MALTA MEMBERSHIP OF THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT ACT

FOR RECONSTRUCTION AND DEVELOPMENT

CHAPTER 347

MALTA MEMBERSHIP OF THE EUROPEAN BANK

FOR RECONSTRUCTION AND DEVELOPMENT

ACT

To provide for Malta’s Membership of the European Bank for

Reconstruction and Development.

25th January, 1991

ACT I of 1991 , as amended by Act VIII of 2005 and Legal Notices

68 of 2012 and 265 of 2023.

This Act may be cited as the Malta Membership of the

European Bank for Reconstruction and Development Act.

Amended by

VIII. 2005.5;

(A RTICLE 2)

L.N. 68 of 2012;

L.N. 265 of 2023.

AGREEMENT ESTABLISHING

THE EUROPEAN BANK FOR RECONSTRUCTION

AND DEVELOPMENT

The contracting parties,

Committed to the fundamental principles of multiparty democracy, the rule of law,

respect for human rights and market economics;

Recalling the Final Act of the Helsinki Conference on Security and Cooperation in

Europe, and in particular its Declaration on Principles;

Welcoming the intent of Central and Eastern European countries to further the

practical implementation of multiparty democracy, strengthening democratic

institutions, the rule of law and respect for human rights and their willingness to

implement reforms in order to evolve towards market-oriented economies;

Considering the importance of close and coordinated cooperation in order to

promote the economic progress of Central and Eastern European countries to help

their economies become more internationally competitive and assist them in their

reconstruction and development and thus to reduce, where appropriate, any risks

related to the financing of their economies;

Convinced that the establishment of a multilateral financial institution which is

European in its basic character and broadly international in its membership would

help serve these ends and would constitute a new and unique structure of cooperation

in Europe;

Have agreed to establish hereby the European Bank for Reconstruction and

Development (hereinafter called " the Bank") which shall operate in accordance with

the following

CHAPTER I

PURPOSE, FUNCTIONS AND MEMBERSHIP

Article 1

PURPOSE

In contributing to economic progress and reconstruction, the purpose of the Bank

shall be to foster the transition towards open market-oriented economies and to promote

private and entrepreneurial initiative in the Central and Eastern European countries

committed to and applying the principles of multiparty democracy, pluralism and market

economics.

Subject to the same conditions, the purpose of the Bank may also be carried out in (i)

Mongolia; (ii) member countries of the Southern and Eastern Mediterranean; and (iii) a

limited number of member countries of sub-Saharan Africa; in each case under (ii) and

(iii) as determined by the Bank upon the affirmative vote of not less than two-thirds of

the Governors, representing not less than three-fourths of the total voting power of the

members. Accordingly, any reference in this Agreement and its annexes to "Central and

Eastern European countries", "countries from Central and Eastern Europe", "recipient

country (or countries)" or "recipient member country (or countries)" shall refer to

Mongolia and each of such countries of the Southern and Eastern Mediterranean and

sub-Saharan Africa as well.

Article 2

FUNCTIONS

1. To fulfil on a long-term basis its purpose of fostering the transition of

Central and Eastern European countries towards open market-oriented economies

and the promotion of private and entrepreneurial initiative, the Bank shall assist the

recipient member countries to implement structural and sectoral economic reforms,

including demonopolization, decentralization and privatization, to help their

economies become fully integrated into the international economy by measures

(i)

to promote, through private and other interested investors, the

establishment, improvement and expansion of productive, competitive and private

sector activity, in particular small and medium sized enterprises;

(ii) to mobilize domestic and foreign capital and experienced management

to the end described in (i);

(iii) to foster productive investment, including in the service and financial

sectors, and in related infrastructure where that is necessary to support private and

entrepreneurial initiative, thereby assisting in making a competitive environment and

raising productivity, the standard of living and conditions of labour;

(iv) to provide technical assistance for the preparation, financing and

implementation of relevant projects, whether individual or in the context of specific

investment programmes;

(v)

to stimulate and encourage the development of capital markets;

(vi) to give support to sound and economically viable projects involving

more than one recipient member country;

(vii) to promote in the full range of its activities environmentally sound and

sustainable development; and

(viii) to undertake such other activities and provide such other services as

may further these functions.

2. In carrying out the functions referred to in paragraph 1 of this Article, the

Bank shall work in close cooperation with all its members and, in such manner as it

may deem appropriate within the terms of this Agreement, with the International

Monetary Fund, the International Bank for Reconstruction and Development, the

International Finance Corporation, the Multilateral Investment Guarantee Agency,

and the Organisation for Economic Cooperation and Development, and shall

cooperate with the United Nations and its Specialised Agencies and other related

bodies, and any entity, whether public or private, concerned with the economic

development of, and investment in, Central and Eastern European countries.

Article 3

MEMBERSHIP

1. Membership in the Bank shall be open

(i) to (1) European countries and (2) non-European countries which are

members of the International Monetary Fund; and

(ii) to the European Economic Community and the European Investment

Bank.

2. Countries eligible for membership under paragraph 1 of this Article, which

do not become members in accordance with Article 61 of this Agreement, may be

adm itted, under such terms and conditions as the Bank may determ ine, to

membership in the Bank upon the affirmative vote of not less than two-thirds of the

Governors, representing not less than three-fourths of the total voting power of the

members.

CHAPTER II

CAPITAL

Article 4

AUTHORIZED CAPITAL STOCK

1. The original authorized capital stock shall be ten thousand million

(10,000,000,000) ECU. It shall be divided into one million (1,000,000) shares,

having a par value of ten thousand (10,000) ECU each, which shall be available for

subscription only by members in accordance with the provisions of Article 5 of this

Agreement.

2. The original capital stock shall be divided into paid-in shares and callable

shares. The initial total aggregate par value of paid-in shares shall be three thousand

million (3,000,000,000) ECU.

3. The authorized capital stock may be increased at such time and under such

terms as may seem advisable, by a vote of not less than two-thirds of the Governors,

representing not less than three-fourths of the total voting power of the members.

Article 5

SUBSCRIPTION OF SHARES

1. Each member shall subscribe to shares of the capital stock of the Bank,

subject to fulfilment of the member’s legal requirements. Each subscription to the

original authorized capital stock shall be for paid-in shares and callable shares in the

proportion of three (3) to seven (7). The initial number of shares available to be

subscribed to by Signatories to this Agreement which become members in

accordance with Article 61 of this Agreement shall be that set forth in Annex A. No

member shall have an initial subscription of less than one hundred (100) shares

2. The initial number of shares to be subscribed to by countries which are

admitted to membership in accordance with paragraph 2 of Article 3 of this

Agreement shall be determined by the Board of Governors; provided, however, that

no such subscription shall be authorized which would have the effect of reducing the

percentage of capital stock held by countries which are members of the European

Economic Community, together with the European Economic Community and the

European Investment Bank, below the majority of the total subscribed capital stock.

3. The Board of Governors shall at intervals of not more than five (5) years

review the capital stock of the Bank. In case of an increase in the authorized capital

stock, each member shall have a reasonable opportunity to subscribe, under such

uniform terms and conditions as the Board of Governors shall determine, to a

proportion of the increase in stock equivalent to the proportion which its stock

subscribed bears to the total subscribed capital stock immediately prior to such

increase. No member shall be obliged to subscribe to any part of an increase of

capital stock.

4. Subject to the provisions of paragraph 3 of this Article, the Board of

Governors may, at the request of a member, increase the subscription of that

member, or allocate shares to that member within the authorized capital stock which

are not taken up by other members; provided, however, that such increase shall not

have the effect of reducing the percentage of capital stock held by countries which

are members of the European Economic Community, together with the European

Economic Community and the European Investment Bank, below the majority of the

total subscribed capital stock.

5. Shares of stock initially subscribed to by members shall be issued at par.

Other shares shall be issued at par unless the Board of Governors, by a vote of not

less than two-thirds of the Governors, representing not less than two-thirds of the

total voting power of the members, decides to issue them in special circumstances on

other terms.

6. Shares of stock shall not be pledged or encumbered in any manner

whatsoever, and they shall not be transferable except to the Bank in accordance with

Chapter VII of this Agreement.

7. The liability of the members on shares shall be limited to the unpaid portion

of their issue price. No member shall be liable, by reason of its membership, for

obligations of the Bank.

Article 6

PAYMENT OF SUBSCRIPTIONS

1. Payment of the paid-in shares of the amount initially subscribed to by each

Signatory to this Agreement, which becomes a member in accordance with Article

61 of this Agreement, shall be made in five (5) instalments of twenty (20) per cent

each of such amount. The first instalment shall be paid by each member within sixty

(60) days after the date of the entry into force of this Agreement, or after the date of

deposit of its instrument of ratification, acceptance or approval in accordance with

Article 61, if this latter is later than the date of the entry into force. The remaining

four (4) instalments shall each become due successively one year from the date on

which the preceding instalment became due and shall each, subject to the legislative

requirements of each member, be paid.

2. Fifty (50) per cent of payment of each instalment pursuant to paragraph 1 of

this Article, or by a member admitted in accordance with paragraph 2 of Article 3 of

this Agreement, may be made in promissory notes or other obligations issued by

such member and denominated in ECU, in United States dollars or in Japanese yen,

to be drawn down as the Bank needs funds for disbursement as a result of its

operations. Such notes or obligations shall be non-negotiable, non-interest-bearing

and payable to the Bank at par value upon demand. Demands upon such notes or

obligations shall, over reasonable periods of time, be made so that the value of such

demands in ECU at the time of demand from each member is proportional to the

number of paid-in shares subscribed to and held by each such member depositing

such notes or obligations.

3. All payment obligations of a member in respect of subscription to shares in

the initial capital stock shall be settled either in ECU, in United States dollars or in

Japanese yen on the basis of the average exchange rate of the relevant currency in

terms of the ECU for the period from 30 September 1989 to 31 March 1990

inclusive.

4. Payment of the amount subscribed to the callable capital stock of the Bank

shall be subject to call, taking account of Articles 17 and 42 of this Agreement, only

as and when required by the Bank to meet its liabilities.

5. In the event of a call referred to in paragraph 4 of this Article, payment shall

be made by the member in ECU, in United States dollars or in Japanese yen. Such

calls shall be uniform in ECU value upon each callable share calculated at the time

of the call.

6. The Bank shall determine the place for any payment under this Article not

later than one month after the inaugural meeting of its Board of Governors, provided

that, before such determination, the payment of the first instalment referred to in

paragraph 1 of this Article shall be made to the European Investment Bank, as

trustee for the Bank.

7. For subscriptions other than those described in paragraphs 1, 2 and 3 of this

Article, payments by a member in respect of subscription to paid-in shares in the

authorized capital stock shall be made in ECU, in United States dollars or in

Japanese yen whether in cash or in promissory notes or in other obligations.

In this Act, unless the context otherwise requires -

"Bank" means the European Bank for Reconstruction and

Development;

"Agreement" means the Agreement signed in Paris on the 29th

May, 1990 establishing the European Bank for Reconstruction and

Development, as set out in the Schedule, as from time to time

amended;

"Minister" means the Minister responsible for finance.

In virtue of this Act, and in compliance with the provisions

of the Ratification of Treaties Act -

(a) the Government of Malta is hereby authorised to ratify

the Agreement; and

(b) the Government of Malta is hereby authorised to ratify

any amendment as may be made to the Agreement

from time to time.

(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 Agreement.

(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 34 of the Agreement) to create

and issue, to the Bank non-interest bearing and non-negotiable

notes or other obligations as are provided for by Article 6(2) of the

Agreement 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 Bank, 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; 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.

(3) Any income or other sums allocated and distributed to the

Government of Malta, or to the Central Bank of Malta, from the

Bank by virtue of the subscription by Malta to the shares of the

capital stock thereof shall be paid into the Consolidated Fund.

The provisions of Articles 45 to 53 inclusive of the

Agreement shall have the force of law in Malta, so however, that

nothing in Article 53 of the Agreement shall be construed as

entitling the Bank to import goods free of customs duty without any

restriction on their subsequent sale in Malta.

The Minister may make regulations as may be necessary

for carrying into effect any of the provisions of the Agreement and

in particular, but without prejudice to the generality of the

foregoing, for the amendment of the Schedule for the purpose of

aligning it to the Agreement as it may be amended from time to

time.

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.

For the purposes of this Article, payment or denomination in ECU shall

include payment or denomination in any fully convertible currency which is

equivalent on the date of payment or encashment to the value of the relevant

obligation in ECU.

Article 7

ORDINARY CAPITAL RESOURCES

As used in this Agreement, the term "ordinary capital resources" of the Bank shall

include the following

(i)

authorized capital stock of the Bank, including both paid-in and

callable shares, subscribed to pursuant to Article 5 of this Agreement;

(ii) funds raised by borrowings of the Bank by virtue of powers conferred

by sub-paragraph (i) of Article 20 of this Agreement, to which the commitment to

calls provided for in paragraph 4 of Article 6 of this Agreement is applicable;

(iii) funds received in repayment of loans or guarantees and proceeds from

the disposal of equity investment made with the resources indicated in sub-

paragraphs (i) and (ii) of this Article;

(iv) income derived from loans and equity investment, made from the

resources indicated in sub-paragraphs (i) and (ii) of this Article, and income derived

from guarantees and underwriting not forming part of the special operations of the

Bank; and

(v) any other funds or income received by the Bank which do not form

part of its Special Funds resources referred to in Article 19 of this Agreement.

CHAPTER III

OPERATIONS

Article 8

RECIPIENT COUNTRIES AND USE OF RESOURCES

1. The resources and facilities of the Bank shall be used exclusively to

implement the purpose and carry out the functions set forth, respectively, in Articles

1 and 2 of this Agreement.

2. The Bank may conduct its operations in countries from Central and Eastern

Europe which are proceeding steadily in the transition towards market oriented

economies and the promotion of private and entrepreneurial initiative, and which

apply, by concrete steps and otherwise, the principles as set forth in Article 1 of this

Agreement.

3. In cases where a member might be implementing policies which are

inconsistent with Article 1 of this Agreement, or in exceptional circumstances, the

Board of Directors shall consider whether access by a member to Bank resources

should be suspended or otherwise modified and may make recommendations

accordingly to the Board of Governors. Any decision on these matters shall be taken

by the Board of Governors by a majority of not less than two-thirds of the

Governors, representing not less than three-fourths of the total voting power of the

members.

4. (i)

Any potential recipient country may request that the Bank provide

access to its resources for limited purposes over a period of three (3) years beginning

after the entry into force of this Agreement. Any such request shall be attached as an

integral part of this Agreement as soon as it is made.

(ii)

During such a period

(a)

the Bank shall provide to such a country, and to enterprises in

its territory, upon their request, technical assistance and other types of assistance

directed to finance its private sector, to facilitate the transition of state-owned

enterprises to private ownership and control, and to help enterprises operating

competitively and moving to participation in the market oriented economy, subject

to the proportion set forth in paragraph 3 of Article 11 of this Agreement;

(b)

the total amount of any assistance thus provided shall not

exceed the total amount of cash disbursed and promissory notes issued by that

country for its shares.

(iii) At the end of this period, the decision to allow such a country access

beyond the limits specified in sub-paragraphs (a) and (b) shall be taken by the Board

of Governors by a majority of not less than three-fourths of the Governors

representing not less than eighty-five (85) per cent of the total voting power of the

members.

Article 9

ORDINARY AND SPECIAL OPERATIONS

The operations of the Bank shall consist of ordinary operations financed from the

ordinary capital resources of the Bank referred to in Article 7 of this Agreement and

special operations financed from the Special Funds resources referred to in Article

19 of this Agreement. The two types of operations may be combined.

Article 10

SEPARATION OF OPERATIONS

1. The ordinary capital resources and the Special Funds resources of the Bank

shall at all times and in all respects be held, used, committed, invested or otherwise

disposed of entirely separately from each other. The financial statements of the Bank

shall show the reserves of the Bank, together with its ordinary operations and,

separately, its special operations.

2. The ordinary capital resources of the Bank shall under no circumstances be

charged with, or used to discharge, losses or liabilities arising out of special

operations or other activities for which Special Funds resources were originally used

or committed.

3. Expenses appertaining directly to ordinary operations shall be charged to the

ordinary capital resources of the Bank. Expenses appertaining directly to special

operations shall be charged to Special Funds resources. Any other expenses shall,

subject to paragraph 1 of Article 18 of this Agreement, be charged as the Bank shall

determine.

Article 11

METHODS OF OPERATION

1. The Bank shall carry out its operations in furtherance of its purpose and

functions as set out in Articles 1 and 2 of this Agreement in any or all of the

following ways

(i)

by making, or co-financing together with multilateral institutions,

commercial banks or other interested sources, or participating in, loans to private

sector enterprises, loans to any state-owned enterprise operating competitively and

moving to participation in the market oriented economy, and loans to any state-

owned enterprise to facilitate its transition to private ownership and control; in

particular to facilitate or enhance the participation of private and/or foreign capital

in such enterprises;

(ii)

(a)

by investment in the equity capital of private sector enterprises;

(b)

by investment in the equity capital of any state-owned

enterprise operating competitively and moving to participation in the market

oriented economy, and investment in the equity capital of any state-owned enterprise

to facilitate its transition to private ownership and control; in particular to facilitate

or enhance the participation of private and/or foreign capital in such enterprises; and

(c)

by underwriting, where other means of financing are not

appropriate, the equity issue of securities by both private sector enterprises and such

state-owned enterprises referred to in (b) above for the ends mentioned in that sub-

paragraph;

(iii) by facilitating access to domestic and international capital markets by

private sector enterprises or by other enterprises referred to in sub-paragraph (i) of

this paragraph for the ends mentioned in that sub-paragraph, through the provision of

guarantees, where other means of financing are not appropriate, and through

financial advice and other forms of assistance;

(iv) by deploying Special Funds resources in accordance with the

agreements determining their use; and

(v) by making or participating in loans and providing technical assistance

for the reconstruction or development of infrastructure, including environmental

programmes, necessary for private sector development and the transition to a

market-oriented economy.

For the purposes of this paragraph, a state-owned enterprise shall not be regarded

as operating competitively unless it operates autonomously in a competitive market

environment and unless it is subject to bankruptcy laws.

2. (i) The Board of Directors shall review at least annually the Bank’s

operations and lending strategy in each recipient country to ensure that the purpose

and the functions of the Bank, as set out in Articles 1 and 2 of this Agreement, are

fully served. Any decision pursuant to such a review shall be taken by a majority of

not less than two-thirds of the Directors representing not less than three-fourths of

the total voting power of the members.

(ii) The said review shall involve the consideration of, inter alia, each

recipient country’s progress made on decentralization, demonopolization and

privatization and the relative shares of the Bank’s lending to private enterprises, to

state-owned enterprises in the process of transition to participation in the market-

oriented economy or privatization, for infrastructure, for technical assistance, and

for other purposes.

3. (i) Not more than forty (40) per cent of the amount of the Bank’s total

committed loans, guarantees and equity investments, without prejudice to its other

operations referred to in this Article, shall be provided to the state sector. Such

percentage limit shall apply initially over a two (2) year period from the date of

commencement of the Bank’s operations, taking one year with another, and

thereafter in respect of each subsequent financial year.

(ii) For any country, not more than forty (40) per cent of the amount of the

Bank’s total committed loans, guarantees and equity investments over a period of

five (5) years, taking one year with another, and without prejudice to the Bank’s

other operations referred to in this Article, shall be provided to the state sector.

(iii)

For the purposes of this paragraph,

(a)

the state sector includes national and local governments, their

agencies, and enterprises owned or controlled by any of them;

(b)

a loan or guarantee to, or equity investment in, a state-owned

enterprise which is implementing a programme to achieve private ownership and

control shall not be considered as made to the state sector;

(c)

loans to a financial intermediary for onlending to the private

sector shall not be considered as made to the state sector.

Article 12

LIMITATIONS ON ORDINARY OPERATIONS

1. The Board of Directors shall establish and maintain appropriate limits with

respect to capital adequacy metrics, in order to protect the financial soundness and

sustainability of the Bank.

2. The amount of any equity investment shall not normally exceed such

percentage of the equity capital of the enterprise concerned as shall be determined,

by a general rule, to be appropriate by the Board of Directors. The Bank shall not

seek to obtain by such an investment a controlling interest in the enterprise

concerned and shall not exercise such control or assume direct responsibility for

managing any enterprise in which it has an investment, except 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 Bank, threaten to jeopardize such investment, in which case the

Bank may take such action and exercise such rights as it may deem necessary for the

protection of its interests.

3. The amount of the Bank’s disbursed equity investments shall not at any time

exceed an amount corresponding to its total unimpaired paid-in subscribed capital,

surpluses and general reserve.

4. The Bank shall not issue guarantees for export credits nor undertake

insurance activities.

Article 13

OPERATING PRINCIPLES

The Bank shall operate in accordance with the following principles

(i)

the Bank shall apply sound banking principles to all its operations;

(ii) the operations of the Bank shall provide for the financing of specific

projects, whether individual or in the context of specific investment programmes,

and for technical assistance, designed to fulfil its purpose and functions as set out in

Articles 1 and 2 of this Agreement;

(iii) the Bank shall not finance any undertaking in the territory of a

member if that member objects to such financing;

(iv) the Bank shall not allow a disproportionate amount of its resources to

be used for the benefit of any member;

(v) the Bank shall seek to maintain reasonable diversification in all its

investments;

(vi) before a loan, guarantee or equity investment is granted, the applicant

shall have submitted an adequate proposal and the President of the Bank shall have

presented to the Board of Directors a written report regarding the proposal, together

with recommendations, on the basis of a staff study;

(vii) the Bank shall not undertake any financing, or provide any facilities,

when the applicant is able to obtain sufficient financing or facilities elsewhere on

terms and conditions that the Bank considers reasonable;

(viii) in providing or guaranteeing financing, the Bank shall pay due regard

to the prospect that the borrower and its guarantor, if any, will be in a position to

meet their obligations under the financing contract;

(ix) in case of a direct loan made by the Bank, the borrower shall be

permitted by the Bank to draw its funds only to meet expenditure as it is actually

incurred;

(x) the Bank shall seek to revolve its funds by selling its investments to

private investors whenever it can appropriately do so on satisfactory terms;

(xi) in its investments in individual enterprises, the Bank 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 Bank,

and the terms and conditions normally obtained by private investors for similar

financing;

(xii) the Bank shall place no restriction upon the procurement of goods and

services from any country from the proceeds of any loan, investment or other

financing undertaken in the ordinary or special operations of the Bank, and shall, in

a l l a p p r o p r i a t e c a s e s , m a k e i t s l o a n s a n d o t h e r o p e r a t i o n s co n d i t i o n a l o n

international invitations to tender being arranged; and

(xiii) the Bank shall take the necessary measures to ensure that the proceeds

of any loan made, guaranteed or participated in by the Bank, or any equity

investment, are used only for the purposes for which the loan or the equity

investment was granted and with due attention to considerations of economy and

efficiency.

Article 14

TERMS AND CONDITIONS FOR LOANS AND GUARANTEES

1. In the case of loans made, participated in, or guaranteed by the Bank, the

contract shall establish the terms and conditions for the loan or the guarantee

concerned, including those relating to payment of principal, interest and other fees,

charges, maturities and dates of payment in respect of the loan or the guarantee,

respectively. In setting such terms and conditions, the Bank shall take fully into

account the need to safeguard its income.

2. Where the recipient of loans or guarantees of loans is not itself a member,

but is a state-owned enterprise, the Bank may, when it appears desirable, bearing in

mind the different approaches appropriate to public and state-owned enterprises in

transition to private ownership and control, require the member or members in

whose territory the project concerned is to be carried out, or a public agency or any

instrumentality of such member or members acceptable to the Bank, to guarantee the

repayment of the principal and the payment of interest and other fees and charges of

the loan in accordance with the terms thereof. The Board of Directors shall review

annually the Bank’s practice in this matter, paying due attention to the Bank’s

creditworthiness.

3. The loan or guarantee contract shall expressly state the currency or

currencies, or ECU, in which all payments to the Bank thereunder shall be made.

Article 15

COMMISSION AND FEES

1. The Bank shall charge, in addition to interest, a commission on loans made

or participated in as part of its ordinary operations. The terms and conditions of this

commission shall be determined by the Board of Directors.

2. In guaranteeing a loan as part of its ordinary operations, or in underwriting

the sale of securities, the Bank shall charge fees, payable at rates and times

determined by the Board of Directors, to provide suitable compensation for its risks.

3. The Board of Directors may determine any other charges of the Bank in its

ordinary operations and any commission, fees or other charges in its special

operations.

Article 16

SPECIAL RESERVE

1. The amount of commissions and fees received by the Bank pursuant to

Article 15 of this Agreement shall be set aside as a special reserve which shall be

kept for meeting the losses of the Bank in accordance with Article 17 of this

Agreement. The special reserve shall be held in such liquid form as the Bank may

decide.

2. If the Board of Directors determines that the size of the special reserve is

adequate, it may decide that all or part of the said commission or fees shall

henceforth form part of the income of the Bank.

Article 17

METHODS OF MEETING THE LOSSES OF THE BANK

1. In the Bank’s ordinary operations, in cases of arrears or default on loans

made, participated in, or guaranteed by the Bank, and in cases of losses on

underwriting and in equity investment, the Bank shall take such action as it deems

appropriate. The Bank shall maintain appropriate provisions against possible losses.

2. Losses arising in the Bank’s ordinary operations shall be charged

(i)

first, to the provisions referred to in paragraph 1 of this Article;

(ii)

second, to net income;

(iii)

third, against the special reserve provided for in Article 16 of this

Agreement;

(iv)

fourth, against its general reserve and surpluses;

(v)

fifth, against the unimpaired paid-in capital; and

(vi) last, against an appropriate amount of the uncalled subscribed callable

capital which shall be called in accordance with the provisions of paragraphs 4 and 5

of Article 6 of this Agreement.

Article 18

SPECIAL FUNDS

1. (i) The Bank may accept the administration of Special Funds which are

designed to serve the purpose and come within the functions of the Bank in its

recipient countries and potential recipient countries. The full cost of administering

any such Special Fund shall be charged to that Special Fund.

(ii) For the purposes of subparagraph (i), the Board of Governors may, at

the request of a member which is not a recipient country, decide that such member

qualifies as a potential recipient country for such limited period and under such

terms as may seem advisable. Such decision shall be taken by the affirmative vote of

not less than two-thirds of the Governors, representing not less than three-fourths of

the total voting power of the members.

(iii) The decision to allow a member to qualify as a potential recipient

country can only be made if such member is able to meet the requirements for

becoming a recipient country. Such requirements are those set out in Article 1 of this

Agreement, as it reads at the time of such decision or as it will read upon the entry

into force of an amendment that has already been approved by the Board of

Governors at the time of such decision.

(iv) If a potential recipient country has not become a recipient country at

the end of the period referred to in subparagraph (ii), the Bank shall forthwith cease

any special operations in that country, except those incident to the orderly

realization, conservation and preservation of the assets of the Special Fund and

settlement of obligations that have arisen in connection therewith.

2. Special Funds accepted by the Bank may be used in its recipient countries

and potential recipient countries in any manner and on any terms and conditions

consistent with the purpose and functions of the Bank, with the other applicable

provisions of this Agreement, and with the agreement or agreements relating to such

Funds.

3. The Bank shall adopt such rules and regulations as may be required for the

establishment, administration and use of each Special Fund. Such rules and regulations

shall be consistent with the provisions of this Agreement, except for those provisions

expressly applicable only to ordinary operations of the Bank.

Article 19

SPECIAL FUNDS RESOURCES

The term "Special Funds resources" shall refer to the resources of any Special

Fund and shall include

(i)

funds accepted by the Bank for inclusion in any Special Fund;

(ii) funds repaid in respect of loans or guarantees, and the proceeds of

equity investments, financed from the resources of any Special Fund which, under

the rules and regulations governing that Special Fund, are received by such Special

Fund; and

(iii)

income derived from investment of Special Funds resources.

CHAPTER IV

BORROWING AND OTHER MISCELLANEOUS POWERS

Article 20

GENERAL POWERS

1. The Bank shall have, in addition to the powers specified elsewhere in this

Agreement, the power to

(i)

borrow funds in member countries or elsewhere, provided always that

(a)

before making a sale of its obligations in the territory of a

country, the Bank shall have obtained its approval; and

(b)

where the obligations of the Bank are to be denominated in the

currency of a member, the Bank shall have obtained its approval;

(ii)

invest or deposit funds not needed in its operations;

(iii) buy and sell securities, in the secondary market, which the Bank has

issued or guaranteed or in which it has invested;

(iv)

guarantee securities in which it has invested in order to facilitate their

(v) underwrite, or participate in the underwriting of, securities issued by

any enterprise for purposes consistent with the purpose and functions of the Bank;

(vi) provide technical advice and assistance which serve its purpose and

come within its functions;

(vii) exercise such other powers and adopt such rules and regulations as

may be necessary or appropriate in furtherance of its purpose and functions,

consistent with the provisions of this Agreement; and

(viii) conclude agreements of cooperation with any public or private entity

or entities.

2. Every security issued or guaranteed by the Bank shall bear on its face a

conspicuous statement to the effect that it is not an obligation of any Government, or

member, unless it is in fact the obligation of a particular Government or member, in

which case it shall so state.

CHAPTER V

CURRENCIES

Article 21

DETERMINATION AND USE OF CURRENCIES

1. Whenever it shall become necessary under this Agreement to determine

whether any currency is fully convertible for the purposes of this Agreement, such

determination shall be made by the Bank, taking into account the paramount need to

preserve its own financial interests, after consultation, if necessary, with the

International Monetary Fund.

2. Members shall not impose any restrictions on the receipt, holding, use or

transfer by the Bank of the following

(i)

currencies or ECU received by the Bank in payment of subscriptions

to its capital stock, in accordance with Article 6 of this Agreement;

(ii)

currencies obtained by the Bank by borrowing;

(iii) currencies and other resources administered by the Bank as

contributions to Special Funds; and

(iv) currencies received by the Bank in payment on account of principal,

interest, dividends or other charges in respect of loans or investments, or the

proceeds of disposal of such investments made out of any of the funds referred to in

sub-paragraphs (i) to (iii) of this paragraph, or in payment of commission, fees or

other charges.

CHAPTER VI

ORGANIZATION AND MANAGEMENT

Article 22

STRUCTURE

The Bank shall have a Board of Governors, a Board of Directors, a President, one

or more Vice-Presidents and such other officers and staff as may be considered

necessary.

Article 23

BOARD OF GOVERNORS: COMPOSITION

1. Each member shall be represented on the Board of Governors and shall

appoint one Governor and one Alternate. Each Governor and Alternate shall serve at

the pleasure of the appointing member. No Alternate may vote except in the absence

of his or her principal. At each of its annual meetings, the Board shall elect one of

the Governors as Chairman who shall hold office until the election of the next

Chairman.

2. Governors and Alternates shall serve as such without remuneration from the

Article 24

BOARD OF GOVERNORS: POWERS

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

2. The Board of Governors may delegate to the Board of Directors any or all of

its powers, except the power to

(i)

admit new members and determine the conditions of their admission;

(ii)

increase or decrease the authorized capital stock of the Bank;

(iii)

suspend a member;

(iv) decide appeals from interpretations or applications of this Agreement

given by the Board of Directors;

(v) authorize the conclusion of general agreements for co-operation with

other international organizations;

(vi)

elect the Directors and the President of the Bank;

(vii) determine the remuneration of the Directors and Alternate Directors

and the salary and other terms of the contract of service of the President;

(viii) approve, after reviewing the auditors’ report, the general balance

sheet and the statement of profit and loss of the Bank;

(ix) determine the reserves and the allocation and distribution of the net

profits of the Bank;

(x)

amend this Agreement;

(xi)

decide to terminate the operations of the Bank and to distribute its

assets; and

(xii) exercise such other powers as are expressly assigned to the Board of

Governors in this Agreement.

3. The Board of Governors shall retain full power to exercise authority over

any matter delegated or assigned to the Board of Directors under paragraph 2 of this

Article, or elsewhere in this Agreement.

Article 25

BOARD OF GOVERNORS: PROCEDURE

1. 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 Board of Directors.

Meetings of the Board of Governors shall be called, by the Board of Directors,

whenever requested by not less than five (5) members of the Bank or members

holding not less than one quarter of the total voting power of the members.

2. Two-thirds of the Governors shall constitute a quorum for any meeting of

the Board of Governors, provided such majority represents not less than two-thirds

of the total voting power of the members.

3. The Board of Governors may by regulation establish a procedure whereby

the Board of Directors may, when the latter deems such action advisable, obtain a

vote of the Governors on a specific question without calling a meeting of the Board

of Governors.

4. The Board of Governors, and the Board of Directors to the extent

authorized, may adopt such rules and regulations and establish such subsidiary

bodies as may be necessary or appropriate to conduct the business of the Bank.

Article 26

BOARD OF DIRECTORS: COMPOSITION

1. The Board of Directors shall be composed of twenty-three (23) members

who shall not be members of the Board of Governors, and of whom

(i)

Eleven (11) shall be elected by the Governors representing Belgium,

Denmark, France, the Federal Republic of Germany, Greece, Ireland, Italy,

Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, the European

Economic Community and the European Investment Bank; and

(ii) Twelve (12) shall be elected by the Governors representing other

members, of whom

(a)

four (4), by the Governors representing those countries listed in

Annex A as Central and Eastern European countries eligible for assistance from the

Bank;

(b)

four (4), by the Governors representing those countries listed in

Annex A as other European countries;

(c)

four (4), by the Governors representing those countries listed in

Annex A as non-European countries.

Directors, as well as representing members whose Governors have elected them,

may also represent members who assign their votes to them.

2. Directors shall be persons of high competence in economic and financial

matters and shall be elected in accordance with Annex B.

3. The Board of Governors may increase or decrease the size, or revise the

composition, of the Board of Directors, in order to take into account changes in the

number of members of the Bank, by an affirmative vote of not less than two-thirds of

the Governors, representing not less than three-fourths of the total voting power of

the members. Without prejudice to the exercise of these powers for subsequent

elections, the number and composition of the second Board of Directors shall be as

set out in paragraph 1 of this Article.

4. Each Director shall appoint an Alternate with full power to act for him or

her when he or she is not present. Directors and Alternates shall be nationals of

member countries. No member shall be represented by more than one Director. An

Alternate may participate in meetings of the Board but may vote only when he or she

is acting in place of his or her principal.

5. Directors shall hold office for a term of three (3) years and may be re-

elected; provided that the first Board of Directors shall be elected by the Board of

Governors at its inaugural meeting, and shall hold office until the next immediately

following annual meeting of the Board of Governors or, if that Board shall so decide

at that annual meeting, until its next subsequent annual meeting. They shall continue

in office until their successors shall have been chosen and assumed office. If the

office of a Director becomes vacant more than one hundred and eighty (180) days

before the end of his or her term, a successor shall be chosen in accordance with

Annex B, for the remainder of the term, by the Governors who elected the former

Director. A majority of the votes cast by such Governors shall be required for such

election. If the office of a Director becomes vacant one hundred and eighty (180)

days or less before the end of his or her term, a successor may similarly be chosen

for the remainder of the term, by the votes cast by such Governors who elected the

former Director, in which election a majority of the votes cast by such Governors

shall be required. While the office remains vacant, the Alternate of the former

Director shall exercise the powers of the latter, except that of appointing an

Alternate.

Article 27

BOARD OF DIRECTORS: POWERS

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

24 of this Agreement, the Board of Directors shall be responsible for the direction of

the general operations of the Bank and, for this purpose, shall, in addition to the

powers assigned to it expressly by this Agreement, exercise all the powers delegated

to it by the Board of Governors, and in particular

(i)

prepare the work of the Board of Governors;

(ii) in conformity with the general directions of the Board of Governors,

establish policies and take decisions concerning loans, guarantees, investments in

equity capital, borrowing by the Bank, the furnishing of technical assistance, and

other operations of the Bank;

(iii) submit the audited accounts for each financial year for approval of the

Board of Governors at each annual meeting; and

(iv)

approve the budget of the Bank.

Article 28

BOARD OF DIRECTORS: PROCEDURE

1. The Board of Directors shall normally function at the principal office of the

Bank and shall meet as often as the business of the Bank may require.

2. A majority of the Directors shall constitute a quorum for any meeting of the

Board of Directors, provided such majority represents not less than two-thirds of the

total voting power of the members.

3. The Board of Governors shall adopt regulations under which, if there is no

Director of its nationality, a member may send a representative to attend, without

right to vote, any meeting of the Board of Directors when a matter particularly

affecting that member is under consideration.

Article 29

VOTING

1. The voting power of each member shall be equal to the number of its

subscribed shares in the capital stock of the Bank. In the event of any member failing

to pay any part of the amount due in respect of its obligations in relation to paid-in

shares under Article 6 of this Agreement, such member shall be unable for so long as

such failure continues to exercise that percentage of its voting power which

corresponds to the percentage which the amount due but unpaid bears to the total

amount of paid-in shares subscribed to by that member in the capital stock of the

Bank.

2. In voting in the Board of Governors, each Governor shall be entitled to cast

the votes of the member he or she represents. Except as otherwise expressly

provided in this Agreement, all matters before the Board of Governors shall be

decided by a majority of the voting power of the members voting.

3. In voting in the Board of Directors each Director shall be entitled to cast the

number of votes to which the Governors who have elected him or her are entitled and

those to which any Governors who have assigned their votes to him or her, pursuant

to Section D of Annex B, are entitled. A Director representing more than one

member may cast separately the votes of the members he or she represents. Except as

otherwise expressly provided in this Agreement, and except for general policy

decisions in which cases such policy decisions shall be taken by a majority of not

less than two-thirds of the total voting power of the members voting, all matters

before the Board of Directors shall be decided by a majority of the voting power of

the members voting.

Article 30

THE PRESIDENT

1. The Board of Governors, by a vote of a majority of the total number of

Governors, representing not less than a majority of the total voting power of the

members, shall elect a President of the Bank. The President, while holding office,

shall not be a Governor or a Director or an Alternate for either.

2. The term of office of the President shall be four (4) years. He or she may be

re-elected. He or she shall, however, cease to hold office when the Board of

Governors so decides by an affirmative vote of not less than two-thirds of the

Governors, representing not less than two-thirds of the total voting power of the

members. If the office of the President for any reason becomes vacant, the Board of

Governors, in accordance with the provisions of paragraph 1 of this Article, shall

elect a successor for up to four (4) years.

3. The President shall not vote, except that he or she may cast a deciding vote

in case of an equal division. He or she may participate in meetings of the Board of

Governors and shall chair the meetings of the Board of Directors.

4. The President shall be the legal representative of the Bank.

5. The President shall be chief of the staff of the Bank. He or she shall be

responsible for the organisation, appointment and dismissal of the officers and staff

in accordance with regulations to be adopted by the Board of Directors. In

appointing officers and staff, he or she shall, subject to the paramount importance of

efficiency and technical competence, pay due regard to recruitment on a wide

geographical basis among members of the Bank.

6. The President shall conduct, under the direction of the Board of Directors,

the current business of the Bank.

Article 31

VICE PRESIDENT (S)

1. One or more Vice-Presidents shall be appointed by the Board of Directors on

the recommendation of the President. A Vice-President shall hold office for such

term, exercise such authority and perform such functions in the administration of the

Bank, as may be determined by the Board of Directors. In the absence or incapacity

of the President, a Vice-President shall exercise the authority and perform the

functions of the President.

2. A Vice-President may participate in meetings of the Board of Directors but

shall have no vote at such meetings, except that he or she may cast the deciding vote

when acting in place of the President.

Article 32

INTERNATIONAL CHARACTER OF THE BANK

1. The Bank shall not accept Special Funds or other loans or assistance that

may in any way prejudice, deflect or otherwise alter its purpose or functions.

2. The Bank, its President, Vice-President(s), officers and staff shall in their

decisions take into account only considerations relevant to the Bank’s purpose,

functions and operations, as set out in this Agreement. Such considerations shall be

weighed impartially in order to achieve and carry out the purpose and functions of

the Bank.

3. The President, Vice-President(s), officers and staff of the Bank, in the

discharge of their offices, shall 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.

Article 33

LOCATION OF OFFICES

1. The principal office of the Bank shall be located in London.

2. The Bank may establish agencies or branch offices in the territory of any

member of the Bank.

Article 34

DEPOSITORIES AND CHANNELS OF COMMUNICATION

1. Each member shall designate its central bank, or such other institution as

may be agreed upon with the Bank, as a depository for all the Bank’s holdings of its

currency as well as other assets of the Bank.

2. Each member shall designate an appropriate official entity with which the

Bank may communicate in connection with any matter arising under this Agreement.

Article 35

PUBLICATION OF REPORTS AND PROVISION OF INFORMATION

1. The Bank shall publish an annual report containing an audited statement of

its accounts and shall circulate to members at intervals of three (3) months or less a

summary statement of its financial position and a profit and loss statement showing

the results of its operations. The financial accounts shall be kept in ECU.

2. The Bank shall report annually on the environmental impact of its activities

and may publish such other reports as it deems desirable to advance its purpose.

3. Copies of all reports, statements and publications made under this Article

shall be distributed to members.

Article 36

ALLOCATION AND DISTRIBUTION OF NET INCOME

1. The Board of Governors shall determine at least annually what part of the

Bank’s net income, after making provision for reserves and, if necessary, against

possible losses under paragraph 1 of Article 17 of this Agreement, shall be allocated

to surplus or other purposes and what part, if any, shall be distributed. Any such

decision on the allocation of the Bank’s net income to other purposes shall be taken

by a majority of not less than two-thirds of the Governors, representing not less than

two-thirds of the total voting power of the members. No such allocation, and no

distribution, shall be made until the general reserve amounts to at least ten (10) per

cent of the authorized capital stock.

2. Any distribution referred to in the preceding paragraph shall be made in

proportion to the number of paid-in shares held by each member; provided that in

calculating such number account shall be taken only of payments received in cash

and promissory notes encashed in respect of such shares on or before the end of the

relevant financial year.

3. Payments to each member shall be made in such manner as the Board of

Governors shall determine. Such payments and their use by the receiving country

shall be without restriction by any member.

CHAPTER VII

WITHDRAWAL AND SUSPENSION OF MEMBERSHIP

TEMPORARY SUSPENSION AND TERMINATION OF OPERATIONS

Article 37

RIGHT OF MEMBERS TO WITHDRAW

1. Any member may withdraw from the Bank at any time by transmitting a

notice in writing to the Bank at its principal office.

2. Withdrawal by a member shall become effective, and its membership shall

cease, on the date specified in its notice but in no event less than six (6) months after

such notice is received by the Bank. However, at any time before the withdrawal

becomes finally effective, the member may notify the Bank in writing of the

cancellation of its notice of intention to withdraw.

Article 38

SUSPENSION OF MEMBERSHIP

1. 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 not less than two-thirds of the

Governors, representing not less than two-thirds of the total voting power of the

members. 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 not less than the

same majority to restore the member to good standing.

2. 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 its obligations.

Article 39

SETTLEMENT OF ACCOUNTS WITH FORMER MEMBERS

1. After the date on which a member ceases to be a member, such former

member 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, equity investments

or guarantees contracted before it ceased to be a member are outstanding; but it shall

cease to incur such liabilities with respect to loans, equity investments and

guarantees entered into thereafter by the Bank and to share either in the income or

the expenses of the Bank.

2. At the time a member ceases to be a member, the Bank shall arrange for the

repurchase of such former member’s shares as a part of the settlement of accounts

with such former member in accordance with the provisions of this Article. For this

purpose, the repurchase price of the shares shall be the value shown by the books of

the Bank on the date of cessation of membership, with the original purchase price of

each share being its maximum value.

3.The payment for shares repurchased by the Bank under this Article shall be

governed by the following conditions

(i)

any amount due to the former member for its shares shall be withheld

s o l o n g a s t h e f o r m e r m e m b e r, i t s c e n t r a l b a n k o r a n y o f i t s a g e n c i e s o r

instrumentalities 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 former member

resulting from its subscription for shares in accordance with paragraphs 4, 5 and 7 of

Article 6 of this Agreement. In any event, no amount due to a member for its shares

shall be paid until six (6) months after the date upon which the member ceases to be

a member;

(ii) payments for shares may be made from time to time, upon their

surrender by the former member, to the extent by which the amount due as the

repurchase price in accordance with paragraph 2 of this Article exceeds the

aggregate amount of liabilities on loans, equity investments and guarantees in sub-

paragraph (i) of this paragraph until the former member has received the full

repurchase price;

(iii) payments shall be made on such conditions and in such fully

convertible currencies, or ECU, and on such dates, as the Bank determines; and

(iv) if losses are sustained by the Bank on any guarantees, participations in

loans, or loans which were outstanding on the date when the member ceased to be a

member, or if a net loss is sustained by the Bank on equity investments held by it on

such date, and the amount of such losses exceeds the amount of the reserves

provided against losses on the date when the member ceased to be a member, such

former member shall 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 shall remain

liable on any call for unpaid subscriptions under paragraph 4 of Article 6 of this

Agreement, 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.

4. If the Bank terminates its operations pursuant to Article 41 of this

Agreement within six (6) months of the date upon which any member ceases to be a

member, all rights of such former member shall be determined in accordance with

the provisions of Articles 41 to 43 of this Agreement.

Article 40

TEMPORARY SUSPENSION OF OPERATIONS

In an emergency, the Board of Directors may suspend temporarily operations in

respect of new loans, guarantees, underwriting, technical assistance and equity

investments pending an opportunity for further consideration and action by the

Board of Governors.

Article 41

TERMINATION OF OPERATIONS

The Bank may terminate its operations by the affirmative vote of not less than

two-thirds of the Governors, representing not less than three-fourths of the total

voting power of the members. Upon such termination 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.

Article 42

LIABILITY OF MEMBERS AND PAYMENT OF CLAIMS

1. In the event of termination of the operations of the Bank, the liability of all

members for uncalled subscriptions to the capital stock of the Bank shall continue

until all claims of creditors, including all contingent claims, shall have been

discharged.

2. Creditors on ordinary operations holding direct claims shall be paid first out

of the assets of the Bank, secondly out of the payments to be made to the Bank in

respect of unpaid paid-in shares, and then out of payments to be made to the Bank in

respect of callable capital stock. Before making any payments to creditors holding

direct claims, the Board of Directors shall make such arrangements as are necessary,

in its judgment, to ensure a pro rata distribution among holders of direct and holders

of contingent claims.

Article 43

DISTRIBUTION OF ASSETS

1. No distribution under this Chapter 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) the Board of Governors has decided by a vote of not less than two-

thirds of the Governors, representing not less than three-fourths of the total voting

power of the members, to make a distribution.

2. Any distribution of the assets of the Bank to the members shall be in

proportion to the capital stock held by each member and shall be effected at such

times and under such conditions as the Bank shall deem fair and equitable. The

shares of assets distributed need not be uniform as to type of assets. No member

shall be entitled to receive its share in such a distribution of assets until it has settled

all of its obligations to the Bank.

3. Any member receiving assets distributed pursuant to this Article shall enjoy

the same rights with respect to such assets as the Bank enjoyed prior to their

distribution.

CHAPTER VIII

STATUS, IMMUNITIES, PRIVILEGES AND EXEMPTIONS

Article 44

PURPOSES OF CHAPTER

To enable the Bank to fulfil its purpose and the functions with which it is

entrusted, the status, immunities, privileges and exemptions set forth in this Chapter

shall be accorded to the Bank in the territory of each member country.

Article 45

STATUS OF THE BANK

The Bank shall possess full legal personality and, in particular, the full legal

capacity

(i)

to contract;

(ii)

to acquire, and dispose of, immovable and movable property; and

(iii)

to institute legal proceedings.

Article 46

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 territory of a country 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 judgment against the Bank.

Article 47

IMMUNITY OF ASSETS FROM SEIZURE

Property and assets of the Bank, wheresoever located and by whomsoever held,

shall be immune from search, requisition, confiscation, expropriation or any other

form of taking or foreclosure by executive or legislative action.

Article 48

IMMUNITY OF ARCHIVES

The archives of the Bank, and in general all documents belonging to it or held by

it, shall be inviolable.

Article 49

FREEDOM OF ASSETS FROM RESTRICTIONS

To the extent necessary to carry out the purpose and functions of the Bank 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.

Article 50

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 any other member.

Article 51

IMMUNITIES OF OFFICERS AND EMPLOYEES

All Governors, Directors, Alternates, officers and employees of the Bank and

experts performing missions for the Bank shall be immune from legal process with

respect to acts performed by them in their official capacity, except when the Bank

waives this immunity, and shall enjoy inviolability of all their official papers and

documents. This immunity shall not apply, however, to civil liability in the case of

damage arising from a road traffic accident caused by any such Governor Director,

Alternate, officer, employee or expert.

Article 52

PRIVILEGES OF OFFICERS AND EMPLOYEES

1. All Governors, Directors, Alternates, officers and employees of the Bank

and experts of the Bank performing missions for the Bank

(i)

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 regulations, as are accorded

by members to the representatives, officials, and employees of comparable rank of

other members; and

(ii) 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.

2. The spouses and immediate dependants of those Directors, Alternate

Directors, officers, employees and experts of the Bank who are resident in the

country in which the principal office of the Bank is located shall be accorded

opportunity to take employment in that country. The spouses and immediate

dependants of those Directors, Alternate Directors, officers, employees and experts

of the Bank who are resident in a country in which any agency or branch office of the

Bank is located should, wherever possible, in accordance with the national law of

that country, be accorded similar opportunity in that country. The Bank shall

negotiate specific agreements implementing the provisions of this paragraph with the

country in which the principal office of the Bank is located and, as appropriate, with

the other countries concerned.

Article 53

EXEMPTION FROM TAXATION

1. Within the scope of its official activities the Bank, its assets, property, and

income shall be exempt from all direct taxes.

2. When purchases or services of substantial value and necessary for the

exercise of the official activities of the Bank are made or used by the Bank and when

the price of such purchases or services includes taxes or duties, the member that has

levied the taxes or duties shall, if they are identifiable, take appropriate measures to

grant exemption from such taxes or duties or to provide for their reimbursement.

3. Goods imported by the Bank and necessary for the exercise of its official

activities shall be exempt from all import duties and taxes, and from all import

prohibitions and restrictions. Similarly goods exported by the Bank and necessary

for the exercise of its official activities shall be exempt from all export duties and

taxes, and from all export prohibitions and restrictions.

4. Goods acquired or imported and exempted under this Article shall not be

sold, hired out, lent or given away against payment or free of charge, except in

accordance with conditions laid down by the members which have granted

exemptions or reimbursements.

5. The provisions of this Article shall not apply to taxes or duties which are no

more than charges for public utility services.

6. Directors, Alternate Directors, officers and employees of the Bank shall be

subject to an internal effective tax for the benefit of the Bank on salaries and

emoluments paid by the Bank, subject to conditions to be laid down and rules to be

adopted by the Board of Governors within a period of one year from the date of entry

into force of this Agreement. From the date on which this tax is applied, such

salaries and emoluments shall be exempt from national income tax. The members

may, however, take into account the salaries and emoluments thus exempt when

assessing the amount of tax to be applied to income from other sources.

7. Notwithstanding the provisions of paragraph 6 of this Article, a member

may deposit, with its instrument of ratification, acceptance or approval, a declaration

that such member retains for itself, its political subdivisions or its local authorities

the right to tax salaries and emoluments paid by the Bank to citizens or nationals of

such member. The Bank shall be exempt from any obligation for the payment,

withholding or collection of such taxes. The Bank shall not make any reimbursement

for such taxes.

8. Paragraph 6 of this Article shall not apply to pensions and annuities paid by

the Bank.

No tax 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.

No tax 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.

Article 54

IMPLEMENTATION OF CHAPTER

Each member shall promptly take such action as is necessary for the purpose of

implementing the provisions of this Chapter and shall inform the Bank of the

detailed action which it has taken.

Article 55

WAIVER OF IMMUNITIES, PRIVILEGES AND EXEMPTIONS

The immunities, privileges and exemptions conferred under this Chapter are

granted in the interest of the Bank. The Board of Directors may waive to such extent

and upon such conditions as it may determine any of the immunities, privileges and

exemptions conferred under this Chapter in cases where such action would, in its

opinion, be appropriate in the best interests of the Bank. The President shall have the

right and the duty to waive any immunity, privilege or exemption in respect of any

officer, employee or expert of the Bank, other than the President or a Vice-President,

where, in his or her opinion, the immunity, privilege or exemption would impede the

course of justice and can be waived without prejudice to the interests of the Bank. In

similar circumstances and under the same conditions, the Board of Directors shall

have the right and the duty to waive any immunity, privilege or exemption in respect

of the President and each Vice President.

CHAPTER IX

AMENDMENTS, INTERPRETATION, ARBITRATION

Article 56

AMENDMENTS

1. 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 that Board. If the proposed

amendment is approved by the Board the Bank shall, by any rapid means of

communication, ask all members whether they accept the proposed amendment.

When not less than three-fourths of the members (including at least two countries

from Central and Eastern Europe listed in Annex A), having not less than four-fifths

of the total voting power of the members, have accepted the proposed amendment,

the Bank shall certify that fact by formal communication addressed to all members.

2. Notwithstanding paragraph 1 of this Article

(i)

acceptance by all members shall be required in the case of any

amendment modifying;

(a)

the right to withdraw from the Bank;

(b)

the rights pertaining to purchase of capital stock provided for in

paragraph 3 of Article 5 of this Agreement;

(c)

the limitations on liability provided for in paragraph 7 of

Article 5 of this Agreement; and

(d)

the purpose and functions of the Bank defined by Articles 1 and

2 of this Agreement;

(ii) acceptance by not less than three-fourths of the members having not

less than eighty-five (85) percent of the total voting power of the members shall be

required in the case of any amendment modifying paragraph 4 of Article 8 of this

Agreement.

When the requirements for accepting any such proposed amendment have been

met, the Bank shall certify that fact by formal communication addressed to all

members.

3. Amendments shall enter into force for all members three (3) months after the

date of the formal communication provided for in paragraphs 1 and 2 of this Article

unless the Board of Governors specifies a different period.

Article 57

INTERPRETATION AND APPLICATION

1. Any question of interpretation or application 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 Board of Directors for its decision. If there is no

Director of its nationality in that Board, a member particularly affected by the

question under consideration shall be entitled to direct representation in the meeting

of the Board of Directors during such consideration. The representative of such

member shall, however, have no vote. Such right of representation shall be regulated

by the Board of Governors.

2. In any case where the Board of Directors has given a decision under

paragraph 1 of this Article, any member may require that the question be referred to

the Board of Governors, whose decision shall be final. Pending the decision of the

Board of Governors, the Bank may, so far as it deems it necessary, act on the basis of

the decision of the Board of Directors.

Article 58

ARBITRATION

If a disagreement should arise between the Bank and a member which has ceased

to be a member, or between the Bank and any member after adoption of a decision to

terminate the operations of the Bank, such disagreement shall be submitted to

arbitration by a tribunal of three (3) arbitrators, one appointed by the Bank, another

by the member or former member concerned, and the third, unless the parties

otherwise agree, by the President of the International Court of Justice or such other

authority as may have been prescribed by regulations adopted by the Board of

Governors. A majority vote of the arbitrators shall be sufficient to reach a decision

which shall be final and binding upon the parties. The third arbitrator shall have full

power to settle all questions of procedure in any case where the parties are in

disagreement with respect thereto.

Article 59

APPROVAL DEEMED GIVEN

Whenever the approval or the acceptance of any member is required before any act

may be done by the Bank, except under Article 56 of this Agreement, approval or

acceptance 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.

CHAPTER X

FINAL PROVISIONS

Article 60

SIGNATURE AND DEPOSIT

1. This Agreement, deposited with the Government of the French Republic

(hereinafter called "the Depository"), shall remain open until 31 December 1990 for

signature by the prospective members whose names are set forth in Annex A to this

Agreement.

2. The Depository shall communicate certified copies of this Agreement to all

the Signatories.

Article 61

RATIFICATION, ACCEPTANCE OR APPROVAL

1. The Agreement shall be subject to ratification, acceptance or approval by the

Signatories. Instruments of ratification, acceptance or approval shall, subject to

paragraph 2 of this Article, be deposited with the Depository not later than 31 March

1991. The Depository shall duly notify the other Signatories of each deposit and the

date thereof.

2. Any Signatory may become a party to this Agreement by depositing an

instrument of ratification, acceptance or approval until one year after the date of its

entry into force or, if necessary, until such later date as may be decided by a majority

of Governors, representing a majority of the total voting power of the members.

3. A Signatory whose instrument referred to in paragraph 1 of this Article is

deposited before the date on which this Agreement enters into force shall become a

member of the Bank on that date. Any other Signatory which complies with the

provisions of the preceding paragraph shall become a member of the Bank on the

date on which its instrument of ratification, acceptance or approval is deposited.

Article 62

ENTRY INTO FORCE

1. This Agreement shall enter into force when instruments of ratification,

ac c e p t a n ce o r ap p r o v a l h a v e b e en d ep o s i t e d b y S i g n a t o r i e s w h o s e i n i t i a l

subscriptions represent not less than two thirds of the total subscriptions set forth in

Annex A including at least two countries from Central and Eastern Europe listed in

Annex A.

2. If this Agreement has not entered into force by 31 March 1991, the

Depository may convene a conference of interested prospective members to

determine the future course of action and decide a new date by which instruments of

ratification, acceptance or approval shall be deposited.

Article 63

INAUGURAL MEETING AND COMMENCEMENT OF OPERATIONS

1. As soon as this Agreement enters into force under Article 62 of this

Agreement, each member shall appoint a Governor. The Depository shall call the

first meeting of the Board of Governors within sixty (60) days of entry into force of

this Agreement under Article 62 or as soon as possible thereafter.

2. At its first meeting, the Board of Governors

(i)

shall elect the President;

(ii) shall elect the Directors of the Bank in accordance with Article 26 of

this Agreement;

(iii) shall make arrangements for

determining

the

date

of

the

commencement of the Bank’s operations; and

(iv) shall make such other arrangements as appear to it necessary to

prepare for the commencement of the Bank’s operations.

3. The Bank shall notify its members of the date of commencement of its

operations.

Done at Paris on 29 May 1990 in a single original, whose English, French,

German and Russian texts are equally authentic, which shall be deposited in the

archives of the Depository which shall transmit a duly certified copy to each of the

other prospective members whose names are set forth in Annex A.

ANNEX A

INITIAL SUBSCRIPTIONS TO THE AUTHORIZED CAPITAL STOCK

FOR PROSPECTIVE MEMBERS WHICH MAY BECOME MEMBERS

IN ACCORDANCE WITH ARTICLE 61

NUMBER

CAPITAL

OF SHARES

SUBSCRIPTION

(in million Ecus)

A - European Communities

a)

22 800

228.00

Belgium

12 000

120.00

Denmark

85 175

851.75

France

85 175

851.75

Germany, Federal Republic of

6 500

65.00

Greece

3 000

00

Ireland

85 175

851.75

Italy

2 000

20.00

Luxembourg

24 800

248.00

Netherlands

4 200

00

Portugal

34 000

340.00

Spain

85 175

851.75

United Kingdom

b)

European Economic Community

30 000

300.00

European Investment Bank

30 000

300.00

B - Other European Countries

Austria

22 800

228.00

Cyprus

1 000

10.00

Finland

12 500

125.00

Iceland

1 000

10.00

Israel

6 500

00

Liechtenstein

2.00

Malta

1.00

Norway

12 500

125.00

Sweden

22 800

228.00

Switzerland

22 800

228.00

Turkey

11 500

115.00

C - Recipient countries

Bulgaria

7 900

00

Czechoslovakia

12 800

128.00

German Democratic Republic

15 500

155.00

Hungary

7 900

79.00

Poland

12 800

128.00

Romania

4 800

48.00

Union of Soviet Socialist Republics

60 000

600.00

Yugoslavia

12 800

128.00

D - Non-European Countries

Australia

10 000

00

Canada

34 000

340.00

Egypt

1 000

10.00

Japan

85 175

851.75

Korea, Republic of

6 500

65.00

Mexico

3 000

30.00

Morocco

1 000

10.00

New Zealand

1 000

10.00

United States of America

100 000

1000.00

E - Non allocated shares

TOTAL

1.25

1 000 000

10000.00

(*) Prospective members are listed under the above categories only for the purpose of this Agreement.

Recipient countries are referred to elsewhere in this Agreement as Central and Eastern European

countries.

ANNEX B

SECTION A - ELECTION OF DIRECTORS BY GOVERNORS REPRESENTING

BELGIUM, DENMARK, FRANCE, THE FEDERAL REPUBLIC OF GERMANY,

GREECE, IRELAND, ITALY, LUXEMBOURG, THE NETHERLANDS, PORTU-

GAL, SPAIN, THE UNITED KINGDOM, THE EUROPEAN ECONOMIC COM-

MUNITY AND THE EUROPEAN INVESTMENT BANK (HEREINAFTER

REFERRED TO AS SECTION A GOVERNORS).

1. The provisions set out below in this Section shall apply exclusively to this

Section.

2. Candidates for the office of Director shall be nominated by Section A

Governors, provided that a Governor may nominate only one person. The election of

Directors shall be by ballot of Section A Governors.

3. Each Governor eligible to vote shall cast for one person all of the votes to

which the member appointing him or her is entitled under paragraphs 1 and 2 of

Article 29 of this Agreement.

4. Subject to paragraph 10 of this Section, the 11 persons receiving the highest

number of votes shall be Directors, except that no person who receives less than 4.5

per cent of the total of the votes which can be cast (eligible votes) in Section A shall

be considered elected.

5. Subject to paragraph 10 of this Section, if 11 persons are not elected on the

first ballot, a second ballot shall be held in which, unless there were no more than 11

candidates, the person who received the lowest number of votes in the first ballot

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

paragraphs 6 and 7 below of this Section to have raised the votes cast

for that person above 5.5 per cent of the eligible votes.

6. In determining whether the votes cast by a Governor are deemed to have

raised the totalvotes cast for any person above 5.5 per cent of the eligible votes, the

5.5 per cent shall be deemed to include, first, the votes of the Governor casting the

largest number of votes for such person, then the votes of the Governor casting the

next largest number and so on, until 5.5 per cent is reached.

7. Any Governor, part of whose votes must be counted in order to raise the

total of votes cast for any person above 4.5 per cent shall be considered as casting all

of his or her votes for such person, even if the total votes for such person thereby

exceed 5.5 per cent and shall not be eligible to vote in a further ballot.

8. Subject to paragraph 10 of this Section, if, after the second ballot, 11

persons have not been elected, further ballots shall be held in conformity with the

principles and procedures laid down in this Section, until 11 persons have been

elected, provided that, if at any stage 10 persons are elected, notwithstanding the

provisions of paragraph 4 of this Section, the 11th may be elected by a simple

majority of the remaining votes cast.

9. In the case of an increase or decrease in the number of Directors to be

elected by Section A Governors, the minimum and maximum percentages specified

in paragraphs 4, 5, 6 and 7 of this Section shall be appropriately adjusted by the

Board of Governors.

10. So long as any Signatory, or group of Signatories, whose share of the total

amount of capital subscriptions provided in Annex A is more than 2.4 per cent, has

not deposited its instrument or their instruments of ratification, approval or

acceptance, there shall be no election for one Director in respect of each such

Signatory or group of Signatories. The Governor or Governors representing such a

Signatory or group of Signatories shall elect a Director in respect of each Signatory

or group of Signatories, immediately after the Signatory becomes a member or the

group of Signatories become members. Such Director shall be deemed to have been

elected by the Board of Governors at its inaugural meeting, in accordance with

paragraph 3 of Article 26 of this Agreement, if he or she is elected during the period

in which the first Board of Directors shall hold office.

SECTION B - ELECTION OF DIRECTORS BY GOVERNORS REPRESENTING

OTHER COUNTRIES.

Section B (i) - Election of Directors by Governors representing those countries

listed in Annex A as Central and Eastern European Countries (recipient countries)

(hereinafter referred to as Section B (i) Governors).

1. The provisions set out below in this Section shall apply exclusively to this

Section.

2. Candidates for the office of Director shall be nominated by Section B (i)

Governors, provided that a Governor may nominate only one person. The election of

Directors shall be by ballot of Section B (i) Governors.

3. Each Governor eligible to vote shall cast for one person all of the votes to

which the member appointing him or her is entitled under paragraphs 1 and 2 of

Article 29 of this Agreement.

4. Subject to paragraph 10 of this Section, the 4 persons receiving the highest

number of votes shall be Directors, except that no person who receives less than 12

per cent of the total of the votes which can be cast (eligible votes) in Section B (i)

shall be considered elected.

5. Subject to paragraph 10 of this Section, if 4 persons are not elected on the

first ballot, a second ballot shall be held in which, unless there were no more than 4

candidates, the person who received the lowest number of votes in the first ballot

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

paragraphs 6 and 7 below of this Section to have raised the votes cast

for that person above 13 per cent of the eligible votes.

6. In determining whether the votes cast by a Governor are deemed to have

raised the total votes cast for any person above 13 per cent of the eligible votes, the

13 per cent shall be deemed to include, first, the votes of the Governor casting the

largest number of votes for such person, then the votes of the Governor casting the

next largest number and so on, until 13 per cent is reached.

7. Any Governor, part of whose votes must be counted in order to raise the

total of votes cast for any person above 12 per cent shall be considered as casting all

of his or her votes for such person, even if the total votes for such person thereby

exceed 13 per cent and shall not be eligible to vote in a further ballot.

8. Subject to paragraph 10 of this Section, if, after the second ballot, 4 persons

have not been elected, further ballots shall be held in conformity with the principles

and procedures laid down in this Section, until 4 persons have been elected, provided

that, if at any stage 3 persons are elected, notwithstanding the provisions of

paragraph 4 of this Section, the 4th may be elected by a simple majority of the

remaining votes cast.

9. In the case of an increase or decrease in the number of Directors to be

elected by Section B (i) Governors, the minimum and maximum percentages

specified in paragraphs 4, 5, 6 and 7 of this Section shall be appropriately adjusted

by the Board of Governors.

10. So long as any Signatory, or group of Signatories, whose share of the total

amount of capital subscriptions provided in Annex A is more than 2.8 per cent, has

not deposited its instrument or their instruments of ratification, approval or

acceptance, there shall be no election for one Director in respect of each such

Signatory or group of Signatories. The Governor or Governors representing such a

Signatory or group of Signatories shall elect a Director in respect of each Signatory

or group of Signatories, immediately after the Signatory becomes a member or the

group of Signatories become members. Such Director shall be deemed to have been

elected by the Board of Governors at its inaugural meeting, in accordance with

paragraph 3 of Article 26 of this Agreement, if he or she is elected during the period

in which the first Board of Directors shall hold office.

Section B (ii) - Election of Directors by Governors representing those countries

listed in Annex A as other European countries (hereinafter referred to as Section B

(ii) Governors).

1. The provisions set out below in this Section shall apply exclusively to this

Section.

2. Candidates for the office of Director shall be nominated by Section B (ii)

Governors, provided that a Governor may nominate only one person. The election of

Directors shall be by ballot of Section B (ii) Governors.

3. Each Governor eligible to vote shall cast for one person all of the votes to

which the member appointing him or her is entitled under paragraphs 1 and 2 of

Article 29 of this Agreement.

4. Subject to paragraph 10 of this Section, the 4 persons receiving the highest

number of votes shall be Directors, except that no person who receives less than 20.5

per cent of the votes which can be cast (eligible votes) in Section B (ii) shall be

considered elected.

5. Subject to paragraph 10 of this Section, if 4 persons are not elected on the

first ballot, a second ballot shall be held in which, unless there were no more than 4

candidates, the person who received the lowest number of votes in the first ballot

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 vote for a person elected are deemed under

paragraphs 6 and 7 below of this Section to have raised the votes cast

for that person above 21.5 per cent of the eligible votes.

6. In determining whether the votes cast by a Governor are deemed to have

raised the total votes cast for any person above 21.5 per cent of the eligible votes, the

21.5 per cent shall be deemed to include, first, the votes of the Governor casting the

largest number of votes for such person, then the votes of the Governor casting the

next largest number and so on, until 21.5 per cent is reached.

7. Any Governor, part of whose votes must be counted in order to raise the

total of votes cast for any person above 20.5 per cent shall be considered as casting all

of his or her votes for such person, even if the total votes for such person thereby

exceed 21.5 per cent and shall not be eligible to vote in a further ballot.

8. Subject to paragraph 10 of this Section, if, after the second ballot, 4 persons

have not been elected, further ballots shall be held in conformity with the principles

and procedures laid down in this Section, until 4 persons have been elected, provided

that, if at any stage 3 persons are elected, notwithstanding the provisions of

paragraph 4 of this Section, the 4th may be elected by a simple majority of the

remaining votes cast.

9. In the case of an increase or decrease in the number of Directors to be

elected by Section B (ii) Governors, the minimum and maximum percentages

specified in paragraphs 4, 5, 6 and 7 of this Section shall be appropriately adjusted

by the Board of Governors.

10. So long as any Signatory, or group of Signatories, whose share of the total

amount of capital subscriptions provided in Annex A is more than 2.8 per cent, has

not deposited its instrument or their instruments of ratification, approval or

acceptance, there shall be no election for one Director in respect of each such

Signatory or group of Signatories. The Governor or Governors representing such a

Signatory or group of Signatories shall elect a Director in respect of each Signatory

or group of Signatories, immediately after the Signatory becomes a member or the

group of Signatories become members. Such Director shall be deemed to have been

elected by the Board of Governors at its inaugural meeting, in accordance with

paragraph 3 of Article 26 of this Agreement, if he or she is elected during the period

in which the first Board of Directors shall hold office.

Section B(iii) - Election of Directors by Governors representing those countries

listed in Annex A as Non-European Countries (hereinafter referred to as Section B

(iii) Governors).

1. The provisions set out below in this Section shall apply exclusively to this

Section.

2. Candidates for the office of Director shall be nominated by Section B (iii)

Governors, provided that a Governor may nominate only one person. The election of

Directors shall be by ballot of Section B (iii) Governors.

3. Each Governor eligible to vote shall cast for one person all of the votes to

which the member appointing him or her is entitled under paragraphs 1 and 2 of

Article 29 of this Agreement.

4. Subject to paragraph 10 of this Section, the 4 persons receiving the highest

number of votes shall be Directors, except that no person who receives less than 8

per cent of the total of the votes which can be cast (eligible votes) in Section B (iii)

shall be considered elected.

5. Subject to paragraph 10 of this Section, if 4 persons are not elected on the

first ballot, a second ballot shall be held in which, unless there were no more than 4

candidates, the person who received the lowest number of votes in the first ballot

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

paragraphs 6 and 7 below of this Section to have raised the votes cast

for that person above 9 per cent of the eligible votes.

6. In determining whether the votes cast by a Governor are deemed to have

raised the total votes cast for any person above 9 per cent of the eligible votes, the 9

per cent shall be deemed to include, first, the votes of the Governor casting the

largest number of votes for such person, then the votes of the Governor casting the

next largest number and so on, until 9 per cent is reached.

7. Any Governor, part of whose votes must be counted in order to raise the

total of votes cast for any person above 8 per cent shall be considered as casting all

of his or her votes for such person, even if the total votes for such person thereby

exceed 9 per cent and shall not be eligible to vote in a further ballot.

8. Subject to paragraph 10 of this Section, if, after the second ballot, 4 persons

have not been elected, further ballots shall be held in conformity with the principles

and procedures laid down in this Section, until 4 persons have been elected, provided

that, if at any stage 3 persons are elected, notwithstanding the provisions of

paragraph 4 of this Section, the 4th may be elected by a simple majority of the

remaining votes cast.

9. In the case of an increase or decrease in the number of Directors to be

elected by Section B (iii) Governors, the minimum and maximum percentages

specified in paragraphs 4, 5, 6, and 7 of this Section shall be appropriately adjusted

by the Board of Governors.

10. So long as any Signatory, or group of Signatories, whose share of the total

amount of capital subscriptions provided in Annex A is more than 5 per cent, has not

deposited its instrument or their instruments of ratification, approval or acceptance,

there shall be no election for one Director in respect of each such Signatory or group

of Signatories. The Governor or Governors representing such a Signatory or group of

Signatories shall elect a Director in respect of each Signatory or group of

Signatories, immediately after the Signatory becomes a member or the group of

Signatories become members. Such Director shall be deemed to have been elected by

the Board of Governors at its inaugural meeting, in accordance with paragraph 3 of

Article 26 of this Agreement, if he or she is elected during the period in which the

first Board of Directors shall hold office.

SECTION C - ARRANGEMENTS FOR THE ELECTION OF DIRECTORS REP-

RESENTING COUNTRIES NOT LISTED IN ANNEX A.

If the Board of Governors decides, in accordance with paragraph 3 of Article 26 of

this Agreement, to increase or decrease the size, or revise the composition, of the

Board of Directors, in order to take into account changes in the number of members

of the Bank, the Board of Governors shall first consider whether any amendments

are required to this Annex, and may make any such amendments as it deems

necessary as part of such decision.

SECTION D - ASSIGNMENT OF VOTES.

Any Governor who does not participate in voting for the election or whose vote

does not contribute to the election of a Director under Section A or Section B (i) or

Section B (ii) or Section B (iii) of this Annex may assign the votes to which he or

she is entitled to an elected Director, provided that such Governor shall first have

obtained the agreement of all those Governors who have elected that Director to such

assignment.

A decision by any Governor not to participate in voting for the election of a

Director shall not affect the calculation of the eligible votes to be made under

Section A, Section B (i), Section B (ii) or Section B (iii) of this Annex.

To the Chairman of the Conference

on the Establishment of the

European Bank for

Reconstruction and Development

M. Chairman

As you know, the initiative of the President of France M. P. Mitterrand to establish

the European Bank for Reconstruction and Development for the purpose of

facilitating the transition of Central and Eastern European countries towards market-

oriented economies has found understanding and support on behalf of the Soviet

authorities. The Soviet delegation participated in the sessions of talks on drafting the

constituent documents of the Bank. As a result the constituent countries have

reached considerable progress in drawing up the Agreement establishing the

European Bank for Reconstruction and Development.

At the same time, certain difficulties largely stem from fears of a number of

countries that due to the size of its economy the Soviet Union may become the

principal recipient of credits of the Bank and therefore will narrow its capacity to

extend aid to other Central and Eastern European Countries.

In this connection, I would like to assure you dear Mr. Chairman, that the

intentions of the Soviet Union to become an equal member of the Bank account

primarily for its will to establish a new institution of multilateral co-operation so as

to foster historical reforms on the European continent.

I would like to inform you that my government is prepared to limit its access to the

Bank’s resources, pursuant to paragraph 4 of Article 8 of the Articles of Agreement

of the Bank, for a period of three years starting from the entry into force of the

Articles of Agreement of the Bank.

During that period, the Soviet Union wishes that the Bank will provide technical

assistance and other types of assistance directed to finance its private sector, to

facilitate the transition of State-owned enterprises to private sector ownership and

control and to help enterprises operating competitively and moving to participation

in the market-oriented economy, subject to the proportion set forth in paragraph 3 of

Article 11 of this Agreement. The total amount of any assistance thus provided by

the Bank would not exceed the total amount of the cash disbursed and the

promissory notes issued by the Soviet Union for its shares.

I am confident that continuing economic reforms in the Soviet Union will

inevitably promote the expansion of the Bank’s activities into the territory of the

Soviet Union. However, the USSR, being interested in securing the multilateral

character of the Bank, will not choose that at any time in future the Soviet

borrowings will exceed an amount consistent with maintaining the necessary

diversity in the bank’s operations and prudent limits on its exposure.

Please accept, Mr. Chairman, the assurances of my highest consideration.

Head of Soviet Delegation

Chairman of the Board

of the State Bank of the U S S R

Victor V. Gerashcenko