-4-

(iii) | During the proceedings, each Government shall bear the
expense of its arbitrator and of its representation in the proceedings before
the tribunal, whereas the expenses of the president and other costs of the
arbitration shall be paid in equal parts by the two Governments. In its
award, the arbitral tribunal may reallocate expenses and costs between the
two Governments.

(iv) __ In all other matters, the arbitral tribunal shall regulate its own
procedures.

ARTICLE 5
(a) This Agreement shall enter into force on the date of signature.

(b) This Agreement shall continue in force until six months from the
date of a receipt of a note by which one Government informs the other of an intent
to terminate this Agreement. In such event, the provisions of this Agreement shall,
with respect to Investment Support provided while this Agreement was in force,
remain in force so long as such Investment Support remains outstanding, but in no
case longer than twenty years after the termination of this Agreement.

IN WITNESS WHEREOF, the undersigned, duly authorized by their respective
Governments, have signed this Agreement.

DONE at Washington, District of Columbia, United States of America, on
the 25th day of July, 2002, in duplicate, in the English language.

FOR THE GOVERNMENT OF FOR THE GOVERNMENT OF
THE UNITED STATES OF AMERICA THE DEMOCRATIC REPUBLIC OF
EAST/TIMOR

r x
Peter S. Watson His Excellency Mari. tiri

President, Prime Minister
Overseas Private Investment Corporation



INVESTMENT INCENTIVE AGREEMENT
BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND
THE GOVERNMENT OF THE DEMOCRATIC REPUBLIC OF

EAST TIMOR

THE GOVERNMENT OF THE UNITED STATES OF AMERICA and THE
GOVERNMENT OF THE DEMOCRATIC REPUBLIC OF EAST TIMOR;

AFFIRMING their common desire to encourage economic activities in the
Democratic Republic of East Timor that promote the development of the economic
resources and productive capacities of the Democratic Republic of East Timor; and

RECOGNIZING that this objective can be promoted through investment
support provided by the Overseas Private Investment Corporation ("OPIC"), a
development institution and an agency of the United States of America, in the form
of investment insurance, coinsurance and reinsurance, debt and equity investments
and investment guaranties;

HAVE AGREED as follows:

ARTICLE 1

As used in this Agreement, the following terms have the meanings herein
provided. The term "Investment Support" refers to any debt or equity investment,
any investment guaranty and any investment insurance, reinsurance or coinsurance
which is provided by the Issuer (or, in the case of coinsurance, is provided by the
Issuer and commercial insurance companies (“Coinsurers”) under coinsurance
arrangements under which the Issuer acts both for itself and for such Coinsurers) in
connection with a project in the territory of the Democratic Republic of East Timor.
The term "Issuer" refers to OPIC and any successor agency of the United States of
America, and any agent of either. The term "Taxes" means all present and future
taxes, levies, imposts, stamps, duties and charges, whether direct or indirect,
imposed in the Democratic Republic of East Timor and all liabilities with respect
thereto.



-2-

ARTICLE 2

The two Governments confirm their understanding that the Issuer’s activities are
governmental in nature and therefore:

(a) The Issuer shall not be subject to regulation under the laws of the
Democratic Republic of East Timor applicable to insurance or financial
organizations, but, in the provision of Investment Support, shall be afforded all
rights and have access to all remedies of any such entity, whether domestic, foreign
or multilateral.

(b) The Issuer, all operations and activities undertaken by the Issuer in
connection with any Investment Support, and all payments, whether of interest,
principal, fees, dividends, premiums or the proceeds from the liquidation of assets
or of any other nature, that are made, received or guaranteed by the Issuer in
connection with any Investment Support shall be exempt from Taxes, whether
imposed directly on the Issuer or payable in the first instance by others. Neither
projects receiving Investment Support nor investors in such projects shall be
exempt from Taxes by operation of this Article, provided, however, that any
Investment Support shall be accorded tax treatment no less favorable than that
accorded to the investment support of any other national or multilateral
development institution which operates in the Democratic Republic of East Timor.
The Issuer shall not be subject to Taxes in connection with any transfer, succession
or other acquisition which occurs pursuant to paragraph (c) of this Article or Article
3(a) hereof, but obligations for Taxes previously accrued and unpaid with respect to
interests received by the Issuer shall not be extinguished as a result of such transfer,
succession or other acquisition.

(c) If the Issuer, alone or with a Coinsurer, makes a payment to any
person or entity, or exercises its rights as a creditor or subrogee,in connection with
any Investment Support, the Government of the Democratic Republic of East Timor
shall recognize the transfer to, or acquisition by, the Issuer and any Coinsurer of any
cash, accounts, credits, instruments or other assets in connection with such payment
or the exercise of such rights, as well as the succession of the Issuer and any
Coinsurer to any right, title, claim, privilege or cause of action existing, or which
may arise, in connection therewith.

(d) With respect to any interests transferred to the Issuer or a Coinsurer
or any interests to which the Issuer or a Coinsurer succeeds under this Article, in its
own right or otherwise, the Issuer shall assert no greater rights than those of the
person or entity from whom such interests were received, provided that nothing in
this Agreement shall limit the right of the Government of the United States of
America to assert a claim under international law in its sovereign capacity, as
distinct from any rights it may have as the Issuer pursuant to paragraph (c) of this
Article. No Coinsurer shall be entitled to the benefits of this Agreement unless it is
acting through, or its interests have been assigned to, the Issuer.



-3-

ARTICLE 3

(a) | Amounts in the currency of the Democratic Republic of East Timor,
including cash, accounts, credits, instruments or otherwise, acquired by the Issuer
(or by the Issuer and any Coinsurer) upon making a payment, or upon the exercise
of its rights as a creditor, in connection with any Investment Support for a project in
the Democratic Republic of East Timor, shall be accorded treatment in the territory
of the Democratic Republic of East Timor no less favorable as to use and
conversion than the treatment to which such funds would have been entitled in the
hands of the person or entity from which such amounts were acquired.

(b) Such currency and credits may be transferred to any person or entity
and upon such transfer shall be freely available for use by such person or entity in
the territory of the Democratic Republic of East Timor in accordance with its laws.

ARTICLE 4

(a) Any dispute between the Government of the United States of
America and the Government of the Democratic Republic of East Timor regarding
the interpretation of this Agreement or which, in the opinion of either party hereto,
presents a question of international law arising out of any project or activity for
which Investment Support has been provided shall be resolved, insofar as possible,
through negotiations between the two Governments. If, six months following a
request for negotiations hereunder, the two Governments have not resolved the
dispute, the dispute, including the question of whether such dispute presents a
question of international law, shall be submitted, at the initiative of either
Government, to an arbitral tribunal for resolution in accordance with paragraph (b)
of this Article.

(b) The arbitral tribunal referred to in paragraph (a) of this Article shall
be established and shall function as follows:

(i) Each Government shall appoint one arbitrator. These two
arbitrators shall by agreement designate a president of the tribunal who shall
be a citizen of a third state and whose appointment shall be subject to
acceptance by the two Governments. The arbitrators shall be appointed
within three months, and the president within six months, of the date of
receipt of either Government's request for arbitration. If the appointments
are not made within the foregoing time limits, either Government may, in
the absence of any other agreement, request the Secretary-General of the
Intemational Centre for the Settlement of Investment Disputes to make the
necessary appointment or appointments. Both Governments hereby agree to
accept such appointment or appointments.

(ii) Decisions of the arbitral tribunal shall be made by majority
vote and shall be based on the applicable principles and rules of
international law. Its decision shall be final and binding.