1.1 Following Iraq's invasion of Kuwait in 1990, the United Nations Security Council imposed restrictions on member states trading with Iraq. The object of the sanctions, imposed by Security Council Resolution 661, was to secure compliance by Iraq with paragraph 2 of Resolution 660, which required Iraq's immediate withdrawal from Kuwait, and to restore the authority of the legitimate Government of Kuwait.[1] The relevant clauses of Resolution 661, which was adopted on 6 August 1990, are:
The Security Council,
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3. Decides that all states shall prevent:
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(c) The sale or supply by their nationals or from their territories or using their flag vessels of any commodities or products, including weapons or any other military equipment, whether or not originating in their territories but not including supplies intended strictly for medical purposes, and, in humanitarian circumstances, foodstuffs, to any person or body in Iraq or Kuwait or to any person or body for the purposes of any business carried on in or operated from Iraq or Kuwait, and any activities by their nationals or in their territories which promote or are calculated to promote such sale or supply of such commodities or products;
4. Decides that all States shall not make available to the Government of Iraq, or to any commercial, industrial or public utility undertaking in Iraq or Kuwait, any funds or any other financial or economic resources and shall prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to that Government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq or Kuwait, except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs;
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6. Decides to establish, in accordance with rule 28 of the provisional rules of procedure, a Committee of the Security Council consisting of all the members of the Council, to undertake the following tasks and to report on its work to the Council with its observations and recommendations:
(a) To examine the reports on the progress of the implementation of the present resolution which will be submitted by the Secretary General;
(b) To seek from all States further information regarding the action taken by them concerning the effective implementation of the provisions laid down in the present resolution.
1.2 The effect of the exemption in paragraph 3(c) was to permit, where humanitarian circumstances existed, states to allow their nationals to export to Iraq foodstuffs and medicines. The same exemption is found in paragraph 4: payments to the Government of Iraq were permitted if the payments were to be used exclusively for medical or humanitarian purposes, including the supply of foodstuffs. Resolution 661 did not, however, decide or declare that 'humanitarian circumstances' then existed in Iraq.
1.3 The committee referred to in clause 6 of the resolution became known as the 661 Committee.
1.4 On 13 September 1990 the Security Council passed Resolution 666, which provided:
The Security Council,
Recalling its resolution 661 (1990) of 6 August 1990, paragraphs 3(c) and 4 of which apply, except in humanitarian circumstances, to foodstuffs,
Recognising that circumstances may arise in which it will be necessary for foodstuffs to be supplied to the civilian population in Iraq or Kuwait in order to relieve human suffering.
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Emphasizing that it is for the Security Council, alone or acting through the Committee, to determine whether humanitarian circumstances have arisen,
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1. Decides that in order to make the necessary determination whether or not, for the purposes of paragraphs 3(c) and 4 of resolution 661 (1990), humanitarian circumstances have arisen, the Security Council Committee established by resolution 661 (1990) concerning the situation between Iraq and Kuwait shall keep the situation regarding foodstuffs in Iraq and Kuwait under constant review;
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5. Decides that if the Committee, after receiving the reports from the Secretary-General, determines that circumstances have arisen in which there is an urgent humanitarian need to supply foodstuffs to Iraq or Kuwait in order to relieve human suffering, it will report promptly to the Council its decision as to how such need should be met;
6. Directs the Committee that in formulating its decisions it should bear in mind that foodstuffs should be provided through the United Nations in co-operation with the International Committee of the Red Cross or other appropriate humanitarian agencies and distributed by them or under their supervision, in order to ensure that they reach the intended beneficiaries;
7. Requests the Secretary-General to use his good offices to facilitate the delivery and distribution of foodstuffs to Kuwait and Iraq in accordance with the provisions of the present resolution and other relevant resolutions.
1.5 On 1 March 1991 the UN Secretary-General announced his decision to send to Iraq a mission to assess humanitarian needs there.[2] The mission was led by Mr Ahtisaari, Under-Secretary for Administration and Management. On 20 March the Secretary-General transmitted to the President of the Security Council Mr Ahtisaari's report on humanitarian needs in Iraq.[3] On 22 March the 661 Committee considered this report and determined as follows:
2. Under paragraph 5 of resolution 666 (1990), the Committee has the power to determine, after receiving all relevant reports and information, that circumstances have arisen in which there is an urgent humanitarian need to supply foodstuffs to Iraq in order to relieve human suffering; and in that event the Committee will report promptly to the Council its decisions as to how such needs will be met.
3. In the light of the new information available to it, the Committee has decided to make, with immediate effect, a general determination that humanitarian circumstances apply with respect to the entire civilian population of Iraq in all parts of Iraq's national territory. The Committee has also concluded that civilian and humanitarian imports to Iraq as identified in Mr Ahtisaari's report are integrally related to the supply of foodstuffs and supplies intended strictly for medical purposes (which are exempt from sanctions under the provisions of resolution 661 (1990)) and that such imports should also be allowed with immediate effect.
4. The Committee decides upon a simply notification procedure for foodstuffs supplied to Iraq and no-objection procedure for those civilian and humanitarian imports (other than supplies intended strictly for medical purposes) described in the preceding paragraph.[4]
1.6 On 3 April 1991 the Security Council adopted Resolution 687, which provided:
Taking note with grave concern of the reports transmitted by the Secretary General on 20 March and 28 March 1991, and conscious of the necessity to meet urgently the humanitarian needs in Kuwait and Iraq …
20. Decides, effective immediately, that the prohibitions against the sale or supply to Iraq of commodities or products other than medicine and health supplies, and prohibitions against financial transactions related thereto contained in resolution 661 (1990), shall not apply to foodstuffs notified to the Security Council Committee established by resolution 661 (1990) concerning the situation between Iraq and Kuwait or, with the approval of that Committee, under the simplified and accelerated 'no-objection' procedure, to materials and supplies for essential civilian needs as identified in the report to the Secretary-General dated 20 March 1991, and in any further findings of humanitarian need by the Committee.
1.7 Thus, from 3 April 1991 Iraq's humanitarian needs were formally recognised. All restrictions on the export of foodstuffs to Iraq were removed, subject to the foodstuffs being 'notified' to the 661 Committee.
1.8 On 14 April 1995 the Security Council adopted Resolution 986, which established the Oil-for-Food Programme. The resolution provided:
The Security Council,
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Concerned by the serious nutritional and health situation of the Iraqi population, and by the risk of a further deterioration in this situation,
Convinced of the need as a temporary measure to provide for the humanitarian needs of the Iraqi people until the fulfilment by Iraq of the relevant Security Council resolutions, including notably resolution 687 (1991) of 3 April 1991, allows the Council to take further action with regard to the prohibitions referred to in resolution 661 (1990) of 6 August 1990, in accordance with the provisions of those resolutions,
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1. Authorizes States, notwithstanding the provisions of paragraphs 3(a), 3(b) and 4 of resolution 661 (1990) and subsequent relevant resolutions, to permit the import of petroleum and petroleum products originating in Iraq, including financial and other essential transactions directly relating thereto, sufficient to produce a sum not exceeding a total of one billion United States dollars every 90 days for the purposes set out in this resolution and subject to the following conditions:
(a) Approval by the Committee established by resolution 661 (1990), in order to ensure the transparency of each transaction and its conformity with the other provisions of this resolution, after submission of an application by the State concerned, endorsed by the Government of Iraq, for each proposed purchase of Iraqi petroleum and petroleum products, including details of the purchase price at fair market value, the export route, the opening of a letter of credit payable to the escrow account to be established by the Secretary-General for the purposes of this resolution, and of any other directly related financial or other essential transaction;
(b) Payment of the full amount of each purchase of Iraqi petroleum and petroleum products directly by the purchaser in the State concerned into the escrow account to be established by the Secretary-General for the purposes of this resolution;
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7. Requests the Secretary-General to establish an escrow account for the purposes of this resolution, to appoint independent and certified public accountants to audit it, and to keep the Government of Iraq fully informed;
8. Decides that the funds in the escrow account shall be used to meet the humanitarian needs of the Iraqi population and for the following other purposes, and requests the Secretary-General to use the funds deposited in the escrow account:
(a) To finance the export to Iraq, in accordance with the procedures of the Committee established by resolution 661 (1990), of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs, as referred to in paragraph 20 of resolution 687 (1991) provided that:
(i) Each export of goods is at the request of the Government of Iraq;
(ii) Iraq effectively guarantees their equitable distribution, on the basis of a plan submitted to and approved by the Secretary-General, including a description of the goods to be purchased;
(iii) The Secretary-General receives authenticated confirmation that the exported goods concerned have arrived in Iraq;
(b) To compliment, in view of the exceptional circumstances prevailing in the three Governorates mentioned below, the distribution by the Government of Iraq of goods imported under this resolution, in order to ensure an equitable distribution of humanitarian relief to all segments of the Iraqi population throughout the country, by providing between 130 million and 150 million United States dollars every 90 days to the United Nations Inter-Agency Humanitarian Programme operating within the sovereign territory of Iraq in the three northern Governorates of Dihouk, Arbil and Suleimaniyeh, except that if less than one billion United States dollars worth of petroleum or petroleum products is sold during any 90 day period, the Secretary-General may provide a proportionately smaller amount for this purpose.
1.9 The effect of Resolutions 986 and 661 was to provide a fund from which foodstuffs and other humanitarian goods could be purchased. The continuing operation of Resolution 661, and in particular clause 4, prevented states and their nationals from 'making available to that Government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq … except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs'. Resolution 986 recognised the need for the provision of foodstuffs and provided a fund from which they could be purchased. The initial period for operation of the Oil-for-Food Programme was 180 days.[5]
1.10 Special provisions were inserted in Resolution 986 to address the needs of the Kurdish population in the three northern governorates of Dihouk, Arbil and Suleimaniyeh. Separate arrangements were later made for distribution of humanitarian supplies in these governorates.
1.11 Paragraphs 12 and 13 of Resolution 986 provided:
12. Requests the Committee established by resolution 661 (1990), in close coordination with the Secretary-General, to develop expedited procedures as necessary to implement the arrangements in paragraphs 1, 2, 6, 8, 9 and 10 of this resolution and to report to the Council 90 days after the date of entry into force of paragraph 1 above and again prior to the end of the initial 180 day period on the implementation of those arrangements;
13. Requests the Secretary-General to take the actions necessary to ensure the effective implementation of this resolution, authorizes him to enter into any necessary arrangements or agreements, and requests him to report to the Council when he has done so;
The 661 Committee, in coordination with the Secretary-General, was thus responsible for the development and implementation of procedures to enable the operation of the Oil-for-Food Programme.
1.12 The Security Council subsequently authorised the Oil-for-Food Programme to be extended in phases. Resolution 986 authorised, for an initial period of 180 days, phase I.[6] In total, 13 phases were authorised; each phase was authorised by a Security Council resolution that extended the operation of Resolution 986 for a further 180 days.[7]
1.13 On 20 May 1996 the Secretariat of the United Nations and the Government of Iraq executed a Memorandum of Understanding on the implementation of Resolution 986 (as contemplated by paragraphs 12 and 13 of that resolution).[8] The MOU provided that:
2. The Distribution Plan referred to in paragraph 8(a)(ii) of the Resolution, which has to be approved by the Secretary-General of the United Nations, constitutes an important element in the implementation of the Resolution.
Section II
Distribution Plan
5. The Government of Iraq undertakes to effectively guarantee equitable distribution to the Iraqi population throughout the country of medicine, health supplies, foodstuffs and materials and supplies for essential civilian needs (hereinafter humanitarian supplies) purchased with the proceeds of the sale of Iraqi petroleum and petroleum products.
6. To this end, the Government of Iraq shall prepare a Distribution Plan describing in detail the procedures to be followed by the competent Iraqi authorities with a view to ensuring such distribution. The present distribution system of such supplies, the prevailing needs and humanitarian conditions in the various Governorates of Iraq shall be taken into consideration with due regard to the sovereignty of Iraq and the national unity of its population. The plan shall include a categorised list of the supplies and goods that Iraq intends to purchase and import for this purpose on a six-month basis.
7. The part of the Distribution Plan related to the three northern Governorates of Arbil, Dihouk and Suleimaniyeh shall be prepared in accordance with Annex I, which constitutes an integral part of this Memorandum.
8. The Distribution Plan shall be submitted to the Secretary-General of the United Nations for approval. If the Secretary-General is satisfied that the plan adequately ensures equitable distribution of humanitarian supplies to the Iraqi population throughout the country, he will so inform the Government of Iraq.
9. It is understood by the Parties to this memorandum that the Secretary-General will not be in a position to report as required in paragraph 13 of the Resolution unless the plan prepared by the Government of Iraq meets with his approval.
10. Once the Secretary-General approves the plan, he will forward a copy of the categorised list of the supplies and goods, which constitutes a part of the plan, to the Security Council Committee established by resolution 661 (1990) concerning the situation between Iraq and Kuwait (hereinafter the 661 Committee) for information.
Section V
Procurement and confirmation procedures
19. The purchase of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs of the Iraqi population throughout the country, as referred to in paragraph 20 of resolution 687 (1991), will, subject to paragraph 20 below, be carried out by the Government of Iraq, will follow normal commercial practice and be on the basis of the relevant resolutions of the Security Council and procedures of the 661 Committee.
20. The purchase of humanitarian supplies for the three northern Governorates of Arbil, Dihouk and Suleimaniyeh, as provided for in the Distribution Plan, will be carried out in accordance with Annex I.
21. The Government of Iraq will, except as provided for in paragraph 20, contract directly with suppliers to arrange the purchase of supplies, and will conclude the appropriate contractual arrangements.
2 2. Each export of goods to Iraq shall be at the request of the Government of Iraq pursuant to paragraph 8 (a) of the Resolution. Accordingly, exporting States will submit all relevant documentation, including contracts, for all goods to be exported under the Resolution to the 661 Committee for appropriate action according to its procedures. It is understood that payment of the supplier from the 'Iraq Account' can take place only for items purchased by Iraq that are included in the categorized list referred to in Section II of the present Memorandum. Should exceptional circumstances arise, applications for the export of additional items may be submitted to the 661 Committee for its consideration.
23. As noted above, the 661 Committee will take action on applications for the export of goods to Iraq in accordance with its existing procedures subject to future modifications under paragraph 12 of the Resolution. The 661 Committee will inform the Government of Iraq, requesting States and the Secretary-General of the actions taken on the requests submitted.
24. After the 661 Committee has taken action on the applications for export in accordance with its procedures, the Central Bank of Iraq will request the bank holding the 'Iraq Account' to open irrevocable letters of credit in favour of the beneficiaries. Such requests shall be referred by the bank holding the 'Iraq Account' to the United Nations Secretariat for approval of the opening of the letter of credit by the latter bank, allowing payment from the 'Iraq Account' upon presentation of credit-conform documents. The letter of credit will require as a condition of payment, inter alia, the submission to the bank holding the 'Iraq Account' of the documents to be determined by the procedures established by the 661 Committee, including the confirmations by the agents referred to in paragraph 25 below. The United Nations, after consultations with the Government of Iraq, shall determine the clause to be inserted in all purchase orders, contracts and letters of credit regarding payment terms from the 'Iraq Account'. All charges incurred in Iraq are to be borne by the applicant, whereas all charges outside Iraq are for the account of the beneficiary.
25. The arrival of goods in Iraq purchased under the plan will be confirmed by independent inspection agents to be appointed by the Secretary-General. No payments can be made until the independent inspection agents provide the Secretary-General with authenticated confirmation that the exported goods concerned have arrived in Iraq.
26. The independent inspection agents may be stationed at relevant Iraqi entry points, customs areas or other locations where the functions set out in paragraph 27 of this Section can be performed. The number and location of the stationing points for the agents will be designated by the United Nations after consultations with the Government of Iraq.
27. The independent inspection agents will confirm delivery to Iraq of shipments. They will compare the appropriate documentation, such as bills of lading, other shipping documents or cargo manifests, and the documents issued by the 661 Committee, against goods actually arriving in Iraq. They will also have the authority to perform duties necessary for such confirmation, including: quantity inspection by weight or count, quality inspection including visual inspection, sampling, and, when necessary, laboratory testing.
28. The inspection agents will report all irregularities to the Secretary- General and to the 661 Committee. If the problem is related to normal commercial practice (e.g., some shortlanded goods), the 661 Committee and the Government of Iraq are informed, but normal commercial resolution practices (e.g., claims) go forth. If the matter is of serious concern, the independent inspection agents will hold the shipment in question pending guidance from the 661 Committee.
Section VI
Distribution of humanitarian supplies purchased under the Distribution Plan
32. The distribution of humanitarian supplies shall be undertaken by the Government of Iraq in accordance with the Distribution Plan referred to in Section II of the present Memorandum. The Government of Iraq will keep the United Nations observation personnel informed about the implementation of the plan and the activities that the Government is undertaking.
33. The distribution of humanitarian supplies in the three northern Governorates of Arbil, Dihouk and Suleimaniyeh shall be undertaken by the United Nations Inter-Agency Humanitarian Programme on behalf of the Government of Iraq under the Distribution Plan with due regard to the sovereignty and territorial integrity of Iraq in accordance with Annex I.
1.14 Annex I to the MOU, referred to in clauses 7, 20 and 33, dealt with distribution of humanitarian supplies, including foodstuffs, in Iraq's three northern governorates. The annex is important when considering the obligations imposed on the Government of Iraq by clause 32 of the MOU relating to distribution elsewhere within Iraq. It provided:
1. In order to ensure the effective implementation of paragraph 8(b) of the Resolution, the following arrangements shall apply in respect of the Iraqi Governorates of Arbil, Dihouk and Suleimaniyeh. These arrangements shall be implemented with due regard to the sovereignty and territorial integrity of Iraq, and to the principle of equitable distribution of humanitarian supplies throughout the country.
2. The United Nations Inter-Agency Humanitarian Programme shall collect and analyse pertinent information on humanitarian needs in the three northern Governorates. On the basis of that information, the Programme will determine the humanitarian requirements of the three northern Governorates for discussion with the Government of Iraq and subsequent incorporation in the Distribution Plan. In preparing estimates of food needs, the Programme will take into consideration all relevant circumstances, both within the three northern Governorates and in the rest of the country, in order to ensure equitable distribution. Specific rehabilitation needs in the three northern Governorates shall receive the necessary attention.
3. Within a week following the approval of the Distribution Plan by the Secretary-General, the Programme and the Government of Iraq will hold discussions to enable the Programme to determine how the procurement of humanitarian supplies for the three northern Governorates can be undertaken most efficiently. These discussions should be guided by the following considerations. The bulk purchase by the Government of Iraq of standard food commodities and medicine may be the most cost-effective means of procurement. Other materials and supplies for essential civilian needs, specifically required for the three northern Governorates, may be more suitably procured through the United Nations system in view of technical aspects related to their proper use.
4. To the extent that purchases and deliveries are made by the Government of Iraq in response to the written communication of the Programme, an amount corresponding to the cost of the delivered goods will be deducted from the amount allocated to the Programme from the 'Iraq Account'.
5. Humanitarian supplies destined for distribution in the three northern Governorates shall be delivered by the Programme to warehouses located within these Governorates. Such supplies can also be delivered by the Government of Iraq or the Programme, as appropriate, to warehouses in Kirkuk and Mosul. The warehouses shall be managed by the Programme. The Government of Iraq shall ensure the prompt customs and administrative clearances to enable the safe and quick transit of such supplies to the three northern Governorates.
6. The Programme shall be responsible in the three northern Governorates for the storage, handling, internal transportation, distribution and confirmation of equitable distribution of humanitarian supplies. The Programme will keep the Government of Iraq informed on the implementation of distribution.
7. Whenever possible and cost-effective, the Programme shall use appropriate local distribution mechanisms which are comparable to those existing in the rest of Iraq in order to effectively reach the population. Recipients under this arrangement will pay a fee for internal transportation, handling, and distribution as in the rest of the country. The Programme shall ensure that the special needs of internally displaced persons, refugees, hospital in-patients and other vulnerable groups in need of supplementary food are appropriately met, and will keep the Government of Iraq informed.
1.15 Resolution 986 and the MOU of 20 May 1996 thus recognised Iraq's humanitarian needs, established an escrow account to hold the proceeds of petroleum sales to fund purchases of goods (including foodstuffs) to address those needs, established a mechanism whereby payments could be made for such humanitarian goods in accordance with the procedures established by the 661 Committee-which included, in the case of foodstuffs, 'notification' of such contracts-and required that there be equitable distribution of humanitarian supplies throughout Iraq.
1.16 Clause 32 of the MOU required that the distribution of humanitarian supplies be 'undertaken by the Government of Iraq in accordance with [an approved] Distribution Plan.' Annex I, and in particular clauses 4 to 7 thereof, recognised that in the three northern governorates the UN Inter-Agency Humanitarian Programme was primarily responsible for 'storage, handling, internal transportation [and] distribution' of such supplies but accepted that in some circumstances the purchase and delivery of such supplies might be effected by the Government of Iraq. Clause 7 of Annex I recognised that throughout Iraq there were existing 'distribution mechanisms' that included 'internal transportation, handling and distribution'.
1.17 The conclusion to be drawn from the provisions of clause 32 of the MOU and Annex I is that the Government of Iraq was obliged to undertake the transport and distribution of humanitarian supplies (including foodstuffs) throughout Iraq, unless in the three northern governorates this task was undertaken by the UN Inter-Agency Humanitarian Programme.[AG1] [9]
1.18 Initially, the MOU was intended to remain in force for 180 days-the initial period of the Oil-for-Food Programme.[10] However, as the Programme was extended so too was the MOU.[11]
1.19 By letter dated 8 August 1996, the Chairman of the 661 Committee informed the President of the Security Council that the 661 Committee had 'adopted procedures to be employed by it [the Committee] in the discharge of its responsibilities'; these are referred to as the 661 Committee procedures.[12] The procedures adopted by the committee were divided into six sections and dealt with both the exporting of humanitarian supplies to Iraq and the sale of oil. Section III set out the procedures to be adopted in relation to humanitarian supplies, including foodstuffs. The 661 Committee procedures relating to the exportation of humanitarian supplies mirrored those described in the MOU.
1.20 Section III of the 661 Committee procedures provided, in part:
Section III
Export to Iraq of humanitarian supplies
26. The Government of Iraq will prepare a categorized list of humanitarian supplies which it intends to purchase and import pursuant to resolution 986 (1995). This list will be submitted to the Secretary-General together with the distribution plan referred to in paragraph 8(a)(ii) of the resolution.
27. After approving the distribution plan, the Secretary-General will forward the list, which constitutes a part of the plan, to the Committee, and will make it known to all States.
28. The Government of Iraq or the United Nations Inter-Agency Humanitarian Programme will contract directly with suppliers to arrange the purchase of humanitarian supplies, and will conclude the appropriate contractual arrangements.
29. Export to Iraq of medicine, health supplies, foodstuffs, and materials and supplies for essential civilian needs (hereinafter humanitarian supplies) financed from the Iraq account shall be undertaken in accordance with the following provisions.
30. Applications for each export of humanitarian supplies, to be financed from the Iraq account consistent with paragraph 22 of the Memorandum of Understanding, shall be submitted to the Committee at the request of the Government of Iraq by the exporting States with all relevant documentation, including the concluded contractual arrangements. Payment from the Iraq account can take place only for items included in the categorized list, unless the Committee exceptionally decides otherwise on a case-by-case basis.
31. The Committee will take action on such applications in accordance with paragraph 20 of resolution 687 (1991), its existing procedures and the provisions of this section. The Committee will inform the Government of Iraq, the requesting States, the Secretary-General and, if appropriate, the independent inspection agents at the intended point(s) of entry into Iraq of the actions taken on the applications submitted.
32. Such applications shall be submitted as follows:
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(b) Foodstuffs
The exporting State notifies the Committee. The notification must indicate that the exporter requests payment from the Iraq account. A copy of the relevant documentation, including the concluded contractual arrangements and intended point(s) of entry into Iraq, must be attached to the notification.
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33. Experts in the Secretariat examine each contract, in particular the details of price and value, and whether the items to be exported are on the categorized list referred to above. They will also take into consideration the reports of the Secretary-General provided for in paragraph 20 above, in order to check availability of funds in the Iraq account for the contract. They will inform the Committee of their findings.
34. The Committee acts upon the findings of the experts as set forth below:
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(b) Foodstuffs
If the Committee finds, under its expedited no-objection procedure within two business days from the circulation of the application, that the contract is in order, it immediately informs the parties concerned that the exporter is eligible for payment from the Iraq account. If the contract is not found in order, the Committee informs the parties concerned that payment cannot be made from the Iraq account, but the foodstuffs can be shipped anyway if the exporter so desires.
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35. When the Committee has informed the parties concerned that the exporter is eligible for payment from the Iraq account, the Central Bank of Iraq will request the bank holding the Iraq account to open an irrevocable, non-transferable, non-assignable (except to the supplier's bank for the repayment of financing for the purchase of the humanitarian supplies) letter of credit for the account of the Iraqi purchaser in favour of the supplier, which will be available only at the bank holding the Iraq account, and provide for payment from the Iraq account. Such requests shall be submitted by the bank holding the Iraq account to the Secretary-General for expeditious approval, so that payment from the Iraq account can be made without delay. The letter of credit will require as condition of payment the submission to the bank holding the Iraq account of the usual commercial documentation, and of the following documents: a copy of the Committee's letter stating that the exporter is eligible for payment from the Iraq account, and a standardized confirmation by the Secretary-General of the arrival of the humanitarian supplies in Iraq.
36. The arrival of the humanitarian supplies in Iraq will be confirmed by independent inspection agents appointed by the Secretary-General pursuant to resolution 986 (1995) and stationed at relevant entry points and other locations in Iraq as referred to in paragraph 26 of the Memorandum of Understanding. The independent inspection agents will add their authenticated confirmation of arrival to a copy of the Committee's letter stating that the exporter is eligible for payment from the Iraq account and to a copy of the invoice, and will inform the Secretary-General in accordance with paragraph 8(a)(iii) of Security Council resolution 986 (1995). This information should be given without delay and in any case within 24 hours. The inspection agents will report all irregularities to the Secretary-General and to the Committee. If the problem is related to normal commercial practice, the Committee and the Government of Iraq will be informed but normal commercial resolution practices will go forth. Performance bonds may not be opened. Payments in favour of the purchaser resulting from normal commercial resolution practices should be made to the Iraq account. If the matter is of serious concern, the independent inspection agents will hold the shipment in question, pending guidance from the Committee. The Committee will make every effort to provide such guidance in the most expeditious manner.
37. The bank holding the Iraq account shall effect payment under any letter of credit only if all documents (listed in para. 35 above) stipulated in the letter of credit are presented to it and the terms and conditions of any such letter of credit are complied with. When specified in the contract and the supporting documents, payment can be made in several instalments corresponding to actual deliveries to Iraq. Documentary discrepancies can only be waived by the Secretary-General.
1.21 It is to be noted that these procedures contemplated the following:
1.22 In the case of foodstuffs, the procedures adopted by the 661 Committee in August 1996 did not affect the 'notification to the Security Council Committee' required as a condition of export by Resolution 687 in April 1991. However, to be paid from the Iraq account for such exported foodstuffs, a supplier was obliged to comply with the 661 Committee procedures adopted in August 1996. This is apparent from paragraphs 32 and 34 of the procedures, which included an examination by experts of each contract, 'in particular the details of price and value …'[AG2]
1.23 The UN Secretary-General established the Office of the Iraq Programme, effective 15 October 1997, 'to consolidate and manage the activities of the United Nations Secretariat pursuant to Security Council resolutions 986 (1995) and 661 (1990)'.[13]
1.24 The 661 Committee procedures just referred to for the approval of contracts for the provision of humanitarian supplies applied until 17 December 1999, when they were varied by Security Council Resolution 1284, which provided:
The Security Council
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Acting under Chapter VII of the Charter of the United Nations, and taking into account that operative provisions of this resolution relate to previous resolutions adopted under Chapter VII of the Charter.
17. Directs the Committee established by resolution 661 (1990) to approve, on the basis of proposals from the Secretary-General, lists of humanitarian items, including foodstuffs, pharmaceutical and medical supplies, as well as basic or standard medical and agricultural equipment and basic or standard educational items, decides, notwithstanding paragraph 3 of resolution 661 (1990) and paragraph 20 of resolution 687 (1991), that supplies of these items will not be submitted for approval of that Committee, except for items subject to the provisions of resolution 1051 (1996), and will be notified to the Secretary-General and financed in accordance with the provisions of paragraph 8(a) and 8(b) of resolution 986 (1995), and requests the Secretary-General to inform the Committee in a timely manner of all such notifications received and actions taken; [emphasis added]
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25. Directs the Committee established by resolution 661 (1990) to take a decision on all applications in respect of humanitarian and essential civilian needs within a target of two working days of receipt of these applications from the Secretary-General, and to ensure that all approval and notification letters issued by the Committee stipulate delivery within a specified time, according to the nature of the items to be supplied, and requests the Secretary-General to notify the Committee of all applications for humanitarian items which are included in the list to which the export/import mechanism approved by resolution 1051 (1996) applies;
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27. Calls upon the Government of Iraq:
(i) to take all steps to ensure the timely and equitable distribution of all humanitarian goods, in particular medical supplies, and to remove and avoid delays at its warehouses …
1.25 The effect of Resolution 1284 was that, provided the items in the application fell within the scope of the approved list, contracts for the exportation of humanitarian supplies (including foodstuffs) did not require the approval of the 661 Committee. Applications for supply and payment were instead required to be 'notified' to the Secretary-General. The exception was items that were subject to the provisions of Resolution 1051, which related to weapons of mass destruction programs. To obtain payment for foodstuffs from the escrow account, an exporter needed to comply with the 661 Committee procedures adopted in August 1996.
1.26 By Resolution 1330, dated 5 December 2000, the Secretary-General was required to expand and update the list of humanitarian items contemplated by Resolution 1284, and the 661 Committee was required to 'approve expeditiously' the expanded list. The expedited approval process described in paragraph 17 of Resolution 1284 then applied to the humanitarian items that fell within the expanded list, so that such contracts were to be 'notified to the Secretary-General and financed in accordance with the provisions of paragraphs 8(a) and 8(b) of resolution 986 (1995) …'[14]
1.27 On 29 November 2001, by Resolution 1382, the Security Council adopted a proposed set of revised procedures 'for implementation beginning on 30 May 2002'.[15] The revised procedures were subject to further refinement by the Security Council.[16] Resolution 1382 did not affect the provisions of prior resolutions or procedures concerning exports to Iraq of humanitarian supplies (including foodstuffs); rather, it was directed to procedures relating to goods on a 'Goods Review List' generally comprising '(1) advanced materials; (2) materials processing; (3) electronics; (4) computers; (5) telecommunications and information security; (6) sensors and lasers; (7) navigation and avionics; (8) marine; and (9) propulsion'.[17][AG3]
1.28 On 14 May 2002, by Resolution 1409, the Security Council, 'determined to improve the humanitarian situation in Iraq':
2. Decides to adopt the revised Goods Review List (S/2002/515) and the revised attached procedures for its application for implementation beginning at 0001 hours, Eastern Daylight Time, on 30 May 2002 as a basis for the humanitarian programme in Iraq as referred to in resolution 986 (1995) and other relevant resolutions;
3. Authorises States, beginning at 0001 hours, Eastern Daylight Time, on 30 May 2002, to permit, notwithstanding the provisions of paragraph 3 of resolution 661 (1990) and subject to the procedures for the application of the Goods Review List (S/2002/515), the sale or supply of any commodities or products other than commodities or products referred to in paragraph 24 of resolution 687 (1991) as it relates to military commodities and products, or military-related commodities or products covered by the Goods Review List (S/2002/515) pursuant to paragraph 24 of resolution 687 (1991) whose sale or supply to Iraq has not been approved by the Committee established pursuant to resolution 661 (1990);
4. Decides that, beginning at 0001 hours, Eastern Daylight Time, on 30 May 2002, the funds in the escrow account established pursuant to paragraph 7 of resolution 986 (1995) may also be used to finance the sale or supply to Iraq of those commodities or products that are authorized for sale or supply to Iraq under paragraph 3 above, provided that the conditions of paragraph 8 (a) of resolution 986 (1995) are met …
1.29 The result was that from 30 May 2002 all goods, other than those of military application, could be purchased by Iraq and funded from the Iraq escrow account. The procedures for 661 Committee approval-or notification to the Secretary-General in the case of foodstuffs-were effectively revoked in favour of new procedures.
1.30 The new procedures provided:
1. The following procedures replace paragraphs 29 to 34 of document S/1996/636* and other existing procedures, notably for the implementation of the relevant provisions of paragraphs 17, 18 and 25 of resolution 1284 (1999) related to the processing of applications to be financed from the escrow account established pursuant to paragraph 7 of resolution 986 (1995).
2. Each application (the 'Notification or Request to Ship Goods to Iraq', as attached to these procedures, hereafter referred to as 'the application,') for the sale or supply of commodities or products, to include services ancillary to the supply of such commodities and products, to Iraq to be financed from the escrow account established pursuant to paragraph 7 of resolution 986 (1995) must be forwarded to the Office of the Iraq Programme (OIP) by the exporting States through permanent or observer Missions, or by United Nations agencies and programmes. Each application should include complete technical specifications, as requested in the standard application form, concluded arrangements (e.g., contracts), and other relevant information, including, if known, whether the application contains any item(s) covered by the Goods Review List (GRL), in order for a determination to be made on whether the application contains any item referred to in paragraph 24 of resolution 687 (1991) as it relates to military commodities and products, or military-related commodities or products covered by the GRL.
3. Each application will be reviewed and registered by OIP within 10 working days. [The balance of the clause deals with incomplete applications.]
4. After OIP registration of the application, each application will be evaluated by technical experts from UNMOVIC and IAEA in order to determine whether the application contains any item referred to in paragraph 24 of resolution 687 (1999) as it relates to military commodities and products, or military-related commodities or products covered by the GRL ('GRL item(s)') …
8. If UNMOVIC and/or IAEA determine that the application contains any item referred to in paragraph 24 of resolution 687 (1991) as it relates to military commodities and products, the application shall be considered ineligible for approval for sale or supply to Iraq …
9. If UNMOVIC and/or IAEA determine that the application contains any GRL item(s), they will immediately inform through OIP the submitting Mission or United Nations agency. Pursuant to paragraph 11 below, absent a request by the submitting Mission or United Nations agency for reconsideration within 10 working days, OIP will forward the application containing the GRL item(s) to the 661 Committee for the purpose of evaluating whether the GRL item(s) may be sold or supplied to Iraq. UNMOVIC and/or IAEA will provide to the 661 Committee through OIP, a written explanation of this determination. In addition, OIP, UNMOVIC and/or IAEA, at the request of the submitting Mission or United Nations agency, will provide to the 661 Committee an assessment of the humanitarian, economic and security implications of the approval or denial of the GRL item(s), including the viability of the whole contract in which the GRL item(s) appears and the risk of diversion of the item(s) for military purposes. The assessment provided by OIP to the Committee should be transmitted in parallel by OIP to the submitting Mission or United Nations agency. OIP will immediately inform appropriate United Nations agents of the finding of a GRL item(s) in the application and that the GRL item(s) may not be sold or supplied to Iraq unless otherwise notified by OIP that the procedures set forth in paragraphs 11 or 12 have resulted in approval for sale or supply of the GRL item(s) to Iraq. The remaining items in the application, which are determined as not covered by the GRL, will be considered approved for sale or supply to Iraq and, at the discretion of the submitting Mission or United Nations agency, and with the consent of the contracting parties, will be processed according to the procedure in paragraph 10 below. The relevant approval letter may be issued for such approved items under request from the submitting Mission or United Nations agency.
10. If UNMOVIC and/or IAEA determine that the application does not contain any item referred to in paragraph 4 above, OIP will inform immediately the Government of Iraq and the submitting Mission or United Nations agency in written form. The exporter will be eligible for payment from the escrow account established pursuant to paragraph 7 of resolution 986 (1995) upon verification by United Nations agents that the items in the application have arrived in Iraq as contracted. OIP and the United Nations Treasury will inform the banks within five working days that the items in the application have arrived in Iraq.
1.31 Document S/1996/636 is the procedures document that had been adopted by the 661 Committee on 8 August 1996. Thus, from 30 May 2002, when the new procedures came into effect, the requirement that the United Nations or its committees or Secretariat examine documents for 'price and value' no longer applied.
1.32 The 'Notification or request to ship goods to Iraq' form attached to Resolution 1409 made provision for the exporting country submitting the notification to 'indicate whether or not you have previously submitted an application(s) for IDENTICAL goods' and, if so, provide the UN committee approval number.[18][AG4]
Notwithstanding the apparently mandatory procedures specified in the resolution's annexure, the form also made provision for an indication whether the form was to be submitted to 'UNMOVIC/IAEA' and the '[661] Committee (if applicable)'.[19] Presumably, it was intended that contracts for foodstuffs would not be submitted to either of those bodies since UNMOVIC (the United Nations Monitoring Verification and Inspection Commission) and IAEA (the International Atomic Energy Agency) were concerned only with potential weaponry.
1.33 The effect of the new procedures was that if exporters wanted to be paid from the escrow account they had to lodge an application form with the Office of the Iraq Programme, which reviewed and 'registered' the application. It was examined by experts to determine whether the goods proposed for export included military or other prohibited goods on the Goods Review List. If the goods were not on the list, the Government of Iraq and the submitting mission or UN agency were notified, and the exporter was eligible for payment from the escrow account on confirmation by the UN agents of delivery to Iraq.[20]
1.34 Although from 30 May 2002 it might technically not have been necessary to review contracts for 'price and value', in fact the United Nations continued to review contracts for those factors. Ms Johnston, the UN Chief Customs Officer, gave evidence that the question of whether such a review was necessary was debated within the Office of the Iraq Programme at the time:
Q: With the adoption of Resolution 1409 in 2002, the establishment of the Goods Review List occurred, and effectively that meant, so far as wheat was concerned, that there was no requirement perforce of any resolution for contracts for the sale of wheat to be examined for price and value after the adoption of resolution 1409; is that right?
A: Well, that was a matter that was debated within OIP at the time. Our initial reading of the situation was that potentially it might involve pre-approval of all contracts on the Goods Review List without referral to the payment clauses, the price, et cetera, et cetera, of the goods.
Therefore, my colleague who, with me, was responsible for the implementation of the resolution, who had responsibility for liaison with the committee concerning the resolution, clarified the matter with some of the committee members.
Q: And what happened in practice thereafter?
A: My colleague was advised by the committee that the spirit of the resolution required OIP to continue with its price checks, to continue carrying out its normal scrutiny of the contracts. Therefore, we adapted[AG5] our procedures to accommodate the GRL, but we continued to look at the contracts for abnormalities or irregularities.
Q: Would it be appropriate to summarise the situation as follows: that, whereas there may have been no specific requirement for contracts to be reviewed for price and value under these revised procedures following the adoption of Resolution 1409, your department continued the process of monitoring the contracts for price and value and other irregularities after 30 May 2002?
A: Yes, that's correct.[21]
1.35 On 30 December 2002 the Security Council adopted a further revised set of procedures for the approval of contracts under the Oil-for-Food Programme.[22] The procedures were set out in Annex B to Resolution 1454 and were, in part, to 'replace paragraphs 29 to 34 of document S/1996/636 and other existing procedures' (summarised in paragraph 15).[23] These further revised procedures were identical to the revised procedures adopted on 14 May 2002 by Resolution 1409, except for paragraph 4, which for present purposes is not material.[AG6]
1.36 The further revised procedures remained in place until 28 March 2003, when the Oil-for-Food Programme was varied as a result of the hostilities in Iraq and Resolution 1472 was passed. That resolution authorised the Secretary-General:
4 …
(b) to review, as a matter of urgency, the approved funded and non-funded contracts concluded by the Government of Iraq to determine the relative priorities of the need for adequate medicine, health supplies, foodstuffs and other materials and supplies for essential civilian needs represented in these contracts which can be shipped within the period of this mandate, to proceed with these contracts in accordance with such priorities;
…
(d) to negotiate and agree on necessary adjustments in the terms or conditions of these contracts and their respective letters of credit and to implement the measures referred to in paragraph 4(a), (b) and (c), notwithstanding distribution plans approved under the Programme …
The mandate was for 45 days; it was later extended by Resolution 1476 to 3 June 2003.[24]
1.37 On 22 May 2003 the Security Council adopted Resolution 1483, which provided:
The Security Council,
…
Acting under Chapter VII of the Charter of the United Nations,
…
10. Decides that, with the exception of prohibitions related to the sale or supply to Iraq of arms … all prohibitions related to trade with Iraq and the provision of financial or economic resources to Iraq established by resolution 661 (1990) and subsequent relevant resolutions, shall no longer apply.
16. Requests also that the Secretary-General, in coordination with the [Coalition Provisional] Authority, continue the exercise of his responsibilities under Security Council resolutions 1472 (2003) of 28 March 2003 and 1476 (2003) of 24 April 2003, for a period of six months following the adoption of this resolution, and terminate within this time period, in the most cost effective manner, the ongoing operations of the 'Oil-for-Food' Programme (the 'Programme'), both at headquarters level and in the field, transferring responsibility for the administration of any remaining activity under the Programme to the Authority, including by taking the following necessary measures:
(a) to facilitate as soon as possible the shipment and authenticated delivery of priority civilian goods as identified by the Secretary-General and representatives designated by him, in coordination with the Authority and the Iraqi interim administration, under approved and funded contracts previously concluded by the previous Government of Iraq, for the humanitarian relief of the people of Iraq, including, as necessary, negotiating adjustments in the terms or conditions of these contracts and respective letters of credit as set forth in paragraph 4(d) of resolution 1472 (2003);
(b) to review, in light of changed circumstances, in coordination with the Authority and the Iraqi interim administration, the relative utility of each approved and funded contract with a view to determining whether such contracts contain items required to meet the needs of the people of Iraq both now and during reconstruction, and to postpone action on those contracts determined to be of questionable utility and the respective letters of credit until an internationally recognized, representative government of Iraq is in a position to make its own determination as to whether such contracts shall be fulfilled.
1.38 On 20 November 2003 the Secretary-General made a statement to the Security Council, announcing the termination of the Oil-for-Food Programme.[25]
1.39 It is necessary to interpret the relevant Security Council resolutions-in particular Resolutions 661, 986 and 1284-to determine whether any activity of AWB Ltd breached those sanctions. Although the Letters Patent require that I report on whether any act of AWB or its associates breached Commonwealth, State or Territory laws, a pervasive issue surrounding both the inquiry of the Independent Inquiry Committee (often called the Volcker Inquiry) and this Inquiry is whether the conduct of AWB was in truth in breach of or contrary to UN sanctions. Interestingly, although the Independent Inquiry Committee report dealt with the manipulation of the Oil-for-Food Programme, it did not make any finding that any act of AWB was an act in breach of UN sanctions.[AG7] Although I refer to AWB the same interpretation issue arises for Alkaloids of Australia and Rhine Ruhr Pty Ltd.
1.40 This may have been because the sanctions did not impose obligations on individual companies as nationals of member states of the United Nations. Such obligations must be found in domestic law. Whilst no criminality may result from a finding of acts that were contrary to the provisions of UN resolutions, which acts may have permitted or facilitated manipulation of the Oil-for-Food Programme, it is nonetheless important to determine whether any acts of AWB were contrary to, or inconsistent with, Security Council resolutions.
1.41 The issue of construction of the resolutions may be stated in the following terms:
Accepting
did the resolutions permit AWB, as an exporter of wheat, to contract with Iraq, through its instrumentality the Iraqi Grain Board, to deliver wheat 'free on truck' to silos in all governorates of Iraq?
1.42 This question is one of construction: it does not purport to address the questions whether Iraq or AWB, or both, sought to circumvent or avoid the operation of Resolutions 661 or 986 by engaging a Jordanian trucking company to transport wheat in Iraq or whether a Jordanian trucking company was an instrument of the Iraqi Government used to channel payments of foreign currency to Iraq.
1.43 In an expert opinion provided to AWB and dated 24 October 2005, Sir Anthony Mason, a former Chief Justice of Australia, addressed the interpretation of Security Council resolutions in the following terms:
20. As the relevant resolutions do not specifically deal with the payment of inland transportation fees, it is necessary to refer briefly to the principles governing the interpretation of Security Council resolutions. Subject to some qualifications, a Security Council resolution should be interpreted in accordance with arts. 31 to 33 of the Vienna Convention, that is, in good faith in accordance with the ordinary meaning of its terms in their context and in the light of the object and purpose of the resolution. Security Council resolutions are, however, very different from treaties. The resolutions are essentially political in nature, often reflecting a compromise of different and conflicting views, fashioned with a view to resolving a dispute or controversy in a flexible and practical way, without the benefit of the considered legal input which is associated with more formal considered legal instruments.
21. The relevant Resolutions are expressed in very general, even vague, terms, so that, in understanding them and their legal consequences, it is necessary to pay close attention to their object and purpose-the imposition of economic sanctions on Iraq subject to an humanitarian exception-and the way in which they have been subsequently acted upon. In this respect, it is legitimate to treat the Resolutions as implicitly authorising the Committee to define, in an operational way, the scope of the permitted categories of exports to Iraq i.e. foodstuffs. Decisions of a Sanctions Committee, being a committee of the whole Council, as the 661 Committee was, will be authoritative, if the Committee is given power to interpret a resolution. In other situations, the interpretation of a resolution by a Sanctions Committee will or may be highly persuasive, depending upon the circumstances. Absent the existence of authority in the 661 Committee to interpret the relevant Resolutions, there would be no stable framework within which States could have confidently participated in exports of foodstuffs and other permitted items to Iraq.
22. Another question is whether the legal opinions of the UN's Office of Legal Affairs are a source of legal interpretation of UN Sanctions Resolutions. These legal opinions are not authoritative in the sense of being conclusive but there is no reason why they should not be regarded as contributing, more particularly if they are accepted or acted upon by a Sanctions Committee, to a general understanding of the way in which resolutions operated.[26]
1.44 I respectfully agree.
1.45 Insofar as it is permissible to have regard to the manner in which a sanctions committee established by resolution acted in relation to that resolution as an aid to interpreting the resolution, it is important to note the findings in the Independent Inquiry Committee's report dated 7 September 2005. The Committee found that, in respect of identified suspected breaches of sanctions involving the payment of 'kickbacks' on humanitarian purchases, no agreement was reached between member states of the 661 Committee regarding whether the 'making [of] some form of payment for internal transport costs to transportation companies that may have links to the Government of Iraq' was permissible.[27] At least one committee member, the United States, said it was not permissible, although this view appeared to conflict in some respects with advice given by the United Nations' Office of Legal Affairs.
1.46 Resolution 661 'decides that all states shall prevent … the sale or supply … of any commodities … but not including … in humanitarian circumstances, foodstuffs'. It seems clear that if humanitarian circumstances so required, the export of wheat to Iraq was permissible. On 22 March 1991 the 661 Committee determined that 'humanitarian circumstances' had arisen. By 3 April 1991 an accelerated 'no-objection' procedure for essential civilian needs, including foodstuffs, applied.
1.47 By paragraph 8(a) of Resolution 986, passed on 14 April 1995, the escrow fund was established to meet humanitarian needs, including the supply of foodstuffs, which were to be 'equitably distributed' throughout Iraq. The Memorandum of Understanding between the Secretariat of the United Nations and the Government of Iraq, dated 20 May 1996, implementing Resolution 986, required the preparation of a 'Distribution Plan describing in detail the procedures to be followed by the competent Iraqi authorities'[28], to ensure the distribution of humanitarian supplies. The distribution plan was to be submitted to and approved by the United Nations. The procedures adopted by the 661 Committee for approving contracts made similar provisions.[29]
1.48 Resolution 1284 did not qualify the previous resolutions relating to distribution of such foodstuffs. Nor did any subsequent resolutions or revised procedures.
1.49 Applying the principles of construction of Security Council resolutions already referred to-and, in particular, having regard to the object of the resolutions-it seems clear that, although restricting trade with Iraq, the UN resolutions contemplated contracts between companies or persons within member states and Iraq for the provision and supply of foodstuffs because of humanitarian considerations, and, at least from 1995, the distribution of those foodstuffs equitably throughout Iraq. That being so, there would be no restriction on Iraq and supplier companies contracting for the supplier to transport and distribute the foodstuffs within Iraq, unless there was some contrary provision restricting the interpretation of the resolutions to which I have referred. If the objective of the qualification on restrictions on dealing with Iraq was to provide humanitarian relief, as plainly it was, a necessary aspect of provision of that relief was distribution of the foodstuffs throughout Iraq.
1.50 A restriction on the interpretation of the resolutions might be found in paragraph 4 of Resolution 661, which provided:
Decides that all states shall not make available to the Government of Iraq, or to any commercial, industrial or public utility undertaking in Iraq … any funds or any other financial or economic resources and shall prevent their nationals and any persons within their territories from … making available to that Government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq … except payments exclusively for … in humanitarian circumstances, foodstuffs.[30]
1.51 It was the view of the Office of Legal Affairs, adopted by the 661 Committee and the Office of the Iraq Programme, that, properly interpreted, paragraph 4 prohibited the payment of funds to any Iraqi enterprise, except in relation to customary port charges at reasonable rates and paid in dinars only. The 661 Committee received two advices from the OLA, dated 7 November 1997 and 12 June 1998, and the Office of the Iraq Programme wrote to Iraq on 27 June 2000 conveying advice from the OLA about dealings with Iraq.[31] Although the first two advices do not relate to humanitarian exemptions from trading with Iraq and the letter of 27 June 2000 relates to port charges on the export of oil, the import of the three advices is similar.
1.52 The OLA's advice of 7 November 1997 related to whether it would be a contravention of the sanctions if the Dubai Ports Authority operated a passenger shipping service between Dubai and Iraq. The purpose of the shipping service was 'mainly to fulfil religious obligations in visiting holy places in Iraq'.[32] The OLA advised that, whilst paragraph 3 of Resolution 661 imposed a comprehensive trade embargo on Iraq, the resolution was 'cargo-oriented and [did] not cover per se the transport of passengers'.[33] Thus, opening a passenger shipping service that did not carry cargo would not breach the embargo. The OLA further advised that paragraph 4 of Resolution 661 prohibited the member states making available to the Iraqi Government or to any commercial, industrial or public utility undertaking in that country any funds or other financial or economic resources, with the exception of payments 'exclusively for strictly medical or humanitarian purposes'.[34] It continued:
A separate question is whether the payment to Iraqi entities of fees and other expenses deriving from ports services, such as towing and berthing, which are necessarily associated with maritime shipping, would contravene paragraph 4 of resolution 661 (1990). It is our view that such payments would not fall per se under paragraph 4 of resolution 661 (1990) if the shipping activity which generates them is lawful in every other respect in terms of the relevant Security Council resolutions, and provided that such fees and charges do not exceed what is customary in the circumstances.
1.53 The OLA's advice of 12 June 1998 related to whether Resolution 661 prohibited an overland shipment of construction material from Syria to Iran, through Iraq, by road. The advice contained the following:
The overriding purpose of the measures which the Security Council has imposed in respect of Iraq should also be borne in mind. Any duties or charges which might be levied in respect of the transit itself should accordingly not be of such a level as to represent a source of income to the Iraqi state and should, in principle , be limited to charges for transportation, such as road tolls, levied on a non-discriminatory basis, and to charges which are commensurate with whatever administrative expenses might reasonably be entailed by the occurrence of the transit. Any charges should also be payable in Iraqi dinars only.[35]
The advice concluded:
… it is the view of this Office that the making of a trans-shipment from Syria to Iran through Iraq by road would not be inconsistent with the measures which the Security Council has imposed in respect of Iraq, provided that:
1) the haulier is not a commercial, industrial or public utility undertaking in Iraq, nor is any such undertaking involved in any part of the haulage;
2) the goods which are to be shipped do not originate in Iraq;
3) the person or body in Iran to which the goods are shipped does not take delivery of them for the purposes of any business carried on in or operated from Iraq;
4) any duties, taxes, fees or charges which are levied by Iraq in respect of the entry of the shipment into Iraq, its transit of Iraq and its departure from Iraq do not exceed what is customary and reasonable in the circumstances, do not represent a source of income to Iraq and are paid in Iraqi dinars only;
5) the haulage equipment enters Iraq territory fully fuelled and provisioned and, subject to force majeure, does not receive any service in Iraq or take on board there any commodity or product, with the exception of such fuel as might be needed to enable it to exit Iraqi territory and reach refuelling facilities in Iran; and
6) the authorities of the Syrian Arab Republic and of the Islamic Republic of Iran should, both independently and in co-operation with each other, take such steps as might be necessary to ensure the strict observance of the terms of all relevant Security Council resolutions, in particular, to ensure that no part of the goods which are shipped or of the haulage equipment which is used to carry those goods is diverted from its journey.[36]
1.54 The 27 June 2000 advice, from the Executive Director of the Office of the Iraq Programme, Mr Sevan, to the Permanent Representative of Iraq to the United Nations, related to an increase in port charges imposed by the Government of Iraq at two ports, one of them Umm Qasr:
It has come to our attention that the Government of Iraq has increased the port charges at Mina al-Bakr and Umm Qasr. We have discussed this matter with our Office of Legal Affairs.
In their view, and in accordance with paragraph 4 of Security Council resolution 661 (1990) of 6 August 1990, which contains some of the basic provisions of the sanctions regime imposed by the Security Council against Iraq, all States are prohibited from making available to the Government of Iraq, or to any commercial, industrial or public utility undertaking in Iraq, any funds or any other financial or economic resources, and are required to prevent their nationals from making available to that Government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq. Paragraph 1 of Article 8 of Part II of the standard oil contract of the Iraqi State Oil Marketing Organisation which was agreed upon between the United Nations and the Iraqi authorities provides that the buyer shall bear alone port dues and fees charged on vessels at the port of loading.
The Office of Legal Affairs, in a letter to the Chairman of the Security Council Committee established by resolution 661 (1990), dated 6 November 1997, took the position that payment to Iraqi entities of fees and other expenses deriving from port services, would not fall per se under paragraph 4 of resolution 661 (1990), if the shipping activity which generates them is lawful in every other respect in terms of the relevant Security Council resolutions, and provided that such fees and charges do not exceed what is customary in such circumstances.
Any such entities and charges, should, in principle, be limited to charges for the services rendered, be levied on a non-discriminatory basis, and be commensurate with whatever administrative expenses might reasonably be entailed in this respect. In light of the restrictions imposed by Security Council resolution 661 (1990), such fees and charges must be paid in Iraqi dinars only.
Therefore, the payment of port costs to the Iraqi authorities per se is not inconsistent with the sanctions regime imposed by the Security Council against Iraq so long as the charges in question do not exceed whatever might in the circumstances be customary and reasonable and so long as they are paid in Iraqi dinars.
We have learned, however, that the Government of Iraq is requesting that port charges be paid not to the Iraqi authorities, but to 'alia for transportation and general trade company, Amman-Jordan', which has been entrusted with the operation of the ports in question, and that payments should be deposited in the account of that company in the Jordan National Bank.
If and insofar as 'alia for transportation and general trade company, Amman-Jordan' is a Jordanian company and not an instrument or agency of the Government of Iraq, the measures which have been imposed by the Security Council in respect of Iraq would not in any event apply. That having been said, it would appear that the Government of Iraq has entered into a contract with 'alia for transportation and general trade company, Amman-Jordan' to provide port services in Iraq. The supply of services of this character would appear to be calculated to promote the import from or export to Iraq of products and commodities. That being so, it would appear that the rendering of such services in Iraq would be prohibited by Security Council resolution 661 (1990). Such services might only be lawfully provided in the event that their provision has been approved by the Security Council Committee. As far as we are aware, no application has been made to the Security Council Committee in respect of the provision of port services by 'alia for transportation and general trade company, Amman-Jordan' to the Government of Iraq, nor has the Security Council Committee granted approval of any such arrangement.
Therefore, no payment should be made to the company concerned unless and until its contract with the Iraqi authorities has been approved by the Security Council Committee. In the absence of such approval, any payment deposited in the Jordan National Bank would be in violation of the sanctions regime established by the Security Council.
I would be grateful if you could bring this matter of concern to the attention of the relevant authorities in Iraq.[37]
1.55 None of these advices relates to humanitarian relief transactions or foodstuffs. The provision of foodstuffs, in humanitarian circumstances, was specifically not prohibited by UN resolutions. Equitable distribution of those foodstuffs was central to the provision of humanitarian relief to Iraqi citizens. Nonetheless, the advices from the OLA contain the basic theme that only reasonable and customary payments made in Iraqi dinars and necessarily associated with permitted transactions were permissible. Transactions with Iraq, or Iraqi entities, were not permissible if they resulted in the provision of funds to Iraq.
1.56 A simple agreement between Iraq and a supplier of grain to Iraq that required the supplier itself to deliver grain internally within Iraq as an aspect of humanitarian relief would appear not to infringe paragraph 4 of Resolution 661. That is because it would not involve the supplier making available funds to Iraq; rather, Iraq would be paying funds to the supplier. Nor would it be contrary to the OLA view of Resolution 661.
1.57 In contrast, if the supplier then sought to subcontract the transportation within Iraq to an Iraqi entity, involving as it would the payment of funds from the supplier to the Iraqi subcontractor, paragraph 4 of Resolution 661 would be infringed because the transaction would constitute the provision of 'funds or other financial economic resources' to an Iraqi entity. Further, any payment to the Iraqi entity in currency other than dinars was impermissible. That view accords with the view of the OLA and the 661 Committee.
1.58 In reality, therefore, a contract requiring an exporter to Iraq to deliver grain internally in Iraq as part of humanitarian relief would infringe paragraph 4 of Resolution 661 if the method of performance of the delivery obligation involved dealing with an Iraqi entity, and paying it funds, particularly in currency other than dinars.
1.59 The view that such a transaction was not permitted by the resolutions is reinforced by the terms of clause 32 of the Memorandum of Understanding dated 20 May 1996. That clause, and Annex I to the MOU, recognised the existence of an internal transportation, handling and distribution system throughout Iraq. It provided that the Government of Iraq was responsible for such distribution except in the three northern governorates of Dihouk, Arbil and Suleimaniyeh. In relation to internal transport and distribution, the agreement contained in the MOU was predicated on the existing system of internal transportation and distribution throughout Iraq being used for the transport and distribution of humanitarian goods, including foodstuffs. The MOU did not contemplate the Government of Iraq agreeing with a foreign supplier of foodstuffs for that supplier to undertake internal transportation of such foodstuffs.[AG8]
1.60 Insofar as it is permissible to have regard to the manner in which the 661 Committee and the Secretary-General, on whom the Security Council conferred certain powers in relation to implementing Resolution 661, interpreted and implemented the resolution, the content of the distribution plans for various phases is of assistance in interpreting Resolutions 661, 986 and 1284.
1.61 Distribution plans were central to the operation of the Oil-for-Food Programme. Only those goods listed in a plan could be exported to Iraq. The plan had to be approved by the Secretary-General. The 661 Committee operated only on the basis of an approved plan. And payment from the Iraq escrow account could be made only for goods listed in an approved plan.
1.62 Each distribution plan submitted by the Government of Iraq and approved by the Secretary-General was divided into a number of sections, one of which dealt with food.[38] The section dealing with food described the way food imported under the Oil-for-Food Programme would be distributed by the Iraqi authorities.
1.63 The distribution plan for phase I of the Oil-for-Food Programme provided:
Part One
Procurement and Distribution Plan for Food
Introduction
12. Following the UN Security Council Resolution 661 (1990) imposing sanctions on Iraq, the Government of Iraq established a special rationing system to ensure the distribution of foodstuffs to all Iraqi citizens, Arabs and foreigners residing in Iraq. The system was launched on 1 September 1990. It is presently applied throughout the country with the exception of the three northern Iraqi Governorates. In accordance with the MOU, the Programme will be responsible for the distribution of foodstuff to the population in the three northern Governorates on behalf of the Government of Iraq.
Main features of the system
13. The main partners of the current system are:
(i) The Ministry of Trade/Government of Iraq.
(ii) The Consumers (citizens of Iraq, Arabs and foreign residents).
(iii) Retail ration agents (private sector).
14. The responsibility of the Ministry of Trade is to undertake, on a monthly basis, the distribution of foodstuffs to the retail ration agents in their designated areas, and to ensure their delivery to the households registered with the concerned agent. There are more than 53,000 ration agents serving the local consumers. Furthermore, to ensure the adequacy, continuity and regularity of supplies of foodstuffs in conformity with the rationing cards, the related coupons are collected from the households monthly by the retail ration agents. Each rationing card has a number of coupons that correspond to basic food items involved in the system and covers one calendar year.
…
15. Every Iraqi citizen, Arab and foreign resident in Iraq is entitled by law to obtain a 'Rationing Card' from the Registration Centers. These centers establish lists of families by name, age and number of consumers in each household and send the lists to the computer center. The computer center sends one copy of each list to the nearest retail ration agent shop at the domicile of the concerned households, and another copy of the list to the food distribution centers.
16. The monthly individual ration under the current system is the same for each individual with regard to commodities, quantity and the related nominal fee. Households are well informed through public and private mass media, on a monthly basis, of their entitlements and on the time of distribution in various distribution centers.[39]
…
Distribution Plan of foodstuffs
25. The distribution of foodstuffs shall be undertaken by the competent Iraqi authorities. The present rationing system referred to in Part 1 of this document will be applied in distributing foodstuffs purchased with the proceeds of the sale of Iraqi petroleum and petroleum products.[40]
[Paragraphs 26 to 28 dealt with the food requirements of the three northern governorates and the distribution of food to them.]
Purchase and storage arrangements
30. In order to implement the foregoing, the following will apply:
…
(iv) All items purchased under the Plan will be transported to and stored in specially designated silos and warehouses. The Government of Iraq will keep the Programme informed of the locations of each silo and warehouse.
(v) Imported grains (wheat and rice) will be delivered to grain silos and rice warehouses located throughout the country in accordance with the details contained in paragraph (iv) above.
…
(vii) Retail ration agents shall receive the monthly food quota for the population residing within their designated areas upon presentation of ration coupons as explained in Part One above against payment of a standard nominal fee as a contribution towards internal transportation.[41]
The distribution plans for each of the remaining phases of the Oil-for-Food Programme included substantially similar terms.[42]
1.64 From phase IV onwards, in each distribution plan an amount was allocated for 'supporting supplies of equipment/spare parts for food supply, goods transportation/trucks/rehabilitation of rail network' and 'Infrastructure support for food, nutrition, and health sector: transport/telecommunications'.[43] Allocation of amounts for these purposes was justified on the basis that a functioning transportation system was necessary to facilitate the distribution of goods imported under the Oil-for-Food Programme, including the transportation of wheat.
1.65 The distribution plan for phase IV provided:
Maintenance, Repairs, Rehabilitation and Replacement of equipment required on the basis of priorities for handling, storage, supply and distribution of food
30. The Plan is based on the actual need of the food sector according to the activities related to the storage and transportation of foodstuffs as well as grain milling and delivering to the consumers in accordance with the ration system and in conformity with the volume of the imported foodstuffs. The following has been taken into consideration in preparing the requirement:
…
- Ensuring new means of transportation to enhance the capacity available in the country for the transportation of grains, flour and foodstuffs as well as their delivery to the citizens according to the determined timings. For example, the provision of trucks and repair of railways.[44]
A similar provision appears in the distribution plans for phases V to XIII.[45]
1.66 The distribution plan for phase VI provided:
PART SEVEN
Infrastructure support for Food, Nutrition, Agriculture and Health sector Transport and Tele Communications Plan of purchase of Material and Requirements
FOR TELECOMMUNICATIONS AND TRANSPORTATION/BANKING REQUIREMENTS
65. The present state of telecommunication and transportation systems throughout Iraq is extremely poor. Apart from the wider social considerations, there are negative consequences for the efficient procurement and distribution of humanitarian supplies …
…
66.2 RAILWAYS REHABILITATION
66.2.1 Iraqi Railways plays a great part in the transportation of food and agriculture products, beginning with the first stage of farming by providing fertilizers, seeds, etc. This kind of transportation from most of the cities in Iraq to different parts of the country requires special wagons and rolling stock. Most of the … food which arrived at Um-Qaser port under the MOU, especially grains and rice, [is] carried by railways to most cities of Iraq. Iraqi Railways can not fulfil its obligations to distribute the required quantities of food due to the lack of spare parts for locomotives and wagons, which are needed for this huge transportation task …[46]
Similar provisions appear in the distribution plans for phases VII to XIII.[47]
1.67 From phase VIII onwards specific provision was made for 'Land transport'. The phase VIII distribution plan provided:
D. LAND TRANSPORT
74. To carry MOU commodities from Um Qasr and Trebil, different kinds of trucks (flat semi-trailer, refrigerants, open trailers, lorries of different kinds and capacities) are required for this purpose. More than 1,000 trucks are required per year.[48]
1.68 Thus:
1.69 The various approved distribution plans thus envisaged Iraqi authorities themselves providing transportation infrastructure for the movement of grain within Iraq. They did not envisage inland transportation of grains arriving at Umm Qasr otherwise than by Iraqi instrumentalities or entities. It was on this basis, approved by the Secretary-General, that the 661 Committee operated the Oil-for-Food Programme.
1.70 Although member states might have had differing views about whether it was in breach of sanctions for exporters to Iraq to make 'some form of payment for internal transport costs to transportation companies that may have links to the Government of Iraq', in practice the 661 Committee implemented Resolution 661 and subsequent resolutions, and operated the Oil-for-Food Programme, on the basis of distribution plans approved by the Secretary-General. These plans contemplated both inland transport and distribution of foodstuffs by Iraq or its authorities.
1.71 It was the view of the Office of Legal Affairs, and of the Office of the Iraq Programme, which had been established by the United Nations to administer the 661 Committee's obligations, that payments could be made to Iraq or Iraqi entities only for 'customary charges', at a 'reasonable rate', only in Iraqi dinars, and only in circumstances where the payments could not be regarded as providing a source of funds to Iraq.
1.72 There were only three categories of entity that could possibly transport grain from port to silo:
Resolution 661 prohibited a category 3 entity contracting with a category 1 entity to effect such transportation because that would involve payments to an Iraqi entity. It would also constitute a source of funds to Iraq.
Resolution 986, the MOU and each distribution plan contemplated the transportation being effected by Iraqi entities. A category 2 entity performing the transportation was thus not in contemplation of either the United Nations or Iraq, although it was not prohibited by Resolution 661.
A category 3 entity agreeing with Iraq to undertake the transportation task itself was not prohibited by Resolution 661, although it was not contemplated by Resolution 986, the MOU or the agreed distribution plans. If, however, a category 3 entity wanted to subcontract the transportation task, it was:
1.73 It necessarily follows that:
- the exporter could itself transport the grain-a practical impossibility in reality
or
- the exporter had engaged a foreign transport company that could perform the task without the transport company making payments to Iraq or an Iraqi entity.
1.74 During the period with which I am concerned, June 1999 to March 2003, three different procedural regimes operated within the United Nations in connection with notification and financing of contracts:
1.75 In each period, before any approval for the export of goods to Iraq under a phase of the Oil-for-Food Programme could be given, a distribution plan was required to be approved by the Secretary-General. Further, the United Nations required at all times that the documents seeking approval or funding from the Iraq account, or notifying sales to Iraq, be submitted by a state through its UN embassy.
1.76 It is convenient to set out, by way of example, the manner in which, and the forms by which, the United Nations, the 661 Committee or the Office of the Iraq Programme gave consent to the export of grain to Iraq and the financing of such exports, under the three differing procedural regimes.
1.77 Before 17 December 1999 the applicable procedures were those in the 20 May 1996 MOU implementing Resolution 986. The contract used here as an example is AWB contract A4653, dated 14 July 1999. This was within phase VI of the Oil-for-Food Programme.
1.78 The distribution plan for phase VI was prepared as required by clause 2 of the MOU of 20 May 1996. The summary of the plan states, 'The Plan constitutes an important element in the implementation of SCR 1242 (1999) and the Secretary-General's report of 18 May 1999 (S/1999/573). It includes a classified list of supplies and goods to be purchased and imported by Iraq for this purpose'.[49]
1.79 Part 1 of the plan dealt with the 'food sector'. Under the heading 'Plan for food distribution' was the following:
24. The same mechanism for food distribution stipulated in paragraph 22 of the Distribution Plan of Phase III shall be followed under this plan.[50]
Arrangements for procurement and storage
25. Arrangements for procurement, storage and transport of food supplies under this plan shall remain as stated in paragraph 24 of the Distribution Plan of Phase III …[51]
…
Warehouses
27. Specific warehouses shall be designated to store the foodstuffs imported by the Government of Iraq under the Plan. The locations of these warehouses will be within the main storage complexes of the Ministry of Trade throughout the governorates of Iraq.
…
Maintenance, repairs, rehabilitation and replacement of equipment required on the basis of priorities for the handling, storage, supply and distribution of food
29. The Plan is based on the actual need of the Food Sector according to activities related to the storage and transportation of foodstuffs, as well as grain milling and delivering to the consumers, in accordance with the ration system and in conformity with the volume of the imported foodstuffs. The following has been taken into consideration in preparing this requirement:
1.80 Paragraph 22 of the distribution plan for phase III adopts paragraphs 25 to 28 of 'the previous Distribution Plan, Phase I'. As noted, paragraph 25 specified that food would be distributed by 'the competent Iraqi authorities', and paragraphs 26 to 28 dealt with arrangements for the three northern governorates.
1.81 In phase I under 'Purchase and storage arrangements', paragraph 30 provided:
(iv) All items purchased under the Plan will be transported to and stored in specially designated silos and warehouses. The Government of Iraq will keep the Programme informed of the locations of each such silo and warehouse.
(v) Imported grains (wheat and rice) will be delivered to grain silos and rice warehouses located throughout the country in accordance with the details contained in paragraph (iv) above.[52]
Table IV, which specified the indicative value of 'wheat flour' and other substances, noted, 'The indicate[d] total value of the items include both external and internal transport costs and are subject to usual market conditions and fluctuations'.[53]
1.82 As noted here in paragraph 1.66, the distribution plan for phase VI referred to the prominent role of the Iraqi rail system in the transporting of foods, especially grains arriving at Umm Qasr, and to the difficulties being posed by a lack of spare parts for locomotives and wagons.[54]
1.83 The distribution plan thus addressed, at least peripherally, the question of transportation of grain from Umm Qasr to storage in silos.
1.84 On behalf of AWB, the Australian mission to the United Nations submitted to the 661 Committee the following:
The cargo will be discharged Free into Truck to all silos within all Governorates of Iraq at the average rate of 3,000 metric tons per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD12.00 and shall be paid by Sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq Distribution Plan.
The price was shown as 'C.I.F., Free in Truck'.[56]
1.85 A customs officer's report dated 10 August 1999 was prepared within the United Nations by Ms Johnston.
1.86 As is evident, the document states, 'Specifically, this application has been examined to establish whether the price and value is credible and whether the items to be exported are in the distribution plan annexes'.[58] This accorded with the provisions of paragraph 33 of the procedures the 661 Committee adopted on 8 August 1996 to implement Resolution 661.[59]
1.87 On 24 August 1999 the United Nations issued a document dated 13 August 1999 advising that the 661 Committee had been 'duly notified' of the intention to send the shipment of wheat through Umm Qasr and that the 'exporter is eligible for payment from the Iraq account' (see Figure 1.2).[60]
1.88 Notwithstanding the statement in the customs officer's report that the 'item price and value have been examined as per paragraph 33 of the Procedures and appear reasonable and acceptable', and the statement that 'specifically, this application has been examined to establish whether the price and value is credible', the evidence before the Inquiry is that UN customs officers did not notice:
Figure 1.1 Notification or request to ship goods to Iraq, 11 August 1999~Oil+for+Food+Inquiry+-+Volume+1+-Figure+1-1+Notification+or+request+to+ship+goods+to+Iraq11+August+1999/$FILE/image011.gif)
Source: Ex 1212, UNO.0003.3322_R.
Figure 1.2 United Nations notification, 13 August 1999
~Oil+for+Food+Inquiry+-+Volume+1+-+United+Nations+notification+13+August+1999/$FILE/image012.gif)
Source: Ex 1216, UNO.0003.3319_R.
1.89 In relation to procedures operating between 17 December 1999 and 30 May 2002, I use as an example AWB contract A1112, dated 20 December 2001. The contract was in phase X. The procedures required by Resolution 1284 applied.
1.90 The approved distribution plan set out a 'plan for food distribution' and 'arrangements for procurement and storage', which were in substance the same as those in phase I.[61] Paragraph 185 of the plan contained statements about the use of railways similar to those previously quoted. However, it also contained a reference to 'land transport':
190. To carry MOU commodities from Umm Qasr and Trebil, different trucks (flat semi-trailer, refrigerants, and open trailers and lorries of different kinds and capacities are required for this purpose. More than 10,000 trucks are required per year.[62]
1.91 On AWB's behalf, the Australian mission to the United Nations submitted to the Office of the Iraq Programme a 'Notification or request to ship goods to Iraq' form (see Figure 1.3). It was received at the OIP on 23 January 2002 and bears a registration date of 4 February 2002.
1.92 Both a short form and long form of contract A1112, each signed on behalf of AWB and the Grain Board of Iraq, were submitted to the United Nations along with the notification form.[63] Both forms of contract showed a price 'C.I.F. Free in Truck' and contained a provision that 'the cargo will be discharged Free into Truck to all silos within all Governorates of Iraq …'
1.93 The OIP prepared a report on the request (see Figure 1.4).
1.94 The report shows that wheat was on a list of goods approved for export, as contemplated by paragraph 17 of Resolution 1284, and that the price and value of the goods had been examined and appeared 'reasonable and acceptable' to the OIP. This examination had been carried out pursuant to paragraph 33 of the MOU dated 8 August 1996.
1.95 On 5 February 2002 the OIP issued a document confirming notification of the contract to the United Nations and advising of eligibility for payment from the escrow account (see Figure 1.5).
Figure 1.3 Notification or request to ship goods to Iraq, 23 January 2002
~OFFI+Inquiry+-+Volume+1+-+Figure+1point+3+Notification+or+request+to+ship+goods+to+Iraq+23+January+2002/$FILE/image013.gif)
Source: Ex 1211, UNO.1214.0398.
Figure 1.4 Report concerning request to ship goods to Iraq, 4 February 2002
~OFFI+Inquiry+-+Volume+1-+Figure+1point+4+Report+concerning+request+to+ship+goods+to+Iraq+4+February+2002/$FILE/image014.gif)
Source: Ex 1211, UNO.1214.0397.
Figure 1.5 United Nations notification, 4 February 2002
~OFFI+Inquiry+-+Volume+1+-Figure+1+point+5+-+United+Nations+notification+4+February+2002/$FILE/image015.gif)
Source: Ex 1211, UNO.1214.0396.
1.96 In connection with procedures operating from 30 May 2002, I use as an example AWB contract A1441, dated 23 June 2002. This was in phase XII. The procedures required by Resolution 1409 applied.
1.97 The distribution plan contained provisions for food distribution, procurement and storage and statements regarding railways and land transport similar to those previously addressed.
1.98 The contract submitted to the United Nations was signed by both AWB and the Grain Board of Iraq. The price was shown per metric tonne for 'CIF F.O.T. to silo to all Governorates of Iraq via Umm Quser port'.[64] The contract was expressed to be an agreement 'according to the Memorandum of Understanding signed between the UN Secretariat and the Government of Iraq on the implementation of Security Council resolution 1409 Phase (XII)'.[65] The Office of the Iraq Programme received the 'Notification or request to ship goods to Iraq' form, and the contract, on 25 July 2002 (see Figure 1.6).
1.99 The OIP prepared a report on the notification (see Figure 1.7). It is to be noted that the report does not indicate that the contract had been examined for 'price and value'. Such examination was necessary after Resolution 1409 only if checking for price and value was a requirement of the 'review' to be carried out pursuant to paragraph 3 of the procedures attached to that resolution.
1.100 The OIP then issued a document showing the 'date of original approval' of 13 August 2002 and a 'date of issuance' of that approval (8 October 2002) (see Figure 1.8).
1.101 This document recorded that the Secretary-General had been 'duly notified', as had been required for the export of humanitarian foodstuffs since Resolution 687 came into effect in April 1991. Entitlement to payment from the Iraq account flowed, it was said, because of consistency with 661 Committee procedures adopted to implement Resolution 986, which remained applicable for funding purposes by virtue of paragraph 4 of Resolution 1409.[66]
Figure 1.6 Notification or request to ship goods to Iraq, 25 July 2002
~OFFI+INquiry+-+Vol+1+-+Figure+1+point+6+Notification+or+request+to+ship+goods+to+Iraq+25+July+2002/$FILE/image016.gif)
Source: Ex 1222, UNO.0003.1237_R.
Figure 1.7 Report concerning request to ship goods to Iraq, 13 August 2002
~OFFI+-+Vol+1+-+Figure+1+point+7+Report+concerning+request+to+ship+goods+to+Iraq+13+August+2002/$FILE/image017.gif)
Source: Ex 1221, UNO.0003.1236_R.
Figure 1.8 United Nations notification, 13 August 2002
~Vol+1+figure+1.8+image+19/$FILE/image019.gif)
~Vol+1+image+20/$FILE/image020.gif)
Source: Ex 1220, UNO.0003.1234_R.
1.102 A crucial aspect of the Oil-for-Food Programme was the review by the United Nations, through its 661 Committee and later the Office of the Iraq Programme, of contracts for the purchase of humanitarian goods. Only contracts favourably reviewed would be paid for from the UN escrow account. The review was thus central to the Oil-for-Food Programme and central to the provision of humanitarian relief, including foodstuffs, to the Iraqi people.
1.103 Notwithstanding that the Oil-for-Food Programme commenced in April 1995 with the adoption of Resolution 986, Ms Johnston, the Chief Customs Officer for the United Nations, gave evidence to the Inquiry that when she joined the Contracts Processing and Monitoring Division in July 1999 the reviewing officers where given only 'very, very minimal guidance' in the performing of their review functions.[67] All they had was a database of prior contracts and the capacity to use the internet to make any other inquiries thought necessary.[68] In reviewing the 'price and value' of wheat contracts, the reviewing officers had no benchmark price from which to work[69], had no price parameters, and knew that the price shown in the contract being reviewed incorporated the costs of delivery to Iraq, insurance, freight and inland transport costs, but they had no method of determining what was a reasonable price for those ingredient costs. In truth, they thus had no method of determining whether the price shown in the contract was reasonable.[70]
1.104 Each contract was reviewed by a reviewing officer and then checked by a second officer. Thus there were two independent reviews of the contract. The first four contracts for the sale of wheat to Iraq under phase VI contained a provision requiring the seller to sell grain pursuant to a contract containing the following new clause:
The cargo will be discharged Free into Truck to all silos within all Governates of Iraq at the average rate of 3,000 metric tons per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD12.00 and shall be paid by Sellers to nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.[71]
1.105 Neither the reviewing officer nor the checking officer noticed the provision about the 'discharge cost' to a maximum of US$12.00. Nor did either note that the US dollar currency was to be paid to 'nominated Maritime Agents in Iraq'. Ms Johnston was the reviewing officer and explained her oversight by reference to lack of training. The checking officer was her superior, Mr Christen, who had been in the department for a year.[72] Ms Johnston gave the following evidence:
Q: What did the checking officer check?
A: The checking officer reviewed the customs report to proofread it, to ensure there were no inaccuracies in comparison with what was stated on the customs report with the contract, and also reviewed the terms of the contract, the contractual clauses, to ensure that the reviewing officer hadn't missed anything.
Q: So, effectively, there were two people independently reviewing this contract on behalf of the United Nations?
A: That's correct, sir.
Q: And they both overlooked this term in the contract?
A: That's correct, sir.[73]
1.106
