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January 31, 1995

The Honourable Toberto R. Romulo
Secretary of Foreign Affairs
Department of Foreign Affairs
Manila

Your Excellency

1. I have the honour to inform you that it is the intention of the Government of the United Kingdom of Great Britain and Northern Ireland to make available to the Government of the Republic of the Philippines certain sums by way of a grant ("the Grant") consisting of contributions towards the cost of the purchase of certain goods wholly produced in and supplied from the United Kingdom and other specific items acceptable to my Government referred to in paragraph 3-2 of Appendix D to this Note, ("UK goods") and certain services performed by persons normally resident in the United Kingdom ("UK services").

2. Our two Governments have agreed that the Grant will be paid by my Government for the benefit of the Manila International Airport Authority.

3. The UK goods and UK services referred to in paragraph 1 of this Note are to be provided under a contract dated 12 October 1994 ("the Contract") between the Manila International Airport Authority, Manila, Philippines ("the Buyer") and Serco-IAL Systems Ltd of Serco House, Hayes Road, Southall, Middlesex, a company registered in the United Kingdom ("the Seller"), for the supply of airport security equipment and services at Ninoy Aquino Airport in Manila.

4. The amount of the Grant will not exceed whichever is the less of the following:-

a) £4,167,025 (four million one hundred and sixty seven thousand and twenty five pounds sterling) or

b) 35 percent of the total cost of UK goods and UK services supplied in accordance with the Contract.

5. The Contract is also to be financed in accordance with an agreement ("the Loan Agreement") dated ............ 19..between the Buyer and West Merchant Bank Limited, 33-3 6 Gracechurch Street, London EC3V OAX.

6. The approved Contract and the Loan Agreement will not be assigned nor the texts amended without the prior approval of my Government's Overseas Development Administration and Export Credits Guarantee Department.

7. The implementation of the Contract is intended to form part of a project consisting of the supply and installation of airport security systems to improve the security of Ninoy Aquino Airport in Manila ("the Project"). A detailed project memorandum is set out in Appendix D to this Note. Your Government will ensure the provision of such finance additional to the Grant as may be required to complete the Project.

8. Your Government will ensure that the Buyer undertakes in writing to:

i) construct an inner security fence and establish an inner airfield security zone within eighteen months of this Note coming into operation, in order to limit and prevent access to aircraft and vital installations,

ii) complete within eighteen months of this Note coming into operation, a perimeter road within the inner security fence to enable patrols to be conducted;

iii) ensure that its managers participate in the "Managing Airport Security Courses" conducted under the Project;

iv) give careful consideration to the purchase of any future equipment with a view to ensuring that it interfaces with equipment provided under the Contract;

v) make available an adequate budget for the local cost element to include the ongoing operation and maintenance of the security equipment and the purchase of spare parts.

9. Save to the extent to which my Government notifies your Government otherwise in writing, drawings from the Grant will be made in accordance with the following paragraphs of this Note.

10. Drawings from the Grant will not exceed the following amounts, in the following periods:

The maximum Grant payable:

(i) until 31 March 1995 will not exceed £1,785,868
(ii) until 31 March 1996 will not exceed £3,248,192
(iii) until 31 March 1997 will not exceed £3,790,668
(iv) until 31 March 1998 will not exceed £4,109,200
(v) until 31 March 1999 will not exceed £4,167,025

11. Subject to the total limit specified in paragraph 4 of this Note and subject to paragraph 10, 20 and 21 of this Note, drawings from the Grant to a total not exceeding £4,167,025 will be applied to certain payments, as specified below:

i) on the coming into operation of the arrangements set out in this Note or when the conditions in Clause 3 9 and sub-clause 17.5 of the Contract and Article 4 of the Loan Agreement have been fulfilled apart from any requirement therein that this payment shall have been .made, whichever is the later, a sum of £1,785,868 may be paid as an advance;

ii) thereafter sums, none of which will, individually, exceed 20 percent of the value of UK Goods or UK Services supplied and delivered in accordance with Clause 17 of the Contract, up to the total value of £2,381,157 may be paid.

12. The Grant will not be used to meet the cost of any taxes, fees, import or customs duties directly or indirectly imposed by your Government. No termination payment will be made from the Grant.

13. Goods will be shipped and insured in accordance with normal commercial competitive practice and not directed to ships or companies of any particular flag or country. This provision will be stated explicitly in all contracts for the supply of goods and services to be paid for out of money made available under the Grant.

14. Your Government hereby appoints the Crown Agents for Oversea Governments and Administrations ("the Crown Agents"), as your Agents in the United Kingdom to manage the financial arrangements set out in this Note.. The Crown Agents are therefore requested by your Government on behalf of the Buyer to open a Special Account which will be styled the United Kingdom/Philippines (Manila Airport Security Equipment) Grant 1994 Account ("the Account").

15. In consideration of the Crown Agents accepting appointment as your Agents your Government undertakes to indemnify and keep indemnified the Crown Agents against third party claims and liabilities incurred in the proper performance of their duties under the arrangements set out in this Note.

16. The Crown Agents will, and as often as any change is made therein, separately notify our two Governments of the names of the officers of the Crown Agents who are duly authorised to sign on their behalf the Requests for Drawing referred to in Appendix A to this Note, and will furnish a specimen signature in duplicate of each such officer.

17. To the extent that the Crown Agents, acting on behalf of my Government, accept a request from the Seller for a payment in accordance with paragraphs 11 and 2 0 of this Note, and under instruction from your Government under paragraph 21 of this Note, my Government will on receipt of a request, in the form set out in paragraph 3 of Appendix A to this Note, from the Crown Agents acting on behalf of your Government, make payments in sterling into the Account and each such payment will constitute drawing on the Grant.

18. Unless my Government notifies your Government otherwise m writing, the last date for payment into the Account opened in accordance with paragraph 14 of this Note will be 31 March 2000.

19. Unless my Government notifies your Government otherwise m writing, drawings from the Grant will be used as provided in paragraph 11 of this Note only and according to the procedures set out in paragraphs 20 and 21 below.

20. Not later than 14 days before the due date of the first payment due to be made under the Contract, your Government will provide the Crown Agents with copies of the signed Contract and Loan Agreement. In relation to those payments to be made under the Contract by the Buyer,, which may be met from the Grant, withdrawal from the Account will be made on receipt by the Crown Agents of:

i) a Payment Certificate from the Seller in the form set out in Appendix B to this Note and the documents referred to therein as appropriate;

ii) any other documentation which is required by the Contract in support of a payment request;

iii) a banker's guarantee in the form set out in Appendix C to this Note (to be construed in accordance with English law), unconditionally and irrevocably guaranteeing payment to the Crown Agents {for crediting to the Account) of the equivalent of such sums as have been advanced for goods and services not provided in accordance with the Contract;

iv) such other relevant documentation as may reasonably be requested by the Crown Agents.

21. In the case of frustration or premature termination of the Contract the Grant may be used to defray the costs incurred by the appointment by Crown Agents of an independent firm of accountants to evaluate and certify as to any sums advanced which have not been expended or irrevocably committed to be expended.

22. Your Government will ensure that a sum in sterling equivalent to any sum paid out of the Account and refunded by the Seller or a guarantor, whether to your Government or not, is repaid to the Crown Agents for crediting to the Account.

23. Your Government will ensure that United Kingdom contractors or suppliers used for the purposes of procuring goods and services paid for under the arrangements set out in this Note extend to my Governments personnel sufficient access to permit a proper examination and assessment of procurement efficiency, including written procurement procedures, evaluations of bids, contract award, tender board decisions, and other relevant documents, as well as day-to-day working practices. Your Government will ensure that this right of access for the representatives of my Government is stated in the contracts between the Seller and the Buyer.

24. My Government has the right to recover any sums remaining in the Account for a period of six months or more. The Crown Agents will remit to my Government any sum remaining in the Account six months after the date in paragraph 18 of this Note.

25. In the event of any goods and services to be provided under the Contract not being so provided, my Government has the right to recover forthwith from your Government any sums paid from the Grant in respect of such goods and services not so provided.

26. My Government has the right to recover from your Government any sum paid out of the Grant in excess of 3 5 percent of the final total value of UK goods and UK services provided in accordance with the Contract. Your Government will ensure that the Seller, not later than ......................... (Note: ie six months after scheduled final delivery date in Contract), provides my Government with a statement listing all goods and services provided under the Contract and their cost, indicating those which are not UK goods or UK services.

27. Your Government will ensure that all goods and all services for which payment has been financed from the Grant will be employed for the purposes for which and by the user for whom they were supplied, for as long as their being so employed remains feasible. In the event of such goods not being, or ceasing to be, so employed ray Government will have the right to recover forthwith from your Government the equivalent of the amount drawn from the Grant for their purchase.

28. Your Government will ensure that my Government's authorised personnel and agents are permitted to examine on arrival any goods purchased from the Grant and to visit any site on which work funded from the Grant is to be or is being done and will enable such personnel and agents to be furnished with such information as regards the Contract and .the progress of work and its financing as they require, including periodic progress reports from the Seller.

29. Your Government will ensure the provision of such finance additional to the Grant as may be required to complete the purchases to be made under the Contract.

30. In the event of translation the English language text of this document will prevail.

31. If the arrangements set out above are acceptable to the Government of the Republic of the Philippines I have the honor to suggest that this Note, and your reply to that ¦effect, will place on record the understanding of our two Governments in this matter which will come into operation on the date of your reply and will be referred to as "the United Kingdom/Philippines (Manila Airport Security Equipment) Grant 1994".

I avail myself of this opportunity to renew to your Execellency the assurance of my highest consideration.

(Sgd.)
A E Montgomery
HM Ambassador