PC-X/HC/1

Preparatory Commission for the	PC-X/HC/1
Organisation for the Prohibition	16 January 1995
of Chemical Weapons	Original: ENGLISH

Tenth Session

(3 - 7 April 1995)

COMMITTEE ON RELATIONS WITH THE HOST COUNTRY

NOTE BY THE EXECUTIVE SECRETARY

REPORT BY THE LEGAL ADVISER ON THE INITIAL DRAFT OF THE PRELIMINARY TENANCY AGREEMENT FOR THE NEW OPCW PURPOSE-BUILT OFFICE BUILDING

1. In the Summary of Meetings of the Committee on Relations with the Host Country from 5 October to 7 November 1994 (subparagraph 2.19 of PC-IX/HC/5), the Committee agreed that it would need to review the draft preliminary tenancy agreement between the developer and the Commission in order to prepare its draft decision for the OPCW's long-term accommodation.

2. Pursuant to that request, discussions were initiated with the developer (Provastgoed Nederland B.V./Hillen & Roosen B.V.) which is in the process of forming a joint venture to carry out the development of the new OPCW purpose-built office building. The joint venture is tentatively called "Peace Building Catsheuvel B.V. i.o. (in oprichting)". The first steps to formally establish the joint venture have been taken. Legal establishment of a new company in the Netherlands takes a minimum of two months.

3. The initial draft of the Preliminary Tenancy Agreement, including its Annex 1: General Terms and Conditions for the Preliminary Tenancy Agreement, has been prepared and is attached to this Note as Attachment 1. In this respect, the Legal Adviser would like to point out the following:

3.1 The initial draft does not refer to the "Lessee", but to the Commission. The Commission will sign the Preliminary Tenancy Agreement for the reason that this agreement safeguards the rights for the future OPCW. The Lessee will be the future OPCW, as the Commission currently cannot be expected to be the tenant.

3.2 The Preliminary Tenancy Agreement has to be confirmed by the Conference of the States Parties at its First Session in accordance with paragraph 4 of the Understandings between the Host Country and the Commission. Once the Conference of the States Parties, as the highest political body of the OPCW, confirms the rights, obligations, terms and conditions as provided for in the Preliminary Tenancy Agreement, the formal Tenancy Agreement will have to be signed immediately thereafter between the OPCW and the Lessor of the OPCW Building at that time. It should be noted that the OPCW has the right to depart from any provisions of the Preliminary Tenancy Agreement that it so wishes.

3.3 Under Article 8.4(b) of the initial draft, the Commission/OPCW has a preferential right to buy the new OPCW purpose-built office building before the date the actual construction starts. The purchase price has to be negotiated but shall be approximately Dfl. 60,000,000 (sixty million Dutch guilders), in accordance with the Financial Offer under the current draft Development Agreement which is based on the letters sent by Provastgoed Nederland B.V. on 15 July 1994 and 13 October 1994.

3.4 The initial draft has introduced provisions from various systems of national laws, for example, the Commission/OPCW has been given rights regarding construction of the new OPCW purpose-built office building (Article 6 of the initial draft) since the OPCW will be the only tenant and user of the brand new building.

4. In general, in the opinion of the Legal Adviser, the Committee on Relations with the Host Country will have to find solutions to four major issues in order to facilitate a prompt conclusion of the Preliminary Tenancy Agreement. Those major issues at present are:

4.1 Parties to the Preliminary Tenancy Agreement. As stated before, this is not a formal Tenancy Agreement since the legal person involved is yet to be born, namely the OPCW. Equally, the Lessor is in the process of legal establishment, namely Peace Building Catsheuvel B.V., and will not be the Lessor at the time of actual entry into force of the formal Tenancy Agreement once the OPCW is established. The developer has made it clear that it intends to sell this development project once construction commences and will only continue as the constructor in this project. Accordingly, the present developer will not be the Lessor of the completed building.

4.2 Indexation of the rental price. The Committee will see in Article 5 of the initial draft two options for increases of the rent: one suggested by the Legal Adviser which provides for a ceiling on indexation; the other one suggested by the developer which consists of free indexation with no ceiling. The need to have ceilings in the indexation of the rent increases would be justified due to the duration of the agreement over the 15-year period (with the unlimited right to extend it) in order to preserve the rights of the organisation in case there are serious economic problems, given the interdependence of the global economy. The first option acts as a protection.

4.3 15-year guarantee demanded by the developer. This is also a major problem because as stated above, the developer will not be the Lessor at the time of entry into force of the Tenancy Agreement. Since this is an investment project, it is in the developer's interest to have the 15-year guarantee because they wish to sell the project and that 15-year guarantee makes the project a viable one. However, in the view of the Legal Adviser, the Commission is not in a position to offer a 15-year guarantee simply because it is not anticipated that the Commission will continue its existence for the next 15 years. A possible solution would be to ask the Host Country to give a 3-year or a 15-year guarantee. Nevertheless, Member States could also determine that other options may be available.

4.4 Settlement of disputes. In accordance with public international law, neither the Commission nor the OPCW will waive their immunity. However, it is the understanding of the Legal Adviser that they will be ready to settle any disputes which may arise under this agreement or the Tenancy Agreement. That is why an expeditious dispute settlement mechanism has been provided for under Article 8.2 of the initial draft. It is worth noting that the developer's concern about the possible enforcement measures of any arbitral decision is being fully met under Article 3.7, whereby it is provided that the OPCW will comply with its obligations under the Tenancy Agreement.

5. Given the importance of the Preliminary Tenancy Agreement, since it will establish the legal framework for the Tenancy Agreement to be undertaken by the OPCW, it is expected that the Committee will provide solutions to the abovementioned major issues in order to finalise the draft Preliminary Tenancy Agreement in the coming weeks. Furthermore, it is absolutely necessary to receive comments from Member States on this initial draft as soon as possible so that they may be taken into account before finalisation of the draft Preliminary Tenancy Agreement.

6. Although the offer of Provastgoed Nederland B.V. remains valid until 31 January 1995 only, the Legal Division has been given the assurance by Provastgoed Nederland B.V. that the validity of developer's offer can be extended beyond that date under the same terms if the Committee on Relations with the Host Country requires more time to reach its decision.

Attachment 1 (English only): Initial draft of the Preliminary Tenancy Agreement between the Preparatory Commission for the Organisation for the Prohibition of Chemical Weapons and Peace building Catsheuvel B.V. i.o., concerning the new OPCW purpose-built office building.

Attachment 1, Annex 1 (English only): General Terms and Conditions of the Preliminary Tenancy Agreement.

English only

- initial draft -

PRELIMINARY TENANCY AGREEMENT

BETWEEN THE PREPARATORY COMMISSION FOR THE

ORGANISATION FOR THE PROHIBITION OF CHEMICAL WEAPONS

AND

[PEACE BUILDING CATSHEUVEL B.V. i.o.]

CONCERNING THE NEW OPCW PURPOSE-BUILT OFFICE BUILDING

The undersigned Parties:

1. [Peace Building Catsheuvel B.V. i.o.]

registered in the Trade Register of ....... under no. ..........

having its legal address at: Tournooiveld 4, 2511 CX, The Hague

represented by:

hereinafter referred to as "the Lessor",

and

2. The Preparatory Commission for the Organisation for the Prohibition of Chemical Weapons

Laan van Meerdervoort 51

2517 AE The Hague,

hereinafter referred to as "the Commission",

hereby declare that they have agreed upon the following:

Article 1

Premises, Purpose, Use

1.1 This agreement relates to the business premises known locally as the new OPCW purpose-built office building which is a turn-key building (hereinafter referred to as "the Leased Premises"), as specified in the Development Agreement between the OPCW Foundation [on behalf of the Host Country] and [Peace Building Catsheuvel B.V. i.o.] for the New OPCW Purpose-Built Office Building, as registered in the Municipality of The Hague (hereinafter referred to as "the Development Agreement").

1.2 The Leased Premises will be exclusively used as office space and includes auxiliary areas related to office space.

1.3 Without the Lessor's prior written approval the OPCW shall not be permitted to give the Leased Premises a purpose other than defined in 1.2.

1.4 The maximum permissible load on the floor(s) of the Leased Premises is 10 KN/m2.

Article 2

General Terms and Conditions

2. The General Terms and Conditions for the Preliminary Tenancy Agreement (hereinafter referred to as "General Terms and Conditions annexed to this agreement") are fully applicable and constitute an annex to, and integral part of, this agreement.

Article 3

Term, Extension and Termination of the Tenancy Agreement

3.1 If the Conference of the States Parties at its First Session confirms this agreement and elects to proceed with the Tenancy Agreement based upon it, the Tenancy Agreement will be entered into for a period of 15 years, beginning on [the date of confirmation] [the date the Leased Premises are delivered].

3.2 The Tenancy Agreement formally concluded between the OPCW and the Lessor at that time will be based on the rights, obligations, terms and conditions as set forth in the Preliminary Tenancy Agreement. The OPCW may agree with the Lessor while concluding the Tenancy Agreement to new undertakings which will be in the letter and spirit of the Preliminary Tenancy Agreement. The rights, obligations, terms and conditions provided in the Preliminary Tenancy Agreement will be fully respected in the Tenancy Agreement unless the OPCW agrees to depart from them.

3.3 Term. The term of the Tenancy Agreement shall commence (.... ) days after the date Lessor delivers possession of the Leased Premises to the OPCW (the "date of delivery"), and shall continue thereafter for a period of 15 years unless extended pursuant to 3.4 below. As used herein, delivery of possession shall mean the date when the OPCW receives notification by the Lessor that: (a) the Lessor has completed its construction obligations pursuant to the Development Agreement, including correction of defects as provided for in the Development Agreement; (b) the Lessor has received a Certificate of Occupancy for the Construction; and (c) a set of keys to the Leased Premises has been provided to the OPCW. Notwithstanding the foregoing, possession shall not be delivered until the OPCW acknowledges in writing that: (a) the Lessor has fulfilled its obligations pursuant to this agreement and the Development Agreement, which acknowledgement shall not unreasonably be withheld; (b) Lessor has recorded a Notice of Completion; and (c) the Lessor has provided the OPCW with a copy of the Lessor's Certificate of Ownership.

3.4 The OPCW shall have the unilateral right to extend the Tenancy Agreement under the same terms and conditions in [5 (five)] [10 (ten)] year periods. Such unilateral right of the OPCW shall be enjoyed for an indefinite period. The OPCW shall notify its intention to exercise this right to the Lessor through written notice given 6 (six) months in advance of commencement of the extension.

3.5 At the end of the period of 15 (fifteen) years, the OPCW shall have the unilateral right to terminate the Tenancy Agreement. The OPCW shall notify its intention to exercise this right to the Lessor through written notice given 6 (six) months in advance of the date the agreement will be terminated. The OPCW shall also have the unilateral right to terminate this agreement before the expiration of the 15 (fifteen) year period through written notice given 12 (twelve) months in advance of the termination. The OPCW shall incur no liability due to such termination.

3.6 Notice shall be given by writ served by a bailiff or by registered letter.

3.7 The Lessor waives any right to terminate the Tenancy Agreement. It is understood that the OPCW will comply with its obligations with respect to the Lessor in accordance with the OPCW Headquarters Agreement.

Article 4

Payment Obligations and Payment terms

4.1 The OPCW shall pay annual costs for the Leased Premises as follows:

(a) An annual rental sum of Dfl. 5,249,710 (five million two hundred and forty nine thousand seven hundred and ten Dutch guilders) indexed to 1997 price levels in accordance with Article 5 hereunder.

(b) Reimbursement for extra costs which may arise out of decisions taken during the design phase, the development phase or the construction phase of the Leased Premises under the Development Agreement, provided that any such decisions have prior approval from the Host Country and the Commission/OPCW, will never exceed Dfl. 400,000 (four hundred thousand Dutch guilders) per year, indexed to 1997 price levels in accordance with Article 5 hereunder. Therefore, unconditionally, the total payment of the annual rental sum will never exceed the amount of Dfl. 5,700,000 (five million seven hundred thousand Dutch guilders) per year, indexed to 1997 price levels in accordance with Article 5 hereunder.

(c) The annual rental sum includes all maintenance costs incurred by the Lessor under Article 6.1 of the General Terms and Conditions annexed to this agreement.

(d) After the first ten years of the rental period, the annual rental sum will be reduced by an amount of Dfl. 1,194,400 (one million one hundred and ninety-four thousand four hundred Dutch guilders) due to the depreciation of the fit-up specified in the Development Agreement.

(e) In addition to the annual rental sum, the OPCW shall pay energy costs in accordance with Article 8.1 of the General Terms and Conditions annexed to this agreement and other general utilities, including garbage collection and sewer system charges.

4.2 In the annual rental sum payable by the OPCW, no component for the land is included and never will be included under any circumstances.

4.3 The annual rental sum will be adjusted annually on the first of March. The annual rental sum will not be subject to any increase other than that provided under Article 5 hereunder. Any unforeseen expenses related to the Leased Premises are Lessor's responsibility and will have to be settled by the Lessor at its own risk. The Lessor is only entitled to recuperate its costs in accordance with Article 4 of this agreement.

4.4 If the Parties agree, the annual rental sum can be paid quarterly in advance beginning the first of March of each year, except for the first calendar year. Payment terms for the first calendar year shall be agreed by the Parties immediately after entry into force of this agreement.

Article 5

Rent revision

[5.1 Any increase in the rent will take place on the basis of the CBS consumer index figures for family consumption. The increase will be charged at:

100% of the indexation amount up to 3% indexation, plus

50% of the indexation amount between 3% up to and including 4.5% indexation.

0% of any indexation amount over 4.5% indexation.]

[5.1 Any revision of the rent will occur on the basis of the revisions of the monthly index figure according to the consumer price index (CP) series CPI Employees Low (1997 = 100), as published by the Central Bureau of Statistics (CBS Centraal Bureau voor Statistiek). The revised rent will be calculated according to the following formula: the revised rent is equal to the current rent on the revision date, multiplied by the index figure of the calendar month which lies four calendar months before the calendar month in which the rent is adjusted, divided by the index figure of the calendar month which lies sixteen calendar months before the calendar month in which the rent is adjusted.

5.2 The revised rent will come into force after formal acceptance by the OPCW in writing. In the event the OPCW does not accept the revised rent, it will inform the Lessor accordingly in writing and then Article 5.4 herein will be applicable.

5.3 If the CBS discontinues publication of the said consumer index figure or if the basis of the calculation is changed, an index figure adjusted to this or as similar to this as possible will be used. In the event of any dispute in this regard, the indexed figure adjusted to this or as similar to this as possible will be used. In the event of any dispute in this regard, the party who takes action first may request a statement from the Host Country which will be binding on all parties.

5.4 If parties have not reached any agreement on the rent adjustment to the market within two months of Lessor's receipt of the notice of non-acceptance as referred to in Article 5.2 herein, that rent will be fixed by three experts. The experts must be instructed to take into account when fixing the rent everything that has been agreed by the parties with respect to the Leased Premises. Either party shall appoint one expert from these three experts within fourteen days after a party has received the request to the effect from the other party. An expert will have to announce within eight days of the date of the instruction whether he will accept it.

The third expert will be appointed by the Host Country within eight days after their acceptance of their appointment.

The third expert's judgement shall be decisive in the absence of agreement between the experts on the rent to be fixed. A party shall pay the expenses of the expert appointed by or for him. The expenses of the third expert will be borne by the Host Country. The experts will be instructed to issue their report within six weeks after their appointment is determined.]

Article 6

Commission/OPCW rights regarding construction of the

Leased Premises

6.1 Actual cost of construction of the Leased Premises. In an event that the actual costs of construction of the Leased Premises exceed the amount of the Bid, the excess amount, irrespective of whether the actual costs exceed Dfl. 60,000,000 (sixty million Dutch guilders), shall be paid, subject to 6.2 and 6.3 herein, by the Lessor.

6.2 Change Orders. The Commission/OPCW shall have the right to issue change orders to the Lessor and Lessor shall promptly comply with such change orders in accordance with the Development Agreement.

6.3 Definition of Costs. As used herein, actual costs of construction of the Leased Premises shall be the amount of payments made to contractors and subcontractors performing construction work in connection with the Construction of the Leased Premises. Such costs do not include, and Lessor shall be solely responsible for, without limitation, fees for building permits, licenses and inspection, insurance premiums paid by Lessor during the construction period, recording fees and filing fees, fees and payments on construction, interim or permanent financing, mortgage brokerage fees, fees of engineers, surveyors, architects, attorneys and others providing professional service, brokerage commissions, and premiums for contractor's faithful performance and for mechanic's lien bonds.

6.4 Covenant to Construct the Leased Premises. In the event that the OPCW elects to proceed with the Tenancy Agreement as hereinabove provided, the Lessor shall use due diligence to construct the Leased Premises in accordance with the Development Agreement, as same may be revised from time to time pursuant to change orders issued in accordance with the Development Agreement. The Lessor shall also use due diligence to obtain approval of the plans and necessary permits from all governmental agencies.

6.5 Completion of Construction of the Leased Premises. The Lessor shall complete the Construction of the Leased Premises in accordance with the Development Agreement.

6.6 Manner of Construction of the Leased Premises. The Lessor represents, warrants and agrees with the OPCW that the Leased Premises shall be constructed in a sound and workmanlike manner and in accordance with all applicable governmental, municipal and local laws, ordinances, rules and regulations, that the roof to be installed on the Building will be a "twenty year" roof and that the heating, ventilating and air conditioning systems will have a warranty of not less than one year from the date of delivery of the Leased Premises. The Lessor warrants to the OPCW that all materials furnished in connection with the construction of the Leased Premises will be new unless otherwise specified, and that such construction will be of good quality in accordance with industry standards, free from faults and latent and patent defects and in conformance with the Development Agreement. Construction work not so conforming to these standards may be considered defective. No payment or payments of rent hereunder shall be construed to constitute an acceptance by the OPCW of improper materials or workmanship that do not conform to the requirements under the Development Agreement and the terms hereof.

6.7 Withholding of Rent. The OPCW may withhold payment or payments of rent on account of: (a) defects in the Leased Premises, including but not limited to, labour, materials, or equipment, not remedied; (b) failure of the Lessor or its predecessor to make payments properly to the contractors or for labour, materials or equipment; or (c) failure to carry out the construction in accordance with the requirements of the Development Agreement and the terms hereof.

6.8 No Liens. The Lessor shall at all times keep the construction of the Leased Premises free of all liens and claims arising out of or related to the performance of the construction of the Leased Premises, including, but not limited to, any and all liens and claims of any contractor, subcontractor, labourer, mechanic or material man for labour performed or material furnished in connection with the performance of the construction of the Leased Premises.

6.9 Right to inspect. The Commission/OPCW shall have the right to inspect the construction of the Leased Premises from the date this Preliminary Tenancy Agreement is signed provided that this inspection does not interfere with the implementation of the Development Agreement. The parties to the Development Agreement shall at all times provide convenient and safe access and the proper facilities to enable the Commission/OPCW to conduct inspections of all parts of the construction of the Leased Premises. The inspection of the construction of the Leased Premises by the Commission/OPCW shall not relieve the parties to the Development Agreement of any of their obligations to fulfil the requirements thereof and will not relieve the Lessor of any of its obligations to fulfil the requirements under the Preliminary Tenancy Agreement.

6.10 The Commission/OPCW shall at all times have the right to reject and/or stop construction of the Leased Premises which does not conform to the requirements under the Development Agreement. However, this right shall not give rise to any duty on the part of Commission/OPCW to exercise this right for the benefit of the Lessor or any other party. When the Commission/OPCW formally notifies the Lessor that part of the construction of the Leased Premises is incorrect and does not conform to the requirements under the Development Agreement, the Lessor shall promptly cause such defective work to be corrected and shall bear the entire cost of doing so, including the costs incurred by the disturbance of work in progress.

6.11 Indemnification Relating to Construction of the Leased Premises. The Lessor shall indemnify and hold harmless the Commission/OPCW, its members, officers, directors, agents, representatives, employees and attorneys from and against any and all claims, demands, causes of action, losses, damages, liabilities, costs and expenses of any nature whatsoever, whether accrued, absolute, contingent or otherwise, and whether due or to become due, including, without limitation, attorneys' fees and court costs, asserted against or incurred by the Commission/OPCW and arising out of or in connection with the Lessor's construction of the Leased Premises. In the event any such claim is made against the Commission/OPCW which is indemnifiable by the Lessor under this agreement, the OPCW may withhold from and offset against the next succeeding payment or payments of rent due hereunder the full amount of such claim or indemnification, pending a final determination of such matters by agreement of the OPCW and the Lessor or the arbitration tribunal established hereunder.

Article 7

Defect liability/maintenance

7.1 Subsequent to the delivery date on which the Leased Premises are complete, the Lessor will be required to complete any remaining work and to remedy all defects which arise in accordance with the General Terms and Conditions annexed to this agreement, unless caused by the OPCW itself.

7.2 The Lessor will be liable to the OPCW for any defective construction of the Leased Premises from the date of delivery.

7.3 The Lessor shall remain liable to the OPCW for any other latent defects.

7.4 With respect to any sub-contractor nominated by the Lessor, it is the Lessor who will bear the risk of default or delay on the part of the sub-contractor(s). The Lessor will take over the rights and obligations of any sub-contractor which fails to perform.

Article 8

Special conditions

8.1 Commission Headquarters Agreement.

This agreement shall fully respect all provisions of the Agreement between the Preparatory Commission for the Organisation for the Prohibition of Chemical Weapons and the Kingdom of the Netherlands concerning the Headquarters of the Commission (signed at The Hague on 8 December 1993 and entered into force on 23 February 1994) and the OPCW Headquarters Agreement when it enters into force. After entry into force of the Tenancy Agreement, the Leased premises shall become part of the OPCW Headquarters and, inter alia, shall be inviolable.

8.2 Settlement of disputes.

(a) Without prejudice to the privileges and immunities of the Commission or the OPCW, any dispute between the Parties concerning the interpretation or application of this Agreement which cannot be settled amicably, shall be submitted to a tribunal of three arbitrators, at the request of either Party to the dispute.

(b) Each Party shall appoint one arbitrator within 14 (fourteen) days after a party has received the request to that effect from the other party.

(c) The third arbitrator will be appointed by the President of the International Court of Justice within 8 (eight) days after the first two arbitrators have accepted their appointments and shall act as Chairman of the tribunal.

(d) The tribunal shall determine its own procedure.

(e) The third arbitrator's decision shall be decisive in the absence of agreement between the arbitrators.

(f) The tribunal shall reach its decision by majority of votes. Such decisions shall be final and binding on the Parties to the dispute acting as bodies corporate. No one shall be liable under this agreement and the formal Tenancy Agreement except the contracting Parties thereto in accordance with Article 3.7 of this agreement.

8.3 Perpetuity of rights.

The Lessor guarantees that all rights and obligations under this agreement as accepted by the OPCW will perpetuate through the duration of the agreement, including extensions, regardless of ownership.

8.4 Sale and transfer.

(a) If the Lessor wishes to sell the Leased Premises, the right of first refusal is granted to the OPCW. Sale of the Leased Premises to a third party can only take place after written approval is obtained from the OPCW. Such approval can be withheld if the OPCW has reasonable grounds to doubt the purchaser's good faith or if the right of first refusal was not duly respected.

(b) Preferential right to buy the Leased Premises under this agreement is granted to the Commission or the OPCW until construction of the Leased Premises commences. The purchase price of the Leased Premises at the time of entry into force of this agreement shall be approximately Dfl. 60,000,000 (sixty million Dutch guilders), in accordance with the financial offer under the Development Agreement. Some costs may be deducted from this figure, e.g., the financing costs and others to be agreed on. If the purchase price is paid in full prior to the commencement of construction, the Commission will receive a 10% reduction on the purchase price.

(c) The Lessor is not entitled, except after prior written permission from the Commission or the OPCW, to transfer rights from this agreement, either totally or in part, to a third party, or to substitute another as party in this agreement.

(d) Any sale of the Leased Premises will not affect this agreement. The successor will be bound by this agreement like a right in rem.

8.5 Amendments.

The provisions of this agreement and its annex as well as the Tenancy Agreement may be amended or supplemented only by means of a supplementary agreement signed by both parties or their authorised representatives.

8.6 This agreement has been drafted in English as the single valid version.

Article 9

Entry into Force

9. This agreement shall enter into force on the date it has been signed by both Parties.

Article 10

Annexes

10.1 The Annex to this agreement constitutes an integral part of it. The Annex is:

Annex 1: General Terms and Conditions for the Preliminary Tenancy Agreement.

10.2 The Tenancy Agreement shall include, in addition to Annex 1, a description of inventory and fit-up agreed by both Parties as its Annex 2.

This agreement consists of ................ pages, including its Annex 1, each page initialed by the parties. Done in two copies in The Hague, this ........... day of ................. 1995.

For the Lessor For the Preparatory Commission for the

Organisation for the Prohibition of Chemical Weapons

_____________________________ _____________________________

Ian R. Kenyon

Executive Secretary

Annex 1

English only

- initial draft -

GENERAL TERMS AND CONDITIONS

FOR THE PRELIMINARY TENANCY AGREEMENT

The Leased Premises

1.1 The Leased Premises includes the auxiliary areas related to office space.

1.2 The Leased Premises will be made available for occupation and accepted in the state outlined in the Development Agreement, in a good state without faults.

Use

2.1 The Leased Premises will be used during the entire term of the Tenancy Agreement exclusively for the purpose stipulated therein. The OPCW shall observe existing limited rights and requirements which have been or may be made by government authorities or public utility companies as long as they are compatible with the OPCW Headquarters Agreement.

2.2 Without prejudice to its privileges and immunities, the OPCW shall act in accordance with Dutch law and local regulations. The OPCW shall also observe the instructions regarding the maintenance, appearance, noise level, public order, fire protection, parking and the correct operation of the installations and the building.

2.3 Licenses. If alterations or improvements to the Leased Premises are necessary, it is the OPCW's responsibility to ensure that the activities to that purpose are carried out in accordance with the Development Agreement and with the requirements made or to be made by the authorities.

2.4 Environment. The OPCW undertakes to respect environmental regulations.

2.5 Waste products/chemical waste. Where directives or regulations by the government or other competent authorities are applicable to the (differentiated) presentation of waste products, the OPCW shall continuously and carefully observe the same.

2.6 Advertisements. The Lessor will have no right under any circumstances to make use of the roofs, outer walls, gardens and grounds of the OPCW building and auxiliary areas for (illuminated) advertisements, signs and the like, both for its own benefit and for the benefit of a third party. This provision is not applicable to the OPCW.

2.7 Prohibitions and regulations regarding Public Order.

2.7.1 The OPCW shall respect the following:

(a) not to burden floors of the Leased Premises more than is technically permissible or specified in the preliminary tenancy agreement;

(b) not to make any alternations or additions in, on or to the Leased Premises which are in conflict with regulations of the authorities and of public utility companies.

2.7.2 The OPCW may make major alterations or additions in, on or to the Leased Premises only upon the Lessor's prior written permission. The Lessor shall not be liable in any way whatsoever for such alterations or additions.

2.7.3 The OPCW shall keep fire fighting equipment and fire exits in the Leased Premises free and clear at all times.

2.8 Security. The OPCW has the right to make whatever improvements or alterations it deems necessary to reinforce the security of the premises.

2.9 Applications/permission.

2.9.1 If the OPCW requires any deviation from and/or addition to any provision of this agreement, the OPCW shall file its application for such deviation of and/or addition in writing.

2.9.2 If and to the extent that any provision of this agreement requires the Lessor's or the OPCW's permission, it shall only be deemed granted if given in writing.

2.9.3 Any permission granted by the Lessor or the OPCW shall be for one instance only and shall not apply to other or subsequent cases.

2.9.4 The OPCW shall be entitled to make its permission conditional.

End of the Tenancy Agreement or Use

3.1 Without prejudice to any of its legal rights, the OPCW shall at the end of the Tenancy Agreement, or on termination of the use, deliver the Leased Premises to the Lessor entirely vacated, free of use or rights to use and properly cleaned and hand over all keys, keycards and the like to the Lessor. The Leased Premises shall be delivered in a good state, taking into account normal wear and tear. Normal wear and tear is for the account of the Lessor. The OPCW shall remove at its own expense all objects added to the Leased Premises or acquired by it. The Lessor shall not be required to pay any sum for objects that are not removed unless he has previously agreed.

3.2 Subject to the provisions of the OPCW Headquarters Agreement, the Lessor and the OPCW shall inspect the Leased Premises together in good time before the end of the Tenancy Agreement or the use of it. The Lessor and the OPCW shall make a report of this inspection, in which they shall record their findings. This report will also set out, by mutual consent, which work in respect of repairs which appeared to be necessary at the time of the inspection and the established outstanding maintenance for which the OPCW is required to meet the costs, must still be carried out at the OPCW's expense and in what way this must be done.

3.3 The OPCW shall carry out or cause the carrying out of the repairs it is required to carry out on the basis of the inspection report within the term specified in the report - or to be further agreed by the Lessor and the OPCW - to the satisfaction of the Lessor.

Damage

4.1 The OPCW shall take appropriate steps in due time to prevent and limit damage to the Leased Premises, such as damage caused by short circuits, fire, leakage, storms, frost and any other weather condition, the inward or outward flow of liquids and gases.

4.2 The OPCW shall be responsible to the Lessor for any damage and loss to the Leased Premises, unless the OPCW proves that it or the persons it has admitted to the Leased Premises or its staff or the persons for whom it is responsible are not to blame or that negligence cannot be held against it in that respect.

4.3 The Lessor shall be held liable for any damage done to the OPCW or to third parties or goods of the OPCW or of third parties resulting from gross faults or serious negligence on the part of the Lessor in respect of the state of repair of the Leased Premises. The Lessor shall also be held liable for claims arising due to the emergence and the consequences of structural faults in the Leased Premises, due to negligence in the maintenance of the Leased Premises, due to faults in the installations and apparatuses, due to explosion and other occurrences, due to disruption of the benefits of leasehold or due to disruption or faults in maintenance, supplies or services.

4.4 The Lessor shall be held responsible for the OPCW's disruption or loss of the benefits of leasehold resulting from gross fault or serious negligence of the Lessor or obstruction to the use of the Leased Premises caused by third parties.

Guarantee

5. As security for the proper fulfilment of the obligations arising from the Preliminary Tenancy Agreement, the Host Country shall present the Lessor with a Letter of Guarantee after signature of the Preliminary Tenancy Agreement, according to a draft agreed by the Lessor and the Guarantor for an amount to be specified in that Letter, increased by the appropriate VAT. This Letter of Guarantee will only apply to the first [3] [15] years after delivery of the Leased Premises.

Maintenance and preservation

At the Lessor's expense

6.1 Unless it concerns work on items which have not been installed by or on behalf of the Lessor, the following shall be at the expense of the Lessor:

(a) maintenance, repair and renovation of structural parts of the Leased Premises, such as foundations, pillars, beams, concrete floors, roofs, terraces, structural walls, outer walls;

(b) maintenance, repairs and renovation of staircases, stairs, sewers, drains, gutters, outer casings of windows and doors, and the like. In respect of sewers the condition set out in 6.2.4 shall remain in full force;

(c) replacement of parts and renovation of installations such as lifts, central heating installations and fire hydrant boosters;

(d) maintenance, repair and renovation of the fit-up included in the rental price;

(e) exterior paint work;

(f) service contracts to carry out the maintenance and preservation hereunder. Such service contracts shall be carried out at Lessor's own risk. Service contracts shall be approved in advance by the OPCW.

At the OPCW's expense:

6.2.1 All other maintenance, repairs and renovations such as the following shall be at the expense of the OPCW:

(a) exterior maintenance requested by the OPCW which must be considered to be of a limited nature and day-to-day maintenance as well as interior maintenance which does not include maintenance as referred to in 6.1, without prejudice to the further conditions hereof;

(b) minor repairs, not resulting from fit-up maintenance, under the amount of Dfl. 250 (two hundred and fifty Dutch guilders).

6.2.2 The OPCW shall pay for maintenance, repair and renovation of items which have been or will be installed by or on behalf of the OPCW under an approximate estimate made available to him by the Lessor.

6.2.3 The OPCW shall furthermore pay for the cleaning of the Leased Premises and keeping the same clean, both inside and out, which shall include the cleaning of windows, window frames and outer walls of the Leased Premises.

6.2.4 In addition the OPCW shall be responsible for the emptying of grease traps, the cleaning and unblocking of cesspools, gutters and all drains/sewers of the Leased Premises up to the municipal main sewers, the sweeping of chimneys and the cleaning of ventilation ducts.

6.3 The OPCW shall be responsible for the proper and competent use of the Leased Premises including the technical installations in the Leased Premises.

6.4 The OPCW shall notify the Lessor immediately in writing of any faults to the Leased Premises. The Lessor shall also notify the OPCW in writing of any of its complaints. The OPCW and the Lessor shall cooperate in order to find a solution to the subject of such notification within 10 days of the receipt of it.

6.5 The OPCW will determine the procedure for permitting entry for maintenance and repair work and will approve the work schedule before such maintenance, repairs or other work takes place.

Access of the Lessor

7.1 In accordance with the OPCW Headquarters Agreement, the OPCW shall determine the arrangements to allow the Lessor to inspect the Leased Premises once every three years. It is understood that inspections shall be conducted under OPCW guidance and surveillance. The request for inspection will be submitted one month in advance and in principle will not be refused.

7.2 In the event of the intended sale of the Leased Premises previously agreed by the OPCW, the OPCW will provide an opportunity for a maximum four-hour inspection of the Leased Premises. The inspection will be conducted under the arrangements determined by the OPCW for regular inspections under 7.1 herein. In any event, inspection related to intended sales will occur only every ten years unless the OPCW agrees otherwise in writing in advance.

7.3 Three months prior to the termination of the Tenancy Agreement, the OPCW shall, after prior notice by the Lessor or his attorney, without any compensation, provide an opportunity for inspection of the Leased Premises during at least two working days every month.

Energy costs

8.1 In addition to the rent, the OPCW will meet the costs incurred for energy (heating, cooling, electricity, water) for the Leased Premises, including the costs for concluding an agreement for the supply and for the hiring of a meter, as well as any other costs and penalties charged by public utility companies. The OPCW shall itself conclude the agreements for supply of energy with the institutions involved.

8.2 Save in the event of serious negligence or gross fault, the Lessor shall not be liable for any damage as a result of the malfunction or improper supply of energy referred to herein, nor shall the OPCW be able to claim rent reduction in such cases.

Payments

9. The payment of rent and all amounts payable under the Tenancy Agreement will be made at the latest on the due date by payment or transfer in Dutch Guilders to an account specified by the Lessor. The Lessor and the OPCW shall agree to any alteration of the place or manner in which payment is to be made. The Lessor and the OPCW shall be entitled to determine the outstanding amount under the Tenancy Agreement from which payments received from the OPCW will be deducted, unless the OPCW specifically states otherwise upon payment.

Taxes, Expenses, Levies, Premiums, etc.

10.1 In accordance with the OPCW Headquarters Agreement and complementary arrangements, the OPCW is exempt from:

(a) VAT on the rent;

(b) real estate tax regarding the actual use of the Leased Premises;

10.2 Without prejudice to the privileges and immunities enjoyed by the OPCW under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and On Their Destruction and the OPCW Headquarters Agreement, the OPCW shall eventually pay environmental levies, including surface water purification levies and charges for waste water purification and any other amounts on account of environmental protection.

10.3 Other charges levied on real estate pertaining to the owner rather than the user, such as district drainage charges, will be paid by the Lessor.

10.4 The Lessor and the OPCW will agree on the proper premium for fire insurance for the Leased Premises. The OPCW will pay any amount over and above the normal premium for the inventory and goods of the Leased Premises as a consequence of the nature or performance of the OPCW's activities.

"Normal premium" shall be understood to mean the premium the Lessor or OPCW may agree to based upon the estimate provided by a reputable insurer established in the Netherlands for the insurance of the Leased Premises or its inventory and goods, against fire risk at the time immediately preceding the entry into force of the Tenancy Agreement, without taking into account the nature or performance of OPCW activities in the Leased Premises, as well as - for the duration of the Tenancy Agreement - each adjustment of this premium which does not result from any change of the nature or extent of the risk insured.

Untimely Availability

11. If the Leased Premises are not available on the agreed commencement date of the Tenancy Agreement, as a result of the fact that the Leased Premises are not ready on time -- not being due to the OPCW's request -- the Lessor has not complied with its obligations in any other way, the OPCW shall be exempt from payment of rent or energy costs until the date on which the Leased Premises are available to it and its other obligations and the agreed terms of the Tenancy Agreement will be postponed accordingly. In addition, the OPCW shall receive from the Lessor an indemnity as compensation for damages in the amount of Dfl. 15,000 per day of delay, indexed at 1997 price levels. In the event the Leased Premises are not ready on time due to non-compliance with the Development Agreement, it is understood that the Lessor will still be held liable with respect to the OPCW.

Domicile

12.1 From entry into force of the Preliminary Tenancy Agreement all communications from the Lessor to the Commission relating to the fulfilment of that agreement shall be addressed to its address as indicated in the Provisional Tenancy Agreement in writing by certified mail.

12.2 From entry into force of the Tenancy Agreement, all communications from the Lessor to the OPCW relating to the fulfilment of that agreement, shall be addressed to the Leased Premises in writing by certified mail.

Complaints, Requests

13. The OPCW shall submit any complaints and requests in writing to the Lessor who will respond immediately within 7 (seven) days after receipt of the complaint or request. The OPCW and the Lessor will agree at the time of signature of the Tenancy Agreement how to reach a solution to such complaints and requests.

- - - o - - -