Annex 6 Legal Status Update

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Report of the Governance and Partnership Committee

ANNEX 6

Update on Legal Status for the Global Fund

Outline: At its 3

meeting in October 2002, the Board asked the Secretariat to

continue to explore an agreement with the Swiss Government to grant the

Global Fund quasi-intergovernmental status and to report on the impact of such

a change in status for the Global Fund.

At the 4

Board meeting, the Global Fund Board asked the Secretariat to

pursue the discussion with the Swiss authorities which would provide the

Global Fund with those privileges and immunities necessary to fulfill its

mandate and to ensure that the Global Fund’s administration is at least as

efficient as and not more costly than under the current arrangement.

A report was distributed to the Board which described the pros and cons of

three legal status options: 1) current arrangement, 2) Quasi-Intergovernmental,

3) Intergovernmental. The report was not presented or discussed at the Board

meeting due to time constraints. The Governance and Partnership Committee

has agreed to review this issue further and to present its findings and

recommendations at the next Board meeting in June 2003.

This document presents an updated report on these options, incorporating

further findings resulting from consultations with:

Dr. Mathias-Charles Krafft, former Ambassador and Honorary

Professor at the Law School of the University of Lausanne,

Ms. Evelyn Gerber, Head of the Legal Division of diplomatic and

consular Law,

Mr. Tom Topping, Legal Counsel, WHO

Tavernier and Tschanz Associates,

It reviews the organizational principles, priorities and pressures driving the

exploration of optional legal statuses and defines the legal, financial and

personnel advantages and disadvantages of each option. The document also

contains a transitional option offered by the Swiss Authorities.

Legal opinion on the modifications which should be made to the legal status of the Global

Fund in view of the transformation of the Fund into an intergovernmental organization -

Annex 6.1

Legal Opinion on the liability of the Foundation and the personal liability of its bodies

members - Annex 6.3

The Global

Fund to Fight AIDS, Tuberculosis and Malaria

Fifth Board Meeting

Geneva, 5 - 6 June 2003

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Part 1: Introduction and Background

Organizational Principles and Priorities of the Global Fund

1. The Global Fund was founded as an independent Swiss foundation, with

the mandate of creating an innovative, efficient and effective financing

mechanism, which would enable and speed country responses to the three

diseases. The Board gave priority to the autonomy of the Fund and to its

ability to pursue a dynamic collaboration with national and international

partners. This requires administrative arrangements that are efficient and

cost-effective to enable the Global Fund to take rapid and responsible action

in line with its mandate and a legal status, which provides the necessary

privileges and immunities.

Historical Perspective

2. During the discussions of the Transitional Working Group (TWG) in 2001,

the core group on legal issues explored several options for organizing the

Global Fund as a legal entity. Balancing the urgent need to get the Fund up

and running and, at the same time, assure independent authority, the TWG

decided to organize the Fund as a private entity, rather than as a treaty-based

international or intergovernmental organization or as part of an existing UN

body. In discussions on the choice of location, several countries (France,

Belgium, South Africa and Switzerland) were asked to outline the benefits

they would provide to the Global Fund if it was organized as a private entity

within their jurisdiction.

3. To make Geneva an attractive choice for the Global Fund, WHO and the

Swiss Government submitted a combined proposal, in which each promised

to provide the following benefits: (1) the WHO committed to house the

Secretariat, and provide administrative services through a unit dedicated

solely to the support of the Global Fund, while respecting Secretariat

autonomy; and (2) the Swiss Government committed to providing the Global

Fund with quasi-intergovernmental status which, at a minimum, would provide

certain tax exemptions and other benefits similar to the privileges allowed

other international organizations.

4. The first promise concerning WHO has been fulfilled, although some

difficulties have arisen from this administrative relationship. The second

commitment, the granting of quasi-intergovernmental status, is unresolved.

However, taking into consideration the studies already done, this option, with

its current features, is not the best solution for the Global Fund as compared

with the privileges and immunities currently granted to the Global Fund.

5. In order to highlight the different options which may be envisaged, along

with their related advantages and disadvantages, it is necessary to

summarize the current situation.

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Part 2: Current situation

1. The Global Fund is a private foundation under Swiss law incorporated

pursuant to a public deed dated 22 January, 2002 and registered in the

Geneva Trade Register on 24 January, 2002.

2. According to the Bylaws, the bodies of the Foundation are (i) the

Partnership Forum (ii) the Board, (iii) the Secretariat, (iv) the Technical

Review Panel and (v) the Auditing Body. The last still needs to be appointed.

3. The Global Fund has concluded two agreements :

a. the Administrative Services Agreement (ASA) with the WHO, and

b. the Trustee Agreement with the World Bank

4. Advantages and Disadvantages of the current situation

Advantages of the current situation Disadvantages of the current situation

From the status as a Swiss foundation:

a. Exemption from income tax for the foundation

From the Administrative Service Agreement (ASA) with the

WHO:

a. Privileges and immunities granted to the Secretariat staff as

employees of WHO working for the Global Fund;

b. In Switzerland, legal immunity, tax exemption, participation

in the UN pension fund, exemption from social security

costs, and a C- permit for spouses wishing to work in

Switzerland.

c. Official travel privileges and immunities in a broad range of

countries for Secretariat staff, as employees of WHO

carrying out work for the Global Fund

;

d. Legal “protection” by the WHO, whereby contracts between

the Global Fund/WHO and other parties (such as the LFA

framework contract) are not subject to national jurisdiction;

e. Privileges and immunities in respect to the assets of the

Secretariat held in trust by the WHO, whereby assets of the

Global Fund held in trust by the WHO are subject to the

privileges and immunities of the WHO.

From the Trustee Agreement with the World Bank:

Privileges and immunities, whereby, according to Article 4 of the

Trustee Agreement, the privileges and immunities of the World

Bank “shall apply to the property, assets, archives, income

operations and transactions of the Global Fund’s “Trust Fund”.

From the status as a Swiss Foundation:

a. Liability of the Foundation according

to Swiss law : see legal opinion

attached (Annex 6.3)

b. Liability of the members of its bodies,

the TRP, Board, Partnership Forum

(except for the Secretariat) (see

Annex 6. 3)

From the Administrative Services

Agreement with WHO:

a. Dual authority for the Executive

Director and Secretariat staff. For

example, the Executive Director is a

member of the WHO staff AND is

appointed by the Foundation Board.

Is the Global Fund’s Executive

Director accountable to the Global

Fund Board or to the Director General

of WHO ?

b. Administrative confusion and delays

between the organizations in human

resources, contracting and

accounting and claims transactions

immunity from legal process in respect of acts committed as part of their official functions (amongst other

protections) as well as a right to a UN laissez-passer which facilitates access and the granting of visas

These principal issues are detailed in Annex 6.2

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Part 3: Other Options

1. The following options for legal status have been explored together with the

Federal Department of Foreign Affairs in Annex 6.1.

2. Quasi-governmental Organization

a. A quasi-governmental organization would provide the Global Fund with

the following advantages and disadvantages, as they relate to fiscal, legal and

employment considerations:

Advantages

Disadvantages

Remains as a private Swiss Foundation, with

added independence from WHO

No benefits or immunities for Board members when in

session in Switzerland

Exemption for foreign staff from income and VAT

taxes and from Swiss “foreigner work rules.”

A significant percentage of the Secretariat must be

separated from the WHO and employed directly by the

Foundation, thus losing important immunities and

exemptions offered by the WHO, including:

a. a loss of immunities from jurisdiction in

Switzerland

b. for foreign staff, a loss of exemption from Swiss

social insurance

c. for Swiss staff, a loss of income tax exemptions

d. a change to B work permits for spouses

(subjecting the spouses to certain controls)

e. loss of the UN laissez passer and privileges and

protections outside of Switzerland

Exemption from direct and indirect tax (VAT)

through the fiscal agreement to be signed

with the Swiss Federal Council.

Increased tax burden for all staff (an estimated USD

1,081, 296), to be borne by the Global Fund to assure

staff would not lose benefits and would remain on equal

benefit footing with their UN colleagues

International recognition through the conclusion

of an international agreement.

b. Due to higher employment costs and limited benefits, this option is not

recommended.

3. Expansion of Board Immunities in Switzerland under the current situation

a. This solution provides for the same structures and features as the current

situation but adds the following benefits:

i. immunities of jurisdiction in Switzerland for members of the Board of

the Global Fund who do not have privileges and immunities and could

fear being brought before a Swiss court by third parties for actions

which they have performed in their capacity as members of the

Foundation Board,

ii. the Secretariat staff will still be employed by the WHO; however it could

be envisaged that certain staff members be detached from the WHO

and appointed directly by the Foundation and for whom an immunity of

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jurisdiction could be requested from the Swiss government. This

solution possesses the merit of partially remedying the problem of

duality with the WHO, as mentioned above, however creating two

categories of personnel. It should also be mentioned that the

immunities of the latter category would be limited to the territory of

Switzerland and any other country that could accord privileges and

immunities to the Global Fund;

iii. international recognition of a status as an international NGO through

the agreement with Switzerland.

b. To effect this added protection, an agreement would be concluded

between the Swiss Federal Counsel and the Global Fund.

4.. Intergovernmental Organization

a. Intergovernmental status for the Global Fund must be created by an

international treaty between subjects of international law, either countries or

international organizations (for example, the WHO)

Advantages Disadvantages

Optimal degree of independence

Private sector and NGO members of the current Board would not be able to

be party to the treaty creating the IO, but may be given the right to vote

and to fully participate in the Global Fund Board and Governance Decisions

Privileges and immunities of members of the

Board as normally accorded to country

repres entatives

Burdensome procedure (up to two years).

Status as international civil servants with all

privileges and immunities in Switzerland for the

Secretariat staff as they currently have with WHO.

No UN laissez passer nor benefits and immunities for the staff, as accorded

to specialized institutions, such as the WHO, when travelling outside of

Switzerland, unless acquired for the Global Fund through other

arrangements (as mentioned below)

International recognition through the conclusion of

an international agreement.

Need to enter into host agreements with each of the countries in which

immunities

and protections for its staff are needed.

Staff costs not significantly different than the

under the current arrangement with the WHO

(might even be slightly less), provided that the

Global Fund staff could opt to remain in the UN

pension plan

See legal opinion from Mathias- Charles Krafft.

According to internal law, the Global Fund in its present status would not qualify for an agreement with

the Swiss government, such as that provided to the International Federation of the Red Cross and Red

Crescent Societies, which did not require treaties to initiate their international status. The transformation

of the Global Fund into an intergovernmental organization would require the conclusion of a multilateral

treaty. The conclusion of a headquarter agreement between the future IO and the host State is

relatively easy in Switzerland.

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5. Specialized institution within the United Nations system

a. In addition to the benefits described under the solution of an IO, the staff

shall profit from a UN laissez passer and the benefits of the Convention

concerning benefits and immunities of specialized institutions.

b. However the disadvantages (among others, the difficulties noted in

creating a specialized institution) are the same as for an IO, with the added

burden of obtaining the status as a specialized organization. Furthermore, the

fact that the Global Fund was never intended to be part of the UN System

speaks for rejecting this solution.

6. Considering the facts as outlined above, only the solutions presented

under Part 3, paragraph 3 (current status with expanded immunities in

Switzerland for Board members) and Part 3, paragraph 4 (Intergovernmental

Organization) can be taken under consideration. However, the option cited

under 3 requires significant and tangible changes to the existing Global

Fund/WHO Administrative Agreement to provide greater independent

authority and higher administrative efficiency.

Part 4: Conclusions – Proposed recommendations

1. The Committee recommends that the Board:

1. Request the Secretariat to pursue negotiations with the Swiss

authorities for expanded Board member immunities as well as staff

Secretariat immunities in Switzerland, and present a draft agreement

between the Global Fund and the Swiss authorities for approval at the

October meeting.

2. Request the Secretariat to work closely with WHO to record key areas

of concern and identify mutually agreed and tangible solutions to

improve the functioning of the Administrative Services Agreement to

ensure greater administrative efficiencies and independent authority for

decisions and actions for the Global Fund.

3. Request the Secretariat to continue to clarify the implications of moving

to the status of an Intergovernmental Organization, including how to

ensure a strong governance role for the private sector, NGOs and civil

society that meets the Global Fund’s commitment to the public-private

partnership.

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ANNEX 6.1

Legal opinion

on the modifications which should be made to the legal status

of the Global Fund (The Global Fund to fight AIDS,

Tuberculosis and Malaria) in view of the transformation

of the Fund into an intergovernmental organization

Mathias-Charles Krafft

Former Ambassador

Honorary Professor at the Law

School of the University of Lausanne

Lausanne, April 2003

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PART A

Review of the current legal status of the Global Fund

1. The Global Fund is constituted as a foundation under Swiss law in the sense of

articles 80 ff. of the Swiss Civil Code (cf. Art. 1 of the Bylaws). It was registered in

the "Registre du commerce" of Geneva on 24 January 2002. With this, it acquired a

legal personality under Swiss law. In virtue of art. 2 of its Bylaws, the Fund has as its

purpose "to collect, administer and distribute resources through a new partnership

between the private and public sectors".

This "new partnership" is reflected in particular by the composition of the

management and administrative organs of the Fund. Thus, for example, according to

art. 10 of the Bylaws, the Foundation Board is composed of 18 members with voting

rights and 5 members without voting rights. The distribution of the members with

voting rights is not only characterized by the fact that the Foundation Board includes

not only representatives of States (developing countries and donor States), but also

representatives of the civil society and the private sector.

2. As a foundation under private law, the Global Fund must be considered as a non-

governmental international organization in the sense of the European Convention on

the Recognition of the Legal Personality of Non-Governmental Organizations, which

was signed in Strasbourg on 24 April 1986 and which entered into force in

Switzerland on 1 January 1991

. Its article 1 states that the said Convention is

applicable to associations and foundations fulfilling the following conditions:

a. have a non-profit objective of international utility;

b. have been created through an act under the national law of a State party to

the Convention;

c. be effectively active in at least two States, and

d. have its statutory headquarters on the territory of one party and its physical

headquarters on the territory of this or another party.

This Convention is open for signature to the member States of the Council of Europe

and for the participation of other States invited by the ministers of this organization.

Up to now, it has only been ratified by a limited number of States. Its principal

purpose is to require member States to recognize the legal personality and

qualification of an non-governmental international organization, as acquired within

(the territory of) the party in which it has its statutory headquarters.

3. On 24 May 2002, the Global Fund concluded an agreement with the World Health

Organization (WHO), with the title " Administrative Services Agreement". This

agreement, subject in principle to Swiss law, foresees putting the necessary

administrative services ("the Fund Secretariat") at the disposal of the Fund. One of the

results of this Agreement is to enable the staff of the Foundation to benefit from the

privileges and immunities given to members of the WHO Secretariat, as defined in the

Agreement concluded between the Swiss Federal Council and the World Health

Receuil systématique du droit fédérale suisse (RS) 0.192.11

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Organization to determine the legal status of this organization

and the implementing

statute thereto

, agreements which were concluded on 21 August 1948. Another result

is to allow to the staff of the Fund the application of the Convention of 21 November

1947 on Privileges and Immunities of Specialized Institutions, insofar, of course, that

it has been ratified by the State in which the staff travels

4. On 23 May 2002, the Global Fund also concluded an agreement with the

International Bank for Reconstruction and Development (World Bank) in view of

establishing a trust fund (Trust Fund for the Global Fund to Fight AIDS, Tuberculosis

and Malaria). It is up to the World Bank to administer the "Trust Fund", a financial

mechanism destined to receive contributions from States, in particular. According to

art.5, par.3 of the Bylaws of the Global Fund, all funds received by the Foundation are

to be kept in trust in an account opened with the World Bank, and this in order to

protect the assets of the Foundation and to facilitate their management. The World

Bank accepted to act as trustee of the assets received and distributed by the

Foundation.

The agreement concluded with the World Bank includes a provision relative to the

applicable privileges and immunities, particularly as concerns the assets and

(financial) operations of the Trust Fund. Point 4 has the following content:

"It is the intention of the parties that the privileges

and immunities accorded to the World Bank under the

Articles of Agreement shall apply to the property,

assets, archives, income, operations and transactions

of the Trust Fund, and that the World Bank shall, as

legal owner thereof, hold the funds, assets and

receipts that constitute the Trust Fund in accordance

with the terms of this Agreement."

The Statutes of the World Bank, which entered into force for Switzerland on 29 May

1992

, contain an article VII which enumerates the privileges and immunities from

which the World Bank benefits in order to be able fulfill the functions with which it

has been entrusted

Within the context of our study, it is interesting to note the provision which figures

under cipher 6 of the Agreement, in the terms of which: "Nothing in this Agreement,

or in the provision by the World Bank of the services referred herein, shall impair the

status of the Global Fund as an independent organization existing under Swiss law,

solely responsible for its own decisions and actions".

Finally, it is important to note that the Agreement contains a provision, cipher 11, for

the settlement of disagreements:

RS 0.192.120.281

RS 0.192.120.281.1.

In order to be complete, one should also mention the headquarters agreements that the WHO has

concluded with different countries

RS 0.979.2

It concerns particularly the immunity from legal jurisdiction under certain conditions, the

nonseizability of the Bank's assets, the inviolability of the archives and fiscal immunities

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"Any dispute between the parties hereto relating to

the interpretation or execution of this Agreement

will, unless amicably settled, be subject to

conciliation. In the event of the failure of the latter,

the dispute will be settled by arbitration. The

arbitration will be conducted in accordance with

the modalities to be agreed upon by the parties or,

in the absence of an agreement, with the Rules of

UNCITRAL. The parties will accept the arbitrage

award as final."

Contrary to the Agreement concluded with the WHO, the Agreement signed on 23

May 2003 does not refer to any specific internal law (in this case, Swiss law). It will

be up to us, in examining the legal status which could be given to the Global Fund,

to come back to the question of the legal nature of the Agreement establishing the

Trust Fund, this in the light of the points raised above and, in particular, of the clause

referring to the rules of arbitration of the CNUDC (UNCITRAL).

Part B

A new legal status for the Global Fund?

1, According to the documents in our possession, it would appear that the Swiss

government has not made a "formal" promise as concerns the attribution of a specific

legal status which would permit it to execute even more efficiently the tasks assigned

by the Bylaws. It would appear however that the discussions within the Foundation

Board of Directors during the year 2002 were particularly concerned with a "quasi-

intergovernmental" status, or, if one refers to the working hypothesis formulated by

the Federal Department of Foreign Affairs (FDFA), with a "quasi-governmental

organization" status.

It is a question of what?

2. Taking into account the evolution of international law and the development of

international cooperation which implies an increased participation of actors of a

private nature in international relations, the Swiss authorities have adopted these last

years a practice which translates into the recognition of international non-

governmental organizations

as partial or limited international legal personalities,

and which translates into the ability to conclude treaties under international law

(treaty-making power). Because of their content, these treaties are sometimes called

"agreements of a fiscal nature". It is this type of agreement which was, for example, at

the center of the discussions which took place on 4 October 2002 between the

Executive Director of the Fund, Dr. Richard Feachem and his colleagues, on one

hand, and Ms. Evelyne Gerber, Head of the Division of Diplomatic and Consular

Law, on the other.

in the sense of the European Convention cited in Part A, cipher 2, above

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In this context, one may mention the agreements concluded by the Federal Council

with the International Air Transport Association (IATA)

, with the International

Council of Airports in 1997

and with the International Society of Aeronautical

Communication (ISAC) in 1992

. These agreements were concluded on the basis of a

Federal decree, of 30 September 1955, currently being revised, on the conclusion and

modification of agreements with international organizations in view of determining

their legal status in Switzerland

3. The agreement concluded on 1 November 2000 between the Federal Council and

the International Olympic Committee (IOC) to determine its status in Switzerland

deserves special mention

. An association under Swiss law in the sense of articles 60

ff. of the Swiss Civil Code, the IOC gained recognition by the Federal Council of

"elements of an international legal personality", which permitted the Swiss

government to conclude with it an agreement under international law, giving it

certain facilities particularly in the fiscal sphere and in legislation limiting the number

of foreigners allowed to work in Switzerland.

4. The Statutes of the International Committee of the Red Cross (ICRC) and of the

International Federation of Red Cross and Red Crescent Societies in Switzerland must

be treated separately. The Federal Council concluded authentic headquarters

agreements

with them, which accord these two institutions the status of a

"functional" international legal personality and which assimilates them to

intergovernmental organizations, and giving them the privileges and immunities

normally allowed such organizations in Switzerland.

5. Finally, this year the Federal Council concluded an agreement with the Geneva

International Centre for Humanitarian Demining in Geneva, which shows some

interesting particularities. Created as a foundation under Swiss law, the Centre

obtained a status which takes into consideration the international tasks which have

been assigned to it by the States which are parties to the Convention on the

Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines

and their Destruction, signed in Ottawa on 18 September 1997. The agreement draws

its inspiration partly from the provisions of the agreement concluded with the

International Olympic Committee (IOC), but goes further in the sense that it foresees

the inviolability of the archives and documents of the Centre, of the acts performed by

the President and the members of the Foundation Board of Directors and the

Executive Director, as well as by the employees of the Centre, in the fulfillment of

their functions.

This agreement is not based on the Federal decree of 30 September 1955, already cited

under cipher 2 above, but on article 47a, paragraph 3, of the Federal law of 23 March

RS 0.192.122.748

RS 0. 192.122.749

RS 0.192.122.784

RS 192.12

RS 0.192.122.415.1

read on this subject: Franck Latty, Le Comité international olympique et le droit international,

Editions Montchrestien, Paris 2001

The agreement with the ICRC was concluded on 19 March 1993 (RS 192.122.50) and with the

Federation on 29 November 1996 (RS 0.192.122.51)

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1962 on the procedure of the Federal assembly, as well as on the format, the

publication and the entry into force of legislative acts (Law on the Relationship

Between the Councils)

, said provision authorizing the Federal Council alone, that is

to say without the approval of Parliament, to conclude certain treaties considered to

have "minor consequences".

Part C

Have the conditions for the conclusion of a

headquarters agreement with the Global Fund

been fulfilled?

In its advisory opinion of 11 April 1949 in the case "Compensation for damages

suffered in the service of the United Nations"

, the International Court of Justice in

The Hague had the opportunity to note that, in a general manner, "the legal subjects, in

a legal system, are not necessarily identical as concerns their nature or the extent of

their rights; and that their nature is dependent on the needs of the community". The

Court continued, in declaring the following:

"The development of international law, in the

course of its history, was influenced by the

requirements of international life and the

progressive increase of the collective activity of

States has already given rise to examples of actions

on an international level by certain entities which

are not States. This development led in June 1945

to the creation of an international organization, the

objectives and principles of which are described in

the Charter of the United Nations. In order to attain

these objectives, it is indispensable that the

Organization have an international personality"

As Professor Paul Reuter has noted, " the legal personality in a specific legal structure

is only the expression of the acknowledged qualification of any organization

whatsoever to place its activities or a part thereof on the level of that structure and to

be the holder of rights and obligations thereof"

. The determining element of the

international personality is that certain functions having been entrusted to said

organism require that its activity be situated on the level of international, law

2. In the case of the International Federation of Red Cross and Red Crescent Societies,

the Swiss government was able to conclude a headquarters agreement in which the

international legal personality and the legal qualification in Switzerland of the

RS 171.11

ICJ Compendium 1949, p. 174, in particular p. 178

Paul Reuter, La personnalité juridique internationale du Comité internationale de la Croix-Rouge, in:

Etudes et essais sur le droit internationale humanitaire et sur les principes de la Croix-Rouge en

l'honneur de Jean Pictet, Geneva-The Hague, 1984, p. 785

Paul Reuter, op.cit., p. 786

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Federation is recognized "for the purposes of the present agreement"

. In doing this,

the Federal Council has formally recognized that insofar necessary to fulfill the

functions which have been assigned to it by the international community

, the

Federation should be considered as being the holder of the rights and obligations not

only under Swiss, but also under international law.

As an association under Swiss law in the sense of article 60 ff. of the Swiss Civil

Code, the Federation profits additionally from a "functional" international legal

personality, as demonstrated notably in the conclusion of a large number of

agreements which define the legal status in the contracting States and which are

authentic international treaties. There is no doubt that the Federation plays a major

role in the humanitarian field. It is composed of national societies of the Red Cross

and the Red Crescent, which have been recognized by their national governments, as

well as by the ICRC, and which have been accepted by the General Assembly of the

International Federation. These national Societies, which are exercising an activity

more in the public than in the private sector, are auxiliaries of the authorities.

In addition, it is necessary to note that the International Federation is one of the

components of the International Red Cross and the Red Crescent Movement, which

includes moreover the ICRC and the national Societies of the Red Cross and the Red

Crescent. The importance of the Federation's role is underlined by the fact that it has

received permanent observer status at the General Assembly of the United Nations,

which particularly took into account the specific place it occupies in international

humanitarian relations.

In taking into account all these different elements, the Federal Council was able to

assimilate the Federation to an inter-governmental association

3. The situation of the Global Fund is, in this respect, quite different. While the

International Federation of Red Cross and Red Crescent Societies is defined in article

1 of its Statutes as "an institution with a legal personality and ruled by its own statutes

which define its rights and obligations" and as "a component of the International Red

Cross and Red Crescent Movement", the Global Fund was created as a non-profit

foundation ruled by its own statutes and by the articles 80 ff. of the Swiss Civil Code.

Its legal personality is therefore anchored mainly, if not exclusively in Swiss internal

law.

It is true that the World Bank has concluded - as we have read

- an agreement with

the Global Fund, and not with the WHO, in view of the establishment of a trust fund.

This agreement takes care to underline, in cipher 6, the characteristic of an

"independent organization" of the Fund, in spite of the important links which continue

Article 1 of the agreement concluded on 29 November 1996

cf. in particular article 81, paragraph 3, of the additional Protocol to the Geneva Convention relative

to the Protection of Civilian Persons in Times of War of 12 August 1949 (Protocol I), adopted in

Geneva on 8 June 1977; RS 0.518.521. This provision requires the contracting parties and the parties in

conflict to facilitate, as much as possible, the aid provided to the victims of conflicts by the Red Cross

and Red Crescent societies.

cf also, part B, cipher 4, above

cf. part A, cipher 4, above

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to exist with the WHO. It contains, in addition, a clause for resolving disputes which

refers to conciliation and arbitrage, that is to say, two means of resolution of disputes

between States which are enumerated in article 33 of the Charter of the United

Nations.

We therefore have no difficulty to give the Global Fund recognition of a nascent

international legal personality, or, in the words of the Federal Council in its agreement

with the IOC, "elements of an international legal personality"

, particularly insofar as

the Global Fund will have to resort more and more to instruments which are offered

by an international personality

and in particular to the ability to conclude agreements

under international law. According to Professor Paul Reuter, the ability to conclude

agreements subject to international public law is the "touchstone" of an international

legal personality

If, on one hand, we thus can admit that the Global Fund has the legal qualification to

conclude an agreement with the Federal Council to determine its status in Switzerland,

on the other hand, we do not see any possibility at this stage of development of the

said Fund to contemplate negotiations in view of the conclusion of an authentic

headquarters agreement, that is to say an agreement including the whole of the

privileges and immunities recognized in an intergovernmental organization.

As we have noted

, the World Bank has, of course concluded an agreement with the

Fund which sanctioned the "independent organization" of the Fund. But this latter has

concluded an "administrative agreement" with the WHO, which puts the accent on the

fact that the Fund is constituted as a foundation under Swiss law (cipher7):

"Nothing in this Agreement, or in the provision of

the administrative services referred to herein, will

impair the status of the Global Fund as an

independent Foundation under Swiss law, which is

solely responsible for its own decisions and

actions."

At least on the administrative level, the ties to the WHO remain strong and the

anchoring point remains Swiss law. Other options, than that of the conclusion of a

headquarters agreement, must therefore be examined.

On the Swiss internal level, the Federal decree of 30 September 1955, as already

cited

, has been interpreted in a liberal manner in order to allow the Federal Council

to conclude certain agreements of limited impact, that is to say, foreseeing only fiscal

privileges for non-governmental organizations having a predominantly

intergovernmental character. We have also been able to ascertain that in order to

conclude an agreement with the Geneva International Centre for Humanitarian

cf. part B, cipher 3, above

cf. the reference to the advisory opinion of the International Court of Justice contained in cipher 1

above

Op.cit. (note 17) p. 791

cf. cipher 3 above

cf. part B, cipher 2, above

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Demining, the Federal Council had recourse to another legal base, that of internal

law

Before formulating any propositions concerning the possible options, it is time to

move on to the central theme of our paper, that is to say the transformation of the

Global Fund into an intergovernmental organization and the problems created by the

existence of a "partnership between the private and public sectors" (art. 2 of the

Bylaws)

Part D

Conditions and consequences of the transformation

of the Global Fund into an intergovernmental

organization.

1. On a general level, it is necessary to remember the fact that the Vienna Convention

on the Law of Treaties is content to qualify international organizations as

intergovernmental

. Said Convention conveys the traditional approach according to

which only States can be represented in organizations, their will only to be voiced by

delegates designated by their respective governments

. Constituting treaties of

international organizations are thus open to States. It cannot be otherwise from the

moment that States adopt these treaties. However, nothing forbids them to open

international organizations to other entities, for example, to entities not under State

control

It is on the level of the participation in organs of international organization that the

distinction between States and other entities will show itself. In a general manner, only

the States which are party to the constituting charter of the international organization

can benefit from the status as members of the organization; other entities being only

associates or observers. Of course, nothing hinders the States, parties to the said

charter and members with full rights, to accord to associate members a status as

favorable as that which is accorded to these States. Most often, the States wish to

maintain control of the organization which they founded and thus hesitate to treat

associate members on an equal footing in giving them, for example, the right to vote

in the principal organ of the organization (Executive Council). Political considerations

and reasons of efficiency lead to varied solutions as concerns the representation of full

member States and associate members in the organs of the international organization.

In each case, it is necessary to establish a balance which fairly takes into account the

rights and responsibilities of each.

As for the observers, they have more limited rights and generally cannot participate in

the activities of the organization, except when they are directly concerned

cf. part B, cipher 5, above

Vienna Convention on the Law of Treaties of 23 May 1969, article 2, paragraph 1, letter c

cf. Patrick Daillier / Alain Pellet, Droit international public, 7

édition, Librairie générale de droit et

de jurisprudence, Paris 2002, page 585

cf. Patrick Daillier / Alain Pellet, op. cit., loc. sit

cf. Patrick Daillier / Alain Pellet, op. cit., page 586

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2. As an example, let us cite the Statutes of the World Tourism Organization (WTO),

which resulted from the transformation of the International Union of Official Tourism

Organizations into an international organization of the intergovernmental type.

According to the message of 2 June 1975 of the Federal Council addressed to the

Federal Assembly concerning the Statutes of the WTO

, the WTO is the successor to

the aforementioned International Union. Herewith the reasons

"The transformation [……] into an intergovernmental

organization was judged necessary for a number of

reasons. The number of international tourists has

increased tenfold since the creation of the

International Union of Official Tourism

Organizations (IUOTO) and the number of States,

participating in the exchange of tourism has continued

to increase. Simultaneously, in the majority of

tourism-oriented countries, the authorities had

constantly taken steps to promote tourism activities.

The increasing interdependence of such activities on

an international level and the strengthening of State

influence on tourism, led the United Nations (UN)

and other intergovernmental organizations to

subordinately concern themselves with tourism

problems. The IUOTO was thus forced to work more

and more closely with intergovernmental

organizations. Its private character imposed limits on

its efforts to harmonize international tourism

activities….."

Created in 1947 and headquartered in Geneva as an organization profiting from a

legal personality in conformity with articles 60 ff. of the Swiss Civil Code

the

IUOTO was transformed into an intergovernmental organization through the revision

of its Statues, as decided by an extraordinary General Assembly of the Union and as

approved by the delegates so empowered by their governments.

In the message of 2 June cited above, the Federal Council dos not dissimulate the

difficulties on a legal level of the operation

"On one hand, the IUOTO, as what as then a private

organization, did not have the authority to transform

itself into an intergovernmental organization, nor to

establish standards under international public law. On

the other hand, the government representatives of the

Assembly were not qualified to revise the Statutes of

Article 1 of the Statutes of the OMT; RS 0.935.21

Federal Bulletin of the Swiss Confederation (FB) 1975, volume II, page 158 ff.

FB 1975, volume II, pages 158 to 159

FB 1975, volume II, pages 159 and 160

FB 1975, volume II, page 162

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the IUOTO, the States as such not being

members….."

Finally, the Statutes of the WTO entered into force 2 January 1975, after having been

ratified by 51 countries. The constituting Assembly of the WTO took place on 12 May

1975 in Madrid. It was on this occasion that the decision was taken that the new

organization would commence its activities at the beginning of 1976.

According to the new Statutes (art. 4 ff.), only sovereign States can become full

members of the WTO

. The new Organization also accepts in its organs "associate

members" and "affiliate members" without the right to vote. Territories which are not

responsible for their external relations can become associate members. International

organizations, intergovernmental or not, as well as commercial associations and

associations and companies having tourism activities can become affiliate members.

Contrary to associate members, which are represented in the General Assembly and

the Executive Council, affiliate members only have a status as simple observers.

3. It is evident that the experiences made in the transformation of the IUOTO into an

intergovernmental organization cannot be transferred without changes to the particular

situation of the Global Fund, for the simple reason that this latter already has States

amongst the members of its Foundation Board of Directors

. One point however

appears clear to us: an intergovernmental organization owes its existence to the

conclusion of a multi-lateral treaty, also called the constituting act of the

organization

. This constituting treaty can be a new treaty or a treaty which revises a

previous treaty and which foresees, for example, a modification of the legal

personality of the previous organization. In the first case, which is the only one of

interest to us, the procedure for elaboration is that generally applicable to multi-

national treaties, within the framework of an international conference.

The initiative for calling for such a conference may come from one State, for example

the headquarters State of the future organization, a group of interested States, or an

already existing international organization, such as the WHO in the case concerning

us.

. Such a conference would have as its mission the elaboration and adoption of an

international treaty, the constituting charter of the new international organization, and

which will thereafter be submitted for approval to the member States invited to

become members of this organization. An appropriate representation of the private

sector should be assured during the activity of the international conference

FB 1975, volume III, page 165

cf. article 10 of the Bylaws of the Global Fund

cf. Patrick Daillier / Alain Pellet, op. cit. (footnote 30), page 279. The Vienna Convention on the

Law of Treaties, already cited under cipher 1 above, specifies in its article 5 that the said Convention is

applicable to any treaty which is the constituent act of an international organization. See also article 1,

letter a, of the Vienna Convention on the Representation of States in their Relations with International

Organizations of a Universal Character: " wherein the expression «international organization» is

defined as an association of States which has been constituted by treaty, endowed with a constitution

and common organs, and possessing a distinct legal status different from that of its member States.

cf. Patrick Daillier / Alain Pellet, op. cit. pages 580 to 581

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4. One of the characteristics of the Global Fund and its current structure is the

establishment of a "new partnership with the public and private sectors"

, which is

demonstrated by the creation of an organ such as "the Partnership Forum" and by the

composition of the management and administrative organs of the Foundation. The

structure of a "classic" international organization generally includes a plenary organ

(General Assembly), a restricted organ (Executive Council) and a Secretariat. The two

first-mentioned organs are composed of government representatives, with the well-

known exception of the International Labor Organization, which does not have an

exclusively intergovernmental organ, and which is characterized by its "tripartite"

nature.

One must thus ask oneself if the transformation of the Global Fund into an

intergovernmental organization would not lead to upsetting the subtle balance

established between the private and public sectors, notably as concerns the Foundation

Board of Directors, which will become the Executive Board of the new international

organization to be created. Will the States, parties to the constituting act of the latter,

be willing to accept, if the case arises, on an equal footing, that is to say with the right

to vote, representatives of the civil society and the private sector in the restricted organ

(Executive Board) to be set up?

Whatever the case, the transformation of the Global Fund into an intergovernmental

organization will first require an eminently political decision by the Foundation Board

of Directors, which is the supreme organ of the Foundation

. It will most likely lead

to a readjustment of the respective roles of the private and public sectors, taking into

consideration that only States will be parties to the constituting act of the organization,

which will be, it is useful to recall, an international treaty in the sense of article 2,

paragraph1, letter a, of the Vienna Convention on the Law of Treaties

. Of course,

nothing would hinder the government delegates, responsible for elaborating and

adopting the Bylaws of the future organization, to reserve an appropriate place for the

private sector in the principal organs, for example, by giving the right to vote to

representatives of the civil society and the private sector, as is actually the case in

article 10, paragraph 3 ( The Voting Members Consist of:) of the Foundation Bylaws.

In parallel with the principal organs, subsidiary organs could defend the interests of

partners not having a governmental character

. Establishing this new "balance" will

be a long and difficult task.

It is interesting to note that the English text of Article 2 begins by mentioning the public sector and

does not speak of a "partnership: "through a new public-private foundation"

Government and non-governmental delegates equally share the seats in the organs of the ILO. the

second category includes representatives of the professional organizations and unions which exist in

each member State.

cf. article 13 of the Foundation Bylaws. The Board of Directors of the Foundation " shall possess the

highest and most extensive authority concerning the administration of the Foundation" paragraph 1). In

addition, it has the authority to make any subsequent modification to the Bylaws (paragraph 2)

cf. footnote 29 above. This provisions foresees that the expression "treaty" is defined as "an

international agreement concluded in writing between States and governed by international law".

Certain agreements concluded in the field of telecommunication could be a source of inspiration. We

can mention the Constitution of the International Telecommunications Union (RS 0.184.01), the

structure of which includes different Sectors ( Radio Communication Sector, Standardisation of

Telecommunications Sector, Development of Telecommunications Sector), or the Agreement Relative

to the International Organisation for Telecommunication by Satellite (INTELSAT), concluded in

Washington on 20 August 1971 (RS 0.784.601), which differentiates between the "Parties" to the

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Finally, one should not forget that the amendment of a multinational treaty is complex

not only on the level of international law, but also in respect to the requirements of the

internal legal structures of the party States

5. On a practical level, the documents which have been submitted to the Global Fund

up to now by the Federal Department of Foreign Affairs (FDFA) make mention a time

of at least two years for the transformation of the Global Fund into an

intergovernmental organization This estimate seems reasonable to us, even though

somewhat optimistic.

In a first step, the Board of Directors has to reach a decision by consensus

, that the

creation of an intergovernmental organization will be favorable to the realization of

the goals as defined in article 2 of the Global Fund's Bylaws. Following this, a

committee of legal experts would have to be established under the aegis of the WHO

or the Global Fund (?). It would have as its task to develop a project of the

constituting act of the future international organization.

In a second step, the project shall be submitted to the Board of Directors for approval

and for a decision on who shall convoke the conference to adopt the approved text

(WHO, the headquarters country, i.e. Switzerland ?). In parallel, a headquarters

agreement should be worked out, taking into account the incertitude of the choice of

which country would finally welcome the new international organization, even if the

proximity of the WHO would be a serious trump for maintaining the headquarters in

Geneva.

Once the constituting act (multilateral treaty) is adopted, it should be approved by the

interested States in accordance with their respective constitutional procedures, as

concerns Switzerland with the probable requirement of a three-month referendum

period.

Part E

Conclusions, including some proposals

1. The GF is constituted as a foundation under Swiss law. It also must be considered

as a non-governmental international organization in the sense of the European

Convention on the Recognition of the Legal Personality of Non-governmental

International Organizations (Strasbourg, 24 April 1986).

2. The characteristics of the Global Fund, its structure and its specific tasks, allow the

admission that the Fund, which has its principal anchorage in Swiss internal law,

can lay claim to a " nascent, "derived" or "functional" international legal

Agreement and the "Signatories", term which designates a Party or a telecommunications organism

designated by a Party which has signed the Operations Agreement.

cf. article 15, paragraph 3, of the Foundation Statutes

cf. article 40 of the Vienna Convention on the Law of Treaties as cited in footnote 29, above. Read

also: Paul Reuter, Introduction au droit des traités, Presse universitaire de France, Paris 1985, pages

113 ff.

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personality, permitting it to contemplate the conclusion of an agreement within

international law with the Swiss Federal Council (Treaty-making power) to

determine its legal status in this country. The activities of public interest with

which it has been entrusted imply of necessity that its activities also take place on

the level of international law.

3. Nevertheless, the recognition of such a international legal personality is not

sufficient at this stage of the Fund's development to authorize the conclusion of an

authentic headquarters agreement, that is to say, an agreement containing the

totality of the privileges and immunities normally accorded an intergovernmental

organization. Other formulas which take into consideration, in particular, the

privileged links that the Fund has with the WHO, must be examined.

4. In the short term, we propose that the Fund examines with the competent Swiss

authorities the possibility of concluding an agreement similar to the one recently

concluded with the Geneva International Centre for Humanitarian Demining. This

agreement has the advantage of foreseeing immunities which could be extended to

the members of the Foundation Board. In addition, as the staff of the Secretariat

of the Fund have an obvious interest in maintaining their status as civil servants of

the WHO, it would also be in the Fund's interest to revise its relations with the

WHO in the sense of a greater transparency in order to better highlight the

requirements for independence and autonomy which are characteristic of the

Fund.. The "administrative" agreement of 24 May 2002 could, for example, be

"separated" from Swiss law to fall within the province of the international legal

structure.

5. In the long term, nothing stands in the way of the competent organs of the Fund to

consider the interest and the possibility of transforming the Fund into an

intergovernmental organization. This however is a task of long duration (at least

two years for its realization), the difficulties of which are not to be underestimated.

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ANNEX 6.2

Challenges arising from the different legal status of the Global Fund and of the

Global Fund Secretariat

Introduction: To date, much discussion has occurred around the functioning of the

administrative relationship between the Global Fund and WHO. Little of that

discussion has focused on the different legal status of the Global Fund and of the

Secretariat and the impact that difference has on how the two entities are able to

function. The Administrative Services Agreement was designed to address the impact

of that difference as best as possible, but there remain important problems where

satisfactory solutions have not yet been found, and where activities and relationships

need to be specially structured.

Background: A solution is needed to address a fundamental quandary: answering to

WHO authority to gain privileges and immunities, while answering to the Global

Fund Board’s authority to lead and manage the Global Fund. This brief is provided to

invite discussion about this important problem and build Governance and Partnership

Committee understanding of a core issue underlying many of the inter-organization

difficulties experienced to date.

The advantages of WHO privileges and immunities

WHO’s privileges and immunities, including tax benefits, apply to WHO and to its

staff carrying out functions of the Organization. They are not available to the Global

Fund or its activities as such. Consequently, the staff of the Global Fund Secretariat

are all WHO staff and the ASA provides that in carrying out their activities, they do

so as a WHO activity on behalf of the Global Fund. This situation has some obvious

advantages:

• If a staff member were to apply for a visa as an employee of the Global Fund, that

person would be subject to whatever restrictions apply to private persons. If the

same person applies as a WHO staff member, they are entitled to special treatment

under international law.

• If an act is carried out in the name of the Fund, the act and that person performing

the act are subject to national court jurisdiction. If the same act is carried out as a

WHO act, WHO’s privileges and immunities may protect that act and the person

from being brought before national courts. It is for this reason that contracts are

signed whenever possible as contracts concluded by WHO.

The problem of dual authority

Having said that, the Global Fund has commissioned a legal analysis of the position of the Fund

under Swiss law. The opinion is expressed in effect that the Fund will be bound under Swiss law for

acts committed by WHO on its behalf, thereby suggesting that the Fund can nevertheless be brought

before Swiss courts for acts of WHO, even though WHO (and the Global Fund Secretariat provided by

WHO) should not be. Whether this will be the result if an actual case were to arise, and whether this

same approach could be generalised to other countries is open to debate.

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This structural anomaly – the Global Fund as a private entity and the Global Fund

Secretariat as part of an international organization – presents various issues of

overlapping or dual authority. For example:

• While Professor Feachem is a WHO staff member and Executive Director of the

Secretariat, he was also appointed by the Board of Directors of the Global Fund as

Executive Director of the Global Fund. As ED of the Global Fund he has

executive authorities and he, in turn, is able to delegate some of those authorities

to members of his staff.

• Thus the Executive Director and the Secretariat staff, may be assigned tasks by the

Board through its bylaws, and held accountable by the Foundation Board for

carrying out those duties, yet as WHO employees they are accountable to WHO

(and in principle have a constitutional obligation not to follow instructions of any

outside entity). The ASA tries to address this issue by providing that the

individual acts to be performed by the Global Fund Secretariat are obligations of

WHO to the Global Fund pursuant to the terms of the ASA (i.e. not as employees

of the Fund), thus trying to minimize the instances in which unavoidable overlaps

of authority might exist.

Notwithstanding the ASA, there are nevertheless situations in which it is difficult to

avoid the consequences of the hybrid situation. For example,

• Since the Trust Fund of the Global Fund is situated in the World Bank, and is the

subject of an agreement directly between the World Bank and the Global Fund

itself, the grant agreement between the Global Fund and a country cannot be

agreed upon by the WHO-based Global Fund Secretariat. Rather, it requires an

agreement between the Principle Recipient(s) in the country concerned and the

Global Fund itself. Thus, when the ED signs the agreement, it is an act of the

Fund, and he signs it on the instructions of the Board of Directors,

notwithstanding the fact that he is a WHO employee. Nevertheless, as an act of

the Fund itself, the grant agreement is not protected by WHO’s privileges and

immunities.

• If WHO, at some point in the future, becomes a PR, can the ED and members of

the Secretariat, while employees of WHO, oversee the WHO as a PR through the

Global Fund’s contracted LFA? On the same note, current LFA contracts are

concluded as “WHO acting for the Fund”. Is it acceptable that WHO be both the

PR and also a party to the LFA contract designed to oversee their performance?

• It may well arise that if the GF wants to engage the services of an entity (e.g., as

an LFA or as an external auditor), which as explained previously would be

through a contract concluded by WHO for the GF, that entity may decline to

provide those services because of a pre-existing relationship with WHO which is

felt to create a conflict of interest.

• When making a decision or concluding a contract that is felt to be in the best

interest of the Global Fund but nevertheless conflicts with a principle or policy of

WHO, to which authority is the ED accountable - the Foundation Board or the

Director General of WHO?

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Conclusion

The structural problem and its business impact illustrated in this note are direct

consequences of securing an arrangement with WHO that provides GF Secretariat

staff with the privileges and immunities needed for carrying out its activities. The

Governance committee is exploring ways in which such privileges and immunities

might be granted through other channels that would obviate the need for this

arrangement, such as a change in the legal status of the Fund. However, even if such

changes were agreed to immediately, a change of status – particularly to a fully

independent IGO - will take time. In the meanwhile, it is important that the

Governance Committee and the Global Fund Board be aware of the underlying nature

of the problem – in order that some form of legally satisfactory solution can be found.