MILLENNIUM CHALLENGE COMPACT ACT, 2013

Arrangement of Sections

PART I
PRELIMINARY

Section

   1.   Short title and commencement

   2.   Scope

   3.   Interpretation

   4.   Application

PART II
IMPLEMENTAION FRAMEWORK

   5.   Oversight and management of Project

   6.   Vesting and delegation of rights and responsibilities

PART III
ACCOUNTING, AUDITING, TAX, PROCUREMENT AND FUNDS

   7.   Accounting principles

   8.   Records

   9.   Audits

   10.   Public procurement

   11.   Exemptions

   12.   Sequestration, compulsory acquisition and liquidation and receivership proceedings

   13.   Sale, donation or disposal of assets

PART IV
GENERAL PROVISIONS

   14.   Indemnity, liability and claims

   15.   Funds of Project and annual reports

   16.   Regulations

   17.   Repeal of Act

      FIRST SCHEDULE

      SECOND SCHEDULE

AN ACT

to give effect to the Millennium Challenge Compact and Program Implementation Agreement; expand access to, and improve reliability of, water supply, sanitation and drainage services in select urban and periurban areas of the City of Lusaka in order to reduce the incidence of waterborne and water related diseases; generate time savings for households and businesses and reduce nonrevenue water in the water supply network by improving water supply and sanitation and drainage services; and provide for matters connected with, or incidental to, the foregoing.

[22nd March, 2013]

Act 6 of 2013.

PART I
PRELIMINARY

1.   Short title and commencement

This Act may be cited as the Millennium Challenge Compact Act, 2013, and shall come into operation on such date as the Minister may, by statutory instrument, appoint.

2.   Scope

   (1) This Act shall apply to the areas, in the city of Lusaka, stipulated in Annex 1 of the Millennium Challenge Compact.

   (2) This Act shall bind the Republic.

3.   Interpretation

In this Act, unless the context otherwise requires—

“Articles” means the Articles of Association of the MCA-Zambia as registered under the Companies Act;

“Board of Directors” means the governing body of the MCA-Zambia, as constituted under section 5;

“Compact Implementation Funding” means the funding, in the amount specified under the Millennium Challenge Compact, to facilitate the implementation of the Millennium Challenge Compact for purposes specified under section 5 and the Millennium Challenge Compact;

“Compact term” means the five year period that the Millennium Challenge Compact shall be in force, unless terminated in accordance with the Millennium Challenge Compact;

“established entity” means any person or body empowered by law to regulate or perform any function relating to water and sanitation, solid waste, water resources management, natural resources, public procurement, public audits, finance, accounting and construction, and includes a Minister;

“implementing entity” means an entity or institution appointed under section 6 as an implementing entity;

“MCC” means the Millennium Challenge Corporation, a United States Government corporation established under the laws of the United States of America;

“MCC Funding” means the Program Funding and Compact Implementation Funding, and includes any refunds or reimbursements of Program Funding or Compact Implementation Funding paid by the Government of Zambia in accordance with the Millennium Challenge Compact;

“Millennium Challenge Account Zambia” or “MCA- Zambia” means the company incorporated in Zambia under the Companies Act for purposes of this Act and the Millennium Challenge Compact;

“Millennium Challenge Compact” means the five year agreement entered into by and between the Republic of Zambia and the United States of America, through the MCC, on 10th May, 2012, and signed in Lusaka, Zambia, as set out in the First Schedule;

“permitted assignee or designee” means any entity to whom the Government has delegated rights and responsibilities under section 6 and the Millennium Challenge Compact and Program Implementation Agreement;

“Program” means the activities, actions and processes to be undertaken or observed for the Project under the Millennium Challenge Compact and the Program Implementation Agreement;

“Program Funding” means the funding, in the amount specified under the Millennium Challenge Compact, for the use of the Government in implementing the Program;

“Program Guidelines” means such guidelines as are stipulated in the Millennium Challenge Compact and the Program Implementation Agreement, including accounting, auditing, procurement, governance, reporting, policy, monitoring and evaluation, administration, Program implementation, gender and environment, as the case may be;

“Program Implementation Agreement” means the agreement entered into by and between the United States of America, acting through MCC, and the Republic of Zambia, dated 10th May, 2012, as set out in the Second Schedule; and

“Project” means the Lusaka Water Supply, Sanitation and Drainage Project as stipulated in the Millennium Challenge Compact.

4.   Application

Notwithstanding the provisions of any other law, except the Constitution, this Act shall govern the implementation of the program.

PART II
IMPLEMENTATION FRAMEWORK

5.   Oversight and management of Project

   (1) The Board of Directors as constituted under the Articles are as follows—

      (a)   the Secretary to the Treasury;

      (b)   the Permanent Secretary from the Ministry responsible for finance;

      (c)   the Permanent Secretary from the Ministry responsible for local government;

      (d)   the Chairperson of the Board of Directors of the Lusaka Water and Sewerage Company;

      (e)   the Town Clerk of the Lusaka City Council;

      (f)   the Chairperson of the Zambia Environmental Management Agency Board;

      (g)   the Executive Director of the Non-Governmental Organisation Coordinating Council;

      (h)   the Executive Director of the Civil Society for Poverty Reduction; and

      (i)   a representative from the private sector selected in accordance with the Articles.

   (2) Subject to section 6, the rights, obligations and responsibilities of the Government under the Millennium Challenge Compact and the Program Implementation Agreement shall be overseen and undertaken by the Board of Directors.

   (3) Without prejudice to the generality of subsection (2), the Board of Directors shall be responsible for—

      (a)   securing the proper and effective utilisation of the MCC Funding;

      (b)   ensuring that funds and other resources that are necessary for the implementation of the Government’s obligations and responsibilities as specified under the Millennium Challenge Compact and Program Implementation Agreement are budgeted for;

      (c)   ensuring that all MCC Funding received or that is projected to be received by the Government, for each financial year, is accounted for in the Government’s annual budget;

      (d)   ensuring that the MCC Funding is used in the manner and for the purposes specified under the Millennium Challenge Compact and Program Implementation Agreement and is not used for any purpose that may contravene the United States law or policy as specified under the Millennium Challenge Compact and Program Guidelines;

      (e)   ensuring that measures are put in place for the active participation of the private sector in the implementation of the Millennium Challenge Compact;

      (f)   putting in place activities and measures to build human resource capacity for the successful implementation of the Millennium Challenge Compact;

      (g)   ensuring that the procurement of goods, works and services for the implementation of the Millennium Challenge Compact comply with this Act and any relevant Program Guidelines;

      (h)   ensuring compliance with the Program Guidelines; and

      (i)   ensuring that MCA-Zambia is and remains, throughout the Compact term duly organised, sufficiently staffed and empowered to exercise the Government’s rights, obligations and responsibilities.

   (4) For purposes of subsection (2), the MCA-Zambia shall have the following rights, obligations and responsibilities:

      (a)   the power and authority to bind the Government with, the approval of Cabinet, to the full extent of the Government’s rights, obligations and responsibilities under the Millennium Challenge Compact and the Program Implementation Agreement;

      (b)   to execute and deliver each agreement, certificate or instrument contemplated by the Millennium Challenge Compact, the Program Implementation Agreement, any other supplemental agreement or Program Guidelines;

      (c)   to perform the Government’s rights, obligations and responsibilities under this Act, the Millennium Challenge Compact, the Program Implementation Agreement, any other supplemental agreement and Program Guidelines;

      (d)   to confirm each representation that it makes on behalf of the Government in any agreement, certificate or instrument delivered by MCA-Zambia with all relevant implementing entities prior to providing such representation to MCC; and

      (e)   to the MCC’s satisfaction, to cause all assets of the Project and risks or liabilities associated with the operations of the Program to be insured, in accordance with the Program Implementation Agreement.

   (5) The Board of Directors shall ensure that any assets or services funded in whole or in part under the MCC Funding are used solely in furtherance of the purposes specified under the Millennium Challenge Compact and are procured and maintained in accordance with the terms and procedures provided under the Millennium Challenge Compact and the Program Implementation Agreement, including for the following purposes:

      (a)   financial management and procurement activities;

      (b)   administrative activities and administrative support;

      (c)   monitoring and evaluation;

      (d)   feasibility, design and other studies; and

      (e)   other activities to facilitate the implementation of the Project.

   (6) Except as provided under this Act, the Board of Directors shall not assign, delegate or otherwise transfer any of the Government’s rights, obligations responsibilities, as specified under this Act, the Millennium Challenge Compact or the Program Implementation Agreement, without the prior written consent of the MCC and the Government;

   (7) The Board of Directors shall not undertake any activities, duties or responsibilities, other than those stipulated in this Act, the Millennium Challenge Compact and the Program Implementation Agreement, without the prior written consent of MCC and the Government;

6.   Vesting and delegation of rights and responsibilities

   (1) Notwithstanding section 5, MCC and the Minister may identify and appoint one or more entities as implementing entities, in accordance with the Millennium Challenge Compact and the Program Implementation Agreement, and shall delegate to such implementing entities such responsibilities as may be necessary for the effective execution of the Project.

   (2) An implementing entity shall be eligible to receive technical assistance or other support under the Millennium Challenge Compact.

PART III
ACCOUNTING, AUDITING, TAX, PROCUREMENT AND FUNDS

7.   Accounting principles

Notwithstanding anything to the contrary in the Accountants Act, 2008, the Public Finance Act, 2004, or any other law, the Project accounts shall be maintained in accordance with generally accepted accounting principles prevailing in the United States of America, or after the MCC’s approval, with other accounting principles such as those prescribed by the International Accounting Standards Board.

8.   Records

The records relating to the Project shall be kept for at least five years after the end of the Compact term or for such longer period as may be required for—

      (a)   the resolution of any litigation or claims;

      (b)   auditing; or

      (c)   any other legal purpose.

9.   Audits

Notwithstanding the Accountants Act, 2008, Public Audits Act or any other written law, the Project’s accounts shall be audited in accordance with the Millennium Challenge Compact, the Program Implementation Agreement and relevant Program Guidelines and shall be subject to quality assurance oversight in accordance with the Millennium Challenge Compact and the Program Implementation Agreement.

10.   Public procurement

   (1) Notwithstanding the Public Procurement Act, 2008, or any other written law, the procedures for procurement of works, goods and services for the Project shall be as provided under the relevant Program Guidelines.

   (2) The following principles shall apply to the procurement of works, goods and services for the Project:

      (a)   open, fair and competitive tender procedures shall be used in a transparent manner to solicit, award and administer and manage procurement contracts;

      (b)   solicitation shall be based on a clear and accurate description of the goods, works and services to be procured;

      (c)   contracts shall be awarded to qualified contractors that have the capability and willingness to perform the procurement contract on a cost effective and timely basis;

      (d)   value for money shall be obtained for all procurements of works, goods and services; and

      (e)   no preferential treatment shall be given to any contractor or group of contractors.

11.   Exemptions

   (1) Notwithstanding the Income Tax Act, the Value Added Tax Act, the Customs and Excise Act, the Property Transfer Tax Act, the Control of Goods Act, the Local Government Act or any other law, any goods, works and services procured under MCC Funding or imported or exported in connection with the Program shall be exempt from any existing or future taxes, property transfer taxes, tariffs, customs duties, excise duties, import taxes or duties, export taxes or duties, levies, contributions and other similar charges, as provided under the Millennium Challenge Compact.

   (2) Notwithstanding the generality of subsection (1), the following exemptions shall be granted with respect to the use of MCC Funding:

      (a)   existing and future taxes and other similar charges on income for work performed in relation to the Millennium Challenge Compact as specified under the Income Tax Act;

      (b)   existing and future social security taxes and other similar charges on all natural or legal persons performing work in connection with the Millennium Challenge Compact:

Provided that where any tax or charge under paragraphs (a) and (b) apply to natural persons who are citizens or permanent residents of Zambia, and legal persons incorporated under the Laws of Zambia, other than MCA-Zambia and any other implementing entity, those persons shall not be exempt from such taxes or charges.

12.   Sequestration, compulsory acquisition and liquidation and receivership proceedings

   (1) Notwithstanding the Land Acquisition Act or any other written law, the assets of the Project shall not be subject to compulsory acquisition, other than as provided under the Millennium Challenge Compact or the Program Implementation Agreement.

   (2) Notwithstanding any other law that would have the effect of allowing any impoundment, rescission or sequestration of assets, the assets of the Project shall not be subject to such impoundment, rescission or sequestration, other than as provided under the Millennium Challenge Compact or the Program Implementation Agreement.

   (3) Notwithstanding the Companies Act or any other written law, MCA-Zambia shall not be subject, during the Compact term, to proceedings or actions for its liquidation or receivership, other than as provided under the Millennium Challenge Compact or the Program Implementation Agreement.

   (4) Notwithstanding any other written law that would have the effect of allowing a lien, attachment, enforcement of judgment, pledge or encumbrance of assets, the assets of the Project shall not be subject to such lien, attachment, enforcement of judgment, pledge or encumbrance, other than as provided under the Millennium Challenge Compact or the Program Implementation Agreement.

13.   Sale, donation or disposal of assets

Notwithstanding any other written law, the assets of the Project shall not be sold, donated or otherwise disposed of, other than as provided under the Millennium Challenge Compact or the Program Implementation Agreement.

PART IV
GENERAL PROVISIONS

14.   Indemnity, liability and claims

   (1) Where MCA-Zambia is held liable under any indemnification or other similar provisions of any agreement, the Minister shall pay the indemnity in full on behalf of MCA-Zambia out of funds appropriated by Parliament and not MCC Funding.

   (2) The Minister shall indemnify and hold harmless each member of the Board of MCA-Zambia, each member of any stakeholder committee and each of the officers, employees and agents of MCA-Zambia from any claim, loss, action, liability, cost, damage or expense incurred by such person in the performance of their duties on behalf of MCA-Zambia out of funds appropriated by Parliament and not MCC Funding:

Provided that the Minister shall not indemnify any such person if and to the extent that any claims, losses, actions, liabilities, costs, damages or expenses are attributable to the fraud, gross negligence or willful misconduct of such person.

   (3) Notwithstanding anything to the contrary in any other written law, no liability or claim shall attach to, or lie against, MCC and the United States of America government with respect to the implementation of, or arising as a result of, the Millennium Challenge Compact or the Program Implementation Agreement.

15.   Funds of Project and annual reports

   (1) In addition to the MCC Funding, the funds for the Project shall consist of such moneys as may be appropriated by Parliament for the purposes of MCA-Zambia and the execution of the Program in accordance with the Millennium Challenge Compact and Program Implementation Agreement.

   (2) As soon as practicable, but not later than 90 days after the end of each financial year, the MCA-Zambia shall submit to the Minister a report concerning the Program and the progress achieved in executing the Project during the financial year.

   (3) The report referred to in subsection (2), shall include information on the financial affairs of the Project, including the status of MCC Funding, and there shall be appended to the report—

      (a)   an audited balance sheet;

      (b)   an audited statement of income and expenditure; and

      (c)   such other information as the Minister may require.

   (4) The Minister shall not later than seven days after the first sitting of the National Assembly next after receipt of the report referred to in subsection (2), lay the report before the National Assembly.

16.   Regulations

The Minister may, by statutory instrument, make regulations to give effect to this Act.

17.   Repeal of Act

   (1) The Minister shall, by statutory order, provide for an appointed date for the completion of the winding-up of the activities of the MCA-Zambia.

   (2) This Act shall stand repealed on the appointed date referred to in subsection (1) and the MCA-Zambia shall be deemed to have been deregistered under the Companies Act.

FIRST SCHEDULE

[SECTION 2]

MILLENNIUM CHALLENGE COMPACT

MILLENNIUM CHALLENGE COMPACT

Between

THE REPUBLIC OF ZAMBIA

And

THE UNITED STATES OF AMERICA

Acting Through

THE MILLENNIUM CHALLENGE CORPORATION

TABLE OF CONTENTS

Article 1—Goal and Objectives

Section 1. 1 Compact Goal

Section 1.2 Project Objective   

Article 2—Funding and Resources

Section 2. 1 Program Funding

Section 2.2 Compact Implementation Funding

Section 2.3 MCC Funding

Section 2.4 Disbursement

Section 2.5 Interest   

Section 2.6 Government Resources; Budget   

Section 2.7 Limitations on the Use of MCC Funding   

Section 2.8 Taxes

Article 3—Implementation

Section 3.1 Program Implementation Agreement

Section 3.2 Government Responsibilities

Section 3.3 Policy Performance

Section 3.4 Accuracy of Information

Section 3.5 Implementation Letters

Section 3.6 Procurement and Grants   

Section 3.7 Records; Accounting; Covered Providers; Access

Section 3.8 Audits; Reviews

Article 4—Communications

Section 4.1 Communications   

Section 4.2 Representatives

Section 4.3 Signatures   

Article 5—Termination; Suspension; Expiration

Section 5.1 Termination; Suspension   

Section 5.2 Consequences of Termination, Suspension or Expiration

Section 5.3 Refunds; Violation

Section 5.4 Survival

Article 6—Compact Annexes; Amendments; Governing Law

Section 6.1    Annexes

Section 6.2 Amendments

Section 6.3   Inconsistencies

Section 6.4   Governing Law

Section 6.5   Additional Instruments

Section 6.6   References to MCC Website

Section 6.7 References to Laws, Regulations, Policies and Guidelines

Section 6.8 MCC Status

Article 7—Entry Into Force

Section 7.1 International Agreements

Section 7.2 Conditions Precedent to Entry into Force

Section 7.3 Date of Entry into Force

Section 7.4 Compact Term

Section 7.5 Provisional Application

Annex I—Program Description

Annex II—Multi-Year Financial Plan Summary

Annex III—Description of the Monitoring and Evaluation Plan

Annex IV—Conditions Precedent to Disbursement of Compact Implementation Funding

Annex V —Definitions

Annex VI—Tax Schedules

MILLENNIUM CHALLENGE COMPACT

PREAMBLE

This MILLENNIUM CHALLENGE COMPACT (this “Compact”) is between the Republic of Zambia (“Zambia”), acting through its Government (the “Government”), and the United States of America, acting through the Millennium Challenge Corporation, a united States Government Corporation (“MCC’), (individually a “Party” and collectively, the “Parties”). Capitalized terms used in tills Compact will have the meanings provided in Annex V.

Recognizing that the Parties are committed to the shared goals of promoting economic growth and the elimination of extreme poverty in Zambia and that MCC assistance under this Compact supports Zambia’s demonstrated commitment to strengthening good governance, economic freedom and investments in people;

Recalling that the Government consulted with the private sector and civil society of Zambia to determine the priorities for the use of MCC assistance and developed and submitted to MCC a proposal for such assistance to achieve lasting economic growth and poverty reduction; and

Recognizing that MCC wishes to help Zambia implement the program described herein to achieve the goal and objectives described herein (as such program description and objectives may be amended from time to time in accordance with the terms hereof, the “Program”);

The Parties hereby agree as follows:

ARTICLE 1
GOAL AND OBJECTIVES

Section 1.1—Compact Goal

The goal of this Compact is to reduce poverty through economic growth in Zambia (the “Compact Goal’). MCC’s assistance will be provided in a manner that strengthens good governance, economic freedom and investments in the people of Zambia.

Section 1.2—Project Objective

The objective of the Project (the “Project Objective”) is to expand access to, and improve the reliability of, water supply and sanitation, and improve drainage services in select urban and peri-urban areas of the city of Lusaka in order to decrease the incidence of water-borne and water- related diseases, generate time savings for households and businesses and reduce non-revenue water in the water supply network.

ARTICLE 2
FUNDING AND RESOURCES

Section 2.1—Program Funding

Upon entry into force of this Compact in accordance with Section 7.3, MCC will grant to the Government, under the terms of this Compact, an amount not to exceed Three Hundred and Thirty-Nine Million Four Hundred and Sixty-Eight Thousand Seven Hundred and One United States Dollars (US$339,468,701) (“Program Funding”) for use by the Government to implement the Program. The allocation of Program Funding is generally described in Annex II.

Section 2.2—Compact Implementation Funding

      (a)   Upon signing of this Compact, MCC will grant to the Government, under the terms of this Compact and in addition to the Program Funding described in Section 2.1, an amount not to exceed Fifteen Million Two Hundred and Eighty-Eight Thousand Nine Hundred and Thirty- Nine United States Dollars (US$15,288,939) (“Compact Implementation Funding”) under Section 609(g) of the Millennium Challenge Act of 2003, as amended (the “MCA Act”), for use to facilitate implementation of the Compact, including for the following purposes:

      (i)   financial management and procurement activities;

      (ii)   administrative activities (including start-up costs such as staff salaries) and administrative support expenses such as rent, computers and other information technology or capital equipment;

      (iii)   monitoring and evaluation activities;

      (iv)   feasibility, design, and other studies; and

      (v)   other activities to facilitate Compact implementation as approved by MCC.

The allocation of Compact Implementation Funding is generally described in Annex II—

      (b)   Without limiting the generality of Section 2.2(a), the Government agrees that MCC will directly administer and manage a portion of the Compact Implementation Funding in order to develop any detailed designs and resettlement action plans required for the Project, and to facilitate any other uses of the Compact Implementation Funding contemplated in clause (a) above, as may be agreed in writing by the Parties (the “MCC Contracted CIF Activities”).

Notwithstanding anything to the contrary in this Compact or the Program Implementation Agreement, MCC will utilize applicable United States government procurement rules and regulations in any procurements it administers and manages in connection with the MCC CIF Contracted Activities, and will disburse MCC Funding from time to time for the MCC CIF Contracted Activities directly to the relevant provider upon receipt of a valid invoice approved by MCC.

      (c)   Each Disbursement of Compact Implementation Funding (other than any Disbursement for the MCC CIF Contracted Activities) is subject to satisfaction of the conditions precedent to such disbursement as set forth in Annex IV.

      (d)   If MCC determines that the full amount of Compact Implementation Funding available under Section 2.2(a) exceeds the amount that reasonably can be utilized for the purposes set forth in Section 2.2(a), MCC, by written notice to the Government, may withdraw the excess amount, thereby reducing the amount of the Compact Implementation Funding available under Section 2.2(a) (such excess, the “Excess CIF Amount”). In such event, the amount of Compact Implementation Funding granted to the Government under Section 2.2(a) will be reduced by the Excess CIF Amount, and MCC will have no further obligations with respect to such Excess CIF Amount.

      (e)   MCC, at its option by written notice to the Government, may elect to grant to the Government an amount equal to all or a portion of such Excess CIF Amount as an increase in the Program Funding, and such additional Program Funding will be subject to the terms and conditions of this Compact applicable to Program Funding.

Section 2.3—MCC Funding

Program Funding and Compact Implementation Funding are collectively referred to in this Compact as “MCC Funding,” and includes any refunds or reimbursements of Program Funding or Compact Implementation Funding paid by the Government in accordance with this Compact.

Section 2.4—Disbursement

In accordance with this Compact and the Program Implementation Agreement, MCC will disburse MCC Funding for expenditures incurred in furtherance of the Program (each instance, a “Disbursement”). Subject to the satisfaction of all applicable conditions precedent, the proceeds of Disbursements will be made available to the Government, at MCC’s sole election, by (a) deposit to one or more bank accounts established by the Government and acceptable to MCC (each, a “Permitted Account”) or (b) direct payment to the relevant provider of goods, works or services for the implementation of the Program. MCC Funding may be expended only for Program expenditures.

Section 2.5—Interest

The Government will pay or transfer to MCC, in accordance with the Program Implementation Agreement, any interest or other earnings that accrue on MCC Funding prior to such funding being used for a Program purpose.

Section 2.6—Government Resources: Budget

      (a)   The Government will provide all funds and other resources and will take all actions that are necessary to carry out the Government’s responsibilities under this Compact.

      (b)   The Government will use its best efforts to ensure that all MCC Funding it receives or is projected to receive in each of its fiscal years is fully accounted for in its annual budget on a multi-year basis.

      (c)   The Government will not reduce the normal and expected resources that it would otherwise receive or budget from sources other than MCC for the activities contemplated under this Compact and the Program.

      (d)   Unless the Government discloses otherwise to MCC in writing, MCC Funding will be in addition to the resources that the Government would otherwise receive or budget for the activities contemplated under this Compact and the Program.

Section 2.7—Limitations on the Use of MCC Funding

The Government will ensure that MCC Funding is not used for any purpose that would violate United States law or policy, as specified in this Compact or as further notified to the Government in writing or by posting from time to time on the MCC website at “www.mcc.gov (the “MCC Website”), including but not limited to the following purposes:

      (a)   for assistance to, or training of, the military, police, militia, national guard or other quasi-military organization or unit;

      (b)   for any activity that is likely to cause a substantial loss of United States jobs or a substantial displacement of United States production;

      (c)   to undertake, fund or otherwise support any activity that is likely to cause a significant environmental, health or safety hazard, as further described in MCC’s environmental and social assessment guidelines and any guidance documents issued in connection with the guidelines posted from time to time on the MCC Website or otherwise made available to the Government (collectively, the “MCC Environmental Guidelines”); or

      (d)   to pay for the performance of abortions as a method of family planning or to motivate or coerce any person to practice abortions, to pay for the performance of involuntary sterilizations as a method of family planning or to coerce or provide any financial incentive to any person to undergo sterilizations or to pay for any biomedical research which relates, in whole or in part, to methods of, or the performance of, abortions or involuntary sterilization as a means of family planning.

Section 2.8—Taxes

      (a)   Unless the Parties specifically agree otherwise in writing, the Government will ensure that all MCC Funding is free from the payment or imposition of any existing or future taxes, duties, levies, contributions or other similar charges (but not fees or charges for services that are generally applicable in Zambia, reasonable in amount and imposed on a non-discriminatory basis) (“Taxes”) of or in Zambia (including any such Taxes imposed by a national, regional, local or other governmental or taxing authority of or in Zambia). Specifically, and without limiting the generality of the foregoing, MCC Funding will be free from the payment of—

      (i)   any tariffs, customs duties, import taxes, export taxes and other similar charges on any goods, works or services introduced into Zambia in connection with the Program;

      (ii)   sales tax, value added tax, excise tax, property transfer tax and other similar charges on any transactions involving goods, works or services in connection with the Program;

      (iii)   taxes and other similar charges on ownership, possession or use of any property in connection with the Program; and

      (iv)   taxes and other similar charges on income, profits or gross receipts attributable to work performed in connection with the Program and related social security taxes and other similar charges on all natural or legal persons performing work in connection with the Program except (x) natural persons who are citizens or permanent residents of Zambia; and (y) legal persons formed under the laws of Zambia (but excluding MCA-Zambia and any other entity formed for the purpose of implementing the Government’s obligations hereunder),

      (b)   The mechanisms that the Government will use to implement the principal tax exemptions required by Section 2.8(a) are set forth in Annex VI. Such mechanisms may include exemptions from the payment of Taxes that have been granted in accordance with applicable law, refund or reimbursement of Taxes by the Government to MCC, MCA-Zambia or to the taxpayer, or payment by the Government to MCA-Zambia or MCC, for the benefit of the Program, of an agreed amount representing any collectible Taxes on the items described in Section 2.8(a).

      (c)   If a Tax has been paid contrary to the requirements of Section 2.8(a) or Annex VI, the Government will refund promptly to MCC (or to another party as designated by MCC) the amount of such Tax in United States Dollars or the currency of Zambia within thirty (30) days (or such other period as may be agreed in writing by the Parties) after the Government is notified in writing (whether by MCC or MCA- Zambia) that such Tax has been paid.

      (d)   No MCC Funding, proceeds thereof or Program Assets may be applied by the Government in satisfaction of its obligations under Section 2.8(c).

ARTICLE 3
IMPLEMENTATION

Section 3.1—Program Implementation Agreement

The Parties will enter into an agreement providing further detail on the implementation arrangements, fiscal accountability and disbursement and use of MCC Funding, among other matters (the “Program Implementation Agreement”); and the Government will implement the Program in accordance with this Compact, the Program Implementation Agreement, any other Supplemental Agreement and any Implementation Letter.

Section 3.2—Government Responsibilities

      (a)   The Government has principal responsibility for overseeing and managing the implementation of the Program.

      (b)   The Government hereby designates Millennium Challenge Account-Zambia as the accountable entity to implement the Program and to exercise and perform the Government’s right and obligation to oversee, manage and implement the Program, including without limitation, managing the implementation of the Project and its Activities, allocating resources and managing procurements. Such entity will be referred to herein as “MCA-Zambia,” and will have the authority to bind the Government with regard to all Program activities. The designation of MCA-Zambia contemplated by this Section 3.2(b) will not relieve the Government of any obligations or responsibilities hereunder or under any related agreement, for which the Government remains fully responsible. MCC hereby acknowledges and consents to the designation in this Section 3.2(b).

      (c)   The Government will ensure that any Program Assets or services funded in whole or in part (directly or indirectly) by MCC Funding are used solely in furtherance of this Compact and the Program unless MCC agrees otherwise in writing.

      (d)   The Government will take all necessary or appropriate steps to achieve the Project Objective during the Compact Term (including, without limiting Section 2.6(a), funding all costs that exceed MCC Funding and are required to carry out the terms hereof and achieve such objectives, unless MCC agrees otherwise in writing).

      (e)   The Government will fully comply with the Program Guidelines, as applicable, in its implementation of the Program.

      (f)   The Government grants to MCC a perpetual, irrevocable, royalty-free, worldwide, fully paid, assignable right and license to practice or have practiced on its behalf (including the right to produce, reproduce, publish, repurpose, use, store, modify or make available) any portion or portions of Intellectual Property as MCC sees fit in any medium, now known or hereafter developed, for any purpose whatsoever.

Section 3.3—Policy Performance

In addition to undertaking the specific policy, legal and regulatory reform commitments identified in Annex I (if any), the Government will seek to maintain and to improve its level of performance under the policy criteria identified in Section 607 of the MCA Act, and the selection criteria and methodology used by MCC.

Section 3.4—Accuracy of Information

The Government assures MCC that, as of the date this Compact is signed by the Government, the information provided to MCC by or on behalf of the Government in the course of reaching agreement with MCC on this Compact is true, correct and complete in all material respects.

Section 3.5—Implementation Letters

From time to time, MCC may provide guidance to the Government in writing on any matters relating to this Compact, MCC Funding or implementation of the Program (each, an “Implementation Letter”). The Government will use such guidance in implementing the Program. The Parties may also issue jointly agreed-upon Implementation Letters to confirm and record their mutual understanding on aspects related to the implementation of this Compact, the Program Implementation Agreement or other related agreements.

Section 3.6—Procurement and Grants

      (a)   The Government will ensure that the procurement of all goods, works and services by the Government or any Provider to implement the Program will be consistent with the “MCC Program Procurement Guidelines” posted from time to time on the MCC Website (the “MCC Program Procurement Guidelines”). The MCC Program Procurement Guidelines include the following requirements, among others:

      (i)   open, fair, and competitive procedures must be used in a transparent manner to solicit, award and administer contracts and to procure goods, works and services;

      (ii)   solicitations for goods, works, and services must be based upon a clear and accurate description of the goods, works and services to be acquired;

      (iii)   contracts must be awarded only to qualified contractors that have the capability and willingness to perform the contracts in accordance with their terms on a cost effective and timely basis; and

      (iv)   no more than a commercially reasonable price, as determined, for example, by a comparison of price quotations and market prices, will be paid to procure goods, works and services.

      (b)   The Government will ensure that any grant issued in furtherance of the Program (each, a “Grant’) is awarded, implemented and managed pursuant to open, fair and competitive procedures administered in a transparent manner acceptable to MCC. In furtherance of this requirement, and prior to the issuance of any Grant, the Government and MCC shall agree upon written procedures to govern the identification of potential Grant recipients, including without limitation appropriate eligibility and selection criteria and award procedures. Such agreed procedures shall be posted on the MCA-Zambia website.

Section 3.7—Records; Accounting; Covered Providers; Access

      (a)   Government Books and Records: The Government will maintain, and will use its best efforts to ensure that all Covered Providers maintain, accounting books, records, documents and other evidence relating to the Program adequate to show, to MCC’s satisfaction, the use of all MCC Funding and the implementation and results of the Program (“Compact Records”). In addition, the Government will furnish or cause to be furnished to MCC, upon its request, originals or copies of such Compact Records.

      (b)   Accounting: The Government will maintain and will use its best efforts to ensure that all Covered Providers maintain Compact Records in accordance with generally accepted accounting principles prevailing in the United States, or at the Government’s option and with MCC’s prior written approval, other accounting principles, such as those prescribed by the International Accounting Standards Board. Compact Records must be maintained for at least five (5) years after the end of the Compact Term or for such longer period, if any, required to resolve any litigation, claims or audit findings or any applicable legal requirements.

      (c)   Providers and Covered Providers. Unless the Parties agree otherwise in writing, a “Provider” is—

      (i)   any entity of the Government that receives or uses MCC Funding or any other Program Asset in carrying out activities in furtherance of this Compact; or

      (ii)   any third party that receives at least fifty thousand United States dollars (US$50,000) in the aggregate of MCC Funding (other than as salary or compensation as an employee of an entity of the Government) during the Compact Term.

A “Covered Provider” is—

      (i)   a non-United States Provider that receives (other than pursuant to a direct contract or agreement with MCC) three thousand United Stated dollars (US$300,000) or more of MCC Funding in any Government fiscal year or any other non-United States person or entity that receives, directly or indirectly, three thousand United Stated dollars (US$300,000) or more of MCC Funding from any Provider in such fiscal year; or

      (ii)   any United States Provider that receives (other than pursuant to a direct contract or agreement with MCC) five thousand United Stated dollars (US$500,000) or more of MCC Funding in any Government fiscal year or any other United States person or entity that receives, directly or indirectly, five thousand United Stated dollars (US$500,000) or more of MCC Funding from any Provider in such fiscal year.

      (d)   Access: Upon MCC’s request, the Government, at all reasonable times, will permit, or cause to be permitted, authorised representatives of MCC, an authorized Inspector General of MCC (“Inspector General’), the United States Government Accountability office, any auditor responsible for an audit contemplated herein or otherwise conducted in furtherance of this Compact and any agents or representatives engaged by MCC or the Government to conduct any assessment, review or evaluation of the Program, the opportunity to audit, review, evaluate or inspect facilities, assets and activities funded in whole or in part by MCC Funding.

Section 3.8—Audits; Reviews

      (a)   Government Audits: Except as the Parties may agree otherwise in writing, the Government will, on at least a semi-annual basis, conduct, or cause to be conducted, financial audits of all disbursements of MCC Funding covering the period from signing of this Compact until the earlier of the following December 31 or June 30 and covering each six-months period thereafter ending December 31 and June 30, through the end of the Compact Term. In addition, upon MCC’s request, the Government will ensure that such audits are conducted by an independent auditor approved by MCC and named on the list of local auditors approved by the Inspector General or a United States-based certified public accounting firm selected in accordance with the “Guidelines for Financial Audits Contracted by MCA” (the “Audit Guidelines”) issued and revised from time to time by the Inspector General, which are posted on the MCC Website. Audits will be performed in accordance with the Audit Guidelines and be subject to quality assurance oversight by the Inspector General. Each audit must be completed and the audit report delivered to MCC no later than ninety (90) days after the first period to be audited and no later than ninety (90) days after each June 30 and December 31 thereafter, or such other period as the parties may otherwise agree in writing.

      (b)   Audits of Other Entities: The Government will ensure that MCC-financed agreements between the Government or any Provider, on the one hand, and—

      (i)   a United States non-profit organisation, on the other hand, state that the United States non-profit organisation is subject to the applicable audit requirements contained in OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organisations,” issued by the United States Office of Management and Budget;

      (ii)   a United States for-profit Covered Provider, on the other hand, state that the United States for-profit organization is subject to audit by the applicable United States Government agency, unless the Government and MCC agree otherwise in writing; and

      (iii)   a non-US Covered Provider, on the other hand, state that the non-US Covered Provider is subject to audit in accordance with the Audit Guidelines.

      (c)   Corrective Actions: The Government will use its best efforts to ensure that each Covered Provider—

      (i)   takes, where necessary, appropriate and timely corrective actions in response to audits;

      (ii)   considers whether the results of the Covered Provider’s audit necessitates adjustment of the Government’s records; and

      (iii)   permits independent auditors to have access to its records and financial statements as necessary.

      (d)   Audit by MCC: MCC will have the right to arrange for audits of the Government’s use of MCC Funding.

      (e)   Cost of Audits, Reviews or Evaluations: MCC Funding may be used to fund the costs of any audits, reviews or evaluations required under this Compact.

ARTICLE 4
COMMUNICATIONS

Section 4.1 —Communications

Any document or communication required or submitted by either Party to the other under this Compact must be in writing and, except as otherwise agreed with MCC, in English. For this purpose, the address of each Party is set forth below:

To the Government (with a copy to the MCA-Zambia):

Minister of Finance

Ministry of Finance

P.O. Box 50062, Chimanga Road

Lusaka

Republic of Zambia Facsimile:   +260211 251078

Telephone:                        +260211 250481

                                 +260211254263

To MCC:

Millennium Challenge Corporation

Attention:   Vice President, Compact Operations

(with a copy to the Vice President and General Counsel, and the MCC resident country mission in Zambia)

875 Fifteenth Street, NW

Washington, DC 20005

United States of America

Facsimile:                        +1 (202) 521-3700

Telephone:                        +1 (202) 521-3600

Email:                           This email address is being protected from spambots. You need JavaScript enabled to view it.(Vice-President,Compact Operations)

                                 This email address is being protected from spambots. You need JavaScript enabled to view it. (Vice President and General Counsel)

Section 4.2—Representatives

For all purposes of this Compact, the Government will be represented by the individual holding the position of, or acting as, the Minister of Finance, and MCC will be represented by the individual holding the position of, or acting as, Vice President, Compact Operations (each of the foregoing, a “Principal Representative”). Each Party, by written notice to the other Party, may designate one or more additional representatives (each, an “Additional Representative”) for all purposes other than signing amendments to this Compact. The Government hereby designates the chairperson of the Board of MCA-Zambia as an Additional Representative. A Party may change its Principal Representative to a new representative that holds a position of equal or higher authority upon written notice to the other Party.

Section 4.3—Signatures

Signatures to this Compact and to any amendment to this Compact will be original signatures appearing on the same page or in an exchange of letters or diplomatic notes. With respect to all documents arising out of this Compact (other than the Program Implementation Agreement) and amendments thereto, signatures may, as appropriate, be delivered by facsimile or electronic mail and in counterparts and will be binding on the Party delivering such signature to the same extent as an original signature would be.

ARTICLE 5
TERMINATION; SUSPENSION; EXPIRATION

Section 5.1—Termination: Suspension

      (a)   Either Party may terminate this Compact without cause in its entirety by giving the other Party thirty (30) days’ prior written notice. MCC may also terminate this Compact or MCC Funding without cause in part by giving the Government thirty (30) days’ prior written notice.

      (b)   MCC may, immediately, upon written notice to the Government, suspend or terminate this Compact or MCC Funding, in whole or in part, and any obligation related thereto, if MCC determines that any circumstance identified by MCC, as a basis for suspension or termination (whether in writing to the Government or by posting on the MCC Website) has occurred, which circumstances include but are not limited to the following:

      (i)   the Government fails to comply with its obligations under this Compact or any other agreement or arrangement entered into by the Government in connection with this Compact or the Program;

      (ii)   an event or series of events has occurred that makes it probable that the Project Objective will not be achieved during the Compact Term or that the Government will not be able to perform its obligations under this Compact;

      (iii)   a use of MCC Funding or continued implementation of this Compact or the Program violates applicable law or United States Government policy, whether now or hereafter in effect;

      (iv)   the Government or any other person or entity receiving MCC Funding or using Program Assets is engaged in activities that are contrary to the national security interests of the United States;

      (v)   an act has been committed or an omission or an event has occurred that would render Zambia ineligible to receive United States economic assistance under Part I of the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151 et seq), by reason of the application of any provision of such act or any other provision of law;

      (vi)   the Government has engaged in a pattern of actions inconsistent with the criteria used to determine the eligibility of Zambia for assistance under the MCA Act;

      (vii)   Zambia is classified as a Tier three (3) country in the United States Department of State’s annual Trafficking in Persons Report; and

      (viii)   the Government or another person or entity receiving MCC Funding or using Program Assets is found to have been convicted of a narcotics offence or to have been engaged in drug trafficking.

Section 5.2—Consequences of Termination, Suspension or Expiration

      (a)   Upon the suspension or termination, in whole or in part, of this Compact or any MCC Funding, or upon the expiration of this Compact, the provisions of Section 4.2 of the Program Implementation Agreement will govern the post-suspension, post-termination or post-expiration treatment of MCC Funding, any related Disbursements and Program Assets. Any portion of this Compact, MCC Funding, the Program Implementation Agreement or any other Supplemental Agreement that is not suspended or terminated will remain in full force and effect.

      (b)   MCC may reinstate any suspended or terminated MCC Funding under this Compact if MCC determines that the Government or other relevant person or entity has committed to correct each condition for which MCC Funding was suspended or terminated.

Section 5.3—Refunds; Violation

      (a)   If any MCC Funding, any interest or earnings thereon, or any Program Asset is used for any purpose in violation of the terms of this Compact, then MCC may require the Government to repay to MCC in United States Dollars the value of the misused MCC Funding, interest, earnings, or asset, plus interest within thirty (30) days after the Government’s receipt of MCC’s request for repayment. The Government will not use MCC Funding, proceeds thereof or Program Assets to make such payment.

      (b)   Notwithstanding any other provision in this Compact or any other existing agreement to the contrary, MCC’s right under Section 5.3(a) for a refund will continue during the Compact Term and for a period of—

      (i)   five (5) years thereafter; or

      (ii)   one (1) year after MCC receives actual knowledge of such violation, whichever is later.

Section 5.4—Survival

The Government’s responsibilities under this Section and Sections 2.7, 3.2(f), 3.7, 3.8, 5.2, 5.3 and 6.4 will survive the expiration, suspension or termination of this Compact.

ARTICLE 6
COMPACT ANNEXES; AMENDMENTS; GOVERNING LAW

Section 6.1—Annexes

Each annex to this Compact constitutes an integral part hereof, and references to “Annex” mean an annex to this Compact unless otherwise expressly stated.

Section 6.2—Amendments

      (a)   The Parties may amend this Compact only by a written agreement signed by the Principal Representatives (or such other government official designated by the relevant Principal Representative).

      (b)   Notwithstanding Section 6.2(a), the Parties may agree in writing, signed by the Principal Representatives (or such other government official designated by the relevant Principal Representative) or any Additional Representative, to modify any Annex to this Compact in order to, without limitation—

      (i)   suspend, terminate or modify the Project or any Activity, or to create a new project;

      (ii)   change the allocations of funds as set forth in Annex II as of the date hereof (including to allocate funds to a new project);

      (iii)   modify the Implementation Framework described in Annex I;

      (iv)   add, delete or waive any condition precedent described in Annex IV; or

      (v)   modify the mechanisms for exempting MCC Funding from Taxes as set forth in Annex VI;

provided that, in each case, any such modification:

   (1) is consistent in all material respects with the Project Objective;

   (2) does not cause the amount of Program Funding to exceed the aggregate amount specified in Section 2.1 (as may be modified by operation of Section 2.2(e));

   (3) does not cause the amount of Compact Implementation Funding to exceed the aggregate amount specified in Section 2.2(a);

   (4) does not reduce the Government’s responsibilities or contribution of resources required under Section 2.6; and

   (5) does not extend the Compact Term.

Section 6.3—Inconsistencies

In the event of any conflict or inconsistency between:

      (a)   any Annex and any of Articles 1 through 7, such Articles 1 through 7, as applicable, will prevail; or

      (b)   this Compact and any other agreement between the Parties regarding the Program, this Compact will prevail.

This section of the article is only available for our subscribers. Please click here to subscribe to a subscription plan to view this part of the article.