Cap 235.fm MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 1
CHAPTER 235
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS ACT
To enable Malta to become a member of the International Bank for Reconstruction and Development, the International Finance Corporation and the International Development Association.
(26th June, 1973)*
Enacted by ACT XXVIII of 1973.
Short title.1. This Act may be cited as the Membership of International Financial Organisations Act.
Interpretation.2. In this Act, unless the context otherwise requires - "Association" means the International Development Association; "Association Agreement" means the Articles of Agreement for
the establishment and operation of the Association as set out in the First Schedule to this Act;
"Bank" means the International Bank for Reconstruction and Development;
"Bank Agreement" means the Articles of Agreement for the establishment and operation of the Bank as set out in the Second Schedule to this Act;
"Corporation" means the International Finance Corporation; "Corporation Agreement" means the Articles of Agreement for
the establishment and operation of the Corporation as set out in the Third Schedule to this Act;
"Malta" has the same meaning as is assigned to it in article 124 of the Constitution;
"Membership Resolution" means the resolutions adopted by the Board of Governors of the Bank, the Corpora t ion and the Association, respectively, specifying the terms and conditions upon w h i c h M a l t a s h a l l b e a d m i t t e d t o m e m b e r s h i p i n t h e s e Organisations;
"Minister" means the Minister responsible for finance. Authorisation for signing of and accepting the Agreements.
3. The Minister is hereby authorised on behalf of the Government of Malta to sign any one or more of the following agreements, that is to say, the Bank Agreement, the Corporation Agreement and the Association Agreement and to deposit, in the case of the Bank Agreement, with the Government of the United States, and, in the cases of the Corporation Agreement and the Association Agreement with the Bank, instruments of acceptance of the said Agreements and of the terms and conditions respectively prescribed thereunder relating to the admission of Malta to membership, or by instruments under his hand, to empower such person as may be named in such instruments to sign the said
*See Government Notice No. 445 of 26th June, 1973.
2 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
Agreements and to deposit the said instruments of acceptance as aforesaid.
Effect of signature of the Agreements.
4. The provisions of the following articles shall have effect in relation to each of the Agreements referred to in article 3 of this Act immediately upon the signing of the relative Agreement in accordance with the provisions of that article*.
Financial provisions relating to membership.
5. (1) There may be paid out of the Consolidated Fund on the warrant of the Minister all sums required for the purpose of making-
(a) all payments required to be made from time to time to the Bank under the provisions of the Membership Resolution and the Bank Agreement;
(b) all payments required to be made from time to time to the Corporation under the provisions of the Membership Resolution and the Corporation Agreement;
(c) all payments required to be made from time to time to the Association under the provisions of the Membership Resolution and the Association Agreement.
(2) The Minister may, if he thinks fit, create and issue, or direct the Central Bank of Malta (as depository for the Government of Malta for the purposes of Section 11 of Article V of the Bank Agreement) to create and issue, to the Bank or the Association, non-interest bearing and non-negotiable notes or other obligations as i s provided for by Sect ion 12 of Ar t ic le V of the Bank Agreement and by paragraph (e) of Section 2 of Article II of the Association Agreement (which sections relate to the acceptance by the Bank or the Association, as the case may be, of notes or similar obligations in place of currency):
Provided that where the Minister has directed the Central Bank of Malta to create and issue notes or other obligations as aforesaid, the Minister shall also undertake as a f irm and irrevocable commitment to repay to the Central Bank of Malta such amount or amounts of notes or other obligations as may be called for payment by the Bank or the Association, such repayments to be made as soon as possible and in no case later than a month after the date of payment to the Bank or the Association; and in case of any such payment all repayments due as aforesaid shall be a charge on the Consolidated Fund and the sums required for such repayments are hereby appropriated for that purpose.
(3) Any sums received by the Central Bank of Malta from the Bank or the Corporation on account of Malta’s subscription to the capital stock thereof and any sums received by the Central Bank of Malta from the Association on account of Malta’s subscriptions therein or of supplementary resources provided by it shall be paid into the Consolidated Fund.
*The Bank Agreement was signed on the 26th September, 1983.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 3
Certain provisions of the Agreements given force of law in Malta.
6. The provisions of: (a) Sections 2 to 9 inclusive of Article VII of the Bank
Agreement; (b) Sections 2 to 9 inclusive of Article VI of the
Corporation Agreement; and (c) Sections 2 to 9 inclusive of Article VIII of the
Association Agreement
shall have force of law in Malta, so however, that nothing in Section 9 of Article VII of the Bank Agreement, Section 9 of Article VI of the Corporation Agreement and Section 9 of Article VIII of the Association Agreement shall be construed -
(i) as entitling the Bank, the Corporation or the Association to import goods free of customs duty without any restriction on their subsequent sale in Malta;
(ii) as conferring on the Bank, the Corporation or the Association any exemption from taxes and duties which form part of the prices of goods acquired by the Bank, the Corporation or the Association in Malta; or
(iii) as conferring on the Bank, the Corporation or the Association any exemption from taxes or duties which are in fact no more than charges for services rendered.
Power of Minister to make orders.
7. The Minister may by order make such provisions as are necessary for carrying into effect any of the provisions of the Bank Agreement, the Corporation Agreement and the Association Agreement.
English text to prevail in Schedules.
8. In the Schedules to this Act, in the case of any conflict between the Maltese and the English text, the English text shall prevail.
4 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
SCHEDULES
FIRST SCHEDULE
[SECTION 2] ARTICLES OF AGREEMENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION
The Governments on whose behalf this Agreement is signed,
Considering:
Tha t mutua l coopera t ion fo r cons t ruc t ive economic purposes , hea l thy development of the world economy and balanced growth of international trade foster international relationships conducive to the maintenance of peace and world prosperity;
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;
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, do hereby agree as follows:
Introductory 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 of the Association shall be those members of the Bank listed in Schedule A hereto 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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 5
accordance with such terms as the Association may determine.
SECTION 2. Initial Subscriptions
(a) Upon accepting membership, each member shall subscribe funds in the amount assigned to i t . Such subscript ions are herein referred to as ini t ial susbscriptions.
(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.
(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 portion 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 which 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":
(i) currency of a member which the Association determines, after consultation with the International Monetary Fund, is adequately convertible 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 convert ible currency pursuant to subsect ion (d) of this Sect ion, 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.
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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 such 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, i f i t deems desirable , shal l 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) below, 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, each 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 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 such terms as may be agreed upon.

MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 7
Article IV Currencies
SECTION 1. Use of Currencies
(a) Currency of any member listed in Part II of Schedule 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 such member and, insofar as consistent with sound monetary policies, in payment for goods and services produced in the territories of such member and required for projects financed by the Association and located in such 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 subscriptions 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 such 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 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.
8 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(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
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) 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 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 such 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.
(e) The Association shall not provide financing for any project if the member in whose territories the project is located objects to such 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 poli t ical or other non-economic influences or
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 9
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 which such resources are furnished expressly authorized such financing.
(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.
(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.
(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 conditions as it may determine, agree to a relaxation or other modification of the terms on which any of its financing shall have been provided.
SECTION 4. Cooperation with Other International Organizations and Members Providing Development Assistance
The Association shall cooperate with those public international organizations and members which provide financial and technical assistance to the less-developed areas of the world.
SECTION 5. Miscellaneous Operations
In addition to the operations specified elsewhere in this Agreement, the Association may:
(i) borrow funds with the approval of the member in whose currency the loan is denominated;
(ii) guarantee securities in which it has invested in order to facilitate their sale;
(iii) buy and sell securities it has issued or guaranteed or in which it has
10 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
invested; (iv) in special cases, guarantee loans from other sources for purposes not
inconsistent with the provisions of these Articles; (v) provide technical assistance and advisory services at the request of a
member; and (vi) exercise such other powers incidental to its operations as shall be
necessary or desirable in furtherance of its purposes.
SECTION 6. Political Activity Prohibited
The Association 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 VI Organization and Management
SECTION 1. Structure of the Association
The Association shall have a Board of Governors, Executive Directors, a President and such other officers and staff to perform such duties as the Association may determine.
SECTION 2. Board of Governors
(a) All the powers of the Association shall be vested in the Board of Governors. (b) Each Governor and Alternate Governor of the Bank appointed by a member
of the Bank which is also a member of the Association shall ex officio be a Governor and Alternate Governor, respectively, of the Association. No Alternate Governor may vote except in the absence of his principal. The Chairman of the Board of Governors of the Bank shall ex officio be Chairman of the Board of Governors of the Association except that if the Chairman of the Board of Governors of the Bank shall represent a state which is not a member of the Association, then 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 Association.
(c) The Board of Governors may delegate to the Executive Directors authority to exercise any of its powers, except the power to:
(i) admit new members and determine the conditions of their admission; (ii) authorize additional subscriptions and determine the terms and
conditions relating thereto; (iii) suspend a member; (iv) decide appeals from interpretations of this Agreement given by the
Executive Directors; (v) make arrangements pursuant to Section 7 of this Article 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 Association and to
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 11
distribute its assets; (vii) determine the distribution of the Association’s net income pursuant to
Section 12 of this Article; and (viii) approve proposed amendments to 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 Executive 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 Association may by regulation establish a procedure whereby the Executive 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 Executive Directors to the extent authorized, may adopt such rules and regulations as may be necessary or appropriate to conduct the business of the Association.
(i) Governors and Alternate Governors shall serve as such without compensation from the Association.
SECTION 3. Voting
(a) Each original member shall, in respect of its initial subscription, have 500 votes plus one addit ional vote for each $5,000 of i t s in i t ia l subscript ion. Subscriptions other than initial subscriptions of original members shall carry such voting rights as the Board of Governors shall determine pursuant to the provisions of Article II, Section 1 (b) or Article III, Section 1 (b) and (c), as the case may be. Additions to resources other than subscriptions under Article II, Section 1 (b) and additional subscriptions under Article III, Section 1, shall not carry voting rights.
(b) Except as otherwise specifically provided, all matters before the Association shall be decided by a majority of the votes cast.
SECTION 4. Executive Directors
(a) The Executive Directors shall be responsible for the conduct of the general operations of the Association, and for this purpose shall exercise all the powers given to them by this Agreement or delegated to them by the Board of Governors.
(b) The Executive Directors of the Association shall be composed ex officio of each Executive Director of the Bank who shall have been (i) appointed by a member of the Bank which is also a member of the Association, or (ii) elected in an election in which the votes of at least one member of the Bank which is also a member of the Association 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 Association. Any Director shall cease to hold office if the member by which he was appointed, or if all the members whose votes counted toward his election, shall cease to be members of the Association.
(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 appointed is entitled to cast in the Association. 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 Association whose votes counted toward his election in the Bank
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are entitled to cast in the Association. All the votes which 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 of the Executive Directors shall be a majority of the Directors exercising not less than one-half of the total voting power.
(f) The Executive Directors shall meet as often as the business of the Association may require.
(g) The Board of Governors shall adopt regulations under which a member of the Association not entitled to appoint an Executive Director of the Bank may send a representative to attend any meeting of the Executive Directors of the Association when a request made by, or a matter particularly affecting, that member is under consideration.
SECTION 5. President and Staff
(a) The President of the Bank shall be ex officio President of the Association. The President shall be Chairman of the Executive Directors of the Association 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 shall be chief of the operating staff of the Association. Under the direction of the Executive Directors he shall conduct the ordinary business of the Association and under their general control shall be responsible for the organization, appointment and dismissal of the officers and staff. To the extent practicable, officers and staff of the Bank shall be appointed to serve concurrently as officers and staff of the Association.
(c) The President, officers and staff of the Association, in the discharge of their offices, owe their duty entirely to the Association and to no other authority. Each member of the Association 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) In appointing 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. Relationship to the Bank
(a) The Association shall be an entity separate and distinct from the Bank and the funds of the Association shall be kept separate and apart from those of the Bank. The Association shall not borrow from or lend to the Bank except that this shall not preclude the Association from investing funds not needed in its financing operations in obligations of the Bank.
(b) The Association may make 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.
(c) Nothing in this Agreement shall make the Association liable for the acts or obligations of the Bank, or the Bank liable for the acts or obligations of the Association.
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SECTION 7. Relations with Other International Organizations
The Association shall enter into formal arrangements with the United Nations and may enter into such arrangements with other public international organizations having specialized responsibilities in related fields.
SECTION 8. Location of Offices
The principal office of the Association shall be the principal office of the Bank. The Association may establish other offices in the territories of any member.
SECTION 9. Depositories
Each member shall designate its central bank as a depository in which the Association may keep holdings of such member’s currency or other assets of the Association, or, if it has no central bank, it shall designate for such purpose such other institution as may be acceptable to the Association. In the absence of any different designation, the depository designated for the Bank shall be the depository for the Association.
SECTION 10. Channel of Communication
Each member shall designate an appropriate authority with which the Association may communicate in connection with any matter arising under this Agreement. In the absence of any different designation, the channel of communication designated for the Bank shall be the channel for the Association.
SECTION 11. Publication of Reports and Provision of Information
(a) The Association 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 of the results of its operations.
(b) The Association 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 12. Disposition of Net Income
The Board of Governors shall determine from time to time the disposition of the Association’s net income, having due regard to provision for reserves and contingencies.
Article VII Withdrawal; Suspension of Membership; Suspension of Operations
SECTION 1. Withdrawal by Members
Any member may withdraw from membership in the Association at any time by transmitting a notice in writing to the Association 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 fulfil any of its obligations to the Association, the Association 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.
14 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(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. Suspension or Cessation of Membership in the Bank
Any member which 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 Association, 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 have no rights under this Agreement except as provided in this Section and in Article X (c) but it shall, except as in this Section otherwise provided, remain liable for all financial obligations undertaken by it to the Association, whether as a member, borrower, guarantor or otherwise.
(b) When a government ceases to be a member, the Association and the government shall proceed to a settlement of accounts. As part of such settlement of accounts, the Association and the government may agree on the amounts to be paid to the government on account of its subscription and on the time and currencies of payment. The term "subscription" when used in relation to any member government shall for the purposes of this Article be deemed to include both the init ial subscription and any additional subscription of such member government.
(c) If no such agreement is reached within six months from the date when the government ceased to be a member, or such other time as may be agreed upon by the Association and the government, the following provisions shall apply:
(i) The government shall be relieved of any further liability to the Association on account of its subscription, except that the government shall pay to the Association forthwith amounts due and unpaid on the date when the government ceased to be a member and which in the opinion of the Association are needed by it to meet its commitments as of that date under its financing operations.
(ii) The Association shall return to the government funds paid in by the government on account of its subscription or derived therefrom as principal repayments and held by the Association on the date when the government ceased to be a member, except to the extent that in the opinion of the Association such funds will be needed by it to meet its commitments as of that date under its financing operations.
(iii) The Association shall pay over to the government a pro rata share of all principal repayments received by the Association after the date on which the government ceases to be a member on loans contracted prior thereto, except those made out of supplementary resources p rovided to the Associa t ion under arrangements specifying special liquidation rights. Such share shall be such proportion of the total principal amount of such loans as the total amount paid by the government on account of its subscription and not returned to it pursuant to clause (ii) above shall bear to the total amount paid by all members on account of their subscriptions which shall have been used or in the opinion of the Association will be needed by it to meet its commitments under its financing operations as of the date on which the government ceases to be a member. Such payment by the Association shall be made in instalments when and as such principal repayments are received by the Association, but not more frequently than annually. Such instalments shall be paid in the currencies received by the Association except that the Association may in its discretion make payment in the currency of the government concerned.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 15
(iv) Any amount due to the government on account of subscription may be withheld so long as that government, or the government of any territory included within its membership, or any political subdivision or any agency of any of the foregoing remains liable, as borrower or guarantor, to the Association, and such amount may, at the option of the Association, be applied against any such liability as it matures.
(v) In no event shall the government receive under this paragraph (c) an amount exceeding, in the aggregate, the lesser of the two following: (a) the amount paid by the government on account of its subscription, or (b) such proportion of the net assets of the Association, as shown on the books of the Association as of the date on which the government ceased to be a member, as the amount of its subscription shall bear to the aggregate amount of the subscriptions of all members.
(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 government 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 considered 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.
16 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
Article VIII Status, Immunities and Privileges
SECTION 1. Purposes of Article
To enable the Association to fulfil 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, be brought by members or persons acting for or deriving claims 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 judgement 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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 17
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.
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 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 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 such 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,
18 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
Section 1; (ii) the right secured by Article III, Section 1 (c); (iii) the limitation on liability provided in Article II, Section 3.
(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 Associat ion 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 which 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 subscription 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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 19
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 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 the 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.
20 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
SCHEDULE A - INITIAL SUBSCRIPTIONS (US $ Millions)*
PART I Australia 20.18 Germany 52.96 Union of South Austria 5.04 Italy 18.16 Africa 10.09 Belgium 22.70 Japan 33.59 United Canada 37.83 Luxembourg 1.01 Kingdom 131.14 Denmark 8.74 Netherlands 27.74 United States 320.29 Finland 3.83 Norway 6.72 763.07 France 52.96 Sweden 10.09
PART II
Afghanistan 1.01 Guatemala 0.40 Pakistan 10.09 Argentina 18.83 Haiti 0.76 Panama 0.02 Bolivia 1.06 Honduras 0.30 Paraguay 0.30 Brazil 18.83 Iceland 0.10 Peru 1.77 Burma 2.02 India 40.35 Philippines 5.04 Ceylon 3.03 Indonesia 11.10 Saudi Arabia 3.70 Chile 3.53 Iran 4.54 Spain 10.09 China 30.26 Iraq 0.76 Sudan 1.01 Colombia 3.53 Ireland 3.03 Thailand 3.03 Costa Rica 0.20 Israel 1.68 Tunisia 1.51 Cuba 4.71 Jordan 0.30 Turkey 5.80 Dominican Korea 1.26 United Arab
Republic 0.40 Lebanon 0.45 Republic 6.03 Ecuador 0.65 Libya 1.01 Uruguay 1.06 El Salvador 0.30 Malaya 2.52 Venezuela 7.06 Ethiopia 0.50 Mexico 8.74 Viet-Nam 1.51 Ghana 2.36 Morocco 3.53 Yugoslavia 4.04 Greece 2.52 Nicaragua 0.30 236.93
TOTAL 1000.00
SECOND SCHEDULE
[SECTION 2]
ARTICLES OF AGREEMENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
The Governments on whose behalf the present Agreement is signed agree as follows:
Introductory Article The International Bank for Reconstruction and Development is established and
shall operate in accordance with the following provisions:
*In terms of United States dollars of the weight and fineness in effect on January 1,1960.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 21
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 guarantees 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) To promote the long-range balanced growth of international trade and the maintenance of equi l ibr ium in balances of payments 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 labour in their territories.
(iv) 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.
Article 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 Monetary 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 stock may be increased when the Bank deems it advisable by a three-fourths majority of the total voting power.
*As of December 31,1970, the authorized capital stock of the Bank had been increased to $27,000,000,000, divided into 270,000 shares having a par value of $100,000 each.
22 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 by the original members shall be those set forth in Schedule A. The minimum number of shares to be subscribed by 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 may subscribe shares of the authorized capital stock of the Bank in addition to their minimum subscriptions.
(c) If the authorized capital stock of the Bank is increased, each member shall have a reasonable opportunity to subscribe, under such conditions as the Bank shall decide, a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscribed bears to the total capital stock of the Bank, but no member shall be obligated to subscribe any part of the increased capital.
SECTION 4. Issue price of shares
Shares included in the minimum subscriptions of original members shall be issued at par. Other shares shall be issued at par unless the Bank by a majority 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) twenty percent shall be paid or subject to call under Section 7 (i) of this
Article as needed by the Bank for its operations; (ii) the remaining eighty percent shall be subject to call by the Bank only
when 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 liability
Liability on shares shall be limited to the unpaid portion of the issue price of the shares.
SECTION 7. Method of payment of subscriptions for shares
Payment of subscriptions for shares shall be made in gold or United States dollars and in the currencies of the members as follows:
(i) under Section 5 (i) of this Article, two percent of the price of each share shall be payable 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) when a call is made under Section 5 (ii) of this Article, payment may be made at the option of the member either in gold, in United States dollars or in the currency required to discharge the obligations of the Bank for the purpose for which the call is made;
(iii) when a member makes payments in any currency under (i) and (ii) above, such payments shall be made in amounts equal in value to the member’s liability under the call. This liability shall be a proportionate part of the subscribed capital stock of the Bank as authorized and defined in Section 2 of this Article.
SECTION 8. Time of payment of subscriptions
(a) The two percent payable on each share in gold or United States dollars under
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 23
Section 7 (i) of this Article, shall be paid within sixty days of the date on which the Bank begins operations, provided that
(i) any original member of the Bank whose metropolitan territory has suffered from enemy occupation or hostilities during the present war shall be granted the right to postpone payment of one-half percent until five years after that date;
(ii) an original member who cannot make such a payment because it has not recovered possession of its gold reserves which are still seized or immobilized as a result of the war may postpone all payment until such date as the Bank shall decide.
(b) The remainder of the price of each share payable under Section 7 (i) of this Article shall be paid as and when called by the Bank, provided that
(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;
(ii) not more than five percent of the price of the share shall be called in any period of three months.
SECTION 9. Maintenance of value of certain currency holdings of the Bank
(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 such member which 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 of shares
Shares shall not be pledged or encumbered in any manner whatever and they shall be transferable only to the Bank.
Article III General Provisions Relating to Loans and Guarantees
SECTION 1. Use of 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 reconstruction of the economy of members whose metropolitan territories have suffered great devastation
24 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
from enemy occupation or hostilities, the Bank, in determining the conditions and terms of loans made to such members, shall pay special regard to lightening the f inanc ia l burden and exped i t ing the comple t ion o f such res to ra t ion and reconstruction.
SECTION 2. Dealings 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 of 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 guarantee, 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:
(i) 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.
(ii) The Bank is satisfied that in the prevailing market conditions the borrower would be unable otherwise to obtain the loan under conditions which in the opinion of the Bank are reasonable for the borrower.
(iii) 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.
(iv) 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.
(v) In making or guaranteeing a loan, the Bank shall pay due regard to the prospects that 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.
(vi) In guaranteeing a loan made by other investors, the Bank receives suitable compensation for its risk.
(vii) 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 of loans guaranteed, participated in or made by the Bank
(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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 25
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.
SECTION 6. Loans to the International Finance Corporation*
(a) The Bank may make, participate in, or guarantee loans to the International Finance Corporation, an affiliate of the Bank, for use in its lending operations. The total amount outstanding of such loans, participations and guarantees shall not be increased if, at the time or as a result thereof, the aggregate amount of debt (including the guarantee of any debt) incurred by the said Corporation from any source and then outstanding shall exceed an amount equal to four times its unimpaired subscribed capital and surplus.
(b) The provisions of Article III, Sections 4 and 5 (c) and of Article IV, Section 3 shall not apply to loans, participations and guarantees authorized by this Section.
Article IV Operations
SECTION 1. Methods of 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.
(iii) 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 (a) (iii) above only with the approval of the member in whose markets 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 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.
(b) Currencies received by the Bank from borrowers or guarantors in payment
*Section added by amendment effective December 17, 1965.
26 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 approval in each case of the members whose currencies are 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 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 gold, 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 commissions and other charges under Section 1 (a) (iii), shall be used or exchanged for other currencies or gold required in the operations of 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) (iii) of this Article, shall also be used or exchanged for other currencies without restriction by such members.
SECTION 3. Provision of currencies for 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 expenditures 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 expenditure of the loan in those territories give rise to an increased need for foreign exchange.
SECTION 4. Payment provisions for direct loans
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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 27
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.
(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-fourths 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:
(i) 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 maintenance of its foreign exchange value; and for the repurchase of such currency on appropriate terms.
(ii) 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 per 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
28 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 Bank may terminate its
liability with respect to interest if, upon default by the borrower and by 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.
(d) The Bank shall have power to determine any other terms and conditions of the guarantee.
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 under this Agreement, as the Executive Directors may decide.
SECTION 7. Methods of meeting liabilities of the Bank in case of 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 discharge of the Bank’s liabilities on borrowings or guarantees under Section 1 (a) (ii) and (iii) of this Article shall be charged:
(i) first, against the special reserve provided in Section 6 of this Article, (ii) then, to the extent necessary and at the discretion of the Bank, against
the other reserves, surplus and capital available to the Bank. (c) Whenever necessary 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 similar payments on loans guaranteed by it, the Bank may call an appropriate amount of the unpaid subscriptions of members in accordance with Article II, Section 5 and 7. Moreover, if it believes that a default may be of long duration, the Bank may call an additional amount of such unpaid subscriptions not to exceed in any one year one percent of the total subscriptions of the members for the following purposes:
(i) To redeem prior to maturity, or otherwise discharge its liability on, all or part of the outstanding principal of any loan guaranteed by it in respect of which the debtor is in default.
(ii) To repurchase, or otherwise discharge its liability on, all or part of its own outstanding borrowings.
SECTION 8. Miscellaneous operations
In addition to the operations specified elsewhere in this Agreement, the Bank shall have the power:
(i) To buy and sell securities it has issued and to buy and sell securities which it has guaranteed or in which it has invested, provided that the Bank shall
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 29
obtain the approval of the member in whose territories the securities are to be bought or sold.
(ii) To guarantee securities in which it has invested for the purpose of facilitating their sale.
(iii) To borrow the currency of any member with the approval of that member.
(iv) To buy and sell such other securities as the Directors by a three-fourths majority of the total voting power may deem proper for the investment of all or part of the special reserve under Section 6 of this Article.
In exercising the powers conferred by this Section, the Bank may deal with any person, partnership, association, corporation or other legal entity in the territories of any member.
SECTION 9. Warning to be placed on securities
Every security guaranteed or issued by the Bank shall bear on i ts face a conspicuous statement to the effect that it is not an obligation of any government unless expressly stated on the security.
SECTION 10. Political activity prohibited
The Bank 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 Article I.
Article V Organization and Management
SECTION 1. Structure of the Bank
The Bank shall have a Board of Governors, Executive Directors, a President and such other officers and staff to perform such duties as the Bank may determine.
SECTION 2. Board of Governors
(a) All the powers of the Bank shall be vested in the Board of Governors consisting of one governor and one alternate appointed by each member in such manner as it may determine. Each governor and each alternate shall serve for five years , subject to the pleasure of the member appoint ing him, and may be reappointed. No alternate may vote except in the absence of his principal. The Board shall select one of the governors as Chairman.
(b) The Board of Governors may delegate to the Executive Directors authority to exercise any powers of the Board, 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
Executive Directors; (v) Make arrangements to cooperate with other international organizations
(other than informal arrangements of a temporary and administrative character);
30 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(vi) Decide to suspend permanently the operations of the Bank and to distribute its assets;
(vii) Determine the distribution of the net income of the Bank. (c) The Board of Governors shall hold an annual meeting and such other
meetings as may be provided for by the Board or called by the Executive Directors. Meetings of the Board shall be called by the Directors whenever requested by five members or by 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, exercising not less than two-thirds of the total voting power.
(e) The Board of Governors may by regulation establish a procedure whereby the Executive Directors, when they deem such action to be in the best interest of the Bank, may obtain a vote of the Governors on a specific question without calling a meeting of the Board.
(f) The Board of Governors, and the Executive Directors to the extent authorized, may adopt such rules and regulations as may be necessary or appropriate to conduct the business of the Bank.
(g) Governors and alternates shall serve as such without compensation from the Bank, but the Bank shall pay them reasonable expenses incurred in attending meetings.
(h) The Board of Governors shall determine the remuneration to be paid to the Executive Directors and the salary and terms of the contract of service of the President.
SECTION 3. Voting
(a) Each member shall have two hundred fifty votes plus one additional vote for each share of stock held.
(b) Except as otherwise specifically provided, all matters before the Bank shall be decided by a majority of the votes cast.
SECTION 4. Executive Directors
(a) The Executive Directors shall be responsible for the conduct of the general operations of the Bank, and for this purpose, shall exercise all the powers delegated to them by the Board of Governors.
(b) There shall be twelve Executive Directors, who need not be governors, and of whom:
(i) five shall be appointed, one by each of the five members having the largest number of shares;
(ii) seven shall be elected according to Schedule B by all the Governors other than those appointed by the five members referred to in (i) above.
For the purpose of this paragraph, "members" means governments of countries whose names are set forth in Schedule A, whether they are original members or become members in accordance with Article II, Section 1 (b). When governments of other countries become members, the Board of Governors may, by a four-fifths majority of the total voting power, increase the total number of directors by increasing the number of directors to be elected.
Executive directors shall be appointed or elected every two years. (c) Each executive director shall appoint an alternate with full power to act for
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 31
him when he is not present. When the executive directors appointing them are present, alternates may participate in meetings but shall not vote.
(d) Directors shall continue in office until their successors are appointed or elected. If the office of an elected director becomes vacant more than ninety days before the end of his term, another director shall be elected for the remainder of the term by the governors who elected the former director. A majority of the votes cast shall be required for election. While the office remains vacant, the alternate of the former director shall exercise his powers, except that of appointing an alternate.
(e) The Executive Directors shall function in continuous session at the principal office of the Bank and shall meet as often as the business of the Bank may require.
(f) A quorum for any meeting of the Executive Directors shall be a majority of the Directors, exercising not less than one-half of the total voting power.
(g) Each appointed director shall be entitled to cast the number of votes allotted under Section 3 of this Article to the member appointing him. Each elected director shall be entitled to cast the number of votes which counted toward his election. All the votes which a director is entitled to cast shall be cast as a unit.
(h) The Board of Governors shall adopt regulations under which a member not entitled to appoint a director under (b) above may send a representative to attend any meeting of the Executive Directors when a request made by, or a matter particularly affecting, that member is under consideration.
(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
(a) 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.
(b) The President shall be chief 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 them in the discharge of their 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, industr ia l , labour, and agr icul tural in teres ts , and with as wide a nat ional representat ion as possible. In those f ields where specialized internat ional organizations exist, the members of the Council representative of those fields shall
32 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 effected only after amendment to this Agreement under Article VIII.
(b) 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 of offices
(a) The principal office of the Bank shall be located in the territory of the member holding the greatest number of shares.
(b) 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.
(b) 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 Bank’s holdings of its currency or, if it has no central bank, it shall designate such other institution as may be acceptable to the Bank.
(b) 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 four 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.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 33
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 into 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.
(b) 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 of 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.
(b) If any part is distributed, up to two percent non-cumulative shall 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) (i), 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 each 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 of 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 fulfil 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 all
34 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
obligations.
SECTION 3. Cessation of membership in International Monetary Fund
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 three-fourths of the total voting power has agreed to allow it to remain a member.
SECTION 4. Settlement of accounts with governments ceasing to be members
(a) When a government ceases to be a member, it shall remain liable for its direct obligations to the Bank and for its contingent liabilities to the Bank so long as any part of the loans or guarantees contracted before it ceased to be a member are outstanding; but it shall cease to incur liabilities with respect to loans and guarantees entered into thereafter by the Bank and to share either in the income or the expenses of the Bank.
(b) At the time a government ceases to be a member, the Bank shall arrange for the repurchase of its shares as a part of the settlement of accounts with such government in accordance with the provisions of (c) and (d) below. For this purpose the repurchase price of the shares shall be the value shown by the books of the Bank on the day the government ceases to be a member.
(c) The payment for shares repurchased by the Bank under this Section shall be governed by the following conditions:
(i) Any amount due to the government for its shares shall be withheld so long as the government, its central bank or any of its agencies remains liable, as borrower or guarantor, to the Bank and such amount may, at the option of the Bank, be applied on any such liability as it matures. No amount shall be withheld on account of the liability of the government resulting from its subscription for shares under Article II, Section 5 (ii). In any event, no amount due to a member for its shares shall be paid until six months after the date upon which the government ceases to be a member.
(ii) Payments for shares may be made from time to time, upon their surrender by the government, to the extent by which the amount due as the repurchase price in (b) above exceeds the aggregate of liabilities on loans and guarantees in (c) (i) above until the former member has received the full repurchase price.
(iii) Payments shall be made in the currency of the country receiving payment or at the option of the Bank in gold.
(iv) If losses are sustained by the Bank on any guarantees, participations in loans, or loans which were outstanding on the date when the government ceased to be a member, and the amount of such losses exceeds the amount of the reserve provided against losses on the date when the government ceased to be a member, such government shall be obligated to repay upon demand the amount by which the repurchase price of its shares would have been reduced, if the losses had been taken into account when the repurchase price was determined. In addition, the former member government shall remain liable on any call for unpaid subscriptions under Article II, Section 5 (ii), to the extent that it would have been required to respond if the impairment of capital had occurred and the call had been made at the time the repurchase price of its shares was determined.
(d) If the Bank suspends permanently its operations under Section 5 (b) of this Article, within six months of the date upon which any government ceases to be a member, all rights of such government shall be determined by the provisions of
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 35
Section 5 of this Article.
SECTION 5. Suspension of operations and settlement of obligations
(a) In an emergency the Executive Directors may suspend temporarily operations in respect of new loans and guarantees pending an opportunity for further consideration and action by the Board of Governors.
(b) The Bank may suspend permanently its operations in respect of new loans and guarantees by vote of a majority of the Governors, exercising a majority of the total voting power. After such suspension of operations the Bank shall forthwith cease all activities, except those incident to the orderly realization, conservation, and preservation of its assets and settlement of its obligations.
(c) The liability of all members for uncalled subscriptions to the capital stock of the Bank and in respect of the depreciation of their own currencies shall continue until all claims of creditors, including all contingent claims, shall have been discharged.
(d) All creditors holding direct claims shall be paid out of the assets of the Bank, and then out of payments to the Bank on calls on unpaid subscriptions. Before making any payments to creditors holding direct claims, the Executive Directors shall make such arrangements as are necessary, in their judgement, to insure a distribution to holders of contingent claims ratably with creditors holding direct claims.
(e) No distribution shall be made to members on account of their subscriptions to the capital stock of the Bank until:
(i) all liabilities to creditors have been discharged or provided for, and (ii) a majority of the Governors, exercising a majority of the total voting
power, have decided to make a distribution. (f) After a decision to make a distribution has been taken under (e) above, the
Executive Directors may by a two-thirds majority vote make successive distributions of the assets of the Bank to members until all of the assets have been distributed. This distribution shall be subject to the prior settlement of all outstanding claims of the Bank against each member.
(g) Before any distribution of assets is made, the Executive Directors shall fix the proportionate share of each member according to the ratio of its shareholding to the total outstanding shares of the Bank.
(h) The Executive Directors shall value the assets to be distributed as at the date of distribution and then proceed to distribute in the following manner:
(i) There shall be paid to each member in its own obligations or those of its official agencies or legal entities within its territories, insofar as they are available for distribution, an amount equivalent in value to its proportionate share of the total amount to be distributed.
(ii) Any balance due to a member after payment has been made under (i) above shall be paid, in its own currency, insofar as it is held by the Bank, up to an amount equivalent in value to such balance.
(iii) Any balance due to a member after payment has been made under (i) and (ii) above shall be paid in gold or currency acceptable to the member, insofar as they are held by the Bank, up to an amount equivalent in value to such balance.
(iv) Any remaining assets held by the Bank after payments have been made to members under (i), (ii), and (iii) above shall be distributed pro rata among the
36 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
members. (i) Any member receiving assets distributed by the Bank in accordance with (h)
above, shall enjoy the same rights with respect to such assets as the Bank enjoyed prior to their distribution.
Article VII Status, Immunities and Privileges
SECTION 1. Purposes of Article
To enable the Bank to fulfil the functions with which it is entrusted, the status, immunities and privileges set forth in this Article shall be accorded to the Bank in the territories of each member.
SECTION 2. Status of the Bank
The Bank 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 Bank with regard to judicial process
Actions may be brought against the Bank only in a court of competent jurisdiction in the territories of a member in which the Bank 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 Bank shall, wheresoever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of final judgement against the Bank.
SECTION 4. Immunity of assets from seizure
Property and assets of the Bank, 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 Bank 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 Bank shall be free from restrictions, regulations, controls and moratoria of any nature.
SECTION 7. Privilege for communications
The official communications of the Bank 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 Bank (i) shall be immune from legal process with respect to acts performed by
them in their official capacity except when the Bank waives this immunity;
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 37
(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.
SECTION 9. Immunities from taxation
(a) The Bank, 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 Bank 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 Bank to executive directors, alternates, officials or employees of the Bank 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 Bank (including any dividend or interest thereon) by whomsoever held -
(i) which discriminates against such obligation or security solely because it is issued by the Bank; 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 Bank.
(d) No taxation of any kind shall be levied on any obligation or security guaranteed by the Bank (including any dividend or interest thereon) by whomsoever held -
(i) which discriminates against such obligation or security solely because it is guaranteed by the Bank; or
(ii) if the sole jurisdictional basis for such taxation is the location of any office or place of business maintained by the Bank.
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 Bank of the detailed action which it has taken.
Article VIII 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 Bank 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 Bank shall certify the fact by formal communication addressed to all members.
(b) Notwithstanding (a) above, acceptance by all members is required in the
38 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
case of any amendment modifying (i) the right to withdraw from the Bank provided in Article VI, Section 1; (ii) the right secured by Article II, Section 3 (c); (iii) the limitation on liability provided in Article II, Section 6.
(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 IX Interpretation
(a) Any question of interpretation of the provisions of this Agreement arising between any member and the Bank or between any members of the Bank shall be submitted to the Executive Directors for their 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 V, Section 4 (h).
(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, the Bank 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 Bank and a country which has ceased to be a member, or between the Bank and any member during the permanent suspension of the Bank, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators, one appointed by the Bank, another by the country involved and an umpire who, unless the parties otherwise agree, shall be appointed by the President of the Permanent Court of International Justice or such other authority as may have been prescribed by regulation adopted by the Bank. 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 X Approval Deemed Given
Whenever the approval of any member is required before any act may be done by the Bank, except in Article VIII, approval shall be deemed to have been given unless the member presents an objection within such reasonable period as the Bank may fix in notifying the member of the proposed act.
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 minimum 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 May 1, 1945.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 39
SECTION 2. 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 government shall become a member of the Bank as from the date of the deposit on its behalf of the instrument referred to in (a) above, except that no government 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 all governments whose membership is approved in accordance with Article II, Section 1 (b), 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 one-hundredth of one percent of the price of each share in gold or United States dollars for the purpose of meeting administrative expenses of the Bank. This payment shall be credited on account of the payment to be made in accordance with Article II, Section 8 (a). 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 Bank when the initial meeting has been called under Section 3 of this Article. 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 1 (b).
(g) By 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) In the case of governments whose metropolitan territories have been under enemy occupation, the deposit of the instrument referred to in (a) above may be delayed until one hundred and eighty days after the date on which these territories have been liberated. If, however, it is not deposited by any such government before the expiration of this period, the signature affixed on behalf of that government shall become void and the portion of its subscription paid under (d) above shall be returned to it.
(i) Paragraphs (d) and (h) shall come into force with regard to each signatory government as from the date of its signature.
SECTION 3. Inauguration of the Bank
(a) As soon as this Agreement enters into force under Section 1 of this Article, each member shall appoint a governor and the member to whom the largest number of shares is allocated in Schedule A shall call the first meeting of the Board of Governors.
40 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(b) At the first meeting of the Board of Governors, arrangements shall be made for the selection of provisional executive directors. The governments of the five countries, to which the largest number of shares are allocated in Schedule A, shall appoint provisional executive directors. If one or more of such governments have not become members, the executive directorships which they would be entitled to fill shall remain vacant until they become members, or until January 1, 1946, whichever is the earlier. Seven provisional executive directors shall be elected in accordance with the provisions of Schedule B and shall remain in office until the date of the first regular election of executive directors which shall be held as soon as practicable after January 1, 1946.
(c) The Board of Governors may delegate to the provisional executive directors any powers except those which may not be delegated to the executive directors.
(d) The Bank shall notify members when it is ready to commence operations. 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 1 (b).
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 41
SCHEDULE A
SUBSCRIPTIONS
(millions of (millions of (millions of dollars) dollars) dollars)
Australia 200 France 450 Panama .2 Belgium 225 Greece 25 Paraguay .8 Bolivia 7 Guatemala 2 Peru 17.5 Brazil 105 Haiti 2 Philippine Canada 325 Honduras 1 Commonwealth 15 Chile 35 Iceland 1 Poland 125 China 600 India 400 Union of South Colombia 35 Iran 24 Africa 100 Costa Rica 2 Iraq 6 Union of Soviet Cuba 35 Liberia .5 Socialist Czechoslovakia 125 Luxembourg 10 Republics 1200 *Denmark Mexico 65 United Kingdom 1300 Dominican Republic 2 Netherlands 275 United States 3175 Ecuador 3.2 New Zealand 50 Uruguay 10.5 Egypt 40 Nicaragua .8 Venezuela 10.5 El Salvador 1 Norway 50 Yugoslavia 40 Ethiopia 3
TOTAL 9100
SCHEDULE B
ELECTION OF EXECUTIVE DIRECTORS
1. The election of the elective executive directors shall be by ballot of the Governors eligible to vote under Article V, Section 4 (b).
2. In balloting for the elective executive directors, each governor eligible to vote shall cast for one person all of the votes to which the member appointing him is entitled under Section 3 of Article V. The seven persons receiving the greatest number of votes shall be executive directors, except that no person who receives less than fourteen percent of the total of the votes which can be cast (eligible votes) shall be considered elected.
3. When seven persons are not elected on the first ballot, a second ballot shall be held in which the person who received the lowest number of votes shall be ineligible for election and in which there shall vote only (a) those governors who voted in the first ballot for a person not elected and (b) those governors whose votes for a person elected are deemed under 4 below to have raised the votes cast for that person above fifteen percent of the eligible votes.
4. In determining whether the votes cast by a governor are to be deemed to have raised the total of any person above fifteen percent of the eligible votes, the fifteen percent shall be deemed to include, first, the votes of the governor casting the
*The quota of Denmark shall be determined by the Bank after Denmark accepts membership in accordance with these Articles of Agreement.
42 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
largest number of votes for such person, then the votes of the governor casting the next largest number, and so on until fifteen percent is reached.
5. Any governor, part of whose votes must be counted in order to raise the total of any person above fourteen percent shall be considered as casting all of his votes for such person even if the total votes for such person thereby exceed fifteen percent.
6. If, after the second ballot, seven persons have not been elected, further ballots shall be held on the same principles until seven persons have been elected, provided that after six persons are elected, the seventh may be elected by a simple majority of the remaining votes and shall be deemed to have been elected by all such votes.
THIRD SCHEDULE
[SECTION 2]
ARTICLES OF AGREEMENT OF THE INTERNATIONAL FINANCE CORPORATION
The Governments on whose behalf this Agreement is signed agree as follows: Introductory 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 Corporat ion is to fur ther 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 contr ibute to the development of i t s member countr ies by making investments, without guarantee of repayment by the member government concerned, in cases where sufficient private capital 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.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 43
Article II Membership and 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
(a) The authorized capital stock of the Corporation shall be $100,000,000, in terms of United States dollars.*
(b) The authorized 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.
(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 of 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 stock equivalent to the proportion which its 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.
(e) 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 be available for subscription only by, and shall be issued only to, members.
SECTION 3. Subscriptions
(a) Each original member shall subscribe to the number of shares of stock set forth opposite its name in Schedule A. The number of shares of stock to be subscribed by other members shall be determined by the Corporation.
(b) Shares of stock initially subscribed by original members shall be issued at par.
(c) The initial subscription of each original member 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 such original member becomes a member, whichever shall be later, or at such date thereafter as the
*On September 3, 1963, the authorized capital stock was increased to $110,000,000, divided into 110,000 shares of $1,000 each.
44 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 stock 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.
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 such an enterprise shall not necessarily preclude the Corporation from making an investment therein.
SECTION 2. Forms of Financing*
The Corporation may make investments of its funds in such form or forms as it may deem appropriate in the circumstances.
SECTION 3. Operational Principles
The operations 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;
*Amended September 21, 1961. Original Text: (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 such 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.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 45
(iv) the Corporation shall not assume responsibility for managing any enterprise in which it has invested and shall not exercise voting rights for such purpose or for any other purpose which, in its opinion, properly is within the scope of managerial control *;
(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 of 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. Applicability of Certain Foreign Exchange Restrictions
Funds received by or payable to the Corporation in respect of an investment of the Corporation made in any 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 that 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; if and so long as the Corporation shall be indebted on loans from or guaranteed by the Bank, the total amount outstanding of borrowings incurred or guarantees given by the Corporation shall not be increased if, at the time or as a result thereof, the aggregate amount of debt (including the guarantee of any debt) incurred by the Corporation from any source and then outstanding shall exceed an amount equal to four times its unimpaired subscribed capital and surplus†;
(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 by other sections of this Article;
*Amended September 21, 1961. Original Text: (iv) The Corporation shall not assume responsibility for managing any enterprise in which it has invested; †Last clause added by amendment effective September 1, 1965.
46 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(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 l. Structure of the Corporation
The Corporation shall have a Board of Governors, a Board of Directors, a Chairman of the Board of Directors, a President and such other officers and staff to perform such duties as the Corporation may determine.
SECTION 2. Board of Governors
(a) All the powers of the Corporation shall be vested in the Board of Governors. (b) Each Governor and Alternate Governor of the Bank appointed by a member
of the Bank which is also a member of the Corporation shall ex officio 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;
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 47
(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 such 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 stock 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 of 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 officio of each Executive Director of the Bank who shall have been either (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 which 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 which 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 which a Director is entitled to cast shall be cast as a unit.
48 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
(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 of 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 which 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 officio 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.
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 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.
*Amended September 1, 1965. Original text included the following: "The Corporation shall not lend to or borrow from the Bank."
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 49
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 such 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.
SECTION 9. Depositories
Each member shall designate its central bank as a depository in which the Corporation may keep holdings of such 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.
SECTION 10. Channel of Communication
Each member shall designate an appropriate authority with which the Corporation may communicate in connection with any matter arising under this Agreement.
SECTION 11. 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 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 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.
(c) Dividends shall be paid in such manner and in such currency or currencies as the Corporation shall determine.
Article V Withdrawal; Suspension of 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 fulfil any of its obligations to the Corporation, the Corporation may suspend i ts membership by decision of a majori ty of the
50 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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.
(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. Suspension or Cessation of Membership in the Bank
Any member which 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 such 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. Such 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 such 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 such instalments, at such 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 government or any of its agencies remains liable to the Corporation for payment of any amount and such amount may, at the option of 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 investments made pursuant to Article III, Section 1, and held by it on the date when the government ceases to be a member, and the amount of such 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 event 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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 51
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 account 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 fulfil 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.
SECTION 2. Status of 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
52 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 of Assets from Restrictions
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, officers and employees of the Corporation: (i) 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.
SECTION 9. Immunities from Taxation
(a) The Corporation, 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 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
(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 Corporation.
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 53
(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 whomsover held:
(i) which discriminates against such obligation or security solely because it is guaranteed by the Corporation; or
(ii) if the sole jurisdictional basis for such taxation is the location of any office or place of business maintained by the Corporation.
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 Corporation of the detailed action which it has taken.
SECTION 11. Waiver
The Corporation in its discretion may waive any of the privileges and immunities conferred under this Article to such extent and upon such conditions as it may determine.
Article VII Amendments
(a) This Agreement may be amended by vote of three-fifths 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 l;
(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 proposal to amend this Agreement, whether emanating from a member, a Governor or the Board of Directors, shall be communicated to the Chairman of the Board of Governors who shall bring the proposal before the Board of Governors. When an amendment has been duly adopted, the Corporation shall so certify by 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 Corporat ion 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
54 CAP. 235.] MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS
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 which 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.
Article IX Final Provisions
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 Agreement enter into force before October 1, 1955.
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).
SECTION 3. Inauguration of the Corporation
(a) As soon as this Agreement enters into force under Section 1 of this Article the Chairman of the 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
MEMBERSHIP OF INTERNATIONAL FINANCIAL ORGANISATIONS [CAP. 235. 55
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
Amount Amount Number of (in United Number of (in United
Country Shares States dollars) Country Shares States dollars)
Australia 2,215 2,215,000 Iran 372 372,000 Austria 554 554,000 Iraq 67 67,000 Belgium 2,492 2,492,000 Israel 50 50,000 Bolivia 78 78,000 Italy 1,994 1,994,000 Brazil 1,163 1,163,000 Japan 2,769 2,769,000
Burma 166 166,000 Jordan 33 33,000 Canada 3,600 3,600,000 Lebanon 50 50,000 Ceylon 166 166,000 Luxembourg 111 111,000 Chile 388 388,000 Mexico 720 720,000 China 6,646 6,646,000 Netherlands 3,046 3,046,000 Colombia 388 388,000 Nicaragua 9 9,000 Costa Rica 22 22,000 Norway 554 554,000 Cuba 388 388,000 Pakistan 1,108 1,108,000 Denmark 753 753,000 Panama 2 2,000 Dominican Paraguay 16 16,000
Republic 22 22,000 Peru 194 194,000 Ecuador 35 35,000 Philippines 166 166,000 Egypt 590 590,000 Sweden 1,108 1,108,000
El Salvador 11 11,000 Syria 72 72,000 Ethiopia 33 33,000 Thailand 139 139,000 Finland 421 421,000 Turkey 476 476,000 France 5,815 5,815,000 Union of Germany 3,655 3,655,000 South Africa 1,108 1,108,000 Greece 277 277,000 United Guatemala 22 22,000 Kingdom 14,400 14,400,000 Haiti 22 22,000 United States 35,168 35,168,000 Honduras 11 11,000 Uruguay 116 116,000 Iceland 11 11,000 Venezuela 116 116,000 India 4,431 4,431,000 Yugoslavia 443 443,000 Indonesia 1,218 1,218,000
Total: 100,000 $100,000,000