United Nations Convention on the Law of the Sea ANNEXES 4-5

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 ANNEX IV. STATUTE OF THE ENTERPRISE
 Article 1 
 Purposes
 1. The Enterprise is the organ of the Authority which shall carry out activities in the Area directly, pursuant to article 153, paragraph 2 (a), as well as the transporting, processing and marketing of minerals recovered from the Area.
 2. In carrying out its purposes and in the exercise of its functions, the Enterprise shall act in accordance with this Convention and the rules, regulations and procedures of the Authority.
 3. In developing the resources of the Area pursuant to paragraph 1, the Enterprise shall, subject to this Convention, operate in accordance with sound commercial principles.
 Article 2 
 Relationship to the Authority
 1. Pursuant to article 170, the Enterprise shall act in accordance with the general policies of the Assembly and the directives of the Council.
 2. Subject to paragraph 1, the Enterprise shall enjoy autonomy in the conduct of its operations.
 3. Nothing in this Convention shall make the Enterprise liable for the acts or obligations of the Authority, or make the Authority liable for the acts or obligations of the Enterprise.
 Article 3 
 Limitation of liability
 Without prejudice to article 11, paragraph 3, of this Annex, no member of the Authority shall be liable by reason only of its membership for the acts or obligations of the Enterprise.
 Article 4 
 Structure
 The Enterprise shall have a Governing Board, a Director-General and the staff necessary for the exercise of its functions.
 Article 5 
 Governing Board
 1. The Governing Board shall be composed of 15 members elected by the Assembly in accordance with article 160, paragraph 2(c). In the election of the members of the Board, due regard shall be paid to the principle of equitable geographical distribution. In submitting nominations of candidates for election to the Board, members of the Authority shall bear in mind the need to nominate candidates of the highest standard of competence, with qualifications in relevant fields, so as to ensure the viability and success of the Enterprise.
 2. Members of the Board shall be elected for four years and may be reelected; and due regard shall be paid to the principle of rotation of membership.
 3. Members of the Board shall continue in office until their successors are elected. If the office of a member of the Board becomes vacant, the Assembly shall, in accordance with article 160, paragraph 2(c), elect a new member for the remainder of his predecessor's term.
 4. Members of the Board shall act in their personal capacity. In the performance of their duties they shall not seek or receive instructions from any government or from any other source. Each member of the Authority shall respect the independent character of the members of the Board and shall refrain from all attempts to influence any of them in the discharge of their duties.
 5. Each member of the Board shall receive remuneration to be paid out of the funds of the Enterprise. The amount of remuneration shall be fixed by the Assembly, upon the recommendation of the Council.
 6. The Board shall normally function at the principal office of the Enterprise and shall meet as often as the business of the Enterprise may require.
 7. Two thirds of the members of the Board shall constitute a quorum.
 8. Each member of the Board shall have one vote. All matters before the Board shall be decided by a majority of its members. If a member has a conflict of interest on a matter before the Board he shall refrain from voting on that matter.
 9. Any member of the Authority may ask the Board for information in respect of its operations which particularly affect that member. The Board shall endeavour to provide such information.
 Article 6 
 Powers and functions of the Governing Board
 The Governing Board shall direct the operations of the Enterprise. Subject to this Convention, the Governing Board shall exercise the powers necessary to fulfil the purposes of the Enterprise, including powers:
 (a) to elect a Chairman from among its members;
 (b) to adopt its rules of procedure;
 (c) to draw up and submit formal written plans of work to the Council in accordance with article 153, paragraph 3, and article 162, paragraph 2(j);
 (d) to develop plans of work and programmes for carrying out the activities specified in article 170;
 (e) to prepare and submit to the Council applications for production authorizations in accordance with article 151, paragraphs 2 to 7;
 (f) to authorize negotiations concerning the acquisition of technology, including those provided for in Annex III, article 5, paragraph 3 (a), (c) and (d), and to approve the results of those negotiations;
 (g) to establish terms and conditions, and to authorize negotiations, concerning joint ventures and other forms of joint arrangements referred to in Annex III, articles 9 and 11, and to approve the results of such negotiations
 (h) to recommend to the Assembly what portion of the net income of the Enterprise should be retained as its reserves in accordance with article 160, paragraph 2 (f), and article 10 of this Annex;
 (i) to approve the annual budget of the Enterprise;
 (j) to authorize the procurement of goods and services in accordance with article 12, paragraph 3, of this Annex;
 (k) to submit an annual report to the Council in accordance with article 9 of this Annex-
 (l) to submit to the Council for the approval of the Assembly draft rules in respect of the organization, management, appointment and dismissal of the staff of the Enterprise and to adopt regulations to give effect to such rules;
 (m) to borrow funds and to furnish such collateral or other security as it may determine in accordance with article 11, paragraph 2, of this Annex;
 (n) to enter into any legal proceedings, agreements and transactions and to take any other actions in accordance with article 13 of this Annex;
 (o) to delegate, subject to the approval of the Council, any non-discretionary powers to the Director-General and to its committees.
 Article 7 
 Director-General and staff of the Enterprise
 1. The Assembly shall, upon the recommendation of the Council and the nomination of the Governing Board, elect the Director-General of the Enterprise who shall not be a member of the Board. The Director-General shall hold office for a fixed term, not exceeding five years, and may be re-elected for further terms.
 2. The Director-General shall be the legal representative and chief executive of the Enterprise and shall be directly responsible to the Board for the conduct of the operations of the Enterprise. He shall be responsible for the organization, management, appointment and dismissal of the staff of the Enterprise in accordance with the rules and regulations referred to in article 6, subparagraph (l), of this Annex. He shall participate, without the right to vote, in the meetings of the Board and may participate, without the right to vote, in the meetings of the Assembly and the Council when these organs are dealing with matters concerning the Enterprise.
 3. The paramount consideration in the recruitment and employment of  the staff and in the determination of their conditions of service  shall be the necessity of securing the highest standards of efficiency  and of technical competence. Subject to this consideration, due regard  shall be paid to the importance of recruiting the staff on an  equitable geographical basis.
 4. In the performance of their duties the Director-General and the  staff shall not seek or receive instructions from any government or  from any other source external to the Enterprise. They shall refrain  from any action which might reflect on their position as international  officials of the Enterprise responsible only to the Enterprise. Each  State Party undertakes to respect the exclusively international  character of the responsibilities of the Director-General and the  staff and not to seek to influence them in the discharge of their  responsibilities.
 5. The responsibilities set forth in article 168, paragraph 2, are equally applicable to the staff of the Enterprise.
 Article 8 
 Location
 The Enterprise shall have its principal office at the seat of the Authority. The Enterprise may establish other offices and facilities in the territory of any State Party with the consent of that State Party.
 Article 9 
 Reports and financial statements
 1. The Enterprise shall, not later than three months after the end of each financial year, submit to the Council for its consideration an annual report containing an audited statement of its accounts and shall transmit to the Council at appropriate intervals a summary statement of its financial position and a profit and loss statement showing the results of its operations.
 2. The Enterprise shall publish its annual report and such other reports as it finds appropriate.
 3. All reports and financial statements referred to in this article shall be distributed to the members of the Authority.
 Article 10 
 Allocation of net income
 1. Subject to paragraph 3, the Enterprise shall make payments to the  Authority under Annex III, article 13, or their equivalent.
 2. The Assembly shall, upon the recommendation of the Governing Board, determine what portion of the net income of the Enterprise shall be retained as reserves of the Enterprise. The remainder shall be transferred to the Authority.
 3. During an initial period required for the Enterprise to become self- supporting, which shall not exceed 10 years from the commencement of commercial production by it, the Assembly shall exempt the Enterprise from the payments referred to in paragraph 1, and shall leave all of the net income of the Enterprise in its reserves.
 Article 11 
 Finances
 1. The funds of the Enterprise shall include:
 (a) amounts received from the Authority in accordance with article 173, paragraph 2 (b);
 (b) voluntary contributions made by States Parties for the purpose of financing activities of the Enterprise;
 (c) amounts borrowed by the Enterprise in accordance with paragraphs 2 and 3;
 (d) income of the Enterprise from its operations;
 (e) other funds made available to the Enterprise to enable it to commence operations as soon as possible and to carry out its functions.
 2. (a) The Enterprise shall have the power to borrow funds and to  furnish such collateral or other security as it may determine. Before  making a public sale of its obligations in the financial markets or  currency of a State Party, the Enterprise shall obtain the approval of  that State Party. The total amount of borrowings shall be approved by  the Council upon the recommendation of the Governing Board.
 (b) States Parties shall make every reasonable effort to support  applications by the Enterprise for loans on capital markets and from  international financial institutions.
 3. (a) The Enterprise shall be provided with the funds necessary to  explore and exploit one mine site, and to transport, process and  market the minerals recovered therefrom and the nickel, copper, cobalt  and manganese obtained,  and to meet its initial administrative expenses. The amount of the  said funds, and the criteria and factors for its adjustment, shall be  included by the Preparatory Commission in the draft rules, regulations  and procedures of the Authority.
 (b) All States Parties shall make available to the Enterprise an  amount equivalent to one half of the funds referred to in subparagraph  (a) by way of long-term interest-free loans in accordance with the  scale of assessments for the United Nations regular budget in force at  the time when the assessments are made, adjusted to take into account  the States which are not members of the United Nations. Debts incurred  by the Enterprise in raising the other half of the funds shall be  guaranteed by all States Parties in accordance with the same scale.
 (c) If the sum of the financial contributions of States Parties is  less than the funds to be provided to the Enterprise under  subparagraph (a), the Assembly shall, at its first session, consider  the extent of the shortfall and adopt by consensus measures for  dealing with this shortfall, taking into account the obligation of  States Parties under subparagraphs (a) and (b) and any recommendations  of the Preparatory Commission.
 (d) (i) Each State Party shall, within 60 days after the entry into  force of this Convention, or within 30 days after the deposit of its  instrument of ratification or accession, whichever is later, deposit  with the Enterprise irrevocable, non-negotiable, non-interest-bearing  promissory notes in the amount of the share of such State Party of  interest-free loans pursuant to subparagraph (b).
 (ii) The Board shall prepare, at the earliest practicable date after  this Convention enters into force, and thereafter at annual or other  appropriate intervals, a schedule of the magnitude and timing of its  requirements for the funding of its administrative expenses and for  activities carried out by the Enterprise in accordance with article  170 and article 12 of this Annex.
 (iii) The States Parties shall, thereupon, be notified by the  Enterprise, through the Authority, of their respective shares of the  funds in accordance with subparagraph (b), required for such expenses.  The Enterprise shall encash such amounts of the promissory notes as  may be required to meet the expenditure referred to in the schedule  with respect to interest-free loans.
 (iv) States Parties shall, upon receipt of the notification, make  available their respective shares of debt guarantees for the  Enterprise in accordance with subparagraph (b).
 (e) (i) If the Enterprise so requests, State Parties may provide debt guarantees in addition to those provided in accordance with the scale referred to in subparagraph (b) .
 (ii) In lieu of debt guarantees, a State Party may make a voluntary contribution to the Enterprise in an amount equivalent to that portion of the debts which it would otherwise be liable to guarantee.
 (f) Repayment of the interest-bearing loans shall have priority over  the repayment of the interest-free loans. Repayment of interest-free  loans shall be in accordance with a schedule adopted by the Assembly,  upon the recommendation of the Council and the advice of the Board. In  the exercise of this function the Board shall be guided by the  relevant provisions of the rules, regulations and procedures of the  Authority, which shall take into account the paramount importance of  ensuring the effective functioning of the Enterprise and, in  particular, ensuring its financial independence.
 (g) Funds made available to the Enterprise shall be in freely usable  currencies or currencies which are freely available and effectively  usable in the major foreign exchange markets. These currencies shall  be defined in the rules, regulations and procedures of the Authority  in accordance with prevailing international monetary practice. Except  as provided in paragraph 2, no State Party shall maintain or impose  restrictions on the holding, use or exchange by the Enterprise of  these funds.
 (h) "Debt guarantee" means a promise of a State Party to creditors of  the Enterprise to pay, pro rata in accordance with the appropriate  scale, the financial obligations of the Enterprise covered by the  guarantee following notice by the creditors to the State Party of a  default by the Enterprise. Procedures for the payment of those  obligations shall be in conformity with the rules, regulations and  procedures of the Authority.
 4. The funds, assets and expenses of the Enterprise shall be kept  separate from those of the Authority. This article shall not prevent  the Enterprise from making arrangements with the Authority regarding  facilities, personnel and services and arrangements for reimbursement  of administrative expenses paid by either on behalf of the other.
 5. The records, books and accounts of the Enterprise, including its  annual financial statements, shall be audited annually by an independent auditor appointed by the Council.
 Article 12 
 Operations
 1. The Enterprise shall propose to the Council projects for carrying out activities in accordance with article 170. Such proposals shall include a formal written plan of work for activities in the Area in accordance with article 153, paragraph 3, and all such other information and data as may be required from time to time for its appraisal by the Legal and Technical Commission and approval by the Council.
 2. Upon approval by the Council, the Enterprise shall execute the project on the basis of the formal written plan of work referred to in paragraph 1.
 3. (a) If the Enterprise does not possess the goods and services required invitations to tender and award contracts to bidders offering the best combination of quality, price and delivery time.
 (b) If there is more than one bid offering such a combination, the contract shall be awarded in accordance with:
 (i) the principle of non-discrimination on the basis of political or other considerations not relevant to the carrying out of operations with due diligence and efficiency; and
 (ii) guidelines approved by the Council with regard to the preferences to be accorded to goods and services originating in developing States, including the land-locked and geographically disadvantaged among them.
 (c) The Governing Board may adopt rules determining the special circumstances in which the requirement of invitations to bid may, in the best interests of the Enterprise, be dispensed with.
 4. The Enterprise shall have title to all minerals and processed substances produced by it.
 5. The Enterprise shall sell its products on a non-discriminatory basis. It shall not give non-commercial discounts.
 6. Without prejudice to any general or special power conferred on the Enterprise under any other provision of this Convention, the Enterprise shall exercise such powers incidental to its business as shall be necessary.
 7. The Enterprise shall not interfere in the political affairs of any State Party; nor shall it be influenced in its decisions by the political character of the State Party concerned. Only commercial considerations shall be relevant to its decisions, and these considerations shall be weighed impartially in order to carry out the purposes specified in article 1 of this Annex.
 Article 13 
 Legal status, privileges and immunities
 1. To enable the Enterprise to exercise its functions, the status, privileges and immunities set forth in this article shall be accorded to the Enterprise in the territories of States Parties. To give effect to this principle the Enterprise and States Parties may, where necessary, enter into special agreements.
 2. The Enterprise shall have such legal capacity as is necessary for the exercise of its functions and the fulfillment of its purposes and, in particular, the capacity:
 (a) to enter into contracts, joint arrangements or other arrangements, including agreements with States and international organizations;
 (b) to acquire, lease, hold and dispose of immovable and movable property;
 (c) to be a party to legal proceedings.
 3. (a) Actions may be brought against the Enterprise only in a court of competent jurisdiction in the territory of a State Party in which the Enterprise:
 (i) has an office or facility;
 (ii) has appointed an agent for the purpose of accepting service or notice of process;
 (iii) has entered into a contract for goods or services;
 (iv) has issued securities; or
 (v) is otherwise engaged in commercial activity. 
 
 (b) The property and assets of the Enterprise, wherever located and by whomsoever held, shall be immune from all forms of seizure, attachment or execution before the delivery of final judgment against the Enterprise.
 4. (a) The property and assets of the Enterprise, wherever located and by whomsoever held, shall be immune from requisition, confiscation, expropriation or any other form of seizure by executive or legislative action.
 (b) The property and assets of the Enterprise, wherever located and by whomsoever held, shall be free from discriminatory restrictions, regulations, controls and moratoria of any nature.
 (c) The Enterprise and its employees shall respect local laws and regulations in any State or territory in which the Enterprise or its employees may do business or otherwise act.
 (d) States Parties shall ensure that the Enterprise enjoys all rights, privileges and immunities accorded by them to entities conducting commercial activities in their territories. These rights, privileges and immunities shall be accorded to the Enterprise on no less favourable a basis than that on which they are accorded to entities engaged in similar commercial activities. If special privileges are provided by States Parties for developing States or their commercial entities, the Enterprise shall enjoy those privileges on a similarly preferential basis.
 (e) States Parties may provide special incentives, rights, privileges and immunities to the Enterprise without the obligation to provide such incentives, rights, privileges and immunities to other commercial entities.
 5. The Enterprise shall negotiate with the host countries in which its offices and facilities are located for exemption from direct and indirect taxation.
 6. Each State Party shall take such action as is necessary for giving effect in terms of its own law to the principles set forth in this Annex and shall inform the Enterprise of the specific action which it has taken.
 7. The Enterprise may waive any of the privileges and immunities conferred under this article or in the special agreements referred to in paragraph 1 to such extent and upon such conditions as it may determine.
ANNEX V. CONCILIATION
 SECTION 1. CONCILIATION PROCEDURE PURSUANT TO 
 SECTION 1 OF PART XV
 Article I 
 Institution of proceedings
 If the parties to a dispute have agreed, in accordance with article 284, to submit it to conciliation under this section, any such party may institute the proceedings by written notification addressed to the other party or parties to the dispute.
 Article 2 
 List of conciliators
 A list of conciliators shall be drawn up and maintained by the  Secretary-General of the United Nations. Every State Party shall be  entitled to nominate four conciliators, each of whom shall be a person  enjoying the highest reputation for fairness, competence and  integrity. The names of the persons so nominated shall constitute the  list. If at any time the conciliators nominated by a State Party in  the list so constituted shall be fewer than four, that State Party  shall be entitled to make further nominations as necessary. The name  of a conciliator shall remain on the list until withdrawn by the State  Party which made the nomination, provided that such conciliator shall  continue to serve on any conciliation commission to which that  conciliator has been appointed until the completion of the proceedings  before that commission.
 Article 3 
 Constitution of conciliation commission
 The conciliation commission shall, unless the parties otherwise agree, be constituted as follows:
 (a) Subject to subparagraph (g), the conciliation commission shall consist of five members.
 (b) The party instituting the proceedings shall appoint two conciliators to be chosen preferably from the list referred to in article 2 of this Annex, one of whom may be its national, unless the parties otherwise agree. Such appointments shall be included in the notification referred to in article 1 of this Annex.
 (c) The other party to the dispute shall appoint two conciliators in the manner set forth in subparagraph (b) within 21 days of receipt of the notification referred to in article 1 of this Annex. If the appointments are not made within that period, the party instituting the proceedings may, within one week of the expiration of that period, either terminate the proceedings by notification addressed to the other party or request the Secretary-General of the United Nations to make the appointments in accordance with subparagraph (e).
 (d) Within 30 days after all four conciliators have been appointed, they shall appoint a fifth conciliator chosen from the list referred to in article 2 of this Annex, who shall be chairman. If the appointment is not made within that period, either party may, within one week of the expiration of that period, request the Secretary-General of the United Nations to make the appointment in accordance with subparagraph (e).
 (e) Within 30 days of the receipt of a request under subparagraph (c) or (d), the Secretary-General of the United Nations shall make the necessary appointments from the list referred to in article 2 of this Annex in consultation with the parties to the dispute.
 (f) Any vacancy shall be filled in the manner prescribed for the initial appointment.
 (g) Two or more parties which determine by agreement that they are in the same interest shall appoint two conciliators jointly. Where two or more parties have separate interests or there is a disagreement as to whether they are of the same interest, they shall appoint conciliators 
 separately.
 (h) In disputes involving more than two parties having separate interests, or where there is disagreement as to whether they are of the same interest, the parties shall apply subparagraphs (a) to (f) in so far as possible.
 Article 4 
 Procedure
 The conciliation commission shall, unless the parties otherwise agree,  determine its own procedure. The commission may, with the consent of  the parties to the dispute, invite any State Party to submit to it its  views orally or in writing. Decisions of the commission regarding  procedural matters, the report and recommendations shall be made by a  majority vote of its members.
 Article 5 
 Amicable settlement
 The commission may draw the attention of the parties to any measures which might facilitate an amicable settlement of the dispute.
 Article 6 
 Functions of the commission
 The commission shall hear the parties, examine their claims and objections, and make proposals to the parties with a view to reaching an amicable settlement.
 Article 7 
 Report
 1. The commission shall report within 12 months of its constitution. Its report shall record any agreements reached and, failing agreement, its conclusions on all questions of fact or law relevant to the matter in dispute and such recommendations as the commission may deem appropriate for an amicable settlement. The report shall be deposited with the Secretary-General of the United Nations and shall immediately be transmitted by him to the parties to the dispute.
 2. The report of the commission, including its conclusions or recommendations, shall not be binding upon the parties.
 Article 8 
 Termination
 The conciliation proceedings are terminated when a settlement has been  reached, when the parties have accepted or one party has rejected the  recommendations of the report by written notification addressed to the  Secretary-General of the United Nations, or when a period of three  months has expired from the date of transmission of the report to the  parties.
 Article 9 
 Fees and expenses
 The fees and expenses of the commission shall be borne by the parties to the dispute.
 Article 10 
 Right of parties to modify procedure
 The parties to the dispute may by agreement applicable solely to that dispute modify any provision of this Annex.
 SECTION 2. 
 COMPULSORY SUBMISSION TO CONCILIATION PROCEDURE PURSUANT TO SECTION 3 OF PART XV
 Article 11 
 Institution of proceedings
 1. Any party to a dispute which, in accordance with Part XV, section 3, may be submitted to conciliation under this section, may institute the proceedings by written notification addressed to the other party or parties to the dispute. 2. Any party to the dispute, notified under paragraph 1, shall be obliged to submit to such proceedings.
 Article 12 
 Failure to reply or to submit to conciliation
 The failure of a party or parties to the dispute to reply to notification of institution of proceedings or to submit to such proceedings shall not constitute a bar to the proceedings.
 Article 13 
 Competence
 A disagreement as to whether a conciliation commission acting under this section has competence shall be decided by the commission.
 Article 14 
 Application of section I
 Articles 2 to 10 of section 1 of this Annex apply subject to this section. 
 

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