CONFIDENTIAL DAFFEIMAI(97) 1/REV2

VI. EXCEPTIONS AND SAFEGUARDS

GENERAL EXCEPTIONS

[1. This Article shall not apply to Articles -- (on expropriation and compensation and protection

from strife).]

2.Nothing in this Agreement shall be construed:

a. to prevent any Contracting Party from taking any action [which it considers] necessary for the

protection of its essential security interests [including those:]

(i) taken in time of war, [or] armed conflict, [or other emergency in international relations];

(ii) relating to the implementation of national policies or international agreements respecting

the non-proliferation [inter alla] of nuclear weapons or other nuclear explosive devices;

[(iii) relating to the production of arms and ammunition;]

b. to require any Contracting Party to furnish or allow access to any information the disclosure

of which [it considers] [would be] contrary to its essential security interests;

c. to prevent any Contracting Party from taking any action in pursuance of its obligations under

the United Nations Charter for the maintenance of international peace and security.

[3.Nothing in this Agreement shall be construed to prevent any Contracting Party from taking any

action necessary for the maintenance of public order.]

[4. Paragraphs 2 and 3 may not be invoked by a Contracting Party as a means to evade its

obligations under this Agreement.]

[5. Actions taken pursuant to this Article shall be notified to the Parties Group in accordance with!

Article-- of this Agreement.1

[6. If a Contracting Party (the "requesting Party") has reason to believe that actions taken by another,

Contracting Party (the "other Party") are not in conformity with [Article] [paragraphs --], it may request

consultations with that other Party. That other Party shall promptly enter into consultations with the

requesting Party and shall provide information to the requesting Party regarding the actions taken and the

reasons therefor.]

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CONFIDENTIAL DAFFE/MAI(97)1/REV2

TRANSACTIONS IN PURSUIT OF MONETARY AND EXCHANGE RATE POLICIES⁽¹⁾

1. Articles XX⁽²⁾ and YY⁽³⁾ do not apply to transactions carried out in pursuit of monetary or exchange

rate policies by a central bank or monetary authority of a Contracting Party.

2. Where such transactions do not conform with Articles XX and YY, they shall not be used as a

means of avoiding the Contracting Party's commitments or obligations under the Agreement.

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CONFIDENTLAlDAFFE/MAl(97) liREV2

TEMPORARY SAFEGUARD⁽⁴⁾

1. A Contracting Party may adopt or maintain measures inconsistent with⁽⁵⁾

its obligations under Article xx (Transfers);

Article yy, pare 1.1 (National Treatment) for [cross-border capital transactions as it relates to

non-resident investors and investments]:

(a) in the event of serious balance-of-payments and external financial difficulties or threat

thereof; or

(b) where, in exceptional circumstances. movements of capital cause, or threaten to cause, serious

difficulties for the operation of [economic,]⁽⁶⁾ monetary or exchange rate policies.

2. Measures referred to in paragraph 1:

[(a) shall provide MEN treatment; ]

[[(b) shall with regard to transfers also provide National Treatment, except as provided in

paragraph 1]; ]⁽⁷⁾

(c) shall be consistent with the Articles of Agreement of the International Monetary Fund;

(d) shall not exceed those necessary to deal with the circumstances described in paragraph 1;

(e) shall be temporary and shall be eliminated as soon as conditions permit;

(f) shall be promptly notified to the Parties Group and International Monetary Fund, including

any changes in such measures.

3. (a) Measures referred to in paragraph I and any changes therein shall be subject to review and

approval or non-approval within six months of their adoption and every six months thereafter

until their elimination.

(b) These reviews shall address the compliance of any measure with paragraph 2, in particular

the elimination of measures in accordance with paragraph 2 (e).

.

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4. Measures [referred to in paragraph l] that are approved by the International Monetary Fund in

the exercise of its jurisdiction shall be considered as consistent with this Article.

5. (a) The Parties Group shall. with regard to measures not falling within paragraph 4, [establish

review procedures to] consider the implications of the measures adopted under this Article

for the obligations of the Contracting Party concerned under this Agreement.

(b) [In such reviews,] the Parties Group shall request an assessment by the Fund of the

conditions mentioned under paragraph l and [may/shall] request an assessment by the Fund

of the consistency of any measures with paragraphs 2 (a) to (e). Any such Fund assessment

shall be accepted by the Parties Group.

(c) Unless the Fund determines that the measure is either consistent or inconsistent with the

provisions of this Article, the Parties Group may either approve or disapprove the measure.

[The Parties Group shall establish procedures for this purpose.]

(d) The Contracting Parties shall seek agreement with the Fund regarding the role of the Fund in

the review procedures established under this Article.

6. Measures approved by the Fund in the exercise of its jurisdiction or determined to be consistent

with this Article by the Fund or the Parties Group cannot be subject to dispute settlement.⁽⁸⁾

[7. The provisions of this Article cannot be invoked with regard to transfers of the payments of

compensation due under Article zz (expropriation).]

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1. This text has been developed in EG5. Most EG5 delegations wanted to consider this matter further. (See

Commentary)

2. Article on National Treatment and Most Favoured Nation Treatment.

3. Article on Transparency.

4. This text has been developed during the informal consultations on financial matters at expert level held

on 14-15 April 1997.

5. It was recognized that the MAI provisions on performance requirements, which are still under discussion, could have implications for the scope of this paragraph

6. As a compromise, Portugal suggested "macro economic" policies instead of "economic" policies.

7. Delegations are reviewing the need for paragraph 2a) and b) in the light of the scope of the measures

permitted by paragraph 1.

8. The dispute settlement provisions would apply if the measure actually applied differed from that

approved or determined to be consistent with this Anicle. The Fund shall be consulted in any such

proceedings involving a measure that the Fund approved or found to be consistent with this Article.