions " include restrictions made effective through state-trading operations. Ad Article

XI

Paragraph 2 (c) The term " in any form " in this paragraph covers the same products when in an early stage of processing and still perishable, which compete directly with the fresh product and if freely imported would tend to make the restriction on the fresh product ineffective. 478

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GATT Paragraph 2, last sub-paragraph

The term " special factors " includes changes in relative productive efficiency as between domestic and foreign producers, or as between different foreign producers, but not changes artificially brought about by means not permitted under the Agreement. Ad Article

XII

The CONTRACTING PARTIES shall make provision for the utmost secrecy in the conduct of any consultation under the provisions of this Article. Paragraph 3 (c) (/) Contracting parties applying restrictions shall endeavour to avoid causing serious prejudice to exports of a commodity on which the economy of a contracting party is largely dependent. Paragraph 4 (b) It is agreed that the date shall be within ninety days after the entry into force of the amendments of this Article effected by the Protocol Amending the Preamble and Parts II and III of this Agreement. However, should the CONTRACTING PARTIES find that conditions were not suitable for the application of the provisions of this sub-paragraph at the time envisaged, they may determine a later date; Provided that such date is not more than thirty days after such time as the obligations of Article VIII, Sections 2, 3 and 4, of the Articles of Agreement of the International Monetary Fund become applicable to contracting parties, members of the Fund, the combined foreign trade of which constitutes at least fifty per centum of the aggregate foreign trade of all contracting parties. Paragraph 4 (e) It is agreed that paragraph 4 (e) does not add any new criteria for the imposition or maintenance of quantitative restrictions for balance of payments reasons. It is solely intended to ensure that all external factors such as changes in the terms of trade, quantitative restrictions, excessive tariffs and subsidies, which may be contributing to the balance of payments difficulties of the contracting party applying restrictions, will be fully taken into account. Ad Article

XIil

Paragraph 2 (d) N o mention was made of " commercial considerations " as a rule for the allocation of quotas because it was considered that its application by governmental authorities might not always be practicable. Moreover, in eases where it is practicable, a contracting party could apply these considerations in the process of seeking agreement, consistently with the general rule laid down in the opening sentence of paragraph 2. Paragraph 4 See note relating to " special factors " in connexion with the last sub-paragraph of paragraph 2 of Article XI. 479

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Ad Article

XIV

Paragraph I The provisions of this paragraph shall not be so construed as to preclude full consideration by the CONTRACTING PARTIES, in the consultations provided for in paragraph 4 of Article XII and in paragraph 12 of Article XVIII, of the nature, effects and reasons for discrimination in the field of import restrictions. Paragraph 2 One of the situations contemplated in paragraph 2 is that of a contracting party holding balances acquired as a result of current transactions which it finds itself unable to use without a measure of discrimination. Ad Article

XV

Paragraph 4 The word " frustrate " is intended to indicate, for example, that infringements of the letter of any Article of this Agreement by exchange action shall not be regarded as a violation of that Article if, in practice, there is no appreciable departure f r o m the intent of the Article. Thus, a contracting party which, as part of its exchange control operated in accordance with the Articles of Agreement of the International Monetary Fund, requires payment to be received for its exports in its own currency or in the currency of one or more members of the International Monetary F u n d will not thereby be deemed to contravene Article XI or Article XIII. Another example would be that of a contracting party which specifies on an import licence the country from which the goods may be imported, for the purpose not of introducing any additional element of discrimination in its import licensing system but of enforcing permissible exchange controls. Ad Article

XVI

The exemption of an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties or taxes in amounts not in excess of those which have accrued, shall not be deemed to be a subsidy. Section B 1. Nothing in Section B shall preclude the use by a contracting party of multiple rates of exchange in accordance with the Articles of Agreement of the International Monetary Fund. 2. For the purposes of Section B, a " primary product " is understood to be any product of farm, forest or fishery, or any mineral, in its natural form or which has undergone such processing as is customarily required to prepare it for marketing in substantial volume in international trade. Paragraph 3 1. The fact that a contracting party has not exported the product in question during the previous representative period would not in itself preclude that 480

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contracting party from establishing its right to obtain a share of the trade in the product concerned. 2. A system for the stabilization of the domestic price or of the return to domestic producers of a primary product independently of the movements of export prices, which results at times in the sale of the product for export at a price lower than the comparable price charged for the like product to buyers in the domestic market, shall be considered not to involve a subsidy on exports within the meaning of paragraph 3 if the CONTRACTING PARTIES determine that: (а) the system has also resulted, or is so designed as to result, in the sale of the product for export at a price higher than the comparable price charged for the like product to buyers in the domestic market; and (б) the system is so operated, or is designed so to operate, either because of the effective regulation of production or otherwise, as not to stimulate exports unduly or otherwise seriously to prejudice the interests of other contracting parties. Notwithstanding such determination by the CONTRACTING PARTIES, operations under such a system shall be subject to the provisions of paragraph 3 where they are wholly or partly financed out of government funds in addition to the funds collected from producers in respect of the product concerned. Paragraph 4 The intention of paragraph 4 is that the contracting parties should seek before the end of 1957 to reach agreement to abolish all remaining subsidies as from 1 January 1958; or, failing this, to reach agreement to extend the application of the standstill until the earliest date thereafter by which they can expect to reach such agreement.

Paragraph I

Ad Article XVII

The operations of Marketing Boards, which are established by contracting parties and are engaged in purchasing or selling, are subject to the provisions of sub-paragraphs (a) and (6). The activities of Marketing Boards which are established by contracting parties and which do not purchase or sell but lay down regulations covering private trade are governed by the relevant Articles of this Agreement. The charging by a state enterprise of different prices for its sales of a product in different markets is not precluded by the provisions of this Article, provided that such different prices are charged for commercial reasons, to meet conditions of supply and demand in export markets. Paragraph 1 (a) Governmental measures imposed to ensure standards of quality and efficiency in the operation of external trade, or privileges granted for the exploitation of national natural resources but which do not empower the government to exercise 481

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control over the trading activities of the enterprise in question, do not constitute " exclusive or special privileges ". Paragraph 1 (b) A country receiving a " tied loan " is free to take this loan into account as a " commercial consideration " when purchasing requirements abroad. Paragraph 2 The term " goods " is limited to products as understood in commercial practice, and is not intended to include the purchase or sale of services. Paragraph 3 Negotiations which contracting parties agree to conduct under this paragraph may be directed towards the reduction of duties and other charges on imports and exports or towards the conclusion of any other mutually satisfactory arrangement consistent with the provisions of this Agreement. (See paragraph 4 of Article II and the note to that paragraph.) Paragraph 4 (b) The term " import mark-up " in this paragraph shall represent the margin by which the price charged by the import monopoly for the imported product (exclusive of internal taxes within the purview of Article III, transportation, distribution, and other expenses incident to the purchase, sale or further processing, and a reasonable margin of profit) exceeds the landed cost. Ad Article

XVIII

The CONTRACTING PARTIES and the contracting parties concerned shall preserve the utmost secrecy in respect of matters arising under this Article. Paragraphs 1 and 4 1. When they consider whether the economy of a contracting party " can only support low standards of living ", the CONTRACTING PARTIES shall take into consideration the normal position of that economy and shall not base their determination on exceptional circumstances such as those which may result from the temporary existence of exceptionally favourable conditions for the staple export product or products of such contracting party. 2. The phrase " in the early stages of development " is not meant to apply only to contracting parties which have just started their economic development, but also to contracting parties the economies of which are undergoing a process of industrialization to correct an excessive dependence on primary production. Paragraphs 2, 3, 7, 13 and 22 The reference to the establishment of particular industries shall apply not only to the establishment of a new industry, but also to the establishment of a 482

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D o c . 24

new branch of production in an existing industry and to the substantial transformation of an existing industry, and to the substantial expansion of an existing industry supplying a relatively small proportion of the domestic demand. It shall also cover the reconstruction of an industry destroyed or substantially damaged as a result of hostilities or natural disasters. Paragraph 7 ( b ) A modification or withdrawal, pursuant to paragraph 7 (¿>), by a contracting party, other than the applicant contracting party, referred to in paragraph 7 (a), shall be made within six months of the day on which the action is taken by the applicant contracting party, and shall become effective on the thirtieth day following the day on which such modification or withdrawal has been notified to t h e CONTRACTING PARTIES.

Paragraph 11 The second sentence in paragraph 11 shall not be interpreted to mean that a contracting party is required to relax or remove restrictions if such relaxation or removal would thereupon produce conditions justifying the intensification or institution, respectively, of restrictions under paragraph 9 of Article X V I I I . Paragraph 12 ( b ) The date referred to in paragraph 12 (b) shall be the date determined by the CONTRACTING PARTIES in accordance with the provisions of paragraph 4 ( b ) of Article X I I of this Agreement. Paragraphs 13 and 14 It is recognized that, before deciding on the introduction of a measure and notifying the CONTRACTING PARTIES in accordance with paragraph 14, a contracting party may need a reasonable period of time to assess the competitive position of the industry concerned. Paragraphs 15 and 16 It is understood that the CONTRACTING PARTIES shall invite a contracting party proposing to apply a measure under Section C to consult with them pursuant to paragraph 16 if they are requested to do so by a contracting party the trade of which would be appreciably affected by the measure in question. Paragraphs 16, 18, 19 and 22 1. It is understood that the CONTRACTING PARTIES may concur in a proposed measure subject to specific conditions or limitations. If the measure as applied does not conform to the terms of the concurrence it will to that extent be deemed a measure in which the CONTRACTING PARTIES have not concurred. In cases in which the CONTRACTING PARTIES have concurred in a measure for a specified period, the contracting party concerned, if it finds that the maintenance of the measure for a further period of time is required to achieve the objective for which the measure was originally taken, may apply to the CONTRACTING PARTIES for an 483

Doc. 24

International Trade

extension of that period in accordance with the provisions and procedures of Section C or D, as the case may be. 2. It is expected that the CONTRACTING PARTIES will, as a rule, refrain from concurring in a measure which is likely to cause serious prejudice to exports of a commodity on which the economy of a contracting party is largely dependent.

Paragraphs 18 and 22 The phrase " that the interests of other contracting parties are adequately safeguarded " is meant to provide latitude sufficient to permit consideration in each case of the most appropriate method of safeguarding those interests. The appropriate method may, for instance, take the form of an additional concession to be applied by the contracting party having recourse to Section C or D during such time as the deviation from the other Articles of the Agreement would remain in force or of the temporary suspension by any other contracting party referred to in paragraph 18 of a concession substantially equivalent to the impairment due to the introduction of the measure in question. Such contracting party would have the right to safeguard its interests through such a temporary suspension of a concession; Provided that this right will not be exercised when, in the case of a measure imposed by a contracting party coming within the scope of paragraph 4 (a), the C O N T R A C T I N G PARTIES have determined that the extent of the compensatory concession proposed was adequate. Paragraph 19 The provisions of paragraph 19 are intended to cover the cases where an industry has been in existence beyond the " reasonable period of time " referred to in the note to paragraphs 13 and 14, and should not be so construed as to deprive a contracting party coming within the scope of paragraph 4 (a) of Article XVIII, of its right to resort to the other provisions of Section C, including paragraph 17, with regard to a newly established industry even though it has benefited from incidental protection afforded by balance of payments import restrictions. Paragraph 21 Any measure taken pursuant to the provisions of paragraph 21 shall be withdrawn forthwith if the action taken in accordance with paragraph 17 is withdrawn or if the C O N T R A C T I N G PARTIES concur in the measure proposed after the expiration of the ninety-day time limit specified in paragraph 17. Ad Article XX Sub-paragraph (h) The exception provided for in this sub-paragraph extends to any commodity agreement which conforms to the principles approved by the Economic and Social Council in its resolution 30 (IV) of 28 March 1947. Ad Article

XXIV

Paragraph 9 It is understood that the provisions of Article I would require that, when a product which has been imported into the territory of a member of a customs 484

GATT

Doc. 24

union or free-trade area at a preferential rate of duty is re-exported to the territory of another member of such union or area, the latter member should collect a duty equal to the difference between the duty already paid and any higher duty that would be payable if the product were being imported directly into its territory. Paragraph 11 Measures adopted by India and Pakistan in order to carry out definitive trade arrangements between them, once they have been agreed upon, might depart from particular provisions of this Agreement, but these measures would in general be consistent with the objectives of the Agreement. Ad Article

XXVIII

The CONTRACTING PARTIES and each contracting party concerned should arrange to conduct the negotiations and consultations with the greatest possible secrecy in order to avoid premature disclosure of details of prospective tariff changes. The CONTRACTING PARTIES shall be informed immediately of all changes in national tariffs resulting from recourse to this Article. Paragraph 1 1. If the CONTRACTING PARTIES specify a period other than a three-year period, a contracting party may act pursuant to paragraph 1 or paragraph 3 of Article XXVIII on the first day following the expiration of such other period and, unless the CONTRACTING PARTIES have again specified another period, subsequent periods will be three-year periods following the expiration of such specified period. 2. The provision that on 1 January 1958, and on other days determined pursuant to paragraph 1, a contracting party "may . . . modify or withdraw a concession " means that on such day, and on the first day after the end of each period, the legal obligation of such contracting party under Article II is altered; it does not mean that the changes in its customs tariff should necessarily be made effective on that day. If a tariff change resulting from negotiations undertaken pursuant to this Article is delayed, the entry into force of any compensatory concessions may be similarly delayed. 3. N o t earlier than six months, nor later than three months, prior to 1 January 1958, or to the termination date of any subsequent period, a contracting party wishing to modify or withdraw any concession embodied in the appropriate Schedule, should notify the CONTRACTING PARTIES to this effect. The CONTRACTING PARTIES shall then determine the contracting party or contracting parties with which the negotiations or consultations referred to in paragraph 1 shall take place. Any contracting party so determined shall participate in such negotiations or consultations with the applicant contracting party with the aim of reaching agreement before the end of the period. Any extension of the assured life of the Schedules shall relate to the Schedules as modified after such negotiations, in accordance with paragraphs 1, 2 and 3 of Article XXVIII. If the CONTRACTING PARTIES are arranging for multilateral tariff negotiations to take place within the period of six months before 1 January 1958, or before any other day determined pursuant to paragraph 1, they shall include in the arrangements for 485

D o c . 24

International Trade

such negotiations suitable procedures for carrying out the negotiations referred to in this paragraph. 4. The object of providing for the participation in the negotiations of any contracting party with a principal supplying interest, in addition to any contracting party with which the concession was initially negotiated, is to ensure that a contracting party with a larger share in the trade affected by the concession than a contracting party with which the concession was initially negotiated shall have an effective opportunity to protect the contractual right which it enjoys under this Agreement. On the other hand, it is not intended that the scope of the negotiations should be such as to make negotiations and agreement under Article XXVIII unduly difficult nor to create complications in the application of this Article in the future to concessions which result from negotiations thereunder. Accordingly, the CONTRACTING PARTIES should only determine that a contracting party has a principal supplying interest if that contracting party has had, over a reasonable period of time prior to the negotiations, a larger share in the market of the applicant contracting party than a contracting party with which the concession was initially negotiated or would, in the judgment of the CONTRACTING PARTIES, have had such a share in the absence of discriminatory quantitative restrictions maintained by the applicant contracting party. It would therefore not be appropriate for the CONTRACTING PARTIES to determine that more than one contracting party, or in those exceptional cases where there is near equality more than two contracting parties, had a principal supplying interest. 5. Notwithstanding the definition of a principal supplying interest in note 4 to paragraph 1, the CONTRACTING PARTIES may exceptionally determine that a contracting party has a principal supplying interest if the concession in question affects trade which constitutes a major part of the total exports of such contracting party. 6. It is not intended that provision for participation in the negotiations of any contracting party with a principal supplying interest, and for consultation with any contracting party having a substantial interest in the concession which the applicant contracting party is seeking to modify or withdraw, should have the effect that it should have to pay compensation or suffer retaliation greater than the withdrawal or modification sought, judged in the light of the conditions of trade at the time of the proposed withdrawal or modification, making allowance for any discriminatory quantitative restrictions maintained by the applicant contracting party. 7. The expression " substantial interest " is not capable of a precise definition and accordingly may present difficulties for the CONTRACTING PARTIES. It is, however, intended to be construed to cover only those contracting parties which have, or in the absence of discriminatory quantitative restrictions affecting their exports could reasonably be expected to have, a significant share in the market of the contracting party seeking to modify or withdraw the concession.

Paragraph 4 1. Any request for authorisation to enter into negotiations shall be accompanied by all relevant statistical and other data. A decision on such request shall be made within thirty days of its submission. 486

GATT

D o c . 24

2. It is recognized that to permit certain contracting parties, depending in large measure on a relatively small number of primary commodities and relying on the tariff as an important aid for furthering diversification of their economies or as an important source of revenue, normally to negotiate for the modification or withdrawal of concessions only under paragraph 1 of Article XXVIII, might cause them at such a time to make modifications or withdrawals which in the lon^ run would prove unnecessary. To avoid such a situation the C O N T R A C T I N G P A R TIES shall authorize any such contracting party, under paragraph 4, to enter into negotiations unless they consider this would result in, or contribute substantially towards, such an increase in tariff levels as to threaten the stability of the Schedules to this Agreement or lead to undue disturbance of international trade. 3. It is expected that negotiations authorized under paragraph 4 for modification or withdrawal of a single item, or a very small group of items, could normally be brought to a conclusion in sixty days. It is recognized, however, that such a period will be inadequate for cases involving negotiations for the modification or withdrawal of a larger number of items and in such cases, therefore, it would be appropriate for the C O N T R A C T I N G PARTIES to prescribe a longer period. 4.

The determination referred to in paragraph 4 () the C o m m i t t e e

shall b a s e its d e c i s i o n o n the type o f p r o c e d u r e on s u c h f a c t o r s a s

the

following: (a) (b)

the t i m e e l a p s e d s i n c e the last full c o n s u l t a t i o n s ; the s t e p s the c o n s u l t i n g c o n t r a c t i n g p a r t y h a s t a k e n in the light o f c o n c l u s i o n s r e a c h e d o n the o c c a s i o n o f p r e v i o u s c o n s u l t a t i o n s ;

(t)

the c h a n g e s in the o v e r a l l level or n a t u r e o f the t r a d e

measures

taken for balance-of-payments purposes; 517

Doc. 29

International Trade

(id)

t h e c h a n g e s in t h e b a l a n c e - o f - p a y n i c n t s s i t u a t i o n

or

(t>)

whether

structural

the

balance-of-payments

problems

are

prospccts; or

t e m p o r a r y in n a t u r e . 9. A l e s s - d e v e l o p e d c o r tations.

a c t i n g p a r t y m a y at a n y t i m e r e q u e s t full c o n s u l -

10. T h e t e c h n i c a l a s s i s t a n c e services of t h e G A T T s e c r e t a r i a t shall, a t t h e r e q u e s t of a l e s s - d e v e l o p e d c o n s u l t i n g c o n t r a c t i n g p a r t y , assist it in p r e p a r i n g the d o c u m e n t a t i o n for the consultations. 11. T h e C o m m i t t e e shall r e p o r t o n its c o n s u l t a t i o n s to t h e C o u n c i l . T h e r e p o r t s o n f u l l c o n s u l t a t i o n s shall i n d i c a t e : (A) (,b)

t h e C o m m i t t e e ' s c o n c l u s i o n s a s well as t h e f a c t s a n d r e a s o n s w h i c h they a r e b a s e d ;

on

t h e s t e p s t h e c o n s u l t i n g c o n t r a c t i n g p a r t y h a s t a k e n in t h e light o f c o n c l u s i o n s r e a c h e d o n t h e o c c a s i o n of p r e v i o u s c o n s u l t a t i o n s ;

(c)

in t h e c a s e o f l e s s - d e v e l o p e d c o n t r a c t i n g p a r t i e s , t h e f a c t s

and

r e a s o n s o n w h i c h t h e C o m m i t t e e b a s e d its d e c i s i o n o n t h e p r o c e d u r e followed; and (//)

in t h e c a s e of d e v e l o p e d c o n t r a c t i n g p a r t i e s , w h e t h e r , a l t e r n a t i v e e c o n o m i c policy m e a s u r e s a r e a v a i l a b l e .

If t h e C o m m i t t e e f i n d s t h a t t h e c o n s u l t i n g c o n t r a c t i n g p a r t y ' s trade

measures

(ia)

a r c in i m p o r t a n t r e s p e c t s r e l a t e d t o restrictive m a i n t a i n e d by a n o t h e r c o n t r a c t i n g p a r t y 1 o r

measures

(b)

h a v e a s i g n i f i c a n t a d v e r s e i m p a c t o n t h e e x p o r t interests of a lessdeveloped contracting party,

it shall so r e p o r t t o t h e C o u n c i l w h i c h shall t a k e s u c h f u r t h e r a c t i o n a s it may consider appropriate. 12. I n t h e c o u r s e of f u l l c o n s u l t a t i o n s w i t h a l e s s - d e v e l o p e d c o n t r a c t i n g p a r t y t h e C o m m i t t e e shall, if t h e c o n s u l t i n g c o n t r a c t i n g p a r t y s o desires, give p a r t i c u l a r a t t e n t i o n t o t h e p o s s i b i l i t i e s f o r a l l e v i a t i n g a n d c o r r e c t i n g the balance-of-payments problem through measures that contracting parties m i g h t t a k e to f a c i l i t a t e a n e x p a n s i o n of t h e e x p o r t e a r n i n g s of t h e c o n s u l t i n g c o n t r a c t i n g p a r t y , as p r o v i d e d f o r in p a r a g r a p h 3 of t h e full c o n s u l t a t i o n procedures. 13. It t h e C o m m i t t e e finds t h a t a restrictive i m p o r t m e a s u r e t a k e n by t h e c o n s u l t i n g c o n t r a c t i n g p a r t y f o r b a l a n c e - o f - p a y m e n t s p u r p o s e s is i n c o n s i s t e n t with t h e p r o v i s i o n s o f A r t i c l e s X I I , X V I I I :B o r this D e c l a r a t i o n , it shall, in its r e p o r t to t h e C o u n c i l , m a k e s u c h findings as will assist t h e C o u n c i l in m a k i n g a p p r o p r i a t e r e c o m m e n d a t i o n s d e s i g n e d t o p r o m o t e t h e i m p l e m e n t a t i o n of A r t i c l e s X I I a n d X V I I I :D a n d t h i s D e c l a r a t i o n . T h e C o u n c i l shall k e e p u n d e r s u r v e i l l a n c e a n y m a t t e r o n w h i c h it h a s m a d e r e c o m m e n d a t i o n s . 1 It is noted that such a finding is more likely to be made in the case of rcccnt measures than of measures in ellect for s o m e considerable time.

518

Tokyo Round: Development Purposes

D o c . 30

- Safeguard Action for Development Purposes

1.

THE CONTRACTING PARTIES r e c o g n i z e t h a t t h e i m p l e m e n t a t i o n b y less-

developed

contracting

parties of p r o g r a m m e s

d e v e l o p m e n t aimed at raising the s t a n d a r d involve

in

addition

to

the

establishment

and

p o l i c i e s of

economic

of living of the p e o p l e of

particular

industries1

may the

d e v e l o p m e n t of new or the m o d i f i c a t i o n or extension of existing p r o d u c t i o n s t r u c t u r e s w i t h a view t o a c h i e v i n g f u l l e r a n d m o r e e f f i c i e n t u s e o f r e s o u r c e s in a c c o r d a n c e w i t h t h e p r i o r i t i e s o f t h e i r e c o n o m i c d e v e l o p m e n t . ingly, they agree t h a t a less-developed c o n t r a c t i n g

party may, to

Accordachieve

t h e s e o b j e c t i v e s , m o d i f y o r w i t h d r a w c o n c e s s i o n s i n c l u d e d in t h e a p p r o p r i a t e s c h e d u l e s a n n e x e d t o t h e G e n e r a l A g r e e m e n t as p r o v i d e d f o r in S e c t i o n A of Article X V I I I or, w h e r e n o m e a s u r e consistent with the o t h e r provisions of the G e n e r a l A g r e e m e n t is p r a c t i c a b l e t o a c h i e v e t h e s e o b j e c t i v e s , h a v e r e c o u r s e to Section C of Article X V I I I , with the a d d i t i o n a l flexibility p r o v i d e d f o r below. In taking such action the less-developed contracting parly concerned s h a l l give d u e r e g a r d t o t h e o b j e c t i v e s of t h e G e n e r a l A g r e e m e n t a n d t o t h e n e e d t o a v o i d u n n e c e s s a r y d a m a g e t o t h e t r a d e of o t h e r c o n t r a c t i n g p a r t i e s . 2.

T h e CONTRACTING PARTIES r e c o g n i z e f u r t h e r t h a t t h e r e m a y b e u n u s u a l

c i r c u m s t a n c e s w h e r e d e l a y in t h e a p p l i c a t i o n o f m e a s u r e s w h i c h a lessdeveloped c o n t r a c t i n g p a r t y wishes to i n t r o d u c e u n d e r Section A or Section C of A r t i c l e X V I I I m a y g i v e rise t o d i f f i c u l t i e s in t h e a p p l i c a t i o n of its p r o g r a m m e s a n d policies of e c o n o m i c d e v e l o p m e n t for the a f o r e s a i d p u r p o s e s . They

agree,

therefore,

that

in

such

circumstances,

the

less-developed

c o n t r a c t i n g p a r t y c o n c e r n e d m a y d e v i a t e f r o m t h e p r o v i s i o n s of S e c t i o n A a n d p a r a g r a p h s 14, 15, 17 a n d 18 o f S e c t i o n C t o t h e e x t e n t n e c e s s a r y f o r i n t r o d u c i n g the m e a s u r e s c o n t e m p l a t e d on a provisional basis immediately after notification. 3. It is u n d e r s t o o d t h a t all o t h e r r e q u i r e m e n t s o f t h e p r e a m b u l a r p a r t o f A r t i c l e X V I I I a n d o f S e c t i o n s A a n d C of t h a t A r t i c l e , a s well as t h e N o t e s a n d S u p p l e m e n t a r y P r o v i s i o n s set o u t in A n n e x I u n d e r t h e s e S e c t i o n s will c o n t i n u e t o a p p l y t o the m e a s u r e s to which this Decision relates. 4.

T h e CONTRACTING PARTIES s h a l l r e v i e w t h i s D e c i s i o n in t h e l i g h t o f

e x p e r i e n c e w i t h its o p e r a t i o n , w i t h a v i e w t o d e t e r m i n i n g w h e t h e r it s h o u l d be extended, modified or discontinued. 5. to

D u r i n g c o n s u l t a t i o n s , c o n t r a c t i n g parties should give special a t t e n t i o n the

particular

problems

and

interests

of

less-developed

contracting

parties.

1 As referred to in paragraphs 2, 3, 7, 13 and 22 of Article XV11I and in (he Nole to these paragraphs.

519

Doc. 30 6.

International Trade

C o n t r a c t i n g parties should attempt to obtain satisfactory adjustment o f

t h e m a t t e r in a c c o r d a n c e with t h e p r o v i s i o n s o f A r t i c l e X X I l i : 1 b e f o r e r e s o r t i n g t o A r t i c l c X X I I I :2. Dispute 7.

settlement

T h e CONTRACTING PARTIES a g r e e t h a t t h e c u s t o m a r y p r a c t i c e o f t h e

G A T T in t h e field o f d i s p u t e s e t t l e m e n t , d e s c r i b e d in t h e A n n e x , s h o u l d b e c o n t i n u e d i n t h e f u t u r e , w i t h t h e i m p r o v e m e n t s set o u t b e l o w . T h e y r e c o g n i z e t h a t t h e efficient f u n c t i o n i n g o f t h e s y s t e m d e p e n d s o n t h e i r will to a b i d e b y t h e p r e s e n t u n d e r s t a n d i n g . T h e CONTRACTING PARTIES r e a f f i r m t h a t t h e c u s t o m a r y practice includes the p r o c e d u r e s for the settlement o f disputes between

developed

and

less-developed

countries

adopted

by

the

CON-

TRACTING PARTIES in 1 9 6 6 ( B I S D , f o u r t e e n t h s u p p l e m e n t , p a g e 18) a n d t h a t these remain available

to

less-developed

contracting

parties wishing

to

use t h e m . 8.

I f a d i s p u t e is n o t r e s o l v e d t h r o u g h c o n s u l t a t i o n s t h e c o n t r a c t i n g p a r t i e s

concerned

may

request

an

appropriate

b o d y or individual

to

g o o d offices w i t h a view t o t h e c o n c i l i a t i o n o f t h e o u t s t a n d i n g

use

their

differences

b e t w e e n t h e p a r t i e s . I f t h e u n r e s o l v e d d i s p u t e is o n e in w h i c h a l e s s - d e v e l o p e d contracting party has brought a complaint against a developed contracting party, the less-developed c o n t r a c t i n g party m a y request the g o o d

offices

o f t h e D i r e c t o r - G e n e r a l w h o , in c a r r y i n g o u t his t a s k s , m a y c o n s u l t w i t h the

Chairman

o f the

CONTRACTING

PARTIES a n d

the

Chairman

of

the

Council. 9.

I t is u n d e r s t o o d t h a t r e q u e s t s f o r c o n c i l i a t i o n a n d t h e use o f t h e d i s p u t e

settlement procedures o f Article X X 1 1 I : 2 should not be intended or c o n s i d e r e d a s c o n t e n t i o u s a c t s a n d t h a t , i f d i s p u t e s a r i s e , all c o n t r a c t i n g p a r t i e s will e n g a g e i n t h e s e p r o c e d u r e s in g o o d f a i t h in a n e f f o r t to r e s o l v e t h e disputes.

It

is a l s o

understood

that complaints

and

counter-complaints

in r e g a r d t o d i s t i n c t m a t t e r s s h o u l d n o t b e l i n k e d . 10.

I t is a g r e e d

that

if a contracting

parly

invoking

Article X X I I I :

2

r e q u e s t s t h e e s t a b l i s h m e n t o f a p a n e l t o a s s i s t t h e CONTRACTING PARTIES to d e a l w i t h t h e m a t t e r , t h e CONTRACTING PARTIES w o u l d d e c i d e o n its e s t a b l i s h m e n t in a c c o r d a n c e w i t h s t a n d i n g p r a c t i c e . It is a l s o a g r e e d t h a t t h e CONTRACTING PARTIES w o u l d s i m i l a r l y d e c i d e t o e s t a b l i s h a w o r k i n g p a r t y

if

this w e r e r e q u e s t e d b y a c o n t r a c t i n g p a r t y i n v o k i n g t h e A r t i c l c . It is f u r t h e r agreed that such requests would be granted only after the contracting party c o n c e r n e d h a d h a d a n o p p o r t u n i t y t o s t u d y t h e c o m p l a i n t a n d r e s p o n d to it b e f o r e t h e CONTRACTING

PARTIES.

11.

up,

When

a

panel

is set

the

Director-General,

after

securing

the

a g r e e m e n t o f the c o n t r a c t i n g parties c o n c e r n e d , should p r o p o s e the c o m p o s i t i o n o f t h e p a n e l , o f t h r e e o r five m e m b e r s d e p e n d i n g o n t h e c a s e , t o t h e CONTRACTING PARTIES f o r a p p r o v a l . T h e m e m b e r s o f a p a n e l preferably 520

be governmental.

It is u n d e r s t o o d

that

citizens

of

would

countries

T o k y o Round: Development Purposes

Doc. 30

w h o s e g o v e r n m e n t s 1 a r e p a r t i e s to t h e d i s p u t e w o u l d n o t be m e m b e r s of t h e p a n e l c o n c e r n e d with t h a t d i s p u t e . T h e p a n e l s h o u l d be c o n s t i t u t e d as p r o m p t l y as p o s s i b l e a n d n o r m a l l y n o t l a t e r t h a n t h i r t y d a y s f r o m t h e d e c i s i o n b y t h e CONTRACTING

PARTIES.

12. T h e p a r t i e s t o t h e d i s p u t e w o u l d r e s p o n d w i t h i n a s h o r t p e r i o d of t i m e , i.e., seven w o r k i n g d a y s , t o n o m i n a t i o n s of p a n e l m e m b e r s by the D i r e c t o r - G e n e r a l a n d w o u l d n o t o p p o s e n o m i n a t i o n s except f o r c o m p e l l i n g reasons. 13. In o r d e r to facilitate t h e c o n s t i t u t i o n of p a n e l s , t h e D i r c c t o r - G e n e r a l s h o u l d m a i n t a i n a n i n f o r m a l i n d i c a t i v e list of g o v e r n m e n t a l a n d n o n g o v e r n m e n t a l p e r s o n s q u a l i f i e d in t h e fields of t r a d e r e l a t i o n s , e c o n o m i c d e v e l o p m e n t , a n d o t h e r m a i l e r s c o v e r e d by t h e G e n e r a l A g r e e m e n t , a n d w h o . c o u l d be a v a i l a b l e f o r s e r v i n g o n p a n e l s . F o r this p u r p o s e , e a c h c o n t r a c t i n g p a r t y w o u l d b e invited t o i n d i c a t e a t t h e b e g i n n i n g of every year to the D i r e c t o r - G e n e r a l t h e n a m e of o n e o r t w o p e r s o n s w h o w o u l d be available for such w o r k . 2 14. P a n e l m e m b e r s w o u l d serve in their i n d i v i d u a l c a p a c i t i e s a n d n o t as g o v e r n m e n t r e p r e s e n t a t i v e s , n o r as r e p r e s e n t a t i v e s of a n y o r g a n i z a t i o n . G o v e r n m e n t s ' w o u l d t h e r e f o r e n o t give t h e m i n s t r u c t i o n s n o r seek to i n f l u e n c e t h e m as i n d i v i d u a l s with r e g a r d t o m a t t e r s b e f o r e a p a n e l . Panel m e m b e r s s h o u l d be selected w i t h a view t o e n s u r i n g t h e i n d e p e n d e n c e of t h e m e m b e r s , a sufficiently d i v e r s e b a c k g r o u n d a n d a wide s p e c t r u m of experience.3 15. A n y c o n t r a c t i n g p a r t y h a v i n g a s u b s t a n t i a l i n t e r e s t in the m a t t e r b e f o r e a p a n e l , a n d h a v i n g notified this t o t h e C o u n c i l , s h o u l d h a v e an o p p o r t u n i t y t o be h e a r d by t h e p a n e l . E a c h p a n e l s h o u l d h a v e t h e r i g h t t o seek i n f o r m a t i o n a n d t e c h n i c a l a d v i c e f r o m a n y i n d i v i d u a l o r b o d y which it d e e m s a p p r o p r i a t e . H o w e v e r , b e f o r e a p a n e l seeks s u c h i n f o r m a t i o n o r a d v i c e f r o m a n y i n d i v i d u a l o r b o d y w i t h i n t h e j u r i s d i c t i o n of a S t a t e it shall i n f o r m t h e g o v e r n m e n t of t h a t S t a t e . A n y c o n t r a c t i n g p a r t y s h o u l d r e s p o n d p r o m p t l y a n d fully t o a n y r e q u e s t by a p a n e l f o r s u c h i n f o r m a t i o n as t h e p a n e l c o n s i d e r s n e c e s s a r y a n d a p p r o p r i a t e . C o n f i d e n t i a l i n f o r m a t i o n w h i c h is p r o v i d e d s h o u l d n o t be r e v e a l e d w i t h o u t f o r m a l a u t h o r i z a t i o n f r o m t h e contracting party providing the information.

1 In ihc case c u s t o m s unions or c o m m o n markets arc parlies to a dispute, this provision applies to cilizcns of all member countries of the customs unions or c o m m o n markets. 2 T h e coverage of travel expenses should be considered within the limits of budgetary possibilities. 3 A statement is included in the A n n e x describing the current practice with respect to inclusion on panels o f persons from developing countries.

521

Doc. 30 16.

International Trade T h e f u n c t i o n o f p a n e l s is t o assist t h e CONTRACTING PARTIES in dis-

c h a r g i n g their responsibilities under Article X X 1 I I : 2 . A c c o r d i n g l y , a panel s h o u l d m a k e an o b j e c t i v e a s s e s s m e n t o f t h e m a t t e r b e f o r e it, i n c l u d i n g a n objective assessment o f the facts o f the case and the applicability o f a n d c o n f o r m i t y w i t h t h e G e n e r a l A g r e e m e n t a n d , i f s o r e q u e s t e d b y t h e CONTRACTING PARTIES, m a k e s u c h o t h e r f i n d i n g s a s will a s s i s t t h e CONTRACTING PARTIES in m a k i n g t h e r e c o m m e n d a t i o n s o r in g i v i n g t h e r u l i n g s p r o v i d e d f o r in A r t i c l e X X I I I : 2 . I n this c o n n e x i o n , p a n e l s s h o u l d c o n s u l t w i t h t h e p a r t i e s t o t h e d i s p u t e a n d give t h e m

regularly

adequate opportunity

to

develop a mutually satisfactory solution. 17.

Where

the

parlies

have

failed

to

develop

a

mutually

satisfactory

s o l u t i o n , t h e p a n e l s h o u l d s u b m i t its findings in a w r i t t e n f o r m . T h e r e p o r t o f a p a n e l s h o u l d n o r m a l l y set o u t t h e r a t i o n a l e b e h i n d a n y f i n d i n g s a n d r e c o m m e n d a t i o n s t h a t it m a k e s . W h e r e a b i l a t e r a l s e t t l e m e n t o f t h e m a t t e r has been found, the report o f the panel m a y be confined to a b r i e f description o f the case and to reporting that a solution has been r e a d i e d . 18.

T o encourage development of mutually satisfactory solutions between

t h e p a r t i e s a n d w i t h a view t o o b t a i n i n g t h e i r c o m m e n t s , e a c h p a n e l s h o u l d first s u b m i t t h e d e s c r i p t i v e p a r t o f its r e p o r t t o t h e p a r t i e s c o n c e r n e d , a n d s h o u l d s u b s e q u e n t l y s u b m i t t o t h e p a r t i e s t o t h e d i s p u t e its c o n c l u s i o n s , o r an o u t l i n e t h e r e o f , a r e a s o n a b l e p e r i o d o f t i m e b e f o r e they a r e c i r c u l a t e d t o t h e CONTRACTING

19.

PARTIES.

I f a m u t u a l l y s a t i s f a c t o r y s o l u t i o n is d e v e l o p e d

by the parties to

a

d i s p u t e b e f o r e a p a n e l , a n y c o n t r a c t i n g p a r t y w i t h a n i n t e r e s t in t h e m a t t e r has a right to enquire a b o u t and be given a p p r o p r i a t e i n f o r m a t i o n

about

t h a t s o l u t i o n in s o f a r as it r e l a t e s t o t r a d e m a t t e r s . 20.

The

time

required

by

panels

will v a r y

with

the

particular

case.

1

However, panels should aim to deliver their findings without undue delay, t a k i n g i n t o a c c o u n t t h e o b l i g a t i o n o f t h e CONTRACTING PARTIES to e n s u r e p r o m p t s e t t l e m e n t . I n c a s e s o f u r g e n c y t h e p a n e l w o u l d be c a l l e d u p o n t o d e l i v e r its

findings

within a period normally o f three m o n t h s f r o m the time

the panel was established. 21.

Reports

of

panels

consideration

by

the

and

working

CONTRACTING

parties

PARTIES.

should The

given

prompt

CONTRACTING

be

PARTIES

should take appropriate action on reports o f panels and working

parties

w i t h i n a r e a s o n a b l e p e r i o d o f t i m e . I f t h e c a s e is o n e b r o u g h t b y a l e s s d e v e l o p e d c o n t r a c t i n g ¿»arty, s u c h a c t i o n s h o u l d b e t a k e n in a

specially

c o n v e n e d m e e t i n g , i f n e c e s s a r y . I n s u c h c a s e s , in c o n s i d e r i n g w h a t

appro-

1 A n e x p l a n a t i o n is i n c l u d e d in t h e A n n e x t h a t " in m o s t c a s e s t h e p r o c e e d i n g s o f ( h e p a n e l s h a v e been c o m p l e t e d w i t h i n a r e a s o n a b l e p e r i o d o f t i m e , e x t e n d i n g f r o m t h r e e t o nine months ".

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p r i a t e a c t i o n m i g h t be t a k e n the C O N T R A C T I N G PARTIES shall t a k e i n t o a c c o u n t n o t only t h e t r a d e c o v e r a g e of m e a s u r e s c o m p l a i n e d of, b u t also their i m p a c t o n the e c o n o m y of less-developed c o n t r a c t i n g parties c o n c e r n e d . T h e C O N T R A C T I N G PARTIES shall k e e p u n d e r surveillance any m a t t e r o n which they h a v e m a d e r e c o m m e n d a t i o n s o r given rulings. If the CONT R A C T I N G P A R T I E S ' r e c o m m e n d a t i o n s a r e n o t i m p l e m e n t e d within a r e a s o n a b l e p e r i o d of time, the c o n t r a c t i n g p a r t y b r i n g i n g the case m a y ask the C O N T R A C T I N G P A R T I E S t o m a k e s u i t a b l e e f f o r t s with a view to finding a n appropriate solution. 22.

23. If the m a t t e r is o n e which h a s been raised by a less-developed c o n t r a c t i n g p a r t y , the C O N T R A C T I N G PARTIES shall c o n s i d e r w h a t f u r t h e r action they m i g h t t a k e w h i c h w o u l d be a p p r o p r i a t e to the c i r c u m s t a n c e s . Surveillance 24. T h e C O N T R A C T I N G P A R T I E S agree to c o n d u c t a regular a n d s y s t e m a t i c review of d e v e l o p m e n t s in the t r a d i n g system. P a r t i c u l a r a t t e n t i o n w o u l d be p a i d t o d e v e l o p m e n t s which affect rights a n d o b l i g a t i o n s u n d e r the G A T T , to m a t t e r s affecting the interests of less-developed c o n t r a c t i n g parties, to t r a d e m e a s u r e s notified in a c c o r d a n c e with this u n d e r s t a n d i n g a n d to m e a s u r e s which have b e e n subject to c o n s u l t a t i o n , conciliation or d i s p u t e s e t t l e m e n t p r o c e d u r e s laid d o w n in this u n d e r s t a n d i n g . Technical

assistance

25. T h e technical assistance services of the G A T T secretariat shall, at the r e q u e s t of a less-developed c o n t r a c t i n g p a r t y , assist it in c o n n e x i o n with m a t t e r s d e a l t with in this u n d e r s t a n d i n g .

- Understanding regarding Notification, Consultation, Dispute Settlement and Surveillance 1. T h e C O N T R A C T I N G PARTIES reaffirm their a d h e r e n c e t o the basic G A T T m e c h a n i s m f o r the m a n a g e m e n t of d i s p u t e s based o n Articles X X I I a n d X X I I I . 1 W i t h a view to i m p r o v i n g a n d refining the G A T T m e c h a n i s m , the C O N T R A C T I N G P A R I ÍES agree as f o l l o w s :

1 It is n o t e d that Article X X V may, as recognized by the CONTRACTING PARTIES, inter alia, when they a d o p t e d Ihc report of ihe Working Party o n particular difficulties c o n n e c t e d with trade in primary products (L/930), also afford an appropriate avenue for c o n s u l t a t i o n a n d dispute settlement in certain circumstanccs.

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International Trade

Notification 2. Contracting parties reaffirm their commitment to existing obligations under the General Agreement regarding publication and notification. 2 3. Contracting parties moreover undertake, to the maximum extent possible, to notify the C O N T R A C T I N G PARTIES of their adoption of trade measures aficcling the operation of the General Agreement, it being understood that such notification would of itself be without prejudice to views on the consistency of measures with or their relevance to rights and obligations under the General Agreement. Contracting parties should endeavour to notify such measures in advance of implementation. In other cases, where prior notification has not been possible, such measures should be notified promptly ex post facto. Contracting parties which have reason to believe that such trade measures have been adopted by another contracting party may seek information on such measures bilaterally, from the contracting party concerned. Consultations 4. Contracting parties reaffirm their resolve to strengthen and improve the effectiveness of consultative procedures employed by contracting parties. In that connexion, they undertake to respond to requests for consultations promptly and to attempt to conclude consultations expeditiously, with a view to reaching mutually satisfactory conclusions. Any requests for consultations should include the reasons therefor.

d) Agreement on Import Licensing Procedures April 12, 1979 GATT Publication 1979 (O.J. EC 1980, N o . L71, 102) PREAMBLE Having regard to the Multilateral T r a d e Negotiations, the Parties to this Agreement on I m p o r t Licensing Procedures (hereinafter referred to as " Parties " and " this Agreement "); Desiring to f u r t h e r the objectives of the General Agreement on Tariffs and T r a d e (hereinafter referred to as " General Agreement " or " G A T T "); Taking into account the particular trade, development and financial needs of developing countries;

2 See secretariat note, N o t i f i c a t i o n s required f r o m contracting parties ( M T N / F R / W / 1 7 , dated 1 A u g u s t 1978).

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Doc. 32

Recognizing the usefulness o f automatic import licensing for certain purposes and that such licensing should not be used to restrict trade; Recognizing that import licensing may be employed to administer measures such as those adopted pursuant to the relevant provisions o f the G A T T ; Recognizing also that the inappropriate use o f import licensing procedures may impede the flow o f international trade; Desiring to simplify, and bring transparency to, the administrative procedures and practices used in international trade, and to ensure the fair and equitable application and administration o f such procedures and practices; Desiring to provide for a consultative mechanism and the speedy, effective and equitable resolution o f disputes arising under this Agreement; Hereby

agree

as follows:

Article I General

provisions

1. F o r the purpose o f this Agreement, import licensing is defined as administrative procedures 1 used for the operation o f import licensing regimes requiring the submission o f an application or oilier documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory o f the importing country. 2. T h e Parties shall ensure that the administrative procedures used to implement import licensing regimes are in conformity with the relevant provisions o f the G A T T including its annexes and protocols, as interpreted by this Agreement, with a view to preventing trade distortions that may arise from an inappropriate operation o f those procedures, taking into account the economic development purposes and financial and trade needs of developing countries. 3. The rules for import licensing procedures shall be neutral in application and administered in a fair and equitable manner. 4. T h e rules and all information concerning procedures for the submission o f applications, including the eligibility of persons, firms and institutions to make such applications, and the lists o f products subject to the licensing requirement shall be published promptly in such a manner as to enable

1 T h o s e procedures referred to as " licensing " as well as o t h e r similar administrative procedures.

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International Trade

g o v e r n m e n t s a n d t r a d e r s t o b e c o m e a c q u a i n t e d with t h e m . A n y c h a n g e s in either the rules c o n c e r n i n g licensing p r o c e d u r e s o r the list of p r o d u c t s subject t o i m p o r t licensing shall also be p r o m p t l y p u b l i s h e d in t h e s a m e m a n n e r . C o p i e s of these p u b l i c a t i o n s shall also be m a d e a v a i l a b l e to the G A T T Secretariat. 5. A p p l i c a t i o n f o r m s a n d , w h e r e a p p l i c a b l e , r e n e w a l f o r m s shall be as simple as possible. S u c h d o c u m e n t s a n d i n f o r m a t i o n as a r e c o n s i d e r e d strictly necessary f o r the p r o p e r f u n c t i o n i n g of the licensing r e g i m e m a y be required on application. 6. A p p l i c a t i o n p r o c e d u r e s a n d , w h e r e a p p l i c a b l e , r e n e w a l p r o c e d u r e s shall be as simple as possible. A p p l i c a n t s shall h a v e to a p p r o a c h only o n e a d m i n istrative b o d y previously specified in t h e rules r e f e r r e d t o in p a r a g r a p h 4 a b o v e in c o n n e x i o n with a n a p p l i c a t i o n a n d shall be allowed a r e a s o n a b l e period t h e r e f o r . In cases w h e r e it is strictly i n d i s p e n s a b l e t h a t m o r e t h a n o n e a d m i n i s t r a t i v e b o d y is to be a p p r o a c h e d in c o n n e x i o n with a n a p p l i c a t i o n , these shall be kept to the m i n i m u m n u m b e r possible. 7. N o a p p l i c a t i o n shall be r e f u s e d f o r m i n o r d o c u m e n t a t i o n e r r o r s w h i c h d o n o t alter basic d a t a c o n t a i n e d therein. N o p e n a l t y g r e a t e r t h a n n e c e s s a r y to serve merely as a w a r n i n g shall be i m p o s e d in respect of a n y o m i s s i o n or m i s t a k e in d o c u m e n t a t i o n or p r o c e d u r e s which is o b v i o u s l y m a d e w i t h o u t f r a u d u l e n t i n t e n t or gross negligence. 8. Licensed i m p o r t s shall n o t be r e f u s e d f o r m i n o r v a r i a t i o n s in v a l u e , q u a n t i t y o r weight f r o m the a m o u n t d e s i g n a t e d o n the licence d u e t o d i f f e r e n c e s o c c u r r i n g d u r i n g s h i p m e n t , differences incidental to b u l k l o a d i n g a n d o t h e r m i n o r differences c o n s i s t e n t with n o r m a l c o m m e r c i a l practice. 9. T h e f o r e i g n e x c h a n g e necessary t o p a y f o r licensed i m p o r t s shall be m a d e a v a i l a b l e t o licence h o l d e r s o n the s a m e basis as t o i m p o r t e r s of g o o d s n o t r e q u i r i n g i m p o r t licences. 10.

W i t h r e g a r d to security e x c e p t i o n s , the p r o v i s i o n s of Article X X I of

the G A T T a p p l y . 11. T h e p r o v i s i o n s of this A g r e e m e n t shall n o t r e q u i r e a n y P a r t y to disclose c o n f i d e n t i a l i n f o r m a t i o n w h i c h w o u l d i m p e d e law e n f o r c e m e n t o r o t h e r w i s e be c o n t r a r y t o t h e p u b l i c interest o r w o u l d p r e j u d i c e t h e legiti m a t e c o m m e r c i a l interests of p a r t i c u l a r e n t e r p r i s e s , p u b l i c o r p r i v a t e .

Article Automatic

import

2 licensing

2

1. A u t o m a t i c i m p o r t licensing is defined as I m p o r t licensing w h e r e a p p r o v a l of the a p p l i c a t i o n is freely g r a n t e d . 526

Tokyo Round: Import Licensing Procedures

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2. The following provisions a , in addition to those in paragraphs 1 to 11 of Article 1 and paragraph 1 of Article 2 above, shall apply to automatic import licensing procedures: (a) Automatic licensing procedures shall not be administered in a manner so as to have restricting effects on imports subject to automatic licensing; (b)

Parties recognize that automatic import licensing may be necessary whenever other appropriate procedures are not available. Automatic import licensing may be maintained as long as the circumstances which gave rise to its introduction prevail or as long as its underlying administrative purposes cannot be achieved in a more appropriate way;

(c)

Any person, firm or institution which fulfils the legal requirements of the importing country for engaging in import operations involving products subject to automatic licensing shall be equally eligible to apply for and to obtain import licences;

(f/) Applications for licences may be submitted on any working day prior to the customs clearance of the goods; (e)

Applications for licences when submitted in appropriate and complete form shall be approved immediately on receipt, to the extent administratively feasible, but within a maximum o f t e n working days.

Article 3 Non-automatic

import

licensing

The following provisions, in addition to those in paragraphs 1 to 11 of Article 1 above, shall apply to non-automatic import licensing procedures, that is, import licensing procedures not falling under paragraphs 1 and 2 of Article 2 above: (a) Licensing procedures adopted, and practices applied, in connexion with the issuance of licences for the administration of quotas and other import restrictions, shall not have trade restrictive effects on imports additional to those caused by the imposition of the restriction;

2 Those import licensing procedures requiring a security which have no restrictive effects on imports, arc to be considered as falling within the scope of paragraphs 1 and 2 of Article 2 below. • A developing country Party, which has specific difficulties with the requirements of sub-paragraphs (d) and (e) below may, upon notification to the Committee referred to in paragraph 1 of Article 4, delay the application of these sub-paragraphs by not more than two years (he date of entry into force of this Agreement for such Party.

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International Trade

Parties shall provide, u p o n the request of any Party having a n interest in the trade in the p r o d u c t concerned, all relevant i n f o r m a t i o n concerning: (i) the a d m i n i s t r a t i o n of the restrictions; (ii) the i m p o r t licences granted over a recent p e r i o d ; (iii) the distribution o f such licences a m o n g supplying c o u n t r i e s ; (iv) where practicable, i m p o r t statistics (i.e. value a n d / o r volume) with respect t o the p r o d u c t s subject t o i m p o r t licensing. T h e developing countries would not be expected to t a k e a d d i t i o n a l administrative or financial b u r d e n s on this a c c o u n t ;

(c)

Parties administering q u o t a s by m e a n s of licensing shall publish the overall a m o u n t of q u o t a s to be applied by quantity a n d / o r value, the opening a n d closing dates of q u o t a s , a n d any c h a n g e t h e r e o f ;

(d) In the case of q u o t a s allocated a m o n g supplying countries, t h e P a r t y applying t h e restrictions shall p r o m p t l y i n f o r m all o t h e r Parties having an interest in supplying the p r o d u c t concerned of t h e shares in the q u o t a currently allocated, by q u a n t i t y o r value, t o t h e various supplying countries a n d shall give public notice thereof; (e)

W h e r e there is a specific opening date for the submission of licensing applications, the rules and p r o d u c t lists referred to in p a r a g r a p h 4 of Article 1 shall be published as far in advance as possible of such date, o r immediately after the a n n o u n c e m e n t of the q u o t a or o t h e r m e a s u r e involving a n i m p o r t licensing r e q u i r e m e n t ;

(/)

A n y person, firm o r institution which fulfils the legal r e q u i r e m e n t s of the i m p o r t i n g c o u n t r y shall be equally eligible to apply a n d t o be considered f o r a licence. If the licence application is not a p p r o v e d , the applicant shall, on request, be given the reasons therefor a n d shall have a right of appeal or review in accordance with the domestic legislation o r p r o c e d u r e s of the i m p o r t i n g c o u n t r y ;

(g)

T h e period f o r processing of applications shall be as short as possible;

(h)

T h e period of licence validity shall be of reasonable duration a n d n o t be so s h o r t as to preclude i m p o r t s . T h e period of licence validity shall not preclude imports f r o m distant sources, except in special cases where i m p o r t s are necessary t o meet unforeseen short-term r e q u i r e m e n t s ;

(/)

W h e n administering q u o t a s , Parties shall not prevent i m p o r t a t i o n f r o m being effected in accordance with the issued licences, and shall not discourage the full utilization of the q u o t a s ;

(_/) W h e n issuing licences, Parties shall t a k e into account the desirability of issuing licenccs f o r p r o d u c t s in e c o n o m i c quantities; 528

Tokyo Round: Import Licensing Procedures

Doc. 32

(k)

In allocating licences, Parties should consider the import performance o f the applicant, including whether licences issued to the applicant have been fully utilized, during a recent representative period;

(/)

Consideration shall be given to ensuring a reasonable distribution o f licences to new importers, taking into account the desirability o f issuing licences for products in economic quantities. In this regard, special consideration should be given to those importers importing products originating in developing countries and, in particular, the least-developed countries;

(im) In the case o f quotas administered through licences which are not allocated among supplying countries, licence holders 1 shall be free to choose the sources o f imports. In the case o f quotas allocated among supplying countries, the licence shall clearly stipulate the country or countries; (n)

In applying paragraph 8 o f Article 1 above, compensating adjustments may be made in future licence allocations where imports exceeded a previous licence level.

Article 4 Institutions, consultation and dispute

settlement

1. There shall be established under this Agreement a Committee on Import Licensing composed o f representatives from each o f the Parties (referred to in this Agreement as " the Committee " ) . T h e Committee shall elect its own Chairman and shall meet as necessary for the purpose o f affording Parties the opportunity o f consulting on any matters relating to the operation o f this Agreement or the furtherance o f its objectives. 2. Consultations and the settlement o f disputes with respect to any matter affecting the operation o f this Agreement, shall be subject to the procedures o f Articles X X I I and X X I I I o f the G A T T .

Article 5 Final 1. Acceptance (a)

4

and

provisions

accession

This Agreement shall be open for acceptance by signature or otherwise, by governments contracting parties to the G A T T and by the European E c o n o m i c Community.

Sometimes referred to as " quota holders " .

529

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International T r a d e

(b)

This Agreement shall be open for acceptance by signature or otherwise by governments having provisionally acceded to the G A T T , on terms related to the effective application of rights and obligations under this Agreement, which take into account rights and obligations in the instruments providing for their provisional accession.

(c) This Agreement shall be open to accession by any other government on terms, related to the effective application of rights and obligations under this Agreement, to be agreed between that government and the Parties, by the deposit witli the Director-General to the C O N T R A C T I N G PARTIES to the G A T T of an instrument of accession which stales the terms so agreed. (d) In regard to acceptance, the provisions of Article XXVI :5(a) and (¿>) of the General Agreement would be applicable. 2.

Reservations

Reservations may not be entered in respect of any of the provisions of this Agreement without the consent of the other Parties. 3. Entry into force This Agreement shall enter into force on 1 January 1980 for the governments 6 which have accepted or acceded to it by that date. For each other government it shall enter into force on the thirtieth day following the date of its acceptance or accession to this Agreement. 4. National

5.

legislation

(a)

Each government accepting or acceding to this Agreement shall ensure, not later than the date of entry into force of this Agreement for it, the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement.

(b)

Each Party shall inform the Committee of any changes in its laws and regulations relevant to this Agreement and in the administration of such laws and regulations.

Review

The Committee shall review as necessary, but at least once every two years, the implementation and operation of this Agreement taking into account the objectives thereof and shall inform the C O N T R A C T I N G PARTIES to the G A T T of developments during the period covered by such reviews. 5 F o r the purpose of this Agreement, the term " governments " is deemed to include the competent authorities of the European E c o n o m i c Community.

530

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Tokyo Round: Import Licensing Procedures

6.

Amendments

The Parties may amend this Agreement, having regard, inter alia, to the experience gained in its implementation. Such an amendment, once the Parties have concurred in accordance with procedures established by the Committee, shall not come into force for any Party until it has been accepted by such Party.

7.

Withdrawal

Any Party may withdraw from this Agreement. The withdrawal shall take effect upon the expiration of sixty days from the day on which written notice of withdrawal is received by the Director-General to the C O N T R A C T I N G P A R T I E S to the G A T T . Any Party may upon such notification request an immediate meeting of the Committee. 8.

Non-application

of this Agreement

between particular

Parties

This Agreement shall not apply as between any two Parties if either of the Parlies, at the time either accepts or accedes to this Agreement, does not c o n s e n t lo such application. 9.

Secretariat This Agreement shall be serviced by the G A T T secretariat.

10. Deposit This Agreement shall be deposited with the Director-General to the PARTIES to the G A I T , w h o shall p r o m p t l y furnish to each Party and each contracting party to the G A T T a certified copy thereof and of each a m e n d m e n t thereto p u r s u a n t lo p a r a g r a p h 6, and a notification of each acceptance thereof or accession thereto p u r s u a n t to p a r a g r a p h 1 and of each withdrawal t h e r e f r o m p u r s u a n t to p a r a g r a p h 7 of this Article.

CONTRACTING

11.

Registration

This Agreement shall be registered in accordance with the provisions of Article 102 of the C h a r t e r of the United N a t i o n s .

D o n e at Geneva this twelfth d a y of April, nineteen h u n d r e d and seventy-nine in a single copy, in the English, French and Spanish languages, each text being authentic. 531

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International Trade

3. GATT Ministerial Declaration on the Uruguay Round September 25, 1986 G A T T Press Release 1396

Ministers, meeting on the occasion of the Special Session of CONTRACTING PARTIES at Punta del Este, have decided to launch Multilateral Trade Negotiations (The Uruguay Bound). following Declaration.

To this end, they have adopted th

The multilateral trade negotiations (MTN) will be

open to the participation of countries as indicated in Parts I and II of this Declaration.

A Trade Negotiations Comnittee (TNC.) is established to

carry out the negotiations.

The Trade Negotiations Committee shall hold

its first meeting not later than 31 October 1986. appropriate at Ministerial

level.

It shall meet as

The Multilateral Trade Negotiations- fcil

be concluded within four years.

PART I NEGOTIATIONS ON TRADE IN GOODS

The CONTRACTING PARTIES meeting at Ministerial

level

DETERMINED

to halt and reverse protectionism and to remove distortions to trade

DETERMINED

also to preserve the basic principles and to further the objectives of the GATT

DETERMINED

also to develop a more open, viable and durable multilateral trading system

CONVINCED

that such action would promote growth and development

MINDFUL

of the negative effects of prolonged financial and monetary instability in the world economy, the indebtedness of a large number of less-developed contracting parties, and considering the linkage between trade, money, finance and development

DECIDE

to enter into Multilateral Trade Negotiations on trade in goods within the framework and under the aegis of the General Agreement on Tariffs and Trade.

532

Uruguay Round A.

Doc. 33

OBJECTIVES

Negotiations shall aim to: (i)

bring about further liberalization and expansion of world trade to the benefit of all countries, especially less-developed contracting parties, including the improvement of access to markets by the reduction and elimination of tariffs, quantitative restrictions and other non-tariff measures and obstacles;

(ii)

strengthen the role of GATT, improve the multilateral trading system based on the principles and rules of the GATT and bring about a wider coverage of world trade under agreed, effective and enforceable multilateral disciplines;

(iii) increase the responsiveness of the GATT system to the evolving international economic environment, through facilitating necessary structural adjustment, enhancing the relationship of the GATT with the relevant international organizations and taking account of changes in trade patterns and prospects, including the growing importance of trade in high-technology products, serious difficulties in commodity markets and the importance of an improved trading environment providing, inter alia, for the ability of indebted countries to meet their financial obligations; (iv)

foster concurrent co-operative action at the national and international levels to strengthen the interrelationship between trade policies and other economic policies affecting growth and development, and to contribute towards continued, effective and determined efforts to improve the functioning of the international monetary system and the flow of financial and real investment resources to developing countries.

B.

GENERAL PRINCIPLES GOVERNING NEGOTIATIONS

(i)

Negotiations shall be conducted in a transparent manner, and consistent with the objectives and commitments agreed in this Declaration and with the principles of the General Agreement in order to ensure mutual advantage and increased benefits to all participants.

(ii)

The launching, the conduct and the implementation of the outcome of the negotiations shall be treated as parts of a single undertaking. However, agreements reached at an early stage may be implemented on a provisional or a definitive basis by agreement prior to the formal conclusion of the negotiations. Early agreements shall be taken into account in assessing the overall balance of the negotiations.

(iii) Balanced concessions should be sought within broad trading areas and subjects to be negotiated in order to avoid unwarranted cross-sectoral demands. (iv)

CONTRACTING PARTIES agree that the principle of differential and more favourable treatment embodied in Part IV and other relevant 533

Doc. 33

International Trade provisions of the General Agreement and in the Decision of the CONTRACTING PARTIES of 28 November 1979 o n Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries applies to the negotiations. In the implementation of standstill and rollback, particular care should be given to avoiding disruptive effects on the trade of less-developed contracting parties.

(v)

The developed countries do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of developing countries, i.e. the developed countries do not expect the developing countries, in the course of trade negotiations, to make contributions which are inconsistent w i t h their individual development, financial and trade needs. Developed contracting parties shall therefore not seek, neither shall less-developed contracting parties be required to make, concessions that are inconsistent with the latter's development, financial and trade needs.

(vi)

Less-developed contracting parties expect that their capacity to make contributions or negotiated concessions or take other mutually agreed action under the provisions and procedures of the General Agreement would improve w i t h the progressive development of their economies and improvement in their trade situation and they would accordingly expect to participate more fully in the framework of rights and obligations under the General Agreement.

(vii) Special attention shall be given to the particular situation and problems of the least-developed countries and to the need to encourage positive measures to facilitate expansion of their trading opportunities. Expeditious implementation of the relevant provisions of the 1982 Ministerial Declaration concerning the least-developed countries shall also be given appropriate attention.

C.

STANDSTILL AND ROLLBACK

Commencing immediately and continuing until the formal completion of the negotiations, each participant agrees to apply the following commitments: Standstill (i)

not to take any trade restrictive or distorting measure inconsistent w i t h the provisions of the General Agreement or the Instruments negotiated w i t h i n the framework of GATT or under its auspices ;

(ii)

not to take any trade restrictive or distorting measure in the legitimate exercise of its GATT rights, that w o u l d go beyond that which is necessary to remedy specific situations, as provided for in the General Agreement and the Instruments referred to in (i) above;

(iii) not to take any trade measures in such a manner as to improve its negotiating positions.

534

Uruguay Round

Doc. 33

Rollback. (i)

that all trade restrictive or distorting measures inconsistent w i t h the provisions of the General Agreement or Instruments negotiated within the framework of GATT or under its auspices, shall be phased out or'brought into conformity w i t h i n an agreed timeframe not ]ater than by the date of the formal completion of the negotiations, taking into account multilateral agreements, undertakings and understandings, including strengthened rules and disciplines, reached in pursuance of the objectives of the negotiations ;

(ii)

there shall be progressive implementation of this commitment on an equitable basis in consultations among participants concerned, including all affected participants. T h i s commitment shall take account of the concerns expressed by any participant about measures directly affecting its trade interests;

(iii) there shall be no GATT concessions requested for the elimination of these measures. Surveillance of standstill and rollback Each participant agrees that the implementation of these commitments on standstill and rollback shall be subject to multilateral surveillance so as to ensure that these commitments are being met. The Trade Negotiations Committee w i l l decide on the appropriate mechanisms to carry out the surveillance, including periodic reviews and evaluations. Any participant may bring to the attention of the appropriate surveillance mechanism any actions or omissions it believes to be relevant to the fulfilment of these commitments. These notifications should be addressed to the GATT secretariat w h i c h may also provide further relevant information.

D.

SUBJECTS FOR NEGOTIATIONS

Tariffs Negotiations shall aim, by appropriate methods, to reduce or, as appropriate, eliminate tariffs including the reduction or elimination of high tariffs and tariff escalation. Emphasis shall be given to the expansion of the scope of tariff concessions among ail participants. Non-tariff

measures

Negotiations shall aim to reduce or eliminate non-tariff measures, including quantitative restrictions, without prejudice to any action to be taken in fulfilment of the rollback commitments. Tropical products Negotiations shall aim at the fullest liberalization of trade in tropical products, including in their processed and semi-processed forms and shall cover both tariff and all non-tariff measures affecting trade in these products. CONTRACTING PARTIES recognize the importance of trade in tropical products to a large number of less-developed contracting parties and agree that negotiations in this area shall receive special attention, including 535

Doc. 33

International Trade

the timing of the negotiations and the implementation of the results as provided for in B(ii). Natural resource-based

products

Negotiations shall aim to achieve the fullest liberalization of trade in natural resource-based products, including in their processed and semi-processed forms. The negotiations shall aim to reduce or eliminate tariff and non-tariff measures, including tariff escalation. Textiles and c l o t h i n g Negotiations in the area of textiles and clothing shall aim to formulate modalities that w o u l d permit the eventual integration of this sector into GATT on the basis of strengthened CATT rules and disciplines, thereby also contributing to the objective of further liberalization of trade. Agriculture CONTRACTING PARTIES agree that there is ar urgent need to bring more discipline and predictability to world agricultural trade by correcting and preventing restrictions and distortions including those related tc structural surpluses so as to reduce the uncertainty, imbalances and instability in world agricultural markets. Negotiations shall aim to achieve greater liberalization of trade in agriculture and bring a l l measures affecting import access and export competition under strengthened and more operationally effective GATT rules and disciplines, taking into account the general principles governing the negotiations, by: (i)

improving market access through, inter alia, the reduction of import barriers;

(ii)

improving the competitive environment by increasing discipline on the use of all direct and indirect subsidies and other measures affecting directly or indirectly agricultural trade, including the phased reduction of their negative effects and dealing w i t h their causes;

(iii) minimizing the adverse effects that sanitary and pbytosanitary regulations and barriers can have on trade in agriculture, taking into account the relevant international agreements.

In order to achieve the above objectives, the negotiating group having primary responsibility for all aspects of.agriculture will use the Recommendations adopted by the CONTRACTING PARTIES at their Fortieth Session, which were developed in accordance with the GATT 1982 M i n i s t e r i a l Programme and take account of the approaches suggested in the work of the Committee on Trade in Agriculture without prejudice to other alternatives that might achieve the objectives of the negotiations. GATT Articles Participants shall review existing GATT Articles, provisions and disciplines as requested by interested contracting parties, and, as appropriate, undertake negotiations.

536

Uruguay R o u n d

Doc. 33

Safeguards (i)

A comprehensive agreement on safeguards is of particular importance to the strengthening of the GATT system and to progress in the MTNs.

(ii) The agreement on safeguards: shall be based on the basic principles of the General Agreement; shall contain, inter alia, the following elements: transparency, coverage, objective criteria for action including the concept of serious injury or threat thereof, temporary nature, degressivity and structural adjustment, compensation and retaliation, notifications, consultation, multilateral surveillance and dispute settlement; and shall clarify and reinforce the disciplines of the General Agreement and should apply to all contracting parties. MTN Agreements and Arrangements Negotiations shall aim to improve, clarify, or expand, as appropriate, agreements and arrangements negotiated in the Tokyo Round of Multilateral Negotiations. Subsidies and countervailing measures Negotiations on subsidies and countervailing neasures shall be based on a review of Articles VI and XVI and the MTN agreement on subsidies and countervailing measures with the objective of improving GATT disciplines relating to all subsidies and countervailing measures that affect international trade. A negotiating group will be established to deal with these issues. Dispute

settlement

In order to ensure prompt and effective itsolution of disputes to the benefit of a l l contracting parties, negotiations shall aim to improve and strengthen the rules and the procedures of the dispute settlement process, while recognizing the contribution that would be made by more effective and enforceable GATT rules and disciplines. Negotiations shall include the development of adequate arrangements for overseeing and monitoring of the procedures that w o u l d facilitate compliance w i t h adopted recommendations. Trade-related aspects of intellectual property rights, including _trade_in counterfeit goods In order to reduce the distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ¿nsure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade, the negotiations shall aim to clarify GATT provisions and elaborate as appropriate new rules and disciplines. N e g o t i a t i o n s shall aim to develop a multilateral framework of principles, rules and disciplines dealing w i t h international trade in counterfeit goods, taking into account work already undertaken in the GATT. These negotiations shall be without prejudice to other complementary initiatives that may be taken in the World Intellectual Property Organization and elsewhere to deal with these matters.

537

Doc. 33

International Trade

Trade-related investment m e a s u r e ^ Following an examination of the operation of GATT Articles related to the trade restrictive and distorting effects of investment measures, negotiations should elaborate, as appropriate, further provisions that may be necessary to avoid such adverse effects on trade.

E.

FUNCTIONING 0_F_ TH E_ GATT_ S.YSTEM

Negotiations shall aim to develop understandings and

arrangements:

(i)

to enhance the surveillance in the GATT to enable regular monitoring of trade policies and practices of contracting parties and their impact on the functioning of the multilateral trading system;

(ii)

to improve the overall effectiveness and decision-making of the GATT as an institution, including, inter alia, through involvement of Ministers;

(iii) to increase the contribution of the GATT to achieving greater coherence in global economic policy-making through strengthening its relationship w i t h other international organizations responsible for monetary and financial matters.

F. (a)

(b)

PARTICIPATION

Negotiations w i l l be open to: (1)

all contracting

parties,

(2)

countries having acceded

(3)

countries applying the GATT on a de facto basis h a v i n g announced, not later than 30 April 1987, their i n t e n t i o n to accede to the GATT and to participate in the negotiations,

(4)

countries that have already informed the CONTRACTING PARTIES, at a regular meeting of the Council of Representatives, of their intention to negotiate the terms of their membership as a contracting party, and

(5)

developing countries that have, by 30 April 1987, initiated procedures for accession to the GATT, w i t h the intention of negotiating the terms of their accession during the course of the negotiations.

provisionally,

Participation in negotiations relating to the amendment or application of GATT provisions or the negotiation of new provisions will, however, be open only to contracting parties.

G.

ORGANIZATION OF THE NEGOTIATIONS

A Group of Negotiations on Goods (GNG) is established to carry out the programme of negotiations contained in this Part of the Declaration. The GNG shall, inter alia; (i)

538

elaborate and put into effect detailed trade negotiating plans prior to 19 December 1986;

Uruguay Round (ii)

Doc. 33

designate the appropriate mechanism for surveillance of commitments to standstill and rollback;

(iii) establish negotiating groups as required. Because of the interrelationship of some issues and taking fully into account the general principles governing the negotiations as stated in B(iii) above it is recognized that aspects of one issue may be discussed in more than one negotiating group. Therefore each negotiating group should as required take into account relevant aspects emerging in other groups; (iv)

also decide upon inclusion of additional subject matters in the negotiations;

(v)

co-ordinate the work of the negotiating groups and supervise the progress of the negotiations. As a guideline not more than two negotiating groups should meet at the same time;

(vi)

the GNG shall report to the Trade Negotiations Committee.

In order to ensure effective application of differential and more favourable treatment the GNG shall, before the formal completion of the negotiations, conduct an evaluation of the results attained therein in terms of the Objectives and the General Principles Governing Negotiations as set out in the Declaration, taking into account all issues of interest to less-developed contracting parties. PART II NEGOTIATIONS 0_N_ T_RAD_E_ _I_N_ SERVICES Ministers, also decided, as part of the Multilateral Trade Negotiations, to launch negotiations on trade in services. Negotiations in this area shall aim to establish a multilateral framework of principles and rules for trade in services, including elaboration of possible disciplines for individual sectors, with a view to expansion of such trade under conditions of transparency and progressive liberalization and as a means of promoting economic growth of all trading partners and the development of developing countries. Such framework shall respect the policy objectives of national laws and regulations applying to services and shall take into account the work of relevant international organizations. GATT procedures and practices shall apply to these negotiations. A Group on Negotiations on Services is established to deal with these matters. Participation in the negotiations under this Part of the Declaration will be open to the same countries as under Part I. GATT secretariat support will be provided, with technical support from other organizations as decided by the Group on Negotiations on Services. The Group on Negotiations on Services shall report to the Trade Negotiations Committee. IMPLEMENTATION OF Rt.SUl.T_S_ _U_N_D_E_F_ _P_A_R_TS_ I_ _A_N_D_ XI When the results of the Multilateral Trade Negotiations in all areas have been established, Ministers meeting also on the occasion of a Special Session of CONTRACTING PARTIES shall decide regarding the international Implementation of the respective results.

539

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International Trade

4. EEC-Council Regulation on Protection against Dumped or Subsidized Imports from Countries not Members of the EEC (No. 2176/84) July 23, 1984 O.J. E C 1984, No. L201, 1 as amended by Regulation No. 1761/87; O.J. EC 1987, No. L167, 9

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community, and in particular Article 113 thereof,

Having regard to the Regulations establishing the common organization of agricultural markets and the Regulations adopted under Article 2 3 5 of the Treaty, applicable to g o o d s manufactured from agricultural products, and in particular the provisions of those Regulations which allow for derogation from the general principle that protective measures at frontiers may be replaced solely by the measures provided for in those Regulations,

Having regard to the proposal from the Commission,

Whereas by Regulation ( E E C ) N o 3 0 1 7 / 7 9 ( l ) , as amended by Regulation ( E E C ) N o 1 5 8 0 / 8 2 ( 2 ) , the Council adopted c o m m o n rules for protection against dumped or subsidized imports from countries which are not members of the E u r o p e a n Economic Community;

Whereas these rules were adopted in accordance with existing international obligations, in particular those arising from Article VI of the General Agreement on tariffs and trade (hereinafter referred to as ' G A I T ' ) , from the Agreement on Implementation of Article VI of the G A T T ( 1 9 7 9 Anti-Dumping Code) and from the Agreement on Interpretation and Application of Articles VI, X V I and X X I I I of the G A T T (Code on Subsidies and Countervailing Duties);

Whereas in applying these rules it is essential, in order to maintain the balance of rights and obligations which these Agreements sought to establish, that the Community take account of their interpretation by the Community's major trading partners, as reflected in legislation or established practice;

Whereas it is desirable that the rules for determining normal value should be presented clearly and in

(') OJ No L 339, 31. 12. 1979, p. 1. ( 2 ) OJ No L 178, 22. 6. 1982, p. 9.

540

sufficient detail; whereas it should be specifically provided that where sales on the domestic market of the country of export or origin d o not for any reason form a proper basis for determining the existence of dumping, recourse may be had to a constructed normal value; whereas it is appropriate to give examples of situations which may be considered as not representing the ordinary course of trade, in particular where a product is sold at prices which are less than the costs of production, or where transactions take place between parties which are associated or which have a compensatory arrangement; whereas it is appropriate t o list the possible methods of determining normal value in such circumstances;

Whereas it is expedient to define the export price and to enumerate the necessary adjustments to be m a d e in those cases where reconstruction of this price from the first open-market price is deemed appropriate;

Whereas, for the purpose of ensuring a fair c o m p a r i s o n between export price and normal value, it is advisable to establish guidelines for determining the adjustments to be made in respect of differences in physical characteristics, in quantities, in conditions and terms of sale and to draw attention to the fact that the burden of proof falls on any person claiming such adjustments;

Whereas the term 'dumping margin' should be clearly defined and the Community's established practice for methods of, calculation where prices or margins vary codified; Whereas it seems advisable to lay d o w n in adequate detail the manner in which the a m o u n t of any subsidy is to be determined; Whereas it seems appropriate to set out certain factors which may be relevant for the determination of injury; Whereas it is necessary to lay d o w n the procedures for anyone acting on behalf of a Community industry which considers itself injured or threatened by d u m p e d or subsidized imports to lodge a complaint; whereas it seems appropriate to make it clear that in the case of withdrawal of a complaint, proceedings [nay, but need not necessarily, be terminated; Whereas there should be cooperation between the M e m b e r States and the Commission both as regards

EEC-Council Regulation: Dumped or Subsidized Imports information about the existence o f dumping or subsidization and injury resulting therefrom, and as regards the subsequent examination o f the matter at Community level; whereas, to this end, consultations should take place within an advisory committee;

Whereas it is appropriate to lay down clearly the rules o f procedure to be followed during the investigation, in particular the rights and obligations o f the Community authorities and the parties involved, and the conditions under which interested parties may have access to information and may ask to be informed o f the essential facts and considerations on the basis o f which it is intended to recommend definitive measures;

Whereas it is necessary that the Community's decision-making process permit rapid and efficient action, in particular through measures taken by the Commission, as for instance the imposition o f provisional duties;

Whereas, in order to discourage dumping, it is appropriate to provide, in cases where the facts as finally established show that there is dumping and injury, for the possibility of definitive collection of provisional duties even if the imposition o f a definitive antidumping duty is not decided o n , on particular grounds;

Whereas it is essential, in order to ensure that anti-dumping and countervailing duties are levied in a correct and uniform manner, that common rules for the application o f such duties be laid down; whereas, by reason of the nature of the said duties, such rules may differ from the rules for the levying o f normal import duties;

Whereas it is appropriate to provide for open and fair procedures for the review o f measures taken, and for the investigation to be reopened when the circumstances so require;

Whereas, in order to avoid abuse o f Community procedures and resources, it is appropriate to lay down a minimum period which must elapse after the conclusion of a proceeding before such a review may be conducted, and to ensure that there is evidence o f a change in circumstances sufficient to justify a review;

Doc. 34

Whereas agricultural products and products derived therefrom might also be dumped or subsidized; whereas it is, therefore, necessary to supplement the import rules generally applicable to these products by making provision for protective measures against such practices;

Whereas, in addition to the above considerations, which led to the adoption o f Regulation ( E E C ) N o 3 0 1 7 / 7 9 , as amended by Regulation ( E E C ) N o 1 5 8 0 / 8 2 , experience has shown that this Regulation should be further amended;

Whereas in this context it is appropriate to bring the terminology of the said Regulation into line with the provisions o f Council Directive 7 9 / 6 2 3 / E E C o f 2 5 June 1 9 7 9 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs debt ( 1 ) and of Council Directive 7 9 / 6 9 5 / E E C o f 2 4 July 1 9 7 9 on the harmonization of procedures for the release o f goods for free circulation ( 1 ) , as last amended by Directive 8 1 / 8 5 3 / E E C ( 2 ) , and to take account o f the replacement of Council Regulation ( E E C ) N o 2 5 3 2 / 7 8 o f 16 October 1 9 7 8 on common rules for imports from the People's Republic o f China ( 3 ) by Council Regulation ( E E C ) N o 1 7 6 6 / 8 2 ( 4 ) and of the replacement o f Council Regulation ( E E C ) N o 9 2 5 / 7 9 o f 8 M a y 1 9 7 9 on common rules for imports from State-trading countries ( s ) by Council Regulation ( E E C ) No 1 7 6 5 / 8 2 (6);

Whereas it is appropriate to define more precisely the cost to be taken into consideration for the determination o f constructed value and of sales below cost on the domestic market;

Whereas it is also appropriate to ensure consistency o f the rules concerning parties which are associated or have a compensatory arrangement with each other;

Whereas it is necessary to clarify the provisions relating to the grant of allowances for differences in conditions and terms of sale, including, in particular, those relating to the level of trade, and for import charges and indirect taxes; Whereas, in order to take account o f the Community's interpretation o f the G A T T rules on subsidies and countervailing duties, it is appropriate to amend the

Whereas appropriate procedures should be established for examining applications for refunds o f anti-dumping duties;

(») OJ No L 179, 17. 7. 1979, p. 31.

Whereas this Regulation should not prevent the adoption o f special measures where this does not run counter to the Community's obligations under the GATT;

(») (2) (3) H (s) («)

OJ OJ OJ OJ OJ OJ

No No No No No No

L L L L L L

205, 319, 306, 195, 131, 195,

13. 8. 1979, p. 19. 7. 11. 1981, p. 1. 31. 10. 1978, p. 1. 5. 7. 1982, p. 21. 29. 5. 1979, p. 1. 5 . 7 . 1982, p. 1.

541

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International Trade

provisions of the said Regulation concerning calculation of the amount of subsidies;

the

HAS ADOPTED THIS REGULATION: Article

Whereas the procedures for cooperation and consultation with Member States should be simplified;

Whereas it is desirable to state explicitly that the investigation of dumping or subsidization should normally cover a period of not less than six months immediately prior to the initiation o f the proceeding and that final determinations must be based on the facts established in respect of the investigation period;

1

Applicability This Regulation lays down provisions for protection against dumped or subsidized imports from countries not members of the European Economic Community.

Article

2

Dumping

A. PRINCIPLE Whereas to avoid confusion, the use of the terms 'investigation' and 'proceeding' in this Regulation should be clarified;

1. An anti-dumping duty may be applied to any dumped product whose release for free circulation in the Community causes injury.

Whereas it is necessary to require that when information is to be considered as being confidential, a request to this effect must be made by the supplier, and to make clear that confidential information which could be summarized but of which no non-confidential summary has been submitted may be disregarded;

2 . A product shall be considered to have been dumped if its export price to the Community is less than the normal value of the like product.

B. NORMAL VALUE Whereas, in order to avoid undue delays and for administrative convenience, it is advisable to introduce time limits within which undertakings may be offered;

Whereas it is necessary to lay down more explicit rules concerning the procedure to be followed after withdrawal or violation of undertakings;

Whereas provision should be made for the review of regulations and decisions to be carried out, where appropriate, in part only;

Whereas it is necessary to provide that, after a certain period of time, anti-dumping and countervailing measures will lapse unless the need for their continued existence can be shown;

Whereas there is a need to ensure that refund procedures apply only in respect of definitive duties or amounts of any provisional duty which have been definitively collected, and to streamline the existing procedures for refunds;

Whereas it is appropriate to take advantage of this opportunity to proceed to a consolidation o f the rules in question,

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3. For the purposes of this Regulation, the normal value shall be:

(a) the comparable price actually paid or payable in the ordinary course of trade for the like product intended for consumption in the exporting country or country of origin; or

(b) when there are no sales ordinary course of trade the exporting country or such sales do not permit

of the like product in the on the domestic market of country o f origin, or when a proper comparison:'

(i) the comparable price of the like product when exported to any third country, which may be the highest such export price but should be a representative price; or (ii) the constructed value, determined by adding cost of production and a reasonable margin o f profit. The cost of production shall be computed on the basis of all costs, in the ordinary course of trade, both fixed and variable, in the country of origin, of materials and manufacture, plus a reasonable amount for selling, administrative and other general expenses. As a general rule, and provided that a profit is normally realized on sales of products of the same general category on the domestic market of the country of origin, the addition for profit shall not exceed such normal profit. In other cases, the addition shall be determined on any reasonable basis, using available information.

EEC-Council Regulation: Dumped or Subsidized Imports 4 . W h e n e v e r there are r e a s o n a b l e g r o u n d s f o r believing o r suspecting t h a t the price at w h i c h a p r o d u c t is actually sold f o r c o n s u m p t i o n in the c o u n t r y of origin is less t h a n the cost of p r o d u c t i o n as defined in p a r a g r a p h 3 (b) (ii), sales a t such prices m a y be considered as n o t h a v i n g been m a d e in the o r d i n a r y course of t r a d e if they:

(a) h a v e been m a d e over an e x t e n d e d period of time a n d in substantial quantities; a n d

(b) are n o t at prices w h i c h p e r m i t recovery of all costs w i t h i n a r e a s o n a b l e period of time in t h e n o r m a l course of t r a d e .

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where such p r o d u c t s ' a r e n o t p r o d u c e d in the c o u n t r y of export o r w h e r e n o c o m p a r a b l e price for it exists in the country of e x p o r t .

7. For the p u r p o s e of determining n o r m a l value, transactions between parties which a p p e a r t o be associated o r t o h a v e a c o m p e n s a t o r y a r r a n g e m e n t with each o t h e r m a y be considered as n o t being in the ordinary course of t r a d e unless the C o m m u n i t y authorities are satisfied that the prices a n d costs involved are c o m p a r a b l e t o those involved in transactions between parties which have n o such link.

C. EXPORT PRICE In such circumstances, the n o r m a l value m a y be determined o n the basis of the r e m a i n i n g sales o n t h e domestic m a r k e t m a d e at a price w h i c h is n o t less t h a n the cost of p r o d u c t i o n o r o n t h e basis of e x p o r t sales t o third countries o r on the basis of the constructed value o r by adjusting the s u b - p r o d u c t i o n - c o s t price referred t o a b o v e in o r d e r t o eliminate loss a n d p r o v i d e for a reasonable p r o f i t . Such n o r m a l - v a l u e calculations shall be based on available i n f o r m a t i o n .

5 . In the case of i m p o r t s f r o m n o n - m a r k e t e c o n o m y countries a n d , in p a r t i c u l a r , t h o s e t o w h i c h Regulations (EEC) N o 1 7 6 5 / 8 2 and (EEC) N o 1 7 6 6 / 8 2 apply, n o r m a l value shall be d e t e r m i n e d in an a p p r o p r i a t e a n d n o t u n r e a s o n a b l e m a n n e r on the basis of o n e of the following criteria:

(a) the price at w h i c h the like p r o d u c t of a m a r k e t e c o n o m y third c o u n t r y is actually sold: (i) for c o n s u m p t i o n o n the domestic m a r k e t of t h a t country; or (ii) t o o t h e r countries, including the C o m m u n i t y ; or

(b) the constructed value of the like p r o d u c t in a m a r k e t e c o n o m y third c o u n t r y ;

(c) if neither price n o r constructed value as established u n d e r (a) or (b) provides an a d e q u a t e basis, the price actually paid o r p a y a b l e in the C o m m u n i t y for t h e like p r o d u c t , duly a d j u s t e d , if necessary, t o include a r e a s o n a b l e profit margin.

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(a) T h e e x p o r t price shall be the price actually paid o r p a y a b l e f o r the p r o d u c t sold for e x p o r t t o the Community.

(b) In cases w h e r e there is n o e x p o r t price o r w h e r e it a p p e a r s that there is an association or a compensatory arrangement between the e x p o r t e r a n d t h e i m p o r t e r o r a third p a r t y , o r that f o r o t h e r reasons the price actually paid o r p a y a b l e for the p r o d u c t sold for e x p o r t t o the C o m m u n i t y is unreliable, the e x p o r t price m a y be constructed o n the basis of the price at w h i c h the i m p o r t e d p r o d u c t is first resold t o an independent b u y e r , o r if the p r o d u c t is n o t resold to an i n d e p e n d e n t buyer, o r n o t resold in the condition i m p o r t e d , o n any reasonable basis. In such cases, allowance shall be m a d e f o r all costs incurred between i m p o r t a t i o n and resale, including all duties and taxes, a n d for a reasonable p r o f i t margin. Such allowances shall include, in particular, the following:

(i) usual transport, insurance, loading and ancillary costs;

handling,

(ii) c u s t o m s duties, any a n t i - d u m p i n g duties a n d o t h e r taxes payable in the i m p o r t i n g country by reason of the i m p o r t a t i o n or sale of the g o o d s ;

(iii)a reasonable margin for overheads and profit and / o r any commission usually paid or agreed.

D. COMPARISON 6. W h e r e a p r o d u c t is n o t i m p o r t e d directly f r o m the country of origin b u t is e x p o r t e d t o the C o m m u n i t y f r o m an intermediate c o u n t r y , the n o r m a l value shall be the c o m p a r a b l e price actually paid o r payable for the like p r o d u c t o n the domestic m a r k e t of either the country of e x p o r t o r the country of origin. T h e latter basis might be a p p r o p r i a t e inter aliay w h e r e the p r o d u c t is merely trans-shipped t h r o u g h the country of e x p o r t ,

9. For the p u r p o s e of a fair c o m p a r i s o n , the e x p o r t price a n d the n o r m a l value shall be o n a c o m p a r a b l e basis as regards physical characteristics of the p r o d u c t , quantities a n d conditions a n d t e r m s of sale. T h e y shall normally be c o m p a r e d at t h e same level of t r a d e , preferably at the ex-factory level, and as nearly as possible at the same time.

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10. If the export price and the normal value are not on a comparable basis in respect of the factors mentioned in paragraph 9 , due allowance shall be made in each case, on its merits, for differences affecting price comparability. Where an interested party claims such an allowance, it must prove that its claim is justified. The following guidelines shall apply in determining these allowances:

(a) differences in physical characteristics of the product: allowance for such differences shall normally be based on the effect on the . market value in the country of origin or export; however, where domestic pricing data in that country are not available or do not permit a fair comparison, the calculation shall be based on those production costs accounting for such differences;

(b) differences in quantities: allowances shall be made when the amount of any price differential is wholly or partly due to either:

(i) price discounts for quantity sales which have been made freely available in the normal course of trade over a representative preceding period of time, usually not less than six months, and in respect of a substantial proportion, usually not less than 2 0 % , of the total sales of the product under consideration made on the domestic market or, where applicable, on a third country market; deferred discounts may be recognized if they are based on consistent practice^ in prior periods, or on an undertaking to comply with the conditions required to qualify for the deferred discount, or

(ii) to savings in the cost of producing different quantities. However, when the export price is based on quantities which are less than the smallest quantity sold on the domestic market, or, if applicable, to third countries, then the allowance shall be determined in such a manner as to reflect the higher price for which the smaller market quantity would be sold on the domestic market, or, if applicable, on a third-country market;

(c) differences in conditions and terms of sale: allowances shall be limited to those differences which bear a direct relationship to the sales under consideration and include, for example, differences in credit terms, guarantees, warranties, technical assistance, servicing, commissions or salaries paid to salesmen, packing, transport, insurance, handling, loading and ancillary costs and, in so far as no account has been taken of them otherwise, differences in the level of trade; allowances generally will not be made for differences in overheads and general expenses, including research and development or advertising costs; the amount of these allowances shall normally be determined by

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the cost of such differences to the seller, though consideration may also be given to their effect on the value of the product;

(d) differences in import charges and indirect taxes: an allowance shall be made by reason of the exemption of a product exported to the Community from any import charges or indirect taxes, as defined in the notes to the Annex, b o m e by the like product and by materials physically incorporated therein, when destined for consumption in the country of origin or export, or by reason of the refund of such charges or taxes.

E. ALLOCATION OF COSTS 11. In general, all cost calculations shall be based on available accounting data, normally allocated, where necessary, in proportion to the turnover for each product and market under consideration.

F. LIKE PRODUCT 12. For the purposes of this Regulation, 'like product' means a product which is identical, i.e., alike in all respects, to the product under consideration, or, in the absence of such a product, another product which has characteristics closely resembling those of the product under consideration.

G. DUMPING MARGIN 13. (a) 'Dumping margin' means the amount by which the normal value exceeds the export price. (b) Where prices vary, the dumping margin may be established on a transaction-by-transaction basis or by reference to the most frequently occurring, representative or weighted average prices. (c) Where dumping margins vary, averages may be established.

Article

weighted

3

Subsidies 1. A countervailing duty may be imposed for the purpose of offsetting any subsidy bestowed, directly or indirectly, in the country of origin or export, upon the manufacture, production, export or transport of any product whose release for free circulation in the Community causes injury.

2. Subsidies bestowed on exports include, but are not limited to, the practices listed in the Annex.

EEC-Council Regulation: Dumped or Subsidized Imports 3. The exemption of a product from import charges or indirect taxes, as defined in the notes to the Annex, effectively borne by the like product and by materials physically incorporated therein, when destined for consumption in the country of origin or export, or the refund of such charges or taxes, shall not be considered as a subsidy for the purposes of this Regulation.

4. (a) The amount of the subsidy shall be determined per unit of the subsidized product exported to the Community. (b) In establishing the amount of any subsidy the following elements shall be deducted from the total subsidy: (i) any application fee, or other costs necessarily incurred in order to qualify for, or receive benefit of, the subsidy; (ii) export taxes, duties or other charges levied on the export of the product to the Community specifically intended to offset the subsidy. Where an interested party claims a deduction, it must prove that the claim is justified. (c) Where the subsidy is not granted by reference to the quantities manufactured, produced, exported or transported, the amount shall be determined by allocating the value of the subsidy as appropriate over the level of production or exports of the product concerned during a suitable period. Normally this period shall be the accounting year of the beneficiary. Where the subsidy is based upon the acquisition or future acquisition of fixed assets, the value of the subsidy shall be calculated by spreading the subsidy across a period which reflects the normal depreciation of such assets in the industry concerned. Where the assets are non-depreciating, the subsidy shall be valued as an interest-free loan.

Article

D o c . 34 4

Injury 1. A determination of injury shall be made only if the dumped or subsidized imports are, through the effects of dumping or subsidization, causing injury i.e., causing or threatening to cause material injury to an established Community industry or materially retarding the establishment of such an industry. Injuries caused by other factors, such as volume and prices of imports which are not dumped or subsidized, or contraction in demand, which, individually or in combination, also adversely affect the Community industry must not be attributed to the dumped or subsidized imports.

2. An examination of injury shall involve the following factors, no one or several of which can necessarily give decisive guidance: (a) volume of dumped or subsidized imports, in particular whether there has been a significant increase, either in absolute terms or relative to production or consumption in the Community; (b) the prices of dumped or subsidized imports, in particular whether there has been a significant price undercutting as compared with the price of a like product in the Community; (c) the consequent impact on the industry concerned as indicated by actual or potential trends in the relevant economic factors such as: — production, — utilization of capacity, — stocks, — sales, — market share, — prices (i.e., depression of prices or prevention of price increases which otherwise would have occurred), — profits, — return on investment, — cash flow,

(d) In the case of imports from non-market economy countries and in particular those to which Regulations (EEC) N o 1 7 6 5 / 8 2 and (EEC) N o 1 7 6 6 / 8 2 apply, the amount of any subsidy may be determined in an appropriate and not unreasonable manner, by comparing the export price as calculated in accordance with Article 2 (8) with the normal value as determined in accordance with Article 2 (5). Article 2 (10) shall apply to such a comparison.

(e) Where the amount of subsidization weighted averages may be established.

varies,

— employment.

3. A determination of threat of injury may only be made where a particular situation is likely to develop into actual injury. In this regard account may be taken of factors such as: (a) rate of increase of the dumped or subsidized exports to the Community; (b) export capacity in the country of origin or export, already in existence or which will be operational in the foreseeable future, and the likelihood that the resulting exports will be to the Community; (c) the nature of any subsidy and the trade effects likely to arise therefrom.

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4. The effect of the dumped or subsidized imports shall be assessed in relation to the Community production of the like product when available data permit its separate identification. When the Community production of the like product has no separate identity, the effect of the dumped or subsidized imports shall be assessed in relation to the production of the narrowest group or range of production which includes the like product for which the necessary information can be found.

5. The term 'Community industry' shall be interpreted as referring to the Community producers as a whole of the like product or to those of them whose collective output of the products constitutes a major proportion of the total Community production of those products except that:

4. T h e complaint may be withdrawn, in which case proceedings may be terminated unless such termination would not be in the interest of the Community.

5. Where it becomes apparent after consultation that the complaint does not provide sufficient evidence to justify initiating an investigation, then the complainant shall be so informed. 6. Where, in the absence of any complaint, a State is in possession of sufficient evidence dumping or subsidization and of injury therefrom for a Community industry, immediately communicate such evidence Commission.

— when producers are related to the exporters or importers or are themselves importers of the allegedly dumped or subsidized product the term 'Community industry' may be interpreted as referring to the rest of the producers; — in exceptional circumstances the Community may, for the production in question, be divided into two or more competitive markets and the producers within each market regarded as a Community industry if, (a) the producers within such market sell all or almost all their production of the product in question in that market, and (b) the demand in that market is not to any substantial degree supplied by producers of the product in question located elsewhere in the Community. In such circumstances injury may be found to exist even where a major proportion of the total Community industry is not injured, provided there is a concentration of dumped or subsidized imports into such an isolated market and provided further that the dumped or subsidized imports are causing injury to the producers of all or almost all of the production within such markets.

Article

S

Complaint 1. Any natural or legal person, or any association not having legal personality, acting on behalf of a Community industry which considers itself injured or threatened by dumped or subsidized imports may lodge a written complaint.

2. T h e complaint shall contain sufficient evidence of the existence of dumping or subsidization and the injury resulting therefrom.

Article

Member both of resulting it shall to the

6

Consultations 1. Any consultations provided for in this Regulation shall take place within an Advisory Committee, which shall consist of representatives of each M e m b e r State, with a representative of the Commission as chairman. Consultations shall be held immediately on request by a Member State or on the initiative of the Commission.

2. The Committee shall meet when convened by its chairman. He shall provide the Member States, as promptly as possible, with all relevant information.

3. Where necessary, consultation may be in writing only; in such case the Commission shall notify the Member States and shall specify a period within which they shall be entitled to express their opinions or to request an oral consultation.

4.

Consultation shall in particular cover:

(a) the existence of dumping or of a subsidy and the methods of establishing the dumping margin or the amount of the subsidy; (b) the existence and extent of injury; (c) the causal link between the dumped or subsidized imports and injury; (d) the measures which, in the circumstances, are appropriate to prevent or remedy the injury caused by dumping or the subsidy and the ways and means for putting such measures into effect.

Article

7

Initiation and subsequent investigation 3. T h e complaint may be submitted to the Commission, or a Member State, which shall forward it to the Commission. T h e Commission shall send Member States a copy of any complaint it receives.

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1. Where, after consultation it is apparent that there is sufficient evidence to justify initiating a proceeding the Commission shall immediately:

EEC-Council Regulation: Dumped or Subsidized Imports (a) announce the initiation of a proceeding in the Official Journal of the European Communities; such announcements shall indicate the product and countries concerned, give a summary of the information received, and provide that all relevant information is to be communicated to the Commission; it shall state the period within which interested partie? may make known their views in writing and may apply to be heard orally by the Commission in accordance with paragraph 5;

(b) so advise the exporters and importers known to the Commission to be concerned as well as representatives of the exporting country, and the complainants;

(c) commence the investigation at Community level, acting in cooperation with the Member States; such investigation shall cover both dumping or subsidization and injury resulting therefrom and shall be carried out in accordance with paragraphs 2 to 8; the investigation of dumping or subsidization shall normally cover a period of not less than six months immediately prior to the initiation of the proceeding.

2. (a) The Commission shall seek all information it deems to be necessary and, where it considers it appropriate, examine and verify the records of importers, exporters, traders, agents, producers, trade associations and organizations.

(b) Where necessary the Commission shall carry out investigations in third countries, provided that the firms concerned give their consent and the government of the country in question has been officially notified and raises no objection. The Commission shall be assisted by officials of those Member States who so request.

3. (a) The Commission may request Member States: — to supply information, — to carry out all necessary checks and inspections, particularly amongst importers, traders and Community producers, — to carry out investigations in third countries, provided the firms concerned give their consent and the government of the country in question has been officially notified and raises no objection.

(b) Member States shall take whatever steps are necessary in order to give effect to requests from the Commission. They shall send to the Commission the information requested together with the results of all inspections, checks or investigations carried out. (c) Where this information is of general interest or where its transmission has been requested by a

DoC. 34

Member State, the Commission shall forward it to the Member States, provided it is not confidential, in which case a non-confidential summary shall be forwarded. (d) Officials of the Commission shall be authorized, if the Commission or a Member State so requests, to assist the officials of Member States in carrying out their duties.

4. (a) The complainant and the importers and exporters known to be concerned, as well as the representatives of the exporting country, may inspect all information made available to the Commission by any party to an investigation as distinct from internal documents prepared by the authorities of the Community or its Member States, provided that it is relevant to the defence of their interests and not confidential within the meaning of Article 8 and that it is used by the Commission in the investigation. To this end, they shall address a written request to the Commission indicating the information required.

(b) Exporters and importers of the product subject to investigation and, in the case of subsidization, the representatives of the country of origin, may request to be informed of the essential facts and considerations on the basis of which it is intended to recommend the imposition of definitive duties or the definitive collection of amounts secured by way of a provisional duty.

(c)

(i) requests for information pursuant to (b) shall: (aa) be addressed to the Commission in writing, (bb) specify the particular issues on which information is sought, (cc) be received, in cases where a provisional duty has been applied, not later than one month after publication of the imposition of that duty; (ii) the information may be given either orally or in writing as considered appropriate by the Commission. It shall not prejudice any subsequent decision which may be taken by the Commission or the Council. Confidential information shall be treated in accordance with Article 8; (iii) information shall normally be given no later than 15 days prior to the submission by the Commission of any proposal for final action pursuant to Article 12. Representations made after the information is given shall be taken into consideration only if received within a period to be set by the Commission in each case, which shall be at least 10 days, due consideration being given to the urgency of the matter.

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5. The Commission may hear the interested parties. It shall so hear them if they have, within the period prescribed in the notice published in the Official Journal of the European Communities, made a written request for a hearing showing that they are an interested party likely to be affected by the result of the proceeding and that there are particular reasons why they should be heard orally.

6. Furthermore the Commission shall, on request, give the parties directly concerned an opportunity to meet, so that opposing views may be presented and any rebuttal argument .¿put forward. In providing this opportunity the Commission shall take account of the need to preserve confidentiality and of the convenience of the parties. There shall be no obligation on any party to attend a meeting and failure to do so shall not be prejudicial to that party's case.

(a) This Article shall not preclude the Community authorities from reaching preliminary determinations or from applying provisional measures expeditiously. (b) In cases in which any interested parry or third country refuses access to, or otherwise does not provide, necessary information within a reasonable period, or significantly impedes the investigation, preliminary or final findings, affirmative or negative, may be made on the basis of the facts available.

8. Anti-dumping or countervailing proceedings shall not constitute a bar to customs clearance of the product concerned.

9. (a) An investigation shall be concluded either by its termination or by definitive action. Conclusion should normally take place within one year of the initiation of the proceeding. (b) A proceeding shall be concluded either by the termination of the investigation without the imposition of duties and without the acceptance of undertakings or by the expiry or repeal of such duties or by the termination of undertakings in accordance with Articles 14 or 15.

Article 8 Confidentiality 1. Information received in pursuance of this Regulation shall be used only for the purpose for which it was requested.

2. (a) Neither the Council, nor the Commission, nor Member States, nor the officials of any of these, shall reveal any information received in

548

pursuance of this Regulation for which confidential treatment has been requested by its supplier, without specific permission from the supplier. (b) Each request for confidential treatment shall indicate why the information is confidential and shall be accompanied by a non-confidential summary of the information, or a statement of the reasons why the information is not susceptible of such summary.

3. Information will ordinarily be considered to be confidential if its disclosure is likely to have a significantly adverse effect upon the supplier or the source of such information.

4. However, if it appears that a request for confidentiality is not warranted and if the supplier is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the information in question may be disregarded.

The information may also be disregarded where such request is warranted and where the supplier is unwilling to submit a non-confidential summary, provided that the information is susceptible of such summary.

5. This Article shall not preclude the disclosure of general information by the Community authorities and in particular of the reasons on which decisions taken in pursuance of this Regulation are based, or disclosure of the evidence relied on by the Community authorities in so far as necessary to explain those reasons in court proceedings. Such disclosure must take into account the legitimate interest of the parties concerned that their business secrets should not be divulged.

Article 9 Termination of proceedings where protective measures are unnecessary 1. If it becomes' apparent after consultation that protective measures are unnecessary, then, where no objection is raised within the Advisory Committee referred to in Article 6 (1), the proceeding shall be terminated. In all other cases the Commission shall submit to the Council forthwith a report on the results of the consultation, together with a proposal that the proceeding be terminated. The proceeding shall stand terminated if, within one month, the Council, acting by a qualified majority, has not decided otherwise.

2. The Commission shall inform any representatives of the country of origin or export and the parties known to be concerned and shall announce the termination in the Official Journal of the European Communities setting forth its basic conclusions and a summary of the reasons therefor.

EEC-Council Regulation: Dumped or Subsidized Imports Article

10

Undertakings 1. Where, during the course of an investigation, undertakings are offered which the Commission, after consultation, considers acceptable, the investigation may be terminated without the imposition of provisional or definitive duties.

Save in exceptional circumstances, undertakings may not be offered later than the end of the period during which representations may be made under Article 7 (4) (c) (iii). The termination shall be decided in conformity with the procedure laid down in Article 9 (1) and information shall be given and notice published in accordance with Article 9 (2). Such termination does not preclude the definitive collection of amounts secured by way of provisional duties pursuant to Article 12 (2).

2. The undertakings referred to under paragraph 1 are those under which:

(a) the subsidy is eliminated or limited, or other measures concerning its injurious effects taken, by the government of the country of origin or export; or

(b) prices are revised or exports cease to the extent that the Commission is satisfied that either the dumping margin or the amount of the subsidy, or the injurious effects thereof, are eliminated. In case of subsidization the consent of the country of origin or export shall be obtained.

3. Undertakings may be suggested by the Commission, but the fact that such undertakings are not offered or an invitation to do so is not accepted, shall not prejudice consideration of the case. However, the continuation of dumped or subsidized imports may be taken as evidence that a threat of injury is more likely to be realized.

4. If the undertakings are accepted, the investigation of injury shall nevertheless be completed if the Commission, after consultation, so decides or if request is made, in the case of dumping, by exporters representing a significant percentage of the trade involved or, in the case of subsidization, by the country of origin or export. In such a case, if the Commission, after consultation, makes a determination of no injury, the undertaking shall automatically lapse. However, where a determination of no threat of injury is due mainly to the existence of an undertaking, the Commission may require that the undertaking be maintained.

5. The Commission may require any party from whom an undertaking has been accepted to provide

Doc. 34

periodically information relevant to the fulfilment of such undertakings, and to permit verification of pertinent data. Non-compliance with such requirements shall be construed as a violation of the undertaking.

6. Where an undertaking has been withdrawn or where the Commission has reason to believe that it has been violated and where Community interests call for such intervention, it may, after consultations and after having offered the exporter concerned an opportunity to comment, apply provisional anti-dumping or countervailing duties forthwith on the basis of the facts established before the acceptance of the undertaking.

Article

11

Provisional duties 1. Where preliminary examination shows that dumping or a subsidy exists and that there is sufficient evidence of injury caused thereby and the interests of the Community call for intervention to prevent injury being caused during the proceeding, the Commission, acting at the request of a Member State or on its own initiative, shall impose a provisional anti-dumping or countervailing duty. In such cases, release of the products concerned for free circulation in the Community shall be conditional upon the provision of security for the amount of the provisional duty, definitive collection of which shall be determined by the subsequent decision of the Council under Article 12 (2).

2. The Commission shall take such provisional action after consultation or, in cases of extreme urgency, after informing the Member States. In this latter case, consultations shall take place 10 days at the latest after notification to the Member States of the action taken by the Commission.

3. Where a Member State requests immediate intervention by the Commission, the Commission shall within a maximum of five working days of receipt of the request, decide whether a provisional anti-dumping of countervailing duty should be imposed.

4. The Commission shall forthwith inform the Council and the Member States of any decision taken under this Article. The Council, acting by a qualified majority, may decide differently. A decision by the Commission not to impose a provisional duty shall not preclude the imposition of such duty at a later date, either at the request of a Member State, if new factors arise, or on the initiative of the Commission.

5. Provisional duties shall have a maximum period of validity of four months. However, where exporters

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representing a significant percentage of the trade involved so request or, pursuant to a notice o f intention from the Commission, do not object, provisional anti-dumping duties may be extended for a further period o f two months.

6 . Any proposal for definitive action, or for extension o f provisional measures, shall be submitted to the Council by the Commission not later than one month before expiry o f the period o f validity of provisional duties. T h e Council shall act by a qualified majority.

7. After expiration of the period o f validity of provisional duties, the security shall be released as promptly as possible to the extent that the Council has not decided to collect it definitively.

the country o f origin or export, the name o f the supplier, if practicable, and the reasons on which the Regulation is based. 3 . T h e amount o f such duties shall not exceed the dumping margin provisionally estimated or finally established or the amount of the subsidy provisionally estimated or finally established; it should be less if such lesser duty would be adequate to remove the injury. 4.

(a) Anti-dumping and countervailing duties shall be neither imposed nor increased with retroactive effect. T h e obligation to pay the amount o f these duties is incurred in accordance with Directive 79/623/EEC. (b) However, where the Council determines: (i) for dumped products: —

that there is a history o f dumping which caused injury or that the importer was, or should have been, aware that the exporter practices dumping and that such dumping would cause injury, and

—

that the injury is caused by sporadic dumping i.e., massive dumped imports of a product in a relatively short period, t o such an extent that, in order to preclude it recurring, it appears necessary to impose an anti-dumping duty retroactively on those imports; or

Article 12 Definitive action 1. Where the facts as finally established show that there is dumping or subsidization during the period under investigation and injury caused thereby, and the interests o f the Community call for Community intervention, a definitve anti-dumping or countervailing duty shall be imposed by the Council, acting by qualified majority on a proposal submitted by the Commission after consultation. 2.

(a) Where a provisional duty has been applied, the Council shall decide, irrespective o f whether a definitive anti-dumping or countervailing duty is to be imposed, what proportion o f the provisional duty is to be definitively collected. T h e Council shall act by a qualified majority on a proposal from the Commission. (b) T h e definitive collection o f such amount shall not be decided upon unless the facts as finally established show that there has been dumping or subsidization, and injury. For this purpose, 'injury' shall not include material retardation o f the establishment o f a Community industry, nor threat o f material injury, except where it is found that this would, in the absence o f provisional measures, have developed into material injury.

(ii) for subsidized products: —

in critical circumstances that injury which is difficult to repair is caused by massive imports in a relatively short period o f a product benefiting from export subsidies paid or bestowed inconsistently with the provisions o f the G A T T and of the Agreement on Interpretation and Application of Articles V I , X V I and X X I I I of the G A T T , and

—

that it is necessary, in order to preclude the recurrence of such injury, t o assess countervailing duties retroactively on these imports; or

(iii) for dumped or subsidized products: —

Article 13 General provisions on duties 1. Anti-dumping or countervailing duties, whether provisional or definitive, shall be imposed by Regulation. 2 . Such Regulation shall indicate in particular the amount and type of duty imposed, the product covered,

550

that an undertaking has been violated,

the definitive anti-dumping o r countervailing duties may be imposed on products in relation t o which the obligation to pay import duties under Directive 7 9 / 6 2 3 / E E C has been or would have been incurred not more than 9 0 days prior to the date o f application o f provisional duties, except that in the case of violation o f an undertaking such retroactive assessment shall not apply to imports which were released for free circulation in the Community before the violation.

EEC-Council Regulation: Dumped or Subsidized Imports 5. Where a product is imported into the Community from more than one country, duty shall be levied at an appropriate amount on a non-discriminatory basis on all imports of such product found to be dumped or subsidized and causing injury, other than imports from those sources in respect of which undertakings have been accepted. 6. Where the Community industry has been interpreted as referring to the producers in a certain region, the Commission shall give exporters an opportunity to offer undertakings pursuant to Article 10 in respect of the region concerned. If an adequate undertaking is not given promptly or is not fulfilled, a provisional or definitive duty may be imposed in respect of the Community as a whole.

7. In the absence of any special provisions to the contrary adopted when a definitive or provisional anti-dumping or countervailing duty was imposed, the rules on the common definition of the concept of origin and the relevant common implementing provisions shall apply.

8. Anti-dumping or countervailing duties shall be collected by Member States in the f o r m , at the rate and according to the other criteria laid d o w n when the duties were imposed, and independently of the customs duties, taxes and other charges normally imposed on imports.

9. N o product shall be subject to both anti-dumping and countervailing duties for the purpose of dealing with one and the same situation arising from dumping or from the granting of any subsidy.

Article

14

Doc. 34

measures shall be amended, repealed or annulled by the Community institution competent for their introduction. However, where measures have been taken under the transitional provisions of an Act of Accession the Commission shall itself amend, repeal or annul them and shall report this to the Council; the latter may, acting by a qualified majority, decide that different action be taken.

Article

15

1. Subject to the provisions of paragraph 2, anti-dumping or countervailing duties and undertakings shall lapse after five years from the date on which they entered into force or were last modified or confirmed. 2. The Commission shall normally, after consultation and within six months prior to the end of the five year period, publish in the Official Journal of the European Communities a notice of the impending expiry of the measure in question and inform the Community industry known to be concerned. This notice shall state the period within which interested parties may make known their views in writing and may apply to be heard orally by the Commission in accordance with Article 7 (5). Where an interested party shows that the expiry of the measure would lead again to injury or threat of injury, the Commission shall carry out a review of the measure. T h e measure shall remain in force pending the outcome of this review. Where anti-dumping or countervailing duties and undertakings lapse under this Article the Commission shall publish a notice to that effect in the Official Journal of the European Communities. 3. Existing anti-dumping or countervailing duties and undertakings shall not lapse under this Article before 1 July 1985.

Review 1. Regulations imposing anti-dumping or countervailing duties and decisions t o accept undenakings shall be subject to review, in whole or in part, where warranted. Such review may be held either at the request of a Member State or on the initiative of the Commission. A review shall also be held where an interested party so requests and submits evidence of changed circumstances sufficient to justify the need for such review, provided that at least one year has elapsed since the conclusion of the investigation. Such requests shall be addressed to the Commission which shall inform the Member States.

Article

16

Refund 1. Where an importer can show that the duty collected exceeds the actual dumping margin or the amount of the subsidy, consideration being given to any application of weighted averages, the excess amount shall be reimbursed.

2. Where, after consultation, it becomes apparent that review is warranted, the investigation shall be re-opened in accordance with Article 7, where the circumstances so require. Such re-opening shall not per se affeet the measures in operation.

2. In order to request the reimbursement referred to in paragraph 1, the importer shall submit an application to the Commission. T h e application shall be submitted via the Member State in the territory of which the products were released for free circulation and within three months of the date on which the amount of the definitive duties to be levied was duly determined by the competent authorities or of the date on which a decision was made definitively to collect the amounts secured by way of provisional duty.

3. Where warranted by the review, carried out either with or without re-opening of the investigation, the

T h e Member State shall forward the application to the Commission as soon as possible, either with or without an opinion as to its merits.

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The Commission shall inform the other Member States forthwith and give its opinion on the matter. If the Member States agree with the opinion given by the Commission or do not object to it within one month of being informed, the Commission may decide in accordance with the said opinion. In all other cases, the Commission shall, after consultation, decide whether and to what extent the application should be granted.

provisions thereof which preclude the application of anti-dumping or countervailing duties; 3. special measures, provided that such action does not run counter to obligations under the G A T T . Article

18

Repeal of existing legislation Article

17

Regulation (EEC) N o 3 0 1 7 / 7 9 is hereby repealed.

Final provisions This Regulation shall not preclude the application of:

References to the repealed Regulation shall be construed as references to this Regulation. Article

1. any special rules laid down in agreements concluded between the Community and third countries; 2. the Community Regulations in the agricultural sector and of Regulations (EEC) N o 1 0 5 9 / 6 9 i 1 ) , ( E E C ) N o 2 7 3 0 / 7 5 ( 2 ) , and ( E E C ) N o 2 7 8 3 / 7 5 {*); this Regulation shall operate by way of complement to those Regulations and in derogation from any

19

Entry into force This Regulation shall enter into force on 1 August 1984. It shall apply to proceedings already initiated.

C O U N C I L REGULATION (EEC) No 1761/87 of 22 June 1987 amending Regulation (EEC) N o 2176/84 on protection against dumped or subsidized imports from countries not members of die European Economic Community THE COUNCIL OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Economic Community, and in particular Article 113 thereof, Having regard to the proposal from the Commission ('), Whereas experience gained from the implementation of Regulation (EEC) No 2176/84 ( l ) has shown that assembly in the Community of products whose importation in a finished state is subject to anti-dumping duty may give rise to certain difficulties;

Whereas, in order to prevent circumvention, it is necessary to provide for the collection of an anti-dumping duty on products thus assembled or produced; Whereas it is necessary to lay down the procedures and conditions for the collection of duty in such circumstances ; Whereas the amount of anti-dumping duty collected should be limited to that necessary to prevent circumvention. HAS ADOPTED THIS REGULATION :

Whereas in particular: — where assembly or production is carried out by a party which is related or associated to any of the manufacturers whose exports of the like product are subject to an anti-dumping duty, and — where the value of the parts or materials used in the assembly or production operation and originating in the* country of origin of the product subject to an anti-dumping duty exceeds the value of all other parts or materials used, such assembly or production is considered likely to lead to circumvention of the anti-dumping duty;

( 1 ) OJ No L 141, 12. 6. 1969, p. 1. ( 2 ) OJ No L 281, 1. 11. 1975, p. 20. ( J ) OJ No L 282, 1. 11. 1975, p. 104. (') OJ No C 67, 14. 3. 1987, p. 20. fa OJ No L 201, 30. 7. 1984, p. 1..

552

Article

1

The following paragraph is hereby added to Article 13 of Regulation (EEC) No 2176/84: 4

10 (a) Definitive anti-dumping duties may be imposed, by way of derogation from the second sentence of paragraph 4 (a), on products that are introduced into the commerce of the Community after having been assembled or produced in the Community provided that: — assembly or production is carried out by a party which is related or associated to any of the manufacturers whose exports of the like product are subject to a definitive anti-dumping duty, — the assembly or production operation was started or substantially increased after the opening of the anti-dumping investigation,

Doc. 35

EEC-Council Regulation: Illicit Commercial Practices — the value of parts or materials used in the assembly or production operation and originating in the country of exportation of the product subject to the anti-dumping duty exceeds the value of all other parts or materials used by at least 50 %. In applying this provision, account shall be taken of the circmstances of each case, and, inter alia, of the variable costs incurred in the assembly or production operation and of the research and development carried out and the technology applied within the Community. In that event the Council shall, at the same time, decide that parts or materials suitable for use in the assembly or production of such products and originating in the country of exportation of the product subject to the antidumping duty can only be considered to be in free circulation in so far as they will not be used in an assembly or production operation as specified in the first subparagraph. (b) Products thus assembled or produced shall be declared to the competent authorities before leaving the assembly or production plant for their introduction into the commerce of the Community. For the purposes of levying an

anti-dumping duty, this declaration ihall be considered to be equivalent to the declaration referred to in Article 2 of Directive 79/695/EEC. (c) The rate of the anti-dumping duty shall be that applicable to the manufacturer in the country of origin of the like product subject to an anti-dumping duty to which the party in the Community carrying out the assembly or production is related or associated. The amount of duty collected shall be proportional to that resulting from the application of the rate of the anti-dumping duty applicable to the exporter of the complete product on the cif value of the parts or materials imported; it shall not exceed that required to prevent circumvention of the anti-dumping duty; (d) The provisions of this Regulation concerning investigation, procedure, and undertakings apply to all questions arising under this paragraph. Article

2

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Luxembourg, 22 June 1987.

5. EEC-Council Regulation on the Strengthening of the Common Commercial Policy with regard to Protection against Illicit Commercial Practices (No. 2641/84) September 17, 1984 O . J . E C 1984, N o . L 2 5 2 , 1

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard Parliament ( l ),

Having regard to the Treaty establishing the European E c o n o m i c Community, and in particular Article 113 thereof,

Having regard to the opinion of the E c o n o m i c and Sdcial Committee (2),

Having regard to the rules establishing the - c o m m o n organization of agricultural markets and the rules adopted under Article 235 of the Treaty, applicable to goods processed from agricultural products, and in particular those provisions thereof which allow for derogation from the general principle that any quantitative restriction or measure having equivalent effect may be replaced solely by the measures provided for in those instruments, Having regard to the proposal from the Commission,

to

the

opinion

of

the

European

Whereas the c o m m o n commercial policy must be based on uniform principles, notably with regard to commercial protection ; whereas Council Regulation (EEC) N o 2 1 7 6 / 8 4 of 23 July 1984 on protection against d u m p e d or subsidized imports from countries not members of the European E c o n o m i c C o m m u -

(•) OJ No C 205, 1. 8. 1983, p. 2. fl OJ No C 211, 8. 8. 1983, p. 24.

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nity (') and the rules for imports laid down pursuant to Regulation (EEC) N o 2 8 8 / 8 2 (4), as amended by Regulations (EEC) N o 8 9 9 / 8 3 0 , (EEC) N o 1 7 6 5 / 8 2 ( o r more c o u n t r i e s , r e g a r d l e s s of t h e l e g a l form and f i e l d s of a c t i v i t y of t h e s e e n t i t i e s , which o p e r a t e s under a system of decision-making, p e r m i t t i n g c o h e r e n t p o l i c i e s and a common s t r a t e g y through one or more decision-making c e n t r e s , in which t h e

No f i n a l d e c i s i o n r e g a r d i n g the use and * subheadings appearing in t h e t e x t has y e t been t a k e n .

contents

of

headings

and

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Transnational Enterprises

entities ace so linked, by ovmershlp or otherwise, that one or more of them (may be able to] exercise a significant influence over the activities of others, and, in particular, to share knowledge, resources and responsibilities with the others.] (b) The tern "entitles" in the Code refers to both parent entities - that is, entities which are the main source of influence over others - and other entities, unless otherwise specified in the Code. (c) The term "transnational corporation" in the Code refers to the enterprise as a whole or its various entities. (d) The term "home country" means the country in which the parent entity is located. The term "host country" means a country in which an entity other than the parent entity is located. (e) The term "country in which a transnational corporation operates" refers to a home or host country in which an entity of a transnational corporation conducts operations. 2. [The Code is universally applicable in, and to this end is open to adoption by, all States.] [The Code is universally applicable in [home and host countries of transnational corporations] [as defined In paragraph 1 (a)], and to this end is open to adoption by, all States [regardless of their political and economic systems and their level of development].] [The Code is open to adoption by all States and is applicable in all States where an entity of a transnational corporation conducts operations.] [The Code is universally applicable to all States regardless political and economic systems and their level of development.] 3.

of

their

[This Code applies to all enterprises as defined in paragraph 1 (a) above.] [TO be placed in paragraph 1 (a).]

[4. The provisions of the Code addressed to transnational corporations reflect good practice for all enterprises. They are not intended to Introduce differences of conduct between transnational corporations and domestic enterprises. Wherever the provisions are relevant to both, transnational corporations and domestic enterprises should be subject to the same expectations in regard to their conduct.] [To be deleted]* [5. Any reference in this Code to States, countries or Governments also includes regional groupings of States, to the extent that the provisions of this Code relate to matters within these groupings' own competence, with respect to such competence.] [To be deleted] ACTIVITIES OP TRANSNATIONAL CORPORATIONS A. General and political Respect for national sovereignty and observance of domestic laws, regulations and administrative practices 6. Transnational corporations should/shall respect the national sovereignty of the countries in which they operate an] the right of each State to exercise its [full permanent sovereignty] [in accordance with international law] [in accoradance with agreements reached by the countries concerned on a bilateral and multilateral basis] over its natural resources [wealth and economic activities] within its territory. * On the grounds, inter alia, that the text within the first pair of brackets goes beyond the mandate of the Intergovernmental Working Group on a Code of Conduct.

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7. [Transnational corporations) [Entities of transnational corporations] [shall/should observe] [are subject to] the laws, regulations [jurisdiction] and [administrative paractices] [ e x p l i c i t l y declared administrative practices] of the countries in which they operate. [Entities of transnational corporations are subject to the jurisdiction of the countries in which they operate to the extent required by the national law of these countries.] 8. Transnational corporations should/shall respect the right of each State to regulate and monitor accordingly the a c t i v i t i e s of their entities operating within i t s territory. Adherence to economic goals and development objectives, policies and p r i o r i t i e s 9. Transnational corporations shall/should carry on their activities in conformity with the development policies, objectives and p r i o r i t i e s set out by the Governments of the countries in which they operate and work seriously towards making a positive contribution to the achievement of such goals at the national and, as appropriate, the regional level, within the framework of regional integration programmes. Transnational corporations shall/should co-operate with the Governments of the countries in which they operate with a view to contributing to the development process and shall/should be responsive to requests for consultation in this respect, thereby establishing mutually beneficial relations with these countries. 10. Transnational corporations shall/should carry out their operations in conformity with relevant intergovernmental co-operative arrangements concluded by countries in which they operate. Review and renegotiation of contracts 11. Contracts between Governments and transnational corporations should be negotiated and implemented in good f a i t h . In such contracts, especially long-term ones, review or renegotiation clauses should normally be included. In the absence of such clauses and where there has been a fundamental change of the circumstances on which the contract or agreement was based, transnational corporations, acting in good f a i t h , shall/should co-operate with Governments for the review or renegotiation of such contract or agreement. Review or renegotiation of such contracts or agreements shall/should be subject to [the laws of the host country] [relevant national laws and international legal principles]. Adherence to socio-cultural objectives and values 12. Transnational corporations should/shall respect the social and cultural objectives, values and traditions of the countries in which they operate. While economic and technological development is normally accompanied by social change, transnational corporations should/shall avoid practices, products or services which cause detrimental e f f e c t s on cultural patterns and socio-cultural objectives as determined by Governments. For this purpose, transnational corporations should/shall respond positively to requests for consultations from Governments concerned. Respect for human rights and fundamental freedoms 13. Transnational corporations should/shall respect human rights and fundamental freedoms in the oountries in which they operate. In their social and industrial relations, transnational corporations should/shall not discriminate on the basis of race, colour, sex, religion, language, social, national and ethnic origin or p o l i t i c a l or other opinion. Transnational corporations should/shall conform to government policies designed to extend equality of opportunity and treatment. Non-collaboration southern Africa

by

transnational

corporations

with

racist

minority

régimes

in

14. In accordance with the e f f o r t s of the international community towards the elimination of apartheid in South Africa and i t s continued i l l e g a l occupation of Namibia,

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[(a) Transnational corporations shall progessively reduce their business activities and make no further investment in South Africa and Immediately cease all business activities in Namibia; (b) Transnational corporations shall refrain indirectly with that régime especially with regard Africa and illegal occupation of Namibia to ensure United Nations resolutions in relation to these two

from collaborating directly or to its racist practices in South the successful implementation of countries.)

[Transnational corporations operating in southern Africa (a) Should respect the national laws and regulations adopted in pursuance of Security Council decisions concerning southern Africa» (b) Should within the framework of their business activities engage in appropriate activities with a view to contributing to the elimination of racial discrimination practices under the system of apartheid.1 Non-interference in internal political affairs 15. Transnational corporations should/shall not Interfere [illegally] in the internal [political] affairs of the oountries in which they operate [by resorting to] [They should refrain from any] [subversive and other [illicit]] activities [aimed at] undermining the political and social systems in these countries. 16. Transnational corporations should/shall not engage in activities of a political nature which are not permitted by the laws and established policies and administrative practices of the countries in which they operate. Non-interference in intergovernmental relations 17. Transnational corporations should/shall concerning] intergovernmental relations [, Governments].

not interfere which are the

in [any affairs sole concern of

18. Transnational corporations shall/should not request Governments acting their behalf to take the measures referred to in the second sentence paragraph 65.

on of

19. With respect to the exhaustion of local remedies, transnational corporations should/shall not request Governments to act on their behalf in any manner inconsistent with paragraph 65. Abstention from corrupt practices 20. [Transnational corporations shall refrain, in their transactions, from the offering, promising or giving or any payment, gift or other advantage to or for the benefit of a public official as consideration for performing or refrainingffrarathe performance of his duties in connection with those transactions. Transnational corporations shall maintain accurate records of payments made by them, in connection with their transactions, to any public official or intermediary. They shall make available these records to the competent authorities of the countries in which they operate, upon request, for investigations and proceedings concerning those payments.] [For the purposes of this Code, the principles set out in the International Agreement on Illicit Payments adopted by the United Nations should apply in the area of abstention from corrupt practices.]* B.

economic, financial and social

Ownership and control 21.

Transnational corporations should/shall make every effort so to allocate their

To be included in one of the substantive introductory parts of the Code.

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decision-making powers among their entities as to enable them to contribute to the economic and social development of the countries in which they operate. 22. To the extent permitted by national laws, policies and regulations of the country in which i t operates, each entity of a transnational corporation should/shall co-operate with the other entities, in accordance with the actual distribution of responsibilities among them and consistent with paragraph 21, so as to enable each entity to meet e f f e c t i v e l y the requirements established by the laws, policies and regulations of the country in which i t operates. 23. Transnational corporations shall/should co-operate with Governments and nationals of the oountries in which they operate in the implementation of national objectives for local equity participation and for the e f f e c t i v e exercise of control by local partners as determined by equity, contractual terms in non-equity arrangements or the laws of such countries. 24. Transnational corporations should/shall carry out their personnel policies in accordance with the national policies of each of the countries in which they operate which give priority to the employment and promotion of its (adequately qualified] nationals at a l l levels of management and direction of the a f f a i r s of each entity so as to enhance the e f f e c t i v e participation of its nationals in the decision-making process. 25. Transnational corporations should/shall contribute to the managerial technical training of nationals of the countries in which they operate f a c i l i t a t e their employment at a l l levels of management of the entitles enterprises as a whole.

and and and

Balance of payments and financing b/ 26. Transnational corporations should/shall carry on their operations in conformity with laws and regulations and with f u l l regard to the policy objectives set out by the oountries in which they operate, particularly developing oountries, relating to balance of payments, financial transactions and other issues dealt with in the subsequent paragraphs of this section. 27. Transnational corporations should/shall respond positively to requests for consultation on their a c t i v i t i e s from the Governments of the countries in which they operate, with a view to contributing to the alleviation of pressing problems of balance of payments and finance of such countries. 28. [As required by government regulations and in furtherance of government p o l i c i e s ] [Consistent with the purpose, nature and extent of their operations] transnational corporations should/shall contribute to the promotion of exports and the diversification of exports [and imports] in the countries in which they operate and to an increased utilization of goods, services and other resources which are available in these countries. 29. Transnational corporations should/shall be responsive to requests by Governments of the countries in which they operate, particularly developing countries, concerning the phasing over a limited period of time of the repatriation of capital in case of disinvestment or remittances of accumulated p r o f i t s , when the size and timing of such transfers would cause serious balance-of-payment3 d i f f i c u l t i e s for such countries. 30. Transnational corporations should/shall not, contrary to generally accepted financial practices prevailing in the countries in which they operate, engage in short-term financial operations or transfers or defer or advance foreign exchange payments, including intra-corporate payments, in a manner which would increase currency instability and thereby cause serious balance-of-payments d i f f i c u l t i e s for the countries concerned. 31. Transnational corporations should/shall not Impose restrictions on their entities, beyond generally accepted conmercial practices prevailing in the countries in which they operate, regarding the transfer of goods, services and funds which would cause serious balance-of-payments d i f f i c u l t i e s for the countries in which they operate.

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32. When having recourse to the itoney and capital markets of the countries In which they operate, transnational corporations should/shall riot, beyond generally accepted financial practices prevailing in such countries, engage in activities which would have a significant adverse impact on the working of local markets, particularly by restricting the availability of funds to other enterprises. When issuing shares with the objective of increasing local equity participation in an entity operating in such a country, or engaging in long-term borrowing in the local market, transnational corporations shall/should consult with the Government of the country concerned upon its request on the effects of such transactions on the local money and capital markets. Transfer pricing 33. In respect of their intra-corporate transactions, transnational corporations should/shall not use pricing policies that are not based on relevant market prices, or, in the absence of such prices, the arm's length principle, which have the effect of modifying the tax base on which their entities are assessed or of evading exchange control measures {or customs valuation regulations] (or which [contrary to national laws and regulations] adversely affect economic and social conditions] of the countries in which they operate. Taxation 34. Transnational corporations should/shall not, contrary to the laws and regulations of the countries in which they operate, use their corporate structure and modes of operation, such as the use of intra-corporate pricing which is not based on the arm's length principle, or other means, to modify the tax base on which their entitles are assessed. Competition and restrictive business practices 35. For the purpose of this Code, the relevant provisions of the Set of Multllaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business practices adopted by the General Assembly in its resolution 35/63 of 5 December 1980 shall/should also apply in the field of restrictive business practices, ç/ Transfer of technology 36. [Transnational corporations 3hall conform to the transfer of technology laws and regulations of the countries in which they operate. They shall co-operate with the competent authorities of those countries in assessing the impact of international transfers of technology in their economies and consult with them regarding the various technological options which might help those countries, particularly developing countries, to attain their economic and social development. Transnational corporations In their transfer of technology transactions, including Intra-corporate transactions, shall avoid practices which adversely affect the International flow of technology, or otherwise hinder the economic and technological development of countries, particularly developing countries. Transnational corporations shall contribute to the strengthening of the scientific and technological capacities of developing countries. In accordance with the science and technology policies and priorities of those countries. Transnational corporations shall undertake substantial research and development activities in developing countries and make full use of local resources and personnel in this process.1 [For the purposes of this Code the relevant provisions of the International Code of Conduct on the Transfer of Technology adopted by the General Assembly in its resolution of shall/should apply in the field of transfer of technology.]* Consumer protection 37. Transnational corporations shall/should carry out their operations, in particular production and marketing, in accordance with national laws, regulations. * To be included in one of the substantive introductory parts of the Code.

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administrative practices and policies concerning consumer protection of the countries In which they operate. Transnational corporations shall/should also perform their a c t i v i t i e s with due regard to relevant International standards, so that they do not cause injury to the health or endanger the safety of consumers or bring about variations in the quality of products in each market which would have detrimental e f f e c t s on consumers. 38. Transnational corporations shall/should, in respect of the products and services which they produce or market or propose to produce or market in any country, supply to the competent authorities of that oountry on request or on a regular basis, as specified by these authorities, a l l relevant information concerning: Characteristics of these products or services which may be injurious to the health and safety of consumers including experimental uses and related aspects; Prohibitions, restrictions, warnings and other public regulatory measures imposed in other countries on grounds of health and safety protection on these products or services. 39. Transnational corporations shall/should disclose to the public in the countries in which they operate a l l appropriate information on the contents and, to the extent known, on possible hazardous e f f e c t s of the products they produce or market in the countries concerned by means of proper labelling, informative and accurate advertising or other appropriate methods. Packaging of their products should be safe and the contents of the product should not be misrepresented. 40. Transnational corporations shall/should be responsive to requests from Governments of the countries in which they operate and be prepared to co-operate with International organizations in their e f f o r t s to develop and promote national and international standards for the protection of the health and safety of consumers and to meet the basic needs of oonsumers. environmental protection 41. Transnational corporations shall/should carry out their activities in accordance with national laws, regulations, administrative practices and p o l i c i e s relating to the preservation of the environment of the countries in which they operate and with due regard to relevant international standards. Transnational corporations shall/should, In performing their a c t i v i t i e s , take steps to protect the environment and where damaged to [restore i t to the extent appropriate and f e a s i b l e ] [rehabilitate i t ] and should make e f f o r t s to develop and apply adequate technologies for this purpose. 42. Transnational corporations shall/should, In respect of the products, processes and services they have introduced or propose to introduce in any country, supply to the oompetent authorities of that country on request or on a regular basis, as specified by these authorities, a l l relevant Information concernlngi Characteristics of these products, processes and other activities including experimental uses and related aspects which may harm the environment and the measures and oosts necessary to avoid or at least to mitigate their harmful e f f e c t s * Prohibitions, restrictions, warnings and other public regulatory measures imposed in other countries on grounds of protection of the environment on these products, processes and services. 43. Transnational corporations shall/3hould be responsive to requests Governments of the countries in which they operate and be prepared where

from

appropriate to oo-operate with international organizations in their e f f o r t s to develop and promote national and International standards for the protection of the environment. C.

Disclosure of information

44. Transnational corporations should disclose to the public in the countries in which they operate, by appropriate means of communication, clear, f u l l and

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comprehensible Information on the structure, p o l i c i e s , a c t i v i t i e s and operations of the transnational corporation as a whole. The information should include financial as well as non-financial items and should be made available on a regular annual basis, normally within six months and in any case not later than 12 months from the end of the financial year of the corporation. In addition, during the financial year, transnational corporations should wherever appropriate make available a semi-annual summary of financial information. The financial information to be disclosed annually should be provided where approrpriate on a consolidated basis, together with suitable explanatory notes and should include, inter a l i a , the following: (a)

A balance sheet}

(b)

An income statement, including operating results and salesr

(c)

A statement of allocation of net profits or net income;

(d)

A statement of the sources and uses of funds;

(e)

Significant new long-term capital investment;

(f)

Research and development expenditure.

The non-financial include, inter a l i a :

information

referred

to

in the f i r s t

subparagraph should

(a) The structure of the transnational corporation, showing the name and location of the parent company, i t s main e n t i t i e s , i t s percentage ownership, direct and indirect, in these e n t i t i e s , including shareholdings between them; (b)

The main a c t i v i t y of i t s e n t i t i e s )

(c)

Employment information including average number of employees;

(d) Accounting policies used in compiling and consolidating published; (e)

the Information

Policies applied in respect of transfer pricing.

The information provided for the transnational corporation as a whole should as far as practicable be broken down: By geographical area or country, as appropriate, with regard to the a c t i v i t i e s of its main e n t i t i e s , sales, operating results, significant new investments and number of employees; By major line of business as regards sales and significant new investment. The method of breakdown as well as details of information provided should/shall be determined by the nature, scale and interrelationships of the transnational corporation's operations, with due regard to their significance for the areas or countries concerned. The extent, detail and frequency of the information provided should take into account the nature and size of the transnational corporation as a whole, the requirements of confidentiality and e f f e c t s on the transnational corporation's competitive position as well as the cost involved in producing the information. The information herein required should, as necessary, be in addition to information required by national laws, regulations and administrative practices of the countries in which transnational corporations operate. 45. Transnational corporations should/shall supply to the competent authorities in each of the oountries in which they operate, upon request or on a regular basis as specified by those authorities, and in accordance with national legislation, a l l Information required for l e g i s l a t i v e and administrative purposes relevant to the a c t i v i t i e s and policies of their entities in the country concerned.

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Transnational corporations should/shall, to the extent permitted by the provisions of the relevant national laws, regulations, administrative practices and policies of the countries concerned, supply to competent authorities in the countries in which they operate information held in other countries needed to enable them to obtain a true and fair view of the operations of the transnational corporation concerned as a whole in so far as the information requested relates to the activities of the entities in the countries seeking such information. The provisions of paragraph 51 concerning confidentiality Information supplied under the provisions of this paragraph.

shall apply to

46. With due regard to the relevant provisions of the ILO Tripartite Declaration of Principles ooncerning Multinational Enterprises and Social Policy and in accordance with national laws, regulations and practices in the field of labour relations, transnational corporations should/shall provide to trade unions or other representatives of employees in their entities in each of the countries in which they operate, by appropriate means of communication, the necessary information on the activities dealt with in this code to enable them to obtain a true and fair view of the performance of the local entity and, where appropriate, the corporation as a whole. Such information should/shall include, where provided for by national law and practices, inter alia, prospects or plans for future development having major economic and social effects on the employees concerned. Procedures for consultation on matters of mutual concern should/shall be worked out by mutual agreement between entities of transnational corporations and trade unions or other representatives of employees in accordance with national law and practice. Information made available pursuant to the provisions of this paragraph should be subject to appropriate safeguards for confidentiality so that no damage is caused to the parties concerned. TREATMENT OF TRANSNATIONAL CORPORATIONS A.

General treatment of transnational corporations by the countries Tn which they operate

47. States have the right to regulate the entry and establishment of transnational corporations including determining the role that such corporations may play in economic and social development and prohibiting or limiting the extent of their presence in specific sectors. 48. Transnational corporations should receive [fair and] equitable land non-discriminatory] treatment [under] [in accordance with] the laws, regulations and administrative practices of the countries in which they operate (as well as intergovernmental obligations to which the Governments of these countries have freely subscribed] [consistent with their international obligations] [consistent with international law]. 49. Consistent with [national constitutional systems and] national needs to [protect essential/national economic interests,] maintain public order and to protect national security, [and with due regard to provisions of agreements among countries, particularly developing countries,] entities of transnational corporations should be given by the countries in which they operate [the treatment] [treatment no less favourable than that] [appropriate treatment].* accorded to domestic enterprises under their laws, regulations and administrative practices [when the circumstances in which they operate are similar/identical] [in like situations). [Transnational corporations should not claim preferential treatment or the incentives and concessions granted to domestic enterprises of the countries in which they operate.] [Such treatment should not necessarily include extension to entities of transnational corporations of incentives and concessions granted to domestic enterprises in order to promote self-reliant development or protect essential economic interests.]** In this alternative, the sentence will end here. Some delegations preferred not to have a second sentence.

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[50. Endeavouring to assure the regulations and administrative regulations and other measures publicly and readily available. to the legitimate rights and transnational corporations.]

clarity and s t a b i l i t y of national p o l i c i e s , laws, practices is of acknowledged importance. Laws, affecting transnational corporations should be Changes in them should be made with proper regard interests of a l l concerned parties, including

[To be deleted] 51. Information furnished by transnational corporations to the authorities in each of the countries in which they operate containing [legitimate business secrets] [confidential business information] should be accorded reasonable safeguards normally applicable in the area in which the information is provided, particularly to protect i t s confidentiality. [52. In order to achieve the purposes of paragraph 25 relating to managerial and technical training and employment of nationals of the countries in which transnational corporations operate, the transfer of those nationals between the entities of a transnational corporation should, where consistent with the laws and regulations of the countries concerned, be f a c i l i t a t e d . ] [TO be deleted] 53. Transnational corporations should be able to transfer f r e e l y and without restriction a l l payments relating to their investments such as income from invested capital and the repatriation of this capital when this investment is terminated, and licensing and technical assistance fees and other royalties, without prejudice to the relevant provisions of the 'Balance of payments and financing" section of this Code and, in particular, i t s paragraph 29.] [To be deleted]

a.

Nationalization and compensation

54. [In the exercise of its right to nationalize or expropriate totally or p a r t i a l l y the assets of transnational corporations operating in i t s t e r r i t o r y , the State adopting those measures should pay adequate compensation taking into account i t s own laws and regulations and a l l the circumstances which the State may deem relevant. When the question of compensation gives rise to controversy or should there be a dispute a3 to whether a nationalization or expropriation has taken place, it shall be settled under the domestic law of the nationalizing or expropriating State and by its tribunals.] [In the exercise of their sovereignty. States have the right to nationalize or expropriate foreign-owned property in their t e r r i t o r y . Any such taking of property whether direct or indirect, consistent with international law, must be non-discriminatory, for a public purpose, in accordance with due process of law, and not be in violation of specific undertakings to the contrary by contract or other agreement) and be accompanied by the payment of prompt, adequate and e f f e c t i v e compensation. Such compensation should correspond to the f u l l value of the property interests taken, on the basis of their f a i r market value, including going concern value, or where appropriate other internationally accepted methods of valuation, determined apart from any e f f e c t s on value caused by the expropria to try measure or measures, or the expectation of them. Such compensation payments should be freely convertible and transferable, and should not be subject to any r e s t r i c t i v e measures applicable to transfers of payments, income or c a p i t a l . ] [In the exercise of its sovereignty, a State has the right to nationalize or expropriate totally or p a r t i a l l y the assets of transnational corporations in i t s t e r r i t o r y , and appropriate compensation should be paid by the State adopting such measures, in accordance with i t s own laws and regulations and a l l the circumstances which the State deems relevant. Relevant international obligations freely jndertaken by the States concerned apply.] [A State has the right to nationalize or expropriate the assets of transnational corporations in its territory against compensation, in accordance with i t s own laws and regulations and its international obligations.]

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Jurisdiction

[55.] [Entitles of transnational corporations are subject to the jurisdiction the countries In which they operate.]

of

[An entity of a transnational corporation operating in a given country subject to the jurisdiction of such a country) [in respect of its operations that country]

is in

[To be deleted] 56. [Disputes between a State and an entity of a transnational corporation operating in i t s territory are Subject to the jurisdiction of the courts and other competent authorities of that State unless anlcably settled between the parties.] [Disputes between a State and an entity of a transnational corporation which are not amicably settled between the parties or resolved in accordance with previously agreed dispute settlement procedures, should be submitted to competent courts or other authorities, or to other agreed means of settlement, such as arbitration.1 [Disputes between States and entities of transnational corporations, which are not amicably settled between the parties, shall/should be submitted to competent national courts or authorities in conformity with the principle of paragraph 7. Where the parties so agree, such disputes may be referred to other mutually acceptable dispute settlement procedures.] [57. In contracts in which at least one party is an entity of a transnational corporation the parties should be free to choose the applicable law and the form for settlement of disputes, including arbitration, i t being understood that such a choice may be limited in i t s e f f e c t s by the law of the countries concerned.] [To be deleted] 58. [States should [use moderation and restraint in order to] [seek to] avoid [undue] encroachment an a jurisdiction more [properly appertaining to, or more] appropriately exercisable, by another State.] Where the exercise of jurisdiction over transnational corporations and their entities by more than one State may lead to conflicts of jurisdiction. States concerned should endeavour to adopt mutually acceptable [principles and procedures, bilaterally or multilaterally, for the avoidance or settlement of such c o n f l i c t s , ] [arrangements] on the basis of respect for [their mutual interests] [the principle of sovereign equality and mutual interests.] [To be placed in the section on intergovernmental co-operation.] INTERGOVERNMENTAL OS-OPERATION 59. [ I t is acknowledged] [States agree] that intergovernmental essential in accomplishing the objectives of the Code.

co-operation

is

60. [States agree that] intergovernmental co-operation should be established or strengthened at the International level and, where appropriate, at the b i l a t e r a l , regional and interregional levels [with a view to promoting the contribution of transnational corporations to their developmental goals, particularly those of developing countries, while controlling and eliminating their negative e f f e c t s ] . * 61. States [agree to] [should] exchange information on the measures they have taken to give e f f e c t to the Code and on their experience with the Code. 62. States [agree to] [should] consult on a bilateral or multilateral basi3, as appropriate, on matters relating to the Code and Its application (in particular on conflicting requirements imposed on transnational corporations by the countries in

• I t is agreed that the last bracketed text w i l l be deleted provided that the concept embodied therein is referred to in the section on objectives.

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which they operate and issues of conflicting national jurisdictions] [in particular in relation to conflicting requirements Imposed by parent companies on their entities operating in different countries] and with respect to the development of international agreements and arrangements on issues related to the Code. S3. States [agree to] [should] take into consideration the objectives of the Code as reflected in its provisions when negotiating bilateral or multilateral agreements concerning transnational corporations. 64. States [agree not to use] [3hould not use] transnational corporations as instruments to intervene in the internal or external affairs of other States [and agree to take appropriate action within their jurisdiction to prevent transnational corporations from engaging in activities referred to in paragraph IS to 17 of this Code]. 65. Government action on behalf of a transnational corporation operating in another country should/shall be subject to the principle of exhaustion of local remedies provided in such a country and, when agreed among the Governments concerned, to procedures for dealing with international legal claims. Such action should not in any event amount to the use of any type of coercive measures not consistent with the Charter of the United Nations and the Declaration on Principles of International Law concerning Friendly Relations and Co-operation among States in accordance with the Charter of the Onlted Nations. IMPLEMENTATION OP THE OODE OP CONDUCT A.

Action at the national level

66. In order to ensure and promote the Implementation of the Code at the national level. States shall/should, inter allai (a)

Publicize and disseminate the Codei

(b)

Pollow the implementation of the Code within their territories)

(c) Report to the United Nations Commission on Transnational Corporations on the action taken at the national level to promote the Code and on the experience gained from its implementation; (d) Take actions to reflect their support for the Code and take into account the objectives of the Code as reflected in its provisions when Introducing, implementing and reviewing laws, regulations and administrative practices on matters dealt with in the Code. B.

International institutional machinery

67. The United Nations Commission on Transnational Corporations shall assuaa the functions of the international institutional machinery for the Implementation of the Code. In this capacity, the Commission shall be open to the participation of all States having accepted the Code. [It may establish the subsidiary bodies and specific procedures it deems necessary for the effective discharge of its functions.] The United Nations Centre on Transnational Corporations shall act aa the secretariat to the Commission. 68. The Comaission shall act as the focal international body within the United Nations system for all matters related to the Code. It shall establish and maintain close oontacts with other United Nations organizations and specialized agencies dealing with matters related to the Code and its implementation with a view to oo-ordinating work related to the Code. When matters covered by international agreements or arrangements, specifically referred to in the Code, which have been worked out in other United Nations forums, arise, the Commission shall forward such matters to the competent bodies concerned with such agreements or arrangements. 69.

The Commission shall have the following functions:

(a) To discuss at its annual sessions matters related to the Code. If agreed by the Governments engaged in consultations on specific Issues related to the Code, the Commission shall facilitate such intergovernmental consultations to the extent

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possible. [Representatives of trade unions, business, consumer and other relevant groups nay express their views on natters related to the Code through the non-governmental organizations represented in the Commission. ] (b) Periodically to assess the Implementation of the Code, such assessments being based on reports submitted by Governments and, as appropriate, on documentation from United Nations organizations and specialized agencies performing work relevant to the Code and non-governmental organizations represented in the Commission. The first assessment shall take place not earlier than two years and not later than three years after the adoption of the Code. The second assessment shall take place two years after the first one. The Commission shall determine whether a periodicity of two years is to be maintained or modified for subsequent assessments. The format of assessments shall be determined by the Commission. [(c) To provide [, upon the request of a Government, 1 clarification of the provisions of the Code in the light of actual situations in which the applicability and Implications of the Code have been the subject of intergovernmental consultations. In clarifying the provisions of the Code, the Commission shall not draw oonclusions concerning the oonduct of the parties involved in the situation which led to the request for clarification. The clarification is to be restricted to issues illustrated by such a situation. The detailed procedures regarding clarification are to be determined by the Commission.] [To be deleted.] (d) To report annually to the General Assembly (through the Economic and Social Council] on its activities regarding the implementation of the Code. (e) To facilitate Intergovernmental arrangements or agreements on specific aspects relating to transnational corporations upon request of the Governments concerned. 70. The United Nations Centre on Transnational Corporations shall provide assistance relating to the implementation of the Code, inter alia, by collecting, analysing and disseminating information and oonducting research and surveys, as required and specified by the Commission. C.

Review procedure

71. The Commission shall make recommendations to the General Assembly [through the Economic and Social Council] for the purpose of reviewing the Code. The first review shall take place not later than six years after the adoption of the Code. The General Assembly shall establish, as appropriate, the modalities for reviewing the Code.* Notes a/ Bowever, Code and parts of

No drafting wa3 done on the Preamble and Objectives of the Code. the following text was drafted during the discussion on other parts of the the decision was taken to place it In one of the substantive introductory the Code:

"For the purposes of this Code, the principles set out in the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, adopted by the Governing Body of the International Labour Office, should apply in the field of employment, training, conditions of work and life and industrial relations." (No decision has yet been taken on the exact location of this paragraph.) b/ Some delegations accepted paragraphs 26, 30, 31 and 32 on balance of payments and financing on an ad referendum basi3. c/

The placement of this paragraph has not yet been decided.

» Further discussion of this provision will take place after related issues, such as the mode of adoption and the legal nature of the code, have been settled.

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NON-COLLABORATION BY TRANSNATIONAL CORPORATIONS WITH RACIST MINORITY REGIMES IN SOUTHERN AFRICA a/ 14. In accordance with the efforts of the International community towards the elimination of apartheid In South Africa and Its Illegal occupation of Namibia, (a) Transnational corporations shall/should refrain from operations and activities supporting and sustaining the racist minority régime of South Africa in maintaining the system of apartheid and the Illegal occupation of Namibia» (b) Transnational corporations shall/should engage in appropriate activities within their competence with a view to eliminating racial discrimination and all other aspects of the system of apartheid; (c) Transnational corporations shall/should comply strictly with obligations resulting from Security Council decisions and shall/should fully respect those resulting from all relevant United Nations resolutions; (d) With regard to investment in Namibia, transnational corporations shall/should comply strictly with obligations resulting from Security Council resolution 283 (1970) and other relevant Security Council decisions and shall/should fully respect those resulting from all relevant United Nations resolutions. Notes »/ The text of paragraph 14 was agreed ad referendum in the working group on paragraph 14, but no final decision thereon was taken by the Commission.

3. ILO-Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy November 16, 1977 17 I . L . M . (1978) 422 The Governing B o d y of the International L a b o u r Office; Recalling that the International L a b o u r Organisation for many years has been involved with certain social issues related to the activities of multinational enterprises; N o t i n g in particular that various Industrial Committees, Regional Conferences, and the International L a b o u r Conference since the mid-1960s have requested appropriate action by the Governing B o d y in the field of multinational enterprises and social policy; Having been informed of the activities of other international bodies, in particular the U N C o m m i s s i o n on Transnational Corporations and the Organisation for E c o n o m i c Co-operation and Development ( O E C D ) ; Considering that the I L O , with its unique tripartite structure, its competence, and its longstanding experience in the social field, has an essential role to play in evolving principles for the guidance of governments, workers' and employers' organisations, and multinational enterprises themselves; Recalling that it convened a Tripartite Meeting of Experts on the Relationship between Multinational Enterprises and Social Policy in 1972, which recommended an I L O programme of research and study, and a Tripartite Advisory Meeting on the Relationship 578

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of Multinational Enterprises and Social Policy in 1976 for the purpose of reviewing the I L O programme of research and suggesting appropriate I L O action in the social and labour field; Bearing in mind the deliberations of the World Employment Conference; Having thereafter decided to establish a tripartite group to prepare a Draft Tripartite Declaration of Principles covering all of the areas of I L O concern which relate to the social aspects of the activities of multinational enterprises, including employment creation in the developing countries, all the while bearing in mind the recommendations made by the Tripartite Advisory Meeting held in 1976; Having also decided to reconvene the Tripartite Advisory Meeting to consider the Draft Declaration of Principles as prepared by the tripartite group; Having considered the Report and the Draft Declaration of Principles submitted to it by the reconvened Tripartite Advisory Meeting; Hereby approves the following Declaration which may be cited as the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, adopted by the Governing Body of the International Labour Office, and invites governments of States Members of the I L O , the employers' and workers' organisations concerned and the multinational enterprises operating in their territories to observe the principles embodied therein. 1. Multinational enterprises play an important part in the economies of most countries and in international economic relations. This is of increasing interest to governments as well as to employers and workers and their respective organisations. Through international direct investment and other means such enterprises can bring substantial benefits to home and host countries by contributing to the more efficient utilisation of capital, technology and labour. Within the framework of development policies established by governments, they can also make an important contribution to the promotion of economic and social welfare; to the improvement of living standards and the satisfaction of basic needs; to the creation of employment opportunities, both directly and indirectly; and to the enjoyment of basic human rights, including freedom of association, throughout the world. O n the other hand, the advances made by multinational enterprises in organising their operations beyond the national framework may lead to abuse of concentrations of economic power and to conflicts with national policy objectives and with the interest of the workers. In addition, the complexity of multinational enterprises and the difficulty of clearly perceiving their diverse structures, operations and policies sometimes give rise to concern either in the home or in the host countries, or in both. 2. The aim of this Tripartite Declaration of Principles is to encourage the positive contribution which multinational enterprises can make to economic and social progress and to minimise and resolve the difficulties to which their various operations may give rise, taking into account the United Nations resolutions advocating the Establishment of a N e w International Economic Order. 3. This aim will be furthered by appropriate laws and policies, measures and actions adopted by the governments and by co-operation among the governments and the employers' and workers' organisations of all countries. 4. The principles set out in this Declaration are commended to the governments, the employers' and workers' organisations of home and host countries and to the multinational enterprises themselves. 5. These principles are intended to guide the governments, the employers' and workers' organisations and the multinational enterprises in taking such measures and actions and adopting such social policies, including those based on the principles laid down in the Constitution and the relevant Conventions and Recommendations of the I L O , as would further social progress. 579

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6. T o serve its purpose this Declaration does not require a precise legal definition of multinational enterprises; this paragraph is designed to facilitate the understanding of the Declaration and not to provide such a definition. Multinational enterprises include enterprises, whether they are of public, mixed or private ownership, which own or control production, distribution, services or other facilities outside the country in which they are based. The degree of autonomy of entities within multinational enterprises in relation to each other varies widely from one such enterprise to another, depending on the nature of the links between such entities and their fields of activity and having regard to the great diversity in the form of ownership, in the size, in the nature and location of the operations of the enterprises concerned. Unless otherwise specified, the term "multinational enterprise" is used in this Declaration to designate the various entities (parent companies or local entities or both or the organisation as a whole) according to the distribution of responsibilities among them, in the expectation that they will cooperate and provide assistance to one another as necessary to facilitate observance of the principles laid down in the Declaration. 7. This Declaration sets out principles in the fields of employment, training, conditions of work and life and industrial relations which governments, employers' and workers' organisations and multinational enterprises are recommended to observe on a voluntary basis; its provisions shall not limit or otherwise affect obligations arising out of ratification of any I L O Convention.

General Policies 8. All the parties concerned by this Declaration should respect the sovereign rights of State, obey the national laws and regulations, give due consideration to local practices and respect relevant international standards. They should respect the Universal Declaration of H u m a n Rights and the corresponding International Covenants adopted by the General Assembly of the United Nations as well as the Constitution of the International Labour Organisation and its principles according to which freedom of expression and association are essential to sustained progress. They should also honour commitments which they have freely entered into, in conformity with the national law and accepted international obligations. 9. Governments which have not yet ratified Conventions N o s . 87, 98, 111 and 122 are urged to do so and in any event to apply, to the greatest extent possible, through their national policies, the principles embodied therein and in Recommendations N o s . I l l , 119 and 122'. Without prejudice to the obligation of governments to ensure compliance with Conventions they have ratified, in countries in which the Conventions and Recommendations cited in this paragraph are not complied with, all parties should refer to them for guidance in their social policy. 10. Multinational enterprises should take fully into account established general policy objectives of the countries in which they operate. Their activities should be in harmony with the development priorities and social aims and structure of the country in which 1

Convention (No. 87) concerning Freedom of Association and Protection of the Right to Organise; Convention (No. 98) concerning the Application of the Principles of the Right to Organise and to Bargain Collectively; Convention (No. I l l ) concerning Discrimination in Respect of Employment and Occupation; Convention (No. 122) concerning Employment Policy; Recommendation (No. I l l ) concerning Discrimination in Respect of Employment and Occupation; Recommendation (No. 119) concerning Termination of Employment at the Initiative of the Employer; Recommendation (No. 122) concerning Employment Policy.

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they operate. To this effect, consultations should be held between multinational enterprises, the government and, wherever appropriate, the national employers' and workers' organisations concerned. 11. The principles laid down in this Declaration do not aim at introducing or maintaining inequalities of treatment between multinational and national enterprises. They reflect good practice for all. Multinational and national enterprises, wherever the principles of this Declaration are relevant to both, should be subject to the same expactations in respect of their conduct in general and their social practices in particular. 12. Governments of home countries should promote good social practice in accordance with this Declaration of Principles, having regard to the social and labour law, regulations and practices in host countries as well as to relevant international standards. Both host and home country governments should be prepared to have consultations with each other, whenever the need arises, on the initiative of either. Employment Employment promotion 13. With a view to stimulating economic growth and development, raising living standards, meeting manpower requirements and overcoming unemployment and underemployment, governments should declare and pursue, as a major goal, an active policy designed to promote full, productive and freely-chosen employment 2 . 14. This is particularly important in the case of host country governments in developing areas of the world where the problems of unemployment and underemployment are at their most serious. In this connection, the general conclusions adopted by the Tripartite World Conference on Employment, Income Distribution and Social Progress and the International Division of Labour (Geneva, June 1976) should be kept in mind 3 . 15. Paragraphs 13 and 14 above establish the framework within which due attention should be paid, in both home and host countries, to the employment impact of multinational enterprises. 16. Multinational enterprises, particularly when operating in developing countries, should endeavour to increase employment opportunities and standards, taking into account the employment policies and objectives of the governments, as well as security of employment and the long-term development of the enterprise. 17. Before starting operations, multinational enterprises should wherever appropriate, consult the competent authorities and the national employers' and workers' organisations in order to keep their manpower plans, as far as practicable, in harmony with national social development policies. Such consultation, as in the case of national enterprises, should continue between the multinational enterprises and all parties concerned, including the workers' organisations. 18. Multinational enterprises should give priority to the employment, occupational development, promotion and advancement of nationals of the host country at all levels in co-operation, as appropriate, with representatives of the workers employed by them or of the organisations of these workers and governmental authorities. 19. Multinational enterprises, when investing in developing countries, should have regard to the importance of using technologies which generate employment, both directly and indirectly. To the extent permitted by the nature of the process and the 2 3

Convention (No. 122) and Recommendation (No. 122) concerning Employment Policy. ILO, World Employment Conference, Geneva 4 - 1 7 June 1976.

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conditions prevailing in the economic sector concerned, they should adapt technologies to the needs and characteristics of the host countries. They should also, where possible, take part in the development of appropriate technology in host countries. 20. To promote employment in developing countries, in the context of an expanding world economy, multinational enterprises, wherever practicable, should give consideration to the conclusion of contracts with national enterprises for the manufacture of parts and equipment, to the use of local raw materials and to the progressive promotion of the local processing of raw materials. Such arrangements should not be used by multinational enterprises to avoid the responsibilities embodied in the principles of this Declaration. Equality of opportunity and treatment 21. All governments should pursue policies designed to promote equality of opportunity and treatment in employment, with a view to eliminating any discrimination based on race, colour, sex, religion, political opinion, national extraction or social origin4. 22. Multinational enterprises should be guided by this general principle throughout their operations without prejudice to the measures envisaged in paragraph 18 or to government policies designed to correct historical patterns of discrimination and thereby to extend equality of opportunity and treatment in employment. Multinational enterprises should accordingly make qualifications, skill and experience the basis for the recruitment, placement, training and advancement of their staff at all levels. 23. Governments should never require or encourage multinational enterprises to discriminate on any of the grounds mentioned in paragraph 21, and continuing guidance from governments, where appropriate, on the avoidance of such discrimination in employment is encouraged. Security of employment 24. Governments should carefully study the impact of multinational enterprises on employment in different industrial sectors. Governments, as well as multinational enterprises themselves, in all countries should take suitable measures to deal with the employment and labour market impacts of the operations of multinational enterprises. 25. Multinational enterprises equally with national enterprises, through active manpower planning, should endeavour to provide stable employment for their employees and should observe freely-negotiated obligations concerning employment stability and social security. In view of the flexibility which multinational enterprises may have, they should strive to assume a leading role in promoting security of employment, particularly in countries where the discontinuation of operations is likely to accentuate long-term unemployment. 26. In considering changes in operations (including those resulting from mergers, take-overs or transfers of production) which would have major employment effects, multinational enterprises should provide reasonable notice of such changes to the appropriate government authorities and representatives of the workers in their employment and their organisations so that the implications may be examined jointly in order to mitigate adverse effects to the greatest possible extent. This is particularly important in the case of the closure of an entity involving collective lay-offs or dismissals.

4

Convention (No. I l l ) and Recommendation (No. I l l ) concerning Discrimination in Respect of Employment and Occupation; Convention (No. 100) and Recommendation (No. 90) concerning Equal Remuneration for Men and Women Workers for Work of Equal Value.

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27. Arbitrary dismissal procedures should be avoided 5 . 28. Governments, in co-operation with multinational as well as national enterprises, should provide some form of income protection for workers whose employment has been terminated 5 . Training 29. Governments, in co-operation with all the parties concerned, should develop national policies for vocational training and guidance, closely linked with employment 6 . This is the framework within which multinational enterprises should pursue their training policies. 30. In their operations, multinational enterprises should ensure that relevant training is provided for all levels of their employees in the host country, as appropriate, to meet the needs of the enterprise as well as the development policies of the country. Such training should, to the extent possible, develop generally useful skills and promote career opportunities. This responsibility should be carried out, where appropriate, in cooperation with the authorities of the country, employers' and workers' organisations and the competent local, national or international institutions. 31. Multinational enterprises operating in developing countries should participate, along with national enterprises, in programmes, including special funds, encouraged by host governments and supported by employers' and workers' organisations. These programmes should have the aim of encouraging skill formation and development as well as providing vocational guidance, and should be jointly administered by the parties which support them. Wherever practicable, multinational enterprises should make the services of skilled resource personnel available to help in training programmes organised by governments as part of a contribution to national development. 32. Multinational enterprises, with the co-operation of governments and to the extent consistent with the efficient operation of the enterprise, should afford opportunities within the enterprise as a whole to broaden the experience of local management in suitable fields such as industrial relations.

Conditions of Work and Life Wages, benefits and conditions of work 33. Wages, benefits and conditions of work offered by multinational enterprises should be not less favourable to the workers than those offered by comparable employers in the country concerned. 34. When multinational enterprises operate in developing countries, where comparable employers may not exist, they should provide the best possible wages, benefits and conditions of work, within the framework of government policies 7 . These should be related to the economic position of the enterprise, but should be at least adequate to satisfy basic needs of the workers and their families. Where they provide workers with

5

6

7

Recommendation ( N o . 119) concerning Termination of Employment at the Initiative of the Employer. Convention ( N o . 142) and Recommendation ( N o . 150) concerning Vocational Guidance and Vocational Training in the Development of H u m a n Resources. Recommendation ( N o . 116) concerning Reduction of H o u r s of Work.

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basic amenities such as housing, medical care or food, these amenities should be of a good standard8. 35. Governments, especially in developing countries, should endeavour to adopt suitable measures to ensure that lower income groups and less developed areas benefit as much as possible from the activities of multinational enterprises. Safety and health 36. Governments should ensure than both multinational and national enterprises provide adequate safety and health standards for their employees. Those governments which have not yet ratified the I L O Conventions on Guarding of Machinery (No. 119), Ionising Radiation (No. 115), Benzene (No. 136) and Occupational Cancer (No. 139) are urged nevertheless to apply to the greatest extent possible the principles embodied in these Conventions and in their related Recommendations (Nos 118, 114, 144 and 147). The Codes of Practice and Guides in the current list of I L O publications on Occupational Safety and Health should also be taken into account 9 . 37. Multinational enterprises should maintain the highest standards of safety and health, in conformity with national requirements, bearing in mind their relevant experience within the enterprise as a whole, including any knowledge of special hazards. They should also make available to the representatives of the workers in the enterprise, and upon request, to the competent authorities and the workers' and employers' organisations in all countries in which they operate, information on the safety and health standards relevant to their local operations, which they observe in other countries. In particular, they should make known to those concerned any special hazards and related protective measures associated with new products and processes. They, like comparable domestic enterprises, should be expected to play a leading role in the examination of causes of industrial safety and health hazards and in the application of resulting improvements within the enterprise as a whole.. 38. Multinational enterprises should co-operate in the work of international organisations concerned with the preparation and adoption of international safety and health standards. 39. In accordance with national practice, multinational enterprises should co-operate fully with the competent safety and health authorities, the representatives of the workers and their organisations, and established safety and health organisations. Where appropriate, matters relating to safety and health should be incorporated in agreements with the representatives of the workers and their organisations.

Industrial Relations 40. Multinational enterprises should observe standards of industrial relations not less favourable than those observed by comparable employers in the country concerned.

8

9

Convention (No. 110) and Recommendation (No. 110) concerning Conditions of Employment of Plantation Workers; Recommendation (No. 115) concerning Workers' Housing: Recommendation (No. 69) concerning Medical Care; Convention (No. 130) and Recommendation (No. 134) concerning Medical Care and Sickness. The I L O Conventions and Recommendations referred to are listed in "Publications on Occupational Safety and Health", ILO, Geneva 1976, pp. 1-3.

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Freedom of association and the right to organise 41. Workers employed by multinational enterprises as well as those employed by national enterprises should, without distinction whatsoever, have the right to establish and, subject only to the ruless of the organisation concerned, to join organisations of their own choosing without previous authorisation 10 . They should also enjoy adequate protection against acts of anti-union discrimination in respect of their employment 11 . 42. Organisations representing multinational enterprises or the workers in their employment should enjoy adequate protection against any acts of interference by each other or each other's agents or members in their establishment, functioning or administration 12 . 43. Where appropriate in the local circumstances, multinational enterprises should support representative employers' organisations. 44. Governments, where they do not already do so, are urged to apply the principles of Convention N o . 87, Article 5, in view of the importance, in relation to multinational enterprises, of permitting organisations representing such enterprises or the workers in their employment to affiliate with international organisations of employers and workers of their own choosing. 45. Where governments of host countries offer special incentives to attract foreign investment, these incentives should not include any limitation of the workers' freedom of association or the right to organise and bargain collectively. 46. Representatives of the workers in multinational enterprises should not be hindered from meeting for consultation and exchange of view among themselves, provided that the functioning of the operations of the enterprise and the normal procedures which govern relationships with representatives of the workers and their organisations are not thereby prejudiced. 47. Governments should not restrict the entry of representatives of employers' and workers' organisations who come from other countries at the invitation of the local or national organisations concerned for the purpose of consultation on matters of mutual concern, solely on the grounds that they seek entry in that capacity. Collective bargaining 48. Workers employed by multinational enterprises should have the right, in accordance with national law and practice, to have representative organisations of their own choosing recognised for the purpose of collective bargaining. 49. Measures appropriate to national conditions should be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers' organisations and workers' organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements 13 . 50. Multinational enterprises, as well as national enterprises, should provide workers' representatives with such facilities as may be necessary to assist in the development of effective collective agreements 14 .

10 11 12 13 14

Convention N o . 87, Article 2. Convention N o . 98, Article 1 (1). Convention N o . 98, Article 2 (1). Convention N o . 98, Article 4. Convention ( N o . 135) concerning protection and facilities to be afforded to workers' representatives in the undertaking.

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51. Multinational enterprises should enable duly authorised representatives of the workers in their employment in each of the countries in which they operate to conduct negotiations with representatives of management who are authorised to take decisions on the matters under negotiation. 52. Multinational enterprises, in the context of bona fide negotiations with the workers' representatives on conditions of employment, or while workers are exercising the right to organise, should not threaten to utilise a capacity to transfer the whole or part of an operating unit from the country concerned in order to influence unfairly those negotiations or to hinder the exercise of the right to organise; nor should they transfer workers from affiliates in foreign countries with a view to undermining bona fide negotiations with the workers' representatives or the workers' exercise of their right to organise. 53. Collective agreements should include provisions for the settlement of disputes arising over their interpretation and application and for ensuring mutually respected rights and responsibilities. 54. Multinational enterprises should provide workers' representatives with information required for meaningful negotiations with the entity involved and, where this accords with local law and practices, should also provide information to enable them to obtain a true and fair view of the performance of the entity or, where appropriate, of the enterprise as a whole 15 . 55. Governments should supply to the representatives of workers' organisations on request, where law and practice so permit, information on the industries in which the enterprise operates, which would help in laying down objective criteria in the collective bargaining process. In this context, multinational as well as national enterprises should respond constructively to requests by governments for relevant information on their operations.

Consultation 56. In multinational as well as in national enterprises, systems devised by mutual agreement between employers and workers and their representatives should provide, in accordance with national law and practice, for regular consultation on matters of mutual concern. Such consultation should not be a substitute for collective bargaining 16 .

Examination of grievances 57. Multinational as well as national enterprises should respect the right of the workers whom they employ to have all their grievances processed in a manner consistent with the following provision: any worker who, acting individually or jointly with other workers, considers that he has grounds for a grievance should have the right to submit such grievance without suffering any prejudice whatsoever as a result, and to have such grievance examined pursuant to an appropriate procedure 1 7 . This is particularly important whenever the multinational enterprises operate in countries which do not abide by the

15

16

17

Recommendation ( N o . 129) concerning Communications between Management and Workers within Undertakings. Recommendation ( N o . 94) concerning Consultation and Co-operation between Employers and Workers at the Level of the Undertaking; Recommendation ( N o . 129) concerning Communications within the Undertaking. Recommendation ( N o . 130) concerning the Examination of Grievances within the Undertaking with a View to their Settlement.

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principles of I L O Conventions pertaining to freedom of association, to the right to organise and bargain collectively and to forced labour 18 .

Settlement of industrial disputes 58. Multinational as well as national enterprises jointly with the representatives and organisations of the workers whom they employ should seek to establish voluntary conciliation machinery, appropriate to national conditions, which may include provisions for voluntary arbitration, to assist in the prevention and settlement of industrial disputes between employers and workers. The voluntary conciliation machinery should include equal representation of employers and workers 19 . Geneva, 16 November 1977

ANNEX List of international labour Conventions and Recommendations referred to in the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy

Conventions Convention (No. 29) concerning Forced or Compulsory Labour, 1930. Convention (No. 87) concerning Freedom of Association and Protection of the Right to Organise, 1948. Convention (No. 98) concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, 1949. Convention (No. 100) concerning Equal Remuneration for Men and Women Workers for Work of Equal Value, 1951. Convention (No. 105) concerning the Abolition of Forced Labour, 1957. Convention (No. 110) concerning Conditions of Employment of Plantation Workers, 1958. Convention (No. I l l ) concerning Discrimination in Respect of Employment and Occupation, 1958. Convention (No. 115) concerning the Protection of Workers against Ionising Radiations, 1960. Convention (No. 119) concerning the Guarding of Machinery, 1963. Convention (No. 122) concerning Employment Policy, 1964. Convention (No. 130) concerning Medical Care and Sickness Benefits, 1969. Convention (No. 135) concerning Protection and Facilities to be Afforded to Workers' Representatives in the Undertaking, 1971. Convention (No. 136) concerning Protection against Hazards of Poisoning arising from Benzene, 1971.

Convention ( N o . 29) concerning Forced or Compulsory Labour; Convention ( N o . 105) concerning the Abolition of Forced Labour; Recommendation ( N o . 35) concerning Indirect Compulsion to Labour. Recommendation ( N o . 92) concerning Voluntary Conciliation and Arbitration.

587

D o c . 38

Transnational Enterprises

Convention (No. 139) concerning Prevention and Control of Occupational Hazards caused by Carcinogenic Substances and Agents, 1974. Convention (No. 142) concerning Vocational Guidance and Vocational Training in the Development of Human Resources, 1975. Recommendations Recommendation (No. 35) concerning Indirect Compulsion to Labour, 1930. Recommendation (No. 69) concerning Medical Care, 1944. Recommendation (No. 90) concerning Equal Remuneration for Men and Woman Workers for Work of Equal Value, 1951. Recommendation (No. 92) concerning Voluntary Conciliation and Arbitration, 1951. Recommendation (No. 94) concerning Consultation and Co-operation between Employers and Workers at the Level of the Undertaking, 1952. Recommendation (No. 110) concerning Conditions of Employment of Plantation Workers, 1958. Recommendation (No. I l l ) concerning Discrimination in Respect of Employment and Occupation, 1958. Recommendation (No. 114) concerning the Protection of Workers against Ionising Radiations, 1960. Recommendation (No. 115) concerning Workers' Housing, 1961. Recommendation (No. 116) concerning Reduction of Hours of Work, 1962. Recommendation (No. 118) concerning the Guarding of Machinery, 1963. Recommendation (No. 119) concerning Termination of Employment at the Initiative of the Employer, 1963. Recommendation (No. 122) concerning Employment Policy, 1964. Recommendation (No. 129) concerning Communications between Management and Workers within the Undertaking, 1967. Recommendation (No. 130) concerning the Examination of Grievances Within the Undertaking with a View to their Settlement, 1967. Recommendation (No. 134) concerning Medical Care and Sickness Benefits, 1969. Recommendation (No. 144) concerning Protection against Hazards of Poisoning arising from Benzene, 1971. Recommendation (No. 147) concerning Prevention and Control of Occupational Hazards caused by Carcinogenic Substances and Agents, 1974. Recommendation (No. 150) concerning Vocational Guidance and Vocational Training in the Development of Human Resources, 1975.

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ICC-Guidelines

4. ICC-Guidelines for International Investments November 29, 1972 ICC Paris, Publ. No. 272 (1973)

I. Investment Policies 1. The Investor

#

а) Should ensure in consultation with the competent authorities that the investment fits satisfactorily into the economic and social development plans and priorities of the host country. б) Should be prepared in any negotiations with the government of the host country to make known his expectations concerning the expansion of the enterprise, employment and marketing prospects and the financing of its operations. c) Should in appropriate cases, where the government of the host country so wishes, be prepared to enter into contractual arrangements with that government. d) Should, in response to the interest shown by the public of the host country in his activities, take steps to provide relevant information about the operations of the enterprise, subject to any exclusions necessary for competitive reasons.

2. The Government

of the Investor's

Country

a) Should, in the formulation or modification of policies that affect foreign investments by its nationals, take the fullest possible account of the need of investors for stability, continuity and growth in their operations as well as of the general interests of the host country. b) Should seek to enter into binding obligations under international law with other governments either on a bilateral or multilateral basis, in respect of the reciprocal treatment to be accorded to the property, rights, and interests of its nationals. c) Should offer, cither nationally or through participation in an international investment insurance agency, guarantee facilities against non-commercial risks encountered by the investor. d) Should examine the possibility of providing special aid for relevant economic and social infrastructure projects in developing countries which will facilitate private investment of significance to the economic development of the host country. (*) Wherever the circumstances are such that a recommendation addressed to "the Investor" falls for implementation to the enterprise operating in the host country, it should be regarded as addressed to that enterprise.

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Transnational Enterprises

3. The Government

of the Host

Country

а) Should, in the formulation or modification of policies that affect foreign investments, take the fullest possible account of the need of investors for stability, continuity and growth in their operations. б) Should, with regard to sectors not reserved to domestic ownership, make known to prospective investors its economic priorities and the general conditions that it wishes to apply to incoming direct private investment, and should provide an opportunity for consultation with the private sector during the development of national planning. c) Should make known the treatment that it will accord to the proposed investment and any limitations or financial charges that it will impose. d) Should not discriminate on the grounds of its foreign ownership in the treatment accorded to the enterprise, it being understood that the government has a right to accord special treatment to any enterprise or enterprises, whether domestic or foreign owned, in the interest of the national economy. e) Should, in appropriate cases and where the foreign investor 60 wishes, be prepared to enter into contractual arrangements with the investor concerned. / ) Should be prepared to enter into binding obligations under international law with other governments either on a bilateral or multilateral basis, in respect of the reciprocal treatment to be accorded to the property, rights, and interests of nationals of the other state or states.

II. Ownership and Management 1. The

Investor

a) Should, in presenting his investment proposals to the authorities of the host country, examine favourably suitable proposals concerning forms of association with local interests, public or private. b) Should, in developing countries where the necessary institutional facilities exist, offer part of the equity of the subsidiary for purchase or subscription by local investors, wherever this is compatible with the long-term economic interest of the enterprise. c) Should encourage local participation in the management of the enterprise, promoting nationals to posts of increasing responsibility and providing the training and experience that are a prerequisite for such promotion. d) Should, if he finds himself in a dominant market position, refrain from abuse of that position by actions that are to the detriment of the economy of the host country. 590

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2. The Government

of the Investor's

Country

Should, in the framework of foreign aid, support financial, educational and other institutions, including those providing managerial training, thus preparing the ground for more local private participation in the financing and management of enterprises established in developing countries.

3. The Government

of the Host

Country

a) Should, once the details of the implementation of an investment project have been accepted and the ownership and management structure of the enterprise has been established, refrain subsequently from modifying such arrangements otherwise than through negotiation and agreement. b) Should recognise that joint ventures are much more likely to be successful if they are entered into voluntarily and if the terms of the contract^ are left to the free negotiation of the parties, and that there may be cases where investments which deserve high priority are only feasible on the basis of total foreign ownership. c) Should take appropriate measures, principally b y encouraging the creation or development of an effective capital market, to facilitate the purchase of equity in domestic and foreign-owned enterprises by local interests. d) In so far as laws or regulations requiring local participation are judged to be necessary, should frame these laws in such a way that the rights of existing enterprises are respected, new investment is not discouraged and flexible application is possible. e) Should rely on economic, fiscal and commercial policy measures applying to all business operations, national and foreign, for the exercise of controls in the public interest rather than seek to do this through compulsory governmental participation in the equity or management of enterprises. / ) If there is abuse of a dominant market position, shoiild, in preference to the immediate application of restrictive regulations, seek to remedy the situation either by stimulating competition, especially through the encouragement of new investment and the lowering of import tariffs, or by recommending a change in the investor's practices.

III. Finance l. The

Investor

a) Should, without prejudice to the freedom of transfer of financial resources, where there is government concern about the balance of payments of the host country, take this situation into account in shaping his commercial and other policies.

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Transnational Enterprises

b) Should assist the enterprise to comply with the requirements for disclosure of profits and other financial information imposed generally on companies by the host country. c) Should, when having substantial recourse to local sources of capital, take into account the impact which his requirements may have on the availability of funds to local enterprise. d) Should consider favourably the reinvestment of part of his profits, whether in the enterprise or in other economic activities in the host country which he considers suitable.

2. The Government

of the Investor's

Country

а) Should not interfere in the financial management of the enterprise by, for example, insisting upon a given level of remittances in any period unless an adverse balance of payments situation forces it to do so. б) Should remove as speedily as possible any existing restrictions on the outflow of capital in the form of dircct investment by companies, and should refrain from introducing new restrictions except where exceptional circumstances make short term regulation necessary.

3. The Government

of the Host

Country

a) Should place no restrictions on the remittance of loan interest, redemption payments, service and advisory fees, licence fees, royalties and similar payments except in circumstances where the laws of the country require prior approval of the underlying agreement between payor and payee and such approval has not been obtained. b) Should allow the. investor liberty to remit his profit, in particular avoiding the imposition of restrictions not notified at the time of the investment, and should respect any engagements entered into with the investor. Similar conditions should apply to the repatriation of capital, although it is recognised that developing countries may find it necessary to require that remittances be spread over a reasonable period of time. c) Should, if faced with balance of payments difficulties which justify the temporary imposition of restrictions, follow the principles of the International Monetary Fund and the General Agreement on Tariffs and Trade. d) Should, in devising any special exemptions or incentives aimed at attracting foreign investment or encouraging new investment in general, have regard to the need to avoid undue distortion of competition between enterprises operating within its territory, whether domestic or foreign. e) Should allow the unrestricted transfer of the personal savings of the investor's expatriate personnel and the funds necessary to meet pension and family commitments. 592

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/ ) Should, whore restrictions on local borrowing are necessary, make them equally applicable to all enterprises without any discrimination as between foreigners and nationals, except that developing countries may in special circumstances be justified in restricting long and medium term borrowing by foreign-owned enterprises.

IV. Fiscal Policies 1. The

Investor

a) Should observe the laws and regulations of the host country in relation to the submission of returns, and provision of information in connection with the assessment and collection of taxes.

b) Should, to the extent that such information is not available to the enterprise that is under the tax jurisdiction of the host country, be prepared to assist that enterprise to provide justification for its export and import prices.

2. The Government

of the Investor's

Country

а) Should seek to enter into effective arrangements for avoidance of double taxation with capital importing countries. б) Should ensure that when, in double taxation arrangem«nts, the host country retains a primary right to tax dividends, interest, rovalties, etc., such tax is fully relieved by tax credit or reimbursement according to the legal status or personal circumstances of the beneficiary deriving the income directly or through an intermediate company. c) Should ensure that, even in the absence of double taxation arrangements, the aggregate of foreign and domestic tax imposed on income from foreign sources (including, in the case of a dividend from direct investment, the foreign tax on profits underlying the dividends) does not exceed the greater of the foreign tax or the t a x imposed on similar income from domestic sources. (1) Should introduce arrangements, unilaterally if necessary, to avoid any double taxation on the salaries and other incomes of expatriate employees. e) Should refrain from frustrating the effects of development reliefs granted by host countries in respect of new investment by affording appropriate matching reliefs.

3. The Government

of the Host

Country

a) Should seek to enter into effective arrangements for avoidance of double taxation with capital-exporting countries.

b) Should ensure that taxes on income are imposed on no more than the net income arising in the host country after deducting all

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Transnational Enterprises

expenses properly attributable thereto incurred within or outside t h e country, whether such expenses are payable to associated or non-associated enterprises. c) Should not impose on enterprises wholly or partially foreignowned, taxes which are higher or more burdensome t h a n those to which purely domestic enterprises are subject. d) Should provide a stable t a x system with profits and other income being t a x e d at rates which do not discourage private investment and enterprise.

V. The Legal Framework 1. The

Investor

a | Should respect the national laws, policies and economic and social objectives of t h e host country in the same wav as would a good citizen of t h a t country, a n d abide by undertakings given to t h e government of t h e host country in connection with the investment. b) Should be willing to enter into arrangements for the settlement by international conciliation or arbitration of disputes with the government of t h e host country.

2. The Government

of the Investor's

Country

Should not seek to interfere with t h e legal order of t h e host country by extending t h e application of its national laws, directives and regulations to t h e investor's operations in the host country.

3. The Government

of the Host

Country

а) Should respect t h e recognised principles of international law, reflected in m a n y international treaties regarding t h e t r e a t m e n t of foreign property, concerning in particular : i) fair and equitable t r e a t m e n t for such p r o p e r t y ; ii) t h e avoidance of unreasonable a n d discriminatory measures; iii) the observance of contractual and other undertakings given to the investor. in t h e event of expropriation or nationalisation the effective p a y m e n t , without undue delay, of j u s t compensation. б) Should in suitable circumstances enter into arrangements for t h e settlement by international conciliation or arbitration of disputes with the investor. iv)

c) Should provide in its national laws for suitable protection for minoritv share-holdings in those cases where appropriate provisions do not as yet exist.

VI. Labour Policies 1. The

Investor

a) Should make the m a x i m u m practicable use of qualified local personnel. 594

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b) Should co-operate with the host government, labour unions and local educational and vocational training institutions in programs for the upgrading and training of local labour. c) Should, to the extent consistent with the efficient operation of the enterprise, take into account the host government's efforts to create employment opportunities in the localities where they are most needed. d) Should, in all matters directly affecting the interests of labour, to the extent appropriate to local circumstances, consult and coopera te with organisations representing its employees. e) When the necessity for the closure of factories or the laying off of redundant employees becomes apparent, should give adequate advance information, and in consultation with the employees, arrange the timing and conditions of such action in a way that will cause the minimum social damage. / ) Should, in fixing wage and salary levels, act as a good employer, participating constructively as a member of national employers associations where these exist, and providing, according to local circumstances, the best possible wages, social benefits, retirement provisions and working conditions within the framework of the government's policies.

2. The Government

of the Investor's

Country

а) Should, in formulating policies aimed at securing full employment, rely on stimulating domestic demand through appropriate economic and social policies, rather than on restrictions on the outflow of direct investment. б) Should consider making available aid for educational and vocational training of local personnel in the skills needed by the enterprise and elsewhere in the economy of the host country, especially if it is a developing country.

3. The Government

of the Host

Country

a) Should seek, in co-operation with investors and with appropriate national and foreign organisations, to assess future needs for skilled employees and to develop adequate programs for technical and managerial training. b) Should permit the employment of qualified foreign personnel where this is needed for the efficient operation of the enterprise or for training purposes.

Vii. Technology (including inventions, know-how and skills) 1. The

Investor

a) Should, whenever practicable, promote the development of the technological capacity of the host country, particularly if it is a developing country, for example by the training of local staff,

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assistance t o educational institutions, and, provided t b a t conditions for efficient research so allow, by establishment in t h e host country of suitable research activities. 6) Should, when granting licences for t h e use of industrial property rights or when otherwise transferring technology, do so on reasonable terms a n d conditions and with an adequate market area. c) Should m a k e t h e latest suitable technology available in return for appropriate payments, and keep it up to date in accordance with t h e circumstances of the host country. d) Should not, without prejudice to existing contracts, require paym e n t for the use of industrial property rights or technology of no real value to t h e enterprise. c) Should support its investment with appropriate services and advice to ensure t h e full contribution of the investment to the development of the economy of the host countrv. / ) Should co-operate with t h e government of t h e host country in examining t h e impact of his operations on t h e environment and t a k e steps t o minimise damage so far as is economically a n d technically practical in t h e local situation.

2. The Government

of the Investor's

Country

a) Should, in so far as it has not already done so, accede to relevant international treaties relating t o Industrial P r o p e r t y a n d seek to conclude bilateral agreements t h a t will facilitate t h e transfer of technology by private enterprises in r e t u r n for appropriate remuneration. b) Should, where applicable, provide assistance to t h e host country, especially if it is a developing country, with a view to promoting the scientific and educational infrastructure necessary to facilitate the transfer and development of technology.

3. The Government

of the Host

Country

a) Should, in t h e formulation of its policies, t a k e into account the fact t h a t technology is mainly developed b y private enterprises in t h e principal industrial a n d scientific centres of t h e world, a n d t h a t its successful international transfer b y such enterprises depends not only upon appropriate compensation being provided b u t also upon suitable conditions in t h e receiving country. b) Should facilitate t h e continuing acquisition on appropriate terms of the additional know-how necessary to sustain competitive efficiency. c) Should, if it wishes to encourage t h e investor t o establish research facilities in its territory, take account of t h e need for an adequate scientific and educational infrastructure, and of the practical limits to dispersing research activities. d) Should ensure effective legal protection for industrial property rights and encourage freedom of contract for licensing, subject to legislation for preventing abuses of industrial property rights such as failure t o p u t t h e m to use. 596

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e) Should, in so far as it has not already done so, accede to relevant international treaties relating to Industrial Property and 6eek to conclude bilateral agreements that will facilitate the transfer of technology by private enterprises in return for appropriate remuneration. /)

Should not impose witholding taxes on licence fees, royalties and payments for services and advice at such a level that they materially increase the cost of the technology, make its transfer difficult, or even prevent it altogether.

VIII. Commercial Policies 1. The

Investor

а) Should not seek undue protection from competition from imports nor require unjustified guarantees against competition from new manufacturers in* the same market. б) Should assist the enterprise in its efforts to develop its export business and should not place any obstacle to such exports unless he is prevented by existing obligations to third parties or. by sound economic reasons which he should be prepared to disclose to the government of the host country. c) Should practice fair pricing policies for goods and services in dealings with associated companies which take into consideration the tax, Customs and competition regulations of the countries involved. n December 7, 1944. The seat may be temporarily transerred elsewhere by decision of the Council.

A r t i c l e 42 Recognition of existing standards of competency of personnel The provisions of this Chapter shall not apply to personnel whose licenses are originally issued prior to a date one year after initial adoption of an international standard of qualification for such personnel; but they shall in any case apply to all personnel whose licenses remain valid five years after the date of adoption of such standard.

A r t i c l e 46 First meeting of Assembly The first meeting of the Assembly shall be summoned )y the Interim Council of the above-mentioned Provisional Organization as soon as the Convention has :ome into force, to meet at a time and place to be derided by the Interim Council.

A r t i c l e 47 PART II

Legal capacity

The International Civil Aviation Organization

The Organization shall enjoy in the territory of each contracting State such legal capacity as may be necessary for the performance of its functions. Full juridical personality shall be granted wherever compatible with the constitution and laws of the State concerned.

C h a p t e r VII The Organization A r t i c l e 43 Name and composition An organization to be named the International Civil .viation Organization is formed by the Convention. It ; made up of an Assembly, a Council, and such other odies as may be necessary.

C h a p t e r VIII The A s s e m b l y A r t i c l e 48 Meetings of Assembly and voting

A r t i c l e 44 Objectives The aims and objectives of the Organization are to evelop the principles and techniques of international ir navigation and to foster the planning and developlent of international air transport so as to: (a) Insure the safe and orderly growth of international civil aviation throughout the world; (b) Encourage the arts of aircraft design and operation for peaceful purposes; (c) Encourage the development of airways, airports, and air navigation facilities for international civil aviation; (d) Meet the needs of the peoples of the world for safe, regular, efficient and economical air transport;

(a) The Assembly shall meet annually and shall be convened by the Council at a suitable time and place. Extraordinary meetings of the Assembly may be held at any time upon the call of the Council or at the request of any ten contracting States addressed to the Secretary General. (b) All contracting States shall have an equal right to be represented at the meetings of the Assembly and each contracting State shall be entitled to one vote. Delegates representing contracting States may be assisted by technical advisers who may participate in the meetings but shall have no vote. (c) A majority of the contracting States is required to constitute a quorum for the meetings of the Assembly. Unless otherwise provided in this Convention, decisions of the Assembly shall be taken by a majority of the votes cast.

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International Transport A r t i c l e 49

Powers and duties of Assembly The powers and duties of the Assembly shall be (a) Elect at each meeting its President and other ficers; (b) Elect the contracting States to be represented the Council, in accordance with the provisions Chapter IX; (c) Examine and take appropriate action on the ports of the Council and decide on any matter ferred to it b y the Council;

to: ofon of rere-

(d) Determine its own rules of procedure and establish such subsidiary commissions as it may consider to be necessary or desirable; (e) Vote an annual budget and determine the financial arrangements of the Organization, in accordance with the provisions of Chapter XII; (f) Review expenditures and approve the accounts of the Organization; (g) Refer, at its discretion,, to the Council, to subsidiary commissions, or to any other body any matter within its sphere of action; (h) Delegate to the Council the powers and authority necessary or desirable for the discharge of the duties of the Organization and revoke or modify the delegations of authority at any time; (i) Carry out the appropriate provisions of Chapter XIII; (j) Consider proposals for the modification or amendment of the provisions of this Convention and, if it approves of the proposals, recommend them to the contracting States in accordance, with the provisions of Chapter XXI; (k) Deal with any matter within the sphere of action of the Organization not specifically assigned to the Council.

(c) No representative of a contracting State on the Council shall be actively associated with the operation of an international air service or financially interested in such a service. A r t i c l e 51 President of Council The Council shall elect its President for a term of three years. He may be reelected. He shall h a v e no vote. The Council shall elect from among its members one or more Vice Presidents who shall retain their right to vote when serving as acting President. The President need not be selected from among the representatives of the members of the Council but, if a representative is elected, his seat shall be deemed vacant and it shall be filled by the State which h e represented. The (Jjities of the President shall be to: (a) Convene meetings of the Council, the Air Transport Committee, and the Air Navigation Commission; (b) Serve as representative of the Council; and (c) Carry out on behalf of the Council the functions which the Council assigns to him. A r t i c l e 52 Voting in Council Decisions by the Council shall require approval by a majority of its members. The Council may delegate authority with respect to any particular matter to a committee of its members. Decisions of any committee of the Council may be appealed to the Council by any interested contracting State. A r t i c l e 53 Participation without a vote Any contracting State may participate, without a vote, in the consideration by the Council and by its committees and commissions on any question which especially affects its interests. No member of the Council shall vote in the consideration by the Council of a dispute to which it is a party.

Chapter IX T h e Council

A r t i c l e 54

A r t i c l e 50

Mandatory functions o! Council

Composition and election o! Council (a) The Council shall be a permanent body responsible to the Assembly. It shall be composed of twenty-one* contracting States elected by the Assembly. An election shall be held at the first meeting of the Assembly and thereafter every three years, and the members of the Council so elected shall hold office until the next following election. (b) In electing the members of the Council, the Assembly shall give adequate representation to 1) the States of chief importance in air transport; 2) the States not otherwise included which make the largest contribution to the provision of facilities for international civil air navigation; and 3) the States not otherwise included whose designation will insure that all major geographic areas of the world are represented on the Council. Any vacancy on the Council shall be filled by the Assembly as soon as possible; any contracting State so elected to the Council shall hold office for the unexpired portion of its predecessor's term of office.

668

The Council shall: (a) Submit annual reports to the Assembly; (b) Carry out the directions of the Assembly and discharge the duties and obligations which are laid on it by this Convention; (c) Determine its organization and rules of procedure; (d) Appoint and define the duties of an Air Transport Committee, which shall be chosen from among the representatives of the members of the Council, and which shall b e responsible to it; (e) Establish an Air Navigation Commission, in accordance with the provisions of Chapter X; (f) Administer the finances of the Organization in accordance with the provisions of Chapters XII and XV; (g| Determine the emoluments of the President of the Council; (h) Appoint a chief executive officer who shall be called the Secretary General, and make provision for the appointment of such other personnel as may

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ICAO b e n e c e s s a r y , in a c c o r d a n c e w i t h t h e p r o v i s i o n s . of C h a p t e r XI } (i) R e q u e s t , collect, e x a m i n e a n d p u b l i s h i n f o r m a t i o n r e l a t i n g to t h e a d v a n c e m e n t of a i r n a v i g a t i o n a n d t h e o p e r a t i o n of i n t e r n a t i o n a l air s e r v i c e s , i n c l u d i n g i n f o r m a t i o n a b o u t t h e c o s t s of o p e r a t i o n a n d p a r t i c u l a r s of s u b s i d i e s p a i d t o a i r l i n e s f r o m p u b l i c funds;

p e r s o n s n o m i n a t e d by c o n t r a c t i n g States, T h e s e p e r s o n s shall h a v e s u i t a b l e q u a l i f i c a t i o n s a n d e x p e r i e n c e in t h e s c i e n c e and p r a c t i c e of a e r o n a u t i c s , T h e C o u n c i l shall r e q u e s t all c o n t r a c t i n g S t a t e s to s u b m i t n o m i n a t i o n s . T h e P r e s i d e n t of t h e Air N a v i g a t i o n C o m m i s s i o n shall b e a p p o i n t e d by t h e Council. A r t i c 1 e 57 Duties ol Commission

(j) R e p o r t to c o n t r a c t i n g S t a t e s a n y i n f r a c t i o n of t h i s Convention, as well as any failure to carry out r e c o m m e n d a t i o n s o r d e t e r m i n a t i o n s of t h e C o u n c i l ; (k) R e p o r t to t h e A s s e m b l y a n y i n f r a c t i o n of* t h i s C o n vention w h e r e a contracting State has failed to take appropriate action within a reasonable time a f t e r n o t i c e of t h e i n f r a c t i o n ; (1) A d o p t , in a c c o r d a n c e w i t h t h e p r o v i s i o n s of C h a p ter VI of this C o n v e n t i o n , i n t e r n a t i o n a l s t a n d a r d s a n d r e c o m m e n d e d p r a c t i c e s ; for c o n v e n i e n c e , d e s ignate them as A n n e x e s to this Convention; and n o t i f y all c o n t r a c t i n g S t a t e s of t h e a c t i o n t a k e n ; (m) C o n s i d e r r e c o m m e n d a t i o n s of t h e A i r N a v i g a t i o n C o m m i s s i o n f o r a m e n d m e n t of t h e A n n e x e s a n d t a k e a c t i o n in a c c o r d a n c e w i t h t h e p r o v i s i o n s of Chapter XX; (n) C o n s i d e r a n y m a t t e r relating to t h e C o n v e n t i o n which a n y c o n t r a c t i n g S t a t e r e f e r s to it. A r t i c l e 55 P e r m i s s i v e f u n c t i o n s of C o u n c i l The Council may: (a) W h e r e a p p r o p r i a t e a n d a s e x p e r i e n c e m a y s h o w to be d e s i r a b l e , c r e a t e s u b o r d i n a t e air t r a n s p o r t c o m m i s s i o n s on a r e g i o n a l or o t h e r b a s i s and d e f i n e g r o u p s of s t a t e s or a i r l i n e s with or t h r o u g h which it m a y d e a l t o f a c i l i t a t e t h e c a r r y i n g o u t of t h e a i m s of this C o n v e n t i o n ; (b) D e l e g a t e t o t h e Air N a v i g a t i o n C o m m i s s i o n d u t i e s a d d i t i o n a l to t h o s e set f o r t h in t h e C o n v e n t i o n and r e v o k e or m o d i f y such d e l e g a t i o n s of a u t h o r i t y at a n y timei (c) C o n d u c t , r e s e a r c h i n t o all a s p e c t s of air t r a n s p o r t a n d air n a v i g a t i o n which a r e of i n t e r n a t i o n a l i m p o r t a n c e , c o m m u n i c a t e t h e r e s u l t s of its research t o t h e c o n t r a c t i n g States, a n d f a c i l i t a t e t h e e x c h a n g e of i n f o r m a t i o n b e t w e e n c o n t r a c t i n g S t a t e s on air t r a n s p o r t and air n a v i g a t i o n m a t t e r s ; (d) S t u d y a n d m a t t e r s a f f e c t i n g t h e o r g a n i z a t i o n and o p e r a t i o n of i n t e r n a t i o n a l air t r a n s p o r t , i n c l u d i n g t h e i n t e r n a t i o n a l o w n e r s h i p a n d o p e r a t i o n of i n t e r n a t i o n a l air s e r v i c e s on t r u n k r o u t e s , a n d s u b m i t to t h e A s s e m b l y p l a n s in r e l a t i o n t h e r e t o ; (e) I n v e s t i g a t e , at t h e r e q u e s t of a n y c o n t r a c t i n g State, a n y s i t u a t i o n which m a y a p p e a r to p r e s e n t a v o i d a b l e o b s t a c l e s t o t h e d e v e l o p m e n t of i n t e r n a t i o n a l air n a v i g a t i o n ; and, a f t e r such i n v e s t i g a t i o n , i s s u e such r e p o r t s a s m a y a p p e a r to it d e s i r a b l e .

T h e Air N a v i g a t i o n C o m m i s s i o n shall: (a) C o n s i d e r , and r e c o m m e n d to t h e C o u n c i l for a d o p tion, m o d i f i c a t i o n s of t h e A n n e x e s to t h i s C o n vention; (b) Establish technical s u b c o m m i s s i o n s o n which a n y c o n t r a c t i n g S t a t e m a y b e r e p r e s e n t e d , if it so desires; (c) A d v i s e t h e C o u n c i l c o n c e r n i n g t h e c o l l e c t i o n a n d c o m m u n i c a t i o n to t h e c o n t r a c t i n g S t a t e s of all inf o r m a t i o n which it c o n s i d e r s n e c e s s a r y a n d u s e f u l for t h e a d v a n c e m e n t of air n a v i g a t i o n .

Chapter XI Personnel A r t i c l e 58

Appointment of personnel S u b j e c t to a n y r u l e s laid d o w n b y t h e A s s e m b l y a n d t o t h e p r o v i s i o n s of t h i s C o n v e n t i o n , t h e C o u n c i l s h a l l d e t e r m i n e t h e m e t h o d of a p p o i n t m e n t a n d of t e r m i n a t i o n of a p p o i n t m e n t , t h e t r a i n i n g , a n d t h e s a l a r i e s , a l l o w a n c e s , a n d c o n d i t i o n s of s e r v i c e of t h e S e c r e t a r y G e n e r al a n d o t h e r p e r s o n n e l of t h e O r g a n i z a t i o n , a n d m a y e m p l o y o r m a k e u s e of t h e s e r v i c e s of n a t i o n a l s of a n y contracting State. A r t i c l e 59

International character of personnel T h e P r e s i d e n t of t h e C o u n c i l , t h e S e c r e t a r y G e n e r a l , and other personnel shall not seek or receive instruct i o n s in r e g a r d t o t h e d i s c h a r g e o f t h e i r r e s p o n s i b i l i t i e s f r o m a n y a u t h o r i t y e x t e r n a l t o t h e O r g a n i z a t i o n . Each contracting State u n d e r t a k e s fully to respect t h e intern a t i o n a l c h a r a c t e r of t h e r e s p o n s i b i l i t i e s of t h e p e r s o n n e l a n d n o t t o s e e k t o i n f l u e n c e a n y of its n a t i o n a l s in t h e d i s c h a r g e of t h e i r r e s p o n s i b i l i t i e s . A r t i c l e 60

Immunities and privileges of personnel Each c o n t r a c t i n g S t a t e u n d e r t a k e s , s o f a r a s p o s s i b l e u n d e r its c o n s t i t u t i o n a l p r o c e d u r e , t o a c c o r d t o t h e P r e s i d e n t of t h e C o u n c i l , t h e S e c r e t a r y G e n e r a l , a n d t h e o t h e r p e r s o n n e l of t h e O r g a n i z a t i o n , t h e i m m u n i t i e s a n d p r i v i l i g e s which a r e a c c o r d e d t o c o r r e s p o n d i n g p e r s o n n e l of o t h e r p u b l i c i n t e r n a t i o n a l o r g a n i z a t i o n s . If a g e n e r a l i n t e r n a t i o n a l a g r e e m e n t on t h e i m m u n i t i e s a n d p r i v i l e g e s of i n t e r n a t i o n a l civil s e r v a n t s is a r r i v e d at, t h e i m m u n i t i e s a n d p r i v i l e g e s a c c o r d e d to t h e P r e s i d e n t , t h e S e c r e t a r y G e n e r a l , a n d t h e o t h e r p e r s o n n e l of t h e O r g a n i z a t i o n shall b e t h e i m m u n i t i e s a n d p r i v i l e g e s a c c o r d ed under that general international agreement.

Chapter X The Air Navigation Commission A r t i c l e 56

Chapter XII Finance

N o m i n a t i o n a n d a p p o i n t m e n t of C o m m i s s i o n

A r t i c l e 61

T h e Air N a v i g a t i o n C o m m i s s i o n shall b e c o m p o s e d of twelve members appointed by the Council from among

T h e Council shalt submit to t h e Assembly a n a n n u a l b u d g e t , a n n u a l s t a t e m e n t s of a c c o u n t s a n d e s t i m a t e s of

Budget and apportionment of expenses

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all receipts and expenditures. The Assembly shall vote the budget with whatever modification i t ' sees fit to prescribe, and, with the exception of assessments under Chapter XV to States consenting thereto, shall apportion the expenses of the Organization among the contracting States on the basis which it shall from time to time determine.

P A R T III

I n t e r n a t i o n a l Air T r a n s p o r t Chapter XIV Information and reports

A r t i c l e 62

A r t i c l e 67

Suspension of voting power

File reports with Council

The Assembly may suspend the voting power in the Assembly and in the Council of any contracting State that fails to discharge within a reasonable period its financial obligations to the Organization.

Each contracting State undertakes that its international airlines shall, in accordance with requirements laid down by the Council, file with the Council traffic reports, cost statistics and financial statements showing among other things all receipts and the sources thereof.

A r t i c l e 63 Expenses of delegations and other representatives Each contracting State shall bear the expenses of its own delegation to the Assembly and the remuneration, travel, and other expenses of any person whom it appoints to serve on the Council, and of its nominees or representatives on any subsidiary committees or commissions of the Organization.

Chapter XV Airports and other air navigation facilities A r t i c l e 68 Designation of routes and airports Each contracting State may, subject to the provisions of this Convention, designate the route to be followed within its territory by any international air" service and the airports which any such service may use.

C h a p t e r XIII Other international arrangements A r t i c l e 64 Security arrangements The Organization may, with respect to air matters within its competence directly affecting world security, by vote of the Assembly enter into appropriate arrangements with any general organization set up by the nations of the world to preserve peace.

A r t i c l e 65

A r t i c l e 69 Improvement of air navigation facilities If the Council is of the opinion that the airports or other air navigation facilities, including radio and meteorological services, of a contracting State are not reasonably adequate for the safé, regular, efficient, and economical operation of international air services, present or contemplated, the Council shall consult with the State directly concerned, and other States affected, with a view to finding means by which the situation may be remedied, and may make recommendations for that purpose. No contracting State shall be guilty of an infraction of this Convention if it fails to carry out these recommendations.

Arrangements with other international bodies The Council, on behalf of the Organization, may enter into agreements with other international bodies for the maintenance of common services and for common arrangements concerning personnel and, with the approval of the Assembly, may enter into such other arrangements as may facilitate the work of the Organization.

A r t i c l e 70 Financing of air navigation facilities

Functions relating to other agreements

A contracting State, in the circumstances arising under the provisions of Article 69, may conclude an arrangement with the Council for giving effect to such recommendations. The State may elect to bear all of the costs involved in any such arrangement. If the State does not so elect, the Council may agree, at the request of the State, to provitie for all or a portion of the costs.

(a) The Organization shall also carry out the functions placed upon it by the International Air Services Transit Agreement and by the International Air Transport Agreement drawn up at Chicago on December 7, 1944, in accordance with the terms and conditions therein set forth.

Provision and maintenance of facilities by Council

(b) Members of the Assembly and the Council who have not accepted the International Air Services Transit Agreement or the International Air Transport Agreement drawn up at Chicago on December 7, 1944 shall not have the right to vote on any questions referred to the Assembly or Council under the provisions of the relevant Agreement.

If a contracting State so requests, the Council may agree to provide, man, maintain, and administer any or all of the airports and other air navigation facilities, including radio and meteorological services, required in its territory for the safe, regular, efficient and economical operation of the international air services of the other contracting States, and may specify just and reasonable charges for the use of the facilities provided.

A r t i c l e 66

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A r t i c l e 71

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ICAO A r t i c l e 72 Acquisition or use of land W h e r e land is needed for facilities financed in whole or in part by the Council at the request of a contracting State, that State shall either provide the land itself, retaining title if it wishes, or facilitate the use of the land by the Council on just and reasonable terms and in accordance with the laws of the State concerned. A r t i c l e 73

operating organizations or international operating agencies and from pooling their air services on any routes or in any regions, but such organizations or agencies and such pooled services shall be subject to all the provisions of this Convention, including those relating to the registration of agreements with the Council. The Council shall determine in what manner the provisions of this Convention relating to nationality of aircraft shall apply to aircraft operated by international operating agencies.

Expenditure and assessment of funds Within the limit of the funds whidi may be made available to it by the Assembly under Chapter XII, the Council may make current expenditures for the purposes of this Chapter from the general funds of the Organization. The Council shall assess the capital funds required for the purposes of this Chapter in previously agreed proportions over a reasonable period of time to the contracting States consenting thereto whose airlines use the facilities. The Council may also assess to States that consent any working funds that are required.

A r t i c l e 74 Technical assistance and utilization of revenues When the Council, at the request of a contracting State, advances funds or provides airports or other facilities in whole or in part, the arrangement may provide, with the consent of that State, for technical assistance in the supervision and operation of t h e airports and other facilities, and for the payment, from the revenues derived from the operation of the airports and other facilities, of the operating expenses of the airports and the other facilities, and of interest and amortization charges.

A r t i c l e 78 Function of Council The Council may suggest to contracting States concerned that they form joint organizations .to operate air services on any routes or in any regions.

A r t i c l e 79 Participation in operating organizations A State may participate in joint operating organizations or m pooling arrangements, either through its government or through an airline company or companies designated b y its government. The companies may, at the sole discretion of the State concerned, b e state* owned or partly state-owned or privately owned.

PART IV Final Provisions Chapter XVII

A r t i c l e 75 Taking over of facilities from Council A contracting State may at any time discharge any obligation into which it has entered under Article 70, and take over airports and other facilities which the Council has provided in its territory pursuant to the provisions of Article 71 and 72, by paying to the Council an amount which in the opinion of the Council is reasonable in the circumstances. If the State considers that the amount fixed by the Council is unreasonable it may appeal to the Assembly against the decision of the Council and the Assembly may confirm or amend the decision of the Council.

Other aeronautical agreements and arrangements A r t i c l e 80 Paris and Habana Conventions Each contracting State undertakes, immediately upon the coming into force of this Convention, to give notice of denunciation of the Convention relating to the Regulation of Aerial Navigation signed at Paris on October 13, 1919 or the Convention on Commercial Aviation signed at Habana on February 20, 1928, if it is a party to either. As between contracting States, this Convention supersedes the Conventions of Paris and Habana previously referred to.

A r t i c 1 e 76 Return of funds

A r - t i c l e 81

Funds obtained by the Council through reimbursement under Article 75 and from receipts of interest and amortization payments under Article 74 shall, in the Case of advances originally financed by States under Article 73, be returned to the States which were originally assessed in the proportion of their assessments, as determined by the Council.

Registration of existing agreements All aeronautical agreements which are in existence on the coming into force of this Convention, and which are between a contracting State and any other State or between an airline of a contracting State and any other State or the airline of any other State, shall be forthwith registered with the Council.

Chapter XVI

A r t i c l e 82

Joint operating organizations and pooled services

Abrogation of inconsistent arrangements

A r t i c l e 77

The contracting States accept this Convention as ab» rogating all obligations and understandings between them which are inconsistent with its terms, and under» take not to enter into any such obligations and under» standings. A contracting State which, before becoming

Joint operating organizations permitted Nothing in this Convention shall prevent two or more contracting States from constituting joint air transport

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a member of the Organization has undertaken any obligations toward a non-contracting State or a national of a contracting State or of a non-contracting State inconsistent with the terms of this Convention, shall take immediate steps to procure its release from the obligations. If an airline of any contracting State has entered into any such inconsistent obligations, the State of which it is a national shall use its best efforts to secure their termination forthwith and shall in any event cause them to be terminated as soon as such action can lawfully be taken after the coming into force of this Convention.

A r t i c l e 83 Registration of new arrangements Subject to the provisions of the preceding Article, any contracting State may make arrangements not inconsistent with the provisions of this Convention. A n y such arrangement shall be forthwith registered with the Council, which shall make it public as soon as possible.

Chapter

XVIII

by majority vote, provided that the Council may determine procedural questions in the' event of any delay which in the opinion of the Council is excessive.

A r t i c l e 86 Appeals Jnless the Council decides otherwise, any decision by the Council on whether an international airline is operating in conformity with the provisions of .this Convention shall remain in effect unless reversed on appeal. On any other matter, decisions of the Council shall, if appealed from, be suspended until the appeal is decided. The decisions of the Permanent Court of International Justice and of an arbitral tribunal shall be final and binding.

A r t i c l e 87 Penalty for non-conformity of airline Each contracting State undertakes not to allow the operation of an airline of a contracting State through the airspace a b o v e its territory if the Council has decided that the airline concerned is not conforming to a final decision rendered in accordance with* the previous Article.

Disputes and default A r t i c l e 88 A r t i c l e 64

Penalty for non-conformity by State

Settlement of disputes

T h e Assembly shall suspend the voting power in the Assembly and in the Council of any contracting State that is found in default under the provisions of this Chapter.

If any disagreement between two or more contracting States relating to the interpretation or application of this Convention and its Annexes cannot be settled by negotiation, it shall, on the application of any State concerned in the disagreement, be decided by the Council. N o member of the Council shall vote in the consideration by the Council of any dispute to which it is a party. A n y contracting State may, subject to Article 85, appeal from the decision of the Council to an ad hoc arbitral tribunal agreed upon with the other parties to the dispute or to the Permanent Court of International Justice. A n y such appeal shall be notified to the Council within sixty days of receipt of notification of the decision of the Council.

A r t i c l e 85 Arbitration procedure If any contracting State party to a dispute in which the decision of the Council is under' appeal has not accepted the Statute of the Permanent Court of International Justice and the contracting States parties to the dispute cannot agree on the choice of the arbitral tribunal, each of the contracting States parties to the dispute shall name a single arbitrator who shall name an umpire. If either contracting State party to the -dispute fails to name an arbitrator within a period of three months from the date of.the appeal, an arbitrator shall be named on behalf of that State by the President of the Council from a list of qualified and available persons maintained by the Council. If, within thirty days, the arbitrators cannot agree on an umpire, the President of the Council shall designate an umpire from the list previously referred to. T h e arbitrators and the umpire shall then jointly constitute an arbitral tribunal. A n y arbitral tribunal established under this or the preceding Article shall settle its o w n procedure and g i v e its decisions

672

Chapter X I X War A r t i c l e 89 W a r and emergency conditions In case of war, the provisions of this Convention shall not affect the freedom of action of any of the contracting States affected, whether as belligerents or as neutrals. The same principle shall apply in the case of any cont&acting State which declares a state of national emergency and notifies the fact to the Council.

Chapter X X Annexes A r t i c l e 90 Adoption and amendment of Annexes (a) The adoption by the Council of the A n n e x e s described in Article 54, subparagraph (1), shall require the v o t e of two-thirds of the Council at a meeting called for that purpose and shall then be submitted b y the Council to each contracting State. A n y such A n n e x or any amendment of an Annex shall become e f f e c t i v e within three months after its submission to the contracting States or at the end of such longer period of time as the Council may prescribe, unless in the meantime a majority of the contracting States register their disapproval with the Council. (b) The Council shall immediately n o t i f y all contracting States of the coming into force of any A n n e x or amendment thereto.

Doc. 47

ICAO Chapter X X I Ratifications, a d h é r e n c e s , amendments, and denunciations A r t i c l e 91 Ratification of Convention (a) This Convention shall be subject to ratification by the signatory States. The instruments of ratification shall be deposited in the archives of the Government of the United States of America, which shall give notice of the date of the deposit to each of the signatory and adhering States. (b) As soon as this Convention has been ratified or adhered to by twenty-six States it shall come into force between them on the thirtieth day after deposit of the twenty-sixth instrument. It shall come into force for each State ratifying thereafter on the thirtieth day after the deposit of its instrument of ratification.

(b) If in its opinion the amendment is of such a nature as to justify this course, the Assembly in its resolution recommending adoption may provide that any State whidi has not ratified within a specified period after the amendment has come into force shall thereupon cease to be a member of the Organization and a party to the Convention. A r t i c l e 95 Denunciation of Convention (a) Any contracting State may give notice of denunciation of this Convention three years after its coming into effect by notification addressed to the Government of the United States of America, which shall at once inform each of the contracting States. (b) Denunciation shall take effect one year from the date of the receipt of the notification and shall operate only as regards the State effecting the denunciation.

(c) It shall be the duty of the Government of the United States of America to notify the government of each of the signatory and adhering States of the date on which this Convention comes into force. A r t i c l e 92 Adherence to Convention

Chapter XXII

(a) This Convention shall be open for adherence by members of the United Nations and States associated with them, and States which remained neutral during the present world conflict.

A r t i c l e 96

(b) Adherence shall be effected by a notification addressed to the Government of the United States of America and shall take effect as from the thirtieth day from the receipt of the notification by the Government of the United States of America, which shall notify all the contracting States. A r t i c l e 93 Admission of other States States other than those provided for in Articles 91 and 92 (a) may, subject to approval by any general international organization set up by the nations of the world to preserve peace, be admitted to participation in this Convention by means of a four-fifths vote of the Assembly and on sudi conditions as the Assembly may prescribe: provided that in each case the assent of any State invaded or attacked during the present war by the State seeking admission shall be necessary.

A r t i c l e 94 Amendment of Convention (a) Any proposed amendment to this Convention must be approved by a two-thirds vote of the Assembly and shall then come into force in respect of States which have ratified such amendment when ratified by the number of contracting States specified by the Assembly. The number so specified shall not be less than two-thirds of the total number of contracting States.

Definitions

For the purpose of this Convention the expression: (a) "Air service' means any scheduled air service performed by aircraft for the public transport of passengers, mail or cargo. (b) "International air service" means an air service which passes through the airspace over the territory of more than one State. (c) "Airline" means any air transport enterprise offering or operating an international air service. (d) "Stop for non-traffic purposes" means a landing for any purpose other than taking on or discharging passengers, cargo or mail.

Signature of C o n v e n t i o n IN WITNESS WHEREOF, the undersigned plenipotentiaries, having been duly authorized, sign this Convention on behalf of their respective governments on the dates appearing opposite their signatures. DONE at Chicago the seventh day of December 1944, in the English language. A text drawn up in the English, French, and Spanish languages, each of which shall be of equal authenticity, shall be open for signature at Washington, D. C. Both texts shall be deposited in the archives of the Government of the. United States of America, and certified copies shall be transmitted by that Government to the governments of all the States which may sign or adhere to this Convention.

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3. International Air Services Transit Agreement December 12, 1944 B G B l . 1956 II, 442 (84 U . N . T . S .

T h e S t a l e s which sign arid a c c e p t this I n t e r n a t i o n a l A i r S e r v i c e s T r a n s i t A g r e e m e n t , b e i n g m e m b e r s of the International Civil Aviation Organization, declare as follows:

Article I Section

1

389)

g a g e d in s i m i l a r i n t e r n a t i o n a l s e r v i c e s : p r o v i d e d that, upon r e p r e s e n t a t i o n by an i n t e r e s t e d c o n t r a c t i n g S t a t e , t h e c h a r g e s i m p o s e d for t h e u s e of airports and other facilities shall be s u b j e c t to r e v i e w b y the C o u n c i l of t h e I n t e r n a t i o n a l C i v i l Aviation Organization established under the abovem e n t i o n e d C o n v e n t i o n , which s h a l l r e p o r t a n d m a k e r e c o m m e n d a t i o n s t h e r e o n for t h e c o n s i d e r a t i o n of t h e S t a t e or S t a t e s c o n c e r n e d .

Each c o n t r a c t i n g S t a t e g r a n t s to the o t h e r c o n t r a c t i n g S t a t e s t h e f o l l o w i n g f r e e d o m s of t h e a i r in r e s p e c t of scheduled i n t e r n a t i o n a l air s e r v i c e s : 1) T h e p r i v i l e g e landing;

to

fly

across

its

territory

without

2) T h e p r i v i l e g e t o land for n o n - t r a f f i c p u r p o s e s . T h e p r i v i l e g e s of this s e c t i o n s h a l l n o t b e a p p l i c a b l e with r e s p e c t to a i r p o r t s utilized for m i l i t a r y p u r p o s e s t o the e x c l u s i o n of a n y scheduled i n t e r n a t i o n a l air s e r v i c e s . In a r e a s of a c t i v e h o s t i l i t i e s or of m i l i t a r y o c c u p a t i o n , and in time of w a r a l o n g the supply r o u t e s leading to such a r e a s , the e x e r c i s e of such p r i v i l e g e s shall be subj e c t to t h e a p p r o v a l of t h e c o m p e t e n t m i l i t a r y a u t h o r i t i e s .

Section

Article Section

2

Section

T h e e x e r c i s e of t h e f o r e g o i n g p r i v i l e g e s shall b e in a c c o r d a n c e with t h e p r o v i s i o n s of the Interim A g r e e m e n t on I n t e r n a t i o n a l C i v i l A v i a t i o n and, w h e n it c o m e s into f o r c e , with t h e p r o v i s i o n s of the C o n v e n t i o n on Intern a t i o n a l C i v i l A v i a t i o n , both drawn up at C h i c a g o on D e c o m b e r 7, 1944. Section

3

A c o n t r a c t i n g S t a t e g r a n t i n g to the a i r l i n e s c o n t r a c t i n g S t a t e t h e p r i v i l e g e to stop for p u r p o s e s m a y r e q u i r e such a i r l i n e s to offer c o m m e r c i a l s e r v i c e at t h e p o i n t s at which are made.

of a n o t h e r non-traffic reasonable such stops

Such r e q u i r e m e n t s h a l l n o t i n v o l v e a n y d i s c r i m i n a t i o n b e t w e e n a i r l i n e s o p e r a t i n g on t h e s a m e route, s h a l l t a k e into a c c o u n t t h e c a p a c i t y of the a i r c r a f t , and shall b e e x e r c i s e d in such a m a n n e r a s not t o p r e j u d i c e t h e n o r m a l o p e r a t i o n s of t h e i n t e r n a t i o n a l air s e r v i c e s conc e r n e d or t h e r i g h t s a n d o b l i g a t i o n s of a c o n t r a c t i n g State.

5

Each c o n t r a c t i n g S t a t e r e s e r v e s the right to w i t h h o l d o r r e v o k e a c e r t i f i c a t e or p e r m i t to an air t r a n s p o r t e n t e r p r i s e of a n o t h e r S t a t e in a n y c a s e w h e r e it is not s a t i s f i e d that s u b s t a n t i a l o w n e r s h i p and e f f e c t i v e c o n t r o l a r e v e s t e d in n a t i o n a l s of a c o n t r a c t i n g S t a t e , or in c a s e of f a i l u r e of such air t r a n s p o r t e n t e r p r i s e to c o m p l y with t h e l a w s of the S t a t e o v e r which it o p e r a t e s , or to p e r f o r m its o b l i g a t i o n s under this A g r e e m e n t .

II 1

A c o n t r a c t i n g S t a t e which d e e m s that a c t i o n b y a n o t h e r c o n t r a c t i n g S t a t e under this A g r e e m e n t is c a u s i n g i n j u s t i c e or h a r d s h i p to it, m a y r e q u e s t t h e C o u n c i l t o e x a m i n e t h e s i t u a t i o n . T h e C o u n c i l s h a l l t h e r e u p o n inq u i r e into t h e matter, a n d shall c a l l the S t a t e s c o n c e r n e d into c o n s u l t a t i o n . S h o u l d such c o n s u l t a t i o n fail to r e s o l v e t h e difficulty, t h e C o u n c i l m a y m a k e a p p r o p r i a t e f i n d i n g s a n d r e c o m m e n d a t i o n s to t h e c o n t r a c t i n g S t a t e s c o n c e r n e d . If t h e r e a f t e r a c o n t r a c t i n g S t a t e c o n c e r n e d s h a l l in t h e opinion of the C o u n c i l u n r e a s o n a b l y fail to t a k e suitable corrective action, the Council may recommend t o t h e A s s e m b l y of t h e a b o v e - m e n t i o n e d O r g a n i z a t i o n t h a t such c o n t r a c t i n g S t a t e b e s u s p e n d e d from its r i g h t s a n d p r i v i l e g e s u n d e r this A g r e e m e n t until such a c t i o n has been taken. T h e Assembly by a two-thirds vote may s o s u s p e n d such c o n t r a c t i n g S t a t e for such p e r i o d of t i m e a s it m a y d e e m p r o p e r or until t h e C o u n c i l s h a l l find t h a t c o r r e c t i v e a c t i o n h a s b e e n t a k e n b y such S t a t e .

Section

2

1. D e s i g n a t e the r o u t e to b e f o l l o w e d within its terr i t o r y by a n y i n t e r n a t i o n a l air s e r v i c e a n d t h e airports which a n y such s e r v i c e m a y u s e ;

If a n y d i s a g r e e m e n t b e t w e e n t w o or m o r e c o n t r a c t i n g S t a t e s relating to the i n t e r p r e t a t i o n or a p p l i c a t i o n of this A g r e e m e n t c a n n o t be s e t t l e d b y n e g o t i a t i o n , the p r o v i s i o n s of C h a p t e r X V I I I of the a b o v e - m e n t i o n e d C o n v e n t i o n s h a l l be a p p l i c a b l e in t h e s a m e m a n n e r a s p r o v i d e d t h e r e i n with r e f e r e n c e to a n y d i s a g r e e m e n t r e l a t i n g to t h e i n t e r p r e t a t i o n or a p p l i c a t i o n of t h e a b o v e - m e n t i o n e d Convention.

2. I m p o s e or p e r m i t to be i m p o s e d on a n y such s e r v i c e j u s t and r e a s o n a b l e c h a r g c s for t h e use of such a i r p o r t s and o t h e r f a c i l i t i e s ; t h e s e c h a r g e s shall not b e h i g h e r than would b e paid for t h e use of such airports and f a c i l i t i e s by its n a t i o n a l a i r c r a f t en-

T h i s A g r e e m e n t shall r e m a i n in f o r c e as long a s the a b o v e - m e n t i o n e d C o n v e n t i o n ; p r o v i d e d , h o w e v e r , that

Section

4

Each c o n t r a c t i n g S t a t e m a y , s u b j e c t to t h e p r o v i s i o n s of this A g r e e m e n t ,

674

Article

III

IATA any contracting State, a p a r t y to the present Agreement, may d e n o u n c e it on one y e a r ' s notice given by it to the G o v e r n m e n t of the United States of America, which shall at once inform all o t h e r contracting States of such notice and w i t h d r a w a l .

Article IV Pending the coming into force of the above-mentioned Convention, all references to it herein, other than those contained in Article II, Section 2, a n d Article V, shall be deemed to be r e f e r e n c e s to the Interim Agreement on International Civil Aviation d r a w n up at Chicago on December 7, 1944; and r e f e r e n c e s to t h e International Civil Aviation Organization, the Assembly, and the Council shall be deemed to be references to the Provisional Internationa] Civil Aviation Organization, the Interim Assembly, and Interim Council, respectively.

Doc. 49 on its behalf shall constitute an a c c e p t a n c e of the A g r e e m e n t by that g o v e r n m e n t and an obligation binding upon it. A n y State a m e m b e r of t h e International Civil Aviation Organization m a y accept the present A g r e e m e n t as an obligation binding upon it by notification of its a c c e p t a n c e to the G o v e r n m e n t of the United States, and such a c c e p t a n c e shall become effective upon t h e date of the receipt of such notification by that Government. This A g r e e m e n t shall come into force as b e t w e e n contracting States upon its a c c e p t a n c e by each of them. T h e r e a f t e r it shall become binding as to each other State indicating its a c c e p t a n c e to the G o v e r n m e n t of the United States on the d a t e of the receipt of t h e acc e p t a n c e by that Government, T h e G o v e r n m e n t of t h e United States shall inform all signatory and accepting States of t h e d a t e of all a c c e p t a n c e s of the Agreement, and of the d a t e on which it comes into force for each accepting State.

Article V For the p u r p o s e s of this Agreement, "territory" shall be defined as in Article 2 of the a b o v e - m e n t i o n e d Convention.

Article VI Signatures and A c c e p t a n c e s oi A g r e e m e n t The u n d e r s i g n e d delegates to the International Civil Aviation Conference, c o n v e n e d in Chicago on November 1, 1944, h a v e a f f i x e d their s i g n a t u r e s to this Agreement with the u n d e r s t a n d i n g that the G o v e r n m e n t of the United States of America shall b e informed at the earliest possible date by each of the g o v e r n m e n t s on w h o s e behalf the A g r e e m e n t has been signed w h e t h e r signature

IN WITNESS WHEREOF, t h e undersigned, h a v i n g been duly authorized, sign this A g r e e m e n t on behalf of their r e s p e c t i v e g o v e r n m e n t s on the d a t e s a p p e a r i n g opposite their r e s p e c t i v e signatures. DONE at Chicago the s e v e n t h day of December, 1944, in t h e English l a n g u a g e . A text d r a w n up in t h e English, French, and Spanish languages, each of which shall be of equal authenticity, shall be opened for s i g n a t u r e at W a s h i n g t o n , D. C. Both texts shall be deposited in the archives of the G o v e r n m e n t of the United States of America, and certified copies shall be transmitted by that G o v e r n m e n t to the g o v e r n m e n t s of all the States which m a y sign and accept this A g r e e m e n t .

4. International Air Transport Agreement December 12, 1944 171 U . N . T . S . 388 T h e States which sign a n d accept t h i s I n t e r n a t i o n a l Air T r a n s p o r t Agreem e n t , being m e m b e r s of t h e I n t e r n a t i o n a l Civil Aviation Organization, declare as follows : ARTICLE

Section

I

1

E a c h c o n t r a c t i n g S t a t e g r a n t s to t h e o t h e r c o n t r a c t i n g S t a t e s t h e following f r e e d o m s of t h e air in respect of scheduled i n t e r n a t i o n a l air services : (1) T h e privilege t o fly across its t e r r i t o r y w i t h o u t landing ; (2) T h e privilege t o l a n d for non-traffic p u r p o s e s ; (3) T h e privilege t o p u t down passengers, mail a n d cargo t a k e n on in t h e t e r r i t o r y of t h e S t a t e whose n a t i o n a l i t y t h e a i r c r a f t possesses ; 675

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(4) The privilege to take on passengers, mail and cargo destined for the territory of the State whose nationality the aircraft possesses ; (5) The privilege to take on passengers, mail and cargo destined for the territory of any other contracting State and the privilege to put down passengers, mail and cargo coming from any such territory. With respect to the privileges specified under paragraphs (3), (4), and (5) of this section, the undertaking of each contracting State relates only to through services on a route constituting a reasonably direct line out from and back to the homeland of the State whose nationality the aircraft possesses. The privileges of this section shall not be applicable with respect to airports utilized for military purposes to the exclusion of any scheduled international air services. In areas of active hostilities or of military occupation, and in time of war along the supply routes leading to such areas, the exercise of such privileges shall be subject to the approval of the competent military authorities.

Section 2 The exercise of the foregoing privileges shall be in accordance with the provisions of the Interim Agreement on International Civil Aviation and, when it comes into force, with the provisions of the Convention on International Civil Aviation , both drawn up at Chicago on December 7, 1944.

Section 3 A contracting State granting to the airlines of another contracting S t a t e the privilege to stop for non-traffic purposes may require such airlines to offer reasonable commercial service at the points at which such stops are made. Such requirement shall not involve any discrimination between airlines operating on the same route, shall take into account the capacity of the aircraft, and shall be exercised in such a manner as not to prejudice the normal operations of the international air services concerned or the rights and obligations of any contracting State.

Section 4 Each contracting State shall have the right to refuse permission to the aircraft of other contracting States to take on in its territory passengers, mail and cargo carried for remuneration or hire and destined for another point within its territory. E a c h contracting State undertakes not to enter into any arrangements which specifically grant any such privilege on a exclusive basis to any other State or an airline of any other State, and not to obtain any such exclusive privilege from any other State. 676

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IATA Section

5

Each contracting State may, subject to the provisions of this Agreement, (1) Designate the route to be followed within its territory by any international air service and the airports which any such service may use ; (2) Impose or permit to be imposed on any such service just and reasonable charges for the use of such airports and other facilities ; these charges shall not be higher than would be paid for the use of such airports and facilities by its national aircraft engaged in similar international services : provided that, upon representation by an interested contracting State, the charges imposed for the use of airports and other facilities shall be subject to review by the Council of the International Civil Aviation Organization established under the above-mentioned Convention, which shall report and make recommendations thereon for the consideration of the State or States concerned.

Section

6

Each contracting State reserves the right to withhold or revoke a certificate or permit to an air transport enterprise of another State in any case where it is not satisfied that substantial ownership and effective control are vested in nationals of a contracting State, or in case of failure of such air transport enterprise to comply with the laws of the State over which it operates, or to perform its obligations under this Agreement.

ARTICLE Section

II 1

The contracting States accept this Agreement as abrogating all obligations and understandings between them which are inconsistent with its terms, and undertake not to enter into any such obligations and understandings. A contracting State which has undertaken any other obligations inconsistent with this Agreement shall take immediate steps to procure its release from the obligations. If an airline of any contracting State has entered into any such inconsistent obligations, the State of which it is a national shall use its best efforts to secure their termination forthwith and shall in any event cause them to be terminated as soon as such action can lawfully be taken after the coming into force of this Agreement. Section

2

Subject to the provisions of the preceding section, any contracting State may make arrangements concerning international air services not inconsistent with this Agreement. Any such arrangement shall be forthwith registered with the Council, which shall make it public as soon as possible. 677

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Each contracting State undertakes that in the establishment and operation of through services due consideration shall be given to the interests of the other contracting States so as not to interfere unduly with their regional services or to hamper the development of their through services. ARTICLE I V Section

1

Any contracting State may by reservation attached to this Agreement at the time of signature or acceptance elect not to grant and receive the rights and obligations of Article I, Section 1, paragraph (5), and may at any time after acceptance, on six months' notice given by it to the Council, withdraw itself from such rights and obligations. Such contracting State may on six months' notice to the Council assume or resume, as the case may be, such rights and obligations. No contracting State shall be obliged to grant any rights under the said paragraph to any contracting State not bound thereby. Section

2

A contracting State which deems that action by another contracting State under this Agreement is causing injustice or hardship to it, may request the Council to examine the situation. The Council shall thereupon inquire into the matter, and shall call the States concerned into consultation. Should such consultation fail to resolve the difficulty, the Council may make appropriate findings and recommendations to the contracting States concerned. If thereafter a contracting State concerned shall in the opinion of the Council unreasonably fail to take suitable corrective action, the Council may recommend to the Assembly of the above-mentioned Organization that such contracting State be suspended from its rights and privileges under this Agreement until such action has been taken. The Assembly by a two-thirds vote may so suspend such contracting State for such period of time as it may deem proper or until the Council shall find that corrective action has been taken by such State. Section

3

If any disagreement between two or more contracting States relating to the interpretation or application of this Agreement cannot be settled b y negotiation, the provisions of Chapter X V I I I of the above-mentioned Convention shall be applicable in the same manner as provided therein with reference to any disagreement relating to the interpretation or application of the abovementioned Convention. ARTICLE V

This Agreement shall remain in force as long as the above-mentioned Convention ; provided, however, that any contracting State, a party to the present 678

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Agreement, may denounce it on one year's notice given by it to the Government of the United States of America, which shall at once inform all other contracting States of such notice and withdrawal.

ARTICLE

VI

Pending the coming into force of the above-mentioned Convention, all references to it herein other than those contained in Article IV, Section 3, and Article V I I shall be deemed to be references to the Interim Agreement on International Civil Aviation drawn up at Chicago on December 7, 1944 ; and references to the International Civil Aviation Organization, the Assembly, and the Council shall be deemed to be references to the Provisional International Civil Aviation Organization, the Interim Assembly, and the Interim Council, respectively.

ARTICLE

VII

For the purposes of this Agreement, "territory" shall be defined as in Article 2 of the above-mentioned Convention.

ARTICLE

VIII

SIGNATURES AND ACCEPTANCES OF

AGREEMENT

The undersigned delegates to the International Civil Aviation Conference, convened in Chicago on November 1, 1944, have affixed their signatures to this Agreement with the understanding that the Government of the United States of America shall be informed at the earliest possible date by each of the governments on whose behalf the Agreement has been signed whether signature on its behalf shall constitute an acceptance of the Agreement' by that government and an obligation binding upon it. Any State a member of the International Civil Aviation Organization may accept the present Agreement as an obligation binding upon it by notification of its acceptance to the Government of the United States, and such acceptance shall become effective upon the date of the receipt of such notification by that Government. This Agreement shall come into force as between contracting States upon its acceptance by each of them. Thereafter it shall become binding as to each other State indicating its acceptance to the Government of the United States on the date of the receipt of the acceptance by that Government. The Government of the United States shall inform all signatory and accepting States of the date of all acceptances of the Agreement, and of the date on which it comes into force for each accepting State. 679

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International Transport

I N WITNESS WHKKKOF, the undersigned, having been duly authorized, sign this Agreement on behalf of their respective governments on the dates appearing opposite their signatures. D O N E at Chicago the seventh day of December 1 9 4 4 , in the English language. A text drawn up in the English, French, and Spanish languages, each of which shall be of equal authenticity, shall be opened for signature at Washington, D. C. Both texts shall be deposited in the archives of the Government of the United States of America, and certified copies shall be transmitted by t h a t Government to the governments of all the States which may sign and accept this Agreement.

5. Convention on the International Maritime Organization ( IMO) May 22, 1982 (formerly IMCO, March 6, 1948) BGBl. 1982 II, 874 (289 U . N . T . S . 3; 607 U.N.T.S. 276; 649 U . N . T . S . 334)

The States parties to the present Convention hereby establish the International Maritime Organization (hereinafter referred to as "the Organization").

(b)

To encourage the removal of discriminatory action and unnecessary restrictions by Governments affecting shipping engaged in international trade so as to promote the availability of shipping services to the commerce of the world without discrimination; assistance and encouragement given by a Government for the development of its national shipping and for purposes of security does not in itself constitute discrimination, provided that such assistance and encouragement Is not based on measures designed to restrict the freedom of shipping of all flags to take part in international trade;

(c)

To provide for the consideration by the Organization of matters concerning unfair restrictive practices by shipping concerns in accordance with Part II;

Parti Purposes of the Organization Article 1 The purposes of the Organization are: (a) To provide machinery for co-operation among Governments in thé field of governmental regulation and practices relating to technical matters of all kinds affecting shipping engaged in international trade; to encourage the general adoption of the highest practicable standards in matters concerning maritime safety, efficiency of navigation and the prevention and control of marine pollution from ships; and to deal with legal matters related to the purposes set out in this Article; 680

(d) To provide for the consideration by the Organization of any matters

IMO concerning shipping that may be referred to it by any organ or specialized agency of the United Nations; (e)

To provide for the exchange of information among Governments on matters under consideration by the Organization.

Part II Functions

D o c . 50 through the normal processes of international shipping business the Organization shall so recommend. When, in the opinion of the Organization, any matter concerning unfair restrictive practices by shipping concerns is incapable of settlement through the normal processes of international shipping business, or has in fact so proved, and provided it shall first have been the subject of direct negotiations between the Members concerned, the Organization shall, at the request of one of those Members, consider the matter.

Article 2 The functions of the Organization shall be consultative and advisory.

Part III Membership

Article 3 In order to achieve the purposes set out in Part I, the Organization shall: (a)

Subject to the provisions of Article 4, consider and make recommendations upon matters arising under Article 1 (a), (b) and (c) that may be remitted to it by Members, by any organ or specialized agency of the United Nations or by any other intergovernmental organization or upon matters referred to it under Article 1 (d);

Article 5 Membership in the Organization shall be open to all States, subject to the provisions of Part III. Article 6 Members of the United Nations may become Members of the Organization by becoming parties to the Convention in accordance with the provisions of Article 67. Article 7

(b)

Provide for the drafting of conventions, agreements, or other suitable instruments, and recommend these to Governments and to inter-governmental organizations, and convene such conferences as may be necessary;

(c)

Provide machinery for consultation among Members and the exchange of information among Governments;

(d)

Perform functions arising In connexion with paragraphs (a), (b) and (c) of this Article, in particular those assigned to it under international instruments relating to maritime matters. Article 4

In those matters which appear to the Organization capable of settlement

. States not Members of the United Nations which have been invited to send representatives to the United Nations Maritime Conference convened in Geneva on 19 February 1948, may become Members by becoming parties to the Convention in accordance with the provisions of Article 67. A r t i c l e S"1 Any State not entitled to become a Member under Article 6 or 7 may apply through the Secretary-General of the Organization to become a Member and shall be admitted as a Member upon its becoming a party to the Convention in accordance with the provisions of Article 67 provided that, upon the recommendation of the Council, Its application has been approved by twothirds of the Members other than Associate Members. 681

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A r t i c l e 14

Any Territory or group of Territories to which the Convention has been made applicable under Article 68, by the Member having responsibility for its international relations or by the United Nations, may become an Associate Member of the Organization by notification in writing given by such Member or by the United Nations, as the case may be, to the Secretary-General of the United Nations.

Regular sessions of the Assembly shall take place once every two years. Extraordinary sessions shall be convened after a notice of sixty days whenever onethird of the Members give notice to the Secretary-General that they desire a session to be arranged, or at any time if deemed necessary by the Council, after a notice of sixty days.

A r t i c l e 10 An Associate Member shall have the rights and obligations of a Member under the Convention except that it shall not have the right to vote or be eligible for membership on the Council and subject to this the word "Member" in the Convention shall be deemed to include Associate Member unless the context otherwise requires. A r t i c l e 11 No State or Territory may become or remain a Member of the Organization contrary to a resolution of the General Assembly of the United Nations.

Part IV Organs A r t i c l e 12 The Organization shall consist of an Assembly, a Council, a Maritime Safety Committee, a Legal Committee, a Marine Environment Protection Committee and such subsidiary organs as the Organization may at any time consider necessary; and a Secretariat.

Part V The Assembly A r t i c l e 13 The Assembly shall consist of all the Members. 682

A r t i c l e 15 A majority of the Members other than Associate Members shall constitute a quorum for the meetings of the Assembly. A r t i c l e 16 The functions of the Assembly shall be: (a) To elect at each regular session from among its Members, other than Associate Members, its President and two Vice-Presidents who shall hold office until the next regular session; (b) To determine its own Rules of Procedure except as otherwise provided in the Convention; (c) To establish any temporary or, upon recommendation of the Council, permanent subsidiary bodies it may consider to be necessary; (d) To elect the Members to represented on the Council provided in Article 18;

be as

(e) To receive and consider the reports of the Council, and to decide upon any question referred to it by the Council; (f)

To approve the work programme of the Organization;

(g) To vote the budget and determine the financial arrangements of the Organization, in accordance with Part XI; (h) To review the expenditures approve the accounts of Organization;

and the

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IMO (i)

(j)

(k)

(I)

To perform the functions of the Organization, provided that in matters relating to Article 3 (a) and (b), the Assembly shall refer such matters to the Council for formulation by it of any recommendations or instruments thereon; provided further that any recommendations or instruments submitted to the Assembly by the Council and not accepted by the Assembly shall be referred back to the Council for further consideration with such observations as the Assembly may make; To recommend to Members for adoption regulations and guidelines concerning maritime safety and the prevention and control of marine pollution from ships or amendments to such regulations and guidelines which have been referred to it;

To take decisions in regard to convening any international conference or following any other appropriate procedure for the adoption of International conventions or of amendments to any international conventions which have been developed by the Maritime Safety Committee, the Legal Committee, the Marine Environment Protection Committee, or other organs of the Organization; To refer to the Council for consideration or decision any matters within the scope of the Organization, except that the function of making recommendations under paragraph (j) of this Article shall not be delegated.

A r t i c l e 18 In electing the Members of the Council, the Assembly shall observe the following criteria: (a)

Six shall be States with the largest interest in providing international shipping services;

(b)

Six shall be other States with the largest interest in international seaborne trade;

(c)

Twelve shall be States not elected under (a) or (b) above, which have special Interests In maritime transport or navigation, and whose election to the Council will ensure the representation of all major geographic areas of the world.

A r t i c l e 19 Members represented on the Council in accordance with Article 17 shall hold office until the end of the next regular session of the Assembly. Members shall be eligible for re-election.

A r t i c l e 20 (a) The Council shall elect its Chairman and adopt its own Rules of Procedure except as otherwise provided in the Convention. (b) Sixteen Members of the Council shall constitute a quorum. (c) The Council shall meet upon one month's notice as often a s may be necessary for the efficient discharge of its duties upon the summons of its Chairman or upon request by not less than four of its Members. It shall meet at such places as may be convenient.

Part VI The Council A r t i c l e 21 A r t i c l e 17 The Council shall be composed of twenty-four Members elected by the Assembly.

The Council shall invite any Member to participate, without vote, in its deliberations on any matter of particular concern to that Member. 683

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A r t i c l e 25

(a) The Council shall consider the draft work programme and budget estimates prepared by the Secretary-General in the light of the proposals of the Maritime Safety Committee, the Legal Committee, the Marine Environment Protection Committee and other organs of the Organization and, taking these into account, shall establish and submit to the Assembly the work programme and budget of the Organization, having regard to the general interest and priorities of the Organization.

The Council shall submit to the Assembly financial statements of the Organization, together with the Council's comments and recommendations.

(b) The Council shall receive the reports, proposals and recommendations of the Maritime Safety Committee, the Legal Committee and the Marine Environment Protection Committee and other organs of the Organization and shall transmit them to the Assembly and, when the Assembly is not in session, to the Members for information, together with comments and recommendations of the Council.

(b) Having regard to the provisions of Part XIV and to the relations maintained with other bodies by the respective Committees under Articles 2 9 , 3 4 and 39, the Council shall, between sessions of the Assembly, be responsible for relations with other Organizations.

(c) Matters within the scope of Articles 29,34 and 39 shall be considered by the Council only after obtaining the views of the Maritime Safety Committee, the Legal Committee or the Marine Environment Protection Committee, as may be appropriate. A r t i c l e 23 The Council, with the approval of the Assembly, shall appoint the SecretaryGeneral. The Council shall also make provision for the appointment of such other personnel as may be necessary, and determine the terms and conditions of service of the Secretary-General and other personnel, which terms and conditions shall conform as far as possible with those of the United Nations and its specialized agencies.

A r t i c l e 26 (a) The Council may enter into agreements or arrangements covering the relationship of the Organization with other organizations, as provided for in Part XIV. Such agreements or arrangements shall be subject to approval by the Assembly.

A r t i c l e 27 Between sessions of the Assembly, the Council shall perform all the functions of the Organization, except the function of making recommendations under Article 16 (j). In particular, the Council shall co-ordinate the activities of the organs of the Organization and may make such adjustments in the work programme as are strictly necessary to ensure the efficient functioning of the Organization.

Part VII Maritime Safety Committee A r t i c l e 28 The Maritime Safety Committee shall consist of all the Members. A r t i c l e 29

A r t i c l e 24 The Council shall make a report to the Assembly at each regular session on the work performed by the Organization since the previous regular session of the Assembly. 684

(a) The Maritime Safety Committee shall consider any matter within the scope of the Organization concerned with aids to navigation, construction and equipment of vessels, manning from a safety standpoint, rules for the prevention

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IMO of collisions, handling of dangerous cargoes, maritime safety procedures and requirements, hydrographie information, log-books and navigational records, marine casualty investigation, salvage and rescue, and any other matters directly affecting maritime safety.

(b) The Maritime Safety Committee shall provide machinery for performing any duties assigned to it by this Convention, the Assembly or the Council, or any duty within the scope of this Article which may be assigned to it by or under any other international instrument and accepted by the Organization.

the provisions of Article 28, the Maritime Safety Committee when exercising the functions conferred upon it by or under any international convention or other instrument, shall conform to the relevant provisions of the convention or instrument in question, particularly as regards the rules governing the procedure to be followed.

Part VIII Legal Committee A r t i c l e 33 The Legal Committee shall consist of all the Members.

(c) Having regard to the provisions of Article 26, the Maritime Safety Committee, upon request by the Council or if it deems such action useful in the interests of its own work, shall maintain such close relationship with other bodies as may further the purposes of the Organization. A r t i c l e 30 The Maritime Safety Committee shall submit to the Council: (a) Proposals for safety regulations or for amendments to safety regulations which the Committee has developed: (b) Recommendations and guidelines which the Committee has developed; (c) A report on the work of the Committee since the previous session of the Council.

A r t i c l e 34 (a) The Legal Committee shall consider any legal matters within the scope of the Organization. (b) The Legal Committee shall take all necessary steps to perform any duties assigned to it by this Convention or by the Assembly or the Council, or any duty within the scope of this Article which may be assigned to it by or under any other international instrument and accepted by the Organization.

(c) Having regard to the provisions of Article 26, the Legal Committee, upon request by the Council or, if it deems such action useful in the interests of its own work, shall maintain such close relationship with other bodies as may further the purposes of the Organization. A r t i c l e 35

A r t i c l e 31 The Maritime Safety Committee shall meet at least once a year. It shall elect its officers once a year and shall adopt its own Rules of Procedure. A r t i c l e 32 Notwithstanding anything to the contrary in this Convention but subject to

The Legal Committee shall submit to the Council: (a) Drafts of international conventions and of amendments to international conventions which the Committee has developed; (b) A report on the work of the Committee since the previous session of the Council. 685

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36

The Legal Committee shall meet at least once a year. It shall elect its officers once a year and shall adopt its own Rules of Procedure. A r t i c l e 37 Notwithstanding anything to the contrary in this Convention, but subject to the provisions of Article 33, the Legal Committee, when exercising the functions conferred upon it by or under any international convention or other instrument, shall conform to the relevant provisions of the convention or instrument in question, particularly as regards the rules governing the procedures to be followed.

Part IX The Marine Environment Protection Committee A r t i c l e 38 The Marine Environment Protection Committee shall consist of all the Members.

(c) Provide for the acquisition of scientific, technical and any other practical information on the prevention and control of marine pollution from ships for dissemination to States, in particular to developing countries and, where appropriate, make recommendations and develop guidelines; (d) Promote co-operation with regional organizations concerned with the prevention and control of marine pollution from ships, having regard to the provisions of Article 26;

(e) Consider and take appropriate action with respect to any other matters falling within the scope of the Organization which would contribute to the prevention and control of marine pollution from ships including co-operation on environmental matters with other international organizations, having regard to the provisions of Article 26.

A r t i c l e 40

A r t i c l e 39

The Marine Environment Protection Committee shall submit to the Council:

The Marine Environment Protection Committee shall consider any matter within the scope of the Organization concerned with the prevention and control of marine pollution from ships and in particular shall:

(a) Proposals for regulations for the prevention and control of marine pollution from ships and for amendments to such regulations which the Committee has developed;

(a) Perform such functions as are or may be conferred upon the Organization by or under international conventions for the prevention and control of marine pollution from ships, particularly with respect to the adoption and amendment of regulations or other provisions, as provided for in such conventions; (b) Consider appropriate measures to facilitate the enforcement of the conventions referred to in paragraph (a) above; 686

(b) Recommendations and guidelines which the Committee has developed; (c) A report on the work of the Committee since the previous session of the Council.

A r t i c l e 41 The Marine Environment Protection Committee shall meet at least once a year. It shall elect its officers once a year and shall adopt its own Rules of Procedure.

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A r t i c l e 47

Notwithstanding anything to the contrary in this Convention, but subject to the provisions of Article 38, the Marine Environment Protection Committee, when exercising the functions conferred upon it by or under any international convention or other instrument, shall conform to the relevant provisions of the convention or instrument in question, particularly as regards the rules governing the procedures to be followed.

In the performance of their duties the Secretary-General and the staff shall not seek or receive instructions from any Government or from any authority external to the Organization. They shall refrain from any action which might reflect on their position as international officials. Each Member on its part undertakes to respect the exclusively international character of the responsibilities of the Secretary-General and the staff and not to seek to influence them in the discharge of their responsibilities.

Part X The Secretariat Article 48 A r t i c l e 43 The Secretariat shall comprise the Secretary-General and such other personnel as the Organization may require. The Secretary-General shall be the chief administrative officer of the Organization and shall, subject to the provisions of Article 23, appoint the above-mentioned personnel. A r t i c l e 44 The Secretariat shall maintain all such records as may be necessary for the efficient discharge of the functions of the Organization and shall prepare, collect and circulate the papers, documents, agenda, minutes and information that may be required for the work of the Organization. A r t i c l e 45 The Secretary-General shall prepare and submit to the Council the financial statements for each year and the budget estimates on a biennial basis, with the estimates for each year shown separately. A r t i c l e 46 The Secretary-General shall keep Members informed with respect to the activities of the Organization. Each Member may appoint one or more representatives for the purpose of communication with the SecretaryGeneral.

The Secretary-General shall assume any other functions which may be assigned to him by the Convention, the Assembly or the Council.

Part XI Finances A r t i c l e 49 Each Member shall bear the salary, travel and other expenses of its own delegation to the meetings held by the Organization. A r t i c l e 50 The Council shall consider the financial statements and budget estimates prepared by the Secretary-General and submit them to the Assembly with its comments and recommendations. A r t i c l e 51 (a) Subject to any agreement between the Organization and the United Nations, the Assembly shall review and approve the budget estimates. (b) The Assembly shall apportion the expenses among the Members in accordance with a scale to be fixed by it after consideration of the proposals of the Council thereon. 687

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A r t i c l e 52 Any Member which fails to discharge its financial obligation to the Organization within one year from the date on which it is due, shall have no vote in the Assembly, the Council, the Maritime Safety Committee, the Legal Committee or the Marine Environment Protection Committee unless the Assembly, at its discretion, waives this provision. Part XII Voting A r t i c l e 53 Except as otherwise provided in the Convention or in any international agreement which confers functions on the Assembly, the Council, the Maritime Safety Committee, the Legal Committee or the Marine Environment Protection Committee, the following provisions shall apply to voting in these organs: (a) Each Member shall have one vote. (b) Decisions shall be by a majority vote of the Members present and voting and, for decisions where a two-thirds majority vote is required, by a twothirds majority vote of those present. (c) For the purpose of the Convention, the phrase "Members present and voting" means "Members present and casting an affirmative or negative vote". Members which abstain from voting shall be considered as not voting. Part XIII Headquarters of the Organization

(c) The Assembly may hold sessions in any place other than the headquarters if the Council deems it necessary.

Part XIV Relationship with the United Nations and other Organizations

A r t i c l e 55 The Organization shall be brought into relationship with the United Nations in accordance with Article 57 of the Charter of the United Nations as the specialized agency in the field of shipping. This relationship shall be effected through an agreement with the United Nations under Article 63 of the Charter of the United Nations, which agreement shall be concluded as provided in Article 26.

A r t i c l e 56 The Organization shall co-operate with any specialized agency of the United Nations in matters which may be the common concern of the Organization and of such specialized agency, and shall consider such matters and act with respect to them in accord with such specialized agency.

A r t i c l e 57 The Organization may, on matters within its scope, co-operate with other inter-governmental organizations which are not specialized agencies of the United Nations, but whose interests and activities are related to the purposes of the Organization.

A r t i c l e 54 (a) The Organization London.

headquarters of the shall be established in

(b) The Assembly may by a two-thirds majority vote change the site of the headquarters if necessary. 688

A r t i c l e 58 The Organization may, on matters within its scope, make suitable arrangements for consultation and cooperation with non-governmental international organizations.

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IMO A r t i c l e 59 Subject to approval by a two-thirds majority vote of the Assembly, the Organization may take over from any other international organizations, governmental or non-governmental, such functions, resources and obligations within the scope of the Organization as may be transferred to the Organization by international agreements or by mutually acceptable arrangements entered into between competent authorities of the respective organizations. Similarly, the Organization may take over any administrative functions which are within its scope and which have been entrusted to a Government under the terms of any international instrument.

Part XV

Secretary-General to Members at least six months in advance of their consideration by the Assembly. Amendments shall be adopted by a twothirds majority vote of the Assembly. Twelve months after its acceptance by two-thirds of the Members of the Organization, other than Associate Members, each amendment shall come into force for all Members except those which, before it comes into force, make a declaration that they do not accept the amendment. The Assembly may by a twothirds majority vote determine at the time of its adoption that an amendment is of such a nature that any Member which has made such a declaration and which does not accept the amendment within a period of twelve months after the amendment comes into force shall, upon the expiration of this period, cease to be a party to the Convention.

Legal Capacity, Privileges and Immunities A r t i c l e 60 The legal capacity, privileges and immunities to be accorded to, or in connexion with, the Organization, shall be derived from and governed by the General Convention on the Privileges and Immunities of the Specialized Agencies approved by the General Assembly of the United Nations on 21 November 1947, subject to such modifications as may be set forth in the final (or revised) text of the Annex approved by the Organization in accordance with Sections 36 and 38 of the said General Convention. A r t i c l e 61 Pending its accession to the said General Convention in respect of the Organization, each Member undertakes to apply the provisions of Appendix II to the present Convention.

A r t i c l e 63 Any amendment adopted under Article 62 shall be deposited with the Secretary-General of the United Nations, who will immediately forward a copy of the amendment to all Members.

A r t i c l e 64 A declaration or acceptance under Article 62 shall be made by the communication of an instrument to the Secretary-General for deposit with the Secretary-General of the United Nations. The Secretary-General will notify Members of the receipt of any such instrument and of the date when the amendment enters into force. Part XVII Interpretation

Part XVI Amendments A r t i c l e 62 Texts of proposed amendments to the Convention shall be communicated by the

A r t i c l e 65 Any question or dispute concerning interpretation or application of Convention shall be referred to Assembly for settlement, or shall settled in such other manner as

the the the be the 689

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parties to the dispute may agree. Nothing in this Article shall preclude any organ of the Organization from settling any such question or dispute that may arise during the exercise of its functions. Article 66 Any legal question which cannot be settled as provided in Article 65 shall be referred by the Organization to the International Court of Justice for an advisory opinion in accordance with At tide 96 of the Charter of the United Nations.

(c) A declaration made under paragraph (a) of this Article shall be communicated to the Secretary-General of the United Nations and a copy of it will be forwarded by him to all States invited to the United Nations Maritime Conference and to such other States as may have become Members. (d) In cases where under a Trusteeship Agreement the United Nations is the administering authority, the United Nations may accept the Convention on behalf of one, several, or all of the Trust Territories in accordance with the procedure set forth in Article 67.

Pari XVIII Miscellaneous Provisions Article 67 S i g n a t u r e and A c c e p t a n c e Subject to the provisions of Part III the present Convention shall remain open for signature or acceptance and States may become parties to the Convention by: (a) Signature without reservation as to acceptance; (b) Signature subject to acceptance followed by acceptance; or (c) Acceptance. Acceptance shall be effected by the deposit of an instrument with the Secretary-General of the United Nations. Article 68 Territories (a) Members may make a declaration at any time that their participation in the Convention includes all or a group or a single one of the Territories for whose international relations they are responsible. (b) The Convention does not apply to Territories for whose international relations Members are responsible unless a declaration to that effect has been made on their behalf under the provisions of paragraph (a) of this Article. 690

Article 69 Withdrawal (a) Any Member may withdraw from the Organization by written notification given to the Secretary-General of the United Nations, who will immediately inform the other Members and the SecretaryGeneral of the Organization of such notification. Notification of withdrawal may be given at any time after the expiration of twelve months from the date on which the Convention has come into force. The withdrawal shall take effect upon the expiration of twelve months from the date on which such written notification is received by the SecretaryGeneral of the United Nations. (b) The appPcation of the Convention to a Territory or g:oup of Territories under Article 68 may at any time be terminated by written notification given to the Secretary-General of the United Nations by the Member responsible for its international relations or, in the case of a Trust Territory of which the United Nations is the administering authority, by the United Nations. The SecretaryGeneral of the United Nations will immediately inform all Members and the Secretary-General of the Organization of such notification. The notification shall take effect upon the expiration of twelve months from the date on which it is received by the Secretary-General of the United Nations.

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Appendix I

Entry into Force

(Referred to in Article 17)

A r t i c l e 70 The present Convention shall enter into force on the date when 21 States, of which seven shall each have a total tonnage of not less than 1,000,000 gross tons of shipping, have become parties to the Convention in accordance with Article 67.

A r t i c l e 71 The Secretary-General of the United Nations will inform all States invited to the United Nations Maritime Conference and such other States as may have become Members, of the date when each State becomes party to the Convention, and also of the date on which the Convention enters into force.

A r t i c l e 72 The present Convention, of which the English, French and Spanish texts are equally authentic, shall be deposited with the Secretary-General of the United Nations, who will transmit certified copies thereof to each of the States invited to the United Nations Maritime Conference and to such other States as may have become Members.

A r t i c l e 73 The United Nations is authorized to effect registration of the Convention as soon as it comes into force.

-

aoolt'shed-

Appendix II (Referred to in Article 61) Legal Capacity, Privileges and Immunities The following provisions on legal capacity, privileges and immunities shall be applied by Members to, or in connexion with, the Organization pending their accession to the General Convention on Privileges and Immunities of Specialized Agencies in respect of the Organization.

Section 1 The Organization shall enjoy in the territory of each of its Members such legal capacity as is necessary for the fulfilment of its purposes and the exercise of its functions. Section 2 (a) The Organization shall enjoy in the territory of each of its Members such privileges and immunities as are necessary for the fulfilment of its purposes and the exercise of its functions. (b) Representatives of Members including alternates and advisers, and officials and employees of the Organization shall similarly enjoy such privileges and immunities as are necessary for the independent exercise of their functions in connexion with the Organization. Section 3 In applying the provisions of Sections 1 and 2 of this Appendix, the Members shall take into account as far as possible the standard clauses of the General Convention on the Privileges and Immunities of the Specialized Agencies. 691