Agreement on terms and conditions of the accession of the European Atomic Energy Community to the Korean Peninsula Energy Development Organisation - Euratom accession: side letter on liability - Side letter in connection with the representation of the Community - Side letter on industrial aspects - Financing arrangement: Side letter on payment procedures and accounting and audit requirements
Date: 1997-07-30
Institutions: European Atomic Energy Community, Japan, North Korea, South Korea, United States
Subjects: EAEC, Japan, North Korea, South Korea, United States, accession to an agreement, energy cooperation, international organisation, nuclear energy, nuclear reactor

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Official Journal of the European Communities

10. 3. 98

II

(Acts whose publication is not obligatory)

COMMISSION

on terms and conditions of the accession of the European Atomic Energy Community
to the Korean Peninsula Energy Development Organisation

AGREEMENT

(98/185/Euratom)

THE EUROPEAN ATOMIC ENERGY COMMUNITY,

hereinafter referred to as ‘the Community’, and

THE KOREAN PENINSULA ENERGY DEVELOPMENT ORGANISATION,

hereinafter referred to as ‘KEDO’,

Whereas the Community and its Member States support the objectives of the Agreed Framework
between the United States of America and the Democratic People’s Republic of Korea (here-
inafter referred to as the ‘DPRK’), signed in Geneva on 21 October 1994;

Whereas KEDO was established pursuant to the Agreement on the establishment of the Korean
Peninsula Energy Development Organisation, entered into in New York on 9 March 1995
(hereinafter referred to as the ‘KEDO Agreement’) among the Governments of the Republic of
Korea, Japan and the United States of America (hereinafter referred to as the ‘Original
Members’);

Whereas the Community is willing to cooperate with the Original Members in taking the neces-
sary steps to implement KEDO’s objectives and, to that end, has become a Member of KEDO
the KEDO Agreement, as amended, effective
pursuant
.................... 199......;

to Article V(b) and XIV(b) of

Whereas the Executive Board of KEDO, noting the Community’s intention to contribute to
KEDO ECU 15 million annually for five years, has determined pursuant to Article VI(b) of the
that such contributions would constitute substantial and
KEDO Agreement, as amended,
sustained support to KEDO,

HAVE AGREED AS FOLLOWS:

Article 1

Executive board

1.
Pursuant to Article VI(b) of the KEDO Agreement, as amended, the Community shall be
represented on the executive board of KEDO for a term to coincide with the Community’s
substantial and sustained support to KEDO.

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2.
As a member of the executive board, the Community shall participate in the activities of
the executive board with the same rights and obligations as the other members of the executive
board, as described in the KEDO Agreement, as amended.

Article 2

Advisory committees

Community representation on KEDO advisory committees under Article IX(b) of the KEDO
Agreement, as amended, shall include representation on advisory committees that may be es-
tablished on safeguards and nuclear safety. The Community shall also be entitled to serve as
chair of appropriate advisory committees, pursuant to the relevant rules and regulations of
KEDO.

Article 3

KEDO staff

Personnel from the Community shall be appointed to suitable positions on the staff of KEDO.

Article 4

Privileges and immunities in the DPRK

Personnel from the Community and its Member States sent to the DPRK by KEDO, its contrac-
tors and subcontractors are entitled to privileges, immunities, protections, exemptions and facil-
ities, as appropriate, in accordance with the respective provisions in the Protocol between KEDO
and DPRK on the juridicial status, privileges and immunities, and consular protections of
KEDO in the DPRK, signed in New York on 11 July 1996, executed pursuant to Article IV of
the Agreement on the supply of a light-water reactor (LWR) project to the DPRK between
KEDO and the DPRK, signed in New York on 15 December 1995 (hereinafter referred to as the
‘Supply Agreement’).

Article 5

Equitable distribution

Pursuant to Article III(i) of the KEDO Agreement, as amended, the Community shall be entitled
to participate in distribution of any remaining KEDO assets or proceeds therefrom in an equit-
able manner according to its contribution to KEDO.

Article 6

Liability protections

1.
In the area of nuclear liability, KEDO has obtained legally binding commitments from the
DPRK in Article XI of the Supply Agreement, with respct, inter alia, to an indemnity to be
given by the DPRK, nuclear liability insurance or other financial security to be secured by the
DPRK, and a legal mechanism to be implemented by the DPRK channelling nuclear liability
exclusively to the operator, in order to protect itself, its Members, its contractors and subcontrac-
tors, and their respective personnel from any liability for any injury, loss or damage resulting
from nuclear incidents in connection with the LWR plants.

Conventional liability for any injury, loss or damage resulting from KEDO’s activities and

2.
omissions shall be covered under appropriate insurance policies.

Article 7

Industrial aspects

1.
Subcontracts for the appropriate portion of the LWR balance of plant will be put to bid
and awarded in a fair and transparent manner by the prime contractor, subject to the terms and
conditions to be stipulated in the prime contract, taking into due account the participation in
KEDO, through the Community, of the Community Member State in which the prospective
subcontractor is established.

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2.
Pursuant to its procurement guidelines for contracts other than the prime contract for the
LWR project, KEDO follows a fair and transparent process in awarding its own contracts for
goods and services in which Community enterprises will be able to participate fully.

Article 8

Audit

The Community will be entitled to audit KEDO’s expenditure of its contribution and, to do so,
will be granted access to, in an appropriate manner, the relevant financial accounts of KEDO
upon demand.

Article 9

Dispute settlement

Any question or dispute relating to the application or interpretation of this Agreement shall be
the subject of consultations, negotiations or other similar procedure.

Article 10

Entry into force

This Agreement shall enter into force upon signature by the Community and KEDO.

Done at Brussels, 30 July 1997, in two originals.

For the European Atomic
Energy Community

Done at New York, 19 September 1997, in two originals.

For the Korean Peninsula Energy
Development Organisation

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Euratom accession: side letter on liability

Brussels, 30 July 1997

Sir

The Commission of the European Communities (hereinafter referred to as ‘the Commission’) presents its
compliments to the Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’)
and wishes to refer to Article VI of the Agreement on Terms and Conditions of the Accession of the Euro-
pean Atomic Energy Community to the Korean Peninsula Energy Development Organisation (hereinafter
referred to as ‘the Accession Agreement’).

The Commission understands that KEDO will provide safe and reliable plants of proven modern technology
conforming to a set of codes and standards equivalent to those of the IAEA and the US and applied to the
Korean standard nuclear plant, as required under Article I of the Agreement on supply of a light-water
reactor project to the Democratic People’s Republic of Korea between the Korean Peninsula Energy De-
velopment Organisation and the Democratic People’s Republic of Korea (hereinafter referred to as ‘the
Supply Agreement’) signed in New York on 15 December 1995, and that KEDO will not be designated
‘operator’ of the plants in the context of nuclear liability.

The Commission understands that under Article XIII(b) of the Agreement on the establishment of the
Korean Peninsula Energy Development Organisation, as amended, the European Atomic Energy Com-
munity (hereinafter referred to as ‘the Community’), like other Members of KEDO, shall not be liable by
reason of its status or participation as a Member, for acts, omissions or obligations of KEDO.

In connection with the legally binding commitments from the Democratic People’s Republic of Korea
(hereinafter referred to as the ‘DPRK’) referred to in Article VI of the Accession Agreement, the Commission
further understands that these matters will be subject of future negotiations between KEDO and the DPRK,
including execution of the legally binding protocol required in Article XI of the Supply Agreement.

The Commission further understands that the Member States of the Community, by reason of their member-
ship in the Community, consequently will enjoy the protection referred to in Article VI of the Accession
Agreement.

The Commission understands that the same level of liability protection referred to in Article VI of the
Accession Agreement will have to be established in relation to any nuclear damage resulting from incidents
occurring during transport of nuclear material from and to the light-water reactor plants in the DPRK.

The Commission also understands that KEDO will not ship any fuel assemblies to the DPRK unless the
requirements set out in Article XI of the Supply Agreement have been met.

Finally, the Commission understands that KEDO intends to set up a working group on liability matters.

The Commission would appreciate KEDO’s confirmation that it shares the understandings recorded in this
letter.

The Commission avails itself of this opportunity to renew to KEDO the assurances of its highest considera-
tion.

For the European Atomic
Energy Community

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KEDO’s reply

19 September 1997

The Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’) presents its
compliments to the Commission of the European Communities (hereinafter referred to as ‘the Commission’)
and has the honor to acknowledge receipt of the letter dated 30 July 1997 from the Commission referring to
Article VI of the Agreement on the accession of the European Atomic Energy Community to the Korean
Peninsula Energy Development Organisation. A copy of that letter is attached (*).

KEDO wishes to record that it shares the understandings recorded in that letter.

KEDO avails itself of this opportunity to renew to the Commission the assurances of its highest considera-
tion.

For the Korean Peninsula
Development Organisation

(*) See page 13 of this Official Journal.

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Side letter in connection with the representation of the Community

Brussels, 30 July 1997

Sir,

The Commission of the European Communities, (hereinafter referred to as ‘the Commission’) presents its
compliments to the Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’)
and wishes to refer to Articles VI(b) and VIII of the Agreement on the establishment of the Korean Penin-
sula Energy Development Organisation, as amended, (hereinafter referred to as ‘the KEDO Agreement, as
amended’).

In connection with Article VI(b) of the KEDO Agreement, as amended, the Commission confirms that the
European Atomic Energy Community (hereinafter referred to as ‘the Community’), will be represented on
the executive board by one representative, but the representation may rotate between two persons designated
by the Community, one from the Commission and the other from the Presidency of the Council of the
European Union. Accordingly, only one of the two designated persons will act as the representative of the
Community on the executive board at any given time. The Commission also confirms that the Community
will bear the responsibility for identifying which of the two persons will serve at any given time in connec-
tion with executive board activities.

In addition, the Commission confirms that it will be the single point of contact for official communications
required in connection with executive board activities.

In connection with Article VIII of the KEDO Agreement, as amended, the Commission understands that
references to nationals of executive board members include, in the case of executive board members that are
international organisations (including regional integration organisations), nationals of the member states of
such international organisations.

The Commission would apprecite KEDO’s confirmation that it shares the understandings recorded in this
letter.

The Commission avails itself of the opportunity to renew to KEDO the assurances of its highest considera-
tion.

For the European Atomic Energy Community

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KEDO’s reply

19 September 1997

The Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’) presents its
compliments to the Commission of the European Communities (hereinafter referred to as ‘the Commission’)
and has the honor to acknowledge receipt of the letter dated 30 July 1997 from the Commission referring to
Articles VI(b) and VIII of the Agreement on the establishment of the Korean Peninsula Energy Develop-
ment Organisation. A copy of that letter is attached (*).

KEDO wishes to record that it shares the understandings recorded in that letter.

KEDO avails itself of this opportunity to renew to the Commission the assurances of its highest considera-
tion.

For the Korean Peninsula Energy
Development Organisation

(*) See page 15 of this Official Journal.

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Side letter on industrial aspects

Brussels, 30 July 1997

Sir,

The Commission of the European Communities (hereinafter referred to as ‘the Commission’) presents its
compliments to the Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’)
and wishes to refer to Article VII of the Agreement on terms and conditions of the accession of the Euro-
pean Atomic Energy Community to the Korean Peninsula Energy Development Organisation (hereinafter
referred to as ‘the Accession Agreement’).

The Commission wishes to note that in the European Union there is recognised expertise in fields such as
nuclear engineering studies, reactor safety, safeguards, nuclear material accounting control systems, physical
protection aspects and training as well as for supplies of related infrastructures, nuclear material and interim
energy alternatives, and that this expertise will be available to KEDO, as appropriate, in furtherance of its
purposes.

In connection with the implementation of Article VII of the Accession Agreement, the Commission wishes
to record its understanding of the general procurement principles for the light-water reactor (LWR) project,
as follows:

— companies based in KEDO member states and in member states of international organisations that are
members of KEDO, will be able to participate in a fair and open procurement process in the form of
competitive bidding on the appropriate portion of the LWR balance of plant (1),

— all companies prequalified by the Korea Electric Power Corporation (hereinafter referred to as ‘KEPCO’)
will be accorded with timely and adequate notification with respect to the bidding process for all appro-
priate subcontracts as well as an equal opportunity to tender a bid,

— KEPCO, in consultation with KEDO, will establish the bidder prequalification criteria in consideration
of technical capabilities, performance history, relevant experience, financial condition and quality as-
surance capability,

— objective criteria will be established as determined by KEPCO, in consultation with KEDO for the
purpose of evaluating bids tendered for appropriate subcontracts, including: the bidder’s proposed price
and conformance of the technical proposal to the purchase specification; proposed quality, delivery sche-
dule and work plan: and the magnitude of the contribution to KEDO of a KEDO member state or inter-
national organisation that is a member of KEDO in which the bidder is based and the magnitude of the
subcontracts already awarded to companies from such members,

— before the expiration of a bid, KEPCO will award the relevant subcontract to the bidder whose bid has
been evaluated to be the lowest priced among the most qualified bidders based on the objective criteria,

— the procurement process will be agreed between KEDO and KEPCO, and conducted by KEPCO. The
executive board will approve a resolution on procurement principles, including the above. KEDO will
ensure conformance with the above principles, without prejudice to the overall project management
capability of KEPCO, as the prime contractor.

As a member of KEDO, the Community will be provided regularly with a list of all available subcontracts for
the appropriate portion of the LWR balance of plant and will be kept informed of the enterprises that are
awarded such subcontracts.

The Commission would appreciate KEDO’s confirmation that it shares the understandings recorded in this
letter.

(1) The expression ‘balance of plant’ in this side letter means all equipment and materials purchased by the prime contractor
necessary to complete nuclear power generating facilities with the exception of the nuclear steam supply system and tur-
bine generator.

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The Commission avails itself of this opportunity to renew to KEDO the assurances of its highest considera-
tion.

For the European Atomic
Energy Community

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KEDO’s reply

19 September 1997

The Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’) presents its
compliments to the Commission of the European Communities (hereinafter referred to as ‘the Commission’)
and has the honor to acknowledge receipt of the letter dated 30 July 1997 from the Commission referring to
Article VII of the Agreement on the Accession of the European Atomic Energy Community to the Korean
Peninsula Energy Development Organisation. A copy of that letter is attached (*).

KEDO wishes to record that it shares the understandings recorded in that letter.

KEDO avails itself of this opportunity to renew to the Commission the assurances of its highest considera-
tion.

For the Korean Peninsula Energy
Development Organisation

(*) See page 17 of this Official Journal.

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Side letter on payment procedures and accounting and audit requirements

Financing arrangement

Brussels, 30 July 1997

Sir,

The Commission of the European Communities, (hereinafter referred to as ‘the Commission’) presents its
compliments to the Korean Peninsula Energy Development Organisation, (hereinafter referred to as ‘KEDO’,
and wishes to refer to the Agreement on terms and conditions of the accession of the European Atomic
Energy Community to the Korean Peninsula Energy Development Organisation, (hereinafter referred to as
‘the Accession Agreement’).

The Commission wishes to record the payment procedures and accounting and audit requirements which
will be followed in connection with the contribution of the European Atomic Energy Community (here-
inafter referred to as ‘the Community’), including those referred to in Article 8 of the Accession Agreement.

Payment procedures

1. The annual contribution of the Community shall be paid by the Commission on 30 June of each
calendar year or in the year of conclusion of the Accession Agreement of the earliest possible date ac-
cording to the financial rules of the Commission.

Payments shall be made by transfer to a designated interest bearing bank account of KEDO.

Payments shall be deemed to have been made on the date on which they are debited to the Commission’s
account.

2. All payments will be made in ecu.

3. The Commission may, after giving notice to KEDO, defer payment of a contribution if the audited finan-
cial statement for the prior year or the statements of acquittal for the prior contribution have not been
received. A statement of acquittal means a statement of the status at any given time, expressed in US
dollars, of the funds contributed by the Commission, including an accounting of the amount and nature
of disbursements made and any sums still held by KEDO. Where payment is so deferred, the Commis-
sion shall not be liable to pay interest or indemnities of any kind.

4. KEDO will reimburse any part of the contribution that remains unused following the termination of the
Agreement on the establishment of the Korean Peninsula Energy Development Organisation (hereinafter
referred to as ‘the KEDO Agreement’, as amended) in accordance with Article III(i) of the KEDO, Agree-
ment, as amended. KEDO will spend the Community’s contribution on items or activities falling inside
the terms of the Accession Agreement and in accordance with the rules and regulations of KEDO.

Accounting requirements

1. KEDO will provide statements of acquittal to the Commission upon receipt of the contribution and on
31 March of each year, or at the time the contribution has been fully acquitted, whichever comes first.
Where relevant, statements of acquittal duly certified by contractors will also be forwarded.

2. KEDO will also:

— keep dated and separated accounts in respect of the contribution by means of an accounting docu-
ment which lists revenue and expenditure relating to the use made of the Community’s contribution,

— maintain a sound financial system capable of verifying all statements of acquittal concerning the

activities financed by the Community,

— maintain records, including clear audit trails, in relation to expenditure of an amount of the Com-
munity’s contribution and to preserve such records and documents for a period of five (5) years from
the date of the final payment made by the Commission,

— upon request, provide to the competent bodies of the Community or its authorised representatives all
relevant financial information concerning items or work financed by the Community’s contribution
whether they are executed by KEDO or, as relevant, by its contractors or subcontractors, and

— upon request, provide copies and extracts of any accounts, records and other documents in relation to

expenditure of the Community’s contribution.

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3. Any interest arising on KEDO’s bank account from the Community’s contribution may be used by

KEDO.

4. The financial transactions, accounting procedures and statements of acquittal shall be subject to the
internal and external auditing procedures laid down in the financial regulations, rules and directives of
KEDO.

5. The Community’s contribution will be marked within the account as contributed by the Community for

the purposes described in the Accession Agreement.

Audit requirements

1. The Commission notes that an independent external audit of KEDO is carried out on an annual basis and

that members of KEDO receive a copy of the auditor’s report as soon as it is available.

2. In accordance with its financial regulation, as it may be amended, the Commission and the Court of
Auditors of the European Community will be entitled to conduct an audit of the Community’s contribu-
tion, including on site, e.g., in the Democratic People’s Republic of Korea.

Dispute settlement

Article 9 of the Accession Agreement shall apply to any dispute arising in connection with the payment
procedures and accounting and audit requirements in this letter. The Commission and KEDO may also
agree that arbitration will apply.

Other

1. In case of suspension of the Accession Agreement, or if KEDO fails to fulfil its obligations under
‘Accounting requirements’ and ‘Audit requirements’ as set out above and fails to provide an acceptable
explanation in writing regarding the reasons for such failure, the Commission may unilaterally suspend
the Community’s contribution.

2. The Community shall not be responsible for expenditures over and above its financial contribution.

The Commission would appreciate confirmation of KEDO’s agreement to the arrangements recorded in this
letter.

The Commission avails itself of this opportunity to renew to KEDO the assurances of its highest considera-
tion.

For the European Atomic
Energy Community

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KEDO’s reply

19 September 1997

The Korean Peninsula Energy Development Organisation (hereinafter referred to as ‘KEDO’) presents its
compliments to the Commission of the European Communities (hereinafter referred to as ‘the Commission’)
and has the honor to acknowledge receipt of the letter dated 30 July 1997 from the Commission describing
the payment procedures and accounting and audit requirements in connection with the contribution of the
European Atomic Energy Community to the Korean Peninsula Energy Development Organisation, as
described in the Agreement on the accession of the European Atomic Energy Community to the Korean
Peninsula Energy Development Organisation. A copy of that letter is attached (*).

KEDO wishes to record its agreement to the arrangements recorded in that letter.

KEDO avails itself of this opportunity to renew to the Commission the assurances of its highest considera-
tion.

For the Korean Peninsula Energy
Development Organisation

(*) See page 20 of this Official Journal.