Chapter 335

MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 1 CHAPTER 335 MULTILATERAL INVESTMENT GUARANTEE AGENCY ACT To provide for Malta’s membership of the Multilateral Investment Guarantee Agency. (10th October, 1989)* Enacted by ACT XXX of 1989 . 1. This Act may be cited as the Multilateral Investment Guarantee Agency Act. 2. In this Act, unless the context otherwise requires - Short title. Interpretation. "Agency" means the Multilateral Investment Guarantee Agency; "Convention" means the Convention providing for the establishment and operation of the Agency as approved by the Board of Governors of the International Bank for Reconstruction and Development on the 11th October, 1985, and signed by Malta in Washington D.C. on the 16th September, 1986, as set out in the Schedule to this Act, and for the purposes of sections 4 and 6 of this Act, as from time to time amended; "Minister" means the Minister responsible for finance. 3. In virtue of this Act, and in compliance with the provisions of the Ratification of Treaties Act, the Government of Malta is hereby authorised to accede to the Convention. 4. (1) There shall be paid out of the Consolidated Fund, on the warrant of the Minister, all sums required for the purpose of making all payments required to be made from time to time under the provisions of the Convention. (2) The Minister may, if he thinks fit, create and issue, or direct the Central Bank of Malta (as the depository for the Government of Malta for the purposes of Article 37 of the Convention) to create and issue, to the Agency non-interest bearing and non-negotiable notes or other obligations as are provided for by Article 7(i) of the Convention, and the sums payable under such notes or obligations so created and issued shall be a charge on the Consolidated Fund: 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 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 Agency, such repayments to be made as soon as possible and in no case later than a month after the date of payment to the Agency; and in respect 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. *See Government Notice No. 577 of 10th October, 1989. Authorisation for acceding to the Convention. Cap. 304. Financial provisions relating to membership. 2 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY (3) Any sums received by the Government of Malta, or by the C e n t r a l B a n k o f M a l t a , f r o m t h e Ag e n c y o n a c c o u n t o f i t s subscription to the capital stock thereof shall be paid into the Consolidated Fund. Certain provisions of the Convention given force of law in Malta. 5. The provisions of Article 1 (b) and Articles 44 to 48 inclusive of the Convention shall have the force of law in Malta, so however, that nothing in Article 47 of the Convention shall be construed: (i) as entitling the Agency to import goods free of customs duty without any restriction on their subsequent sale in Malta; (ii) as conferring on the Agency any exemption from taxes and duties which form part of the prices of goods acquired by the Agency in Malta; or (iii) as conferring on the Agency any exemption from taxes or duties which are in fact no more than charges for services rendered. Power of Minister to make orders. Language of Schedule. 6. The Minister may by order make such provisions as are necessary for carrying into effect any of the provisions of the Convention. 7. The Schedule to this Act shall be in the English language only, and such text shall apply also to the Maltese text of the Act. MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 3 SCHEDULE [Section 2] CONVENTION ESTABLISHING THE MULTILATERAL INVESTMENT GUARANTEE AGENCY PREAMBLE The Contracting States Considering the need to strengthen international cooperation for economic development and to foster the contribution to such development of foreign investment in general and private foreign investment in particular; Recognizing that the flow of foreign investment to developing countries would be facilitated and further encouraged by alleviating concerns related to non-commercial risks; Desiring to enhance the flow to developing countries of capital and technology for productive purposes under conditions consistent with their development needs, policies and objectives, on the basis of fair and stable standards for the treatment of foreign investment; Convinced that the Multilateral Investment Guarantee Agency can play an important role in the encouragement of foreign investment complementing national and regional investment guarantee programs and private insurers of non-commercial risk; and Realizing that such Agency should, to the extent possible, meet its obligations without resort to its callable capital and that such an objective would be served by continued improvement in investment conditions, Have Agreed as follows: CHAPTER I ESTABLISHMENT, STATUS, PURPOSES AND DEFINITIONS Article 1. Establishment and Status of the Agency (a) There is hereby established the Multilateral Investment Guarantee Agency (hereinafter called the Agency). (b) The Agency shall possess full juridical personality and, in particular, the capacity to: (i) contract; (ii) acquire and dispose of movable and immovable property; and (iii) institute legal proceedings. Article 2. Objective and Purposes The objective of the Agency shall be to encourage the flow of investments for productive purposes among member countries, and in particular to developing member countries, thus supplementing the activities of the International Bank for Reconstruction and Development (hereinafter referred to as the Bank), the International Finance Corporation and other international development finance institutions. 4 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY To serve its objective, the Agency shall: (a) issue guarantees, including coinsurance and reinsurance, against noncommercial risks in respect of investments in a member country which flow from other member countries; (b) carry out appropriate complementary activities to promote the flow of investments to and among developing member countries; and (c) exercise such other incidental powers as shall be necessary or desirable in the furtherance of its objective. The Agency shall be guided in all its decisions by the provisions of this Article. Article 3. Definitions For the purposes of this Convention: (a) "Member" means a State with respect to which this Convention has entered into force in accordance with Article 61. (b) "Host country" or "host government" means a member, its government, or any public authority of a member in whose territories, as defined in Article 66, an investment which has been guaranteed or reinsured, or is considered for guarantee or reinsurance, by the Agency is to be located. (c) A "developing member country" means a member which is listed as such in Schedule A hereto as this Schedule may be amended from time to time by the Council of Governors referred to in Article 30 (hereinafter called the Council). (d) A "special majority" means an affirmative vote of not less than two-thirds of the total voting power representing not less than fifty-five percent of the subscribed shares of the capital stock of the Agency. (e) A "freely usable currency" means (i) any currency designated as such by the International Monetary Fund from time to time and (ii) any other freely available and effectively usable currency which the Board of Directors referred to in Article 30 (hereinafter called the Board) may designate for the purposes of this Convention after consultation with the International Monetary Fund and with the approval of the country of such currency. CHAPTER II MEMBERSHIP AND CAPITAL Article 4. Membership (a) Membership in the Agency shall be open to all members of the Bank and to Switzerland. (b) Original members shall be the States which are listed in Schedule A hereto and become parties to this Convention on or before October 30, 1987. Article 5. Capital (a) The authorized capital stock of the Agency shall be one billion Special Drawing Rights (SDR 1,000,000,000). The capital stock shall be divided into 100,000 shares having a par value of SDR 10,000 each, which shall be available for subscription by members. All payment obligations of members with respect to MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 5 capital stock shall be settled on the basis of the average value of the SDR in terms of United States dollars for the period January 1, 1981 to June 30, 1985, such value being 1.082 United States dollars per SDR. (b) The capital stock shall increase on the admission of a new member to the extent that the then authorized shares are insufficient to provide the shares to be subscribed by such member pursuant to Article 6. (c) The Council, by special majority, may at any time increase the capital stock of the Agency. Article 6. Subscription of Shares Each original member of the Agency shall subscribe at par to the number of shares of capital stock set forth opposite its name in Schedule A hereto. Each other member shall subscribe to such number of shares of capital stock on such terms and conditions as may be determined by the Council, but in no event at an issue price of less than par. No member shall subscribe to less than fifty shares. The Council may prescribe rules by which members may subscribe to additional shares of the authorized capital stock. Article 7. Division and Calls of Subscribed Capital The initial subscription of each member shall be paid as follows: (i) Within ninety days from the date on which this Convention enters into force with respect to such member, ten percent of the price of each share shall be paid in cash as stipulated in Section (a) of Article 8 and an additional ten percent in the form of non-negotiable, non-interestbearing promissory notes or similar obligations to be encashed pursuant to a decision of the Board in order to meet the Agency’s obligations. (ii) The remainder shall be subject to call by the Agency when required to meet its obligations. Article 8. Payment of Subscription of Shares (a) Payments of subscriptions shall be made in freely usable currencies except that payments by developing member countries may be made in their own currencies up to twenty-five percent of the paid-in cash portion of their subscriptions payable under Article 7 (i). (b) Calls on any portion of unpaid subscriptions shall be uniform on all shares. (c) If the amount received by the Agency on a call shall be insufficient to meet the obligations which have necessitated the call, the Agency may make further successive calls on unpaid subscriptions until the aggregate amount received by it shall be sufficient to meet such obligations. (d) Liability on shares shall be limited to the unpaid portion of the issue price. Article 9. Valuation of Currencies Whenever it shall be necessary for the purposes of this Convention to determine the value of one currency in terms of another, such value shall be as reasonably determined by the Agency, after consultation with the International Monetary Fund. 6 CAP. 335.] Article 10. MULTILATERAL INVESTMENT GUARANTEE AGENCY Refunds (a) The Agency shall, as soon as practicable, return to members amounts paid on calls on subscribed capital if and to the extent that: (i) the call shall have been made to pay a claim resulting from a guarantee or reinsurance contract and thereafter the Agency shall have recovered its payment, in whole or in part, in a freely usable currency; or (ii) the call shall have been made because of a default in payment by a member and thereafter such member shall have made good such default in whole or in part; or (iii) the Council, by special majority, determines that the financial position of the Agency permits all or part of such amounts to be returned out of the Agency’s revenues. (b) Any refund effected under this Article to a member shall be made in freely usable currency in the proportion of the payments made by that member to the total amount paid pursuant to calls made prior to such refund. (c) The equivalent of amounts refunded under this Article to a member shall become part of the callable capital obligations of the member under Article 7 (ii). CHAPTER III OPERATIONS Article 11. Covered Risks (a) Subject to the provisions of Sections (b) and (c) below, the Agency may guarantee eligible investments against a loss resulting from one or more of the following types of risk: (i) Currency Transfer any introduction attributable to the host government of restrictions on the transfer outside the host country of its currency into a freely usable currency or another currency acceptable to the holder of the guarantee, including a failure of the host government to act within a reasonable period of time on an application by such holder for such transfer; (ii) Expropriation and Similar Measures any legislative action or administrative action or omission attributable to the host government which has the effect of depriving the holder of a guarantee of his ownership or control of, or a substantial benefit from, his investment, with the exception of non-discriminatory measures of general application which governments normally take for the purpose of regulating economic activity in their territories; (iii) Breach of Contract any repudiation or breach by the host government of a contract with the holder of a guarantee, when (a) the holder of a guarantee does not have recourse to a judicial or arbitral forum to determine the claim of repudiation or breach, or (b) a decision by such forum is not rendered within such reasonable period of time as MULTILATERAL INVESTMENT GUARANTEE AGENCY (iv) [ CAP. 335. 7 shall be prescribed in the contracts of guarantee pursuant to the Agency’s regulations, or (c) such a decision cannot be enforced; and War and Civil Disturbance any military action or civil disturbance in any territory of the host country to which this Convention shall be applicable as provided in Article 66. (b) Upon the joint application of the investor and the host country, the Board, by special majority, may approve the extension of coverage under this Article to specific non-commercial risks other than those referred to in Section (a) above, but in no case to the risk of devaluation or depreciation of currency. (c) Losses resulting from the following shall not be covered: (i) any host government action or omission to which the holder of the guarantee has agreed or for which he has been responsible; and (ii) any host government action or omission or any other event occurring before the conclusion of the contract of guarantee. Article 12. Eligible Investments (a) Eligible investments shall include equity interests, including medium- or long-term loans made or guaranteed by holders of equity in the enterprise concerned, and such forms of direct investment as may be determined by the Board. (b) The Board, by special majority, may extend eligibility to any other mediumor long-term form of investment, except that loans other than those mentioned in Section (a) above may be eligible only if they are related to a specific investment covered or to be covered by the Agency. (c) Guarantees shall be restricted to investments the implementation of which begins subsequent to the registration of the application for the guarantee by the Agency. Such investments may include: (i) any transfer of foreign exchange made to modernize, expand, or develop an existing investment; and (ii) the use of earnings from existing investments which could otherwise be transferred outside the host country. (d) In guaranteeing an investment, the Agency shall satisfy itself as to: (i) the economic soundness of the investment and its contribution to the development of the host country; (ii) compliance of the investment with the host country’s laws and regulations; (iii) consistency of the investment with the declared development objectives and priorities of the host country; and (iv) the investment conditions in the host country, including the availability of fair and equitable treatment and legal protection for the investment. Article 13. Eligible Investors (a) Any natural person and any juridical person may be eligible to receive the Agency’s guarantee provided that: (i) such natural person is a national of a member other than the host 8 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY country; (ii) such juridical person is incorporated and has its principal place of business in a member or the majority of its capital is owned by a member or members or nationals thereof, provided that such member is not the host country in any of the above cases; and (iii) such juridical person, whether or not it is privately owned, operates on a commercial basis. (b) In case the investor has more than one nationality, for the purposes of Section (a) above the nationality of a member shall prevail over the nationality of a non-member, and the nationality of the host country shall prevail over the nationality of any other member. (c) Upon the joint application of the investor and the host country, the Board, by special majority, may extend eligibility to a natural person who is a national of the host country or a juridical person which is incorporated in the host country or the majority of whose capital is owned by its nationals, provided that the assets invested are transferred from outside the host country. Article 14. Eligible Host Countries Investments shall be guaranteed under this Chapter only if they are to be made in the territory of a developing member country. Article 15. Host Country Approval The Agency shall not conclude any contract of guarantee before the host government has approved the issuance of the guarantee by the Agency against the risks designated for cover. Article 16. Terms and Conditions The terms and conditions of each contract of guarantee shall be determined by the Agency subject to such rules and regulations as the Board shall issue, provided that the Agency shall not cover the total loss of the guaranteed investment. Contracts of guarantee shall be approved by the President under the direction of the Board. Article 17. Payment of Claims The President under the direction of the Board shall decide on the payment of claims to a holder of a guarantee in accordance with the contract of guarantee and such policies as the Board may adopt. Contracts of guarantee shall require holders of guarantees to seek, before a payment is made by the Agency, such administrative remedies as may be appropriate under the circumstances, provided that they are readily available to them under the laws of the host country. Such contracts may require the lapse of certain reasonable periods between the occurrence of events giving rise to claims and payments of claims. Article 18. Subrogation (a) Upon paying or agreeing to pay compensation to a holder of a guarantee, the Agency shall be subrogated to such rights or claims related to the guaranteed investment as the holder of a guarantee may have had against the host country and other obligors. The contract of guarantee shall provide the terms and conditions of such subrogation. MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 9 (b) The rights of the Agency pursuant to Section (a) above shall be recognized by all members. (c) Amounts in the currency of the host country acquired by the Agency as subrogee pursuant to Section (a) above shall be accorded, with respect to use and conversion, treatment by the host country as favourable as the treatment to which such funds would be entitled in the hands of the holder of the guarantee. In any case, such amounts may be used by the Agency for the payment of its administrative expenditures and other costs. The Agency shall also seek to enter into arrangements with host countries on other uses of such currencies to the extent that they are not freely usable. Article 19. Relationship to National and Regional Entities The Agency shall cooperate with, and seek to complement the operations of, national entities of members and regional entities the majority of whose capital is owned by members, which carry out activities similar to those of the Agency, with a view to maximizing both the efficiency of their respective services and their contribution to increased flows of foreign investment. To this end, the Agency may enter into arrangements with such entities on the details of such cooperation, including in particular the modalities of reinsurance and coinsurance. Article 20. Reinsurance of National and Regional Entities (a) The Agency may issue reinsurance in respect of a specific investment against a loss resulting from one or more of the non-commercial risks underwritten by a member or agency thereof or by a regional investment guarantee agency the majority of whose capital is owned by members. The Board, by special majority, shall from time to time prescribe maximum amounts of contingent liability which may be assumed by the Agency with respect to reinsurance contracts. In respect of specific investments which have been completed more than twelve months prior to receipt of the application for reinsurance by the Agency, the maximum amount shall initially be set at ten percent of the aggregate contingent liability of the Agency under this Chapter. The conditions of eligibility specified in Articles 11 to 14 shall apply to reinsurance operations, except that the reinsured investments need not be implemented subsequent to the application for reinsurance. (b) The mutual rights and obligations of the Agency and a reinsured member or agency shall be stated in contracts of reinsurance subject to such rules and regulations as the Board shall issue. The Board shall approve each contract for reinsurance covering an investment which has been made prior to receipt of the application for reinsurance by the Agency, with a view to minimizing risks, assuring that the Agency receives premiums commensurate with its risk, and assuring that the reinsured entity is appropriately committed toward promoting new investment in developing member countries. (c) The Agency shall, to the extent possible, assure that it or the reinsured entity shall have the rights of subrogation and arbitration equivalent to those the Agency would have if it were the primary guarantor. The terms and conditions of reinsurance shall require that administrative remedies are sought in accordance with Article 17 before a payment is made by the Agency. Subrogation shall be effective with respect to the host country concerned only after its approval of the reinsurance by the Agency. The Agency shall include in the contracts of reinsurance provisions requiring the reinsured to pursue with due diligence the rights or claims related to the reinsured investment. 10 CAP. 335.] Article 21. MULTILATERAL INVESTMENT GUARANTEE AGENCY Cooperation with Private Insurers and with Reinsurers (a) The Agency may enter into arrangements with private insurers in member countries to enhance its own operations and encourage such insurers to provide coverage of non-commercial risks in developing member countries on conditions similar to those applied by the Agency. Such arrangements may include the provision of reinsurance by the Agency under the conditions and procedures specified in Article 20. (b) The Agency may reinsure with any appropriate reinsurance entity, in whole or in part, any guarantee or guarantees issued by it. (c) The Agency will in particular seek to guarantee investments for which comparable coverage on reasonable terms is not available from private insurers and reinsurers. Article 22. Limits of Guarantee (a) Unless determined otherwise by the Council by special majority, the aggregate amount of contingent liabilities which may be assumed by the Agency under this Chapter shall not exceed one hundred and fifty percent of the amount of the Agency’s unimpaired subscribed capital and its reserves plus such portion of its reinsurance cover as the Board may determine. The Board shall from time to time review the risk profile of the Agency’s portfolio in the light of its experience with claims, degree of risk diversification, reinsurance cover and other relevant factors with a view to ascertaining whether changes in the maximum aggregate amount of contingent liabilities should be recommended to the Council. The maximum amount determined by the Council shall not under any circumstances exceed five times the amount of the Agency’s unimpaired subscribed capital, its reserves and such portion of its reinsurance cover as may be deemed appropriate. (b) Without prejudice to the general limit of guarantee referred to in Section (a) above, the Board may prescribe: (i) maximum aggregate amounts of contingent liability which may be assumed by the Agency under this Chapter for all guarantees issued to investors of such individual member. In determining such maximum amounts, the Board shall give due consideration to the share of the respective member in the capital of the Agency and the need to apply more liberal limitations in respect of investments originating in developing member countries; and (ii) maximum aggregate amounts of contingent liability which may be assumed by the Agency with respect to such risk diversification factors as individual projects, individual host countries and types of investment or risk. Article 23. Investment Promotion (a) The Agency shall carry out research, undertake activities to promote investment flows and disseminate information on investment opportunities in developing member countries, with a view to improving the environment for foreign investment flows to such countries. The Agency may, upon the request of a member, provide technical advice and assistance to improve the investment conditions in the territories of that member. In performing these activities, the Agency shall: (i) be guided by relevant investment agreements among member countries; MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 11 (ii) seek to remove impediments, in both developed and developing member countries, to the flow of investment to developing member countries; and (iii) coordinate with other agencies concerned with the promotion of foreign investment, and in particular the International Finance Corporation. (b) The Agency also shall: (i) encourage the amicable settlement of disputes between investors and host countries; (ii) endeavour to conclude agreements with developing member countries, and in particular with prospective host countries, which will assure that the Agency, with respect to investment guaranteed by it, has treatment at least as favourable as that agreed by the member concerned for the most favoured investment guarantee agency or State in an agreement relating to investment, such agreements to be approved by special majority of the Board; and (iii) promote and facilitate the conclusion of agreements, among its members, on the promotion and protection of investments. (c) The Agency shall give particular attention in its promotional efforts to the importance of increasing the flow of investments among developing member countries. Article 24. Guarantees of Sponsored Investments In addition to the guarantee operations undertaken by the Agency under this Chapter, the Agency may guarantee investments under the sponsorship arrangements provided for in Annex I to this Convention. CHAPTER IV FINANCIAL PROVISIONS Article 25. Financial Management The Agency shall carry out its activities in accordance with sound business and prudent financial management practices with a view to maintaining under all circumstances its ability to meet its financial obligations. Article 26. Premiums and Fees The Agency shall establish and periodically review the rates of premiums, fees and other charges, if any, applicable to each type of risk. Article 27. Allocation of Net Income (a) Without prejudice to the provisions of Section (a) (iii) of Article 10, the Agency shall allocate net income to reserves until such reserves reach five times the subscribed capital of the Agency. (b) After the reserves of the Agency have reached the level prescribed in Section (a) above, the Council shall decide whether, and to what extent, the Agency’s net income shall be allocated to reserves, be distributed to the Agency’s 12 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY members or be used otherwise. Any distribution of net income to the Agency’s members shall be made in proportion to the share of each member in the capital of the Agency in accordance with a decision of the Council acting by special majority. Article 28. Budget The President shall prepare an annual budget of revenues and expenditures of the Agency for approval by the Board. Article 29. Accounts The Agency shall publish an Annual Report which shall include statements of its accounts and of the accounts of the Sponsorship Trust Fund referred to in Annex I to this Convention, as audited by independent auditors. The Agency 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. CHAPTER V ORGANIZATION AND MANAGEMENT Article 30. Structure of the Agency The Agency shall have a Council of Governors, a Board of Directors, a President and staff to perform such duties as the Agency may determine. Article 31. The Council (a) All the powers of the Agency shall be vested in the Council, except such powers as are, by the terms of this Convention, specifically conferred upon another organ of the Agency. The Council may delegate to the Board the exercise of any of its powers, except the power to: (i) admit new members and determine the conditions of their admission; (ii) suspend a member; (iii) decide on any increase or decrease in the capital; (iv) increase the limit of the aggregate amount of contingent liabilities pursuant to Section (a) of Article 22; (v) designate a member as a developing member country pursuant to Section (c) of Article 3; (vi) classify a new member as belonging to Category One or Category Two for voting purposes pursuant to Section (a) of Article 39 or reclassify an existing member for the same purposes; (vii) determine the compensation of Directors and their Alternates; (viii) cease operations and liquidate the Agency; (ix) distribute assets to members upon liquidation; and (x) amend this Convention, its Annexes and Schedules. (b) The Council shall be composed of one Governor and one Alternate appointed by each member in such manner as it may determine. No Alternate may vote except in the absence of his principal. The Council shall select one of the Governors as Chairman. MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 13 (c) The Council shall hold an annual meeting and such other meetings as may be determined by the Council or called by the Board. The Board shall call a meeting of the Council whenever requested by five members or by members having twenty-five percent of the total voting power. Article 32. The Board (a) The Board shall be responsible for the general operations of the Agency and shall take, in the fulfilment of this responsibility, any action required or permitted under this Convention. (b) The Board shall consist of not less than twelve Directors. The number of Directors may be adjusted by the Council to take into account changes in membership. Each Director may appoint an Alternate with full power to act for him in case of the Director’s absence or inability to act. The President of the Bank shall be ex officio Chairman of the Board, but shall have no vote except a deciding vote in case of an equal division. (c) The Council shall determine the term of office of the Directors. The first Board shall be constituted by the Council at its inaugural meeting. (d) The Board shall meet at the call of its Chairman acting on his own initiative or upon request of three Directors. (e) Until such time as the Council may decide that the Agency shall have a resident Board which functions in continuous session, the Directors and Alternates shall receive compensation only for the cost of attendance at the meetings of the Board and the discharge of other official functions on behalf of the Agency. Upon the establishment of a Board in continuous session, the Directors and Alternates shall receive such remuneration as may be determined by the Council. Article 33. President and Staff (a) The President shall, under the general control of the Board, conduct the ordinary business of the Agency. He shall be responsible for the organization, appointment and dismissal of the staff. (b) The President shall be appointed by the Board on the nomination of its Chairman. The Council shall determine the salary and terms of the contract of service of the President. (c) In the discharge of their offices, the President and the staff owe their duty entirely to the Agency and to no other authority. Each member of the Agency shall respect the international character of this duty and shall refrain from all attempts to influence the President or the staff in the discharge of their duties. (d) In appointing the 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. (e) The President and staff shall maintain at all times the confidentiality of information obtained in carrying out the Agency’s operations. Article 34. Political Activity Prohibited The Agency, its President and staff shall not interfere in the political affairs of any member. Without prejudice to the right of the Agency to take into account all the circumstances surrounding an investment, they shall not be influenced in their 14 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY decisions by the political character of the member or members concerned. Considerations relevant to their decisions shall be weighed impartially in order to achieve the purposes stated in Article 2. Article 35. Relations with International Organizations The Agency shall, within the terms of this Convention, cooperate with the United Nations and with other inter-governmental organizations having specialized responsibilities in related fields, including in particular the Bank and the International Finance Corporation. Article 36. Location of Principal Office (a) The principal office of the Agency shall be located in Washington, D.C., unless the Council, by special majority, decides to establish it in another location. (b) The Agency may establish other offices as may be necessary for its work. Article 37. Depositories for Assets Each member shall designate its central bank as a depository in which the Agency may keep holdings of such member’s currency or other assets of the Agency or, if it has no central bank, it shall designate for such purpose such other institution as may be acceptable to the Agency. Article 38. Channel of Communication (a) Each member shall designate an appropriate authority with which the Agency may communicate in connection with any matter arising under this Convention. The Agency may rely on statements of such authority as being statements of the member. The Agency, upon the request of a member, shall consult with that member with respect to matters dealt with in Articles 19 to 21 and related to entities or insurers of that member. (b) Whenever the approval of any member is required before any act may be done by the Agency, approval shall be deemed to have been given unless the member presents an objection within such reasonable period as the Agency may fix in notifying the member of the proposed act. CHAPTER VI VOTING, ADJUSTMENTS OF SUBSCRIPTIONS AND REPRESENTATION Article 39. Voting and Adjustments of Subscriptions (a) In order to provide for voting arrangements that reflect the equal interest in the Agency of the two Categories of States listed in Schedule A of this Convention, as well as the importance of each member’s financial participation, each member shall have 177 membership votes plus one subscription vote for each share of stock held by that member. (b) If at any time within three years after the entry into force of this Convention the aggregate sum of membership and subscription votes of members which belong to either of the two Categories of States listed in Schedule A of this Convention is less than forty percent of the total voting power, members from such a Category MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 15 shall have such number of supplementary votes as shall be necessary for the aggregate voting power of the Category to equal such a percentage of the total voting power. Such supplementary votes shall be distributed among the members of such Category in the proportion that the subscription votes of each bears to the aggregate of subscription votes of the Category. Such supplementary votes shall be subject to automatic adjustment to ensure that such percentage is maintained and shall be cancelled at the end of the above-mentioned three-year period. (c) During the third year following the entry into force of this Convention, the Council shall review the allocation of shares and shall be guided in its decision by the following principles: (i) the votes of members shall reflect actual subscriptions to the Agency’s capital and the membership votes as set out in Section (a) of this Article; (ii) shares allocated to countries which shall not have signed the Convention shall be made available for reallocation to such members and in such manner as to make possible voting parity between the above-mentioned Categories; and (iii) the Council will take measures that will facilitate members’ ability to subscribe to shares allocated to them. (d) Within the three-year period provided for in Section (b) of this Article, all decisions of the Council and Board shall be taken by special majority, except that decisions requiring a higher majority under this Convention shall be taken by such higher majority. (e) In case the capital stock of the Agency is increased pursuant to Section (c) of Article 5, each member which so requests shall be authorized to subscribe a proportion of the increase equivalent to the proportion which its stock theretofore subscribed bears to the total capital stock of the Agency, but no member shall be obligated to subscribe any part of the increased capital. (f) The Council shall issue regulations regarding the making of additional subscriptions under Section (e) of this Article. Such regulations shall prescribe reasonable time limits for the submission by members of requests to make such subscriptions. Article 40. Voting in the Council (a) Each Governor shall be entitled to cast the votes of the member he represents. Except as otherwise specified in this Convention, decisions of the Council shall be taken by a majority of the votes cast. (b) A quorum for any meeting of the Council shall be constituted by a majority of the Governors exercising not less than two-thirds of the total voting power. (c) The Council may by regulation establish a procedure whereby the Board, when it deems such action to be in the best interests of the Agency, may request a decision of the Council on a specific question without calling a meeting of the Council. Article 41. (a) Election of Directors Directors shall be elected in accordance with Schedule B. (b) Directors shall continue in office until their successors are elected. If the office of a Director becomes vacant more than ninety days before the end of his 16 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY 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. Article 42. Voting in the Board (a) Each Director shall be entitled to cast the number of votes of the members whose votes counted towards his election. All the votes which a Director is entitled to cast shall be cast as a unit. Except as otherwise specified in this Convention, decisions of the Board shall be taken by a majority of the votes cast. (b) A quorum for a meeting of the Board shall be constituted by a majority of the Directors exercising not less than one-half of the total voting power. (c) The Board may by regulation establish a procedure whereby its Chairman, when he deems such action to be in the best interests of the Agency, may request a decision of the Board on a specific question without calling a meeting of the Board. CHAPTER VII PRIVILEGES AND IMMUNITIES Article 43. Purposes of Chapter To enable the Agency to fulfil its functions, the immunities and privileges set forth in this Chapter shall be accorded to the Agency in the territories of each member. Article 44. Legal Process Actions other than those within the scope of Articles 57 and 58 may be brought against the Agency only in a court of competent jurisdiction in the territories of a member in which the Agency has an office or has appointed an agent for the purpose of accepting service or notice of process. No such action against the Agency shall be brought (i) by members or persons acting for or deriving claims from members or (ii) in respect of personnel matters. The property and assets of the Agency shall, wherever located and by whomsoever held, be immune from all forms of seizure, attachment or execution before the delivery of the final judgment or award against the Agency. Article 45. Assets (a) The property and assets of the Agency, wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation or any other form of seizure by executive or legislative action. (b) To the extent necessary to carry out its operations under this Convention, all property and assets of the Agency shall be free from restrictions, regulations, controls and moratoria of any nature; provided that property and assets acquired by the Agency as successor to or subrogee of a holder of a guarantee, a reinsured entity or an investor insured by a reinsured entity shall be free from applicable foreign exchange restrictions, regulations and controls in force in the territories of the member concerned to the extent that the holder, entity or investor to whom the Agency was subrogated was entitled to such treatment. (c) For purposes of this Chapter, the term "assets" shall include the assets of the MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 17 Sponsorship Trust Fund referred to in Annex I to this Convention and other assets administered by the Agency in furtherance of its objective. Article 46. (a) Archives and Communications The archives of the Agency shall be inviolable, wherever they may be. (b) The official communications of the Agency shall be accorded by each member the same treatment that is accorded to the official communications of the Bank. Article 47. Taxes (a) The Agency, its assets, property and income, and its operations and transactions authorized by this Convention, shall be immune from all taxes and customs duties. The Agency shall also be immune from liability for the collection or payment of any tax or duty. (b) Except in the case of local nationals, no tax shall be levied on or in respect of expense allowances paid by the Agency to Governors and their Alternates or on or in respect of salaries, expense allowances or other emoluments paid by the Agency to the Chairman of the Board, Directors, their Alternates, the President or staff of the Agency. (c) No taxation of any kind shall be levied on any investment guaranteed or reinsured by the Agency (including any earnings therefrom) or any insurance policies reinsured by the Agency (including any premiums and other revenues therefrom) by whomsoever held: (i) which discriminates against such investment or insurance policy solely because it is guaranteed or reinsured by the Agency; or (ii) if the sole jurisdictional basis for such taxation is the location of any office or place of business maintained by the Agency. Article 48. Officials of the Agency All Governors, Directors, Alternates, the President and staff of the Agency: (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 the members concerned to the representatives, officials and employees of comparable rank of other members; and (iii) shall be granted the same treatment in respect of travelling facilities as is accorded by the members concerned to representatives, officials and employees of comparable rank of other members. Article 49. Application of this Chapter 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 Chapter and shall inform the Agency of the detailed action which it has taken. Article 50. Waiver 18 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY The immunities, exemptions and privileges provided in this Chapter are granted in the interests of the Agency and may be waived, to such extent and upon such conditions as the Agency may determine, in cases where such a waiver would not prejudice its interests. The Agency shall waive the immunity of any of its staff in cases where, in its opinion, the immunity would impede the course of justice and can be waived without prejudice to the interests of the Agency. CHAPTER VIII WITHDRAWAL, SUSPENSION OF MEMBERSHIP AND CESSATION OF OPERATIONS Article 51. Withdrawal Any member may, after the expiration of three years following the date upon which this Convention has entered into force with respect to such member, withdraw from the Agency at any time by giving notice in writing to the Agency at its principal office. The Agency shall notify the Bank, as depository of this Convention, of the receipt of such notice. Any withdrawal shall become effective ninety days following the date of the receipt of such notice by the Agency. A member may revoke such notice as long as it has not become effective. Article 52. Suspension of Membership (a) If a member fails to fulfil any of its obligations under this Convention, the Council may, by a majority of its members exercising a majority of the total voting power, suspend its membership. (b) While under suspension a member shall have no rights under this Convention, except for the right of withdrawal and other rights provided in this Chapter and Chapter IX, but shall remain subject to all its obligations. (c) For purposes of determining eligibility for a guarantee or reinsurance to be issued under Chapter III or Annex I to this Convention, a suspended member shall not be treated as a member of the Agency. (d) The suspended member shall automatically cease to be a member one year from the date of its suspension unless the Council decides to extend the period of suspension or to restore the member to good standing. Article 53. Rights and Duties of States Ceasing to be Members (a) When a State ceases to be a member, it shall remain liable for all its obligations, including its contingent obligations, under this Convention which shall have been in effect before the cessation of its membership. (b) Without prejudice to Section (a) above, the Agency shall enter into an arrangement with such State for the settlement of their respective claims and obligations. Any such arrangement shall be approved by the Board. Article 54. Suspension of Operations (a) The Board may, whenever it deems it justified, suspend the issuance of new guarantees for a specified period. (b) In an emergency, the Board may suspend all activities of the Agency for a period not exceeding the duration of such emergency, provided that necessary MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 19 arrangements shall be made for the protection of the interests of the Agency and of third parties. (c) The decision to suspend operations shall have no effect on the obligations of the members under this Convention or on the obligations of the Agency towards holders of a guarantee or reinsurance policy or towards third parties. Article 55. Liquidation (a) The Council, by special majority, may decide to cease operations and to liquidate the Agency. Thereupon the Agency shall forthwith cease all activities, except those incident to the orderly realization, conservation and preservation of assets and settlement of obligations. Until final settlement and distribution of assets, the Agency shall remain in existence and all rights and obligations of members under this Convention shall continue unimpaired. (b) No distribution of assets shall be made to members until all liabilities to holders of guarantees and other creditors shall have been discharged or provided for and until the Council shall have decided to make such distribution. (c) Subject to the foregoing, the Agency shall distribute its remaining assets to members in proportion to each member ’s share in the subscribed capital. The Agency shall also distribute any remaining assets of the Sponsorship Trust Fund referred to in Annex I to this Convention to sponsoring members in the proportion w h i c h t h e i n v e s t m e n t s s p o n s o r e d b y e a c h b e a r s t o t h e t o t a l o f sp o n s o r e d investments. No member shall be entitled to its share in the assets of the Agency or the Sponsorship Trust Fund unless that member has settled all outstanding claims by the Agency against it. Every distribution of assets shall be made at such times as the Council shall determine and in such manner as it shall deem fair and equitable. CHAPTER IX SETTLEMENT OF DISPUTES Article 56. Interpretation and Application of the Convention (a) Any question of interpretation or application of the provisions of this Convention arising between any member of the Agency and the Agency or among members of the Agency shall be submitted to the Board for its decision. Any member which is particularly affected by the question and which is not otherwise represented by a national in the Board may send a representative to attend any meeting of the Board at which such question is considered. (b) In any case where the Board has given a decision under Section (a) above, any member may require that the question be referred to the Council, whose decision shall be final. Pending the result of the referral to the Council, the Agency may, so far as it deems necessary, act on the basis of the decision of the Board. Article 57. Disputes between the Agency and Members (a) Without prejudice to the provisions of Article 56 and of Section (b) of this Article, any dispute between the Agency and a member or an agency thereof and any dispute between the Agency and a country (or agency thereof) which has ceased to be a member, shall be settled in accordance with the procedure set out in Annex II to this Convention. (b) Disputes concerning claims of the Agency acting as subrogee of an investor 20 CAP. 335.] MULTILATERAL INVESTMENT GUARANTEE AGENCY shall be settled in accordance with either (i) the procedure set out in Annex II to this Convention, or (ii) an agreement to be entered into between the Agency and the member concerned on an alternative method or methods for the settlement of such disputes. In the latter case, Annex II to this Convention shall serve as a basis for such an agreement which shall, in each case, be approved by the Board by special majority prior to the undertaking by the Agency of operations in the territories of the member concerned. Article 58. Disputes Involving Holders of a Guarantee or Reinsurance Any dispute arising under a contract of guarantee or reinsurance between the parties thereto shall be submitted to arbitration for final determination in accordance with such rules as shall be provided for or referred to in the contract of guarantee or reinsurance. CHAPTER X AMENDMENTS Article 59. Amendment by Council (a) This Convention and its Annexes may be amended by vote of three-fifths of the Governors exercising four-fifths of the total voting power, provided that: (i) any amendment modifying the right to withdraw from the Agency provided in Article 51 or the limitation on liability provided in Section (d) of Article 8 shall require the affirmative vote of all Governors; and (ii) any amendment modifying the loss-sharing arrangement provided in Articles 1 and 3 of Annex I to this Convention which will result in an increase in any member’s liability thereunder shall require the affirmative vote of the Governor of each such member. (b) Schedules A and B to this Convention may be amended by the Council by special majority. (c) If an amendment affects any provision of Annex I to this Convention, total votes shall include the additional votes allotted under Article 7 of such Annex to sponsoring members and countries hosting sponsored investments. Article 60. Procedure Any proposal to amend this Convention, whether emanating from a member or a Governor or a Director, shall be communicated to the Chairman of the Board who s h a l l b r i n g t h e p r o p o s a l b e f o r e t h e B o a r d . I f t h e p r o p o s e d a m e nd m e n t i s recommended by the Board, it shall be submitted to the Council for approval in accordance with Article 59. When an amendment has been duly approved by the Council, the Agency shall so certify by formal communication addressed to all members. Amendments shall enter into force for all members ninety days after the date of the formal communication unless the Council shall specify a different date. MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 21 CHAPTER XI FINAL PROVISIONS Article 61. Entry into Force (a) This Convention shall be open for signature on behalf of all members of the Bank and Switzerland and shall be subject to ratification, acceptance or approval by the signatory States in accordance with their constitutional procedures. (b) This Convention shall enter into force on the day when not less than five instruments of ratification, acceptance or approval shall have been deposited on behalf of signatory States in Category One, and not less than fifteen such instruments shall have been deposited on behalf of signatory States in Category Two; provided that total subscriptions of these States amount to not less than one-third of the authorized capital of the Agency as prescribed in Article 5. (c) For each State which deposits its instrument of ratification, acceptance or approval after this Convention shall have entered into force, this Convention shall enter into force on the date of such deposit. (d) If this Convention shall not have entered into force within two years after its opening for signature, the President of the Bank shall convene a conference of interested countries to determine the future course of action. Article 62. Inaugural Meeting Upon entry into force of this Convention, the President of the Bank shall call the inaugural meeting of the Council. This meeting shall be held at the principal office of the Agency within sixty days from the date on which this Convention has entered into force or as soon as practicable thereafter. Article 63. Depository Instruments of ratification, acceptance or approval of this Convention and amendments thereto shall be deposited with the Bank which shall act as the depository of this Convention. The depository shall transmit certified copies of this Convention to States members of the Bank and to Switzerland. Article 64. Registration The depository shall register this Convention 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. Article 65. Notification The depository shall notify all signatory States and, upon the entry into force of this Convention, the Agency of the following: (a) signatures of this Convention; (b) deposits of instruments of ratification, acceptance and approval in accordance with Article 63; (c) the date on which this Convention enters into force in accordance with Article 61; (d) exclusions from territorial application pursuant to Article 66; and CAP. 335.] 22 (e) MULTILATERAL INVESTMENT GUARANTEE AGENCY withdrawal of a member from the Agency pursuant to Article 51. Article 66. Territorial Application This Convention shall apply to all territories under the jurisdiction of a member including the territories for whose international relations a member is responsible, except those which are excluded by such member by written notice to the depository of this Convention either at the time of ratification, acceptance or approval or subsequently. Article 67. Periodic Reviews (a) The Council shall periodically undertake comprehensive reviews of the activities of the Agency as well as the results achieved with a view to introducing any changes required to enhance the Agency’s ability to serve its objectives. (b) The first such review shall take place five years after the entry into force of this Convention. The dates of subsequent reviews shall be determined by the Council. DONE at Seoul, 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 fulfil the functions with which it is charged under this Convention. ANNEX I GUARANTEES OF SPONSORED INVESTMENTS UNDER ARTICLE 24 Article 1. Sponsorship (a) Any member may sponsor for guarantee an investment to be made by an investor of any nationality or by investors of any or several nationalities. (b) Subject to the provisions of Sections (b) and (c) of Article 3 of this Annex, each sponsoring member shall share with the other sponsoring members in losses under guarantees of sponsored investments, when and to the extent that such losses cannot be covered out of the Sponsorship Trust Fund referred to in Article 2 of this Annex, in the proportion which the amount of maximum contingent liability under the guarantees of investments sponsored by it bears to the total amount of maximum contingent liability under the guarantees of investments sponsored by all members. (c) In its decisions on the issuance of guarantees under this Annex, the Agency shall pay due regard to the prospects that the sponsoring member will be in a position to meet its obligations under this Annex and shall give priority to investments which are co-sponsored by the host countries concerned. (d) The Agency shall periodically consult with sponsoring members with respect to its operations under this Annex. Article 2. Sponsorship Trust Fund (a) Premiums and other revenues attributable to guarantees of sponsored investments, including returns on the investment of such premiums and revenues, shall be held in a separate account which shall be called the Sponsorship Trust Fund. (b) All administrative expenses and payments on claims attributable to MULTILATERAL INVESTMENT GUARANTEE AGENCY [ CAP. 335. 23 guarantees issued under this Annex shall be paid out of the Sponsorship Trust Fund. (c) The assets of the Sponsorship Trust Fund shall be held and administered for the joint account …