The 12-point interpretive declaration shows that the Nepali side did not understand the compact or the leaders have an underlying motive in attaching the declaration. Either the Nepal government does not have a legal expert who understands the compact or it was brought to save the coalition and make a fool of the people
It is good news that the parliament has approved the MCC compact. But the 12-point interpretative declaration shows that the Nepali side did not understand the compact or the leaders have an underlying motive in attaching the declaration. Either the Nepal government does not have a legal expert who understands the compact or it was brought to save the coalition and make a fool of the people. The compact itself clarifies all terms and conditions. The letter of September 8, 2021, received by the Nepal government in response to its queries seeking clarification on the MCC Nepal compact, shows that Nepal had failed to discuss all issues when the compact was signed.
This is a business agreement, and Nepal must look at it from a business and legal point of view. Provisions like auditing were kept to prevent the misuse of the fund because Nepal is one of the most corrupt countries in the world.
Declaration No. 1 related to the military is redundant.
The MCC prohibits the use of the fund for assistance or training of the military, police, militia or other quasi-military organisation or unit. Moreover, the compact empowers Nepal, not the US, to select the projects. Declaration No. 2 declares that the Constitution of Nepal shall prevail over the compact. This is only natural. In the event the US puts such a condition, Nepal has the option of either negotiating with the US or to give 30 days' notice and refund the unused grant to the MCC.
Declaration 3 also does not add anything new. The compact clearly states it applies only to MCC funding.
Section 5.1 (b) (iii) itself is clear that it will be used only for MCC funding or continued implementation of this compact or programme.
Should Nepal use the funding in violation of U.S. law, the US may terminate or suspend this compact or MCC funding. Section 5 has given either party the right to terminate or suspend the compact by giving 30 days' notice. As for Declaration 4, section 3.2(b) of the compact provides that Nepal will designate an entity, such as MCA-Nepal, to be established with prior written consent of the MCC. This entity is responsible for implementing the programme, managing the implementation of projects, activities, allocating resources, and managing procurements. But the government is still responsible even if the entity is created.
If there is a dispute, either party may terminate the agreement with 30 days' notice.
Declaration 5 does not contradict with section 3.2(f) of the compact. The compact provides that Nepal shall grant the right and license to use intellectual property (IP) to the MCC.
But the declaration provides that MCC shall not be the owner of the intellectual property created under the compact, recognising Nepal as the sole owner of all intellectual property.
The declaration does not state that the US will not have the right and license to use IP. So what is the change? Declaration 6 states that implementation letters under the compact shall be implemented within the scope of the compact. Section 3.5 of the compact stipulates that the MCC may advise Nepal in writing on any matter relating to the compact, MCC funding, or implementation of the programme.
With reference to Declaration 7, section 3.8 (a) of the compact states, among other things, the parties will do a financial audit every six months until the end of the compact. In addition, upon the MCC's request, Nepal will ensure that such audits are conducted by an independent auditor approved by the MCC and a list of local auditors approved by the Inspector General or a USbased certified public accounting firm selected in accordance with MCC's Guidelines. This does not preclude the Office of the Auditor General of Nepal from conducting an audit of MCA-Nepal.
Declaration 8 does not bring any changes in the compact. It states that Nepal has the right to terminate the compact without cause or if any activities/ programme under the compact violates Nepal's laws or policies, by giving 30 days' notice. Section 5.1(a) of the compact clearly states that either party may terminate the compact without cause by giving the other party 30 days' prior written notice. Section 5.3 requires the refund of funds misused or used in violation of the compact.
MCC may require Nepal to repay to the MCC the value of the misused fund, interest, earnings, or asset, plus interest within 30 days after Nepal receives notice from the MCC.
Section 6.4 states that the compact is an international agreement, and will thus be governed by the principles of international law. It is clear that this section also relates to the compact and MCC funding.
Declaration 10 provides that the compact shall be implemented by complying with the compact and in accordance with the domestic laws of Nepal. Section 7.1, however, provides that the compact will prevail over the domestic laws of Nepal. The declaration is not clear which prevails if there is a conflict. However, if it conflicts with the Nepali constitution, it becomes invalid, and if it contradicts with the country's acts and regulations, the compact prevails. Based on the September 8, 2021 letter, the Nepal government has already notified the US that there is no conflict between the compact and Nepali laws.
Declaration 11 states that all property will be under the ownership of the Nepal government. The compact never claims that the projects will be owned by the US or any other government but Nepal. Section 8.1, however, requires the government to ensure cooperation for land acquisition, site access and forest clearance required to implement the compact.
Declaration 12 states that the letter dated September 8, 2021 shall aid in the interpretation and implementations of the compact.
Based on my review that letter states exactly what is mentioned in the compact.
The declaration has put more things that are not in the subject sections. Raising unnecessary issues after negotiations and signing of an agreement is harmful to Nepal.
Bhurtel is an attorney-at-law based in New York
A version of this article appears in the print on March 4, 2022, of The Himalayan Times.
