France - Reconstruction Project : Loan 0001 - Guarantee Agreement - Conformed

29 GUARANTEE AGREEMENT BETWEEN THE REPUBLIC OF FRANCE AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Agreement dated May 9, 1947, between THE REPUBLIC OF FRANCE (hereinafter called the Guarantor) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVEL- OPMENT (hereinafter called the Bank) WHEREAS the Guarantor has prepared a program for the general reconstruction and development of the productive facili- ties and resources of France; and WHEREAS Cr6dit National pour faciliter la r6paration des dommages caus6s par la guerre (hereinafter called the Borrower) has made application to the Bank for a loan to assist in the financing of a part of such program; and WHEREAS by an agreement between the Bank and the Borrower (which agreement and the Schedules therein referred to are hereinafter called the Loan Agreement) executed and delivered simultaneously with the execution and delivery of this Agreement and bearing even date herewith, the Bank has agreed to make to the Borrower a loan in the aggregate principal amount of two hundred fifty million dollars ($250,000,000) on the terms and conditions set forth in the Loan Agreement, but only on con- dition that the Guarantor agrees to guarantee such loan and the obligations of the Borrower in respect thereof; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guarantee such loan and the obligations of the Borrower in respect thereof; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Wherever used in this Guarantee Agreement, unless the context shall otherwise require, the respective terms which are defined in Article I of the Loan Agreement shall have the respec- tive meanings therein set forth. 0 30 ARTICLE II Without limitation or restriction upon any of the other covenants on its part in this Guarantee Agreement contained, the Guarantor hereby unconditionally guarantees the due and punctual payment of the principal of, and the interest, commit- ment charge and commission on, the Loan, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. It is further agreed by the Guarantor that its obligations under any covenants and agreements on its part in this Guarantee Agreement are not subject to any prior notice to, demand upon or action against the Borrower or to any prior notice to or demand upon the Guarantor with regard to any default by the Borrower in respect of any of its obligations set forth in the Loan Agreement and in the Bonds. No extension of time or forbearance given to the Borrower in respect of the perfonance of any of its obliga- tions under the Bonds or the Loan Agreement, and no failure of the Bank or of any holder of the Bonds to give any notice or to imake any demand or protest whatsoever, or strictly to assert any right or pursue any remedy against the Borrower in respect of the Bonds or of the Loan Agreement, shall in any way termi- nate, diminish or limit the unconditional guarantee of the Guaran- tor hereunder. ARTICLE III The Guarantor hereby covenants that the principal of the Loan and the interest accruing thereon as specified in the Loan Agreement and in the Bonds and the commitment charge and the commission specified in Article II of the Loan Agreement shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter im- posed by the Guarantor or by any taxing authority thereof or therein and shall be paid free from all restrictions of the Guaran- tor, its political subdivisions or its agencies. The Guarantor hereby further covenants that this Guarantee Agreement, the Loan Agreement and the Bonds shall be free of any issue, stamp or other tax imposed by the Guarantor or any taxing authority thereof or therein. 31 ARTICLE IV The Guarantor agrees to endorse its guarantee hereunder on the Bonds to be executed by the Borrower and delivered in accordance with Article V of the Loan Agreement, which guaran- tee shall be in the form prescribed in Schedules 2-A and 2-B to the Loan Agreement, respectively. ARTICLE V The parties hereto accept and agree to the provisions of Articles IX and X of the Loan Agreement with the same force and effect as though set forth herein. This Guarantee Agreement is subject to ratification as in Article XI of the Loan Agreement provided. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed in their respective names by their representatives thereunto duly authorized as of the day and year first above written. THE REPUBLIC OF FRANCE by H. Bonnet Ambassador of France INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT by John J. McCloy President 32 TRANSLATION FROM FRENCH ORIGINAL OF LETTER FROM MINISTER OF FINANCE, FRANCE May 9, 1947 Dear Mr. President, In a memorandum addressed to the International Bank on 8 October 1946, I indicated what were, in terms of the economic and financial policy of the French Government, the purposes of the loan requested of that institution. France, seriously im- poverished both in manpower and resources as a result of the First World War, has again suffered heavily through the Second. Since the liberation of her territory she has succeeded, thanks principally to her own efforts, in the first arid most difficult step in her reconstruction. The results which she has already achieved are not to be underestimated if just account is taken of the diffi- culties encountered. But these efforts must be continued and intensified. In order for France to recover her full economic capacity and to participate fully in international trade, she must re-equip and modernize her industry This is the purpose of the plan for equipment and modernization which has becn approved by the French Government after having received the complete support of all elements representatihe of the vital forces of the Nation. The French Government intends to devote its best efforts to the carrying oit of this program. The general purpose of the plan is to raise French lproduction between now and 1950 to a level equal to that which w as reached in 1929, and to achieve at the same time equilibrium in the balance of payments. Within this framework, the purpose of the loan applied for from the International Bank is to assure the financing of a part of the needs of the plan during the year 1947. More precisely, the proceeds of the loan are to be devoted to the acquisition of equipment goods arid raw matexials which will Mr. John J. McCloy, President of the International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 6, D. C. be allocated to different sectors of the French economy in con- formity with the requirements of the program in question. In support of its application the French Government has furnished to the International Bank all necessary documentation both as to the precise purposes of the loan and as to the economic situation of France. In particular, detailed information has been given regarding the balance of external payments. This infor- mation reveals the important proportion of our needs which has been, or will be, covered thanks to the liquidation of national gold and foreign exchange assets. The French Government is fully conscious of the fact that the covering of her needs in foreign exchange is only one of the problems to be resolved in order to carry out the work of recon- struction. It is continuing, at this very moment, the effort under- taken some time ago to balance the ordinary budget. The measures of economy which it has just ordered, combined with the ex- pansion of receipts, should permit this balance to be achieved in the near future. This elimination of the risks of inflation will facilitate the stabilization of prices, which remains one of our essential preoccupations, but which also, and above all, depends on the rising trend of production. In this connection, the French Government, while at the same time maintaining and even re- infi rcing the strictest rationing measures, continues to devote its most active attention to the two capital problems of coal supply and manpower resources. France, who has done much to help herself, must neverthe- less still receive external assistance during this difficult period of transition. The French Government, while appreciating the reasons which have obliged the International Bank to grant in the present circumstances only a part of the loan applied for, hopes that the additional assistance it will need can be made available through your Institu'ion. The French Government has decided to sign the guarantee contract annexed to the loan contract between the International Bank and the Cr6dit National. In thus deciding to guarantee both the service of the loan and the fulfillment of the contract, it gives to the operation the unconditional support of its credit. The French Government has never consented to mortgage or 34 pledge any of its resources whatsoever as a guarantee of its external debt, except in cases such as the mobilization of for- eign securities through a loan of two years' maturity. The French Government intends to remain faithful to this policy. Therefore, the Bank has the additional assurance that, except for the pos- sibility of such a short-term credit, no other foreign loan will be entitled to a priority over the loan granted by the Bank in the form of a pledge or mortgage. France adhered to the Bretton Woods Agreements not only in anticipation of finding through them the necessary sup- port for its reconstruction effort, but also in the desire to par- ticipate in an indispensable work of international co-operation. The French Government is confident that the Institutions created by these Agreements will satisfy the hopes to which they gave rise. In this spirit it is, both as a member of the International Bank and as guarantor of the loan in question, prepared to co- operate to the fullest possible extent in the accomplishment of the purposes of the International Bank. The latter should re- ceive the information necessary for the performance of its func- tions. The French Government will furnish such information, in particular as concerns the development of our balance of pay- ments and of our external debt. It is likewise prepared to par- ticipate in exchanges of views on questions of mutual interest. It expects that such exchanges of information and views will have satisfactory results for both parties and that the Interna- tional Bank for Reconstruction and Development will be able to assist with full effectiveness in the reconstruction arid de- velopment of France. Please accept, Mr. President, the assurance of my highest esteem, Signed: ROBERT SCHUMAN 35 S INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN REGULATIONS NO. 1 Regulations Governing the Arbitration of Controversies and Claims Arising under Loan Agreements. ARTICLE I As used in these Regulations: 1. The term "Bank" means International Bank for Recon- struction and Development. 2. The term "Articles" means the Articles of Agreement of the Bank. 3. The term "Loan Agreement" means an agreement made by the Bank for the making of a loan out of the funds of the Bank and shall include any agreement providing for the guar- antee of such loan and any agreements supplemental to the Loan Agreement or to any such guarantee agreement. 4. The term "Borrower" means the party to the Loan Agreement to which the loan is made. 5. The tern "Guarantor" means the member of the Bank which has guaranteed the loan provided for in the Loan Agree- ment. If the only party to a Loan Agreement other than the Bank shall be a member of the Bank and the loan provided for in such Loan Agreement shall not be guaranteed by any other party, references herein to a Guarantor shall be disregarded in so far as concerns such Loan Agreement. 6. The term "Bonds" means bonds or other securities of the Borrower issued under a Loan Agreement for all or any part of the loan provided for therein. ARTICLE II If and to the extent that any Loan Agreement shall so pro- vide, the Regulations herein set forth shall govern the arbitra- tion of controversies between the parties to such Loan Agree- ment and claims by any such party against any other such party arising under the provisions of such Loan Agreement or of 86 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN REGULMTIONS No. 1 Bonds issued thereunder. These Regulations are subject to re- vocation or amendment by the Bank at any time without prior notice; provided, however, that any such revocation or amend- ment shall not be effective in respect of any such Loan Agree- ment, unless the parties thereto shall so agree. Any Loan Agree- ment may provide for modifications of or exceptions to these Regulations as they shall be applied to controversies and claims arising under such Loan Agreement. ARTICLE III Section 1 Any controversy between the parties to a Loan Agreement and any claim by any such party against any other such party arising under a Loan Agreement or Bonds which shall not be de- termined by agreement of the parties shall be submitted to arbitration by an Arbitral Tribunal as hereinafter provided. Section 2 The parties to such arbitration shall be the Bank on the one side and the Borrower and the Guarantor on the other side. Section 3 The Arbitral Tribunal shall consist of three arbitrators ap- pointed as follows: one arbitrator shall be appointed by the Bank; a second arbitrator shall be appointed by the Borrower and the Guarantor or, if they shall not agree on the appoint- ment of such arbitrator, he shall be appointed by the Guarantor; and the third impartial arbitrator (hereinafter sometimes called the umpire) shall be appointed by agreement of the parties or, if they shall not agree upon the umpire, he shall be appointed by the President of the International Court of Justice. If either side shall fail to appoint an arbitrator, such arbitrator shall be appointed by the umpire. In case any arbitrator appointed in accordance with these Regulations shall resign, die or become unable to act, a successor arbitrator shall be appointed by the same authority which appointed the original arbitrator and such 37 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN REGULATIONS No. I successor shall have all the powers and duties of such original arbitrator. Section 4 An arbitration proceeding may be instituted under these Regulations upon notice by the party instituting such proceed- ing to the other parties. Such notice shall contain a statement setting forth the nature of the controversy or claim to be sub- mitted to arbitration, the nature of the relief sought, and the name of the arbitrator appointed by the party instituting such proceeding. Within 30 days after the giving of such notice, the adverse party or parties shall notify the party instituting the pro- ceeding of the name of the arbitrator appointed by such adverse party or parties. Section 5 If, within 60 days after the giving of such notice by the party or parties instituting the arbitration proceeding, the par- ties shall not have agreed upon an umpire, any party may re- quest the President of the International Court of Justice to ap- point an umpire. When such President shall appoint an umpire, he shall notify all parties and the umpire of such appointment. Section 6 The Arbitral Tribunal shall convene at the principal office of the Bank at such time as shall be fixed by the umpire. There- after, the Arbitral Tribunal shall determine where and when it shall sit. Section 7 Subject to the provisions of these Regulations and of the particular Loan Agreement and except as the parties shall other- wise agree, the Arbitral Tribunal shall decide all questions re- lating to its competence and shall determine its procedure. All decisions of the Arbitral Tribunal shall be by majority vote. Section 8 The Arbitral Tribunal shall afford to all parties a fair hear- 38 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN RECULATIONS No. I ing and shall render its award in writing. Such award may be rendered by default. The award of the Arbitral Tribunal when signed by a majority thereof shall constitute the award of such Tribundl. Any such award rendered in accordance with the provisions of these Regulations shall be final and binding upon all parties to the Loan Agreement. A signed counterpart of the award shall be transmitted to each of such parties. All such parties shall abide by and comply with any such award rend- ered by the Arbitral Tribunal in accordance with the provisions of these Regulations. Section 9 The parties shall fix the amount of the remuneration of the arbitrators and such other persons as shall be required for the conduct of the arbitration proceeding. If the parties shall not agree on such amount before the Arbitral Tribunal shall con- vene, the Arbitral Tribunal shall fix such amount as shall be reasonable under the circumstances. The cost of the arbitration proceeding shall be divided and shared equally by the Bank on the one side and the Borrower and Guarantor on the other side. Any question concerning the division of the cost of the arbitration proceeding or the procedure for payment of such cost shall be determined by the Arbitral Tribunal. Section 10 The provisions for arbitration set forth in these Regulations shall be exclusive of any other procedure ror the determination of controversies between the parties to the particular Loan Agreement and any claim by any such party against any other such party arising thereunder or under the Bonds issued there- under. If, within 30 days after counterparts of the award shall be delivered to the parties, the award shall not be complied with any party may enter judgment upon or institute a proceeding to enforce the award in any court of competent jurisdiction or pursue such other remedy or remedies as may be available for the enforcement of the award and of the provisions of the par- ticular Loan Agreement and Bonds, 39 INTERNATIONAL BANX FOR RECONSTRUCTION AND DEVELOPMENT LOAN REGULATIONS No. 1 Section 11 Service of any notice or process in connection with any pro- ceeding under these Regulations or any proceeding to enforce any award rendered pursuant to these Regulations may be made in the manner provided for the service of any notice or demand under the particular Loan Agreement. The respective parties to such Loan Agreement, by agreeing therein to the arbitration of controversies and claims as provided in these Regulations, waive any and all other requirements for the service of any such notice or process and agree that any judgment entered upon the award or any judicial mandate or order of whatsoever nature made in any proceeding for the enforcement of the award may be enforced by execution or otherwise. Dated May 9th, 1947. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT by John J. McCloy President