A clearing union can be defined as a multilateral payments arrangement that periodically offsets the debits and credits accumulated by each member against the other members in the process of trade and other transactions. Multilateral clearing or payments arrangements facilitate the use of national currencies, and thus serve to relax the foreign exchange constraints of the members.
Asian Clearing Union
Bangkok, in December 1974
The central banks and monetary authorities of regional members and associate members of the UNITED NATIONSUNO The main bodies of the United Nations are the General Assembly, the Security Council, the Economic and Social Council, the Trusteeship Council, the International Court of Justice, and the UN Secretariat. All were established under the UN Charter when the Organization was founded in 1945. It has 193 members. ECONOMIC AND SOCIAL COMMISSION FOR ASIAAsia Central Asia Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Eastern Asia China China–Hong Kong China–Macao China–Taiwan Japan Mongolia North Korea South Korea Southern Asia Afghanistan Bangladesh Bhutan British Indian Ocean Territory India Iran Maldives Nepal Pakistan Sri Lanka South-Eastern Asia Brunei Cambodia East Timor Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Western Asia Armenia Azerbaijan Bahrain Cyprus Georgia Iraq Israel Jordan Kuwait Lebanon Oman Palestine Qatar Saudi Arabia Syria Turkey United Arab Emirates Yemen AND THE PACIFICPacific Australia and New Zealand Australia Christmas Island Cocos (Keeling) Islands New Zealand Norfolk Island Melanesia Fiji New Caledonia Papua New Guinea Solomon Islands Vanuatu Micronesia Guam Kiribati Marshall Islands Micronesia Nauru Northern Mariana Islands Palau Polynesia American Samoa Cook Islands French Polynesia Niue Pitcairn Samoa Tokelau Tonga Tuvalu Wallis and Futuna (ESCAP) as well as central banks and monetary authorities of non-ESCAP members,
DESIRING to establish a facility to settle payments related to import and exportExport How to export: Canada-India-USA of goods and services, as well as payments mutually agreed between two or more participants within the ESCAP and non-ESCAP regions on a multilateral basis,
RECOGNIZING that such a facility would contribute to the expansion of trade and the promotion of monetary co-operation among their countries,
RECOGNIZING further that a facility designed to promote the use of the participants’ currencies would reduce the use of extra-regional currencies to settle payments related to import and export of goods and services, as well as payments mutually agreed between two or more participants within ESCAP and non-ESCAP regions and thereby effect economies in the use of foreign exchange and reduce the cost of making payments for such transactions,
REALIZING that regions-wide clearing facility could co-exist and function in cooperation with sub-regional or less than regional arrangements in Asia and the Pacific and other regions,
CONVINCED that the regional clearing facility must be established and operated in a manner that will not prejudice the principles of multilateral trade and payments,
ON WHOSE BEHALF this AGREEMENTContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. has been signed, HAVE AGREED as follows:
CHAPTER I
GENERAL PROVISIONS
ARTICLE I-ASIAN CLEARING UNION
The central banks and other monetary authorities on whose behalf the present Agreement is signed, hereinafter referred to as “participants”, agree to establish a system for clearing payments among their respective countries on a multilateral basis, hereinafter referred to as the “Asian Clearing Union”, which shall be governed by the provisions of this Agreement and by the rules, regulations and decisions agreed within its framework.
ARTICLE II-PURPOSES
The purposes of this Agreement are:
(a) To provide a facility to settle, on a multilateral basis, payments related to import and export of goods and services, as well as payments mutually agreed between two or more participants among the territories of participants;
(b) To promote the use of participants’ currencies in payments related to import and export of goods and services, as well as payments mutually agreed between two or more participants between their respective territories and thereby effect economies in the use of the participants’ exchange reserves;
(c) To promote monetary co-operation among the participants and closer relations among the banking systems in their territories and thereby contribute to the expansion of trade and economic activity among the countries of the ESCAP and non-ESCAP regions; and
(d) To provide for currency swap arrangement among the participants so as to make Asian Monetary Units available to them temporarily.
ARTICLE III-PARTICIPATION
SECTION 1- Eligibility to participate
(a) Participation in the Asian Clearing Union shall be open to the central bank or monetary authority of each regional member or associate member of ESCAP as well as central bank or monetary authority of non-ESCAP members.
(b) Participation in another clearing group or arrangement is not precluded by participation in the Asian Clearing Union.
SECTION 2- Original participants
Original participants shall be those central banks or monetary authorities that are eligible to participate in and which sign this Agreement not later than three months from the date this Agreement has been signed by the duly authorized representatives of five such central banks or authorities. Each shall become a participant on the date this Agreement enters into force.
SECTION 3- Other participants
A central bank or monetary authority that is eligible to participate and is not an original participant may apply to the Board of Directors to become a participant and be admitted as a participant if the Board so decides by a two-third vote of all the Directors for each regional member or associate member of ESCAP and by unanimous vote of all the Directors for each non-ESCAP members and upon such central bank or monetary authority signing this Agreement and accepting the rules, regulations and decisions of the Board of Directors. The Chairman of the Board shall determine the date on which the payments and transfers with respect to such a participant shall be included in the clearing facility.
CHAPTER II
OPERATIONS
ARTICLE IV-UNIT OF ACCOUNT
(a) The accounts of the Asian Clearing Union shall be kept in “Asian Monetary Units” (viz. ACU dollar, ACU euro and ACU yen) which may be referred to in the abbreviated form as “AMUs”.
(b) The Asian Monetary Units shall, with effect from 01.01.2009 , and until such timeTime Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) as it is changed by the Board of Directors in terms of sub-clause (c) of the Article, be denominated as ‘ACU dollar’, ‘ACU euro’ and ‘ACU yen’ which shall be equivalent in value to one US dollar, one Euro and Japanese Yen, respectively.
(c) The Board of Directors may change the denomination and/or the value of the Asian Monetary Units at any time by a unanimous vote of all the Directors.
(d) In the event of a change in the denomination and/or the value of the Asian Monetary Units by the Board of Directors, the outstanding net debtor and creditor positions as of the date of this change including accrued interest shall be settled on the basis of the denomination and the value of the Asian Monetary Units preceding such change.
ARTICLE V-CLEARING OF INDIVIDUAL
PAYMENTS AND TRANSFERS
SECTION 1- Rules for individual payments and transfers
(a) The Board of Directors, after consultation with participants, shall prescribe by appropriate rules consistent with this Agreement the procedures to effect the financial settlement of eligible payments and transfers through the clearing facility. In particular, these rules and regulations shall specify the procedures to be followed by persons, commercial banks, and central banks or monetary authorities. The Board shall prescribe the information to be supplied to the Secretary General for the operation of the clearing facility.
(b) Each participant, in so far as its monetary and exchange system permits, shall take all steps necessary to put into effect in its territories the procedures prescribed by the Board of Directors and to supply the information required by the Board for the operation of the clearing facility.
SECTION 2- Eligible payments and transfers
(a) The payments that are eligible to be made through the clearing facility are payments:
(i) from a resident in the territory of one participant to a resident in the territory of another participant;
(ii) related to import and export of goods and services, as well as payments mutually agreed between two or more participants;
(iii) permitted by the country in which the payer resides; and
(iv) not declared ineligible under (b) or (c) below.
(b) The Board of Directors may declare specified payments to be ineligible to be channeled through
the clearing facility and may terminate such ineligibility.
(c) A participant, at the time it signs this Agreement, may declare that payments for specified transactions
are ineligible to be made by and to residents in its territories through the clearing facility. The participant
shall consult with the Board of Directors with a view to the relaxation and eventual removal of this ineligibility
as soon as circumstances permit.
SECTION 3- Duty to complete payment
Each participant undertakes that all eligible payments made through the clearing facility to residents in its territory will be accepted and completed.
SECTION 4- Use of the clearing facility
(a) A participant shall make mandatory for residents to make payments related to import and export of goods and services, as well as payments mutually agreed between two or more participants through the clearing facility.
(b) However, if there are some legitimate cases that require going through non-clearing facility, each central bank may allow as specific cases of exceptions.
(c) In order to promote the use of the clearing facility, participants may adopt measures designed to provide incentives to make payments for individual transactions through the clearing facility. Thus, for this purpose, participants may allow the conversion of their currencies into Asian Monetary Units (ACU dollar, ACU euro and ACU yen) or into those of other participants in respect of payment receipts at rates which are more favorable than those for dealings outside the clearing facility.
SECTION 5- Instruments of payment
The Board of Directors shall specify in its rules and regulations the types of instrument of payment that may be used and how each is to be used to make payment through the facility. Only instruments of payment denominated in Asian Monetary Units (ACU dollar, ACU euro and ACU yen) may be used to make payment through the clearing facility. A participant, after consultation with the Board may prohibit the use of particular instruments of payment by its residents for making payments through the clearing facility, but shall notify the Secretary General of such prohibition who shall notify all other participants.
ARTICLE VI-SETTLEMENT OF BALANCES
AMONG PARTICIPANTS
SECTION 1- Periodical settlement
(a) Settlement shall be made of net positions and accrued interest at the end of each two monthly settlement period. Settlements shall be made in accordance with section 3 of this article.
(b) The Board of Directors may change the length of the settlement period by a decision taken by a unanimous vote of all of the Directors.
SECTION 2- Interest
(a) Interest shall be paid by net debtors and transferred to net creditors on daily balances outstanding between settlement dates. The accrued interest shall be included in the calculation of the net amounts to be paid and received at the end of each settlement period and shall be notified at the end of each settlement period along with the net position of each participant.
(b) The Board of Directors shall determine, from time to time, the rate of interest, which shall be the same for both net creditor and net debtor positions, on the basis of the return on balances held on similar availability in major financial centers.
SECTION 3- Notifications and payments
(a) The Secretary General shall notify each participant of its net position, including accrued interest, and of the amounts it shall pay to, or receive from, other participants at the end of each settlement period.
(b) Each debtor participant, within four working-days of the receipt from the Secretary General of the notice of the amounts to be paid, shall make the payments in international reserve assets specified by the Board of Directors for the purpose. Payments may also be made in the currency of the creditor subject to its specific consent.
ARTICLE VII-MAINTENANCE OF VALUE AND
NON-SETTLEMENT OF BALANCES
SECTION 1- Value of payments and transfers
The value of any instrument of payment or transfer of a currency for the purpose of the amount to be settled through the clearing facility shall be the amount in the respective Asian Monetary Unit (ACU dollar or ACU euro or ACU yen), as well as in the case of a transfer of currency, be equivalent in the respective Asian Monetary Unit (ACU dollar or ACU euro or ACU yen) determined as of the date the transfer is considered to be made under the rules prescribed by the Board of Directors. The values of payments and transfers made and received with respect to participants and the resulting positions of participants shall be recorded by the Secretary General in the respective Asian Monetary Units (ACU dollar, ACU euro and ACU yen).
SECTION 2- Delayed payments
If a participant fails to make any payment notified to it by the Secretary General under article VI within the time required, interest shall be payable by the participant on the amount due at such rate as may be determined by the Board of Directors.
SECTION 3- Default
(a) In the event the payment referred to in Section 2 above remains unpaid after fifteen days from the date on which it was due in terms of Article VI Section 3(b), the participant shall be deemed to have defaulted and the Secretary General shall immediately notify the Directors and all participants. Thereafter no payments with respect to residents in the territory of the defaulting participant can be made through the clearing facility until the default has been fully discharged and the participant restored to full participation in accordance with (c) below.
(b) Unless the defaulting participant, within seven days of the date of default agrees with the participants to which it is obliged to make any payments due under article VI on arrangements to make the payments, with interest, its participation in the Asian Clearing Union shall be suspended.
(c) After the default has been fully discharged, the Board of Directors may restore the defaulting participant to full participation in the Asian Clearing Union subject to any special terms and conditions that the Board may deem appropriate, or may require the defaulting participant to withdraw from participation. If the defaulting participant does not agree to continue participation on the terms and conditions specified by the Board within thirty days of the decision of the Board on this matter, it shall be deemed to have withdrawn. The special terms and conditions may be revoked at any time by the Board.
(d) In addition, the Board of Directors shall consider, in consultation with participants, other means by which the amount of the default may be recovered, and participants shall take such further measures as the Board deems appropriate in order to recover the amount of the default in the shortest possible time.
ARTICLE VIIA-CURRENCY SWAP ARRANGEMENT
The Board of Directors may provide for a currency swap arrangement among the participants and specify in the rules the eligibility criteria, the terms including the rate of interest and the period for which the facility should be extended, the manner in which the participants should contribute and such other relevant conditions and procedures as are considered necessary.
CHAPTER III
ORGANIZATION AND ADMINISTRATION
ARTICLE VIII-ORGANIZATION
SECTION 1- Joint action
Representatives of the participants shall meet from time to time for the purpose of giving effect to those provisions of this Agreement which involve joint action and, generally, with a view to facilitating the operation and furthering the objectives of this Agreement. Whenever reference is made in this Agreement to the participants acting jointly, they are designated as the Board of Directors.
SECTION 2- The Board of Directors
(a) Each participant shall appoint one Director and one Alternate Director to represent it on the Board of Directors. Each Director and Alternate Director shall be appointed for a term of two years, may be reappointed, and may be replaced at any time during the term of his appointment. Each Director shall have one vote. An Alternate Director may attend the meetings but may vote only when his principal is not present or when his principal is acting as the Chairman. The Board shall elect a Chairman from among its members to serve for a period of one year, and a Vice-Chairman to serve in the absence or inability of the Chairman during the same period.
(b) The Board of Directors shall meet at least once in a calendar year. In addition, meetings of the Board shall be called by the Chairman when requested by two Directors or when the Chairman considers a meeting necessary.
(c) A quorum for any meeting of the Board of Directors shall be the Chairman or Vice-Chairman and two-thirds of the Directors.
(d) All decisions of the Board of Directors shall be taken by a majority of the votes of all of the Directors unless a special majority is required by this Agreement. The votes of “all of the Directors” mean the votes of all the Directors and not merely of those present and voting. When both a Director and his Alternate are not present at a meeting of the Board, the Director, in accordance with rules established by the Board, may authorize another Director to present his views and to cast his vote. The Chairman shall have no vote, except in the case of an equal division when he shall cast the deciding vote.
(e) The Board of Directors may establish a procedure whereby the Chairman may obtain the votes of the Directors on a specific question without calling a meeting of the Board.
(f) The Board of Directors may adopt such rules and regulations as are necessary for the organization and operation of the Asian Clearing Union.
(g) The remuneration and expenses of a Director and Alternate Director shall be borne by the participant appointing them.
SECTION 3-Secretary General and staff
(a) The Board of Directors, by a two-thirds majority of all of the Directors, shall select and appoint the Secretary General, who shall not be a Director, for a term of three years. The Board shall establish the remuneration and other terms of the contractContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. of service of the Secretary General. The Secretary General may be reappointed and shall cease to hold office when the Board so decides by a two-thirds vote of all of the Directors.
(b) The Secretary General, under the direction of the Board of Directors shall conduct the ordinary business of the Asian Clearing Union. He shall be the head of the staff and, subject to the general rules of the Board, organize, appoint and dismiss members of the staff. He shall exercise such other powers as are assigned to him by the Board.
(c) The Secretary General shall prepare and submit to the Board the documents necessary for its work particularly the financial statements, the proposed annual budget and the draft annual report.
(d) The Secretary General shall act as the representative of the Board of Directors within the limits prescribed by the Board.
(e) The Secretary General and the staff members, in the discharge of their official functions, shall owe their duty entirely to the Board of Directors and to no other authority. Each participant in the Asian Clearing Union shall respect the international charter of this duty and shall refrain from all attempts to influence any of the staff in the discharge of his functions.
ARTICLE IX-AGENTAgent An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the principal. Indian Contract Act
The Board of Directors may make arrangements with a central bank or monetary authority of a participant or with the Asian Reserve Bank when it is established to provide the necessary services and facilities for the operation of the clearing facility. The agreement establishing these arrangements with an Agent must be approved by a vote of two-thirds of all of the Directors.
ARTICLE X-RELATIONS WITH OTHER
ORGANIZATIONS AND CLEARING
ARRANGEMENTS
The Board of Directors may make arrangements to co-operate with other general, regional or sub-regional international organizations or other clearing arrangements among countries within or outside the ESCAP region. Any such arrangement shall not apply to a participant which does not consent.
ARTICLE XI-INTERPRETATION
(a) Any question of interpretation of this Agreement or of any rules, regulations or decisions of the Board of Directors arising between the Secretary General and a participant or between participants shall be decided by the Board whose decision shall be final.
(b) Should any dispute, out of or in connection with the Agreement Establishing the Asian Clearing Union and Procedure Rules, arise between the participants or between the Participants and the Board, and if efforts to settle the controversy by negotiating fail, such dispute shall be submitted to arbitration by a tribunal of three arbitrators, the first and second appointed by the parties to the dispute, and the third designated by the first two arbitrators. If they fail to reach agreement, the third arbitrator shall be appointed by the Executive Secretary of ESCAP. The third arbitrator shall be empowered to decide all matters of procedure whenever the other two arbitrators disagree with respect to such a question. The place of arbitration shall be decided by the parties to the dispute. The language of arbitration shall be English. Every effort shall be made to settle the controversy within a period of six months after service of a written request to the arbitration.
ARTICLE XII-REPORTS AND ASSESSMENTS
SECTION 1- Reports
The Board of Directors shall publish an annual report on its activities and the operations of the Asian Clearing Union. The report shall contain an audited statement of accounts and of the clearing operations. The Board may publish such other reports as it deems desirable.
SECTION 2- Operating expenses
(a) The Board of Directors shall approve the annual budget and determine the formula under which expenses shall be apportioned among participants, on the basis of the actual use made of the Asian Clearing Union and of the services rendered to them.
(b) The Board shall specify the currencies or other means in which the assessments shall be paid by members as well as the schedule of payments for each fiscal year.
(c) The Board of Directors may request the Agent to make an advance to the Asian Clearing Union on behalf of the participants when such action becomes necessary to meet expenses, but the Board shall promptly make an assessment to meet the amount borrowed.
(d) All the decisions taken by the Board of Directors in accordance with this section shall require the affirmative vote of two-thirds of all of the Directors.
CHAPTER IV
MISCELLANEOUS PROVISIONS
ARTICLE XIII-WITHDRAWAL FROM PARTICIPATION
SECTION 1- Voluntary withdrawal
Any participant may withdraw from this Agreement at any time by transmitting a notice in writing to the Secretary General. Withdrawal shall become effective three business days from the date such written notice is received by the Secretary General unless a later date is indicated by the participant in the notice. The Secretary General shall notify all other participants as promptly as possible.
SECTION 2- Compulsory withdrawal
If a participant fails to fulfill any of its obligations under this Agreement, and if, after consultation between the Board of Directors and the participant concerned, the participant fails to correct the situation, the Board may require such participant to withdraw from participation. The participant shall be deemed to have withdrawn on the date of the decision of the Board or such later date as the Board may specify.
SECTION 3- Settlement of accounts
(a) A participant shall remain liable for and shall meet all its obligations to other participants arising from its participation under the Agreement until the final settlement of accounts with it has taken place.
(b) Only instruments of payments for the settlement of transactions involving residents in the territory of the withdrawing participant issued on or before the date of its withdrawal shall be settled thereafter through the clearing facility. Settlements shall normally be made at the regular settlement dates until all outstanding instruments of payments have been cleared. The Board of Directors shall determine any further procedures needed to effect the final settlement of accounts with the withdrawing participant.
ARTICLE XIV-AMENDMENT
(a) This Agreement may be amended by a decision of the Board of Directors taken by a vote of two-thirds of all the Directors.
(b) Notwithstanding the provisions of the preceding paragraph, the affirmative vote of each Director on the Board shall be required to approve an amendment to modify the provisions of:
(i) Article III on participation;
(ii) Article IV(c) on the modification of the denomination and/or the value of the Asian Monetary Units;
(iii) Article V, Section 2(b) on specified ineligible payments;
(iv) Article VI, Section 1(b) on the change of the settlement period;
(v) Article VII, Section 1 on the value of payments and transfers;
(vi) Article XII, Section 2(a) on the formula under which expenses shall be apportioned among participants;
(vii) Article XIII, Section 1 on the right of a member to withdraw voluntarily from this Agreement at any time; and
(viii) Article XIV on the amendment of this agreement.
The absence or abstention of a Director shall be considered to be a negative vote.
(c) Any proposal to amend this Agreement shall be communicated to the Chairman of the Board of Directors who shall place the proposal before the Board for discussion. When an amendment has been adopted by the Board, the Chairman shall so certify in an official notice addressed to all participants and to the Executive Secretary of ESCAP. Amendments shall enter into force one month after the date of dispatch of the official communication unless the Board specifies a different date.
ARTICLE XV-SUSPENSION AND LIQUIDATION
(a) The Board of Directors may suspend operations by a decision of the Board taken by a vote of two-thirds of the Directors. All participants shall be notified immediately and no instrument of payment issued after the date of notice shall be settled through the clearing facility.
(b) After a decision under sub-section (a), if the Board of Directors does not decide to resume operations within six months, all operations and other activities shall be suspended, except those necessary for the orderly liquidation and the final settlement of accounts among participants as determined by the Board.
CHAPTER V
FINAL PROVISIONS
ARTICLE XVI-SIGNATURE AND CUSTODY
(a) The Executive Secretary of ESCAP shall be the depository of this Agreement and shall send certified copies of this Agreement and any amendments to it, to all regional members and associate members of ESCAP. Any amendments to this Agreement, as certified by the Chairman of the Board of Directors under the provisions of Article XIV(c), shall be appended to its text.
(b) This Agreement shall be open for acceptance by signature by duly authorized representatives of central banks or monetary authorities of regional members or associate members of ESCAP at the United Nations Economic and Social Commission for Asia and the Pacific. Each Central Bank or monetary authority on whose behalf this Agreement is signed shall deposit with the Executive Secretary, before signature, an instrument setting forth that it has full legal authority to accept this Agreement and to carry out all its obligations under it.
ARTICLE XVII-ENTRY INTO FORCE
This Agreement shall enter into force when it has been signed and the instruments provided in article XVI(b) have been deposited by duly authorized representatives of at least five central banks or monetary authorities of regional members or associate members of ESCAP, but not before the date determined by article III, section 2.
ARTICLE XVIII-COMMENCEMENT
OF OPERATIONS
(a) As soon as this Agreement enters into force, each participant shall appoint a Director and Alternate Director, and the Executive Secretary of ESCAP shall call the inaugural meeting of the Board of Directors.
(b) At its inaugural meeting, the Board shall:
(i) elect the Chairman and Vice-Chairman; and
(ii) make arrangements to proceed with the preparatory work necessary to commence operations of
the clearing facility.
(c) The Chairman of the Board shall notify the participants of the date of the commencement of the operation of the clearing facility.
ARTICLE XIX-NOTIFICATION
The Executive Secretary of ESCAP shall notify signatories and all regional members and associate members of ESCAP of:
(i) all signatures to this Agreement, and
(ii) the date on which this Agreement enters into force.
DONE in a single copy in the English language.
Secretariat
Address: 47, 7th Negarestan Alley, Pasdaran Avenue
P. O. Box 15875/7177
Tehran, Iran
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