INTERNATIONAL FINANCIAL INSTITUTIONS LEGISLATION AMENDMENT BILL 2010

i International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

Contents

1 Short

title

...........................................................................................

2 Commencement

.................................................................................

3 Schedule(s)

........................................................................................

Schedule 1--Extra shares in International Bank for

Reconstruction and Development

International Monetary Agreements Act 1947

Schedule 2--Changes to international agreements

Part 1--Articles of Agreement of the International Finance

Corporation

International Finance Corporation Act 1955

Part 2--Convention establishing the Multilateral Investment

Guarantee Agency

Multilateral Investment Guarantee Agency Act 1997

International Financial Institutions Legislation Amendment Bill 2010 No. , 2010 1

A Bill for an Act to amend the law relating to some

international financial institutions, and for related

purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the International Financial Institutions

Legislation Amendment Act 2010.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

2 International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

Commencement information

Column 1

Column 2

Column 3

Provision(s) Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedule 1

The day after this Act receives the Royal

Assent.

3. Schedule 2,

Part 1

The later of:

(a) the day after this Act receives the Royal

Assent; and

(b) the day the amendment of the Articles of

Agreement of the International Finance

Corporation, that the Board of Directors

of the Corporation recommended, in a

report approved on 20 July 2010, that the

Board of Governors of the Corporation

approve, comes into force for Australia.

However, the provision(s) do not commence

at all if the event mentioned in paragraph (b)

does not occur.

The Minister must announce by notice in the

Gazette the day that amendment of those

Articles of Agreement comes into force for

Australia.

4. Schedule 2,

Part 2

The later of:

(a) the day after this Act receives the Royal

Assent; and

(b) the day the amendments of the

Convention Establishing the Multilateral

Investment Guarantee Agency that were

approved by the Council of Governors

by the resolution set out in the

provision(s) come into force for

Australia.

The Minister must announce by notice in the

Gazette the day those amendments come

into force for Australia.

International Financial Institutions Legislation Amendment Bill 2010 No. , 2010 3

Note:

This table relates only to the provisions of this Act as originally

enacted. It will not be amended to deal with any later amendments of

this Act.

(2) Any information in Column 3 of the table is not part of this Act.

Information may be inserted in this column, or information in it

may be edited, in any published version of this Act.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

Schedule 1 Extra shares in International Bank for Reconstruction and Development

4 International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

Schedule 1--Extra shares in International

Bank for Reconstruction and

Development

International Monetary Agreements Act 1947

1 After section 8F

Insert:

9 Appropriation for Australia to buy extra shares in the Bank

The Consolidated Revenue Fund is appropriated for the purposes

of payments by Australia under one or more agreements that:

(a) are made by the Minister, on behalf of Australia, with the

Bank, for Australia to buy a total of not more than 7,128

additional shares of the capital stock of the Bank at a price

equivalent to 120,635 United States dollars a share; and

(b) contain terms and conditions determined by the Minister.

Changes to international agreements Schedule 2

Articles of Agreement of the International Finance Corporation Part 1

International Financial Institutions Legislation Amendment Bill 2010 No. , 2010 5

Schedule 2--Changes to international

agreements

Part 1--Articles of Agreement of the International

Finance Corporation

International Finance Corporation Act 1955

1 Section 3 (definition of the Agreement)

Repeal the definition, substitute:

the Agreement means the Articles of Agreement of the

International Finance Corporation set out in the First Schedule to

this Act, as amended in accordance with the following resolutions

accepted in accordance with Article VII of those Articles:

(a) the resolutions set out in the Second and Third Schedules to

this Act;

(b) the resolution the preamble to which and Part (A) of which

are set out in Schedule 4 to this Act.

2 At the end of the Act

Add:

Schedule 4--Resolution recommended by the

Board of Directors on 20 July 2010

Note:

See the definition of the Agreement in section 3.

Amendment to the Articles of Agreement and 2010 Selective Capital

Increase

WHEREAS at its April 2010 meeting, the Joint Ministerial Committee

of the Boards of Governors of the Bank and the Fund on the Transfer of Real

Resources to Developing Countries endorsed proposals for the second phase of

reforms to enhance the voice and participation of developing countries and

countries in transition in the World Bank Group.

Schedule 2 Changes to international agreements

Part 1 Articles of Agreement of the International Finance Corporation

6 International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

WHEREAS in their Report approved on July 20, 2010, the Board of

Directors recommends that the Board of Governors approves:

(a)

an increase in Basic Votes which requires an amendment of the

Articles of Agreement of the Corporation as set forth in Part (A) of

this Resolution;

(b)

an increase in the authorized capital stock of the Corporation as set

forth in Part (B) of this Resolution;

(c)

an allocation of shares to members as set forth in Part (C) of this

Resolution; and

(d)

a periodic review of the Corporation's shareholding as set forth in

Part (D) of this Resolution.

NOW THEREFORE, the Board of Governors, noting the

recommendations and the said Report of the Board of Directors, hereby resolves

as set forth below.

(A) Increase in Basic Votes and Amendment of the Articles of Agreement of

the Corporation

The Board of Governors hereby resolves that:

Article IV, Section 3(a) of the Articles of Agreement of the Corporation

shall be amended to read as follows:

Section 3.

Voting

"(a)

The voting power of each member shall be equal to the sum of

its basic votes and share votes.

(i)

The basic votes of each member shall be the number of

votes that results from the equal distribution among all

members of 5.55 percent of the aggregate sum of the

voting power of all the members, provided that there

shall be no fractional basic votes.

(ii)

The share votes of each member shall be the number of

votes that results from the allocation of one vote for

each share of stock held."

The amendment above shall enter into force for all members as of the

date three months after the Corporation certifies, by formal communication

addressed to all members, that three-fifths of the Governors exercising

eighty-five percent of the total voting power, have accepted the amendment.

Changes to international agreements Schedule 2

Convention establishing the Multilateral Investment Guarantee Agency Part 2

International Financial Institutions Legislation Amendment Bill 2010 No. , 2010 7

Part 2--Convention establishing the Multilateral

Investment Guarantee Agency

Multilateral Investment Guarantee Agency Act 1997

3 Section 3 (at the end of the definition of Convention)

Add ", as that Convention is amended by the resolution of the Council

of Governors of the Agency, a copy of which is set out in Schedule 2".

4 At the end of the Act

Add:

Schedule 2--Resolution adopted by the

Council of Governors on 30 July 2010

Note:

See the definition of Convention in section 3.

Modernizing MIGA's Mandate: Amendments to MIGA's Convention

WHEREAS, Article 59 of the MIGA Convention Establishing the Multilateral

Investment Guarantee Agency ("the MIGA Convention") provides that, "this

Convention and its Annexes may be amended by vote of three-fifths of the

Governors exercising four-fifths of the total voting power"; and

WHEREAS, Article 60 of the MIGA Convention provides that, "Any proposal

to amend this Convention, whether emanating from a member or a Governor or

a Director, shall be communicated to the Chairman of the Board who shall bring

the proposal before the Board. If the proposed amendment is recommended by

the Board, it shall be submitted to the Council for approval in accordance with

Article 59. When an amendment has been duly approved by the Council, the

Agency shall so certify by formal communication addressed to all members.

Amendments shall enter into force for all members ninety days after the date of

the formal communication unless the Council shall specify a different date."

NOW THEREFORE the Council of Governors hereby resolves that:

Article 11 of the MIGA Convention shall henceforth read as follows:

Schedule 2 Changes to international agreements

Part 2 Convention establishing the Multilateral Investment Guarantee Agency

8 International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

Article 11. Covered Risks

(a) Subject to the provisions of Sections (b) and (c) below, the Agency

may guarantee eligible investments against a loss resulting from one or

more of the following types of risk:

(i) Currency Transfer

any introduction attributable to the host government of

restrictions on the transfer outside the host country of its

currency into a freely usable currency or another currency

acceptable to the holder of the guarantee, including a failure of

the host government to act within a reasonable period of time

on an application by such holder for such transfer;

(ii) Expropriation and Similar Measures

any legislative action or administrative action or omission

attributable to the host government which has the effect of

depriving the holder of a guarantee of his ownership or control

of, or a substantial benefit from, his investment, with the

exception of non-discriminatory measures of general

application which governments normally take for the purpose

of regulating economic activity in their territories;

(iii) Breach of Contract

any repudiation or breach by the host government of a contract

with the holder of a guarantee, when (a) the holder of a

guarantee does not have recourse to a judicial or arbitral forum

to determine the claim of repudiation or breach, or (b) a

decision by such forum is not rendered within such reasonable

period of time as shall be prescribed in the contracts of

guarantee pursuant to the Agency's regulations, or (c) such a

decision cannot be enforced; and

(iv) War and Civil Disturbance

any military action or civil disturbance in any territory of the

host country to which this Convention shall be applicable as

provided in Article 66.

(b) In addition, the Board, by special majority, may approve the

extension of coverage under this Article to specific non-commercial

risks other than those referred to in Section (a) above, but in no case to

the risk of devaluation or depreciation of currency.

(i) any host government action or omission to which the holder

of the guarantee has agreed or for which he has been

responsible; and

Changes to international agreements Schedule 2

Convention establishing the Multilateral Investment Guarantee Agency Part 2

International Financial Institutions Legislation Amendment Bill 2010 No. , 2010 9

(ii) any host government action or omission or any other event

occurring before the conclusion of the contract of guarantee.

Article 12 of the MIGA Convention shall henceforth read as follows:

Article 12. Eligible Investments

(a) Eligible investments shall include equity interests, including

medium- or long-term loans made or guaranteed by holders of equity in

the enterprise concerned, and such forms of direct investment as may be

determined by the Board.

(b) Loans other than those mentioned in Section (a) are eligible for

coverage (i) if they are made to finance or are otherwise related to a

specific investment or project in which some other form of direct

investment is present, whether or not guaranteed by the Agency and

regardless of when such other investment was made, or (ii) as may be

otherwise approved by the Board by special majority.

medium- or long-term form of investment.

(d) Guarantees shall generally be restricted to investments the

implementation of which begins subsequent to the registration of the

application for the guarantee by the Agency or receipt by the Agency of

other satisfactory evidence of investor intent to obtain guarantees from

the Agency. Such investments may include:

(i) a transfer of foreign exchange made to modernize, expand,

or develop an existing investment, in which case both the

original investment and the additional investment may be

considered eligible for coverage;

(ii) the use of earnings from existing investments which could

otherwise be transferred outside the host country;

(iii) the acquisition of an existing investment by a new eligible

investor;

(iv) existing investments where an eligible investor is seeking

to insure a pool of existing and new investments;

(v) existing investments owned by an eligible investor where

there is an improvement or enhancement of the underlying

project or the investor otherwise demonstrates medium- or

long-term commitment to the project, and the Agency is

satisfied that the project continues to have a high

developmental impact in the host country; and

Schedule 2 Changes to international agreements

Part 2 Convention establishing the Multilateral Investment Guarantee Agency

10 International Financial Institutions Legislation Amendment Bill 2010 No. , 2010

(vi) such other investments as may be approved by the Board

by special majority.

(e) In guaranteeing an investment, the Agency shall satisfy itself as to:

(i) the economic soundness of the investment and its

contribution to the development of the host country;

(ii) compliance of the investment with the host country's laws

and regulations;

(iii) consistency of the investment with the declared

development objectives and priorities of the host country; and

(iv) the investment conditions in the host country, including the

availability of fair and equitable treatment and legal protection

for the investment.

Commonwealth of Australia Bills

INTERNATIONAL FINANCIAL INSTITUTIONS LEGISLATION AMENDMENT BILL 2010