First report of the drafting committee on the draft agreement establishing an African development bank : Articles 1 to 36

U Nl'rED . NA:rIONS

I"E bNOMIC

·A D

SOCIAL COUNCIL

EC ON OMI C C OI::1.11 S S1 OU F011 AFRI CA Preparatory Meeting: Conference

of Finance Ministers on the Establishment of an ^Africa~ Development Bank

Khartoum, 16-27 July 1963~

)

^Distr. LIMITED

E/CND14/FMAB/19

24 July 1963

Original : ENGIJISH

FIRST REFORrr OF THE DRAFTING COMMITTEE ON THE DRAFT AGREm~ENT ESTABLISHING AN AFRICAN

DEVELOPMENT BANK

(ARTICLES 1 to 36)

KHAR-63-76

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1. The Drafting Commi ttee estq,blished by the preparatory ^meeting to the conference of Finance Ministers at its second plenary session in Khartoum on 17" July 196) held ito first meeting on 22 July 1963 under the chairmanship of Mr. "lVIangasha, Representative of Ethiopia.

2. The Draft Committee reviewed the draft Agreement establishing an African Development Bank from Article 1 to Article 36 and agreed on amendments to a number of Articles of the Agreement in the light of proposals made and suggestions referred to it by the preparatory meeting.. The amended text of these Articles is set out on the "

following pages.

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Article 2 Functions

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(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 eoonomic or social development

of its members, with special emphasis on:

(i) projects or programmes which by their nature or soope concern several members; and

(ii) 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- ment;

(c) to mobilize and increase 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 contribute to the economio 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 suoh other activities and provide such other servioes as may advance its purpose.

(2) In oarrying out its functions, the Bank should co-operate with national regional and sub-regional development institutions in Africa. To the same end, it should co-operate lfi th other in terna tional organizations pursuing a

similar purpose and 1'ri th other insti tutions concerned 'Hi th the development of Africa.

(3) The Bank shall be guided in all its decisions by the provisions of Articles land 2 of this Agreement.

Article 3

Membership and GeograEhical Area

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(1) Any African country 1·rhich has the status of an independent State

may become a membor of the Bank. It shall acquire membershiI) in accordance wi th paragraph (1) or paragraph (2) of Article 64 of ·t~!is Agreement.

(2) The geographical area to uhich the mel7lbership and deyelopment activities of the Bank may extend (referred to in this Agreement as

"Africa^ll or "African", as the case may be) shall comprise the continent of Africa and African islands.

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Article

..4

Structure

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The Bank shall have a Board of Governors, a Eon:rd of Directors, a President, at least ⁰¹¹⁶ Vice-President and such other' officers and staff to perform such duties as the Bank may determine.

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Payment of Subscription

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(1) (a) Payment of the amount initially. subscribed to the paid-up capital ., stook of the'Bank by a'member w'hich acquires membership in accordance ivi th

'. paragraph (1) of Article 64, shall be m~de in six. instalments, the first of which shall be five per oent, the second thirty-five per cent, and the remaining four instalments each fifteen per cent of that a~ount_

(b) The first instalment shall be paid by the Government concerned

on or before the date of deposit, 'on its behalf, of the instrument o~ratifioatiDn

or accep:tanoe of this Agreement in accorda:nce ui ~h paragraph (1) of Article 64. The second instalment shall become due on the last day of a period of six m'onths from the entry into force of this Agreement or on the day of the said deposit, . whicliever is the later day_ The third, 'instalment .shall

become due on the last day of a period of eichteen months from the entry into force of this Agreement. The remaining three instalments shall become due successively each ⁰¹¹ tJ;re last day of a period of one year imrned.ia tely following the day on which the preceding instalment becomes due.

(2) Payments of the a.mou..Y!ts ini tially subscribed by the members of the

Bank to the paid-Up capital stock shall be made in gold or convertible currency.

The Board of Governors shall determine the mode of payment of 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 amounts subscribed by the members of the Bank to the paid-up capital stock to which the provisions of paragraph (1) of this Article do not apply.

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(4) (a) Payment of the amounts subscribed to the callable caT>ital stock of the Bank shall be subj ect to call only as and l';hen required by the Bank to meet its obligations' inC1Irred., pursuant to paragraph (1) (b) and

(d) of Article 14, on bqr~q1-T.in6 .. :of funds

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inclusion in its ordinary capi tal resources or guarantees chargeable to such :resour..ces~ '.: .

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. '(b) In the event of such call s 1 pa,}T.lent may b e l71~de at the Ciption

of the member cioncerned in b~ld, c9nvertible cur~ency or~ri the 'c~r~ehcy

required to discharge 'the 'obliga tion of the Bank f01"' the .purpos.e . of lThich . the call is made.

(c) Calls on unpaid. subscriptions shall be uniform· in percentage on

, all 'callable shares.

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The Ba..~ shell determirie the place for any , payme,n t ~~e,.r. thi.s Artiqle provided that; until the firs~ meetinG of .. i,ts EOBl;'d . .of Gover.·no"rs provided in Article 66 of thi s Agreement;i ,the pa;yment of tl;1e first instalment referred to in paragraph '(l) of this Article shall. be made to· the Trustee

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referred' to

in

Article 66. ^{. "}

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Article

14.

Hecipients and Irlethods of Uper..?-tions~

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In its operations, the Bank iTlP,Y prowid.e cr facili tate financing for any member, political sub-division or any agency thereof or for any institution or undertaking in the ·~erri tOI'Y of any member as well as for international or regional agencies Ol" insti tutions concerned wi th the clevelopment of Africa.

Su!)ject to the provisions 01." t~~lis Chapter, the Bank may carry out its operations in any of the folloi'ring 'ways:

(a) by makj.ng 0:' l_o.rticipating in direct. loans out of:

(i) funds oorresponc.ing to its unimpaired subscribed paid-up capital and, except as provided in Article 20 of this 1l.gr88ment, to its Toserves and undistr'ibuted surplus; or

ou~ of

(ii) funds corresponding to special resources; or

(b) by making or paI'ticipating in ,di.rect loans out of funds horrowed or otheI'Wise acquired by the Bal'lk for inclusion in i ts oI\~.inary capi tal resources or in speoial resources; or

(e) by invGstment of funds referl"'ed -Win sub-paragraph (a) or (b) of this paragraph in the equi ty capi tal of' an undertaking or insti tu tion; or

(d) by gual'anteein6? in vlhole or in part, loans made by others ..

('2) The provi.sions of this Agreement applying to direct loans which the Bank ma~ make pursuant to sub-paI'agraph (a) or (b) of the preceding paragraph

shall also apply to its paI·ticipation in any dir-ect :Loan undertaken pursuant to any of those suo-pal~agraphs .. EClually, the provislons of this Agreemant applying to guarantees of loans undertaken by the Bank pursuant to sub-

parc:.graph (d) of the preceding par'agraph shall apply lrhere the Bame guarantees part of such a loan onlyo

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Article 15

Limi tations on Oporatj;ons

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(1)

The total amount outstanding in respect of the ordinary operations of the Bank aball not at any time exceed the totsl amount of its unimpaired subscribed capital, reserves and surplus inciliuded in its ordinary capital.

resources excepting, however ⁷ the speci~l reserve provided for in Article 20 of this Agreement.

(2) The total amount outstanding in respect of the special operations of the Bank rela tirlg to any Special :Fund shall not at any tilDe exceed the total amount of the unimpaired speci~l resources appertaining to that Special Fund.

(3) In the case of loans made out of fund.s borroued by the J3ank to which the commi tment to calls provided for ill paragraph (4) of Article 7 of this Agreement applies, the total amount of principal outstanding and payable to the Bank in a specific currency shall not at any time exceed the total amount of principal outstanding in respect of funds borrowed by the Bank that al'e payable in the sar,16 currency.

(4) (a) In the case of' investments made -by virtue of paragraph (1)(0) of Article

14

of this Agreement out of the ordinary oapital 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 ^oaI.Ji tal stock of the Bank together wi th the reserves and surplus included in its ordinary capital resources excepting₇

however, the special reserve providod for in Article 20 of tL.is Agreement.

(b) At the time it is madst the amount of any specific investment

referred to in the preceding sU-b-paragraph shall not exceed a percentage of equi ty capital of the institution or undert~kin~ concerned, which the Board of Governors shall have fixed. for any investment to be made by virtue of paragraph (1)(0) of Article

14

of this ·Agreement. In no t.)vent shall tho Bank seek to obtain by such an investment a controlling interest in the institution or undertaking concerned.

Article 16

Provi~ion of Currencies for Direct Loans

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In making direct loands, the Bank shall furnish the borrower with currencies other than the currency of the member in whose territory the project concerned is to be carried out (the latter currency hereinafter to be called "local currencylt), which are required to meet foreign exchange expenditure on that project; provided always that the Bank may, in making direct loans, provide financing to meet local expenditure on the project concerned:

(a) where it can do so by supplying local currency without selling any of its holdings in gold or convertible currencies; or (b) llhere ^j n the opinion of the Bank local expendi ture on that

project is likely to GAllS • . undue loss or strain on the balance of payments of the country 1-There that projeot is to be carI'ied out and the amount of such financing by the Bank does not exceed a reasonable portion of the total local expenditure incurred on that project.

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Article

17

Operational Principles

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(1) The operations of the Bank shall be conducted in accordance vri th the following principles:

(a) (i) The operations of the Bank shall, except in special circumstances, provide for the financinb of specific projectB. Jr groups of

projects, particularly those forming part of a national or regional development programme, urgently required for the economic or

(0)

social development of its members. They may, hOvTever, include global loans to, or ~~arantees of loans made to, African national development baru~s or other suitable institutions, in order that the latter may finance projects of a specified t~~e serving the purpose of the Baruc within the respective fields of activities of such banks or institutions;

(ii) In selecting suitable projects, the Bank shall always be guided

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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

proj~ct. It shall, however, pay special attention to the selection of suitable multi-national projects;

Bank shall not provide for the fina'1cing of a project in the territory of a member if that member objects thereto;

The Bank shall not provide for the financing of a project to the extent that in its opii1ion the recipient may obtain the finance or facili ties ClSe1'There on terms that the Bank considers are reasonable for the recipient;

(d) Subject to the provisions of Articles 16 ^ru1d 24 of this Agreement, the Baru( 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

(p.2g No change)

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Article 21

Methods of MeetinK Liabilities of the Bank (Ordinary Operations)

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(1) t-Ihenever necessary to meet contractual payments of interest) other charges or amortization on the borro't<Ting of the Bank, or to meet its liabili ties vTi th respect to similar payments in respect of loans guaranteed by it and chargeable to its ordinary capital

I'esources, the Bank may call an appropriate amount of tlIe unpaid

subscribed callable capi tal in accordance 'Hi th paragraph (4) of Article

7

of this Agreement.

(2) In cases of default in respect of a loan made out of borrow'ed funds or guaranteed by the Bank as part of its ordinary operationn, the Bank may, if i t believes that the default may be of long du:cation~

call an addi tional amount of such callable capi tal not to exceed i.n anyone year one per cent of the total subscriptions of the membe .. s;) for the following purposes:

(a) To redeem before maturity, or otherwise discharge, its liabili ty on all or part of the outstanding principe'].

of any loan gual'anteed by it in respect of which the debtor is in default; and

(b) To repurchase, or otherwise discharge, its liabiJ.i ty on all or part of its own outstanding borrol-ring"

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Article 22

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Methods of Meeting Liabili ties on Borrow}ngs for Spec~al Fund

Payments in satisfaction of any liability in respect of borrowings of funds for inclusion in the special resources appertaining to a Special Fund shall be charged:

(i) first, against any reserve established for this purpose for or 1vi thin the Special Fund concerned; and

(ii) then, against any other assets available in the special resources appertaining to that Special Fund.

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Borrol-ling and Other Addi tiona.l Powers Art:lble 23

General Powers

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In addition to the p~wers provided elsewhere in this Agr~ement, the Bank shall have power to:

. (a) borr'~w ' funds in member countries or elsewhere, and in that

c6n~~xion to furnish such collateral or other security as it shall determine ~rovided always that:

. (i), before making a. ;38:1e .of its obligations in the market of a

memoer, the Bank shall have obtained its approval;

(ii.). wl?-ere the obligations of .the Banle are .. to be 'denominat~d in the currency Of ·a ,membe'r, 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,

wher~ 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 undenTri te securi ties in 1.;hich 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;

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(e) undertake aotivities incidental to its operations such as, among Qt.h.ers~_ .. the proClQt.ion·

of

consortia: for financing

'tI<7hich serves the purpose. of the Bank and comes "Ii thin

its functions;

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(f) (i) provide all technioal advice and assistance which serve its purpose and come Ivi thin its functions; and

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",heI'e expendi ture incurred by such a , service is not reimbursed, charge the net income of the Bank there1'1i th and, in the first rive i~ars ~~ it~ operations, use up to

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one per cent of its paid-up ~apit~l on ~~q~ exp~nditure;

provided always that the total expenditure of the Bank . on . such services in each year of '·tha t period do-ss not

. exce.ed one-fifth 'of that perce11tage; .and:

:.(g) . -'exercise .such. other powers as shall- be necessary or desirable in furtherance of its purpose and functions, consistent with the provisions of this Agreement.

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Article 24

Special Borrowing Powers

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(1) The Bank may request any member to loan amounts of its currency to the Bank in order to finance expenditure in respect of goods or services produced in the terri tory of that member for the purl)ose of a project to be carried out in the territory of another member.

(2) Unless the member concerned invokes economic and financial difficulties which, in its opinion, are likely to be provoked or aggravated by the granting of such a loan to the Bank, that member shall comply with the request of the Bank. The loan shall be made fOl. ... a period to be agrred wi th 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 nade to the Bank pursuant to this Article shall not, aD any time, exceed the equivalent of the arno~nt of its subscription to the capital stock. of the Bank.

(4) Loans to the Bank made pursuant to this Article shall bear interest, payable by the Bank to the lending member, at a rate ''Thich shall correspond

to the average rate of interest paid by the Bank on its borrowings for Special Funrnduring a period of one year preceding the conclusion of the loan agreement. This rate shall in no event exceed a maximum rate which the Board of Governors shall determine from time to time.

(5) The Bank shall repay the loan, and pay the interest due in respect thereof, in the currency ~f 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.

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Article

2l

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(1) Members may not main~jain or impose any restrictions on the holding or use by the Bank or by any recipient from the Bank, for payments any- where, of the following~

(a) gold or convertible currencies receiv~d by the Bank in payment of subscriptions to the capital stock of the Bank from its members;

(b) currencies of members purchased with the gold or convertible currencies referred to in the preoeding sub-paragraph;

(c) currencies obtained by the Bank by borr01ving, pursuant to para- graph (a) of Artiole 23 of this Agreement, for inclusion in its ordinary capital resources₉

(d) gold or currencies received by the Bank in payment on acoount of principal, interest, dividends or other oharges in respect of loans or investments made out of any of -the funds referred to in sub-paragraphs (a) to (c) or in payment of commissions or fees in respeot of guarantees issued by the Bank; and

(e) currencj.es, other 'Ghan its own, received by a member from the

Bank in distrjbution of the net income of the Bank in' aooordanoe with Article 42 of this Agreement,

(2) Members may not maintain or impose any restrictions on the holding or use by the Bank or by any reoipient from the Bank, for payments anywhere, of currenoy of a member reoei ved by the Bank i'l"hioh does not come 1'1i thin the provisions of the preceding paragraph, unless:

(a) that member deolares that it desires the use of such currenoy to be restrioted to payments for goods or servic6E produced in its territory, or

(b) suoh currenoy forms part of the speoial resourcas of the Bank ~nd

its use is subject to speoial rules and regulations6

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CHAPTER V

Organization and Kanagement Article

29

Board of Governors: Powers

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(1) All the powers of the Bank shall be vested in the Board of Governors.

In particular, the Board shall issue general directives concerning the credit policy of the ~ank.

(2) The Board of Governors may delegate to the Board of Directors all its powers except the p01ier to:

(a) decrease the authorized capital stock of the Bank;

(b) establish or accept the administration of Special Funds;

(c) authorize the conclusion of general arrangements for co-operation with the authorities of African countries which have not yet

attained independent status or of general agreements for co- operation with African overnments which have not yet acquired merabership of the Bank, as well as of such agreements vTi th other governments and with other international organizations;

(d) determine the remuneration of directors and their alternates;

(e) select outside inspeotors to certify the General Balance Sheet and the Statement of Profit and Loss of the Bank and to select such other experts as may be necessary to examine and report on the general management of the Bank;

(f) approve, after reviewing theinspectors'report, the General Balance Sheet and Statement of Profit and Los8 of the Bank; and

(g) exercise such other powers as are expressly provided for that Board in this Agreement.

(3) The Board of Governors shall retain full po~ers to exeroise authority over any matter delegated to the Board of .:Jirectors pursuant to pa.rabTaph (2) of this Article.

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Article 32

Board of Directors: Powers

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Without prejudice to the powers of the Board of Governors as provided in Article

29

of this Agreement, the Board of Directors shall be responsible for the conduct of the general operations of the Bank and for this purpose shall, in addition to the powers provided for it expressly in this Agreement, exercise all the powers delegated to it by the Board of Governors, and in particular:

(~) elect the President and, on his recommendation, appoint one or more Vice-Presidents of the Bank and determine their terms of service;

(b) prepare the work of the Board of Governors;

(c) in conformity with the general directives of the Board of Governors, take decisions concerning particular direct loans, guarantees, investments in equity capital and borrowing of funds by the Bank;

(d) determine the rates of interest for direct loans and of commissions for guarantees;

(e) submit the accounts for each financial year and an annual report for approval to the Board of Governors at each annual meeting; and (f) determine the general structure of the services of the Bank.

Artiole 36

The President~ Appointment

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The Board of Directors, by a majority of the total voting power of the members, shall elect the President of the Bank. He shall be a person of the highest competsnce in matters pertaining to the activities, management and administration of the Bank and shall be

a-national of a member State. While holding office, neither he nor any

~ice-Fresident shall not be a governor O~ a directoI' or alternate for either. The term of office of the President shall be five years.

It may be renewed. He shall, however, oease to hold office if the Board of Direotors so decides by a two-thirds majority of the voting power of the members.