European Bank for Reconstruction and Development Regulation 2012

This legislative instrument substitutes two provisions in the Agreement Establishing the European Bank for Reconstruction and Development (the Agreement) as incorporated into Australian law by the European Bank for Reconstruction and Development Act 1990 (the Act). Mechanically the Regulation does four things.

First, it declares its name and records that it is made under the Act (European Bank for Reconstruction and Development Regulation 2012). It records the making date (16 August 2012) and the statutory officers by whose command it is made (Governor‑General, on advice of the Federal Executive Council, and the Treasurer) (front matter).

Second, it sets staged commencement dates that tether the Regulation’s operation in Australia to the international entry into force of two distinct amendments to the Agreement, namely Resolution 137 and Resolution 138 of the Board of Governors of the Bank (both adopted 30 September 2011). Sections 1-4 and Schedule 1 commence on the later of (i) the day that the amendment effected by Resolution 138 enters into force for Australia and (ii) the day after the Regulation is registered. Section 5 and Schedule 2 commence on the day that the amendment effected by Resolution 137 enters into force for Australia. The Minister must publish Gazette notice of the days on which each resolution comes into force for Australia (s 2(1)-(2)).

Third, the Regulation defines a shorthand: “Act” means the European Bank for Reconstruction and Development Act 1990 (s 3).

Fourth, and substantively, it amends the text applied in Australia from the Agreement by substituting new text for (a) Schedule 1, Article 18, paragraphs 1 and 2 (Schedule 1 to this Regulation) and (b) Schedule 1, Article 1 (Schedule 2 to this Regulation). The instrument effects those substitutions by reference: for section 6 of the Act, Schedule 1 amends the Act (s 4) and for section 6 of the Act, Schedule 2 amends the Act (s 5). The substituted Article 18 sets out rules governing the Bank’s administration of Special Funds, including that the full cost of administering such funds “shall be charged to that Special Fund” and procedural limits around designation of “potential recipient countries” (Schedule 1, Article 18(1)(i)-(iv), (2)). The substituted Article 1 expands the Bank’s stated purpose to allow the Bank, subject to the same conditions, to carry out its purpose in Mongolia and in member countries of the Southern and Eastern Mediterranean as determined by the Bank upon a specified qualified vote of Governors (Schedule 2, Article 1).

The Regulation therefore implements textual changes to the Australian application of the Agreement, ties commencement to the international effectiveness of two separate Board resolutions, and places one specific administrative duty on the Minister to notify commencement in the Gazette (s 2(2)). The Regulation contains no standalone offences or penalty provisions and does not itself create funding appropriations in the instrument text.

This Regulation operates by substituting particular Articles of the EBRD Agreement as incorporated by the Act. The main legal concepts introduced or clarified by the substituted text are:

• Special Funds administration and cost allocation: Article 18(1)(i) declares that the Bank may accept administration of Special Funds that “serve the purpose and come within the functions of the Bank” in recipient and potential recipient countries, and explicitly provides that “the full cost of administering any such Special Fund shall be charged to that Special Fund.” The Regulation therefore records a self‑financing principle for administration expenses of such funds, at least as a matter of the Agreement’s text as applied in Australia (Schedule 1, Article 18(1)(i)).

• Potential recipient country designation and limits: Article 18(1)(ii) permits the Board of Governors, “at the request of a member which is not a recipient country,” to decide that the member qualifies as a potential recipient country for a limited period and on terms the Board considers advisable. The decision requires an affirmative vote of not less than two‑thirds of the Governors representing not less than three‑quarters of the total voting power of members. That is a qualified majority voting rule for such designations (Schedule 1, Article 18(1)(ii)).

• Preconditions for permitting potential recipient status: Article 18(1)(iii) provides that a decision to allow potential recipient status can only be made if the member is able to meet the requirements for becoming a recipient country, and identifies those requirements by reference to Article 1 of the Agreement “as it reads at the time of such decision or as it will read upon the entry into force of an amendment that has already been approved by the Board of Governors at the time of such decision.” That ties present decisions to the then‑current substantive eligibility test in Article 1 and to already‑approved future amendments that may alter Article 1’s text (Schedule 1, Article 18(1)(iii)).

• Sunset/termination mechanics for special operations in a potential recipient that fails to qualify: Article 18(1)(iv) directs that, if a potential recipient country has not become a recipient country at the end of the period decided by the Board, the Bank “shall forthwith cease any special operations in that country, except those incident to the orderly realization, conservation and preservation of the assets of the Special Fund and settlement of obligations that have arisen in connection therewith.” That limits the Bank’s continuing activity to wind‑down and asset/obligation settlement functions (Schedule 1, Article 18(1)(iv)).

The Regulation affects a small set of actors by changing the text of the Agreement as applied in Australia and by imposing a ministerial notification duty.

• Australian Commonwealth: The instrument is made under the Act and operates to amend the Act’s application of the EBRD Agreement. It therefore affects the Commonwealth’s statutory framework for relating to the Bank. The practical domestic actors are the Treasury (which administers international financial institutions legislation), the Minister required to publish Gazette notice (s 2(2)), and the office responsible for registering legislative instruments (Legislative Instruments Act 2003 is cited in the Note).

• The Bank and its members: The substantive text substituted into the Agreement affects the governance of the EBRD by specifying how the Bank may administer Special Funds and by widening the Agreement’s definition of recipient countries to include Mongolia and eligible Southern and Eastern Mediterranean member countries subject to the prescribed voting threshold (Schedule 1, Article 18; Schedule 2, Article 1). These changes alter the legal rules the Board of Governors must follow when making determinations about potential recipients and fund administration.

• Member countries that may seek to be treated as potential recipients: A member which is not a recipient country but seeks potential recipient country status is directly affected: the Board may grant that status for a limited period and under terms it sets, provided the member “is able to meet the requirements for becoming a recipient country” (Schedule 1, Article 18(1)(ii)-(iii)). Such members also face the risk that if they do not become recipient countries within the Board‑set period the Bank “shall forthwith cease any special operations in that country” save for wind‑down activities (Schedule 1, Article 18(1)(iv)).

• Parties that establish or supply Special Funds: Contributors, donors, or entities that propose Special Funds intended to be administered by the Bank will be affected by the self‑funding rule that administrative costs are to be charged to the relevant Special Fund (Schedule 1, Article 18(1)(i)). That affects budgeting and contractual arrangements for funds.

• Australian practitioners and counterparties referencing the Agreement: Lawyers, accountants, compliance officers and project parties that rely on the Australian text of the Agreement must recognise that references in the Agreement to “recipient country” now include Mongolia and any Southern and Eastern Mediterranean members prescribed by the Bank under the qualified vote, and that Special Funds administered by the Bank are subject to the “full cost charged to that Special Fund” rule (Schedule 2 Article 1; Schedule 1 Article 18).

The Regulation creates, preserves or clarifies a limited set of duties and rights by way of substitution into the Agreement.

Duties (express in the substituted text):

• Bank’s duty to charge administration costs to the Special Fund: Article 18(1)(i) states that “The full cost of administering any such Special Fund shall be charged to that Special Fund.” That is an explicit allocation of administrative cost burden. The duty falls on the operator of the Special Fund administration function, which in context is the Bank accepting administration of the Special Fund (Schedule 1, Article 18(1)(i)).

• Ministerial duty to notify commencement: Section 2(2) of the Regulation requires the Minister to give notice in the Gazette of the day on which the amendments made by Resolutions 137 and 138 come into force for Australia. That is an express domestic procedural duty on a Minister (s 2(2)).

• Board of Governors’ decision‑making duties governed by qualified majorities: Two provisions condition Board power with voting thresholds. Article 18(1)(ii) requires an affirmative vote of not less than two‑thirds of Governors representing not less than three‑quarters of total voting power to make a member a potential recipient country for a limited period. Article 1 requires the same threshold for determination of Southern and Eastern Mediterranean member countries to be treated under the Agreement’s purpose expansion (Schedule 1 Article 18(1)(ii); Schedule 2 Article 1).

Rights (express or implied in text):

• Right of a member to request potential recipient status: Article 18(1)(ii) contemplates that a member which is not a recipient country may request that it qualify as a potential recipient country; the Board is empowered to grant such requests within the qualified vote constraints (Schedule 1, Article 18(1)(ii)).

• Bank’s discretion to accept administration of Special Funds: Article 18(1)(i) states that the Bank “may accept the administration of Special Funds,” which is a permissive right of the Bank to take on administrative responsibilities for funds consistent with its purpose and functions (Schedule 1, Article 18(1)(i)).

• Right to use Special Funds within Agreement constraints: Article 18(2) allows Special Funds to be used “in any manner and on any terms and conditions consistent with the purpose and functions of the Bank, with the other applicable provisions of this Agreement, and with the agreement or agreements relating to such Funds.” That gives fund‑designers and the Bank scope to agree terms, subject to the Agreement’s limits (Schedule 1, Article 18(2)).

The Regulation itself does not introduce penalty provisions or a new enforcement regime. The substituted text in Article 18 and Article 1 governs the Bank’s internal decision‑making and the permissible use and administrative treatment of Special Funds; those provisions do not create criminal or civil sanctions within the Regulation’s text. Two consequences flow from this absence:

• No direct domestic penalties in this instrument: The Regulation does not specify offences, fines or enforcement powers under Australian law. It amends the text of the Agreement as applied by the Act; enforcement of the substituted Agreement provisions, where relevant, will be by the Bank’s governance procedures and by the legal relationships established in the Agreement and any fund‑specific agreements (Schedule 1, Article 18(2); Schedule 2, Article 1). The Regulation therefore enacts governance rules rather than domestic sanctions.

• Enforcement will operate through institutional governance and contractual mechanisms: The Bank’s obligation to charge full administrative costs to Special Funds (Article 18(1)(i)) is an allocation of cost responsibility; enforcing that allocation would occur through the Bank’s administrative accounting and through any contractual commitments in the agreements relating to each Special Fund (Schedule 1, Article 18(1)(i); Schedule 1, Article 18(2)). The Bank’s obligation to cease special operations in a potential recipient at the end of the period (Article 18(1)(iv)) is a binding governance command within the Agreement; practical enforcement of that duty is a matter for the Bank’s governing bodies and operational procedures.

• Ministerial Gazette notice is a procedural requirement: Section 2(2) requires the Minister to publish the day on which the amendments come into force for Australia in the Gazette. Failure to give that notice may be a procedural irregularity in domestic administration but the instrument does not attach an express statutory penalty to omission. Compliance expectation for the Minister is explicit in the instrument (s 2(2)).

• No domestic judicial enforcement examples are provided: The Regulation contains no guidance about judicial remedies or domestic statutory enforcement of the substituted Agreement terms. Any domestic legal effects of the Agreement provisions as applied in Australia would need to be pursued under the Act or other domestic law; the Regulation itself does not establish an enforcement apparatus.

The Regulation is a statutory instrument made under the European Bank for Reconstruction and Development Act 1990. Its effect is therefore to change the text of the Agreement as applied in Australia under that Act (s 4-5; schedules). The interactions with other domestic legal instruments are limited and specific in the text:

• Interaction with the Act: The Regulation expressly amends the Act by substituting text for the Agreement text incorporated under section 6 of the Act. Sections 4 and 5 of the Regulation each state: “For section 6 of the Act, Schedule 1 (respectively Schedule 2) amends the Act.” That is the primary domestic interaction; the Regulation is an implementing instrument for international amendments to the Agreement (s 4-5).

• Interaction with registration requirements for legislative instruments: The Note at the end reminds readers that all legislative instruments and compilations are registered on the Federal Register of Legislative Instruments under the Legislative Instruments Act 2003 and points to the government register. Section 2(1)(a)(ii) uses registration as a commencement trigger , sections 1-4 and Schedule 1 commence on the later of the day Resolution 138 enters into force for Australia and “the day after it is registered.” That expressly ties operation of the Regulation to domestic registration (s 2(1)(a)(ii) and Note referencing Legislative Instruments Act 2003).

• Interaction with international law and the Agreement’s entry into force: The Regulation’s operation is contingent on the international entry into force of the Board of Governors’ resolutions (Resolutions 137 and 138). Sections 2(1)(a)(i) and 2(1)(b) tie commencement to the day the respective amendments “enter into force for Australia.” Thus the Regulation integrates the international law timing of Agreement amendments into domestic statute operation. The Regulation therefore straddles domestic legislative mechanics and the timing of international obligations.

• Interaction with the Agreement’s internal cross‑references: The substituted Article 18(1)(iii) cross‑references Article 1 of the Agreement for the requirements for becoming a recipient country, and explicitly permits reliance on Article 1 “as it will read upon the entry into force of an amendment that has already been approved by the Board of Governors at the time of such decision.” That means Article 18 decision‑making may be operationally dependent on other amendments to Article 1 that have been approved but not yet entered into force. This introduces an internal interaction within the Agreement between amendment processes and decision authority.

This single legislative instrument implements two Board of Governors’ resolutions (Resolution 137 and Resolution 138) adopted by the Bank’s Board of Governors on 30 September 2011, as recorded in the instrument’s Note. The Regulation records the date it was made (16 August 2012) and effects two textual substitutions into the Agreement as applied by the Act.

Chronology within the instrument:

• 30 September 2011: Board of Governors adopted Resolutions 137 and 138 (instrument Note).

• 16 August 2012: The Regulation was made by the Governor‑General, on the advice of the Federal Executive Council, and signed by the Treasurer (front matter).

• Commencement staging: Sections 1-4 and Schedule 1 commence on the later of (i) the day Resolution 138 enters into force for Australia and (ii) the day after the Regulation is registered (s 2(1)(a)). Section 5 and Schedule 2 commence on the day Resolution 137 enters into force for Australia (s 2(1)(b)). The Minister must publish Gazette notice of the days on which each resolution comes into force for Australia (s 2(2)).

Textual amendments effected:

• Schedule 1 to the Regulation substitutes Article 18, paragraphs 1 and 2, of Schedule 1 to the Agreement (Schedule 1, [1]). The substituted text governs Special Funds administration, potential recipient country designation, conditions for such designations, termination of special operations on expiry, and permitted uses of Special Funds (Schedule 1, Article 18(1)(i)-(iv); Article 18(2)).

• Schedule 2 to the Regulation substitutes Article 1 of Schedule 1 to the Agreement (Schedule 2, [1]). The substituted Article 1 expands the Agreement’s purpose to include Mongolia and member countries of the Southern and Eastern Mediterranean as determined by the Bank on a qualified vote, subject to the same conditions that apply to Central and Eastern European countries. It also states that references to “recipient country” in the Agreement shall refer to Mongolia and each Southern and Eastern Mediterranean country so determined (Schedule 2, Article 1).

Statutory mechanics:

• Sections 4 and 5 each state the substitution is “for section 6 of the Act, Schedule 1 amends the Act” and “for section 6 of the Act, Schedule 2 amends the Act” respectively, indicating these Schedules are the vehicle by which the Act’s incorporated Agreement text is updated (s 4-5).

The Regulation contains no record of litigation and does not cite any judicial decisions. The instrument itself is an amending regulation and its text does not refer to court proceedings or judicial interpretations. The material facts relevant to litigation history as present in the instrument are:

• There is no litigation antecedent recited in the Regulation. The instrument records only the Board of Governors’ adoption of Resolutions 137 and 138 on 30 September 2011 and the Regulation’s making on 16 August 2012.

• The Regulation does not create domestic offences, private causes of action, or administrative penalties, nor does it alter domestic judicial procedures. It substitutes definitions and governance text into the Agreement as applied under the Act.

• Any litigation that might arise concerning the substituted provisions would be fought under the Agreement and the Act’s domestic application, but the Regulation provides no guidance on forum, remedies or relevant domestic procedural law. The instrument does not identify any past judicial interpretations of the substituted Article 1 or Article 18 in the Agreement.

• Because the Regulation ties commencement for parts of the instrument to the international entry into force of Board resolutions, disputes could in theory arise about whether those amendments have entered into force for Australia and the proper domestic commencement date. The instrument includes a Ministerial Gazette notice requirement (s 2(2)). The instrument itself does not provide a mechanism for resolving disputes about entry‑into‑force timing beyond reliance on international law and the ministerial notice.

• The Regulation does not reference arbitration clauses or dispute‑settlement pathways in relation to Special Funds; those matters would be governed by the Agreement and by the specific agreements for any Special Fund (Schedule 1, Article 18(2)).

In short, the instrument records no litigation history. Practitioners looking for judicial treatment of these substituted provisions must look beyond the instrument to judicial records, the Act as recently amended, and any decisions of Australian courts that might later address Article 1 or Article 18 as applied domestically. The Regulation itself contains no litigation record or guidance.

The text contains several drafting and operational features that can produce practical traps or create sources of uncertainty. These are matters to watch when applying or advising on the Regulation’s effect.

• Commencement is contingent on international entry into force: Sections 2(1)(a)(i) and 2(1)(b) make commencement dependent on the day the relevant Board resolution amendments “enter into force for Australia.” That can create timing uncertainty for domestic actors because the instrument will not operate until the international amendment is effective for Australia. The Regulation does require a Gazette notice by the Minister of these entry‑into‑force dates (s 2(2)), but until that happens practitioners must not assume immediate operation upon the Regulation’s registration.

• Split commencement dates and registration trigger: Parts of the Regulation (sections 1-4 and Schedule 1) are subject to both the resolution entry‑into‑force test and to a registration‑linked trigger (the later of the two). Section 5 and Schedule 2 commence on a different trigger (entry into force of the other resolution). This creates a two‑stage implementation that may leave the Act with partially updated text until both commencements have occurred. Practitioners must check which substituted Article is in force domestically at any given time (s 2(1)).

• “Full cost” of administration is not defined: Article 18(1)(i) requires the full cost of administering a Special Fund to be charged to the Fund, but the substituted text does not define “full cost.” That leaves scope for interpretive disagreement: accounting allocations, overhead apportionment, sunk capital, and staff costs could be disputed between the Bank, donors and recipient countries. Absent detailed guidance in the substituted Article or in the fund agreement, this is an area of operational negotiation and administrative discretion (Schedule 1, Article 18(1)(i)).

• Qualified majority thresholds for substantive expansions: Both Article 1 and Article 18 use a dual voting threshold (not less than two‑thirds of Governors representing not less than three‑quarters of total voting power). The dual requirement means neither simple majority nor a single metric of Governors/voting power suffices. This can be a procedural gotcha for decision‑makers who miscalculate whether the dual threshold is met. The instrument makes the threshold explicit (Schedule 1, Article 18(1)(ii); Schedule 2, Article 1).

• Circularity and cross‑reference to Article 1 in Article 18: Article 18(1)(iii) conditions potential recipient decisions on the member being “able to meet the requirements for becoming a recipient country,” defined by reference to Article 1 “as it reads” or “as it will read upon the entry into force of an amendment that has already been approved by the Board.” Because Article 1 itself has been substituted by Schedule 2 of this Regulation, and because Article 18 permits reference to future‑entry amendments already approved by the Board, there is scope for temporal complexity when multiple amendments are in play. Decision‑makers must check which version of Article 1 applies at the time of the Board decision (Schedule 1, Article 18(1)(iii)).

Compliance under this instrument is primarily about adapting to the substituted Agreement text and meeting the procedural domestic requirements. The following checklist and practical steps are grounded in the Regulation’s text.

For Australian government and the Minister:

• Track international entry into force: Monitor when Resolutions 137 and 138 “enter into force for Australia.” The Regulation’s commencement provisions hinge on those events (s 2(1)(a)(i), s 2(1)(b)). Keep a record of the international communication or legal instrument that confirms entry into force to support an authoritative domestic commencement date.

• Gazette notice: Publish the Ministerial notice in the Gazette of the day on which each of the amendments comes into force for Australia as required by s 2(2). Ensure the Gazette notice records the precise day used for domestic purposes.

• Register the instrument: Ensure registration on the Federal Register of Legislative Instruments is complete and confirm which parts of the Regulation have taken effect, particularly where commencement depends on registration as well as entry into force (s 2(1)(a)(ii) and Note referring to Legislative Instruments Act 2003).

• Update consolidated statutory materials and guidance: Amend any publicly accessible consolidations and explanatory materials for the Act to reflect the substituted Article 1 and Article 18. Ensure Treasury and legal counsels update internal guidance about the scope of the Bank’s purpose and Special Funds administration under the updated Agreement text.

For the Bank and its governing bodies:

• Apply qualified majority checks: When considering requests to designate a member as a potential recipient country or to determine Southern and Eastern Mediterranean members as within the Article 1 remit, verify the dual threshold is satisfied: not less than two‑thirds of Governors and not less than three‑quarters of total voting power (Schedule 1, Article 18(1)(ii); Schedule 2, Article 1).

• Document limited periods and terms: If the Board grants potential recipient status under Article 18(1)(ii), precisely document the limited period and the terms and conditions it imposes. Include steps for reviewing candidate members’ ability to meet Article 1 requirements and for wind‑down triggers consistent with Article 18(1)(iv).

• Define “full cost” for fund accounting: For Special Funds, establish clear accounting standards and internal policy defining “full cost of administering” a fund. Set out overhead, staff time, direct and indirect costs, and any cross‑fund allocations. Record these definitions in fund agreements so donors and recipients understand administrative charges (Schedule 1, Article 18(1)(i)).