Legal Opinion on the Draft Agreement for Remittance Arrangement.

Dated: September 07, 2006

Mr. A

Senior Vice President & Head of International Division

Bank 1

International Division

Head Office

Printers Building, 5 Rajuk Avenue,

Dhaka-1000, Bangladesh.

Dear Sir

Re:      Legal Opinion on the Draft Agreement for Remittance Arrangement.

We refer to your letter ID/2689/2006 dated 22 August 2006 on the above subject.

We have perused the copy of Draft Agreement in connection with establishing Remittance Arrangement between Bank 1 and Company 1, London, UK.

Our comments are as follows:

SL No. Clauses/

Paragraph

 Comments.

01. Particulars of the Bank We suggest that Bank 1 should be defined as “BANK 1” instead of “Correspondent”. And the defined term should be used throughout the Agreement.
02. Clause 1.1 It is our suggestion that this clause should be deleted from the Agreement since the definition of ‘Correspondent’ as stated in this clause may create confusion.
03. Clause 1.2 The definition of “Confidential Information” as stated in this clause is only applicable to Company 1. We therefore suggest to re-write the clause as follows:

“Confidential Information” means confidential business or technical information, including but not limited to, terms and conditions of this agreement, training materials, Transaction Software, Password, Security Code, written policies and procedures belonging to BANK 1 or Company 1.”
04. Clause 1.4 It is our suggestion that this clause should be rewritten as follows:

“Territory” means territory of Bangladesh or geographical territory within Bangladesh where BANK 1 carries on its business.”
05. Clause 1.8 We suggest to rewrite the clause as follows:

“Marks” means the service mark and all trade marks used by the respective parties.”
06. Clause 1.13 Please replace the words ‘Transaction Control Center’ by ‘Company 1 Control Center’ in the 2nd line of this clause.
07. Clause 1.14 Please replace the words ‘Transaction Control Center’ by ‘Company 1 Control Center’ in the 3rd line of this clause.
08. Clause 2.1(b) Please note that under this clause, Company 1 proposes to enter into a Remittance Arrangement with BANK 1 on a non-exclusive basis i.e. Company 1 is at liberty to appoint other representatives in Bangladesh.
09. Clause 3 This clause states that Company 1 shall provide Company 1 Software to BANK 1 to provide money transfer services under this Agreement. Please check whether BANK 1 is willing to use the software to be provided by Company 1.
10. Clause 4.1(a) This clause states that BANK 1 shall provide services as per written policies and procedure of Company 1 and also as per user guides of Company 1. Please check the policies, procedure and user guides of Company 1 and determine as to whether BANK 1 can provide such services and whether such policies, procedure and guidelines are in conformity with the rules and regulations of Bangladesh Bank.
11. Clause 4.1(b) Under this clause, Company 1 will have the right to amend the said policies and procedures from time to time during the term of this Agreement. This gives Company 1 wide power to amend its policies and procedures. The clause should be revised so that the power to amend is subject to compliance with the applicable laws, rules and regulations of UK and Bangladesh and subject to the consent of BANK 1.
12. Clause 4.3 It is our opinion that this clause should be revised as follows:

“BANK 1 shall be responsible for the transaction initiated by the staffs of BANK 1 submitting the correct password and security code, unless such initiation is caused by the instruction or act or omission or negligence of Company 1 or its employees or staffs of Company 1, in which case Company 1 shall be liable for such transaction”
13. Clause 4.4 Under this clause the obligation for taking reasonable care to avoid fraudulent transaction is only applicable against BANK 1. We therefore suggest to re-write this clause as follows:

“The parties hereby agree to take all reasonable precautions and actions to prevent fraudulent transactions”.
14. Clause 5.1(a) This clause states that Company 1 will set the conversion rate, which is impracticable and prejudicial to the interest of BANK 1 since the conversion will be made in Bangladesh at the time of effecting payment to the beneficiaries. We therefore suggest to re-write the clause as follows:

“BANK 1, upon receipt of Transfer Amount and its commission from Company 1, agrees to pay the Transfer Amount to the recipient in Taka amount at the prevailing conversion rate to be determine by the sole discretion of BANK 1.”
15. Clause 5.1(b) We suggest that this clause should be re-written as follows:

“BANK 1 shall not be liable for any wrongful disburse to a person other than the intended recipient, or payment of an incorrect amount or contrary to the authorisation procedure if the same is caused by the act or omission or inducement or negligence of Company 1 or its employees/staffs.”
16. Clause 5.3(c) The statements of this clause have already been covered by clauses 5.1(a) and 5.1(b). We therefore suggest that clause 5.3(c) should be deleted from the Agreement.
17. Clause 6.2 We suggest to re-write the clause as follows:

“BANK 1 shall comply the laws and regulations, including but not limited to the Money Laundering Act of 2002 applicable upon BANK 1 in providing service under this Agreement and Company 1 shall co-operate and assist by providing necessary papers/documents and information as and when required by BANK 1 to comply any such laws and regulations applicable in Bangladesh”.
18. Clause 6.3 We suggest that the last sentence of this clause should be deleted.
19. Clause to be added We suggest to insert the following clause to be numbered as 6.4:

“This Agreement is subject to the approval of Bangladesh Bank. BANK 1 shall not begin to offer the Money Transfer Service until Bangladesh Bank has granted approval. Neither party will be liable for the consequences of any delay or refusal to approve the contract on the part of Bangladesh Bank”
20. Clause 7.1 We suggest to rewrite the clause as follows:

“BANK 1 shall be responsible for all funds received from Company 1 and shall hold the same on trust until the same is disbursed to the intended recipients.”
21. Clause 7.2 We suggest to re-write the clause as follows:

“Until all funds so received from Company 1 are disbursed to the intended recipients, BANK 1 shall assume the risk of loss of the said funds, unless the loss is caused by the act or omission or inducement or negligence of Company 1 or its employees.”
22. Clause 8 The settlements and reporting procedure as stated in this clause are vague, unspecified and prejudicial to the interests of BANK 1. Usually, the company remitting from abroad through the bank in Bangladesh maintains two accounts, namely, Non-Resident Convertible US Dollar/GBP Account to deposit cover funds and Non-Resident Non Convertible Taka Account for fixed deposit of certain amount of money with the bank in Bangladesh for security purposes. The bank usually effect payment to the recipient upon receipt of cover funds. Please note that nothing has been stated in the Agreement regarding cover funds and maintenance of accounts with the Bank.

The Bank should check the matter and re-arrange the settlement procedures and re-write the clause accordingly.
23. Clause 9 This clause relates to commissions of service which is a commercial issue. The Bank should check whether it is agreed with the commissions and payment procedures as stated in this clause.
24. Clause 10 This clause states that Company 1 shall provide training to the employees of BANK 1. Please check whether any training is necessary for the purpose of providing service under this Agreement and whether BANK 1 is willing to allow Company 1 to provide any such training to its employees.
25. Clause 11 We suggest to rewrite the clause as following:

“11.  Signage Advertising and Promotion

11.1      Company 1 may provide BANK 1 with sample signs, displays and/or decals and advertising procedures which has to be approved by BANK 1. Upon receipt of sample signs, displays and/or decals and advertising procedures from Company 1, the BANK 1 at its sole discretion decides regarding display of such signage at its premises. In order to maintain its standard and business policy, BANK 1, if necessary and required, will display signs provided by Company 1.

11.2        Company 1 may use the name of BANK 1 and its sign and sample only upon prior approval of BANK 1. All advertising and promotional materials displaying or referring to the name of BANK 1 or Marks or to any other     proprietary classification of BANK 1 shall be submitted to BANK 1 for its prior approval. Company 1 shall comply with any conditions of any such approval by BANK 1.

11.3        BANK 1 and Company 1 may develop a marketing plan with mutual understanding.

11.4        Company 1 will provide sample forms of promotional materials to BANK 1 for its use in developing the promotional campaigns to attract the client’s interest in the Services.”
26. Clause 12.1 We suggest to delete the words “in accordance with Company 1’s written policies and procedures” from this clause.
27. Clauses 12.2 & 12.3 We suggest to re-write clauses 12.2 & 12.3 as follows:

12.2 The Marks and control of their use, trade names, service marks, copyrights and other rights of BANK 1 shall remain the property of BANK 1 exclusively and Company 1 shall not assert any claims, rights or interest thereto or therein. Company 1 shall use the marks and names and associated goodwill upon prior approval of BANK 1.

12.3 Upon termination of this Agreement for any reason whatsoever, all rights granted hereunder by the BANK 1 to Company 1 shall terminate. Company 1 shall immediately cease to use all and any marks or names of BANK 1 in any manner whatsoever, including but not limited to, removing all signs showing the marks and name of BANK 1 from the Company 1’s Locations. Concurrently, BANK 1 shall immediately cease to use all and any marks or names of Company 1 in any manner whatsoever. Within 10 (ten) business days of such termination, both parties shall return to the other part all materials upon which the marks and names of the other party appears.”
28. Clause 13.1 We suggest to re-write the clause as follows:

“This Agreement shall be for a period of _______ (_________) years (the Term) to commence from the date of signing this agreement. The Term of this agreement may be renewed by mutual agreement”.
29. Clause 13.3 Please delete the word “Initial” from this clause.
30. Clause 13.3(ii) Please replace the word “Correspondence” by “Either party” in this sub-clause.
31. Clause 13.4 Please replace the last sentence of this clause buy the following sentence:

“Further, the parties shall return to each other any transaction software, signs, display materials or other property or equipments furnish by one party to other under this Agreement”.
32. Clause 13.5 This clause states that Company 1 shall have right to audit and inspect the books and records of the Bank. This clause is prejudicial to interest of the Bank and we suggest to delete the same from the Agreement.
33. Clause 14.2 Please insert the word “reimburse,” after the words “Company 1 Shall” in the 1st line of this clause.
34. Added new clause We also suggest to insert the following clause to be numbered as 14.4:

“BANK 1 shall have no liability whatsoever for any fraud committed in the issuance of any payment instruction/Draft/TT/MT/Pay Orders issued /drawn by Company 1 and no claim of such fraud shall be entertained by BANK 1 once payment of the proceeds of the Draft/TT/MT/Pay Orders are made to its recipients”.
35. Clause 15 We suggest to re-write the clause as follows:

“This Agreement may not be assigned or transferred by either party without the prior written consent of the other.”
36. Clause 17 This clause states that BANK 1 shall arrange and maintain adequate insurance coverage against any claim that may arise in connection with the services. Please check whether BANK 1 is willing to take such responsibility and agreed with terms of this clause.
37. Clause 18.1 The confidentiality clause is only applicable against BANK 1. We therefore suggest to re-write the clause as follows:

“The parties hereto undertake each with the other that they (including their officers, employees and independent contractors) will not, at any time hereafter use or divulge or communicate to any third person any confidential information relating to the documents and information to be carried under this Agreement (unless required by law) which may come to their knowledge and they shall use their best efforts to prevent the publication or disclosure of any confidential information concerning such matters”.
38. Clause 19 This clause states that BANK 1, as a security for its payment obligation to Company 1 under this Agreement, grants the right of set off to Company 1. We do not understand what kind of payment obligations BANK 1 has under this Agreement to Company 1. The clause is prejudicial to the interest of BANK 1 and we therefore suggest to delete the clause from the Agreement.
39. Clause 20.1 We suggest to re-write the clause as follows:

“Both parties shall, at all their locations, keep records of all money transfers made under this Agreement. These records shall include copies of all transaction forms and receipts and all other records that the parties may compile in connection with the Services.”
40. Clause 20.2 We suggest to re-write the clause as follows:

“Upon request by either party, the other party shall provide with certified copies of documents relating to Money Transfer Service transactions within a reasonable period of time”.
41. Clause 21 This clause states that the governing laws of the Agreement will laws of United Kingdom. Please note that since the performance of the Agreement will be in Bangladesh, we suggest that the laws of Bangladesh should be the governing laws of the Agreement. We therefore suggest that the governing laws of the Agreement should be the laws of Bangladesh.
42. Clause 22 This clause states that disputes shall be settled by arbitration with the Arbitration Rules of United Kingdom Committee on International Trade Law. Please note that we have suggested in clause 21 that laws of Bangladesh should be the governing laws of the Agreement. Moreover, Arbitration in United Kingdom would not be cost effective for BANK 1 and therefore we suggest that disputes should be settled in accordance with the Arbitration Act 2001. Accordingly, the clause should be re-write as follows:

22.1     If any difference or dispute arises between the Parties during the subsistence of this contract or thereafter, in connection with the validity, interpretation, implementation or alleged breach of any provision of this contract, such dispute shall be referred to a sole arbitrator or in case of disagreement as to the appointment of the sole arbitrator to three arbitrators, one of whom will be appointed by each party and the third one will be appointed by the arbitrators. The arbitration proceedings shall be conducted in accordance with the Arbitration Act, 2001.

22.2     Subject to the provisions of the Arbitration Act, 2001, no party shall be entitled to commence or maintain any action in a court of law upon any matter in dispute until such matter has been submitted to arbitration and determined as provided above, and then only for the enforcement of the arbitral award. Judgement on the arbitration award may be entered in any court of competent jurisdiction.

22.3     The place of arbitration shall be Dhaka. The proceedings of arbitration shall be conducted in the English language. All costs of enforcing this Agreement, including the costs of arbitration, court costs, reasonable accountants’ fee and reasonable attorneys’ fee shall be awarded to the prevailing party or parties or allocated as the arbitral panel shall determine to be equitable.

22.4     Pending the resolution of a dispute by arbitration, the parties shall, except in the event of termination, continue to perform all their obligations under this contract without prejudice to a final adjustment in accordance with the arbitral award.”
43. Clause 23 Please delete and replace this Clause as follows:

23. Representation

23.1    Company 1 hereby warrants and represents to BANK 1 that:

23.1.1 It is a validly and legally constituted company and has obtained all necessary and requisite licences, permits, approvals, authorisations and/or certificates from the relevant authorities/agencies to carry on its business.

23.1.2    It has the corporate power and authority and all corporate authorisation necessary to enter into this contract and to perform all the obligations contained herein.

23.1.3     The execution, delivery and performance of this Agreement by Company 1 does not and will not conflict with or result in any breach of any of the provisions of (i) the Constitution of Company 1; or (ii) any indenture, lease, loan agreement or other agreement or instrument; or (iii) any law, statue, rule or regulation or order, judgement or decree to which Company 1 is subject, the result of which shall invalidate this contract.

23.1.4    It shall comply with all the requirement of law, regulations, notifications and directions issued from time to time by the relevant authorities.

23.1.5    Company 1 shall indemnify BANK 1 for any or all losses, claims, expenses, damages, liabilities arising out of or in connection with the breach of the aforesaid warranties and representations made by Company 1.
44. Clause 25 We suggest to re-write the clause as follows:

“Nothing contained in this Agreement is intended to confer upon any person, other than the parties hereto, any rights to enforce any term of this Agreement or any benefits or remedies of any kind or character whatsoever, and no such person shall be deemed a third-party beneficiary under or by reason of this Agreement.”
45. Clause 26.2 This sub-clause is prejudicial to the interest of BANK 1 and we therefore suggest to delete this sub-clause from the Agreement.

The transactions under the Agreement can only be carried out upon obtaining prior written permission from Bangladesh Bank. Prior to the execution of the Agreement, it is therefore advisable to seek the necessary permission of Bangladesh Bank.

Apart from the above observations, the terms and conditions of the Agreement are otherwise in order.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you.

Yours faithfully,

(_______________)

Barrister-at-Law


The Lawyers & Jurists

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Bijoy Nagar, Dhaka-1000.

www.lawyersnjurists.com

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