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Railway Agreement
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Between
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The Government of Afghanistan
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MCC-Jiangxi Copper Consortium
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1 July 2010
EX EC l TIVE SUMMARY
The Parties acknow ledge that construction of an operable raihvay is of extreme importance to
the economic development of Afghanistan and MCC has committed to construct such a
railway on a BOOT basis, subject to an approved positive feasibility study. Therefore the
goal of this Railw ay Agreement is to provide for the construction, initial operation, and a
suitable training environment to build and operate that railway. As defined in this Railway
Agreement:
1. Based on a positive Feasibility Study outcome, MCC agrees that it will provide the
investment to construct and operate the Railway on a timely, cost-efficient, and non¬
profit BOOT basis. MCC's investment is to be repaid as rapidly as possible, through
the operational fees of the Railway.
2. The Government agrees to provide tin environment which does not add to the
financial burdens of returning MCC's investment, in a manner that is as secure as
practical.
This Railway Agreement is designed to provide the general framework under which the
Railway can proceed to operation and construction as rapidly as possible. As the details
of construction and operation will not be known until the Feasibility Study is completed,
those details will be included in a separate Railw ay BOOT Agreement with a Security
annex, immediately upon completion of the Route Study and the Feasibility Study.
1 July 2010
TABU OF CONTENTS
EXECUTIVE SUMMARY
TABLE OF CONTENTS
RECITALS...............................................................................................................................1
PART I - GENERAL TERMS AND CONDITIONS..............................................................2
1. General...........................................................................................................................2
2. Organization....................................................................................................................2
3. Definitions......................................................................................................................3
4. Incorporation of the Aynak Mining Contract...................................................................4
5. MCC’s General Rights under the Railway Agreement.....................................................5
6. MCC's General Obligations under the Railway Agreement.............................................5
7. Environmental Protection................................................................................................7
8. Government Right of Access...........................................................................................8
9. Use of Subcontractors.....................................................................................................9
10. Cooperation of the Parties...............................................................................................9
11. Security............................................................................... 10
12. International Coordination................................................... 10
13. Conditions Precedent.....................................................................................................11
PART II - RAILWAY ROUTE SELECTION AND FEASIBILITY STUDY.....................11
14. Route Identification and Evaluation...............................................................................11
15. Feasibility Study...........................................................................................................12
16. BOOT Agreement.........................................................................................................13
17. Route Acquisition..........................................................................................................14
PART III - RAILWAY CONSTRUCTION..........................................................................14
18. Railway Construction - General Requirements..............................................................14
19. Railway Construction - Technical Requirements...........................................................16
20. Construction Timetable.................................................................................................17
21. Railway Facilities..........................................................................................................17
22. Railway Route Land Use...............................................................................................18
PART IV- RAILWAY OPERATION..................................................................................18
23. Railway Operation........................................................................................................18
24. Recovery of Investment by MCC..................................................................................19
25. Review of Railroad Agreement Economic Terms..........................................................20
26. Tax Obligations and Financial Record Keeping.............................................................20
27. Compliance with Rail Transportation Requirements......................................................22
PART V - RAILWAY TRANSFER......................................................................................22
28. Railway Transfer Entity................................................................................................22
29. Railway Transfer Date...................................................................................................22
30. Assets to be Transferred................................................................................................22
31. Warranty.......................................................................................................................22
32. MCC Use of Railway Following Transfer to Government.............................................22
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PART VI - RAILWAY SOCIAL AND SUSTAINABLE DEVELOPMENT
COMMITMENTS AND OBLIGATIONS.............................................................................23
33. Resettlement and Compensation Plan............................................................................23
34. Protection and Respect of Religious Belief....................................................................23
35. Government's and Third Parties' Rights to Use Company's Facilities...........................23
PART VII - LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS......23
36. Services and Supplies....................................................................................................23
PART VIII - EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS.................23
37. Employment of Afghan Nationals.................................................................................23
38. Training............................................... 24
39. Non-Afghan Personnel.................................................................................................24
40. Employee Accident Compensation................................................................................24
PART IX - IMPORTS AND RE-EXPORTS.........................................................................24
41. Imports..........................................................................................................................24
42. Re-Exports....................................................................................................................26
43. Cooperation...................................................................................................................26
PART X - DOMICILE; SERVICE OF PROCESS...............................................................26
44. General.........................................................................................................................26
45. Notices................................................ 26
PART XI - MISCELLANEOUS PROVISIONS...................................................................27
46. Termination...................................................................................................................27
47. Notification and Remedy...............................................................................................28
48. Default......................... 29
49. Force Majeure...............................................................................................................29
50. Dispute Resolution.........................................................................................................30
51. Duration.....................................................................................................................31
52. Assignment...................................................................................................................31
53. Amendments.................................................................................................................32
54. Applicable Law.............................................................................................................32
55. Complete Agreement.....................................................................................................32
APPENDIX 1: RAILWAY ROUTE........................................................................................1
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1 July 2010
RAILWAY AGREEMENT
Between
The Government of Afghanistan (“Government”)
And
MCC-Jiangxi Copper Consortium (“MCC”)
This Railway Agreement (“Railway Agreement’") is made this 3*3. day
of S£rp. 2010 between the Government and MCC (the “Parties”).
RECITALS
Whereas:
1. The Government and MCC have entered into a Mining Contract under which MCC
has been granted the mineral rights for the Aynak Copper Deposit (the “Aynak
Mining Contract"). The mineral rights were subsequently transferred from MCC to
the MCC-JCL Aynak Minerals Company Ltd (“MJAM”) pursuant to Section 61 of the
Aynak Mining Contract;
2. The Aynak Mining Contract contains a Memorandum of Agreement between the
Parties concerning a Railway (the “Railway MO A”) which incorporates MCC’s
binding commitment to the Government to construct and operate a Railway, at its own
cost and consistent with the terms specified in MCC’s letter dated September 25, 2007
into the Aynak Mining Contract as an enforceable part of the Aynak Mining Contract.
3. MCC' made the following commitments to the Government concerning the Railway in
its September 25, 2007 letter:
a. MCC will conduct reconnaissance (survey) and prepare a feasibility study
according to the schedule provided in MCC's August 16, 2007 letter.
b. Upon completion of the feasibility study and on the basis of the Railway
project being feasible, MCC will build the Railway on a “BOOT" (Build,
Own, Operate, and Transfer) basis.
i. MCC will arrange 100% financing for the construction of the Railway.
ii. MCC will design and build the Railway on its own.
iii. MCC will own the Railway and be responsible for the overall
operation and management of the Railway upon completion of the
Rail wav' construction and commencement of operations.
1 Julv 2010 1 of 33
c. Within the two years before the full recovery of MCC’s investment, the
Government should form an operating entity (or joint venture operating entity
with MCC) to work together with MCC for the purpose of studying and
formulating relevant issues and policies regarding the operation and
management of the Railway following its take-over by the Government.
d. After the full recover) of MCC’s investment, MCC will transfer the Railway
to the Government.
e. MCC will provide free training concerning the maintenance, operation and
management of the Railway.
4. The Government has made a commitment to MCC in the Railway MOA to use its
authorities to assist MCC in securing the land and route necessary to construct the
Railway.
5. The Parties agreed in the Railway MOA that the feasibility study will be provided to
the Government for review. In the event that the Government disagrees with the
conclusions of the feasibility study, the Government may retain an independent expert
to review the feasibility study.
6 The Parties agreed in the Railway MOA that MCC’s Railway activities shall be at
MCC’s sole expense and in compliance with all applicable requirements under the
laws of Afghanistan. In addition, the Government agreed to provide all necessary
assistance with respect to making available information and licenses to plan and
expedite the necessary Railway development and operation. The Parties agreed that
they will work diligently and cooperatively to expedite completion of the Railway,
including the preparation of appropriate environmental and social impact studies,
route survey, and feasibility study necessary to allow MCC to build and operate the
Railway.
Agreement
Tium fork, in consideration of the commitments and obligations set forth in this Railway
Agreement, the Parties agree as follows:
PART I - GENERAL TERMS AND CONDITIONS
1. General
MCC agrees to conduct its railway construction, operations and activities on a non¬
profit basis.
2. Organization
This Railway Agreement is organized to reflect and address the scope of
Railway issues identified by the Parties in the Aynak Mining Contract and the
Railway MOA. This Railway Agreement contains 11 parts as described in the Table
of Contents above.
1 July 2010 2 of 33
Definitions
In this Railway Agreement, the following expressions (except where the
context otherwise requires) shall have the following meanings:
(a) Agreement Period: The term as set forth in Section 51 of this Railway
Agreement and any extensions or other modifications to the term
agreed to in writing by the Parties.
(b) Aynak Copper Project: The copper project located in the Aynak area of
Logar province for which a Mineral Right has been granted to MCC.
(c) Build-own-operate-transfer (“BOOTH: An approach to public project
development in which a private entity is granted a concession by a
governmental authority to undertake the financing, construction,
operation and maintenance of a given infrastructure facility in
exchange for the right to collect tariffs or fees from its users in order to
repay the loans or other financial obligations utilized to make the
investment in the project Under tins arrangement the private entity
owns the facility and its assets until transferred to the governmental
authority, and typically seeks financing on either a limited recourse or
a non-recourse basis, where the lender (financing bank) looks only to
the project’s assets and revenue stream for repayment, and not to
additional sources of security, such as the total assets or balance sheet
of the private entity.
(d) BOO T Agreement: The Agreement addressing the specific
requirements, details and time schedules for the construction, operation
and transfer of the Railway which shall be signed by the Parlies as per
Section 16 of this Railway Agreement in accordance with the
definition of BOOT in this Railway Agreement.
(e) Commences Commercial Operation: The first day on which the
commercial transport of passengers or freight occurs.
Effective Date of the Railway Agreement: The date_.
Environment: Physical factors of the surroundings of human beings,
including land, water, atmosphere, climate, sound, odors, tastes,
artifacts, and biological factors of animals and plants and the social
factors of aesthetics.
(h) Feasibility Studv: A study performed to MCC specifications to assess
the suitability of the proposed Railw ay route and associated facility
locations, taking into consideration the results of national and regional
rail transportation planning and all currently known and forecasted
relevant technical, environmental, economic, operational and logistical
factors and requirements necessary for the successful construction and
operation of the Railway by MCC. including considerations of the
environmental and social impact assessment activities conducted as
required by Section 7 of this Railway Agreement.
July 2010 3 of 33
Government: The Government of Afghanistan or any successor entity,
acting on behalf of the Government of Afghanistan with respect to the
Aynak Mining Contract and the Railway Agreement.
(j) MCC-Jiangxi Copper Consortium (“MCC’T: The entity comprised of
China Metallurgical Group Corporation and Jiangxi Copper Company
Limited that was selected as the Preferred Bidder during the Aynak
Tender Process to negotiate and conclude the Aynak Mining Contract
with the Government and w hich w ill be bound by the terms of the
Aynak Mining Contract and this Railway Agreement, jointly and
severally, together with any successor entities.
(k) Ministry of Mines: The Ministry of Mines of the Government of
Afghanistan or any successor entity, acting on behalf of the
Government of Afghanistan with respect to the Aynak Mining
Contract and the Aynak Copper Project.
Ministry of Transportation and Civil Aviation: The Ministry of the
Government of Afghanistan or any successor entity, acting on behalf
of the Government of Afghanistan w ith responsibility for rail
transportation issues.
(m) Month: All references to months in this Railway Agreement shall be
based on the solar calendar specified in Article I8 of Afghanistan's
Constitution.
Pollution: Any direct or indirect alteration of the physical, thermal,
chemical, biological, or radioactive properties of any part oflhe
Environment by discharging, emitting, or depositing wastes so as
materially to affect any beneficial use adversely, or to cause a
condition which is hazardous or potentially hazardous to public health,
safety or welfare, or to animals, birds, wildlife, fish or aquatic life, or
to plants. The term “pollute” shall have a corresponding meaning.
Railway Construction Plan: A plan that sets forth the sequence and
schedule for Railway construction activities.
Route Study: A study which evaluates the technical merits of various
alternative routes or courses for the Railway.
(q) Waste: Any matter, whether liquid, solid, gaseous or radioactive,
which is discharged, emitted or deposited in the Environment in such
volume, consistency, or manner as to cause an alteration of the
Environment.
4. Incorporation of the Aynak Mining Contract
This Railway Agreement is being entered into by the Parties in
accordance w ith the terms of the Aynak Mining Contract and the
Railway MO A.
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The Parties acknowledge and agree that one purpose of this Railway
Agreement is to support the development and operation of the Aynak
Copper Project through the development of a Railway. The Parties
further acknowledge and agree that the Railway developed in
accordance with this Railway Agreement is also intended by the
Government to become part of a national railway network. As a result,
in the event that a conflict arises between the terms of this Railway
Agreement and the Aynak Mining Contract, the terms of this Railway
Agreement shall control. Matters which are not explicitly covered by
the terms of this Railway Agreement shall be governed by the
applicable terms, provisions and procedures of the Aynak Mining
Contract. Insofar as such matters are not covered by the Aynak
Mining Contract or this Railway Agreement, both parties shall resolve
such matters through friendly consultation in compliance with the
terms of the Minerals Law and all other applicable laws and
regulations, from lime to lime in effect in Afghanistan.
5. MCC’s General Rights under the Railway Agreement
Pursuant to the requirements of the applicable Afghan Law and in
accordance with the terms of the Aynak Mining Contract and the
Railway MOA, the Government hereby grants to MCC and MCC
hereby accepts the rights to develop, design, engineer, finance,
procure, construct, ow n, maintain and operate a railway to conduct all
of the operations hereinafter described in such areas and along such
route as may be agreed to by the Parties. This Railway Agreement
shall remain in effect until MCC’s total investment, is actually
recovered, or it is terminated in accordance with Section 46 of this
Railway Agreement.
(b) MCC shall have the exclusive right and shall receive the necessary
licenses and authorizations required under the law's of Afghanistan to
(i) construct the Railway in accordance with the Feasibility Study and
Railway Construction Plan, (ii) operate and maintain the Railway and
regulate the use of the Railw ay by third parties until MCC recovers its
total investment and (iii) transfer the Railway to the Government in
accordance with the terms set forth in this Railway Agreement.
(c) MCC shall be entitled to charge and collect tariffs or usage fees as a
condition of use of the Railway as specified in Section 21 of this
Railway Agreement and in accordance w ith the HOOT Agreement.
(d) MCC shall be entitled to the protections provided bv all applicable
provisions of Afghan law. including, Article ‘M of the Minerals Law',
with respect to expropriation, nationalization, deprivation and
confiscation of any assets ow ned and/or used by MCC pursuant to this
Railway Agreement.
1 July 2010 5 of 33
6. MCC’s General Obligations under the Railway Agreement
MCC hereby accepts the obligations to conduct its railway
construction, operations and activities, on a non-profit BOOT basis, in
accordance with all of the applicable terms of, this Railway
Agreement, the BOOT Agreement and the applicable laws and
regulations of Afghanistan.
MCC acknowledges and agrees that it shall conduct all such railway
operations and activities in a sound manner in accordance with those
international railway design, engineering, construction and operational
standards and practices which are incorporated in the BOOT
Agreement and mutually agreed upon by the Parties as best suited to
the physical, social, economic, environmental, political and security
conditions found in Afghanistan. All operations and activities under
this Railway Agreement shall be conducted in accordance with
environmental and social protection plans approved by the
Government prior to the commencement of operations so as to protect
natural resources against unnecessary damage, to prevent pollution and
contamination of the environment and protect affected communities
from negative impacts of railway construction and operation.
(c) MCC shall take all appropriate risk management measures to prevent
damage to the rights and proper!) of the Government of Afghanistan or
third parties. In the event of negligence or carelessness on the part of
MCC or its agents or of any subcontractor carrying on operations or
activities for MCC under this Railway Agreement, MCC will be liable
for such injuries in accordance with the applicable laws of
Afghanistan.
(d) MCC shall install and utilize such internationally recognized modern
safety devices and shall observe such internationally recognized
modem safety precautions and risk management measures as are
provided and observed internationally under conditions and operations
comparable to those undertaken by MCC under this Railway
Agreement. MCC shall observe internationally recognized measures,
including risk management measures, for the protection of the general
health and safety of its employees and of all other persons having legal
access to the area covered b> this Railway Agreement.
(e) MCC shall comply with such legally valid instructions as may from
time to time be given in w riting by the Government. MCC shall be
entitled to dispute the legality of any instruction which it believes may
adversely affect the rights, interests and protections provided by the
Aynak Mining Contract, and this Railway Agreement. Such disputes
shall be in accordance with the dispute resolution provisions
established in this Railway Agreement and BOOT Agreement.
(0 MCC shall pay all applicable fees, rents, penalties and other non-tax
charges to the Government as set forth in this Railway Agreement,
BOOT Agreement and the applicable laws of Afghaiislan.
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(g) MCC shall have sole responsibility lor financing all construction and
operations authorized pursuant to this Railway Agreement and
determining the terms on which said financing shall be obtained. MCC
may, as authorized by the applicable laws of Afghanistan, pledge such
rights, licenses and authorizations obtained in accordance with
operations authorized b} this Railway Agreement.
MCC shall bear and pay all expenses, costs and charges incurred in the
fulfillment of its obligations under this Railway Agreement, except
where such expenses, costs and charges are the responsibility of the
Government or third parties.
During the term of this Railw ay Agreement, MCC shall maintain, with
financially sound and reputable insurers, insurance against injury to
persons, damage to property and related contingencies, of such types,
on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is consistent with international practice. MCC shall
provide evidence of insurance to the Government as specified in the
BOOT Agreement.
(j) MCC shall provide open access to commercial use the Railway. The
Parties agree that the Railway shall not be operated to the disadvantage
of other users (including passengers), and the country of Afghanistan
in general as specified in the BOOT Agreement.
(k) MCC shall comply with all reporting requirements as agreed to and
specified in this Railwa) Agreement, the BOOT Agreement and the
laws of Afghanistan.
Insofar as such obligations are not otherwise covered by the terms of
the Railway Agreement or the Aynak Mining Contract, MCC shall
comply with the terms of the Minerals Law' and all other applicable
laws and regulations, from time to time in effect in Afghanistan.
7. Environmental Protection
MCC has made broad environmental and social protection commitments to the
Government concerning the Aynak Copper Project including, without limitation, its
commitment to comply w ith the applicable environmental laws and regulations of
Afghanistan, Afghanistan's environmental and social protection guidelines and policies, all
World Bank Environmental and Social Safeguard Policies, the Equator Principles and the
Voluntary Principles on Security and Human Rights. The Parties acknowledge and agree that
these commitments shall extend equally to all of MCC’s railway activities and operations, in
so far as these commitments are applicable to MCC’s railway activities. On this basis,
MCC's commitments and obligations with respect to environmental and social protection, as
more fully specified in Appendix 6 of the Aynak Mining Contract, are specifically adopted
and incorporated by reference into this Railway Agreement and are fully enforceable
pursuant to the terms of the Aynak Mining Contract and this Railway Agreement. In the
event of a conflict between the above referenced laws, regulations, guidelines and policies,
the Parties agree to adhere to the most applicable standard or combination of standards to
1 Julv 2010 7 of 33
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protect Afghanistan's environment and people. In light of these commitments, the Parties
acknowledge and agree as follows:
(a) MCC shall manage its railway activities and operations in a
technically, financially, socially, culturally and environmentally
responsible manner to achieve the environmental protection and
sustainable development objectives and responsibilities required by
this Railway Agreement and the Avnak Mining Contract, the laws of
Afghanistan and any applicable international conventions to which
Afghanistan is or may become a signatory;
(b) MCC shall prepare on a timely basis and as soon as practical an
environmental and social impact assessment of the Railway and related
facilities, activities and operations in accordance with the requirements
of the Aynak Mining Contract, this Railway Agreement, the
environmental laws of Afghanistan, and the above referenced
environmental and social protection guidelines, principles and policies.
MCC shall submit its environmental and social impact assessment for
the Railway and related facilities, activities and operations to the
Government for review and approval prior to commencing
construction of the Railway and its related facilities and structures.
MCC acknowledges and agrees that the Government may require
reasonable additional environmental and social impact assessment
activities as a condition of approval of the impact assessment;
(c) As specified in the BOO T Agreement, MCC shall prepare a railway
impact management plan that presents a detailed, technically and
scientifically sound approach to the management, mitigation or
elimination of railway impacts and risks to the environment and local
residents. MCC shall submit its railway impact management plan to
the Government for review and approval prior to commencing railway
construction and operation,
(d) MCC shall comply with the standards regulating the discharge or
emission of pollutants and waste into the environment associated with
railway construction and operation as specified in the railway impact
management plan; and
MCC shall provide fair compensation, as specified in the BOOT
Agreement and the law s of Afghanistan, for any loss suffered by any
local inhabitant resulting from any damage done or any interference
with any right to use additional land or water caused by MCC’s
construction or operation of the Railway under this Railway
Agreement. This Section excludes railway land acquisition,
resettlement, and relocation activities.
8. Government Right of Access
The Government reserves the right to access any and all areas covered by this
Railway Agreement for the purpose of any authorized legal activity, provided that if damage
results to MCC's property from such activity, the Government agrees to provide fair and
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reasonable compensation to MCC for such damage, except in cases where such damage is
I caused by an act of MCC.
9. Use of Subcontractors
I i
Without in any way detracting from MCC’s responsibilities and obligations under this
Railway Agreement and the Aynak Mining Contract, MCC may engage subcontractors for
I the execution of such phases of its railway activities and operations as MCC deems
appropriate.. MCC will have full responsibility and assume all risks related to the activities
of its subcontractors in accordance with the terms and conditions of this Railway Agreement
I and the Aynak Mining Contract. The records of such subcontractors shall be made available
to Government’ inspectors as provided in Appendix 3 of the Aynak Mining Contract, which
are adopted and incorporated by reference into this Railway Agreement as an enforceable
I part of this Railway Agreement.
10. Cooperation of the Parties
I The Parties will cooperate and take such actions as may be desirable to achieve the
mutual objectives of this Railway Agreement.
I (a) The Parlies agree that they will at all limes use their best efforts to
carry out the provisions of this Railway Agreement to the end that the
activities authorized by this Railway Agreement may at all times be
conducted efficiently and for the optimum benefit of the Parties.
(b) MCC agrees to plan and conduct all operations under this Railway
Agreement in accordance with the standards and requirements imposed
elsewhere in this Railway Agreement and the Aynak Mining Contract
for the sound and progressive development of rail transportation in
Afghanistan, to give at all times full consideration to the aspirations
and welfare of the people of Afghanistan and to the development of
Afghanistan, and to cooperate in promoting the growth and
development of Afghanistan's economic and social structure, and
pursuant to the provisions of this Agreement, at all times to comply
w ith the laws and regulations of Afghanistan.
(c) At any time during the term of this Railway Agreement, upon request
by either Party, the Government and MCC may consult with each other
to determine whether, in the light of all relevant circumstances, this
Railway Agreement requires revision in order to ensure that the
Railway Agreement operates equitably and without major detriment to
the interests of either Party. Such consultation shall be carried out in a
spirit of cooperation w ith due regard to the intent and objectives of the
respective Parties. Both Parties desire to realize the success of the
Railway for the benefit of the people of Afghanistan and the economic
and social growth and development of the nation.
(d) The Government shall provide all available data and information to
MCC for the preparation of the Feasibility Study.
1 July 2010 9 of
(e) An adequate reporting procedure is required and will be established for
the purpose of enabling each Party to be informed and capable of
proceeding with the performance of its activities in a timely and
efficient manner.
An Aynak BOOT Railway Committee will be formed and comprised
of MCC and the Government as members to ensure cooperative
development of the Railway.
11. Security
(a) The Parties acknowledge and agree that the Government shall be
responsible for the security of all facilities and structures, constructed
and operated in accordance with this Railway Agreement and for the
security of all persons involved in the preparation of the Feasibility
Study, construction and operation of the Railway. Security for the
Railway shall be separated into two parts, both of which will be the
responsibility of the Government. The purpose of the first part shall
consist of security measures necessary for the execution of the Route
Study and the Feasibility Study. The second part shall specifically
address security measures for the construction and operation of the
Railway. The full, detailed description of the second part shall be
negotiated by the Parties and referral to as "the Railway Security
Agreement, ' and attached to Ihe BOOT Agreement.
(b) MCC. through its Feasibility subcontractor, will prepare ami deliver a
timeline for and description of the execution and completion of Ihe
Route Study and Feasibility Study upon award ol the Feasibility Study
contract as defined in Section 15 of this Agreement The (iovemmenl
will prepare and deliver to MCC a security plan for the Route Study
and Feasibility Study within one month of receipt of MCC s timeline
Upon acceptance of the security plan for the Route Study and
Feasibility Study by the Parties, MCC will commence activities in
accordance with the timeline.
(c) In the event MCC believes the Government has failed to fulfill the
security responsibilities established under this Railway Agreement,
MCC shall notify the Government of such failure. In the event the
Government defaults on the obligations of this Section, the
Government shall compensate MCC for the actual loss, including
human and property loss, attributable to the Government default. If the
default is disputed by the Government, the Parties agree to pursue
dispute resolution as specified in Section 50 of this Railway
Agreement.
12. International Coordination
The Parties acknowledge and agree that the Railway constructed pursuant to this
Railway Agreement should be routed, designed, engineered, constructed, operated and
maintained in a manner that is consistent with the Government's regional and international
rail transportation planning efforts.
1 July 2010 siiS# 10 of 33
13. Conditions Precedent
The Parties acknowledge and agree that the rights and obligations granted to MCC
pursuant to this Railway Agreement are subject to the full satisfaction by the Parties of the
following conditions precedent:
(a) MCC shall:
i Prepare a Feasibility Study to determine the technical and economic
feasibility of constructing and operating the Railway in order to assist
MCC's decision making concerning the Railway;
ii. Prepare an environmental and social impact assessment for
Government review and approval;
iii. Prepare a railway construction plan for Government review and
approval as described in Section 19(a);
iv. Submit the Feasibility Study to the Chinese Government for approved
in the event the Feasibility Study shows the Railway project studied is
feasible in accordance with the generally accepted principles and
standards forjudging similar projects;
\ After the submission of the f easibility Study, obtain approval of the
Railway project from the Chinese Government;
vi. Obtain all necessary licenses and authorizations for railway
construction from the Government;
vii. Acquire adequate funding provided that the Feasibility Study is
acceptable to any lender or lenders selected by MCC.
(b) The Government shall:
1 Obtain the land and rights of way necessary' for railway construction
and operation in accordance with this railway agreement and the
Railway Security Agreement.
ii. Grant to MCC the exclusive right to use the surface of such lands and
such portions of the subsurface as may be necessary for the
construction, operation and maintenance of the Railway.
iii. Establish adequate security for survey, railway construction and
operation of the Railway in accordance with Railway Security
Agreement.
PART II - RAILWAY ROUTE SELECTION AND FEASIBILITY STUDY
14. Route Identification and Evaluation
(a) The Parties acknoyvledge and agree that the route of the railway shall
run from Torkham at the Pakistan border through Kabul and end at
1 July 2010 11 of 33
Hairatan on the Uzbekistan border. A spur will extend from Kabul to
the Aynak Copper Project. A more detailed route for the Railway and
proposed tentative locations for certain Railway facilities including,
terminals, depots and junctions will be identified by the Parties through
good faith discussion and consultation taking into consideration the
results of national and regional rail transportation planning and all
currently known and relevant technical, environmental, economic,
operational and logistical factors and requirements necessary for the
successful construction and operation of the Railway by MCC. The
Government has proposed a preferred route, which is described in
Appendix 1 to this Railway Agreement.
(b) MCC shall commence its evaluation, referred to in this Railway
Agreement as "the Route Study," of the selected Railway route and
facility locations as soon as practicable following the establishment of
adequate security in the areas to be evaluated. MCC’s route evaluation
activities may include, but not be limited to, additional surveying,
mapping, geotechnical analyses, sampling, and activities related to the
development of the Feasibility Study, which are required by this
Railway Agreement and more fully described in Section 15 of this
Railway Agreement.
(c) The Parties acknowledge and agree that in the event that they are
unable to select a mutually agreeable, proposed general route for the
Railw ay, the disputed portions of the route shall be evaluated in the
Feasibility Study as alternatives. The Parties agree that any disputed
portion or location of the Railway route which is determined to be
infeasible in the Feasibility Study shall not be included as part of the
Railway route. The Parties urther agree that any dispute concerning
the determination that a disputed portion of the Railway route is
infeasible shall be resolved per Section 50 of this Railway agreement.
In accordance with the terms of the Aynak Mining Contract, the
Government agrees that it shall take those steps necessary to ensure
that access to the proposed route and facility locations is made
available to MCC, its employees, contractors, subcontractors and
advisors conducting the evaluation.
15. Feasibility Study
(a) The Parties acknowledge and agree that the completion of a Feasibility
Study is a necessary prerequisite for the Railway. In its September 25,
2007 letter, MCC stated that it would proceed willi the Railway only
on the basis of the Railway being feasible. The Feasibility Study will
assess the suitability of the proposed railway route and associated
facilitv locations, taking into consideration the results of national and
regional rail transportation planning and all currently known and
relevant technical, environmental economic, operational and logistical
factors and requirements necessary for the successful construction and
operation of the Railway by MCC and will include consideration of the
environmental and social impact assessment required by Section 7(b)
of this Railway Agreement. The Parties acknowledge and agree that
the Feasibility Study shall be prepared by an independent third party
subcontractor selected in a competitive international tender process
conducted by YICC. The initiation of the competitive bidding process
shall be within 6 months of the signing of this Agreement. The
Feasibility Study shall be prepared in sufficient depth and detail so that
it would be acceptable to international lending institutions.
The Parties acknowledge and agree that the Feasibility Study must be
completed and demonstrate the feasibility of the Railway prior to
commencement of railway construction. Upon awarding the
Feasibil ity Study contract and acceptance of the Phase 1 Security Plan
(Section 11). the f easibility study shall be completed within 2 years or
as specified in the Feasibility Study contract. MCC shall promptly
submit its Feasibility Study to the Government for review. The
Government shall use its best efforts to complete its review of the
Feasibility Stud} w ithin three (3) months of receipt from MCC and
notify MCC, in writing,, of any concerns it may have regarding the
Feasibility Stud} W ithin two (2) months of being notified of the
Government's concerns. MCC will respond to the Government’s
concerns, and the Parties shall have two (2) months in which to reach a
mutually agreeable resolution of those concerns. At any time, either
Party may retain, at Us own expense, a recognized railway consulting
firm on the matter or matters of concern to recommend the best manner
of addressing the concerns.
ii. After the efforts described in Section I5(»)(i), the Parties may agree to
meet and consider alternate development scenarios, to include the
possibility of different means of funding construction and or operation
of the Railway. If the Parties are unable to agree on an alternate
development scenario, either Parly may choose to arbitrate the
unresolved issues in the Feasibility Study in accordance with Section
50.
(b) The Parties agree that MCC shall not be obligated to commence the
Route Study and Feasibility Study until each of the following
preconditions is satisfied:
i. This Railway Agreement is signed and in full force and effect;
Sufficient security measures have been taken by the Government with
respect to the Route Stud}- and Feasibility Study activities;
iii. The Government has notified MCC in writing that all necessary actions
to ensure MCC's access to the proposed route and facility locations
have been taken and such access is available to MCC.
16. BOOT Agreement
(a) When all conditions precedent established by Sections 13 and 15 of
this Railway Agreement are satisfied, the Parties shall:
i. Prepare and execute a detailed BOOT Agreement which will identify
I and allocate the specific rights, obligations and requirements between
the Parties and provide the legal basis upon which the construction and
I operation of the Railway will be undertaken in accordance with the
principles of this Railway Agreement;
Cooperate, and MC'(' shall obtain all necessary licenses and
I authorizations for Railway construction from the Government;
in Cooperate, and MCC shall obtain funding, if necessary, for railway
I construction, provided that the Feasibility Study is bankable and
acceptable to lenders selected by MCC.
17. Route Acquisition
I
Upon completion of the Feasibility Study and signing of the BOOT Agreement, the
Government shall obtain, at their own expense, and retain ownership of the railway right-of-
way and other property necessary for construction and operation of the Railway. The
Government will also conduct, at its own expense, the relocation and resettlement of people
displaced by the construction and operation of the Railway. The Government shall then
obtain and provide to MCC the proper authorization for the exclusive right to use the surface
of such lands and such portions of the subsurface as may be necessary for the construction,
operation and maintenance of the Railway. Subject to the applicable laws and regulations of
Afghanistan, MCC shall have the right to occupy and utilize for the duration of this Railway
Agreement, the surface of such areas selected by the Parties for use pursuant to this Railway
Agreement as may be necessary for the construction, operation and maintenance of the
Railway.
PART III - RAILWAY CONSTRUCTION
18. Railway Construction - General Requirements
(a) Following the acquisition of the land necessary/or the railway route
and associated operations and facilities, MCC shall undertake, at its
sole expense, the design, engineering, construction and testing of a
railway that meets the service requirements specified in the Feasibility
Study and this Railway Agreement. MCC shall be solely responsible
for the design, engineering, construction and testing of the Railway.
MCC acknowledges and agrees that all construction activities related
to the Railway shall be conducted in accordance with the Feasibility
Study, all applicable Afghan laws and regulations and all applicable
international practice standards and guidelines, including
environmental protection standards, adopted in this Railway
Agreement.
(b) All construction and pre-operation costs incurred in connection with
the Railway shall be borne by MCC and MCC shall be responsible for
arranging all funding necessary to construct the Railway.
1 Julv 2010 14 of 33
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(c) The Parties agree that the Government shall be responsible for
reasonable improvements to existing infrastructure necessary for the
construction and operation of the Railway.
(d) MCC shall, where possible, aw ard contracts to Afghan contractors and
suppliers of materials and services provided that, in its opinion, the
quality, delivery times, costs, reliability and other terms are
comparable to those offered by foreign contractors and/or suppliers.
(e) MCC, including its subcontractors, shall use its best efforts to purchase
goods and services in Afghanistan if there are available in Afghanistan
goods and services of suitable and reasonably comparable quality, and
at no higher price than goods available from abroad. In comparing
prices of goods available in Afghanistan to the prices of goods
imported by MCC, the following conditions shall apply. For goods
and services imported during the construction period, customs duties
shall not be added to the other expenses incurred up to the time the
imported goods are landed in Afghanistan. For goods and services
imported during operations, customs duties for raw materials shall be
added to the other expenses. The Parties agree that the process of
comparing locally available goods and services to imported goods and
services shall not delay MC’C's construction activities or operations.
(0 MCC shall be responsible for the importation and transportation of
equipment to the Railway site MCC shall comply with the import and
export requirements established in this Railway Agreement
(g) The Government shall be entitled, at its own cost, to moniloi lailwav
construction. For this purpose, MC( shall:
i. Ensure that the Government and any experts appointed by the
Government are afforded reasonable access to the Railway site at times
to be agreed with MCC provided that such access does not materially
interfere with railway construction activities or expose any person on
the railway site to any danger;
Make copies of all plans and designs available for inspection; and
Within tw o months of the completion of the Railway, supply the
Government w ith one set of reproducible copies, one digital copy in a
commonly used format and five sets of white print copies (or
equivalent) of all "as built" plans, maps and designs.
(h) MCC shall in no way represent to any third parts' that, as a result of
an\ review by the Government, the Government is responsible for the
engineering soundness of the Railway and shall, subject to the security
provisions of this Railway Agreement, be solely responsible for the
economic and technical feasibility, operational capability and
reliability of the Railway, until the Railway is transferred to the
Government in accordance w ith the requirements of this Railway
Agreement.
1 July 2010 15 of 33
During construction and operation of the Railway, MCC shall own the
Railway and all facilities, machinery and equipment used in connection
w ith the Railway which have been purchased or supplied by'MCC.
The Railway and all appurtenant structures, facilities, machinery and
equipment shall be transferred to the Government in accordance with
the transfer provisions of this Railway Agreement.
19. Railway Construction - Technical Requirements
(a) Railway Construction Plan - The Parties acknowledge and agree that
MCC shall prepare a railway construction plan that meets international
railway design, engineering and construction standards. The railway
construction plan shall include a proposed construction schedule. At a
minimum, the railway construction plan shall address the following:
track materials (rails, ties, fasteners); rail gauge; track configurations
(curves, lengths, clearances); rights of way; road crossings; buildings;
signal information: track culverts; track bridges; over track or under
track structures; utilities; and trackside devices. A copy of all planning
documents shall be provided to the Government.
(b) General Design and Construction Requirements - Tracks should be
designed and constructed in accordance with track design and
construction standards as defined in the BOOT Agreement.
Line Capacity - The railway line must provide adequate capacity so as
to allow efficient, reliable and economical movement of rail services in
Afghanistan for goods and passengers as determined in the Feasibility
Study and specified in the BOOT Agreement.
Interoperability - The Parties acknowledge and agree that the Railway
shall be designed and constructed to allow the efficient transport of
international goods and containers. As a result, the Railway and
related infrastructure and equipment shall meet international
requirements, including those for the transport and transfer of heavy
trains carrying goods such as coal, mineral ores, cement and grain.
Further, the Parties acknowledge and agree that the Railway design
and construction shall take into consideration technical requirements of
neighboring countries and endeavor to minimize or eliminate technical
barriers to interoperability between railways.
Construction Monitoring - During the Construction Period, MCC shall
furnish to the Government progress reports, as specified in the BOOT
Agreement, of actual progress of the construction of the Railway and
shall give all such other relevant information as may be required by the
Government. For the purposes of determining that construction is
being undertaken in accordance with the requirements of this Railway
Agreement, MCC shall employ quality assurance and quality control
methods as may be necessary and specified in the BOOT Agreement.
MCC shall promptly carry out such remedial measures as may be
necessary to cure the defects or deficiencies, if any, indicated in such
i ink, min 1 A of
test results and furnish a report to the Government confirming the
curative actions.
20. Construction Timetable
The Construction Timetable shall be determined following completion of the
Feasibility Study and included in the detailed BOOT Agreement.
21. Railway Facilities
Railway facilities to be constructed shall include, but not be limited to,
the tracks, rail yards, switches, sidetracks, depots, fuel stations, loading
and unloading facilities, communication, water supply, and other
necessarily related facilities for which MCC is, subject to the rights of
third parlies, authorized to construct and operate in accordance with
such reasonable safely regulations relating to design, construction, and
operation as required by international railway practice most suitable
for Afghanistan. The facilities may include, but are not limited to:
The tracks (rails, lies and fasteners), road bed, embankments; rail
yards; rights of way; drainage structures; road crossings; bridges;
sw itches, depots; fuel stations; and loading and unloading facilities;
ii. Access and maintenance roads;
iii. A modem wireless communications system that complies with
Ministry of Communication requirements;
iv. Water supply facilities;
v In addition, the Railway may require other buildings, workshops,
w arehouses, storage areas, sewage disposal, machine shops, repair
shops, and all such additional or other facilities, plant and equipment
as MCC shall consider necessary for its operations or to provide
services or to carry on activities ancillary or incidental to such
operations. The land and all appurtenant structures shall be returned to
the Government upon the expiration of this Railway Agreement.
All Railw ay facilities and structures shall be the personal property' of
MCC and may be mortgaged, pledged or otherwise encumbered during
the term of this Railw ay Agreement, with written notification to the
Government, by MCC subject to (i) the provisions relating to
Assignment and to Termination established in the Aynak Mining
Contract which are adopted and incorporated by reference into this
Railw ay Agreement and (ii) the provisions related to Railway transfer
established in Part V of this Railway Agreement.
1 July 2010 17 of 33
22. Railway Route Land Use
(a) Subject to the approval of the Government, MCC may appropriate and
use gravel, sand, clay, or stone found within the Railway Route Area
for purposes necessary and useful to MCC’s railway operations and
activities under this Railway Agreement. Provided that upon
termination of this Railway Agreement, any excavation shall be
rehabilitated by MCC in accordance with its approved mine
development, environmental management and reclamation plans.
MCC shall have the right to cut, appropriate and use the brushwood,
undergrowth and timber (except protected trees) which may be found
on public lands within the Railway route area, subject to the general
forestry law s of Afghanistan. Such cutting, appropriation, and use
shall be permitted only to the extent necessary to MCC’s railway
operations and activities. Such cutting, appropriation, and use may be
for the purpose of facilitating ingress and egress into and from the
Railway route, for the purpose of clearing land for the erection of
machinery, plant and buildings connected with MCC’s railway
operations and activities, and for the purpose of construction required
for MCC’s railway operations and activities. Provided, however, that
such timber shall be sold by MCC only with the prior approval of the
Government and subject to such conditions as may be imposed.
(c) MCC shall describe and provide a detailed estimate of its railroad
construction water supply requirements to the Government Subject to
the approval of the Government and consistent with the requirements
specified in any water supply agreement reached by the Parlies
pursuant to the Aynak Mining Contract or the Water Supply
Agreement, MCC may appropriate and use water found within or
outside the Route Area for MCC's railway construction activities
under this Railway Agreement. For water appropriated from outside
the Route Area, the Government w ill facilitate the acquisition of water
resources. MCC shall not adversely affect local agricultural water or
deprive any lands, villages, houses, or watering places for animals of a
reasonable supply of w ater insofar as such water has, through custom,
been utilized for such lands, villages, houses, or animals. Nor shall
MCC interfere with any w ater rights or existing uses of water enjoyed
by any persons under the law of Afghanistan.
PART IV - RAILWAY OPERATION
23. Railway Operation
Subject to the provisions of this Railway Agreement addressing the recovery of
MCC's investment, during the period of its ownership and operational control of the Railway,
MCC shall have full and effective control and management of all matters relating to the
operation of the Railw ay. MCC may, subject to complying with the applicable requirements
ot this Railway Agreement and receiving approval from the Government, make material
expansions or modifications of the Railway facilities, and may add new facilities, as MCC
1 July 2010 i s
shall consider necessary for the operation of the Railway. All such expansions,
modifications, improvements, replacements, and additions shall be considered part of the
Railway facilities.
(a) MCC shall, at its own cost, be responsible for the management,
operation, testing, inspection, maintenance and repair of the Railway
and shall ensure that the Railway is in good operating condition and
capable of carrying freight in a safe, uninterrupted manner which is
sufficient to meet the transportation requirements agreed to by the
Parties in this Railway Agreement.
(b) MCC shall operate the Railway in accordance with the licenses and
authorizations granted by the Government, all applicable Afghan laws
and regulations pertaining to railway operation and all applicable
international standards and guidelines adopted by the Parties as
enforceable requirements of this Railway Agreement, including
environmental requirements.
(c) The Government shall inspect the Railway on a periodic basis to
confirm that the Railway is being operated in conformance with
applicable Afghan laws and regulations and international standards
adopted by the Parties as enforceable requirements of this Railway
Agreement. The Parties shall jointly inspect the Railway on a periodic
basis to confirm that it meets the applicable structural, engineering,
operational and maintenance requirements identified in this Railway
Agreement, international practice standards most suitable for
Afghanistan, the Feasibility Study and the railway construction plan.
(d) During the period of its ownership and operational control of the
Railway, all operational and maintenance costs incurred in connection
with the Railway shall be borne by MCC. Subject to the provisions of
this Railway Agreement addressing the recovery of MCC’s
investment, MCC shall be responsible for obtaining the funds
necessary' to operate the Railway.
(e) MCC agrees that it shall provide sufficient training concerning all
aspects of railway operations and maintenance to allow the
Government to continue normal and established operations of the
Railway upon transfer of the Railway from MCC to the Government
As part of this training, MCC shall prepare an operations and
maintenance manual for the Government's use following transfer.
24. Recovery of Investment by MCC
The method by which MCC shall recover its investment will be through the collection
of tariffs and fees on Railway users.
(a) MCC shall negotiate with the Government railway authority to
establish tariffs and fees. MCC shall have the right at any time to
request the Government railway authority authorize an adjustment of
tariffs and fees.
I lnlv90in i o
(b) If MCC is unable to recover its investment as scheduled due to reasons
that are beyond the control ol MCC, MCC will notify the Government.
i. In the case of a negative operating cash flow, the Government will use
its best efforts to assist the Railway to continue operations.
In the event either party believes there is reason for early termination
of this Railwax Agreement, both Parties shall negotiate and mutually
agree to the terms of early termination of this Agreement, transfer of
railroad assets, and recover}' of MCC's outstanding investment.
(c) One year before commencement of commercial operation, and to set
the initial tariff, MCC's investment will be reported to the Government
railway authority responsible for establishing railway tariffs and fees.
(d) For accounting purposes, MCC's Railway investment shall be initially
estimated in the Feasibility Study, refined in the BOO T Agreement,
with the final amount of the initial investment determined within six
(6) months following the date upon which MCC Commences
Commercial Operation. MCC s initial investment will include
expenditures up to and including the date that MCC Commences
Commercial Operation including but not limited to any interest and
other charges directly regarding financing of the Railway project over
the life of the loan.
25. Review of Railroad Agreement Economic Terms
(a) The Parties shall, as needed, from the date on which the Railway
commences operations, review the economic terms of this Railway
Agreement and the BOOT Agreement, to determine whether the
existing economic terms of the Railway Agreement require amendment
to achieve the outcomes providing lor an adjusted allocation of
economic benefits between MCC and the Government.
(b) In undertaking such review, the Parties shall bargain in good faith with
a view tow ard providing a lair and equitable division of profits in light
of the economic factors prevailing at the time of the review.
(c) In undertaking such review the Parties shall be guided by, but not
limited to, consideration of the follow ing factors:
i The economic value of the Railway concession,
ii. The progress tow ards the recox ery of MCC's investment.
26. Tax Obligations and Financial Record Keeping
(a) Taxes shall be applied in accordance with the provisions of the Laws
of Afghanistan and as agreed to in the Aynak Mining Contract.
(b) Maintenance of Accounting Books and Records.
1 July 2010 20 of 33
I
MCC shall submit accounting and income tax returns for the full term
of this Railway Agreement in accordance with the provisions of
Afghanistan’s Income Tax Law. In determining MCC’s taxable
income as defined in the Income Tax Law, International Financial
Reporting Standards using sound, consistent, and generally accepted
accounting principles shall be employed, provided, however, that
where more than one accounting practice is found by the Government
of Afghanistan to prevail with regard to any item, the Government of
Afghanistan shall determine which practice is to be applied by MCC
with regard to the particular item.
ii. MCC shall, at its offices in Afghanistan, maintain books of accounting
stated in United Slates Dollars in accordance with generally accepted
accounting principles ("GAAP"). All payments to the Government of
Afghanistan shall be calculated in Afghanis in accordance with the
official exchange rate of the Da Afghanistan Bank and paid in
Afghanis or in such other currencies as may be acceptable to the
Ministry of Finance or any Government of Afghanistan agency which
is a successor in function thereto. MCC shall within a period as
provided by the prevailing law and regulations furnish annually to the
Government of Afghanistan audited financial statements prepared in
accordance with International Financial Reporting Standards together
with production statistics in reasonable detail. The accounts shall be
audited by an internationall\ recognized accounting firm acceptable to
the Government of Afghanistan.
iii. MCC shall permit the Government, through a duly authorized
representative, to inspect at all reasonable limes the books of account
and records of MCC relative to the construction and operation of the
Railway. Such books of account and records shall he maintained at
MCC’s offices in Afghanistan.
iv. The Government of Afghanistan shall be entitled to audit MCC
accounts in accordance with applicable Afghan law in order to confirm
MC'C's progress towards recovering its investment. MCC shall
maintain all relevant records for a period of ten (10) years for each tax
year that is necessary to audit MCC’s accounts. In the event that MCC
fails to maintain all relevant records and make available to the
Government of Afghanistan those records upon reasonable request, the
Government of Afghanistan shall be entitled to make reasonable
estimates of the information normally provided by such records.
v. In the event that the Government of Afghanistan enters into a similar
BOOT Agreement with a third party engaged in a similar BOOT
railway that, based on the laws in force in Afghanistan at the lime,
affords more favorable treatment with respect to the stability of fiscal
or other tax terms than have been granted to MCC under the Aynak
Mining Contract or this Railway Agreement, the Parlies agree that this
Railway Agreement and BOOT Agreement shall be amended to apply
the more favorable treatment to MCC.
1 Julv 2010
27. Compliance with Rail Transportation Requirements
The Parties acknowledge and agree that during the period of MCC’s ownership and
operational control of the Railway, MCC shall be subject to applicable Afghan law's and
regulations governing rail transportation, including the transportation of goods provisions set
forth in Afghanistan's Commercial Law. The Parties further acknowledge and agree that
MCC shall have a reasonable time period in which to modify its railway operations and
activities to achieve compliance with new laws or regulations that may apply to the Railway
in the future.
PART V - RAILWAY TRANSFER
28. Railway Transfer Entity
In accordance w ith the terms of the Railway MOA, the Parlies agree that no later than
two years prior to the dale on which the Parties anticipate that MCC will transfer ownership
and operational control of the Railway to the Government, the Government shall identify the
entity w hich the Government intends to operate the Railway. The Parties agree that this
entity shall consult with MCC to identify issues and develop policies regarding the operation
and management of the Railway after the transfer to the Government
29. Railway Transfer Date
The Parties agree that ownership and operational control of the Railway shall occur
no later than 30 days following a determination by the Parties tliat MCC has achieved the
recover}- of its investment specified in Section 24 of this Railway Agreement
30. Assets to be Transferred
The Parties acknow ledge and agree that the Railway assets will be transferred free of
charge from MCC ownership to Government ownership upon transfer of the assets from
MCC to the Government. The Parties agree that a list of Railway assets and the method of
transfer shall be prepared and agreed to by the Parties prior to the transfer date specified in
Section 29 of this Railway Agreement.
31. Warranty
The Parties acknowledge and agree that any and all Railway assets transferred to the
Government by MCC shall be in good working order and suitable for normal use on the date
of transfer. Any issue regarding the transfer of assets that is disputed shall be resolved in
accordance with Section 50.
32. MCC Use of Railway Following Transfer to Government
Once the Railway is transferred to the Government, MCC, or its successor, as
operator of the Railway, shall have the status of any normal public user of the Railway.
1 July 2010 22 of 33
I
PART VI - RAILWAY SOCIAL AND SUSTAINABLE DEVELOPMENT
COMMITMENTS AND OBLIGATIONS
33. Resettlement and Compensation Plan
The Government shall be required to compensate local residents adversely affected by
development activities authorized by this Railway Agreement. Compensation shall be
determined through the application of the Laws of Afghanistan and internationally accepted
principles of fairness and reasonableness.
34. Protection and Respect of Religious Belief
MCC has expressed its commitment to respect and protect the religious beliefs of the
Afghan people. To demonstrate this commitment, MCC shall provide employees and their
families with special places to conduct their religious actn ilies. The Parties acknowledge
and agree that MCC shall engage in consultation with appropriate religious and governmental
officials concerning the implementation of its commitment to protect and respect religious
belief.
35. Government’s and Third Parties’ Rights to Use Company’s Facilities.
Although it is expected that the Government will have laws governing the Railway,
MCC shall allow the Government and third parties the use of Railway facilities as more
particularly described in the BOOT Agreement and the laws of Afghanistan.
PART VII - LOCAL PURCHASING: PROMOTION OF NATIONAL INTERESTS
36. Services and Supplies
MCC, including its subcontractors, shall use its best efforts to purchase goods and
services in Afghanistan if there are available in Afghanistan goods and services of suitable
and reasonably comparable quality, and at no higher total price than goods available from
abroad including freight. In comparing prices of goods available in Afghanistan to the prices
of goods imported by MCC, the following conditions shall apply. For goods and services
imported during the Railway construction period, customs duties shall not be added to the
other expenses incurred up to the time the imported goods are landed in Afghanistan. For
goods and services imported during Railway operations, customs duties for raw materials
shall be added to the other expenses. The Parties agree that the process of comparing locally
available goods and services to imported goods and services shall not delay MCC’s
construction activities or operations.
PART VIII - EMPLOYMENT AND TRAINING OF AFGHAN NATIONALS
37. Employment of Afghan Nationals
MCC shall employ Afghan personnel, to the maximum extent practicable, and upon
terms which are acceptable to MCC, in all classifications of full-time employment, for its
railway construction and operations in Afghanistan. Such percentages and classifications
shall be specified in the BOOT Agreement.
38. Training
As specified in the BOOT Agreement, MCC shall provide for the training of suitable
persons of Afghanistan citizenship for Railway employment.
39. Non-Afghan Personnel
(a) Subject to the requirements established in this Part, MCC and its
subcontractors may bring into Afghanistan such non-Afghan personnel
as in MCC's judgment are required to carry out railway construction
and operations efficiently and successfully, and at MCC’s request
(which shall be accompanied by information concerning the education,
experience, and other qualifications of the personnel concerned), the
Government shall cause all necessary permits and visas to be issued
w ithin a reasonable time period and without hampering the continuous
and efficient performance of MCC under this Railway Agreement. In
this connection MCC shall have the right periodically to submit
manpower requirement plans and the Government will, within a
reasonable lime period during which it will conduct its review' of
MCC's proposal, thereupon issue the necessary permits and visas for
all personnel covered by any such plan subject only to completion of
the required security checks. MCC shall bear all costs related to the
issuance of such permits and visas for non-Afghan personnel. All
MCC employees entering Afghanistan shall respect the religious and
cultural traditions of Afghanistan.
(b) The Parties agree that work visas shall, subject to the Laws of
Afghanistan, remain valid for one to three years.
(c) There shall at all times be equal treatment, facilities, and opportunities
for all employees, both Afghan and non-Afghan, in the same job
classification regardless of nationality.
40. Employee Accident Compensation
MCC shall be responsible for the medical and rehabilitation costs for any Railway
employee injured performing his or her duties while employed by MCC. Injured employees
shall be entitled to return to the same or similar positions following recovery from injury. In
the event that a Railway employee is killed performing his or her duties while employed by
MCC, MCC shall be responsible for the payment of an adequate death benefit to the
immediate family of the deceased employee.
PART IX - IMPORTS AND RE-EXPORTS
41. Imports
(a) This Railway Agreement authorizes MCC, including its
subcontractors, to import into and use in Afghanistan all equipment
and materials, such as machinery, supplies, and equipment necessary
for the construction and operation of the Railway, including its Kabul
office in accordance with the Law s of Afghanistan and the Aynak
1 July 2010 24 of 33
Mining Contract. Some operational items that are difficult to control
may receive different treatment with regard to customs and duties as
provided in the BOOT Agreement. The import of equipment and
materials by MCC shall be in accordance with expedited customs
procedures, by routes selected by MCC and identified to the
Government and any means of transport. Prior to commencing
imports, MCC shall provide a list of equipment and materials to the
Government for review and shall provide all necessary documents
required by the Customs Office of the Ministry of Finance, as
necessary, for customs clearance. This authorization shall apply to the
following categories of imports:
All of the capital assets, construction materials and raw materials
related to the Railway including, but not limited to, machinery,
machine units, vehicles (excluding sedan cars), Railway facilities and
equipment, office equipment; appliances, office buildings, employee
housing, security facility equipment, schools, hospitals, domestic
goods and personal effects including household and living equipment
and goods belonging to foreign personnel employed in the project and
especially provided from abroad shall be exempted from the payment
of import duties during the railway construction period;
ii. During the operations period which shall commence immediately upon
expiration of the construction period, MCC shall be required to pay
import duties only on raw materials in accordance with the Customs
Law;
(b) The Government shall have the right to inspect and inventory any
articles imported by MCC.
(c) If MCC. including its subcontractors, intends to sell or transfer any
articles w hich have been imported free of duty under this Section, a
declaration shall be made to the Ministry of Finance before such sale
or transfer is effected, and, unless such goods are sold or transferred to
another company or contractor entitled to the same exemption, such
import duty shall be paid as may be assessed by the Ministry of
Finance in accordance with the customs laws and regulations as from
time to time in effect.
(d) If MCC applies any article which has been imported free of duty under
this Railway Agreement to a nonexempt purpose, a declaration shall be
made to the Ministry of Finance w ithin thirty days of such initial use of
nonexempt purposes and such import duty shall be paid as may be
assessed by the Ministry of Finance in accordance with the laws and
regulations governing customs.
(e) In order to enjoy the benefits granted by this Part, all articles which are
imported and for which a duty exemption is claimed must be marked
with the name or marks of MCC in a manner difficult to delete.
1 July 2010 25 of 33
MCC, including its subcontractors, shall be liable for violations of the
requirements of Afghanistan's Customs Law.
MCC shall maintain depreciation records for all imported items subject
to the exemptions established b> this Section and submit such records
to the Ministry of Finance annually.
42. Re-Exports
Any items imported by MCC or its subcontractors for use in connection with the
Railway and no longer needed for such use may be sold outside Afghanistan and re-exported
free of all customs duties and levies. No imported items shall be sold domestically except
after compliance with customs and import laws and regulations which shall at the time of
such sale be in effect.
43. Cooperation
All imports and exports of articles under this Railway Agreement shall be handled
simply and expeditiously and the Government will, at MCC's request, cooperate with MCC
in making appropriate arrangements between MCC and the customs authorities to this end.
The Government has agreed to establish a customs facility for the importation by MCC of
material necessary for the construction, operation and maintenance of the Railway, which
shall be funded, constructed and operated by MCC, to facilitate and complete the customs
clearance of such items. The Parlies agree that import shipments will receive customs seals at
the border, but shall only be opened upon arrival at the railway customs facility.
PART X - DOMICILE; SERVICE OF PROCESS
44. General
MCC shall be licensed to do business in Afghanistan, be subject to the jurisdiction of
Afghan courts for disputes that are not subject to the dispute resolution provisions specified
in Section 55 of the Aynak Mining Contract, and shall maintain an office or agent in
Afghanistan for receipt of service of process or notification or other official or legal
communication.
45. Notices
Notices for the purpose of this Railway Agreement shall be sufficiently
served if delivered or sent by registered post:
i. In the case of the Government, to the Ministry of Mines.
ii. In the case of MCC, to the manager of the Kabul office.
(b) All notices, requests or other communications required by, provided
for in, or relative to this Railway agreement shall be in writing. L-
mails, when acknowledged, and facsimiles shall be considered as
written communications.
1 July 2010 26 of 33
PART XI - MISCELLANEOUS PROV ISIONS
46. Termination
(a) In the event that:
MCC assigns to a third party all or a portion of the rights held by MCC
under this Railway Agreement without the previous written consent of
the Government as provided in Section 53, or
ii. MCC has know ingly submitted to the Government false statements
which were a material consideration for the execution of this Railway
Agreement, or
MCC fails to comply with any final decisions by the arbitral tribunal
with respect to a dispute with the Government under this Railway
Agreement, or
iv. There exists another material breach or nonobservance by MCC of any
of the terms, obligations, or conditions of this Railway Agreement, or
of any law of Afghanistan, or
\ MCC fails to construct or operate the Railway in accordance with this
Railway Agreement.
The Government may. subject to the provisions of this Section 46. revoke this
Railway Agreement and be entitled to recover any damages it may have sufibred due
to MCC committing one or more of the above actions.
(b) In the event that:
i. The Government revokes or otherwise terminates this Railway
Agreement without cause or legal justification, or
ii The Government violates MCC’s rights under this Railway
Agreement, or
MCC’s operations are interfered so seriously by the Government that
MCC is unable to maintain the normal operation of the Railway, or
The Government fails to provide sufficient security for the Railway
project in accordance with the terms of an executed Railway Security
Agreement, or
\ The Government fails to comply with any final decisions by the
arbitral tribunal in controversy arising with the Government under this
Railway project, or
\ i. There exists another material breach or nonobservance by the
Government of any of the terms, obligations, or conditions of this
Railway project, or of the laws of Afghanistan.
1 July 2010 27 of 33
MCC may, subject to the provisions of this Section 46, revoke this
Railway Agreement and be entitled to recover any damages it may
have suffered due to the Government committing one or more of the
above actions. MCC may also be entitled to recover the un-recouped
portion of its investment.
(d) If any Party believes it has suffered damages due to the actions or
inactions of the other Party, the Party shall submit the claim of
damages for dispute resolution in accordance with Section 50 of this
Railway Agreement.
47. Notification and Remedy
In the event that the Government seeks to terminate the Railway
Agreement pursuant to this Part, the Government shall give notice in
writing specifying the particular cause for termination and requiring,
within three calendar months of such notice (or within such extended
time as the Government may deem fair having regard to the
circumstances of the particular case), to remedy the same or make
reasonable compensation to the Government, as the case may be, in a
manner acceptable to the Government. In the event that MCC seeks to
terminate this Railway Agreement pursuant to this Part, MCC shall
give notice in writing specifying the particular cause of termination
and proposing a time period of at least three calendar months during
which the Government must remedy the same.
(b) If MCC or the Government shall fail to comply with said notice, the
Government or MCC may, after the expiration of the time period for
remedying the cause for termination, terminate this Railway
Agreement, provided, however, that where there is any dispute
between the Parties as to:
i. The existence of the cause for termination identified by the terminating
Party, or
ii. Whether there has been any breach or nonobservance by MCC or the
Government of any term, obligation, or condition of this Railway
Agreement, or
Whether any cause, breach or nonobservance can be remedied or as to
the manner in which it should be remedied,
(c) MCC or the Government may, within one year of notice refer the
dispute to arbitration, and neither the Government nor MCC shall
exercise its power of termination until the result of arbitration is
known, and then subject to the terms of the award. Provided, however,
that if MCC or the Government elects to refer the dispute to
arbitration, it shall be prompt in prosecuting its claim before the
arbitral tribunal.
48. Default
Failure by a Party to perform or comply with any of the terms,
provisions or obligations of this Railway Agreement, expressed or
implied, shall not automatically terminate this Railway Agreement. In
the event of a default, the aggrieved Party may notify the other Party in
writing of the default or breach, and the notified Parly shall have a
period of thirty (30) days after receipt of such notice to cure, or
commence and diligently pursue activities if the breach cannot
reasonably be cured within thirty (30) days; provided that the period of
lime for remedying the breach shall be extended by any time that a
Party is prevented from acting because of an event of circumstances
beyond its control, including Government action or inaction. If a Party
fails to commence corrective activities within such time for remedying,
the other Party may terminate this Railway Agreement by giving
written notice.
(e) In the event that a failure by a Party to perform or comply with any of
the terms, provisions or obligations of this Railway Agreement causes
economic loss including the outstanding portion of MCC’s investment
to the other Party, the defaulting party shall compensate the other Party
for the amount of the economic loss sustained by the other Party.
49. Force Majeure
(a) General.
(b) Any failure by the Government or any of its Ministries or subdivisions,
or by MCC, to carry out any of its obligations under this Railway
Agreement shall not be deemed a breach of the Railway Agreement if
such failure is cause by force majeure. If, through force majeure. the
fulfillment by either Party of any terms and conditions of this Railway
Agreement is delayed, curtailed or prevented, then, anything in this
Railway Agreement to the contrary notw ithstanding, the time period
for fulfilling the obligation thereby affected shall each be extended for
a period equal to the total of the periods during which such causes or
their effects were operative. For purposes of this Raihvay Agreement,
force majeure shall include wars, acts of terrorism, insurrections, civil
disturbances, blockades, embargoes, strikes and other labor conflicts,
riots, epidemics, earthquakes, storms, floods, or other adverse weather
conditions, explosions, fires, lightning, orders or directions of any
government de jure or de facto or instrumentality or subdivision
thereof, and acts of God or the public enemy. Provided, however, that
only such loss, damage or injury as could not have been avoided by the
taking of proper precautions, due care or such reasonable alternative
measures as aforesaid shall be regarded as the consequences of any
failure caused by force majeure.
(c) Notice.
i T.,K-onin /yy /! y?
The Party whose ability to perform its obligations as affected by force
majeure shall, as soon as possible after the occurrence, notify the other
Party thereof in writing, stating the force majeure and identifying the
additional time period necessary to address the force majeure. The
Parties shall agree as to the amount of time necessary to address the
force majeure and the parties shall endeavor to do all reasonable within
their power to remove such cause and resume activities within the
agreed upon time period; provided, however, that neither parly shall be
obligated to resolve or terminate any disagreement with third parties,
including labor disputes, except under conditions acceptable to it or
pursuant to the final decision of any arbitral, judicial, or statutory
agencies having jurisdiction to finally resolve the disagreement. As to
labor disputes, the Government and MCC will cooperate in a joint
endeavor to alleviate any conflict which may arise.
50. Dispute Resolution
Disputes arising under this Railway Agreement, which cannot be amicably resolved
by the Parlies, shall be settled through the follow ing dispute settlement process;
Either Party shall have the right, subject to no conditions precedent, to
refer the dispute to the International Centre for Settlement of
Investment Disputes ( TCSID^) for settlement by conciliation and/or
arbitration as hereinafter provided. Either Parly may commence
conciliation or arbitration proceedings by giving notice to the other
Party and to the Secretary-General of ICSID (including in such notice
a statement of the question or dispute and of the claim or contention of
the Party giving the notice). The assignment, transfer, lease or pledge
of the right authorized by the Government to build, own, operate and
transfer the railw ay line or any part thereof by MCC as specified in the
railway agreement shall not prejudice MCC’s right under this section.
I he Rules of Conciliation and Arbitration of ICSID shall govern the
conciliation and arbitration. The place of conciliation or arbitration
shall be such as may be agreed by the parties and in default of
agreement shall be as provided in the Rules of ICSID.
(c) Pending the issue of a decision or aw ard, the operations or activities
that shall have given rise to the arbitration need not be discontinued,
but if the decision or award recognizes that a complaint was justified,
provision may be made in the award for such reparation or
compensation in respect of such continued operations and activities as
shall be decided by the arbitrator to be appropriate.
The decision of the arbitrator shall be final and binding upon the
Parties to this Railway Agreement and upon any person who
participated as a party in such arbitration proceedings, and they shall
comply in good faith with the decision.
(e) Should ICSID be replaced by, or its functions substantially change, or
are transferred to any new international body of similar type and
1 July 2010 30 of 33
competence, the function of the Arbitration Tribunal of ICSID
provided by this Article shall be exercised by the chief officer of such
international body w ithout further agreement of the Parties.
Principles of fairness, good faith and fair dealing shall apply during the
arbitration if no applicable law or regulation exists.
If the services of ICSID are unavailable to the parties to this Railway
Agreement, then such unsettled dispute shall be referred to the
Arbitration Institute of the Stockholm Chamber of Commerce for
arbitration pursuant to the Rules of Arbitration of the United Nations
Commission on International Trade Law (‘'UNCITRAL”). The place
of the arbitration shall be in Stockholm and the arbitration tribunal
shall be composed of three arbitrators appointed in accordance with the
Rules of UNCITRAL. The aw ard of the arbitration tribunal shall be
final and binding on the Parties to this Railway Agreement and on any
persons who participated as a party in such arbitration proceedings.
Both Parties agree to accept the jurisdiction of the Arbitration Institute
of the Stockholm Chamber of Commerce and execute voluntarily the
aw ard of the said Arbitration Tribunal of this Arbitration Institute of
the Stockholm Chamber of Commerce.
(h) The arbitration fee shall be borne by the losing party.
51. Duration
The Parties agree that this Railway Agreement will take effect immediately upon
execution by the Parties. This Railway Agreement shall remain valid until MCC has
recovered its total investment regarding the Railway as described in this Railway Agreement.
This agreement may also terminate in accordance with the terms and provisions of this
Railway Agreement, or as otherwise mutually determined and agreed to in writing by the
parties.
52. Assignment
MCC may not assign, transfer, lease or pledge any of the rights, privileges, liabilities
or obligations established under this Railway Agreement without the prior written consent of
the Government. The consent of the Government shall not be required where:
The assignment is solely for the purpose of providing security for the
financing of the Project or,
ii. The assignment is to another company controlled by MCC through
share-holding, provided that the Government shall be informed of any
such assignment with 30 days advance notice prior to the assignment.
(a) The Government shall not give its consent unless it is satisfied that:
i. The proposed assignee is itself of good reputation or is a member of a
group or groups of companies of good reputation or is owmed by a
company or companies of good reputation;
1 July 2010 31 of 33
ii. There is likely to be available to the proposed assignee either from its
ow n resources or through other companies in the group of w hich it is a
member, or otherwise, sufficient technical know ledge, experience,
know-how and sufficient financial resources to enable it to effectively
carry out a program satisfactory to the Government for the operations
hereunder; and
iii. The proposed assignee is in all other respects acceptable to the
Government. The Government may impose such conditions on the
assignment as it considers appropriate.
The assignee shall have all the rights and privileges and shall assume all the liabilities
apd obligations of the assignor with respect to what is assigned w ithout relieving MCC of
such liabilities and obligations unless the Government expressly consents to such a release.
53. Amendments
The Parties mutually agree that this Railway Agreement may be amended by the
written consent of the Parties and will be revised as necessary. For the purpose of this
Railway Agreement, the Ministry of Mines is authorized to approve decisions concerning
amendments lor the Government and MCC, or its successor, is authorized to approve
decisions concerning amendments for MCC.
54. Applicable Law.
This Railway Agreement is subject to and governed by all applicable laws of the
Government of Afghanistan.
55. Complete Agreement
This Railw ay Agreement, consisting of the above Sections 1-55, together with the
herein referenced documents, constitutes the complete agreement of the Parlies with respect
to the Railway for the Aynak Copper Project and supersedes all prior agreements and
understandings between the parties regarding the Railway. This Railway Agreement shall be
e 'cuted in English in four (4) originals with each Party holding two (2) originals and in
1 i. In the event that a dispute arises under this Railw ay Agreement, between the English
and Dari versions, the English text shall be definitive as to the terms, conditions, rights and
obligations of the Parties under this Railway Agreement.
*** SIGNATURES FOLLOW ON NEXT PAGE ***
1 July 2010 4^ 32 of 33
Agreed to and a V*) dav of S' It ,2010:
Accepted this
Ministry of Mines rr
MCC-Jiangxi Copper
Consortium
1 July 2010
33 of 33
APPENDIX 1: RAILWAY ROUTE
1 July 2010
The general Railway rouljn„ ^ shown in Figure L is described as transiting the following
towns, mine locations r
’ and provinces of:
1. At the border Pakistan near Torkham in Nangarhar; west to
2. -ru UA’ m ? Province; with a spur line to
3. pie Aynak Mine# in Logar Province.
4. rom abu , north to Parwan Province; west to
5. Bamiyan in Province; north l0
6. Baghlan Proving northto
7. “z’in ^duz Province; west to
8. Naibabad ana north to Hairatan, in Balkh Province on the Uzbekhistan border.
1 July 2010
iTakhar
Samangan
s ®i2Q'lO^Gne^Spo|t^mage
^>/2Q1Q£u(?Suechrioloa'e6 Peihawari
Figure 1. - PREFERRED RAILWAY ROUTE
1 July 2010