Proposal for a COUNCIL DECISION concerning the conclusion of an Agreement on telecommunications procurement and an Agreement in the form of a memorandum concerning the procurement of private operators between the European Community and the Republic of Korea
Date: 1997-02-17
Institutions: European Commission
Subjects: South Korea, private sector, public contract, telecommunications, trade agreement (EU)

COMMISSION OF THE  EUROPEAN  COMMUNITIES 

Brussels,  17.02.1997 
COM(97) 56 final 

97/ 0040  (ACC) 

Proposal  for a 

COUNCIL DECISION 

concerning the conclusion of an Agreement  on telecommunications  procurement and 
an Agreement in the form of a memorandum  concerning the procurement  of private 
operators between the European Community and the Republic of Korea. 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

The  attached  proposal  for  a  Council  decision  is  to  conclude  an  agreement  on 
telecommunications  procurement  and  an  agreement  in  the  form  of  a  memorandum 
between the European Community and the Republic of Korea 

Background: 

As  an  important  part  of  the  Community's  Internal  Market  program,  the  Utilities 
directive  93/3 8/EC,  which  entered  into  force  on  1  January  1993,  liberalised  the 
procurement  markets  in  the  electricity,  water,  transport  and  telecommunications 
sectors.  The Directive  ensures  that  utilities  covered  procure  in  an  open,  transparent 
and  non-discriminatory  way through  detailed  rules  governing tendering  and  contract 
awarding. The directive applies to enterprises which operate under  special or exclusive 
rights. It  covers all major  Community telecommunications  network  operators.  Article 
36  of  this  directive  contains  a  limited  local  content  provision.  It  applies  to  tenders 
comprising products which originate in third countries with which the Community has 
not  concluded  an  agreement,  which  ensures  comparable  and  effective  access  for 
Community undertakings to the markets of those third countries. 

While until the mid  1980s Community  suppliers had  a substantial  share in the Korean 
telecommunications  network  equipment  market,  their  position  deteriorated  rapidly  in 
the  1990s.  This  is  partly  due  to  the  rapid  government-led  build-up  of  domestic 
equipment  manufacturers  in  Korea  and  partly  to  the  legislation  in  Korea  on 
procurement.  Korean  procurement 
legislation  distinguishes  between  "foreign-
currency"  and "domestic  currency" procurement.  The former  applies  to  procurement 
of  goods  and* services  which  are  not  available  on  the  Korean  market.  Specific 
regulation  applies  to  state  agencies  and  companies,  so  called  government-invested 
corporations, which are more than 50 per cent state owned. In the telecommunications 
sector, only Korea Telecom (KT), which accounts for  roughly  80 per cent  of  Korea's 
network  equipment  market,  is regulated  as a government-invested  corporation.  KT is 
therefore  subject  to  Korean  procurement  legislation  unless  it  receives  a  special 
exemption.  Subsequent  to the conclusion  of a bilateral Korea-US  telecommunications 
agreement, in 1993 a partial exemption was granted to KT with regard to the domestic 
currency  procurement  of products from US  companies.  Today,  "domestic-currency" 
procurement applies to more than 90 per cent of KT equipment purchases. As a result, 
since  1992 European suppliers have been de facto  excluded from KT's purchasing. As 
Community suppliers were not permitted  to  qualify  for KT  procurement,  they  could 
not  participate in KT tendering.  A second Korean  operator, the fully  privately-owned 
Dacom,  started  providing  international  telephone  services  in  1992.  Since  1 January 
1996, Dacom also operates in Korea's national long-distance market. While Dacom is 
not covered by the above-mentioned  procurement  regulations, its internal  procurement 
rules  stipulated  that  foreign  purchasing  should  only  be  undertaken  if  the  equipment 
cannot be bought domestically.  Thus, European suppliers also faced  a severe handicap 
when selling to the second Korean operator. 

The  EC  and  Korea  are  both  members  to  the  plurilateral  Government  Procurement 
Agreement  (GPA).  However,  the  procurement  of  telecommunications  network 
equipment  is  not  covered  under  the  GPA.  The  Community  did  not  include 

/ 

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telecommunications  operators  under  its  GPA  offer  for  any  of  its  purchasing.  In 
contrast,  Korea  chose to  cover  KT  under  its  GPA  offer  for  general  procurement,  as 
commodities  and  construction  services.  However  KT  is not  covered  under  the  GPA 
with regard to telecommunications equipment. 

Based on a negotiating directive from the Council (adopted  on 28th November  1994), 
in  consultation  with  the  Committee  set  up  under  Article  113  of  the  Treaty,  the 
Commission  entered  into  formal  negotiations  with  Korea  on  a  mutual  opening  of 
telecommunications procurement markets in May 1995. Since the Commission felt that 
insufficient  progress  was  made,  in  May  1996  it 
initiated  a  dispute  settlement 
procedure  under  the  WTO  on  discrimination  in  the  Korean  telecommunications 
procurement  market.  Negotiations  were  finally  concluded  on  22  November  1996, 
resulting  in  a  draft  agreement  and  a  memorandum.  As  a  result  of  reaching  these 
agreements, KT opened qualification procedures to  Community suppliers  immediately 
.  The  Commission  undertook  to  suspend  any  action  under  the  pending  dispute 
settlement  case. Prior to  signing the bilateral agreement,  the Community will  formally 
end the dispute settlement procedure. 

The telecommunications procurement agreement 

The telecommunications  procurement  agreement  is purely bilateral.  It  is, therefore,  a 
stand-alone agreement  with no impact  on coverage under the GPA.  It  provides  for  a 
mutual  opening  of  procurement  by  telecommunications  operators  by  granting  an 
exchange  of  national  treatment  above  certain  thresholds.  In  the  main  segment  of 
telecommunications  procurement,  provision  is  made  to  enhance  transparency  and 
guarantee suppliers' rights by setting out minimum procurement  and national challenge 
procedures. While this does not imply any procedural change for European  operators, 
KT  will  be  obliged  to  follow  procedures  based  on  those  set  out  in  the  GPA.  The 
agreement is enforced through a binding bilateral dispute settlement procedure. 

It is a liberal and broad  agreement with no product  exceptions apart from a transition 
period  of five years  for  the  procurement  of  satellites by Korea  Telecom.  Korea  also 
excluded  single tendering involving  set asides for  small and medium  sized  enterprises 
which,  however,  mainly  covers  contracts  below  the  threshold  specified  in  the 
agreement.  The  agreement  only  applies  to  the  procurement  of  telecommunications 
equipment  and  incidental  services.  This  reflects  the  Community's  interest  since,  as 
mentioned above, with regard to general procurement KT is already covered under the 
GPA. With regard  to  other  government-invested  corporations, the EC's  interests  are 
protected  should  such  companies  obtain  licenses  to  operate  telecommunications 
networks in the future,as  these would  automatically be covered  under  the  agreement. 
For its part, the EC will not apply the provisions of Article 36 of the Utilities  directive 
for tenders comprising products of Korean origin. 

Since the EC  side was  concerned  that  a long  ratification  process  could  further  delay 
European suppliers' entry into the Korean market, negotiators agreed to do the utmost 
to  conclude the agreement by May 1997. 

Memorandum regarding private operators 

The Utilities directive covers private network operators if they operate under special or 
exclusive  rights.  In  Korea,  procurement  legislation  only  applies  to  government-
invested  corporations.  As the  procurement  of  private  operators  is not  subject  to  any 
government  regulation,  Korea  stated  that  it  was  not  in  a  position  to  cover  private 
operators  under  the  agreement.  However,  because  of  complaints  from  European 
industry  about  discrimination  by  private  operators  in  Korea,  the  EC  requested  a 
government  commitment  not  to  interfere  in  the  procurement  by  private  operators. 
Both  sides  therefore  agreed  to  a  memorandum  in  which  they  confirm  that  such 
companies shall carry out their purchasing in an independent way and that they should 
not  discriminate  against  foreign  companies  or  products.  In  the  case  of  conflict  both 
sides agree to  take recourse  to  the WTO dispute  settlement.  The EC  side wished  to 
protect  its  interests  if,  in  the  future,  Korea  concludes  a  more  favourable  agreement 
with  a third  country.  As  a  result,  ,  both  sides  agreed  to  grant  the  other  party  MFN 
treatment  on  a  reciprocal  basis  for  measures  taken  with  regard  to  the  purchasing  of 
private  operators.  Formally  speaking,  the  memorandum  constitutes  a  separate 
agreement. 

The  Korean  government  has  already 
initiated  the  process  of  revising  domestic 
telecommunications  and  procurement  legislation,  abolishing  provisions  which  were 
criticised  by the EC  side during the  consultations under the WTO  dispute  settlement. 
Upon request from the Korean government, Dacom abolished its internal "buy-Korea" 
provision and Korea Telecom has written to European  suppliers,  opening to them the 
qualification  procedure.  There  are  also  indications  that  the  successful  conclusion  of 
negotiations  has  improved  European  suppliers'  position  with  other  private  network 
operators in Korea. 

* * * * * * * * * * * * * ** 

The draft  agreement  and the memorandum  build on the closer political and  economic 
relationship  established  between  Korea  and  the  EC  under  the  bilateral  Framework 
agreement  which  was  signed  in  October  1996.  It  offers  the  EC  more  favourable 
treatment than Korea has been prepared to offer  any other third country with regard to 
the  purchasing  of  telecommunications  network  equipment.  Moreover,  the  draft 
agreement  and  the  memorandum  protect  EC  suppliers  from  further  discrimination 
should access to the Korean market improve as a result of negotiations with other third 
countries. Its conclusion will  send  a positive message to the ongoing negotiations  for 
an Information  Technology Agreement  (ITA) and GATS negotiations, in particular in 
the field of telecommunication services and government  procurement. 

The main elements of the agreement: 

The main elements of the agreement reached on 22 November  1996 are as follows: 

•  Exchange  of  national  treatment  above  a  threshold  of  130,000  SDR  for  the  main 

telecommunications operators on both sides; 

•  Above this threshold, Korea  abolishes all discriminatory  regulations  and  practices 
for the purchasing of telecommunications  equipment with an exception  of satellites 
and the procurement from small and medium sized enterprises; 

•  Above  a threshold  of  450,000  SDR, KT  is subject  to  GPA  like  procurement  and 
challenge  procedures,  while  EC  TOs  are  subject  to  the  Utilities  directive  for 
contracts above 600,000 ECU; 

•  Upon entry into force of the agreement, EC will extend the benefits  of the Utilities 

directive with regard to tenders containing goods of Korean origin; 

•  binding bilateral dispute settlement; 

•  Upon  reaching  agreement  KT  qualification  procedures  were  open  to  European 

suppliers. 

•  with regard to the purchasing  by private operators, in a memorandum  both  sides 
confirm  the  independence  of  such  companies  and  offer  MFN  treatment  on  a 
reciprocal basis; 

•  Upon request from the Korean government, the second (private) operator,  Dacom, 

has abolished  a "buy-Korea" provision in its internal procurement rules. 

The Council is invited to  approve the Agreement  on telecommunications  procurement 
and  the  Agreement  in  the  form  of  a  memorandum  and  adopt  the  proposal  for  a 
Decision concerning the conclusion of these Agreements between Korea and the EC. 

r.  € 

Proposal for a Council Decision 

concerning the conclusion of the Agreement on telecommunications procurement and 
an  Agreement in the form of a memorandum  concerning the procurement  of private 
operators between the European Community and the Republic of Korea. 

THE COUNCIL OF THE EUROPEAN UNION; 

Having regard to the Treaty establishing the European Community,  and in particular 
Article 113 thereof; 

Having regard to the proposal from the Commission, 

Whereas  the  Agreements  between  the  European  Community  and  the  Republic  of 
Korea on telecommunications procurement should be approved, 

Whereas the conclusion of the Agreement on telecommunications procurement and the 
Agreement  in  the  form  of  a  memorandum  should  be  based  on  Article  113  of  the 
Treaty  because  the  Agreements  apply  only  to  products  and  services  which  are 
incidental to the procurement of these products; 

Whereas it is appropriate that the Council authorises the Commission, in consultation 
with a special committee to be appointed by the Council, to approve modifications  on 
behalf of the Community of Annex I of the telecommunications  agreement; however, 
such authorisation will be limited to the modifications resulting from the application of 
the procedure of article 8 of the Council Directive 93/38/EEC of 14 June 1993, 

HAS DECIDED AS FOLLOWS: 

Article 1 

The Agreement on telecommunications procurement and the Agreement in the form of 
a memorandum  concerning the procurement of private telecommunication  operators 
between the European Community and the Republic of Korea are hereby approved on 
behalf of the Community. 

The text of the Agreement and the memorandum is attached to this Decision. 

1r 

Article 2 

The President of the Council is hereby authorised to designate the person empowered 
to sign the Agreement and the memorandum in order to bind the Community. 

Article 3 

The Commission is authorised to approve, on behalf of the Community,  modifications 
to Annex I of the Agreement on telecommunications procurement. 

The  Commission  is  assisted  in  this  task  by  a  special  committee  appointed  by  the 
Council. 

The  authorisation  referred  to  in  paragraph  1  of  this  Article  shall  be  limited  to  the 
modifications that will be necessary if the procedures laid down in article 8 of Council 
Directive 93/38/EEC were to be applied. 

Done at Brussels, 

For the Council 

The President 

g 

AGREEMENT ON TELECOMMUNICATIONS  PROCUREMENT 

BETWEEN THE REPUBLIC OF KOREA AND THE EUROPEAN  COMMUNITY 

(DATE) . 

The EUROPEAN COMMUNITY (hereinafter  "the EC"), 

of the one part, and 

THE GOVERNMENT OF THE REPUBLIC OF KOREA (hereinafter  "Korea"), 

of the other part, 

(hereinafter  referred to as the "Parties" and singularly as a "Party"), 

CONSIDERING the Parties' efforts  and commitments to liberalize their  respective public 
procurement  markets  notably  through  the  Government  Procurement  Agreement  (1994 
GPA); 

DESIROUS  to  pursue  liberalization  efforts  among  themselves  by  granting  reciprocal 
access  to  procurement  by  their  respective  telecommunications  operators,  subject  to  the 
conditions provided for in this agreement; 

MINDFUL of the need to ensure a successful  outcome to negotiations under the auspices 
of  the  World  Trade  Organisation  (WTO)  on  the  liberalisation  of  telecommunications 
services; 

Have agreed as follows: 

i 

Article 1 

Objective, Definitions and Scope of coverage 

1.1  The  purpose  of  this  Agreement  is  to  secure  reciprocal,  transparent  and  non 
discriminatory  access  for  the  Parties'  suppliers  and  service  providers  to  the 
procurement  of products and incidental  services  by designated  telecommunications 
operators listed in Annex I ("TOs"). 

1.2  For the purpose of this Agreement: 

1.2.1 TOs shall be those listed in Annex I. The Parties shall update that list by mutual 

consent where appropriate. 

1.2.2. "Products"  include  any  equipment,  supplies  and  materials  that  are  used  to 
install,  operate,  maintain,  repair or manage  transmission  networks  as  well  as 
research  and development  equipment,  test  and measuring  equipment  training 
equipment and terminal equipment. 

1.2.3. "Incidental  Services"  are  the  services  that  TOs  procure,  incidental  to  the 

procurement of a product. 

1.3.  This Agreement applies to any law, regulation or practice affecting  the procurement 
of  products  and  incidental  services  by  the  Parties'  TOs  and  to  the  award  of  all 
contracts for the procurement of products or incidental services by the Parties' TOs. 

1.4.  In the  case  of  contracts,  or  series  of  contracts,  awarded  by  Korean  TOs  for  the 
procurement of products and incidental  services, this Agreement shall apply only to 
those with an estimated value of which, excluding VAT or comparable turnover tax, 
is not less than 450,000 SDR, unless otherwise agreed between the Parties. 

In  the  case  of  contracts,  or  series  of  contracts,  awarded  by  EC  TOs  for  the 
procurement of products and incidental  services, this Agreement  shall apply only to 
those with an estimated value of which, excluding VAT or comparable turnover tax, 
is not less than 600,000 ECU, unless otherwise agreed between the Parties. 

The value of SDR in Korean Won shall be fixed in accordance with the procedures 
set out  in the 1994 WTO Agreement on Government Procurement (GPA).] 

1.5.  This Agreement does not apply to the following contracts: 

1.5.1  Procurement of products and services with a view to commercial resale or use 

in the production of goods for commercial sale; 

1.5.2  For the EC: 

procurement  contracts  entered  into by TOs that  are  subject to  complete and 
effective  competition in the market place, pursuant to the requirements under 
Article 8 of the EC's Utilities Directive. 

St=> 

procurement  contracts for the procurement  of products  and incidental  services 
entered  into  before  1  January  1997  by  TOs  established  in  Spain  or  to  the 
award  of  contracts  for  the  procurement  of  products  and  incidental  services 
entered into before  1 January  1998 by TOs established in Portugal and Greece. 

1.5.3  For Korea: 

single tendering  procurement  involving  set  asides  for  small  and  medium  sized 
Invested  Enterprise 
businesses 
Management  Law  and  the  Accounting  Regulations  on  Government-Invested 
Enterprises; and 

stipulated  under  Korea's  Government 

procurement  of  satellites  pursuant  to  Korea's  Aviation  and  Space  Industry 
Development  Promotion  Law  for  a  five  year  period  commencing  on  the  date 
on which Korea's accession to the GPA becomes  effective. 

/«i 

Article 2 

National  Treatment and Non-Discrimination 

2.1  Each Party  shall ensure that  in all procurement  procedures  and  practices  and  in the 
award  of  procurement  contracts,  the  TOs  established  in  its  territory  provide  (i) 
products and incidental  services, arid (ii) suppliers1 of the other Party with treatment 
no less favourable than that accorded to: 

(1) 

domestic (i) products and incidental services, and/or (ii) suppliers; and 

(2) 

(i) products and incidental services, and/or (ii) suppliers of any third country. 

2.2  The Parties  shall ensure that  the  TOs established  in their  respective  territories  shall 

not, with respect to the procurement contracts covered by this Agreement, 

(1) 

treat  a  locally-established  supplier  less  favourably  than  another  locally-
established supplier on the basis of the degree of affiliation  to, ownership of or 
control by natural or legal persons from the other Party; 

(2) 

discriminate  against  a locally-established  supplier  on  the basis of the  fact  that 
the product or service being supplied originates from the other Party. 

2.3  The  parties  shall  ensure  that  the  TOs  do  not,  in  the  qualification  and  selection  of 
suppliers, products  or  incidental  services, or  in the evaluation  of tenders  and  award 
of contracts, impose or seek  offsets2. 

2.4  With regard  to challenge procedures  and disclosure  of information  concerning  these 
procedures, a Party and its TOs  shall not treat  the other  Party  and  its suppliers less 
favourably than its domestic suppliers or those of other third countries. 

2.5  To the extent  applicable, the WTO  Agreement  on Technical  Barriers to  Trade shall 
apply  to  the  laws,  regulations  and  policies  of  the  Parties  as  they  relate  to  the 
procurement of products and incidental services by their respective TOs. 

"suppliers" shall be construed as meaning suppliers of products and incidental services 

2 

Offsets in government procurement are measures used to encourage local development or improve the 
balance-of-payments  accounts  by  means  of  domestic  content,  licensing  of  technology,  investment 
requirements, counter-trade or similar requirements. 

4  I 

2.6  The Parties shall also ensure that, where appropriate, their TOs define the technical 
specifications  set  out  in the  tender  documentation  in  terms  of  performance  rather 
than  design  or  descriptive  characteristics.  Such  specifications  shall  be  based  on 
international standards, where such exist, otherwise on national technical regulations 
or recognized  national  standards.  Any technical  specifications  adopted  or applied 
with a view to, or with the effect  of creating unnecessary  obstacles to  procurement 
by a Party's TO of  products  or services from the  other  Party  and to  related trade 
between the Parties, shall be prohibited. 

^ 

Article 3 

Procurement Procedures 

The Parties shall ensure that the procurement  procedures and practices followed by 
their  TOs  comply  with  the  principles  of  non-discrimination,  transparency  and 
fairness.  Such procedures shall at least contain the following elements: 

(a) 

(b) 

(c) 

(d) 

(e) 

the  call  for  competition  shall  be  made by  means  of  a tender  notice  inviting 
submission  of  tenders,  an indicative  notice  or a notice  on the  existence  of a 
qualification  system.  These notices,  or a summary of the important  elements 
thereof,  shall be published at least in one of the  1996 GPA official  languages 
on a national  level  or, as regards the EC, on a Community  level.  They shall 
contain  all  necessary  information  about  the  intended  procurement,  including 
where applicable the type of award procedure being followed; 

time-limits shall be adequate to allow suppliers or service providers to prepare 
and submit tenders; 

tender documentation shall contain all information necessary, notably technical 
specifications  and  selection  and award criteria,  to  enable tenderers  to  submit 
eligible  tenders.  Tender  documentation  shall  be  forwarded  to  suppliers  or 
service providers upon request; 

selection criteria  shall be objective.  Where a TO runs a qualification  system, 
such a system  shall operate on the basis of pre-defined  and objective  criteria 
and  the  procedure  and  conditions  for  participation  shall  be  made  available 
upon request; 

award  criteria  may be  either  the  most  economically  advantageous,  involving 
specific  evaluation  criteria  such  as  delivery  or  completion  date,  cost-
effectiveness,  quality,  technical  merit,  after-sales  service,  commitments  with 
regard to spare parts, price, etc., or the lowest price only. 

M 

Article 4 

Challenge Procedures 

With  respect  to  procurements  by  its  TOs,  the  Parties  shall  provide  non 
discriminatory,  timely,  transparent  and effective  procedures  enabling  suppliers and 
service  providers  to  challenge  alleged  breaches  of  this  Agreement  arising  in  the 
context  of  procurements 
in which  they  have,  or  have  had,  an interest.  Challenge 
procedures compatible with those set out in Article XX of the GPA shall apply. 

The Parties  shall  ensure  that  its  TOs  retain  relevant  documentation  relating  to  all 
aspects of the process  concerning  procurements  covered  by this Agreement  for at 
least three years. 

The Parties shall also ensure that decisions taken by bodies responsible for challenge 
procedures are enforced  effectively. 

•<iS 

Article 5 

Information Exchange 

5.1.  To the extent necessary to ensure effective  implementation  of this Agreement, the 
Parties  shall, upon the request of either Party, exchange information on legislation, 
other measures or imminent changes affecting  or likely to  affect  TOs' procurement 
policies or practices. 

-if 

i 

Article 6 

Consultation and Dispute Settlement 

6.1.  The Parties shall  consult  regularly  and, in any case,  at least  once  a year to  ensure 

adequate operation of the Agreement. 

6.2.  When  a  Party  requests  consultations  on  any  matter  affecting  the  operation  of  the 
Agreement, such consultations shall be held not later than 30 days following the date 
on which the request is received, unless otherwise mutually agreed to by the Parties. 

6.3  If either Party considers that  any benefit  accruing  to  it, directly  or indirectly, under 
this Agreement is being nullified or impaired by the failure of the other Party to carry 
out  its  obligations  under  this  Agreement,  it  may  request  consultations  under 
paragraph 6.2 above. 

6.4  In the event of such a dispute, the Parties shall endeavour to resolve the dispute by 
means  of  consultations  within  3  months  of  the  date  of  the  initial  request  for 
consultations.  The consultation period can be extended subject to mutual agreement 
by the Parties. 

6.5.  If a dispute is not resolved  through consultations  between  the  Parties,  either Party 
may refer the dispute to binding arbitration and notify the other Party of its decision 
to  resort to arbitration.  The essential  elements  of the arbitration procedure are set 
forth in Annex II. 

4f-

Article 7 

Access to Procurement Information 

7.1.  The Parties shall make their best efforts to cooperate with a view to ensuring that the 
type of procurement information,  notably in tender notices and documentation, held 
on  their  respective  databases,  is  comparable  in  terms  of  quality  and  accessibility. 
Likewise, they shall make their best efforts to cooperate with a view to ensuring that 
the type of information exchanged through the respective electronic means between 
interested  parties for the  purpose  of  public procurement  is comparable  in terms  of 
quality and accessibility. 

7.2.  Paying  due  attention  to  issues  of  interoperability  and  interconnectivity,  and  after 
having  agreed  that  the  type  of  procurement  information  referred  to  in  Article  7.1 
above  is  comparable,  the Parties  shall  make their  best  efforts  to  secure  reciprocal 
access for suppliers and services providers of the other party to relevant procurement 
information,  such as tender  notices,  held  on their respective  databases.  They shall 
also  make their best  efforts  to  ensure  reciprocal  access  for  suppliers  and  services 
providers of the other party to their respective electronic procurement systems, such 
as electronic tendering.  The Parties shall also take due account  of Article  XXI V(8) 
of the 1996 GPA. 

At 

Article 8 

Final Provisions 

8.1.  This  Agreement  is  drawn  up  in  duplicate  in  the  Danish,  Dutch,  English,  Finnish, 
French,  German,  Greek,  Italian,  Portuguese,  Spanish,  Swedish  and  Korean 
languages, each of these texts being equally authentic. 

8.2.  This Agreement shall enter into force on the first day of the month following the date 
on which the Parties have notified  each other that their ratification  or conclusion or 
adoption  process,  according  to  the  rules  applicable  to  each  Party,  has  been 
completed. 

8.3.  This Agreement  shall  not  affect  the rights and obligations  of  the  Parties under the 

WTO and other multilateral instruments negotiated under the auspices of the WTO. 

8.4.  The Parties  shall review the functioning  of the provisions  of this Agreement within 
three years of the  entry  into force  of this  Agreement  with  a view  to  improving  its 
operation when necessary. 

8.5.  If a Party wishes to withdraw from the Agreement, it shall notify  the other Party in 
writing of such intention and the withdrawal will take effect  6 months after the date 
on which the notification was received. 

8.6.  The  Annexes  attached  to  the  Agreement  shall  form  an  integral  part  of  this 

Agreement. 

A*\ 

Annex I 

European Community 

Belgacom (Belgium) 

Korea3 

-  Korea Telecom-

Tele Danmark A/S and subsidiaries (Denmark) 
Deutsche Telekom  (Germany) 

OTE/Hellenic Telecom Organisation  (Greece) 

Telefonica de Espafta  S.A.  (Spain) 

France Telecom (France) 

Telecom Eireann  (Ireland) 

Telecom Italia (Italy) 

Administration des postes et télécommunications (Luxembourg) 

Koninklijke PTT Nederland NV and subsidiaries4 (Netherlands) 

Portugal Telecom S.A. and subsidiaries (Portugal) 

British Telecommunications  (BT) (United Kingdom) 

City of Kingston upon Hull (United Kingdom) 

Ûsterreichische Post und Telekommunikation (PTT) (Austria) 

Telecom Finland (Finland) 

Telia (Sweden) 

3 

This  list  will  include  in  the  future  government-invested  corporations,  as  defined  by  the  relevant 
Korean laws and regulations, with  respect to their purchase of telecommunications equipment,  where 
(1)  such  corporations  are  licensed  to  provide  basic  telecommunications  services  pursuant  to  the 
substance  and  content  of  Article  5  of  the  Telecommunications  Business  Act;  (2)  one  of  the  main 
purposes of the corporations  is to provide telecommunications  services; and  (3) the procurement  by 
the corporations is subject to the laws and regulations of the Republic of Korea 

Except PTT Post BV 

go 

Annex £1 

1.  An arbitration panel shall consist  of three members.  The Party  initiating  an arbitration 
proceeding  shall appoint  an arbitrator and notify  the other Party of  such  appointment. 
Within  15 days of such notice, the other Party shall appoint a second arbitrator. 

2.  The two  arbitrators appointed  by  the Parties  shall  appoint  a  third  arbitrator,  selected 
from a list of potential  arbitrators compiled by Korea and the EC, or random  selection 
from  that  list  if  necessary,  within  15  days  after  the  appointment  of  the  second 
arbitrator. The third arbitrator shall not be a national  of either Party and shall  serve as 
Chairman of the arbitration panel. 

3.  No  arbitrator  shall  have  a financial interest  in  the  dispute  or  take  instructions  from 

either  Party. 

4.  The rules of the arbitration procedure  shall be established jointly, by the arbitrators.  In 
addition  the  procedure  shall  assure  a  right  to  at  least  one  hearing  as  well  as  the 
opportunity  for  the  Parties  to  submit  written  arguments  and  rebuttals.  Unless 
otherwise agreed, such meetings shall take place either in Brussels or in Seoul. 

5.  Each Party shall bear the cost  of its own arbitrator and its presentation,  including  legal 
fees,  in the proceeding.  The remaining costs of the proceedings  shall be borne  equally 
by the Parties. 

6.  The panel shall make its decisions by majority vote.  The Parties always retain the right 
to terminate the arbitration proceeding  at any stage  if they  so  agree  by notifying  such 
an agreement to the Chairman. 

7.  Within three months after  the  Chairman is  appointed,  the  panel  shall  publish  a report 
which  will  rule  on  the  question  whether  benefits  under  this  Agreement  have  been 
nullified  or  impaired.  The  report  will  also  indicate  appropriate  remedies.  In 
extraordinary circumstances that prevent the panel from meeting the required deadline, 
the  parties may  agree to  extend  the  deadline,  but  only  to  the  extent  necessary  and  in 
any event, not to exceed  180 days. 

The  Parties  shall  implement  the  panel  report.  If either  Party  cannot  comply  with  the 
remedies  indicated  by  the  panel,  it  will  notify  the  other  Party  within  a  month  of  the 
rendering of the panel report.  The non-complying Party may propose compensation  or 
other  remedial  action  to  the  other  Party.  If  the  other  Party  cannot  agree  to  such 
proposed  compensation  or  other  remedial  action  within  2  months  after  the  rendering 
of  the  panel  report,  it  may  propose  to  the  panel  the  suspension  or  withdrawal  of 
equivalent  benefits  under  this  Agreement.  Such  suspension  or  withdrawal  shall  take 
effect  30  days  after  it  is  proposed  to  the  panel,  unless  the  panel  disapproves  such 
action. 

2A 

Side letter on qualification  procedures 

Dear 

I  refer  to the recent  discussions in Brussels between the Republic of Korea  ("RoK")  and 
the European Community (the "EC") on the subject of telecommunications procurement. 

With  regard  to  vendor  qualification  process,  I  am  pleased  to  inform  you  that  Korea 
Telecom  ("KT")  will  accept  preliminary  proposals  for  qualification  submitted  by 
telecommunications equipment suppliers established  in the EC or their Korean subsidiaries 
("EC  suppliers") from the  date  on which  the  EC  and  Korea  initial  a  bilateral  agreement 
regarding telecommunications procurement (the "Agreement"). I have been assured by KT 
the 
that  it  will  use  its  best  endeavours  to  limit  the  time  period  necessary  to  carry  out 
qualification  procedure. 

After  reviewing  a preliminary  proposal  for  qualification  submitted  by  an  EC  supplier,  if 
KT  determines  the  proposal  acceptable  in  technical  and  economic  terms,  KT  will  hold 
discussions with the proposing supplier and request him to present a formal  application for 
qualification.  If KT finds the  preliminary  proposal  unacceptable,  KT  will  explain  to  the 
supplier in writing the reasons for  refusal. 

Additionally,  KT  is  allowed  under  its  qualification  procedures  to  limit  the  number  of 
suppliers  for  a  procurement  contract  if  an  excessive  number  of  suppliers  may  result  in 
incompatibility,  technical  difficulties  or  disproportionate  costs  in  KT's  operation  and 
maintenance of its network.  Such a limitation of suppliers, however, is not allowed with a 
view to avoiding maximum possible competition or in a manner which would constitute a 
means  of  discrimination  against  EC  suppliers  or  protection  to  domestic  producers  or 
suppliers. 

Agreed  Minutes  of  the  Signing  of  the  Agreement  on  Telecommunications 
Procurement between the Republic of Korea and the European  Community 

The  Plenipotentiaries  of  both  Parties 
the  Agreement  on 
Telecommunications  Procurement  between  the Republic  of  Korea  and  the  European 
Community and agreed on the following: 

this  day  signed 

1. 

On procurement, qualification  and challenge procedures 

As regards the Agreement  on procurement  by telecommunications  operators, the two 
Parties  agree  that  Articles  2,  3  and  4  of  the  Agreement  require  the  application  of 
procurement,  qualification  and  challenge  procedures  compatible with  the  1996  GPA. 
As  regards  the  EC, the  procurement  and  qualification  procedures  set  out  in  Council 
Directive  93/38/EEC  of  14 June  1993  co-ordinating  the  procurement  procedures  of 
entities operating in the water,  energy, transport  and  telecommunications  sectors  (OJ 
No  L  199,  09.08.1993,  p.84)  fulfil  this  requirement.  The  EC  confirms  that  the 
procurement procedures of EC TOs are subject to this Directive1. 

As regards qualification  procedures, both Parties agree that  TOs may limit the number 
of suppliers who qualify  where that may result in incompatibility, technical difficulty  or 
disproportionate  costs in the operation  and  maintenance  of their networks.  However, 
such  a  limitation  of  suppliers  may  not  be  applied  to  avoid  maximum  possible 
competition  or to  constitute  a  means  of  discriminating  against  suppliers  of the  other 
Party or protecting domestic suppliers. 

Also,  as  regards  the  EC,  the  challenge  procedures  set  out  in  Council  Directive 
92/13/EEC of 25 February  1992 co-ordinating the laws, regulations and  administrative 
provisions  relating  to  the  application  of  Community  rules  on  the  procurement 
procedures  of  entities  operating 
and 
in 
telecommunications  sectors (OJ L 76, 23.03.1992, p. 14) are compatible with Article 4 
of the Agreement. 

the  water, 

transport 

energy, 

Both Parties further  agree that the provisions of Article 2.6 on technical  specifications 
are compatible with Article VI of the GPA. 

The transitional arrangements for Spain, Portugal and Greece apply, as referred to article 1 (5) oï 
this agreement. 

tr> 

On National Treatment 

Both Parties confirm  that telecommunications  operators  of the Republic of Korea and 
the  EC,  as  annexed  to  the  Agreement,  do  not  treat  telecommunications  equipment 
suppliers  of  the  other  Party  less  favourably  than  domestic  telecommunications 
equipment suppliers for contracts, or series of contracts, above a threshold  of  130,000 
SDR. 
This threshold can be reviewed upon the request of either Party. 

3.  On  the  status  of  Korean  suppliers  under  Article  36  of  the  Utilities 
Procurement Directive 

The European  Community  (EC)  informs  that,  as  a result  of  the  recent  conclusion  of 
the  Korea-EC  bilateral  agreement  on  procurement  by  telecommunications  operators, 
Korean  suppliers  will  not  be  subject  to  the  provisions  of  Article  36  of  the  Utilities 
the  European 
to 
Procurement  Directive  with 
telecommunications  operators  covered  by  the  Directive  as  soon  as  the  Korea-EC 
bilateral agreement enters into force. 

the  procurement  by 

regard 

The Republic of Korea 

The European Community 

•tf 

MEMORANDUM 

1.  In  light  of  the  relevant  provisions  of  the  GATT  1994,  the  Government  of  the 
Republic of Korea and the European Community ("EC")  confirm that procurement by 
private telecommunications operators shall be made independently and should be made 
in accordance with each operator's commercial considerations, regardless of the origin 
of the goods and suppliers. 

2.  If a problem  arises in this regard,  the Republic  of Korea  and  the EC agree to  hold 
consultations at either party's request  on a timely basis.  Should such a problem not be 
resolved  through  consultations, the  Republic  of Korea  and the EC  agree to  resort  to 
the dispute settlement procedures provided under the WTO. 

3.  Should the Republic of Korea or the European Community grant  additional  benefits 
regarding the procurement  by  private  operators to  another  third  party, those  benefits 
will be extended to the European Community or the Republic of Korea, provided  that 
the  European  Community  or  the  Republic  of  Korea  grants  the  same  treatment  on  a 
reciprocal basis. 

The Republic of Korea 

The European Community 

zr 

ISSN 0254-1475 

COM(97) 56 final 

DOCUMENTS 

EN 

11  15 

Catalogue number  : CB-CO-97-048-EN-C 

ISBN 92-78-15653-1 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg 

âc