Vetting of draft agreement for establishment of Remittance Arrangement between Bank and Company.

Dated: September 20, 2007

Mr. M

Senior Vice President

Bank 1

Head Office

Chini Shilpa Bhaban (2nd, 3rd & 8th Floor)

3, Dilkusha C/A

Dhaka – 1000

Dear Sir,

Re:                  Vetting of draft agreement for establishment of Remittance Arrangement between Bank 1 and Company 1.

We refer to your letter No. ID/1556/2007/15790 dated September 10, 2007 received by us on September 12, 2007 on the above subject.

We have perused the draft deed of agreement for establishment of Remittance Arrangement (“the Agreement”) between Bank 1 (“BANK 1”) and Company 1. (“Euro-Bangla”). Our comments on the draft agreement are given below:

Clauses/ Paragraphs Comments.
General The agreement has many vague terms, if not defined explicitly it will be difficult to identify the responsibility or breach of each of the parties thereto.As such, please add a new clause at the beginning of the agreement and define the following terms in that clause:

Beneficiaries

Cover Fund

DD

Drawing Position

EFT

Electronic Transfers

Foreign Exchange cover

Instant Cash Payment

Money Transfer Arrangement

Money Transfer Services

MT

Nostro A/C

Payment Instruction

PO

Remitter

Summary Statements FCS-7

Test Keys

Tested Messages

Transaction Enquiry
General The term “the Bank” has been used in several places in the agreement. However, as Jamuna Bank Ltd has been defined as “BANK 1”, we suggest you to delete all references to “the Bank” and replace those with “BANK 1”.
Clauses 1 and 2 Clauses 1 and 2 refer to ‘Annexure A’ that contains the list of Branches of BANK 1. But upon perusal of the Agreement we could not find any such annexure. At the time of execution of the agreement, please ensure that the annexure is attached with the agreement.
Clause 5 In the first paragraph of Clause 5, it is stated that BANK 1 will credit the account of Euro-Bangla upon getting confirmation of Cover Fund.  It is not clear as to which account of Euro-Bangla is referred here. We suggest you to define this account in this clause.
Clause 7 In Clause 7, it is stated that Euro-Bangla will maintain a deposit of US $ 10,000.00 only as security in their account maintained with BANK 1.  It is not clear as to which account of the three accounts of Euro-Bangla maintained with BANK 1 is referred here. We suggest you to define this account clearly.
Clause 12 According to this clause, Euro-Bangla will have to send Cover Fund to BANK 1 on a daily basis with good-value. The term “with good value” is vague. We suggest you to delete Clause 12 and replace it with the following:“Under the Money Transfer Arrangement, COMPANY 1. shall send enough Cover Fund to the Nostro A/C of BANK 1 on a daily basis so that there is Cover Fund for all Payment Instructions.”
Clause 19 In the last paragraph of Clause 19, “Mashreqbank psc, London” should be replaced with “Mashreqbank psc, New York” because from the previous paragraph it is apparent that the said bank is situated in New York.
Addition of New Clauses 21 and 22 After Clause 20 please add the following new clauses:

“21. In the event BANK 1 makes payment to the Beneficiary in accordance with the Payment Instructions of COMPANY 1. for which there is no Cover Fund in the Nostro A/C, BANK 1 shall have the right to sett off the said paid amount from any of the accounts of COMPANY 1. maintained with BANK 1.

22. COMPANY 1. shall be solely liable for any claims made by the Beneficiary, the Remitter or any other person regarding any loss, damage or expense incurred and/or suffered by that party pursuant to any Payment Instruction issued/to be issued by COMPANY 1. and paid/to be paid by BANK 1.”
Clause 23 We suggest you to delete Clause 23 and replace it with the following:

“23.The arrangement under this Agreement shall continue unless terminated in the following manner:

(i) by mutual written agreement of the Parties; or

(ii) by either party upon service of 6 (six) months’ prior notice in writing or by tested message/SWIFT to the other party without assigning any reason; or

(iii)by either party upon service of 1 (one) month’s prior notice in writing or by tested message/SWIFT to the other party in case the following events occur:

a. Breach of any obligation under this Agreement which shall not be capable of remedy; or

b. Breach of any obligation under this Agreement which shall be capable of remedy but the defaulting party fails to cure the same within 15 (fifteen) days of receipt of written notice from the non-defaulting party

(iv)by BANK 1 upon serving 7(seven) days’ notice to COMPANY 1. in case of:

a)a bankruptcy or insolvency proceeding is filed against COMPANY 1.;

b)A trustee or receiver is appointed by the COMPANY 1. or by court order or order of any regulatory agency for any substantial part of COMPANY 1.’s property;

c) COMPANY 1. makes an assignment of all or substantially all of its property for the benefit of creditors or ceases to conduct its operations in the normal course of business;

d) COMPANY 1.’s participation in this Agreement is held to be illegal by any judicial or regulatory authority having jurisdiction over it.”
Clause 25 Please delete Clause 25 and replace it with the following two clauses:

“25. The construction, validity and performance of this Agreement shall be governed in all respects by the laws of the People’s Republic of Bangladesh.

26 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. The place of arbitration shall be Dhaka. 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.”
Clause 31 At the end of Clause 31 please add the following:

“subject to obtaining the relevant approvals of Bangladesh Bank and all other relevant regulatory authorities of Bangladesh and/or the relevant regulatory authorities of the respective country where the bonds are to be sold and distributed.”
Clause 36 Please delete Clause 36 and replace it with the following:

“36. Records of all transaction plus subsequent investigations, cancellations and returned items shall be retained by both parties for three years from the date of the relevant transaction or as required by the relevant law or regulatory authority of the respective country of the parties.”
Clause 41 In the second line of Clause 41, before the word “fraud” we suggest you to add the words “negligence and”.
Addition of New Clause 42 After Clause 41 please add the following new clause:

“42 In event of default of any of the terms, conditions or warranties of this Agreement, the defaulting party shall indemnify the non defaulting party for any loss, damage or expense incurred and/or suffered by such non defaulting party in consequence of such default. However, the liability of BANK 1 shall under no circumstances exceed the amount of claim under the remittance transaction in dispute.”
Clause 45 According to Clause 45, BANK 1 will not charge against Euro-Bangla’s accounts for using BANK 1’s own instruments like PO, MT, DD etc. Please check whether BANK 1 agrees to provide the usage of its own instruments free of charge.
Clause 46 According to this clause, all other bank’s charges, courier charges and any charges/expenses in Bangladesh shall be borne by BANK 1. Please check whether BANK 1 agrees to pay such charges.
Clause 48 According to this Clause, BANK 1 will not charge anything for the Money Transfer Services. Therefore, BANK 1 will not be getting any commission or any kind of fees/charges for providing the remittance services. Please check whether BANK 1 agrees to provide the services free of charge to Euro-Bangla.
Addition of New Clause 53 The Agreement has no Notice Clause. As such, after Clause 52 we suggest you to add the following new Clause 53:“53. Notices:

53.1 Any notice or other communication in connection with this Agreement shall be in writing in English (“Notice”) and shall be sufficiently given or served if delivered or sent:

In the case of BANK 1 to:

Address:________________________

_______________________________

_______________________________

Fax: _____________

Attention: _______________

In the case of COMPANY 1. to:

Address: _______________________

_______________________________

_______________________________

Fax: _____________

Attention: _______________

or (in either case) to such other address or fax number as the relevant party may have notified to the other in writing in accordance with this Clause.

53.2 Any Notice may be delivered by hand or sent by fax or prepaid registered post or registered airmail in the case of international service.  Without prejudice to the foregoing, any Notice shall conclusively be deemed to have been received the next Business Day, if sent by fax, or two days from the time of posting, if sent by post, or seven days from the time of posting, if sent by airmail, or at the time of delivery, if delivered by hand.”
General Please check all other commercial terms and conditions.

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

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

All documents referred to us are returned herewith.

Thanking you.

Yours faithfully,

­­­­­­­­­­­­­­­­­_______________

Barrister

Drafted by:

 The Lawyers & Jurists
M.L.Hotel Tower Ltd, 208, Shahid Syed Nazrul Islam Sarani,
Bijoy Nagar, Dhaka-1000.
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