AND
I I S?CIAL COUNCIL
• ll:ONOMIC COl4MISSION FUR .ArnICA Preparatory Meeting
Conference of Finance Ministers on the Establishment of an African Development Khartoum, 16-27 July 1963
Provisional agenda, item
N o.5
Bank
E/CN.14/FMAB/4/Add.3 4 July 1963
Original I ENGLISH
DRAFT AGREEMENT ESTABLISHING AN AFRICAN DEVELOF~~NT BANK AND AMENDMENTS PROPOSED BY GOVERNMENTS AND
INTERNATIONAL INSTITUTIONS
KHAR-63-20 63-2294
(prepared by the Executive Secretary)
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E/CN.14/FMAB/4/Add.3
TABLE OF C ONTEN'fS INTaODUCTION
NOTE Preamble
Chapter II Purpose. Functions. Membership and Struoture Article 1 Purpose
Artiole 2 Functions
Article 3 Membership and Geographioal Area Article 4 Structure
Chapter III Capital
Artiole 5 Authorized Capital Article 6 Subscription of Shares
·Artiole 7 Payment of Subsoriptions Artiole 8 Special Funds
Artiole 9 Ordinary Capital Resouroes Artiole 10 Special Resources
Article 11 Separation of Resources Chapter III: Operations
Article 12 Use of Resources
Article 13 Ordinary and Special Operations Article 14 Recipients and Methods of Operations Article 15 Limitations on Operations
Artiole 16 Provision of Currencies for D·irect Loans Article 17 Operational Principles
Article 18 Terms and Conditions for Direct Loans and . Guarantees
Article
19 ·
Commission and Fees Article 20 Special ReserveArticle 21 Methods of Meeting Liabilities of the Bank in Case of Default (Ordinary Operations) Artiole 22 Methods of Meeting Liabilities of the Bank
on Borrowings for Special Funds
.Paragraphs
I
~ 1
3 5 7 9
11
13 15 18 20 22 24
26 28 30 32 34 36
39
42 44
49
- ii -
Chapter IV: Borrowing and other Additional Powers Artiole 23 General Powers
Article 24 Special Borrowing Powers
. Article 25 Warning to be Placed on Securities
. Article 26 Valuation of Currencies and Determination of Co,\vsrti bili ty
Artiole 27 Use of Currencies
Article 28 Maintenance of Value of the Currency Holdings of the Bank
Chapter VI Organization and b~nagement
Article 29 Board of Governorsl Powers Article 30 Board of Governors: Composition Article 31 Board of Governorsl Procedure Article 32 Board of Direotorsl Powers Article 33 Board of Directors: Composition Article 34
Article 35 Article 36 Article 37 Article 38
·Article
39
Article 40 Article 41 Article 42 Artiole 43
Board of Directors: Procedure Voting
The President: Appointment The Office of the President
Prohibition of Political Activity,
the International Character of the Bank Advisory COUD.cil
Offices of the Bank
Channel of Co~upioations,Depositories ..
Publication of the Agreement, Reports and Provisions of Information
Allocation of Net In~ome
Chapter VII Withdrawal and Suspension of Members, Tsmporary Suspension and Termination of Operations of the
~
Artiole ~ Withdrawal Artiole 45 Suspension.
Article
46
Settlement of AooountsArtiole
47
Temporary Suspension of Operations. .
Page 51 54 56 58
60
63
65 67 ' . . 69
71
73
75
77 79 81... 8"3 "
85 87
89 91 93
95 97
99 102, - •
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E/CN.14/FMAB/4/Add .3 - iii -
Article 48 Termination of Operations
Artiole 49 Liabili,ty of Members and Payment of Claims Article 50 Distribution of Assets
Chapter VII: Status, Immunities, Exemptions and Privileges Article 51 Status
Article 52 Status in Member Countries Article 53 Judicial Proceedings
Article 54 Immunity of Assets and Archives Article 55 Freedom of Assets from Restrictions Article 56 Privilege for Communications
Article 57 Personal Immunities and Privileges Article 58 Exemption from Taxation
Article 59 Notification of Implementation
Article 60 Application of Immunities, Exemptions and
Page 104 106 108
111 113 115 117 119 121 123 125 127
Privileges 129
Chapter VIII: Amendments, Interpretation, Arbitration Article 61 Amendments
Article 62 Interpretation Article 63 Arbitration Chapter IX: Final Provisions
Artiole 64 Article 65 Artiole 66 Artiole 67 .ANNEX A
ANNEX B
Signature and Deposit
Ratification, Accepiance, Accession, and Acquisition of Membership
Entry into Force
Commenoement of Operations
Initial Subscriptions to the Authorized Capital of the Bank.
Election of Directors
131 ): 3 135
137 139 141 143
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'• E/CN .14/F'lIlil/4/ Add.3
1. This document reproduces the text of the Draft Agreement establish- ing the African Development Bank set out in document E/CN.14/FMAB/4/Add.2.
In addition, it sets out, arranged under the Articles to which they refer, proposals of amendments received from the Governments of Gambia, Kenya, Liberia Tanganyika, the United Arab Republic and Upper Volta and from the Inter-
national Telecommunications Union before 13
lu17
1963 (see also para- graph 4 below).2. This Document uses the following abbreviations:
"Agreement"
"IBRD"
"I Fe "
"IDA"
"IADB"
"EIB"
The Agre~ment establishing the Afrioan Development Bank International Bank for Reconstruction )
and Development )
- International Finance Corporation International Development Association - Inter-Amerioan Development Bank
Europelll1 Investment Bank
as well as the consti tuent instruments establishing thes"
institutions 3. The Draft Agreement should be read in conjunction with the following special Notes by the Executive Secretary:
African Development Bank:
African Development Bante:
African Development Bank:
The Currency of the EqUity Capital (doc. E/CN.14/FMAB/S)
Questions relating to the Use of Member Currenoies (doc. E/CN .14/YltAll/9)
Separation of Accounts - Ordinary Capital Resources and Special Resources &
(doc. E/CN.14/FMAB/IO).
4. (a) The Government of the United Arab Republic proposes that a formula should be found so as to enable the Bank to make use of financial assistance offered from any source or Staie.
(b) The Government of Upper Volta desires to recall the existence of the African and b~dagascar Union of Development Banks. This institution, created at regional and sub-regional level, could find its place within.
the framework of the Bank. The relations between the Union and the Bank should be defined and it should be determined how the Union should be
represented on the Board of Governors as well as on the Board of Directors.
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DRAFT AGREEMENT ESTABLISHING AN AFRICAN DEVELOPMENT BAIIK
E/CN .14/FMAB/ 4/ Add.3
THE GOVERmlENTS on whose behalf this Agreement is signed;
DETERMINED to strengthen African solidarity by means of economic co-operation between Afrioan States;
CONSIDERING the necessity of accelerating the development of the extensive human and natural resouroes of Africa in order to stimulate economic development and social progress in that region!
REALIZING the importance of co-ordinating national plans of economic and social development for the promotion of the harmonious growth of Afrioan economies as a whole and the expansion of African. foreign trade and, in particular, inter-Afrioan trade;
RECOGNIZING that the establishment of a financial institution common to all Afrioan oountries would serve these ends;
HAVE AGREED to establish hereby the Afrioan Development Bank
(hereinafter called the "Bank") which shall be governed by the following provisions I
PREAMBLE
Amendments proposed
E!CN.14!FMAB!4!Add.3 Page 2
Preamble (Amend.)
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CHAPTER I
E/cn .14/FM.AJ3/ 4/
Add·3 Page 3Chapter I
!.rticle 1
Purpose. Functions. Membership and Structure Article I
The purpose of the Bank shall be to contribute to the economic
development and social progress of its members - individually and jOintly.
Amendments proposed
E/CN.14/m~/4/Add.3 Page 4
Chapter I
Article 1 (Amend.)
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•Article 2 Functions
E/CN .14/mlAB/ 4/ Add.3 Page 5
Chapter I Article 2
(1) To implement its purpose, the Bank shall have the following functions:
(a) to use the resources at its disposal for the financing of invest- ment projects and programmes relating to the economic or social development of its members, including, among others:
(i) projects or programmes which by their ~atura or scope concern several members; and
(i~) projects or programmes designed to make the economies of its members increasingly complementary and to bring about an orderly expansion of their foreign trade;
(b) to undertake, or participate in, the selection, study and pre-
paration of projects, enterprises and activities contributing to such develop- mentl
(c) to mobilize in Africa, and outside Africa, resources for the financing of such investment projects and programmes;
(d) generally, to promote investment in Africa of public and private capital in projects or programmes designed to contribu,te to the economic development or social progress of its members;
(e) ' to provide such technical assistance as may be needed in Africa for the study, preparation, financing and execution of development projects or programmes; and
(f) to undertake such other activities and provide such other services as may advance its purpose.
(2) In carrying out its functions, the Bank should co-operate with national and regional development institutions existing in Africa. To the same end, it should co-operate with other international organizations pursuing a similar purpose and with other institutions concerned with the development of Africa.
(3) The Bank shall be guided in all its decisions by the provisions of Articles 1 and 2 of this Agreement.
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Article 2
Amendmen ts ~proposed
E/CN.14/FMAB/4/Add .3 Page 6
Chapter I
Article 2 (Amend.)
UAB Paragraph (2): The word "existing" at the end of the first sentence should be deleted. A sentence should be added at the end of the paragraph, lI"hich should read: "Bank loans from international or national lending institutions should not be conditional and should be free from all strings".
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Article .3
Membership and Geographical Area
E/CN .14/Fi\IAB/ 4/ Add.3 Page
7
Chapter I Article 3
(1) Any African country which has the status of an independent State
may become a member of the Bank. It shall acquire membership in accordance with paragraph (1) or paragraph (2) of Article 65 of this Agreement.
(2) The geographical area to which the membership and development activities of the Bank may extend (referred to in this Agreement as "Africa" or "African", as the Case may be) shall comprise the continent of Africa, Uadagascar and other African islands.
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Article 3
Amendments proposed
E/CN.14/FMAB/4/Add.3 Page 8
Chapter I
Article 3 (Amend.)
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Article 4 Struoture
E/CN .l4/FilAll/ 4/Add.3 Page 9
Chapter I Article
4
The Bank shall have a Board of Governors, a BOard of Directors, a PreSident, and such other officers and staff to perform such duties as the Bank may detel~ine.
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Article 4
Amendments proposed
E/CN .14/~1AB/4/Add.3 Page 10
Chapter I
Article 4 (Amend.)
Liberi::1~ The .Ag.!'ecmm:lt should provide for at loar;t 01:18 Vinco-Pr)oiciont as a statutory officor •
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•CHAPTER JI
B/CH .14/Fl1AB/4/ Add.3
Page 11
Chap·~8r II
-,~l.rticle
5
unitn of aCCo11nt. It shall 1)8 div:'doc1. into 20~OOO t':lCu'ez ·':If d, par value of 10, 000 U11i ts of aOCOD..'1 t eao~ r3ho;-~';:';, ~·:h:i.ch f;;~l.A.J.J. b0 :-:.va:Llp,bJ.e for subscription bj' tr.ember8.
(b) lJ.1b.o value of the unit cf 2.l'COUJ~·~ ;:;hr..:1..:t. ~oe O~el-i8S70S8 .r:;'ram~J8 0f' fine galt ~
(2) The authorized capi·~al s tock sh:~~i..l be Iii\, :'L.cli.!ld i ! l to :9a:.l.d·-up shares and c!J.l.lahle sha.reB.. 'J.lhe 8qtL"i. ---al:1~t of IGG, 000, 000 uui 'ts ('If c.cee ~j]t
ohall b.1 p::-..ir:1.. U"9, ancl t!"LC eqU:·i.'t,-... :lc:i.1 ~ r;" l()O;J:)OO,OOO 1.l.' . .1i t.1 of .J,.ccou.;Jt sha.ll be ce..llc.ble for t!:.e pU:i..~p0r:e it0_~~L"jstl :t.n p2ra,S'I.L~':r. (4} (;.1.~ of _'i.:t'·:~icle
7 of this ~~t1:L"eonIAnt ..
power of the ffier.lb;;:cB.
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Article
5
Amendments proposed
E/Cll.14/FMAB/4/ Add.3 Page 12
Chapter II
Article
5
(Amend.)•
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Article 6
Subscription of Shares
E/CN .14/0W/ 4/ Add. 3 Page 13
Chapter II Article 6
(1) Each member shall initially subscribe shares of the capital stock of the Bank. The initial subscription of each member shall consist of an equal number of paid-up and callable shares. The initial number of shares to be subscribed by a State which acquires membership in accordance with paragraph (1) of Article 65 of this Agreement, shall be that set forth in its respect in Annex A to this Agreement, ,Ihich shall form an integral part thereof. The initial number of sharos to be subscribed by other members shall be determined by the Board of Governors.
(2) In the event of an increase of the capita,l stock for a purpose other than solely to provide for an initial subscription of a member, each member shall have the risht to subscribe, on such uniform terms and conditions as
the Board of Governors shall determine, a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscfibed bears to the total capital stock of the Bank. No member, however, shall be obligated to subscribe to any part of Bu.ch increased stock.
(3) A member may request the Bank to increase its subscription on such terms and conditions as the Board of Governors may determine.
(4) Shares of stock initially subscribed by States which acquire member- ship in accordance with paragraph (1) of Article 65 of this Agreement shall be issued at par. Other shares shall be issued at par unless the Board of Governors by a majority of the total voting power of the members decides in special circumstances to issu.e them on other terms.
(5)' Liability on sha~es shall be limited to the unpaid portion of their issue price.
(6) Shares shall not be pledged nor encumbered in any manner. Tbey shall be transferable only to the Bank.
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Gambia:
Kenya I
Article 6
Amendments proposed
E/CN.14/FMAB/4/Add.3 Page 14
Chapter II
Article 6 (Amend.)
The Government of Gambia desires that the ~inimum of one million units of account for initial subscriptions aAould apply to "foundation members" O1)ly, and not to States which like Gambia, will become eligible for membership on the attainment of independence. The sum in question amounts to approximately 20 per cent of Gambia's annual revenue.
Insistence thereon could make it impossible for Gambia to seek membership of the Bank. If Gambia should seek member- ship, her initial subscription should be determined by the Board of Governors in the light of such factors as they consider should properly be taken into account.
Paragraphs (2) and (3): These paragraphs provide for a
voluntary increase in members' subscriptions. It would seem desirable to include provision for a corresponding right, after proper notice, to withdraw auch extra Bubscriptions.
Tanganyikal Paragraph
(4):
Issues below par should be authorized by a two-thirds majority.;
Article
7
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Payment of Subscription
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E/C}T.14/FNAB/4/Add .3
Page 15 Chapter II Article
7
(l) '(a) . Payment of the amount initially subacribed to the paid-up capital atock of t\:te Bank by' a member which acquires·. membership in accordailcewi th paragraph (1) of Article 65, shall be made in six insta.lments, : the fi,rst of which shall be five per cent, the second
35
per cent, and the remaining four instalments each fifteen per cent of that amount.(b). The first instalment shall be paid by the Government concerned on or before the date of . .' the deposit of the instrument of acceptance or .
,
ratifioation of this, Agreement on its behalf in. acco.rdaJ;lCewi'1ih ;para~raph
(1) of Article 65. The se,cond instalment Sllal1 become due on the last day of a period of six months from the entry into force of this Agreement or on the day of the said deposit, whichever is the later day. The third instalment shall become due on the last day of a period of eighteen months from the en try in to force of this Agreen:en t. 'l'he remaining three ins tal:"
ments shall become due successively each on the last day of a period of one year immediately following the day on which the preceding instalment becomes due.
(2) Payment of the amounts initially subscribed by the members of the Bank to the paid-up capital etock shall be made in gold or convertible
currency.~ The Board of Governors shall determine the mode of payment I')f other amounts subscribed by the members to the paid-up capital stock.
(3) The Board of Governors shall determine the dates for the payment of amount. subscribed by the members of the Bank to the paid-up capital stock to ',hich the provisions of paragraph (1) of this Article do not apply.
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E/CN .14/Fdlw/4/ Add.3 Pe!ge 16 ,
Chapter 'II' Article ,7 ( ii)
(4) (a) Payment of the amounts .subscribed to the callable capital stock of the Bank shall be subject to call only as and when required by the Bank to meet its obligations incilrred,pursuant' to paragraph (1) (b) and (d) of Article 14, on bor.owing of funds for inclusion in it", ordinary capital resources or guarantees Chargeable to such resources.
(b) J:n the event of such calls, payment may be made at the .option ,of the member c.oncerned in gold, convertible currency or in the currency
required to disc!'-arge the obligation .of the Bank for th,e purpose of which the call is made.
(c) . Calls on unpaid subscriptions shall be, uniform in. percentage on all.callable shares.
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'(5) The Bank shall determine the plac'e for any payment und'e:r this Article
·provided that, until the Bank comes into eXistence!;· the payment of the first' instalment rel'erredto in paragraph (1) of this Article shall b'e made to the Trustee referred to in Article
67.
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TanganYika I
Article 7
Amendments proposed
E!CN.14!FMilB!4!Add.3 Page 17
Chapter II
Article
7
(Amend.)Paragraph (2): The phrase "Payment of the amourJts initially subscribed" may need closer definition to show whether reference is made to the first or to all instalments.
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Article 8 Special Funds
E/cN.14/~{AB/4/Add.3 Page 18
Chapter II Article 8
(1) The Bank may establish, or be entrusted with the administration of, Special Funds whioh are designed to serve its purpose and come within its functions. It may receive, hold, use, commit or otherwise dispose of resources appertaining to such Special Funds.
(2) The resources of such Special Funds shall be kept separate and apart from the ordinary capital resources of the Bank in accordance with the provisions of Article 11 of this Agreement.
(3) The Bank shall adopt such special rules and regulations as may be required for the administration and use of each Special Fund; provided always that
(a) such special rules and regulations shall be subject to paragraph (4) of Article
7,
Articles 9 to 11, and those provisions of this Agreement which expressly apply to the ordinary capital resources or ordinary operations of the Bank;(b) such special rules and regulations must be consistent with provisions of this Agreement which expressly apply to special resources or special operations of the Bankl and that
(c) where su.ch special rules and regulations do not apply, the Special Funds shall be governed by the provisions of this Agreement.
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Amondments proposed
E/c~r.14/FMAB/4/ Acld.3 Page 19
Chapter II
Article 8 (Amend.)
Liberia I The article does not define what is meant by Special Funds.
A definition should be included.
Article 9
Ordinary Capital Resources
E/CN.14/FMAB/4/Add.3 Page 20
Chapter II Article 9
For the purposes of this Agreement, the expression "ordinary capital resources" of the Bank shall include:
(a) au.thorized capital stock of the Bank subscribed pursuant to the provisions of Article 6 of this Agreement;
(b) funds raised by borrm-/ing of the Bank, by virtue of powers conferred in paragraph (a) of Article 23 of this ilgreement, to which the commitment to calls provided for in paragraph
(4)
of Article7
of this Agreement applies;(c) funds received in repayment of loans made \'lith the resources referred to in paragraphs (a) and (b) of this Article; and
(d) income derived from loans made from the aforementioned funds;
income from guarantees to which the commitment to calls provided for in paragraph (4) of Article
7
of this Agreemen.t applies; as l<eU as(e) any other funds or income received by· the BanI, which do not form part of its special resources.
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Article 9 Amendments proposed
E/cN
.14/~dAB/41 Add.3 Page 21Chapter II
Article 9 (Amend.)
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- - - --- - - -
Special Resouroes
Bleli! .14/V:!All/ 4/ Add. 3 Page 22
Chap"::er II Article 10
(1) For the ptITposes of this Agreemt3nt, the exp:r'ession "special resources!!
shall refer to the resources of Special FUnds and. shall include:
(a) resources initially contributed to any Special FUnd. ;
(b) fUl,ds borroVled for the purposes of e:ny Special l~nd: inc1u.ding the Special FUnd provided for in puagraph (6) of Arti6le 24 of this Agreement;
(c) funds repaid in respect of -'.oans or guarnnteGs financec. froM the resources of any Special B'und which, un~.er the rulos and :cegulations governinG' tha"t Speciaj. li"i.md, are receiYf3d by that Special Fund;
(d) income derived from opera tions of the Bank b:r O:-lhj.ch e .. ny of the aforementicDed resources or fund .. arc used or committed if, under the rules an.d regu.Jatio!}s gOyeri1:!.ng the Special I!\md concerned, th2'.t in.come
"'OCT"ues ·~o the BEdcl Special Fund; and
(e) any other resources at the disposal of any Special FUnd.
(2) For the purposes of this Agreement, the eJ:pression "special resources"
appertaining to a Special Fund" shall include the resources, funds and income which are referred to in the preceding paragraph and are - as the case may b. - contributed to, borrOl,ed or received by, accruing to, or at the disposal of the 3pecial FUnd concerned in conformity with the rulea and regulations governing that Special Fund.
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Article 10 Amendments proposed
E/CN.14/FMAB/4/Add.3 Page 23
Chapter II
Article 10 (Amendo)
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Article 11
Separation of Resources
E/CN.J.4/»IAB/4/Add.3 Page 24
Chapter II Article 11
(1) The ordinary capital resources of the Bank shall at all times and in all respects be held, used, committal, invested or otherwise disposed of, entirely separate from special resources. Each Special Fund, its resources and accounts shall be kept entirely separate from other Special Funds, their resources and accounts.
(2) The ordinary capi tal resources of the Bank .mall under no Mrcums tances be charged with, or used to discharge, losses or liabilities arising out of operations or other activities of any Special Fund. Special resources appertaining to any Special Fund shall under no circumstances be charged with, Or used to discharge, losses Or liabilities arising out of operations Or other activities of the Bank financed from its ordinary capital resources Or from special resources appertaining tc any other Special Fund.
(3) In the operations and other activities of any Special Fund, the liability of the Bank shall be limited to the special resources appertaining to that Special Fund which are at the disposal of the Bank.
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Artiole 11
E/CN .14/FIWl/
4/
Add.3Page 25 Chapter II
Article 11 (Amend.)
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Ope::'ations
£.j icle 12 Use of Resourc~
E!CN.14!FMAB!4!Add.3
Page 26 Chapter III Article 12
The resources and faoili tiee of the BallJc shall be used exolusi vely to implement the purpose and ftmotions set forth in Artioles land 2 of this A{;reement.
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Article 12 Amendments proposed
E/CN.14/FMAB/4/Add.3 Page 27
Chapter III
Article 12 (Amend.)
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Arti01e 13
O~dinary and Special Operations
E!CN.14!FMAB!4!Add.3 Page 28
Chapter III Article 13
(1) The operations of the Bank shall coneist of ordinary operations and of special operations.
(2) The ordinary operations shall be those financed from the ordinary capital resources of the Bank.
(3) The special operations shall be those financed from the special resources.
(4) The financial statements of the Bank shall show the ordinary opera- tions and the special operations of the Bank separately. The Bank shall adopt such other rules and regulations as may be required to ensure the effsctive separation of the two types of its operations.
(5) Expenses appertaining directly to ordinary operations shall be
chacged to the ordinary capital resources of the Bank; expenses appertain- ing directly to special operations shall be charged to the appropriate special resources. Other expenses shall be charged as the Bank shall determine.
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E/CN.14/FMAB/4/Add.3 Page 30
Chapter III Article 14
(1) Irl i tn opera.tions, the :eil,~1:( -;;.3.y provir~.e or facili ta. te financing f or any member, poli tioal sub-d.i'. isJ.on or any age:Jcy thereof or for any insti tU-'!.ii01.1 or u"clert:J.~'j.nc~· i~ t·:le .I~er::.··.i. trry of any member as well as for ::i.nterna tional or :;:':J;3ion2.1 ;\£,3ncies or j.ns ti tutions concerned with the de,-elopl'wnt 0::' _A.:fl'icp.o S,,~)j.3(;' t~ he provisions of this Chapter, the Ballk ID.s.y oa:.'~y o1xt i tc ()ps:a.~.'2 tiOYlS in e.ny of the follorling ways:
cr).~:<~ ";·:-,1 t: ;'".:J., 0:, :r.~C'.j!t C'. ~ r:.:o\-ided j,Xl Arti ole 20 of this
J\'IT:r...-~e!N'Ert, -~·o :i.~~l J.';:~·!er:··:3 :tori t~:1d:~iJtr~.buted surplus; or out of
(b) by makin~ 0.\' ptJ..::·~ioip~ ... ~tl1Z i!i direct loans out of funds borrowed or othel'~liz~ !?c.q~:~:.'oJ. 1)7 t'~J .l!i:;"':'~~~ f:'~:, i:1el· .. U2.l.on in its ordinary capital resources or in GJ?1Gial ~'.'{~~~UU ... '·~(' ,';; 01'
(0) by inv<'ztw3nt 01' f'l';:c.·' :r'JfeJ'l·'l(l
'co
j.D. F:l:"··p ue.graph (a) or (b) of this par1:'.g:'aph inch" oo.·~i\:-- cc.pH2.J. uf an u.nder~akine or institution;or
(d) by gl1.a:'al~tecing, i':1 11!laJ.c 0:::' in pP.:-t, l oans made by others and thereby ccr:',i:l:~t,~:.i.n...; fru:ds r8fcl'::"~<~ . . ~~) ::.r~ ::u).;-"1.:Lagraph (a) and (b) of this paragraph.
(2) The provision:J of "',jhtc A:;J..~,:~::~~::rt £l.P11l;;'·j.r:g to direct loans which the Bank may make pur,·uant to sub-para{l'rar-h Co.) or (b) of the preceding
paragraph sha.ll also e.pply to ~ t" ~:)2.r'.;icipaticn in any direct loan under- taken pursuant to any of those :lull-paragraphs. Equally, the provisions of this AgreGm~mt cPplY:cllg' to gu..'l.ro.n',c":J of 10anB undertaken by the Bank pursuant to sub-paraera.pli (d) of the pl'8ced.ing paragraph shall apply where the Bank guarantee>] part of su.ch a loa;) onlyo
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•Article 1,)
Limitations on Operations
E/CN .14/FMAB/ 4/ Add. 3 Page 32
Chapter III Article 15
(1) The total amount ou.tstanding in respect of the ordinary operations of the Bank shall not at any time exceed the total amount of its unimpaired subscribed capital togE)ther with the unimpaired reserves and surplus included in its ordinary capital resources excepting, however, the special reserve provided for in Article 20 of this Agreement.
(2) The total amount outstandin& in respect of the special operations .of the Bank relating to any Special ~und shall not at any time exceed the total aJljount of the unimpaired special resources appertaining to that Special Fund.
(3) In the case of loans made out of funds borrowed by the Bank to whioh the commitment to calls provided for in paragraph(1)(4) of Article
7
of this Agreement applies, the total amount of principal ou.tstanding and pay- able to thE) Bank in a specific currency shall not at any time exceed thetotal amount of principal outstanding in respect of funds borrowed by the Bank that are payable in the same currency.
(4) (a) In the case of investments made by virtue of paragraph (1) (c) of Article 14 of this Agreement out of the ordinary capital resources of the Bank, the total amount outstanding shall not at any time exceed ten per cent of the aggregate amount of the paid-up capital stock of the Bank together with the reserves and surplus included in its ordinary capital rescurceaexcepting, however, the special reserve provided for in Article 20 of this Agreement.
(b) At the time it is made, the amount of any specific investment referred to in the preceding sub-paragraph shall not exceed a percentage of equity capital of the institution or undertaking concerned, which the Board of Governors shall have fixed for any investment to be made by virtue of paragraph (l)(c) of Article 14 of this Agreement. In no event shall the Bank seek to obtain by such an investment a controlling interest in the institution or undertaking concerned.
, .
TanganYika:
Article 15 Amendments proPbsed
E/CN.14/~laB/4/Add.3 Page 33
Chapter III
Article 15 (Amend.)
Paragraph (4) (b), The expression "Controlling interest"
needs clearer definition to cover minority controlling interest and conditions laid down by the Bank on. investing which may involve some degree of control.
Article 16
E/CN .14/FT.W3/ 4/ Add.3 Page 34
Chapter III Article 16
Provision of Currencies for Direct Loans
In making direct loans, the Bank shall furnish the borrower 1<ith currencies other than the currency of the member in whose territory the project concerned is to be carried out (the latter cuxrency hereinafter to be called "local currency"), which are required to meet foreign exchange expenditure on that project; provided always that the Bank may, in making direot loans, provide financing to meet local expenditure on the project concerned I
(a) where it oan do so by supplying looal currency 'without selling any of its holdings in gold or convertible currencies; or (b) in exceptional circumstances, where in the opinion of the Bank
local expenditure on that project indirectly gives rise to an increased demand for foreign exchange in the country where that pxoject is to be carried out and the amount of suoh finanoing by the Bank does not exoeed a reasonable portion of the total local expenditure incurred on the said project.
•
,
Tanganvika;
Article 16
Amendments proposed
E/CN.14/FMAB/4/Add.3 Page 35
Chapter III
Article 16 (Amend.)
Sub-paragra.ph (b) I . Delete the phralle "in exceptional circumstanoea". The Article should be re-phrased so as to provide for Members sharing the same currency.
Article 17
Operational Principles
E!CN.14!FMAll!4!Add.3 Page 36
Chapter III Article 17
(1) The operations of the Bank shall be conducted in accordance with the following principles:
(a) (i) The operations of the Bank shall, except in special circum- stances, provide for the financing of specific projects including those forming part of a national or regional development programme urgently, required for the economic or social development of its members. They may, however, include global loans to, or guarantees of loans made to, African national development banks in order that the latter may finanoe projects of a specified type serving the purpose of the Bank within the respective 'fields of activities of such banksl
(ii) In selecting suitabl~ projects, the Bank shall always be guided by the provisions of paragraph (1) (a) of Article 2 of this Agreement and by the potential contribution of the project concerned to the purpose of the Bank rather than by the type of the prQjQc~.· It .shall, however, pay special attention to the seleotion of suitable mUlti-national projeetsl
(b) The Bank shall 'not. ,provide for the 'financing of a projeot in the territory of a member if that member objects thereto,
(c) The Bank shall not provide for the financing of a project to the extent that in its opinion the recipient may obtain the finance or facili ties elsewhere on terms that the .Bank considers are' reasonable for the recipient;
(d) Subject to the provisions of Articles 16 and 24 of this Agreement, the Bank shall not impose conditions enjoining that the proceeds of any financing undertaken pursuant to its ordinary operations shall be spent in the territory of any particular country nor
E/CN.14/FMAB/4/Add.3 Page 37
Chapter' III . Article 17 ( u)
(2)
that such proceeds shall not be spent in the territory of any particular country;
(e) In making or guar",nteeing a loan, the Bank shall pay due rof,"-"0.
to the prospects that the borrower ano_ the guarar.-I;oC', j_f ar.f, will be jon a position to meet their obligations unde:;:- tho 1_02n;
(f) In making or guaranteeing a loan, the Bank shall. bE< F'.LGisfiGd that the rate of interezt ano_ other charges are reasonable c_nd suoh rate, charges and the schedule for the repayment of pre,nc'''pal are appropriate for the pro ject concerned;
(g) In the case of a direct loan mao_e by the Bank, the ;)Or,c01nr sr..:;J.l be permitted by the Bank to draw its fu.,)ds· o:11y +,0 :"ce~ 'J1:V'Dh_- ttu'e in connexi0!l with the pra.ject as it is act':'?J.ly i[1Cl;\':""~:-.i
(h) The Bank shall make arrangemerits: to ensure that th.e n:I~:)0Gc'iu c_~
any lOan mad_e or guaranteed by· ft are U3eQ 0,,1;:, 1'01' +··,e p"·!.'-_:CC:;)~
for which the loan Was granted, ;-li th ".uc atten-,:io;, ':;0
r,"""'ccle:r,',-
tions of economy and efc:'iciency;
(i)
The Bank shall seek 1;0 maintain a rZ\.1,;onD,ble d;'-.f0:csi~,:j.G:?J ... j ,n i:.1.its investments.- in equity 'capital;
(j) The Bank shall appj~y sound banking principles ·to :It,,, cpel'GL_OTICI
and, in particular,. to' "its investments in equlty or..Ti~:.te,l· I-j shall not' assume responsi bili ty for managing any i.n,-;ti ·\.;u-c:'o::l. 0.y:
undertaking in which i t has an investMent; and
(k:)
In. guaranteeing a loan. made by other investorc, tl:e Ea.:;.:.'.: 8J~!?I~.receive- sUitable compensation for its risk.
; ."
The Bank sha.ll adopt such rules and regulations as ar8 l'3~1'ir"cl :-01' the cO~6iderationocf 'projects submitted to i t~
Kenya:
Article
17
Amendments proposed
E/CN .14/F1I!AJ3/ 4/ Adcl.3 Page 38
Chapter III
Article
17
(Amend.)Paragraph (1): The Government has already stressed the need for programme rather than project loans. It not98 therefore wi th some misgiving that, notwi thstanding the terms of Article 2 (l)(a), Article
17
(l)(a)(i) provides that, except in special circumstances, the operations of the Bank shall provide for the finanCing of specific projects. The Government considers that the present circumstances of Kenya, and probably of many other African countries, will warrant substantial emphasiS On the making of programme loans in crder to ensure that Governments Can carry out properly balanced programmes of development. The first sentence of sub-paragraph (a)(i) should be suitably re-drafted.The Government supports the proposal that global loans mBY be made to African national development banks. It suggests, however, that the words "or other suitablo financial institutions"
should be added. This 1iould enable programme loans to be made, for example, to an Aericultural ]~nance Corporation.
Tanga~yikal Paragraph (1) (a) (i): Provision should be made for loans to
"other sui table financial insti tutions".
•
Paragraph (1) (c): In exercising discretion the Bank should take into account the foreign exchange position of a country.
Para.o:raph (1) (.j): 'rhe right of the Bank~o impose conditions on recipients of ec;ui ty capital should be maintained •
E/CN.14/FMAB/4/Add.3 Page 39
Chapter III ' "
Article 18 ' -
Article 18 :, .C·
Terms and'Conditions 'for Direct Loans and, Guarantees (1) In the Case of direct loans made by the Bank, the contract:
(a) shall establish, in conformity >lith the operaticnal principles
set' forth in paragraph
(1)
of Article' 17 of this 'Agreement andsubject to the ' other provisi'ons of this Chapter, all the terms and' oondi tions for the loan concerned, including those relating 'to amortization, interest and 01l1e1' charges, and to maturities
and Qat'ss of payment;, and, in, part'icular
(b) s,r h'all provide that'- silbject to paragraph '_.~. ~ , .• (3) (c) of:this 'Article
" .. , 1 .·,
paYments 'to the Bank of anlortiiation, interest, commission and other charge" shall be made in the currency lcane'd, unless - in the Oase of a direct 10an, made as part of spo,?ial operations the rules and, regula tions provide, otherwise.
(2) In the case of lOans guaranteed by the Bank, the contract of" guarantee:
(a') shaiie'stablish, in 'c'onformity with the opera:tionalprinciples set forth in paragraph (1) of Article"17of this Agreement and subjeot to the .. other provision,S of ,this Chapter, all ,the terms ,and conditions of the guarantee .conqerne5i inqludinK those ,relat-
ing' to the fees, commission, and ,o~her charges of the Bank; and, in particular
(b) shall provide that - subject to paragraph (3) (c) of this Article all payments to the Bank under the guarantee contract Shall be made in tbe currency loaned, unless - in the case of a loan guaranteed as part of special operations - the rules and regula- tions provide otherwise; and
(c) shall also provide that the Bank may terminate its liability with respect to interest if" upon default by the borrower and the
guarantor, if any, the Bank offers to purchase, at par and interest accrued to a date designated in the offer, the bonds or other
obligations guaranteed.
\,
E/CN.14/~1AB/4/Add.3 Page 40 '
Chapter III Article 18 (ii)
(3) In the case of direct lOans made or loans guara~teed by the Bank, the Bank
.:
. ',
in determining the terms and conditions for the operation, shall , take due account of the terms and condi honson which the
corr~sponding f(mds were 'obtained by the Bank;
(b) where the recipi~nt is not a member, .may, when it deems it
, .,
ad visable, req,uire that the member in whose terri tory the pro ject
.-
ooncerned is to be carried out, or a public agency or institution of that member acceptable to th~ Bank, guarantee the repa~ent
of the .I'~incipal and the payment of inte'rest and C"ther chargee On the loan;
(c) shall expressly, state t,he currency in whi,ch all payments to the Bank under the .contract .concerned shall be made. At the option ,
,C
of the borrower, however, such payments may gOld or convertible cUrrency or, subject to
..
Bank, i"n 'any other currency; and
• • • L •
,
alliays be made in the agreement of the
(d) ·· may .<,-ttach
~ucb,
other terms Or CO;d,itiOns, as i t deemsa~propriate,
.taki;ng into <,-cco.'¥'t both the interest of the member dir;'-ctly
concerned in the. Pr9ject and the inte:rests of the me'mbers as a whole.
'.
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, .
· .
Article 18
Amendments proposed
E/CN .14/WlAB/ 4/ Add.3 Page 41
Chapter III
Article 18 (Amend.)
Tanganyika: The Article should provide for the possibility of grants.
•
Article 19
Commission and Fees
E/CN.14/FMAB/4/Add.3
Page 42 Chapter III Article 19
(1) The Bank shall charge a commission on direot loans made and guarantees given as part of its ordinary operations. This commission, payable
periodically, shall be computed on the amount outstanding on each loan or guarantee and shall be at the rate of not less than one per cent per annum, unless the Bank, after the first ten years of its operations, decides
to change this minimum rate by a majority of two-thirds of its members represen ting not less than three-quarters of' the total voting power of the members.
(2) In guaranteeing a loan as part of its ordinary operations, the Bank shall charge a guarantee fee, at a rate determined by the Board of Directors, payable periodically On the amount of the loan outstanding.
(3) Other charges cf the Bank in its ordinary operations and the commission, fees and other charges in its special operations shall be determined by
the Board of Directors.
Tani<anyika:
Artiole 19
E/CN .14/FMAll/ 4/ Add, 3 Page 43
Chapter III
Artiole 19 (Amend.)
A guaran tee commission atone per cent wi th a gue"rantee fee seems exoessive.
Article 20 Special Reserve
E/CN.14/FMAB/4/Add.3 Page 44
Chapter III Article 20
The amount of commissions received by the Bank pursuant to Article 19 of this Agreement shall be set aside as a special reserve which shall be kept for meeting liabilities of the Bnnk in accordance with its Article 21. The special reserve shall be held in sU,ch liquid form, permitted under this Agreement, ae the Board of Directors may decide.
Article 20
Amendments proposed
E/CN.14/FMAB/4/Add.3 Page
45
Chapter III
Article 20 (Amend.)
:'.
Article 21
Methods of Meeting Liabilities of the Dank' in Case of 'Default ..
(Ordinary Operations)
E/CN .14/FMA)3/
4/
Add.3 Page' 46 "Chapter III Article 21
In calles of default in respect of a lcan made or guaran.teed by the Bank as part of its ordinary op,era tiona:
(a) The Dank shall make such arrangements as may be feasible to adjust the obligations under the loan (excluding, however, a modification in the currency of repayment);
(b) The payments in discharge of the liabilities of the Bank on borrowings or guarantees pursuant to paragraph (1) (b) or (d) of Article 14 of this Agreement, chargeable against the ordinary capital resources of the Bank, shall. be charged:
(i) first, against the special reserve provided in Article 20 of this Agreement; and
(ii) then, to the extent necessary and at the discretion of the Bank, against the other reserves, surplus and funds, corres- ponding to the capital paid up for shares of the Bank; and (c) Whenever necessary to meet contractual payments of interest,
other charges or amortization on the borroliings of the Bank, or to meet its liabilities with respect to similar payments in respect of lOans guaranteed by it and chargeable. to its ordinary capital resources, the Bank may call an appropriate amount of the unpaid subscribed callable capital in accordance with paragraph (4) of Article
7
of this Agreement. Moreover, if it believes that a default may be of long duration, the Bank may call an eduitional amount of su,ch callable capi tal not to exceed in anyone year one per cent of the total subscriptions of the members, for the following purposes:E/CN.
i4/FJlIAB/4/Add.3
Page
41 .
Chapter III Article 21 (ii)
(i) To redeem before maturity, or otherwise disoharge, its liability on all or part of tlie outstandingprinoipaJ.
of any loan guaranteed by it" ill. respect .of which 'che debtor is in defaul t; and"
(ii) To repurchase, or otherwise discharge, its' liability on all or part of its own outstanding borrowings.
,.
,;
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Article 21
Amendments proposed
E!CH.14!FMAB!4!Add.3 Page 48
Chapter III
Article 21 (Amend.)
Article 22
E/CN.l4/FMAB/4/Add.3 Page 49
Chapter III Article 22
Methods of !.ieetinl<. Liabili ties of the Bank on Borrowings for Speoial Funds
Payments in satisfaction of any liability in respect of borrowings of funds for inclusion in the speoial resouroes appertaining to a Special Fund shall be charged:
(i) first, against any reserve established for this purpose for or wi thin. the Special Fund concerned, and
(ii) then, against any other assets availahle in the special resources appertaining to that Special Fun.d.
•
Article 22
Amendments proposed
E/CN.l4/FMAB/4/Add .3 Page 50
Chapter III
Article 22 (Amend.)
PHAPTER IV
Borrowing and Other Additional Powers Article 23
General Powers
E/CN o14/Flill/4/ Add 03 Page 51 .
Chapter IV Article 23'
In addition to the powers provided elsewhere in this Agreement, the Bank shall have power tOI
(a) borrow funds in momber countries or elsewhere, ,and in that
connexion to furnish such collateral or other security as it shall determine provided alliays thatl
(i) before making a sale of its obligations in the market of a member, the Bank shall have obtained its approval;
(ii) where the obligations of the Bank are to be denominated in the currency of a member, the Bank shall have obtained its approval; and
(iii) where the funds to be borrowed are to' be included in its ordinary capital resources, the Bank shall have obtained, where appropriate, the approval of the members referred to in sub-paragraphs (i) and
(ii)
of this paragraph that the proceeds may be exchanged for any other currency without any restrictions;(b) buy and sell securities the Bank has issued or guaranteed or in which it has invested provided always that it shall have obtained the approval of any member in whose territory the securities are to be bought or sold;
(c) guarantee or underwrite securities in which it has invested, in order to facilitate their sale;
(d) invest funds not needed in its operations in such obligations as it may determine and invest funds held by the Bank for pension or similar purposes in marketable securities;
E/cN .14!FYWl/4/Add.3 Page 52
Chapter IV Article 23 ( ii)
. :
.
(e) undertake activities incidental to its operations such as, among others, the· promotion of· consortia for the financing of projects which serve the purpose of the Bank and come within its functions;
(f) (i) provide all technical advice and assistance which serve its purpose and collie ,Ii tliin its functions; and
(ii) where expenditure incurred by such a service is not reimbursed, charge' the net income of the Bank therewith and, ·in the first .. five years ·of its operations, us·e up to one per cent of its
paid-up capi tal ·on such expenditure; provided always that the totale,xpenditure of the Bank On such services in each year of . that period .¢oes not exceed one-fifth of that percentage; and
Cg)
exercise such other pClwers as shall be necessary or desirable in. furtherance of its purpose and functions, consistent with the provisions of this Agreement •..:,
... .
KenYa:
Article 23
Amendments proposed
EICN .14/Fl'IABI
41
Add.3Page 53 Chapter IV
Article 23 (Amend.)
Paragraph (d): Some res triction on the power to inves t should be written into this Article. The Governm9nt suggests that the practice of the IADB which requ.ires the approval of a two-thirds majority of the total voting power should be adopted.
Tanganyika. Paragraph (al (i): The phrase "market of a member" requires closer definition.
Paragraph (d): Investment of funds should be confined to member countries.
A provision for countries sharing the same currency is required.
Artiole 24
Speoial Borrowing Powers
E/CN.14/FMAB/4/Add.3 Page
54
Chapter IV Artiole 24
(1) The Bank may request any member to loan amounts of its ourrenoy to the Bank in order to finanoe expenditure in respect of goods or services produced in the territory of that member for the purpose of a project to be carried ou.t in the terri tory of anothor mombur ••
(2) Unless the member concerned invokes economic diffioul ties which, in its opinion, are likely to be provoked or aggravated by the granting of suoh a loan to the Bank, that member shall comply with the request of the Bank. The lOan. shall be made for a period to be agreed with the Bank,
which shall be in relation to the duration of the project which the proceeds of that loan are designed to finance.
(3) Unless the member agrees otherwise, the aggregate amount outstanding in respect of its loans made to the Bank pursuant to this Article shall not, at any time, exceed the equivalent of the amount of its subscription to the capital st.ock of thc E['.nk.
(4) Loans to the Bank made pursuant to this Article shall bear interest, payable by the Bank to the lending member, at a rate which shall correspond to the average rate of interest paid by the Bank on its borrowings for Special Funds during a period of one year preceding the conolusion of the loan agreement; it shall in no eveflt exceed four per cent per annum.
(5) The Bank shall repay the loan, and pay the interest due in respect thereof, in the currency of the lending member or in a currency acceptable to the latter.
(6) All resources obtained by the Bank by virtue of the provisions of this Article shall constitute a Special Fund.
Kenya:
Ta!:fia!!i\::ika.
Libtlria:
E!Clif.14!F1,AB!4!Add .3 Page 55
Chapter IV
Article 24 (Amend.)
Article 24
.'Unendments proposed
In the light of current market rates it is thought that a maximum interest rate of
4
per cent might impose hardship on a lending member and. in fact could lead to African dis- uni ty rather that "African solidarity" as suggested in the Note. The maximum should be therefore fixed at6
per cent, although the rate for loans under this Article would normall~b~ substantially lower.
Paragraph (2L: Compulsory power of the Bank to obtain loans should be abandoned and loans should be made by agreement only.
ParaRraph (4L: Maximum interest rate should be 6 per cen.t.
As r~gards th0 second sentence in paragra;;>h (2), it is consider8d tlia t ~ho repaym<mt period should not be tied to the d.1ll'ation of the project because it is ,<ui tG posGible tha t in many instances the time re<l.uired. to payoff the loan may bear no relation lo!hatsoever to the time r0G.uirBd to comp18t" tho project financ8d by it.
Article 2'5
Warning to be Placed on Securities
E/CN.14/FMAB/4/Add.3 Page 56
Chapter IV Article 25
Every security issued or guaranteed by the Bank shall bear on its face a oonspicuous statement ·GO the effeot that it is not an obligation of any government unless it is in faot the obligation of a partioular governmen.t in whioh oase it shall so state.
Artiole 25 Amendments proposed
,.
E/CN.14/FMAB/4/Add.) Page 57
Chapter IV
Artiole 25 (Amend.)
Article 26
E/CN .14/b'MAll/ 4/ Add. 3 Page
58
Chapter IV Article 26
Valuation of Curxencies and Determination of Convertibility Whenever it shall become necessary under this Agreement:
(i) to value any currency in terms of another currency, in terms of gold or of the unit of account defined in paragraph (l)(b) of Article
5
of this Agreement; or(ii) to determine whether any currency is convertible.
f!uch valuation or determination, as the case may be, shall be reasonably made by the Bank after consultation with the International Monetary Fund.
Article 26
Amendments proposed
E/CN.14/FMAB/4/Add.) Page
59
Chapter IV
Article 26 (Amend.)
