FIRST EDITION OF THE

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1 ANNEX TO CC 252 FIRST EDITION OF THE MODEL INTERGOVERNMENTAL AND HOST GOVERNMENT AGREEMENTS FOR CROSS-BORDER PIPELINES

2 EXPLANATORY NOTE First Edition of the Intergovernmental and Host-Government Model Agreements 1. This note introduces the attached First Edition of the Intergovernmental ( IGA ) and Host-Government ( HGA ) Model Agreements for cross-border pipelines. The note begins with a brief explanation of the idea behind developing model agreements in general. Secondly, it recalls the background for developing the attached IGA and HGA Models. Thirdly, the note provides a brief account of the purpose, nature and overall structure of the present package comprising the IGA and HGA Models. Background 2. The idea of devising model agreements is not a new one. Various intergovernmental organisations and other specialised private institutions (e.g. OECD, 1 UNCITRAL, 2 AIPN 3 and FIDIC 4 ) have been actively involved in devising and developing model laws and agreements that may be utilised in regulating a particular economic activity. 3. Generally speaking, model agreements are developed for the purpose of assisting parties to negotiate a final agreement within a particular field of activity. A model agreement therefore is meant to provide a template of prescriptive clauses that are designed to reflect the generally accepted practices within a given field. 4. Model agreements are evolutionary by design: they are designed to be revised and updated in due time in order to reflect the most recent accepted practices within their field of concern. 5. An important feature of any successful model agreement is its underlying assumption of neutrality; it thus aims to reflect the various interests of the parties who will be using it as a starting point for their prospective negotiations. In identifying the crucial issues concerning a particular field of activity, a successful model agreement will contain relevant clauses aiming to maximize the optimal benefit of all parties concerned. Addressing these issues is essential in order to ensure that the resulting binding agreement will endure and continue to operate smoothly during its lifetime. 6. It is with the above understanding that the attached Model Agreements have been developed. The First Edition of the IGA and the HGA 7. In the last few years, there has been a marked increase in both interest and need for interstate or cross-border pipelines for hydrocarbons. This has been accentuated by various factors, including the emergence of new energy markets and the wider policy objective of security of energy supply. 1 Organisation for Economic Co-operation and Development. 2 United Nations Commission on International Trade Law. 3 Association of International Petroleum Negotiators. 4 International Federation of Consulting Engineers.

3 8. However, a prospective cross-border pipeline project for the transportation of oil or gas raises a multitude of complex political, financial, environmental, technical and legal issues. The complexity of these issues frequently poses an unnecessary barrier to the realisation of a much needed energy pipeline project. For example, there is the issue of individual states with different political and economic interests, each with its own separate jurisdiction. There is also the issue of various entities, both public and private, taking part in the project. Furthermore, cross-border pipeline projects are normally financed by both private and public financial institutions which require certain guarantees regarding the economic feasibility and the ultimate legal security of the prospective project. 9. Whilst all parties concerned may be genuinely interested in seeing a particular crossborder pipeline project succeed, conflicting interests and the lack of compromise over some of the complex issues involved could result in long delays, enormous expense and even the failure of the project. 10. The need to develop comprehensive and usable legal structures that will facilitate and guide prospective negotiations for the construction and operation of cross-border pipelines is therefore of a significant operational value. 11. Based on an initial proposal from Azerbaijan, 5 the Energy Charter Conference, at its 4 th Meeting, 6 acknowledged the importance of model instruments in addressing the concerns of governments and industry regarding the need for a swift solution in realising new crossborder energy projects, with the ultimate aim of securing investments in cross-border pipeline projects. At its 5 th Meeting, the Conference approved the establishment of an Expert Group in which representatives from governments and industry were to be invited to participate To assist the Expert Group in developing balanced and legally coherent drafts of model agreements, the Energy Charter Secretariat established an ad-hoc Legal Advisory Task Force on Model Agreements ("LATF") comprising expert senior lawyers, which has met regularly three times a year since it was established in It is to be noted that all LATF members rendered their advice on a pro bono basis. 13. In light of the Expert Group s findings and recommendations, the LATF reviewed earlier draft Models, which were found wanting in terms of balance and coverage by the Expert Group. After comprehensive discussions, it was decided not to pursue the original idea of developing a transportation agreement model in addition to the IGA and HGA Models, but to concentrate solely on developing the IGA and HGA Model Agreements. 14. Since its establishment, the Expert Group has met five times, 8 and its last meeting was held on October 2003, during which it discussed both the IGA and HGA drafts cf. document, (CS (99) 369 TRS 9). cf. Summary Record (CS (00) 454 CC162) pp.7-8. cf. Summary Record (CS (00) 506 CC173) p. 3. Meetings of the Expert Group were held on: 11 September and 23 October 2000; 28 September 2001and 4-5 June and October 2003.

4 submitted by the Secretariat. The attached First Edition of the IGA and HGA Models has taken into account the comments made by the Expert Group. Purpose and nature 15. In general terms, both the IGA and HGA Models aim to assist in: Facilitating project-specific negotiations; Providing transparency regarding present practices in the areas of cross-border pipeline construction, operation and investment; Shortening lead-times for the mobilisation of project specific investment; Reducing the cost of project implementation. 16. It is important to emphasise that neither of the Model Agreements is meant to be legally binding. Each Model represents a template and thus serves only as a guideline. Whether or not these Models will be used either in full or in part depends entirely upon the agreement of the parties who are in the process of negotiating a prospective agreement. Basic assumptions 17. The structure of the attached First Edition of the IGA and HGA Models is based on the following assumptions: Both the IGA and HGA Models relate to a specific, identified infrastructure project; Both Models are interdependent and are designed to represent a single package ; The IGA represents a treaty model which is governed by public international law; Both the project and the project investors are assumed to have been already identified; The execution of the HGA is entirely dependent on the IGA entering into force; Both Models will be updated periodically in light of evolving practice in the field. Structure 18. Together, the attached First Edition of the two Models aims to identify key areas of interest to the parties involved in a cross-border infrastructure projects, whether state or private entities. 19. It is also to be noted that the two Models have been structured with the aim of striking a reasonable balance between the obligations of a state wishing to attract scarce and/or competitive investment and the rights of private investors prepared to invest. The underlying idea is therefore a sustainable allocation of risk and the equitable distribution of the overall benefits between public and/or private parties engaged in the project.

5 IGA Model 20. The IGA Model is a template for an international agreement or treaty among the states through whose territory an identified pipeline system is to be constructed and operated. 21. The IGA Model deals mainly with horizontal issues that concern the pipeline infrastructure as a whole. It is therefore intended to facilitate the realisation of the project within the territories of the states collectively. Issues dealt with by the IGA Model include co-operation, the provision of land rights, the harmonisation of tax structures applicable to the project and issues relevant to the implementation of the project. HGA Model 22. The HGA Model is a template for an agreement between each of the States within whose territory the pipeline system is to be realised and the project investor(s). 23. The HGA Model deals mainly with vertical issues that concern the project activity within the territory of each State. The HGA Model expands on some of the issues identified in the IGA Model. Issues dealt with in the HGA Model include various governmental obligations, investor duties, environmental and other relevant standards, liability, termination and issues relevant to the implementation of the project in each specific territory. Appendices 24. It is envisaged that both Models will contain a number of appendices, each of which (when applicable) is referred to in a specific Article in both Models. These appendices therefore constitute an integral part of the Models, and should be developed in light of the circumstances of each specific project. For this reason, it was impractical to spell out fully the contents of the appendices in a model of this nature. However, to facilitate the negotiations of their contents, each appendix identifies the main issues that may be included in similar appendices to the final agreement. Conclusion 25. The operational value of the attached non-binding First Edition of both the IGA and HGA is to facilitate the efficient realisation of prospective cross-border pipeline systems for the transportation of petroleum or natural gas, as the case may be. Furthermore, the First Edition will be revised and updated in the future in order to reflect the on-going developments in the field. 26. Accordingly, the Energy Charter Conference is invited to take positive note of the attached First Edition of IGA and HGA Models, and to authorise the Secretariat to revise and update both Models in light of the future developments in the field.

6 MODEL INTERGOVERNMENTAL AGREEMENT Between/Among [Insert the name of STATES] CONCERNING THE [insert Project name] PIPELINE SYSTEM

7 TABLE OF CONTENTS Page PREAMBLE... 3 PART I DEFINITIONS AND SCOPE OF THE AGREEMENT... 4 ARTICLE 1 DEFINITIONS... 5 ARTICLE 2 ENTRY INTO FORCE... 8 ARTICLE 3 NO CONFLICT WITH THIS AGREEMENT... 8 PART II GENERAL OBLIGATIONS... 9 ARTICLE 4 ARTICLE 5 ARTICLE 6 ARTICLE 7 PERFORMANCE AND OBSERVANCE OF THIS AND OTHER RELATED AGREEMENTS...10 CO-OPERATION...10 RIGHTS TO LAND...10 TITLE TO OR OWNERSHIP OF [PETROLEUM] [NATURAL GAS] IN THE PIPELINE SYSTEM...11 ARTICLE 8 NON-INTERRUPTION OF PROJECT ACTIVITIES AND UNINTERRUPTED FLOW OF [PETROLEUM] [NATURAL GAS]...11 ARTICLE 9 ENVIRONMENTAL AND SAFETY STANDARDS...12 ARTICLE 10 HARMONISATION OF TECHNICAL STANDARDS...12 ARTICLE 11 SECURITY...12 PART III TAXES, IMPORT & EXPORT...13 ARTICLE 12 TAXES...14 ARTICLE 13 IMPORT AND EXPORT...15 PART IV FINAL PROVISIONS...16 ARTICLE 14 JOINT COMMISSION...17 ARTICLE 15 ISOLATION OF ANY BOUNDARY OR TERRITORIAL DISPUTES...17 ARTICLE 16 STATE SUCCESSION...18 ARTICLE 17 EXPROPRIATION...18 ARTICLE 18 SANCTIONS...18 ARTICLE 19 RESPONSIBILITY...19 ARTICLE 20 DISPUTE SETTLEMENT...19 ARTICLE 21 AMENDMENT AND TERMINATION OF THIS AGREEMENT...19 APPENDICES... i - 2 -

8 PREAMBLE The State of [insert State name], the State of [insert State name] and the State of [insert State name] (hereinafter referred to individually as a State and collectively as the States ), parties to this Agreement, WHEREAS, the States are Contracting Parties [Signatories] to the Energy Charter Treaty; WHEREAS, the States wish to co-operate in facilitating the development, construction and operation of the [name of the Project] Pipeline System for the carriage of [Petroleum] [Natural Gas] in and across their Territories; WHEREAS, the States enter into this Agreement to promote and protect investment in the Pipeline System and safeguard the efficient and secure development, [ownership] 1 and operation of such Pipeline System within their Territories; HAVE AGREED AS FOLLOWS: 1 Where ownership is permitted

9 PART I DEFINITIONS AND SCOPE OF THE AGREEMENT - 4 -

10 ARTICLE 1 DEFINITIONS Capitalised terms used in this Agreement (including the Preamble), and not otherwise defined herein, shall have the following meaning: 1. Affiliate shall mean, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with that Person. For purposes of this definition, control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of a majority or other controlling interest in the voting securities or other equity ownership interest in an Entity, by law, or by agreement between Persons conferring such power or voting rights. 2. Agreement shall mean this Intergovernmental Agreement, including any Appendices attached hereto, together with any written amendment or other modification hereof signed by all States. 3. Contractor shall mean any Person supplying directly or indirectly, goods, work, technology or services, including financial services (including inter alia, credit, financing, insurance or other financial accommodations), to the Project Investors or their Affiliates, in connection to the Pipeline System. 4. Double Tax Treaty shall mean any treaty or convention, to which a State is a party, with respect to Taxes for the avoidance of double taxation of income or capital. 5. Energy Charter Treaty shall mean the Energy Charter Treaty as opened for signature in Lisbon on 17 December 1994 and effective as of 16 April Entity shall mean any company, corporation, limited liability company, partnership, limited partnership, enterprise, joint venture, unincorporated joint venture, association, trust or other juridical entity or organisation duly organised under the laws of any state. 7. Foreign Currency shall mean any freely convertible currency (other than the Local Currency) which is widely traded in international foreign exchange markets and widely used in international transactions, including but not limited to EURO/US Dollar. 8. Host Government shall mean the central or federal government of the State, including any other organs or agencies with jurisdiction in respect of the Project, that affect, financially or otherwise, directly or indirectly, the Project Activities or the rights or obligations of the Project Participants in respect of the Project, notwithstanding any change at any time or from time to time in structure, form or otherwise. 9. Host Government Agreement shall mean each agreement of that name, entered into between a Host Government, on the one hand, and Project Investors, on the other hand, in connection with the Pipeline System

11 10. Local Authorities shall mean any and all regional, local and municipal authorities of the State and all their constituent elements, notwithstanding any changes at any time or from time to time in structure, form or otherwise, that have the authority to govern, adjudicate, regulate, levy or collect taxes, duties or other charges, grant licences or permits or approve or otherwise impact (financially or otherwise) directly or indirectly on Project Activities or the rights and obligations of any Project Participants in respect of the Project. 11. Local Currency shall mean the national currency of the State. 12. Natural Gas shall mean a gaseous mixture of hydrocarbon compounds, the primary one being methane. 13. Permanent Establishment shall have the meaning set out in the relevant Double Tax Treaty. If no such treaty exists then Permanent Establishment shall have the same meaning as in the [1992] Model Tax Convention on Income and Capital of the Organisation for Economic Co-operation and Development. 14. Person shall mean any natural person, and Entity, whether of a public or private nature. 15. Petroleum shall mean any liquid hydrocarbon, including crude oil, lease condensate, unfinished oils, refined products obtained from the processing of crude oil, and natural gas plant liquids. 16. Pipeline System shall mean the [Petroleum] [Natural Gas] Pipeline intended to run from [insert name] to [insert name], and all ancillary facilities, as described in Appendix [ ]. 17. Project shall mean the evaluation, development, design, construction, installation, financing, insuring, [ownership] 2, operation (including the transportation by any or all of the Project Investors and the shipment by Shippers of [Petroleum] [Natural Gas] through the Pipeline System), repair, replacement, refurbishment, maintenance, expansion, extension (including laterals) and protection of the Pipeline System. 18. Project Activities shall mean the activities conducted by the Project Participants and Interest Holders, in connection with the Project. 19. Project Agreements shall mean any agreements, contracts and other documents, other than this Agreement and the Host Government Agreement to which, on the one hand, the Host Government, any Local Authority or State Entity and, on the other hand, any Project Participants are or later become a party relating to the Project, as such agreements, contracts or other documents may be extended, renewed, replaced, amended or otherwise modified from time to time in accordance with their terms. 20. Project Investors shall mean [list name of Investors in the Host Government Agreement] or any of their successors and permitted assignees, in respect to the Host Government Agreement. 2 Where ownership is permitted

12 21. Project Participants shall mean any and all of the Project Investors and any Affiliates thereof, the Operating Companies, the Contractors, the Shippers, the Lenders and the Insurers. Operating Companies, Lenders and Insurers are terms defined in the Host Government Agreement. 22. Shippers shall mean those Persons that have arranged or contracted for transportation of [Petroleum] [Natural Gas] through all or any portion of the Pipeline System. 23. State Entity shall mean any Entity in which, directly or indirectly, a State has a controlling equity interest or similar economic interest or which is directly or indirectly controlled by the State. For the purpose of this definition, controlled by shall mean control in fact, determined after an examination of the actual circumstances in each situation. In any such examination, all relevant factors should be considered, including those of the respective State: (a) Financial interest, including equity interest, in the State Entity, (b) Ability to exercise substantial influence on the management and operation of the State Entity, and (c) Ability to exercise substantial influence on the selection and deliberations of members of the board of directors or any other managing body. 24. Taxes shall mean all future and existing levies, duties, customs, imposts, payments, fees, assessments, taxes, charges and contributions payable to or imposed by the State, any organ or any subdivision of the State, whether central or local, or any other body having the effective power to levy any such charges within the Territory of the State, and Tax shall mean any one of them. 25. Territory shall mean, with respect to a State, the land territory of such State, its territorial sea and the air space above them, as well as the maritime areas over which the State has jurisdiction or exercises sovereign rights in accordance with public international law. 26. Transport shall mean carriage of [Petroleum] [Natural Gas] through the Territory of the Host Government, or to or from port facilities in its Territory for loading or unloading of [Petroleum] [Natural Gas], [including Transit as defined in Article 7(10)(a) of the Energy Charter Treaty] VAT shall mean value added tax and any other similar Tax applicable to the provision of goods, Land Rights as defined in Host Government Agreement, works, services or technology, within the Territory of a State. 28. Year shall mean a Gregorian calendar year. 3 To be included in case the Host Government is a Transit State

13 ARTICLE 2 ENTRY INTO FORCE 1. This Agreement shall enter into force on the exchange of instruments of ratification by all State parties. 2. Each State shall use all lawful and reasonable endeavours to achieve ratification of this Agreement by [ ] 20[..]. ARTICLE 3 NO CONFLICT WITH THIS AGREEMENT Each State confirms that it is not a party to any agreement or commitment, or bound to observe or enforce any domestic law, regulation, or international agreement that conflicts with, impairs or interferes with this Agreement, limits, abridges or adversely affects the ability of the State to implement this Agreement or to enter into and implement the applicable Host Government Agreement and any Project Agreements to which the State is a party

14 PART II GENERAL OBLIGATIONS - 9 -

15 ARTICLE 4 PERFORMANCE AND OBSERVANCE OF THIS AND OTHER RELATED AGREEMENTS 1. From and after the entry into force of this Agreement, each State shall fulfil and perform each of its obligations arising under this Agreement, any Host Government Agreement and any Project Agreement it enters into. 2. Each State shall ensure its full support for the implementation and conduct of such Project Activities as provided in this Agreement, any Host Government Agreement or any Project Agreement it enters into and take the necessary steps to ensure compliance by its Local Authorities and/or State Entities with all obligations imposed on them by virtue of this Agreement, any Host Government Agreement or any Project Agreement. ARTICLE 5 CO-OPERATION 1. The States shall co-operate in order to establish and maintain necessary and favourable conditions for the construction and operation by Project Participants of the Pipeline System, and for the Transport of [Petroleum] [Natural Gas], in and across their Territories. 2. Each State shall co-operate in the conduct of negotiating and entering into such other multilateral or bilateral agreements as may be appropriate between and among the States, or any other states, international institutions and authorities, including full consultation with the Project Investors, in order to authorise, enable and support the implementation of Project Activities. 3. Each State shall co-operate in supporting all financing efforts by Project Investors within the framework of the Project, including, upon the request of any Project Investor, the confirmation in writing to any financial institution, multilateral lending agency or export credit agency of any representation, warranty, guaranty, agreement or undertaking contained in any Project Agreement entered into by such State. ARTICLE 6 RIGHTS TO LAND Each State shall ensure it grants and maintains exclusive rights to land in its Territory for said Project Activities under fair, transparent and clear commercial terms and conditions to the extent provided in Article 11 of and Appendix [ ] to the Host Government Agreement entered into by such State

16 ARTICLE 7 TITLE TO OR OWNERSHIP OF [PETROLEUM] [NATURAL GAS] IN THE PIPELINE SYSTEM Title to or ownership of [Petroleum] [Natural Gas] transported through the Pipeline System which has been made subject to this Agreement shall remain vested in the relevant Shippers and/or Project Investors in accordance with their commercial agreements and, except to the extent that a State acts in the role of a commercial participant in accordance with Project Agreements. ARTICLE 8 NON-INTERRUPTION OF PROJECT ACTIVITIES 1. If a State takes any action, fails to take any action, or allows the taking of any action or occurrence of an event which interrupts or otherwise impedes, or threatens to interrupt or impede Project Activities, such State shall use all lawful and reasonable endeavours to eliminate the threat and rectify any interruption or impediment and promote restoration of such Project Activities at the earliest opportunity. 2. No State shall, except as specifically provided in the applicable Host Government Agreement, interrupt, curtail, subject to conditions, or otherwise impede the flow of [Petroleum] [Natural Gas] through the Pipeline System in, across and exiting its Territory and shall take any actions which may be necessary to prevent such interruption, curtailment or other impediment. 3. If a State takes, fails to take or suffers the taking of any action which interrupts, curtails, subjects to conditions, or otherwise impedes the flow of [Petroleum] [Natural Gas] through the Pipeline System in its Territory, such State shall immediately give notice to the other States and relevant Project Investors of any such interruption, curtailment, conditions, or other impediment, the reasons therefore, and the timetable for alleviating the same, and shall eliminate the reasons underlying such interruption, curtailment, condition or other impediment and restore the uninterrupted, un-curtailed, unconditioned, and unimpeded flow of [Petroleum] [Natural Gas] through the Pipeline System in its Territory at the earliest possible opportunity. 4. However, in cases in which the operation of the Pipeline System in its Territory creates a serious threat to public health and safety, property or the environment, which renders it reasonable for such State to take or fail to take any action, as the case may be, such action will be only to the extent and for the length of time necessary to remove such threat

17 ARTICLE 9 ENVIRONMENTAL AND SAFETY STANDARDS 1. Each State shall co-operate with the other States and the Project Investors in the implementation of the environmental and safety standards agreed upon in the applicable Host Government Agreement and Appendix [ ]. 2. Environmental and safety standards as set forth in the Host Government Agreement entered into by a State, shall be appropriate to the conditions and environment prevailing feature of the biosphere and in each particular geographic area traversed by the Pipeline System. 3. Each State shall consult with the other States and take all necessary steps to ensure compliance with such compatible and internationally acceptable environmental and safety standards formulated and established in accordance with paragraph 2 of this Article and laid down in Appendix [ ] to the Host Government Agreement. 4. Without prejudice to the obligations of each State under the Host Government Agreement it has entered into, in the event of spillage of [Petroleum] [Natural Gas] from any part of the Pipeline System, or any other occurrence causing or likely to cause material environmental damage or risk to health and safety, and, at the request of the affected State, the other States shall provide immediate assistance and to the greatest extent possible as requested by such affected State. The affected State shall reimburse the other States the cost of such labour, materials and equipment. ARTICLE 10 HARMONISATION OF TECHNICAL STANDARDS The States shall use lawful and reasonable endeavours to harmonise the technical standards agreed upon in the respective Host Government Agreement. ARTICLE 11 SECURITY Each State shall make every reasonable effort to ensure the security of all personnel associated with Project Activities, the related Pipeline System, the tangible assets of Project Participants within its Territory associated with such Project Activities, and all [Petroleum] [Natural Gas] transported within its Territory with respect to such Project Activities

18 PART III TAXES, IMPORT & EXPORT

19 ARTICLE 12 TAXES 1. Each State shall ensure that the tax treatment of Project Investors, Interest Holders, Shippers or Persons who provide goods, works, technology or services (including inter alia, credit, financing, insurance or other financial accommodations) with respect to any part of Project Activities will be no less favourable than that applicable to domestic entrepreneurs under the generally applicable tax legislation, in similar circumstances. 2. With respect to measures regarding any relevant Taxes or other payments, irrespective of their names and origin, each State shall co-operate with the other States to ensure a fair and transparent application of Taxes on the Project Investor, Shipper or Person who provides goods, works, technology or services (including, inter alia, credit, financing, insurance or other financial accommodations) with respect to any part of specific Project Activities. 3. If any Tax is imposed on the profit of a Project Investor, or Person who provides goods, works, technology or services (including inter alia, credit, financing, insurance or other financial accommodations) for a calendar year or a harmonised fiscal year with respect to Project Activities, such Tax shall be limited to the profits of such Project Investor or Person who provides goods, works, technology or services (including inter alia, credit, financing, insurance or other financial accommodations) which is attributable to such Project Activities in each State for such calendar year or a harmonised fiscal year. Each State will grant relief from double taxation either by exemption from tax or credit against tax. Taxes shall generally be recognised and credited through the application of the respective Double Tax Treaty. In the event that there is a choice between the exemption and the credit method, the taxpayer may make the choice best suited to its circumstances. 4. For the purpose of computing Taxes, the aggregate amount of revenues, costs and expenses shall be allocated between the States. For the determination of the tax assessment basis, the principles of the OECD (Double Tax Treaty Model), especially concerning transfer pricing within a legal entity and/or between related entities (i.e. transfer of goods, services, royalties and license fees) shall apply. For each of the revenues and costs of the Project, uniform and appropriate allocation keys to be determined jointly by the Project Investors and the States shall be used to allocate revenues and costs between the States, so that the total of the revenues and the costs of the Project recognised for purposes of Taxes individually by each Host Government equals the total of such revenues and costs. Such allocation keys shall be applied consistently from year to year. In the event that the States and the Project Investors fail to agree upon the allocation keys referred to in this paragraph within [ ] days of the signature of this Agreement, the keys to be used shall be determined by an expert appointed by [insert name of the appointing authority]. 5. Each State confirms that there is no withholding tax or other Taxes on cash transfers to bring liquidity to the Project Investor, Interest Holders, Shipper or Person who provides goods, works, technology or services (including inter alia, credit, financing, insurance or

20 other financial accommodations) as far as they are not paid into the stated capital of a legal entity. 6. Except as otherwise provided under the applicable Host Government Agreement for particular Project Activities, and without prejudice to the terms thereof, no Project Investor, Interest Holder or Shipper, with respect to all or any part of such Project Activities shall be subject to any Taxes levied on the asset value, equity value or stated capital of the entity or Permanent Establishment located or domiciled in the host State. No Taxes shall be levied on the value of the related Pipeline System, all [Petroleum] [Natural Gas] that are transported through the related Pipeline System or on the value of any Project related assets. 7. Except as otherwise specifically provided under the applicable Host Government Agreement and without limiting the express terms thereof, no Taxes shall be imposed or withheld with respect to payments (including, inter alia, Taxes on payments of interest, royalties, fees for services and dividends or other distributions or remittances of profit) or deemed payments (including, inter alia, Taxes on undistributed profit after imposition of any other Taxes on profit) that are associated, directly or indirectly, with the Project Activities or any related assets or activities by all or any of the Project Investors, Shippers or Persons who provide goods, works, technology or services (including, inter alia, credit financing, insurance or other financial accommodation) with respect to all or any part of such Project Activities, or any branch or Permanent Establishment thereof, to any Entity. 8. Each State shall ensure that there will be no value added taxes ("VAT") or sales taxes on imports, exports or the supply of goods, works or services with respect to all or any part of specific Project Activities. 9. Except as provided in this Article or in the Tax Article of a relevant Host Government Agreement, no Taxes or associated obligations shall be imposed by any State on any Project Investor, Shipper or Person who provides goods, works, technology or services (including inter alia, agency services, credit, financing, insurance or other financial accommodations) or any of their employees or on any aspect of Project Activities. ARTICLE 13 IMPORT AND EXPORT 1. Each State shall accord imported goods and services associated, directly or indirectly, with any Project Activities, treatment no less favourable than that accorded to like goods and services of national or foreign origin, which are not associated with the Project. 2. A State that has granted a trading advantage with respect to any part of specific Project Activities to any other state must grant the same advantage to all other States. 3. No customs duties or other levies shall be imposed or withheld with respect to Project Activities

21 PART IV FINAL PROVISIONS

22 ARTICLE 14 JOINT COMMISSION 1. A commission shall be established consisting of two representatives from each State to oversee compliance with and facilitate the implementation of this Agreement ( Joint Commission ). Each Project Investor shall also provide two observers to assist in the work of the Joint Commission. 2. Within [ ] days after the entry into force of this Agreement, each State shall designate in writing to the other States its representatives on the Joint Commission. The representatives of a State shall be fully authorised and empowered by such State to act on its behalf with regard to any matter brought before the Joint Commission in respect of the Project. Each State shall at the same time notify in writing the Project Investors of its representatives to the Joint Commission. Each State may change its representatives, effective upon delivery of written notice to the other States and to the Project Investors. 3. Within [ ] days after the entry into force of this Agreement, each Project Investor shall designate in writing to the States its observers to the Joint Commission. The observers shall be fully authorised and empowered by the Project Investor to act on its behalf with regard to any matter brought before the Joint Commission in respect of the Project. Each Project Investor may change its observers, effective upon delivery of written notice to the States and to the other Project Investors. 4. The Joint Commission shall meet according to an agreed timetable and/or at the written request of any of the States. The States shall consult each other and the Project Investors in order to provide prompt and effective assistance on the implementation of the Project as well as to resolve in good faith any complications, issues, problems or complaints that may arise in connection with this Agreement or the Project, or to discuss any matter relating to the application and interpretation of this Agreement. 5. In addition to other matters that may be considered from time to time, the Joint Commission shall take all appropriate action to facilitate Project Activities, including but not limited to the unimpeded movement of goods, materials, supplies, technology and personnel in and between each of the States Territories as well as take any other measures to facilitate and allow the uniform and efficient operation of the Pipeline System. ARTICLE 15 ISOLATION OF ANY BOUNDARY OR TERRITORIAL DISPUTES 1. Each State agrees that its commitment to the Project Activities exists independently of any dispute, difference, claim, demarcation, fixing, change or other modification regarding the location of any of its boundaries or the composition or extent of its Territory, that may exist

23 now or may arise in the future or take place between or amongst it and any other state(s) (for the purposes of this Article, Boundary or Territorial Dispute ). 2. No Boundary or Territorial Dispute between or amongst any of the States shall interfere in any manner with any Project Activities. In particular, the obligations described in this Agreement and the Host Government Agreement shall not be altered or varied because of a Boundary or Territorial Dispute that may arise after the date of this Agreement. ARTICLE 16 STATE SUCCESSION If any State is replaced or succeeded to by one or more other states in relation to the responsibility for the international relations of its Territory, any successor state shall be considered as a party to this Agreement and the Host Government Agreement. ARTICLE 17 EXPROPRIATION The provisions of Article 13 of the Energy Charter Treaty shall apply mutatis mutandis to this Agreement and to all aspects of the Project Activities. ARTICLE 18 SANCTIONS 1. Sanctions imposed on a State by any international organisation of which it is a member, including sanctions imposed by states that are obliged or authorised to do so by virtue of their membership in such an international organisation, shall not be considered to have created a situation of force majeure in terms of that State's responsibility under this Agreement, the Host Government Agreement or any Project Agreement in relation to the Project. 2. Paragraph 1 shall have no effect on the ability of any State, that is not subject of the sanctions, or of any Project Investor to rely on a claim of force majeure in relation to those sanctions

24 ARTICLE 19 RESPONSIBILITY Any failure of, or refusal by a State to fulfil or perform its obligations, take all actions and grant all rights and benefits as provided in this Agreement, any Host Government Agreement or any Project Agreements it enters into shall constitute a breach of such State s obligations under this Agreement, for which the State shall be fully liable for all damages, including but not limited to, loss of profits, suffered on account of such failure or refusal on the part of such State. The aggrieved party shall be entitled to any available remedies, including, without limitation, full compensation in Foreign Currency for any damages, inclusive of interest. ARTICLE 20 DISPUTE SETTLEMENT 1. The States shall endeavour to settle disputes concerning the application or interpretation of this Agreement through the Joint Commission under Article 14 or through diplomatic channels. 2. If, in the sole discretion of a State and, regardless of the status of consultations undertaken pursuant to this Agreement, a dispute has not been settled, that State may, upon written notice to the other State(s), submit the matter for final and binding resolution to an arbitral tribunal under this Article. 3. Such an arbitral tribunal shall be constituted and shall conduct proceedings in accordance with the dispute resolution provisions contained in Article 27(3) of the Energy Charter Treaty, applying those dispute resolution provisions mutatis mutandis to this Agreement. ARTICLE 21 AMENDMENT AND TERMINATION OF THIS AGREEMENT 1. Except as may be expressly provided therein, the States shall not amend, or otherwise seek to avoid or limit this Agreement, the Host Government Agreement or any Project Agreement it enters into without the prior written consent of the Project Investors, and/or any other Project Participants which are parties to such agreements. 2. This Agreement shall terminate upon the termination or expiration of all Project Agreements, including the Host Government Agreement and the conclusion of all Project Activities thereunder

25 MODEL HOST GOVERNMENT AGREEMENT Between/Among THE GOVERNMENT OF STATE [ ] AND THE PROJECT INVESTORS CONCERNING THE [insert Project name] PIPELINE SYSTEM

26 TABLE OF CONTENTS PREAMBLE...1 Page PART I DEFINITIONS AND SCOPE OF THE AGREEMENT...2 ARTICLE 1 DEFINITIONS...3 ARTICLE 2 EFFECTIVE DATE AND DURATION...8 ARTICLE 3 AUTHORITY...8 ARTICLE 4 RELATIONSHIP TO OTHER AGREEMENTS...8 PART II GENERAL OBLIGATIONS...10 ARTICLE 5 CO-OPERATION...11 ARTICLE 6 COMMITMENTS WITH RESPECT TO PROJECT AGREEMENTS ENTERED INTO BY LOCAL AUTHORITIES AND/OR STATE ENTITIES...11 ARTICLE 7 PROJECT INVESTOR OBLIGATIONS, COMMITMENTS AND DUTIES...12 ARTICLE 8 INSURANCE...13 ARTICLE 9 COMPLIANCE...14 ARTICLE 10 GRANT OF RIGHTS...14 ARTICLE 11 LAND RIGHTS...14 ARTICLE 12 QUALITY ASSURANCE...16 ARTICLE 13 ENVIRONMENTAL PROTECTION AND SAFETY...16 ARTICLE 14 PERSONNEL...17 ARTICLE 15 LABOUR STANDARDS...17 ARTICLE 16 SOCIAL IMPACT STANDARDS...18 ARTICLE 17 TECHNICAL STANDARDS...18 ARTICLE 18 ACCESS TO RESOURCES AND FACILITIES...18 ARTICLE 19 SECURITY...19 ARTICLE 20 ACCESS TO AVAILABLE CAPACITY...20 PART III TAXES, IMPORT & EXPORT AND CURRENCY...21 ARTICLE 21 TAXES...22 ARTICLE 22 IMPORT AND EXPORT...26 ARTICLE 23 FOREIGN CURRENCY...26 PART IV ARTICLE 24 ARTICLE 25 ARTICLE 26 IMPLEMENTATION...28 AUTHORISED REPRESENTATIVES...29 OPERATING COMPANY...29 APPLICATION REQUIREMENTS...30 i

27 PART V LIABILITY...32 ARTICLE 27 LIABILITY OF THE PROJECT INVESTORS...33 ARTICLE 28 LIABILITY OF THE HOST GOVERNMENT...33 ARTICLE 29 NATURE OF HOST GOVERNMENT OBLIGATIONS...34 ARTICLE 30 FORCE MAJEURE...34 PART VI FINAL PROVISIONS...37 ARTICLE 31 AMENDMENT AND CHANGE IN LAW...38 ARTICLE 32 EXPROPRIATION...39 ARTICLE 33 TERMINATION...39 ARTICLE 34 SUCCESSORS AND PERMITTED ASSIGNEES...40 ARTICLE 35 WAIVER OF IMMUNITY...40 ARTICLE 36 ABANDONMENT...40 ARTICLE 37 SETTLEMENT OF DISPUTES...41 ARTICLE 38 APPLICABLE LAW...41 ARTICLE 39 NOTICES...42 ARTICLE 40 MISCELLANEOUS...43 APPENDICES... i ii

28 PREAMBLE THIS AGREEMENT, entered into in the city of [insert City name] in [insert State] as of this [insert date of signature] between: [insert State name] and [insert name of company], a corporation organised and existing under the laws of [insert name of State]; [insert name of company], a corporation organised and existing under the laws of [insert name of State]; being the Project Investors. WHEREAS, this Agreement is entered into in furtherance of the Intergovernmental Agreement among [insert name of States] concerning the [insert project name] Pipeline System, dated [insert date]; WHEREAS, the Project Investors wish to develop, [own] 1 and operate an efficient and secure Pipeline System employing generally recognised international technical and environmental standards for the Transport of [Petroleum] [Natural Gas] in and across he Territory of [insert name of the State Party to this Agreement]; WHEREAS, the Project Investors agree to invest in the construction of a new Pipeline System, as well as to operate and utilise capacity in such system, on the terms and conditions of this Agreement and relevant Project Agreements. WHEREAS, the Host Government enters into this Agreement to promote and protect investment in the Pipeline System and shall safeguard the efficient and secure development, [ownership] 2 and operation of such system within its Territory, in accordance with this Agreement, the Intergovernmental Agreement, Energy Charter Treaty and any relevant Project Agreement it enters into. HAVE AGREED AS FOLLOWS: 1 Where ownership is permitted. 2 Where ownership is permitted. 1

29 PART I DEFINITIONS AND SCOPE OF THE AGREEMENT 2

30 ARTICLE 1 DEFINITIONS Capitalised terms used in this Agreement (including the Preamble), and not otherwise defined herein, shall have the following meaning: 1. Affiliate shall mean, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with that Person. For purposes of this definition, control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of a majority or other controlling interest in the voting securities or other equity ownership interest in an Entity, by law, or by agreement between Persons conferring such power or voting rights. 2. Agreed Interest Rate shall mean, for each day of an Interest Period with respect to any amount due and payable under or pursuant to this Agreement, interest at the rate per annum equal [to [ ] percent (%) plus LIBOR] OR [LIBOR plus 25% of LIBOR] in effect on the Business Day immediately preceding the first day of the initial applicable Interest Period and, thereafter, as in effect on the Business Day immediately preceding the first day of each succeeding Interest Period. For the purposes of this definition, Interest Period shall mean a period of [ ] days, beginning the first day after the date on which any such amount becomes due and payable and ending [ ] days thereafter, with each succeeding Interest Period beginning on the first day after the last day of the Interest Period it succeeds. 3. Agreement shall mean this Intergovernmental Agreement, including any Appendices attached hereto, together with any written amendment or other modification hereof signed by all States. 4. Best Available Terms shall mean, at any time with respect to any goods, works, services or technology to be rendered or provided at any location, the prevailing rates then existing in the ordinary course of business between unrelated Persons for goods, works, services or technology which are of a similar kind and quality provided at the same location and under terms and conditions comparable to those applicable to the subject goods, works, services or technology. 5. Business Day shall mean any day on which clearing banks are customarily open for business in [insert name of city and state]. 6. Contractor shall mean any Person supplying directly or indirectly, goods, work, technology or services, including financial services (including inter alia, credit, financing, insurance or other financial accommodations), to the Project Investors or their Affiliates, in connection to the Pipeline System. 7. Double Tax Treaty shall mean any treaty or convention, to which a State is a party, with respect to Taxes for the avoidance of double taxation of income or capital. 3

31 8. Economic Equilibrium shall mean the economic value to the Project Investors of the relative balance established under the Project Agreements at the applicable date between the rights, interests, exemptions, privileges, protections and other similar benefits provided or granted to such Person and the concomitant burdens, costs, obligations, restrictions, conditions and limitations agreed to be borne by such Person. 9. Effective Date is defined in Article Energy Charter Treaty shall mean the Energy Charter Treaty as opened for signature in Lisbon on 17 December 1994 and effective as of 16 April Entity shall mean any company, corporation, limited liability company, partnership, limited partnership, enterprise, joint venture, unincorporated joint venture, association, trust or other juridical entity or organisation duly organised under the laws of any state. 12. EURO shall mean the currency of the Member States participating in the European Economic Monetary Union. 13. Foreign Currency shall mean any freely convertible currency (other than the Local Currency) which is widely traded in international foreign exchange markets and widely used in international transactions, including but not limited to EURO/US Dollar. 14. Host Government shall mean the central or federal government of the State, including any other organs or agencies with jurisdiction in respect of the Project, that affect, financially or otherwise, directly or indirectly, the Project Activities or the rights or obligations of the Project Participants in respect of the Project, notwithstanding any change at any time or from time to time in structure, form or otherwise. 15. Insurer shall mean any insurance company or other Person providing insurance covering all or a portion of the Pipeline System risks, the Project, or other risks to any Project Participant, and any successors or permitted assignees of such Person. 16. Interest Holder shall mean, at any time, any Person holding any form of equity interest in a Project Investor or an Operating Company, together with all Affiliates, successors and permitted assignees of that Person. 17. Intergovernmental Agreement shall mean that agreement among [insert state names] concerning the [insert Project name] Pipeline System dated [insert date of signature of the Intergovernmental Agreement], together with its appendices as set forth therein as such agreement may be extended, renewed, replaced, amended or otherwise modified from time to time in accordance with its terms. 18. Land Rights shall mean all those rights of examination, testing, evaluation, analysis, inspection, construction, use, possession, occupancy, control, [ownership] 3 assignment and 3 Where ownership is permitted. 4