March 19, 1971

AGREEMENT BETWEEN THE REPUBLIC OF THE PHILIPPINES AND DENMARK FOR A DANISH GOVERNMENT LOAN TO THE REPUBLIC OF THE PHILIPPINES

Signed in Manila, March 19, 1971.

Note: The Agreement entered into force, March 19, 1971.

Reference: This Agreement is also published in X DFA TS No. 1, p. 1.
 

The Government of the Republic of the Philippines and the Government of Denmark, desiring to strengthen the traditional cooperation and cordial relations between their countries, have agreed that, as a contribution to the economic development of the Philippines, a Danish Government Loan will be extended to the Philippines in accordance with the following provisions of this Agreement and the attached Annexes, which are considered an integral part of the Agreement:
 

ARTICLE I

THE LOAN
 

The Government of Denmark (hereinafter called the Lender) will make available to the Government of the Philippines (hereinafter called the Bor-rower) a Loan in an amount of 30 million Danish Kroner for the purposes described in Article VI of this Agreement

.

ARTICLE II

LOAN ACCOUNT

Section I. An account designated "Government of the Philippines Loan Account" (hereinafter called "Loan Account") will, at the Borrower's request, be opened with Danmarks Nationalbank (acting as agent for the Lender) in favor of Central Bank of the Philippines (acting as agent for the Borrower). The Lender will ensure that sufficient funds are always available in the Loan Account to enable the Borrower to effect punctual payment for capital goods and services procured within the amount of the Loan.

Section 2. The Borrower (or Central Bank of the Philippines) shall be entitled, subject to the provisions of this Agreement, to withdraw from the Loan Account amounts needed for payment of capital goods or services procured under the Loan.
 

ARTICLE III

RATE OF INTEREST

The Loan will be free of interest.
 

ARTICLE IV

REPAYMENTS

Section 1. The Borrower will repay the Loan in thirty-five semi-annual installments of 830,000 Danish Kroner each, commencing on October 1, 1977 and ending on October 1, 1994, and one final installment of 950,000 Danish Kroner on April 1, 1995.

Section 2. If the Loan is not fully utilized in accordance with the provisions of Article VI, section 8, a revised schedule of repayment shall be established by mutual consent.
 

ARTICLE V

PLACE OF PAYMENT
 

The Loan shall be repaid by the Borrower in convertible Danish Kroner to Danmarks Nationalbank to the credit of the current account of the Ministry of Finance with Danmarks Nationalbank.
 

ARTICLE VI

USE OF THE LOAN
 

Section 1. The Borrower will use the Loan to finance imports from Denmark (including cost of transport from Denmark to the Philippines) of such Danish capital goods as are to be used for identifiable projects and are needed for the economic development of the Philippines. An indicative list of such goods is contained in Annex II.

Section 2. The Loan may also be used to pay for Danish services required for the implementation of development projects in the Philippines including, in particular, pre-investment studies, preparation of projects, provision of consultants during the implementation of projects, assembly or construction of plants or buildings and technical and administrative assistance during the initial period of undertakings established by means of the Loan.

Section 3. All contract to be financed under the Loan shall be subject to approval by the Borrower and the Lender.

Section 4. The approval by the Lender of a contract for financing under the Loan shall not imply any responsibility for the proper performance of such contracts.

The Lender also disclaims responsibility for the efficient use of supplies and services financed under the Loan and for the proper operation of the projects, etc., to which such supplies have been made and such services have been rendered.

Section 5. A contract under the Loan shall contain no clauses involving any special credit facilities from the Danish party to the contract.

Section 6. The proceeds of the Loan may be used only for payment of capital goods and services contracted for after the entry into force of the Agreement, unless otherwise agreed by the Borrower and the Lender.

Section 7. The proceeds of the Loan shall not be used for payment to the Borrower of any import duty, tax, national or other public charge such as import surcharges, duties to compensate for domestic excise taxes, charges or deposits in connection with the issuance of payments licenses or import licenses.

Section 8. The Borrower may draw against the Loan Account in fulfill-ment of contracts approved by the Parties for up to three years after the entry into force of the Agreement or from such other date as may be mutually agreed by the Borrower and the Lender.
 

ARTICLE VII

NON-DISCRIMINATION

Section 1. In regard to the repayment of the Loan, the Borrower under-takes to give the Lender no less favorable treatment than that accorded to other foreign creditors.

Section 2. All shipments of capital goods covered by this Agreement shall be in keeping with the principle of free circulation of ships in international trade in free and fair competition.
 

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Prior to the first drawing against the Account referred to in Article II the Borrower will satisfy the Lender that all constitutional and other requirements laid down by statute in the Borrower's home country have been met, so that this loan Agreement will constitute an obligation binding on the Borrower.

Section 2. The Borrower will inform the Lender of Persons who are authorized to take any action on behalf of the Borrower, and supply authenticated specimen signatures of all such persons.

Section 3. Any notices, requests or agreements under this Agreement shall be in writing.
 

ARTICLE IX

PARTICULAR COVENANTS

The Loan shall be repaid without deduction for, and free from, any taxes and charges, and free from all restrictions imposed under the laws of die Borrower. This Agreement shall be free from any present and future taxes imposed under existing or future laws of the Borrower in connection with the issue, execution, registration, entry into force of the Agreement, or otherwise.

ARTICLE X

DURATION OF THE AGREEMENT

Section 1. The Agreement shall come into force on the date of signature.

Section 2. When the Loan has been repaid, the Agreement shall terminate forthwith.
 

ARTICLE XI

SPECIFICATION OF ADDRESSES

The following addresses are specified for the purposes of this Agreement: For the Borrower:

Central Bank of the Philippines Manila

Development Bank of the Philippines Makati, Rizal

Department of Foreign Affairs Manila

Cablegrams:

PHILCENBANK
PHILDEBANK
DEFORAF

For the Lender with respect to disbursements:

Ministry of Foreign Affairs,
Danish International Development Agency,
Copenhagen.

Cablegrams:

ETRANGERES COPENHAGEN.

For the Lender with respect to servicing of the Loan:

Ministry of Finance
Copenhagen.

Cablegrams:

FINANS COPENHAGEN.

In witness whereof the Parties hereto, acting through their representatives duly authorized for this purpose, have caused this Agreement to be signed in two copies in the English language in Manila on this 19th day of March 1971.

For the Government of the Philippines:
(Sgd.) CARLOS P. ROMULO
For the Government of Denmark:
(Sgd.) ILLEGIBLE

ANNEX I

The following provisions shall govern the rights and obligations under the Agreement between the Government of Denmark and the Government of the Philippines on a Danish Government Loan to the Philippines (hereinafter called the Agreement), of which they are considered an integral part with the same force and effect as if they were fully set forth therein.
 

ARTICLE I

CANCELLATION AND SUSPENSION

Section 1. The Borrower may, by notice to the Lender, cancel any amount of the Loan which the Borrower shall not have withdrawn.

Section 2. In the event of default by the Borrower in the fulfillment of any commitment or arrangement under the Agreement, the Lender may suspend, in whole or in part the right of the Borrower to make withdrawals from the Loan Account.

If the default which entitled the Lender to suspend the Borrower's right to draw against the Loan Account persists beyond a period of sixty days after the Lender's notice to the Borrower of the suspension, the Lender may at any time claim immediate repayment of all withdrawals made from the Loan Account, notwithstanding anything in the Agreement to the contrary, unless the basis on which the suspension was made has ceased to exist.

Section 3. Notwithstanding any cancellation or suspension all the provisions of the Agreement shall continue in full force and effect except as is specifically provided in this Article.
 

ARTICLE II

SETTLEMENT OF DISPUTES

Section 1. Any dispute between the Parties arising out of the interpreta-tion or administration of the present Agreement, which has not been settled within six months through diplomatic channels, shall, at the requests of either Party, be submitted to a tribunal of arbitration consisting of three members. The chairman of the tribunal shall be a citizen of a third country and shall be appointed by common consent of the Parties. Should the Parties fail to agree on the appointment of the chairman of the tribunal, either Party may request the President of the International Court of Justice to make the appointment. Each Party appoints its own arbitrator; if a Party abstains from appointing an arbitrator, the latter may be appointed by the chairman of the tribunal.

Section 2. Each Party will observe and carry out awards given by the tribunal.
 

ANNEX II

This Agreement is applicable to supplies of the following Danish machinery and equipment for an irrigation project:

2000 water pumps with accessory diesel engines; 2000 diesel engines for pumps which will be manufactured in the Philippines.
 

19 March 1971

Sir: I have the honor to acknowledge receipt of your letter of today's date which reads as follows:
"Excellency,

With reference to the Agreement of today's date between the Government of Denmark and the Government of the Philippines I have

the honour to propose that the following provisions shall govern the implementation of Article VI of the Agreement.

Payment out of the Loan Account shall be effected in the following manner:

(1) The Danish exporter or consultant and the Philippine importer or prospective investor shall negotiate a contract, subject to the final approval of the Philippines' and the Danish authorities. No contract below 200,000 Danish Kroner, except for utilization of any final balance below that amount, shall be eligible for financing under the Agreement.

(2) The Government of the Philippines will make available to the Danish Ministry of Foreign Affairs copies of the contracts to be concluded under this Agreement. The latter will ascertain, inter alia, that

(a) the commodities or services contracted for fall within the framework of the Agreement;

(b) the capital equipment involved has been manufactured in Denmark, or the services to be rendered will be performed by persons carrying on business in Denmark; and inform the Government of the Philippines of its findings.

(3) When the contracts have been approved, the Government of the Philippines may draw on the Loan Account to effect payment of the consignment referred to in the contract. Payments out of this account to Danish exporters or consultants shall be subject to presentation of the necessary documents when Danmarks Nationalbank has ascer tained that the conditions for effecting such payments have otherwise been complied with."

I have the honor of confirming herewith that my Government agrees with these provisions.

I avail myself of this opportunity, Sir, to renew to you the assurances of my high consideration.
 

	(Sgd.) CARLOS P. ROMULO
	Secretary of Foreign Affairs

Mr. William Winther Schmidt
	Charge d'Affaires
		Embassy of the Kingdom of Denmark
			Djakarta

Excellency, With reference to the Agreement of today's date between the Governmerit of Denmark and the Government of the Philippines i have the honor to propose that the following provisions shall govern the implementation of Article VI of the Agreement. Payment out of the Loan Account shall be effected in the following manner:

(1) The Danish exporter or consultant and the Philippine importer or prospective investor shall negotiate a contract, subject to the final approval of the Philippines' and the Danish authorities. No contract below 200,000 Danish Kroner, except for utilization of any final balance below that amount, shall be eligible for financing under the Agreement.

(2) The Government of the Philippines will make available to the Danish Ministry of Foreign Affairs copies of the contracts to be concluded under this Agreement. The latter will ascertain, inter alia, that

(a) the commodities or services contracted for fall within the framework of the Agreement;

(b) the capital equipment involved has been manufactured in Denmark, or the services to be rendered will be performed by persons carrying on business in Denmark, and inform the Government of the Philippines of its findings.

(3) When the contracts have been approved, the Government of the Philippines may draw on the Loan Account to effect payment of the consignment referred to in the contract. Payments out of this account to Danish exporters or consultants shall be subject to presentation of the necessary documents when Denmarks National Bank has ascertained that the conditions for effecting such payments have otherwise been complied with. If the foregoing provisions are acceptable to the Government of the Philippines, I have the honor to suggest that this letter and your reply to it constitute an agreement between our two Governments on this matter. Please accept, Excellency, the assurance of my highest consideration.

(Sgd.) WILLIAM WINTHER SCHMIDT

For the Government of Denmark:

Manila, March 19, 1971

His Excellency
Mr. Carlos P. Romulo
Secretary of Foreign Affairs

Manila

MINISTRY OF FOREIGN AFFAIRS
Secretariat for Technical Co-operation
with Developing Countries

Copenhagen

Memorandum on capital goods and services eligible for financing under Danish Government Loans to developing countries.

1. The object of Danish government loans is to contribute towards the financing of identifiable development projects in developing countries. Loans may be used for purchases of such Danish capital equipment or for payment of such services as are required for the establishment of projects. An individual loan is not necessarily tied to any individual development project but may, on the other hand, not be used for acquisition of any article available in Denmark. Danish government loans are therefore neither project loans nor programme loans in the strictest sense of these terms.

2. The Danish authorities cannot enter into substantive negotiations about a government loan to a developing country, until the letter has specified what categories of capital equipment and services are to be supplied and financed under the loan. A list of such capital goods and services will be incorporated in the loan agreement, but the list may be amended and amplified also after the signing of the loan agreement.

3. If it is proposed to use parts of a loan for nonstationary equipment or for a small or large number of uniform capital goods to be distributed among an undetermined number of users the loan will be subject to the additional condition that such equipment shall be an integral part of a specific project, defined by a detailed project description showing the geographical placing of the equipment. The same rule shall apply to supplies of breeding cattle.

4. A loan may be used either by the borrower to finance projects or relent, on terms to be stipulated by the borrower, to semi-governmental undertakings, local government authorities or private undertakings in the borrower's territory.

5. The following list covers capital good and services from Denmark which, under previous loan agreements, have been earmarked for financing out of Danish government loans. The list may serve as a guideline in the prospective borrower's deliberations on potential uses of a Danish government loan:
a. Capital Equipment

I. Stationary equipment for
Cement works	Sugar refineries (diffusors)
Water supply installations	Chicken farms
Drainage & irrigation installations	Spray-drying plant
Abattoirs	Grain-drying plant
Dairies	Fish meal factories
Breweries	Hospitals
Cold stores	Hotels
Ice Factories	Harbour installations
Plants for pre-fabrication of houses
II. Non-stationary equipment (of. item 3 above)
Agricultural machinery
Diesel engines
Pumps
Machine tools
Compressors
Wood-working machinery
Metal-working machinery
Cranes and other contractor's equipment
Electromotors
Transformers Generators
Other equipment for electric power supply
Teleprinters
Telephones, desk switchboards, etc.
Radio communication installations
Hospital equipment
Hotel equipment

b. Services

Project planning, assembly and consultant services in connection with the establishment of the undertakings indicated in item A.I, above and fertilizer industries. Also, project planning and supervision of road, bridge, rail-way, and harbor construction.

c. Turn-key Projects

Loans may also be used to finance complete projects, including project planning, assembly and consultant as well as deliveries of capital equipment for projects of the above-mentioned categories (combination of A.I and B), except that purely local expenses (for Construction of buildings, wages for local workers, board and lodging for consultant engineers, fitters, etc.) will generally not be eligible for financing out of loan funds. The foregoing details are intended for information only. They are not an exhaustive list of supplies available from Denmark. Denmark's diplomatic missions and the Ministry of Foreign Affairs will give more detailed information in reply to inquiries about specific wishes for imports from Denmark.
 

MINISTRY OF FOREIGN AFFAIRS
Secretariat for Technical Cooperation
with Developing Countries
Copenhagen

Annexes.

To the authorities of................................................................................who are in charge of the administration of the Government Loan Agreement concluded with Denmark on................................................................................The following details, supplementing and interpreting the terms of the Loan Agreement, are intended to facilitate the utilization of the Danish Loan.

1. Procedure for payments to be effected under the Loan Agreement.

1) Opening of the Loan Account

As soon as the Loan Agreement has entered into force, the Agent acting on behalf of the Borrower should take steps to open with Danmarks Nationalbank the Loan Account referred to in Article II of the Agreement by requesting Danmarks Nationalbank to open the Loan Account.

At the same time, it will be useful to establish a procedure for payments to be effected from the Loan Account for goods and services to be supplied under contracts approved by the Borrower and the Lender.

Such payments may be effected either by forwarding to Danmarks Nationalbank a Payment Order in the form of a Letter of Authority addressed to Danmarks Nationalbank (a tentative form is suggested in Annex I), or by opening of a letter of credit with Danmarks Nationalbank or a Danish commercial bank.

The letter requesting Danmarks Nationalbank to open the Loan Account should contain authenticated specimen signatures of the persons who are authorized to act on the Borrower's behalf, of, Article VIII (2) of the Loan Agreement. The opening letter may be in the form suggested in Annex 2.

2) Declaration to make the Loan Agreement an obligation binding on the Borrower.

Prior to the first drawing against the Loan Account the Borrower must satisfy the Lender that all constitutional requirements and other requirements laid down by statute in the Borrower's country have been met so that the Loan Agreement constitutes an obligation binding on the Borrower, of, article VIII, Sec. 1. This formal requirement — known for example, from loan agree-ments with the International Bank for Reconstruction and Development — will be satisfied by a declaration made to the lender by a competent authority of the Borrower's home country. The declaration may be a very short one, and a formal legal opinion citing statutory provisions is not required. The rules as to which authority is competent to make such a binding declaration vary from country to country; the authority may, for instance, be the Ministry of Foreign Affairs, Ministry of Justice, or President of the Supreme Court. If the competent authority is not the Ministry of Foreign Affairs, the competence of the authority making the declaration should be confirmed by the Ministry of Foreign Affairs.

II. Approval of contracts eligible for financing under the Loan Agreement.

1) Contracts concluded prior to the entry into force of the Loan Agreement will normally not be approved. Approval may, however, be granted if the contract was concluded after the opening of negotiations for the Loan Agreement, and if the contract was concluded on the condition that supplies delivered under the contract would be eligible for financing out of a Danish government loan.

2) All contracts should contain information, or be accompanied by information on the nature and location of the projects for which the supplies concerned are intended.

In cases where supplies consist of nonstationary capital equipment of a large or small number of uniform items of capital goods to be distributed among a more or less well-defined group of users, approval will be granted on the condition that such supplies form part of a specified project; in that event, a detailed project description should be attached to the contract. Examples of such supplies are: engines, pumps, agricultural machinery, contractor's equipment, generators, compressors, electrical equipment, etc.

Ships and other means of transports will normally not be eligible for financing under the Loan Agreement.

3) In addition to the type of services which are eligible for financing in pursuance of Article VI (2) of the Loan Agreement, contracts with Danish firms or experts for assistance in examining and evaluating offers, including quotations, will be eligible for financing under the Loan Agreement.

It will often be useful for the Borrower to invite competitive bids for contracts. The Danish Ministry of Foreign Affairs will assist the Borrower in the distribution of invitations for tenders to potential Danish bidders. If the Borrower should wish the supplier to furnish a banker's guarantee for the performance of the contract in cases where the con-tract stipulates payment of a large part of the amount of the contract on receipt of the order, such a guarantee should be issued by a Danish bank in favor of the Borrower; payments, if any, under such a guarantee must be paid into the Loan Account in Danmarks Nationalbank.

4) The amount of the contract must be stated in Denmark Kroner. The approval covers only that amount, regardless of any clauses in the contract stipulating adjustment of the amount as a result of changes made in the rates of exchange.

5) A form is attached (Annex 3) which the Borrower may use for transmission of approved contracts to the Ministry of Foreign Affairs in Denmark.

ANNEX I

 

Our Letter of Authority No ..................................

Danmarks Nationalbank,
Copenhagen.
Dear Sirs,

Loan Agreement of.................................................................between Denmark and In accordance with the terms and conditions of the above-mentioned Loan Agreement we hereby authorize you irrevocably, valid until ................................................................. , to effect payments in full or in part an amount of up to
 

D.kr _________________

to against delivery of the following documents:

(e.g. invoice, bill of lading or other transport document evidencing receipt of goods, insurance policy).

We ask you to place the amoiint(s) paid to the debit of our account with you designated: "......................................................................." After approval of the documents, please forward these to.............................................................. The above payments are made under a contract of ...............................................between (supplier) and ........................................................ (purchaser) which was approved by the Government of (authority of borrower) on .....................................................and by the Danish Ministry of Foreign Affairs on

Yours faithfully,

 

ANNEX II

Danmarks Nationalbank,
Copenhagen.
Dear Sirs,

Loan Agreement of............................................................................ between Denmark and ................................................................................

With reference to Article II of the above-mentioned Agreement I request you, on behalf of the Government of (name of the Borrower), to open an account in the name of as agents of the Government of (name of the Borrower) to be styled "Government of (country) "Loan Account" (hereinafter called "Loan Account").

Payments into the Loan Account will be made from time to time by the Ministry of Foreign Affairs of Denmark.

Payments from the Account are to be made from time to time either

1) against Letters of Authority to Denmarks National Bank, or

2) by means of a letter of credit opened with the Danmarks Nationalbank or a Danish Commercial bank.

under contracts approved by the Danish Ministry of Foreign Affairs in conformity with Loan Agreement.

Any two of the following persons are authorized to sign Payment Authorities jointly on behalf of the Government of ...............................................................

1...........................................................................................................
2...........................................................................................................
3...........................................................................................................
4...........................................................................................................

Specimen signatures of each of the above persons are attached.

A copy of this letter has been sent to the Danish Ministry of Foreign Affairs.

Yours faithfully,

 

ANNEX III

To: The Ministry of Foreign Affairs,
Secretariat for Technical Cooperation
with Developing Countries,
Amaliegade 7,
DK 1256 Copenhagen K.

Dears Sirs,

Re: Loan Agreement of.....................................................................between Denmark and ...................................................................................

The following are details of a contract, a copy of which is enclosed, approved by the Government of.................................................................for financing under the above-mentioned Loan Agreement.

1) Name and address of the Danish supplier
2) Date of contract
3) Name of purchaser
4) Short description of goods and/or works & services
5) Value of contract: D.kr.
6) Terms of payment.

Please communicate the Danish Government's approval of the contract to.................................................................................at your earliest convenience.
 

Yours faithfully,

Source: Supreme Court e-Library