Al mashriq - The Levant

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                   PROTOCOL ON ECONOMIC RELATIONS
                               between
                the Government of the State of Israel
                                 and
           the P.L.O., representing the Palestinian people


                              PREAMBLE


The two parties view the economic domain as one of the cornerstone in
their mutual relations with a view to enhance their interest in the
achievement of a just, lasting and comprehensive peace. Both parties
shall cooperate in this field in order to establish a sound economic
base for these relations, which will be governed in various economic
spheres by the principles of mutual respect of each other's economic
interests, reciprocity, equity and fairness.

This protocol lays the groundwork for strengthening the economic base
of the Palestinian side and for exercising its right of economic
decision making in accordance with its own development plan and
priorities. The two parties recognise each other's economic ties with
other markets and the need to create a better economic environment
for their peoples and individuals.


                              Article I

                FRAMEWORK AND SCOPE OF THIS PROTOCOL


1.  This protocol establishes the contractual agreement that will
    govern the economic relations between the two sides and will
    cover the West Bank and the Gaza Strip during the interim period.
    The implementation will be according to the stages envisaged in
    the Declaration of Principles on Interim Self Government
    Arrangements signed in Washington D.C. on September 13, 1993 and
    the Agreed Minutes thereto. It will therefore begin in the Gaza
    Strip and the Jericho Area and at a later stage will also apply
    to the rest of the West Bank, according to the provisions of the
    Interim Agreement and to any other agreed arrangements between
    the two sides.

2.  This Protocol, including its Appendixes, will be incorporated
    into the Agreement on the Gaza Strip and the Jericho Area (in
    this Protocol - the Agreement), will be an integral part thereof
    and interpreted accordingly. This paragraph refers solely to the
    Gaza Strip and the Jericho Area.

3.  This Protocol will come into force upon the signing of the
    Agreement.

4.  For the purpose of this Protocol, the term "Areas" means the
    areas under the jurisdiction of the Palestinian Authority,
    according to the provisions of the Agreement regarding
    territorial jurisdiction.
    The Palestinian Jurisdiction in the subsequent agreements could
    cover areas, spheres or functions according to the Interim
    Agreement. Therefore, for the purpose of this Protocol, whenever
    applied, the term "Areas" shall be interpreted to mean functions
    and spheres also, as the case may be, with the necessary
    adjustments.


                             Article II

                    THE JOINT ECONOMIC COMMITTEE


1.  Both parties will establish a Palestinian-Israeli Joint Economic
    Committee (hereinafter - the JEC) to follow up the implementation
    of this Protocol and to decide on problems related to it that may
    arise from time to time. Each side may request the review of any
    issue related to this Agreement by the JEC.

2.  The JEC will serve as the continuing committee for economic
    cooperation envisaged in Annex III of the Declaration of
    Principles.

3.  The JEC will consist of an equal number of members from each side
    and may establish sub-committees specified in this Protocol.

    A sub-committee may include experts as necessary.

4.  The JEC and its sub-committees shall reach their decisions by
    agreement and shall determine their rules of procedure and
    operation, including the frequency and place or places of their
    meetings.


                            Article  III

                   IMPORT TAXES AND IMPORT POLICY


1.  The import and customs policies of both sides will be according
    to the principles and arrangements detailed in this Article.

2.  a. The Palestinian Authority will have all powers and
       responsibilities in the sphere of import and customs policy
       and procedures with regard to the following:

       (1) Goods on List Al, attached hereto as Appendix I
           locally-produced in Jordan and in Egypt particularly and
           in the other Arab countries, which the Palestinians will
           be able to import in quantities agreed upon by the two
           sides up to the Palestinian market needs as estimated
           according to para 3 below.

       (2) Goods on List A2, attached hereto as Appendix II, from the
           Arab, Islamic and other countries, which the Palestinians
           will be able to import in quantities agreed upon by the
           two sides up to the Palestinian market needs as estimated
           according to para 3 below.

    b. The import policy of the Palestinian Authority for Lists Al
       and A2 will include independently determining and changing
       from time to time the rates of customs, purchase tax, levies,
       excises and other charges, the regulation of licensing
       requirements and procedures and of standard requirements. The
       valuation for custom purposes will be based upon the GATT 1994
       agreement as of the date it will be introduced in Israel, and
       until then - on the Brussels Definition of Valuation (BDV)
       system. The classification of goods will be based on the
       principles of "the Harmonized Commodity Description and Coding
       System". Concerning imports referred to in Article VII of this
       Protocol (Agriculture), the provisions of that Article will
       apply.

3.  For the purposes of para 2(a) above, the Palestinian market needs
    for 1994 will be estimated by a sub-committee of experts. These
    estimates will be based on the best available data regarding past
    consumption, production, investment and external trade of the
    Areas. The sub-committee will submit its estimate within three
    months from the signing of the Agreement. These estimates will be
    reviewed and updated every six months by the sub-committee, on
    the basis of the best data available regarding the latest period
    for which relevant data are available, taking into consideration
    all relevant economic and social indicators. Pending an agreement
    on the Palestinian market needs, the previous period's estimates
    adjusted for population growth and rise in per-capita GNP in the
    previous period, will serve as provisional estimates.

4.  The Palestinian Authority will have all powers and
    responsibilities to independently determine and change from time
    to time the rates of customs, purchase taxes; levies, excises and
    other charges on the goods on List B, attached hereto as Appendix
    III, of basic food items and other goods for the Palestinian
    economic development program, imported by the Palestinians to the
    Areas.

5.  a. With respect to all goods not specified in Lists Al, A2 and B,
       and with respect to quantities exceeding those determined in
       accordance with paras 2(a) & 3 above (hereinafter - the
       Quantities), the Israeli rates of customs, purchase tax,
       levies, excises and other charges, prevailing at the date of
       signing of the Agreement, as changed from time to time, shall
       serve as the minimum basis for the Palestinian Authority. The
       Palestinian Authority may decide on any upward changes in the
       rates on these goods and exceeding quantities when imported by
       the Palestinians to the Areas.

    b. With respect to all goods not specified in Lists A1 and A2,
       and with respect to quantities exceeding the Quantities,
       Israel and the Palestinian Authority will employ for all
       imports the same system of importation, as stipulated in para
       10 below, including inter alia standards, licensing, country
       of origin, valuation for customs purposes etc.

6.  Each side will notify the other side immediately of changes made
    in rates and in other matters of import policy, regulations and
    procedures, determined by it within its respective powers and
    responsibilities as detailed in this Article. With regard to
    changes which do not require immediate application upon decision,
    there will be a process of advance notifications and mutual
    consultations which will take into consideration all aspects and
    economic implications.

7.  The Palestinian Authority will levy VAT at one rate on both
    locally produced goods and services and on imports by the
    Palestinians (whether covered by the three Lists mentioned above
    or not), and may fix it at the level of 15% to 16%.

8.  Goods imported from Jordan, Egypt and other Arab countries
    according to para 2(a)(1) above (List A1) will comply with rules
    of origin agreed upon by a joint sub-committee within three
    months of the date of the signing of the Agreement. Pending an
    agreement, goods will be considered to have been "locally
    produced" in any of those countries if they conform with all the
    following:

    a. (i) They have been wholly grown, produced, or manufactured in
       that country, or have been substantially transformed there
       into new or different goods, having a new name, character, or
       use, distinct from the goods or materials from which they were
       so transformed;

       (ii) They have been imported directly from the said country;

       (iii) The value or the costs of the materials produced in that
       country, plus the direct processing costs in it, do not fall
       short of 30 percent of the export value of the goods. This
       rate may be reviewed by the joint committee mentioned in para
       16 a year after the signing of the Agreement.

       (iv) The goods are accompanied by an internationally
       recognized certificate of origin;

       (v) No goods will be deemed as substantially new or different
       goods, and no material will be eligible for inclusion as
       domestic content, by virtue of having merely undergone simple
       combining or packaging, or dilution with water or other
       substances, which do not materially alter the characteristics
       of the said goods.

9.  Each side will issue import licences to its own importers,
    subject to the principles of this Article and will be responsible
    for the implementation of the licensing requirements and
    procedures prevailing at the time of the issuance of the
    licenses.
    Mutual arrangements will be made for the exchange of information
    relevant to licensing matters.

10. Except for the goods on Lists A1 and A2 and their Quantities - in
    which the Palestinian Authority has all powers and
    responsibilities, both sides will maintain the same import policy
    (except for rates of import taxes and other charges for goods in
    List B) and regulations including classification, valuation and
    other customs procedures, which are based on the principles
    governing international codes, and the same policies of import
    licensing and of standards for imported goods, all as applied by
    Israel with respect to its importation. Israel may from time to
    time introduce changes in any of the above, provided that changes
    in standard requirements will not constitute a non-tariff-barrier
    and will be based on considerations of health, safety and the
    protection of the environment in conformity with Article 2.2. of
    the Agreement on Technical Barriers to trade of the Final Act of
    the Uruguay Round of Trade Negotiations.
    Israel will give the Palestinian Authority prior notice of any
    such changes, and the provisions of para 6 above will apply.

11. a. The Palestinian Authority will determine its own rates of
       customs and purchase tax on motor vehicles imported as such,
       to be registered with the Palestinian Authority. The vehicle
       standards will be those applied at the date of the signing of
       the Agreement as changed according to para 10 above.
       However, the Palestinian Authority may request, through the
       sub-committee on transportation, that in special cases
       different standards will apply.
       Used motor vehicles will be imported only if they are
       passenger cars or dual-purpose passenger cars of a model of
       no more than three years prior to the importation year. The
       sub-committee on transportation will determine the procedures
       for testing and confirming that such used cars comply with the
       standards' requirements for that model year.
       The issue of importing commercial vehicles of a model prior to
       the importation year will be discussed in the joint
       sub-committee mentioned in para 16 below.

    b. Each side may determine the terms and conditions for the
       transfer of motor vehicles registered in the other side to the
       ownership or use of a resident of its own side, including the
       payment of the difference of import taxes, if any, and the
       vehicle having been tested and found compatible with the
       standards required at that time by its own registration
       administration, and may prohibit transfer of vehicles.

12. a. Jordanian standards, as specified in the attached Appendix I,
       will be acceptable in importing petroleum products into the
       Areas, once they meet the average of the standards existing in
       the European Union countries, or the USA standards, which
       parameters have been set at the values prescribed for the
       geographical conditions of Israel, the Gaza Strip and the West
       Bank.
       Cases of petroleum products which do not meet these
       specifications will be referred to a joint experts' committee
       for a suitable solution. The committee may mutually decide to
       accept different standards for the importation of gasoline
       which meet the Jordanian standards even though, in some of
       their parameters, they do not meet the European Community or
       USA standards. The committee will give its decision within six
       months.
       Pending the committee's decision, and for not longer than six
       months of the signing of the Agreement, the Palestinian
       Authority may import to the Areas, gasoline for the
       Palestinian market in the Areas, according to the needs of
       this market, provided that:

       (1) this gasoline is marked in a distinctive colour to
           differentiate it from the gasoline marketed in Israel; and

       (2) the Palestinian Authority will take all the necessary
           steps to ensure that this gasoline is not marketed in
           Israel.

    b. The difference in the final price of gasoline to consumers in
       Israel and to consumers in the Areas, will not exceed 15% of
       the official final consumer price in Israel. The Palestinian
       Authority has the right to determine the prices of petroleum
       products, other than gasoline, for consumption in the Areas.

    c. If Egyptian gasoline standards will comply with the conditions
       of sub-para (a) above, the importation of Egyptian gasoline
       will also be allowed.

13. In addition to the points of exit and entry designated according
    to the Article regarding Passages in Annex I of the Agreement for
    the purpose of export and import of goods, the Palestinian side
    has the right to use all points of exit and entry in Israel
    designated for that purpose. The import and export of the
    Palestinians through the points of exit and entry in Israel will
    be given equal trade and economic treatment.

14. In the entry points of the Jordan River and the Gaza Strip:

    a. Freight shipment

       The Palestinian Authority will have full responsibility and
       powers in the Palestinian customs points (freight-area) for
       the implementation of the agreed upon customs and importation
       policy as specified in this protocol, including the inspection
       and the collection of taxes and other charges, when due.

       Israeli customs officials will be present and will receive
       from the Palestinian customs officials a copy of the necessary
       relevant documents related to the specific shipment and will
       be entitled to ask for inspection in their presence of both
       goods and tax collection.

       The Palestinian customs officials will be responsible for the
       handling of the customs procedure including the inspection and
       collection of due taxes.

       In case of disagreement on the clearance of any shipment
       according to this Article, the shipment will be delayed for
       inspection for a maximum period of 48 hours during which a
       joint sub-committee will resolve the issue on the basis of the
       relevant provisions of this Article. The shipment will be
       released only upon the sub-committee's decision.

    b. Passengers customs lane

       Each side will administer its own passengers customs
       procedures, including inspection and tax collection. The
       inspection and collection of taxes due in the Palestinian
       customs lane will be conducted by customs officials of the
       Palestinian Authority.

       Israeli customs officials will be invisibly present in the
       Palestinian customs lane and entitled to request inspection of
       goods and collection of taxes when due. In the case of
       suspicion, the inspection will be carried out by the
       Palestinian official in a separate room in the presence of the
       Israeli customs official.

15. The clearance of revenues from all import taxes and levies,
    between Israel and the Palestinian Authority, will be based on
    the principle of the place of final destination. In addition,
    these tax revenues will be allocated to the Palestinian Authority
    even if the importation was carried out by Israeli importers when
    the final destination explicitly stated in the import
    documentation is a corporation registered by the Palestinian
    Authority and conducting business activity in the Areas. This
    revenue clearance will be effected within six working days from
    the day of collection of the said taxes and levies.

16. The Joint Economic Committee or a sub-committee established by it
    for the purposes of this Article will deal inter alia with the
    following:

    1) Palestinian proposals for addition of items to Lists A1, A2
       and B. Proposals for changes in rates and in import
       procedures, classification, standards and licensing
       requirements for all other imports,

    2) Estimate the Palestinian market needs, as mentioned in para 3
       above;

    3) Receive notifications of changes and conduct consultations, as
       mentioned in para 6 above;

    4) Agree upon the rules of origin as mentioned in para 8 above,
       and review their implementation;

    5) Co-ordinate the exchange of information relevant to licensing
       matters as mentioned in para 9 above.

    6) Discuss and review any other matters concerning the
       implementation of this Article and resolve problems arising
       therefrom.

17. The Palestinian Authority will have the right to exempt the
    Palestinian returnees who will be granted permanent residency in
    the Areas from import taxes on personal belongings including
    house appliances and passenger cars as long as they are for
    personal use.

18. The Palestinian Authority will develop its system for temporary
    entry of needed machines and vehicles used for the Palestinian
    Authority and the Palestinian economic development plan.

    Concerning other machines and equipment, not included in Lists
    A1, A2 and B, the temporary entry will be part of the import
    policy as agreed in para 10 above, until the joint sub-committee
    mentioned in para 16 decides upon a new system proposed by the
    Palestinian Authority. The temporary entry will be coordinated
    through the joint sub-committee.

19. Donations in kind to the Palestinian Authority will be exempted
    from customs and other import taxes if destined and used for
    defined development projects or non-commercial humanitarian
    purposes.
    The Palestinian Authority will be responsible exclusively for
    planning and management of the donors' assistance to the
    Palestinian people. The Joint Economic Committee will discuss
    issues pertaining to the relations between the provisions in this
    Article and the implementation of the principles in the above
    paragraph.


                             Article IV

                    MONETARY AND FINANCIAL ISSUES


1.  The Palestinian Authority will establish a Monetary Authority
    (PMA) in the Areas.
    The PMA will have the powers and responsibilities for the
    regulation and implementation of the monetary policies within the
    functions described in this Article.

2.  The PMA will act as the Palestinian Authority's official economic
    and financial advisor.

3.  The PMA will act as the Palestinian Authority's and the public
    sector entities' sole financial agent, locally and
    internationally.

4.  The foreign currency reserves (including gold) of the Palestinian
    Authority and all Palestinian public sector entities will be
    deposited solely with the PMA and managed by it.

5.  The PMA will act as the lender of last resort for the banking
    system in the Areas.

6.  The PMA will authorize foreign exchange dealers in the Areas and
    will exercise control (regulation and supervision) over foreign
    exchange transactions within the Areas and with the rest of the
    world.

7.  a. The PMA will have a banking supervision department that will
       be responsible for the proper functioning, stability, solvency
       and liquidity of the banks operating in the Areas.

    b. The banking supervision department will predicate its
       supervision on the international principles and standards
       reflected in international conventions and especially on the
       principles of the "Basle Committee".

    c. The supervision department will be charged with the general
       supervision of every such bank, including:
       -The regulation of all kinds of banking activities, including
       their foreign activities;
       -The licensing of banks formed locally and of branches,
       subsidiaries, joint ventures and representative offices of
       foreign banks and the approval of controlling shareholders;
       -The supervision and inspection of banks.

8.  The PMA will relicense each of the five branches of the Israeli
    banks operating at present in the Gaza Strip and the West Bank,
    as soon as its location or the authorities regarding it come
    under the jurisdiction of the Palestinian Authority. These
    branches will be required to comply with the general rules and
    regulations of the PMA concerning foreign banks, based on the
    "Basle Concordat". Para I0 d, e, and f below will apply to these
    branches.

9.  a. Any other Israeli bank wishing to open a branch or a
       subsidiary in the Areas will apply for a license to the PMA
       and will be treated equally to other foreign banks, provided
       that the same will apply to the Palestinian banks wishing to
       open a branch or a subsidiary in Israel.

    b. Granting of a license by both authorities will be subject to
       the following arrangements based on the "Basle Concordat"
       valid on the date of signing of the Agreement and to the host
       authority's prevailing general rules and regulations
       concerning opening of branches and subsidiaries of foreign
       banks.

       In this para 10 "host authority" and "home authority" apply
       only to the Bank of Israel (BOI) and the PMA.

    c. A bank wishing to open a branch or establish a subsidiary will
       apply to the host authority, having first obtained the
       approval of its home authority. The host authority will notify
       the home authority of the terms of the license, and will give
       its final approval unless the home authority objects.

    d. The home authority will be responsible for the consolidated
       and comprehensive supervision of banks, inclusive of branches
       and subsidiaries in the area under the jurisdiction of the
       host authority. However, the distribution of supervision
       responsibilities between the home and the host authorities
       concerning subsidiaries will be according to the "Basle
       Concordat".

    e. The host authority will regularly examine the activities of
       branches and subsidiaries in the area under its jurisdiction.
       The home authority will have the right to conduct on site
       examinations in the branches and subsidiaries in the host
       area. However, the supervision responsibilities of the home
       authority concerning subsidiaries will be according to the
       "Basle Concordat".
       Accordingly, each authority will transfer to the other
       authority copies of its examination reports and any
       information relevant to the solvency, stability and soundness
       of the banks, their branches and subsidiaries.

    f. The BOI and the PMA will establish a mechanism for cooperation
       and for the exchange of information on issues of mutual
       interest.

10. a. The New Israeli Sheqel (NIS) will be one of the circulating
       currencies in the Areas and will legally serve there as means
       of payment for all purposes including official transactions.
       Any circulating currency, including the NIS, will be accepted
       by the Palestinian Authority and by all its institutions,
       local authorities and banks, when offered as a means of
       payment for any transaction.

    b. Both sides will continue to discuss, through the JEC, the
       possibility of introducing mutually agreed Palestinian
       currency or temporary alternative currency arrangements for
       the Palestinian Authority.

11. a. The liquidity requirements on all deposits in banks operating
       in the Areas will be determined and announced by the PMA.

    b. Banks in the Areas will accept NIS deposits. The liquidity
       requirements on the various kinds of NIS deposits (or deposit
       linked to the NIS) in banks operating in the Areas will not be
       less than 4% to 8%, according to the type of deposits. Changes
       of over 1% in the liquidity requirements on NIS deposits (or
       deposits linked to the NIS) in Israel will call for
       corresponding changes in the above mentioned rates.

    c. The supervision and inspection of the implementation of all
       liquidity requirements will be carried out by the PMA.

    d. The reserves and the liquid assets required according to this
       paragraph will be deposited at the PMA according to rules and
       regulations determined by it. Penalties for non compliance
       with the liquidity requirements will be determined by the PMA.

12. The PMA will regulate and administer a discount window system and
    the supply of temporary finance for banks operating in the Areas.

13. a. The PMA will establish or license a clearing house in order to
       clear money orders between the banks operating in the Areas,
       and with other clearing houses.

    b. The clearing of money orders and transactions between banks
       operating in the Areas and banks operating in Israel will be
       done between the Israeli and the Palestinian clearing houses
       on same working day basis, according to agreed arrangements.

14. Both sides will allow correspondential relations between each
    others' banks.

15. The PMA will have the right to convert at the BOI excess NIS
    received from banks operating in the Areas into foreign currency,
    in which the BOI trades in the domestic inter-bank market, up to
    the amounts determined per period, according to the arrangements
    detailed in para 16 below.

16. a. The excess amount of NIS, due to balance of payments flows,
       that the PMA will have the right to convert into foreign
       currency, will be equal to:

       (1) Estimates of all Israeli "imports" of goods and services
           from the Areas, valued at market prices (inclusive of
           taxes), which were paid for in NIS, less:
           (i) the taxes collected by the Palestinian Authority on
           all Israeli "imports" from the Areas and rebated to Israel
           in NIS, and
           (ii) the taxes collected by Israel on all Israeli
           "imports" from the Areas and included in their market
           value, and not rebated to the Palestinian Authority,
       minus
       (2) Estimates of all Israeli "exports" of goods and services
           to the Areas, valued at market prices (inclusive of
           taxes), which were paid for in NIS, less:
           (i) the taxes collected by Israel on such "exports" and
           rebated to the Palestinian Authority, and
           (ii) the taxes collected by the Palestinian Authority on
           such "exports" and included in their market value, and not
           rebated to Israel;
       plus
       (3) The accumulated net amounts of foreign currency converted
           previously into NIS by the PMA, as recorded in the BOI
           Dealing Room.

    b. The said flows and amounts will be calculated as of the date
       of the signing of the Agreement.

Notes to para 16:

       (i) The estimates of the said "exports and imports" of goods
           and services will include inter alia labor services, NIS
           expenditure of tourists and Israelis in the Areas and NIS
           expenditure of Palestinians of the Areas in Israel.

       (ii) Taxes and pension contributions on "imports" of labor
            services, paid to "importing" side and rebated to the
            "exporting" one, will not be included in the estimates of
            the sums to be converted, as the "exports'" earnings of
            labor services are recorded in the statistics inclusive
            of them, although they do not accrue to the individuals
            supplying them.

17. The PMA and the BOI will meet annually to discuss and determine
    the annual amount of convertible NIS during the following
    calendar year and will meet semi-annually to adjust the said
    amount. The amounts determined annually and adjusted
    semi-annually will be based on data and estimates regarding the
    past and on forecasts for the following period, according to the
    formula mentioned in para 16. The first meeting will be as soon
    as possible within three months after the date of the signing of
    the Agreement.

18. a. The exchange of foreign currency for NIS and vice-versa by the
       PMA will be carried out through the BOI Dealing Room, at the
       market exchange rates.

    b. The BOI will not be obliged to convert in any single month
       more than 1/5 of the semi-annual amount, as mentioned in para
       17.

19. There will be no ceiling on the annual foreign currency
    conversions by the PMA into NIS. However, in order to avoid
    undesirable fluctuations in the foreign exchange market, monthly
    ceilings of such conversions will be agreed upon in the annual
    and semi-annual meetings referred to in para 17.

20. Banks in the Areas will convert NIS into other circulating
    currencies and vice-versa.

21. The Palestinian Authority will have the authorities, powers and
    responsibilities regarding the regulation and supervision of
    capital activities in the Areas, including the licensing of
    capital market institutions, finance companies and investment
    funds.


                             Article  V

                           DIRECT TAXATION


1.  Israel and the Palestinian Authority will each determine and
    regulate independently its own tax policy in matters of direct
    taxation, including income tax on individuals and corporations,
    property taxes, municipal taxes and fees.

2.  Each tax administration will have the right to levy the direct
    taxes generated by economic activities within its area.

3.  Each tax administration may impose additional taxes on residents
    within its area on (individuals and corporations) who conduct
    economic activities in the other side's area.

4.  Israel will transfer to the Palestinian Authority a sum equal to:

    a. 75% of the income taxes collected from Palestinians from the
       Gaza Strip and the Jericho Area employed in Israel.

    b. The full amount of income taxes collected from Palestinians
       from the Gaza Strip and Jericho Area employed in the
       settlements.

5.  The two sides will agree on a set of procedures that will address
    all issues concerning double taxation.


                             Article VI

                 INDIRECT TAXES ON LOCAL PRODUCTION


1.  The Israel and the Palestinian tax administrations will levy and
    collect VAT and purchase taxes on local production, as well as
    any other indirect taxes, in their respective areas.

2.  The purchase tax rates within the jurisdiction of each tax
    administration will be identical as regards locally produced and
    imported goods.

3.  The present Israeli VAT rate is 17%. The Palestinian VAT rate
    will be 15% to 16%.

4.  The Palestinian Authority will decide on the maximum annual
    turnover for businesses under its jurisdiction to be exempt from
    VAT, within an upper limit of 12,000 US $.

5.  The VAT on purchases by businesses registered for VAT purposes
    will accrue to the tax administration with which the respective
    business is registered.

    Businesses will register for VAT purposes with the tax
    administration of the side of their residence, or on the side of
    their ongoing operation.

    There will be clearance of VAT revenues between the Israeli and
    Palestinian VAT administrations on the following conditions:

    a. The VAT clearance will apply to VAT on transactions between
       businesses registered with the VAT administration of the side
       in which they reside.

    b. The following procedures will apply to clearance of VAT
       revenues accruing from transactions by businesses registered
       for VAT purposes:

       (1) To be acceptable for clearance purposes, special invoices,
           clearly marked for this purpose, will be used for
           transactions between businesses registered with the
           different sides.

       (2) The invoices will be worded either in both Hebrew and
           Arabic or in English and will be filled out in any of
           these three languages, provided that the figures are
           written in "Arabic" (not Hindi) numerals.

       (3) For the purpose of tax rebates, such invoices will be
           valid for six months from their date of issue.

       (4) Representatives of the two sides will meet once a month,
           on the 20th day of the month, to present each other with a
           list of invoices submitted to them for tax rebate, for VAT
           clearance. This list will include the following details
           regarding each invoice:
           (a) The number of the registered business issuing it;
           (b) The name of the registered business issuing it;
           (c) The number of the invoice;
           (d) The date of issue;
           (e) The amount of the invoice;
           (f) The name of the recipient of the invoice.

       (5) The clearance claims will be settled within 6 days from
           the meeting, through a payment by the side with the net
           balance of claims against it, to the other side.

       (6) Each side will provide the other side, upon demand, with
           invoices for verification purposes. Each tax
           administration will be responsible for providing invoices
           for verification purposes for 6 months after receiving
           them.

       (7) Each side will take the necessary measure to verify the
           authenticity of the invoices presented to it for clearance
           by the other side.

       (8) Claims for VAT clearance which will not be found valid
           will be deducted from the next clearance payment.

       (9) Once an inter-connected computer system for tax rebates to
           businesses and for VAT clearance between the two sides is
           operational, it will replace the clearance procedures
           specified in sub-paras (4) - (8).

       (10) The two tax administrations will exchange lists of the
           businesses registered with them and will provide each
           other with the necessary documentation, if required, for
           the verification of transactions.

       (11) The two sides will establish a sub-committee which will
           deal with the implementation arrangements regarding the
           clearance of VAT revenues set above.

6.  VAT paid by not-for-profit Palestinian organizations and
    institutions, registered by the Palestinian Authority, on
    transactions in Israel, will accrue to the Palestinian tax
    administration. The clearance system set out in para 5 will apply
    to these organizations and institutions.


                             Article VII

                                LABOR


1.  Both sides will attempt to maintain the normality of movement of
    labor between them, subject to each side's right to determine
    from time to time the extent and conditions of the labor movement
    into its area. If the normal movement is suspended temporarily by
    either side, it will give the other side immediate notification,
    and the other side may request that the matter be discussed in
    the Joint Economic Committee.

    The placement and employment of workers from one side in the area
    of the other side will be through the employment service of the
    other side and in accordance with the other sides' legislation.
    The Palestinian side has the right to regulate the employment of
    Palestinian labor in Israel through the Palestinian employment
    service, and the Israeli Employment Service will cooperate and
    coordinate in this regard.

2.  a. Palestinians employed in Israel will be insured in the Israeli
       social insurance system according to the National Insurance
       Law for employment injuries that occur in Israel, bankruptcy
       of employers and maternity leave allowance.

    b. The National Insurance fees deducted from the wages for
       maternity insurance will be reduced according to the reduced
       scope of maternity insurance, and the equalization deductions
       transferred to the Palestinian Authority, if levied, will be
       increased accordingly.

    c. Implementation procedures relating thereto will be agreed upon
       between the Israeli National Insurance Institute and the
       Palestinian Authority or the appropriate Palestinian social
       insurance institution.

3.  a. Israel will transfer to the Palestinian Authority, on a
       monthly basis, the equalization deductions as defined by
       Israeli legislation, if imposed and to the extent levied by
       Israel. The sums so transferred will be used for social
       benefits and health services, decided upon by the Palestinian
       Authority, for Palestinians employed in Israel and for their
       families.

       The equalization deductions to be so transferred will be those
       collected after the date of the signing of the Agreement from
       wages of Palestinians employed in Israel and from their
       employers.

       These sums will not include

       (1) Payments for health services in places of employment.

       (2) 2/3 of the actual administrative costs in handling the
           matters related to the Palestinians employed in Israel by
           the Payments Section of the Israeli Employment Service.

4.  Israel will transfer, on a monthly basis, to a relevant pension
    insurance institution to be established by the Palestinian
    Authority, pension insurance deductions collected after the
    establishment of the above institution and the completion of the
    documents mentioned in para 6.

    These deductions will be collected from wages of Palestinians
    employed in Israel and their employers, according to the relevant
    rates set out in the applicable Israeli collective agreements.
    2/3 of the actual administrative costs in handling these
    deductions by the Israeli Employment Service will be deducted
    from the sums transferred. The sums so transferred will be used
    for providing pension insurance for these workers. Israel will
    continue to be liable for pension rights of the Palestinian
    employees in Israel, to the extent accumulated by Israel before
    the entry into force of this para 4.

5.  Upon the receipt of the deductions, the Palestinian Authority and
    its relevant social institutions will assume full responsibility
    in accordance with the Palestinian legislation and arrangements,
    for pension rights and other social benefits of Palestinians
    employed in Israel, that accrue from the transferred deductions
    related to these rights and benefits. Consequently, Israel and
    its relevant social institutions and the Israeli employers will
    be released from, and will not be held liable for any obligations
    and responsibilities concerning personal claims, rights and
    benefits arising from these transferred deductions, or from the
    provisions of paras 2-4 above.

6.  Prior to the said transfers, the Palestinian Authority or its
    relevant institutions, as the case may be, will provide Israel
    with the documents required to give legal effect to their
    aforesaid obligations, including mutually agreed implementation
    procedures of the principles agreed upon in paras 3-5 above.

7.  The above arrangements concerning equalization deductions and/or
    pension deductions may be reviewed and changed by Israel if an
    authorized court in Israel will determine that the deductions or
    any part thereof must be paid to individuals, or used for
    individual social benefits or insurance in Israel, or that it is
    otherwise unlawful. In such a case the liability of the
    Palestinian side will not exceed the actual transferred
    deductions related to the case.

8.  Israel will respect any agreement reached between the Palestinian
    Authority, or an organization or trade-union representing the
    Palestinians employed in Israel, and a representative
    organization of employees or employers in Israel, concerning
    contributions to such organization according to any collective
    agreement.

9.  a. The Palestinian Authority may integrate the existing health
       insurance scheme for Palestinians employed in Israel and their
       families in its health insurance services. As long as this
       scheme continues, whether integrated or separately, Israel
       will deduct from their wages the health insurance fees
       ("health stamp") and will transfer them to the Palestinian
       Authority for this purpose.

    b. The Palestinian Authority may integrate the existing health
       insurance scheme for Palestinians who were employed in Israel
       and are receiving pension payments through the Israeli
       Employment Service, in its health insurance services. As long
       as this scheme continues, whether integrated or separately,
       Israel will deduct the necessary sum of health insurance fees
       ("health stamp") from the equalization payments and will
       transfer them to the Palestinian Authority for this purpose.

10. The JEC will meet upon the request of either side and review the
    implementation of this Article and other issues concerning labor,
    social insurance and social rights.

11. Other deductions not mentioned above, if any, will be jointly
    reviewed by the JEC. Any agreement between the two sides
    concerning these deductions will be in addition to the above
    provisions.

12. Palestinians employed in Israel will have the right to bring
    disputes arising out of employee - employer relationships and
    other issues before the Israeli Labor Courts, within these
    courts' jurisdiction.

13. This Article governs the future labor relations between the two
    sides and will not impair any labor rights prior to the date of
    signing of the Agreement.


                            Article VIII

                             AGRICULTURE


1.  There will be free movement of agricultural produce, free of
    customs and import taxes, between the two sides, subject to the
    following exceptions and arrangements.

2.  The official veterinary and plant protection services of each
    side will be responsible, within the limits of their respective
    jurisdiction, for controlling animal health, animal products and
    biological products, and plants and parts thereof, as well as
    their importation and exportation.

3.  The relations between the official veterinary and plant
    protection services of both sides will be based on mutuality in
    accordance with the following principles, which will be applied
    in all the areas under their respective jurisdiction:

    a. Israel and the Palestinian Authority will do their utmost to
       preserve and improve the veterinary standards.

    b. Israel and the Palestinian Authority will take all measures to
       reach equivalent and compatible standards regarding animal
       disease control, including mass vaccination of animals and
       avians, quarantines, "stamping out" measures and residue
       control standards.

    c. Mutual arrangements will be made to prevent the introduction
       and spread of plant pests and diseases, for their eradication
       and concerning residue control standards in plant products.

    d. The official veterinary and plant protection services of
       Israel and the Palestinian Authority will co-ordinate and
       regularly exchange information regarding animal diseases, as
       well as plant pests and diseases, and will establish a
       mechanism for immediate notification of the outbreak of such
       diseases.

4.  Trade between the two sides in animals, animal products and
    biological products will be in keeping with the principles and
    definitions set out in the current edition of the OIE National
    Animal Health Code as updated from time to time (hereinafter -
    I.A.H.C.)

5.  Transit of livestock, animal products and biological products
    from one side through the area under the jurisdiction of the
    other side, should be conducted in a manner aimed at the
    prevention of diseases spreading to or from the consignment
    during its movement. For such a transit to be permitted, it is a
    prerequisite that the veterinary conditions agreed upon by both
    sides will be met in regard to importation of animals, their
    products and biological products from external markets. Therefore
    the parties agree to the following arrangements.

6.  The official veterinary services of each side have the authority
    to issue veterinary import permits for import of animals, animal
    products and biological products to the areas under its
    jurisdiction. In order to prevent the introduction of animal
    diseases from third parties, the following procedures will be
    adopted:

    a. The import permits will strictly follow the professional
       veterinary conditions for similar imports to Israel as
       prevailing at the time of their issuance. The permits will
       specify the country of origin and the required conditions to
       be included in the official veterinary certificates which
       should be issued by the veterinary authorities in the
       countries of origin and which should accompany each
       consignment.

       Each side may propose a change in these conditions. The change
       will come into force 10 days after notice to the other side,
       unless the other side requested that the matter be brought
       before the Veterinary Sub-Committee specified in para 14
       (hereinafter - VSC). If it is more stringent than the
       prevailing conditions - it will come into force 20 days after
       the request, unless both sides decide otherwise through the
       VSC, and if more lenient - it will come into force only if
       agreed upon by both sides through the VSC.
       However, if the change is urgent and needed for the protection
       of animal and public health, it will come into force
       immediately after notice by the other side and will remain in
       force unless and until both sides agree otherwise through the
       VSC.

    b. The official veterinary certificates will include the
       provisions regarding OIE Lists A & B Diseases as specified in
       the I.A.H.C. When the I.A.H.C. allows alternative requirements
       regarding the same disease, the most stringent one will be
       adopted unless otherwise agreed upon by the VSC.

    c. When infectious diseases which are not included in Lists A & B
       of the I.A.H.C. exist or are suspected, on scientific grounds,
       to exist in the exporting country, the necessary veterinary
       import conditions that will be required and included in the
       official veterinary certificates, will be discussed in the
       VSC, and in the case of different professional opinions, the
       most stringent ones will be adopted.

    d. The import of live vaccines will be permitted only if so
       decided by the VSC.

    e. Both sides will exchange, through the VSC, information
       pertaining to import licensing, including the evaluation of
       the disease situation and zoosanitary capability of exporting
       countries, which will be based upon official information as
       well as upon other available data.

    f. Consignments which do not conform with the above mentioned
       requirements will not be permitted to enter the areas under
       the jurisdiction of either side.

7.  Transportation of livestock and poultry and of animal products
    and biological products between areas under the jurisdiction of
    one side through areas under the jurisdiction of the other side,
    will be subject to the following technical rules:

    a. The transportation will be by vehicles which will be sealed
       with a seal of the official veterinary services of the place
       of origin and marked with a visible sign "Animal
       Transportation" or "Products of Animal Origin" in Arabic and
       Hebrew, in coloured and clearly visible letters on white
       background.;

    b. Each consignment will be accompanied by a veterinary
       certificate issued by the official veterinary services of the
       place of origin, certifying that the animals or their products
       were examined and are free of infectious diseases and
       originate from a place which is not under quarantine or under
       animal movement restrictions.

8.  Transportation of livestock and poultry, animal products and
    biological products destined for Israel from the Areas and vice
    versa will be subject to veterinary permits issued by the
    official veterinary services of the recipient side, in keeping
    with the OIE standards used in international traffic in this
    field. Each such consignment will be transported by a suitable
    and marked vehicle, accompanied by a veterinary certificate in
    the form agreed upon between the official veterinary services of
    both sides. Such certificates will be issued only if permits of
    the recipient side are presented.

9.  In order to prevent the introduction of plant pests and diseases
    to the region, the following procedures will be adopted :

    a. The transportation between the Areas and Israel, of plants and
       parts thereof (including fruits and vegetables), the control
       of pesticide residues in them and the transportation of plant
       propagation material and of animal feed, may be inspected
       without delay or damage by the plant protection services of
       the recipient side.

    b. The transportation between the Areas through Israel of plants
       and parts thereof (including fruits and vegetables) as well as
       of pesticides, may be required to pass a phytosanitary
       inspection without delay or damage.

    c. The official Palestinian plant protection services have the
       authority to issue permits for the import of plants and parts
       thereof as well as of pesticides from external markets. The
       permits will be based on the prevailing standards and
       requirements.

       The permits will specify the required conditions to be
       included in the official Phytosanitary Certificates (hence
       P.C.) based upon the standards and the requirements of the
       International Plant Protection Convention (I.P.P.C.)and those
       of the European and Mediterranean Plant Protection
       Organization (E.P.P.O.) which should accompany each
       consignment.
       The P.C.'s will be issued by the plant protection services in
       the countries of origin. Dubious or controversial cases will
       be brought before the sub-committee on plant protection.

10. The agricultural produce of both sides will have free and
    unrestricted access to each others' markets, with the temporary
    exception of sales from one side to the other side of the
    following items only: poultry, eggs, potatoes, cucumbers,
    tomatoes and melons. The temporary restrictions on these items
    will be gradually removed on an increasing scale until they are
    finally eliminated by 1998, as listed below:


Year     Poultry   Eggs   Potatoes   Cucumbers   Tomatoes    Melons
--------------------------------------------------------------------
         (In tons)  (In   (In tons)   (In tons)  (In tons)  (In tons)
                  millions)

1994       5,000     30    10,000     10,000      13,000     10,000

1995       6,000     40    13,000     13,000      16,000     13,000

1996       7,000     50    15,000     15,000      19,000     15,000

1997       8,000     60    17,000     17,000      22,000     17,000

1998   unlimited unlimited unlimited  unlimited  unlimited  unlimited
---------------------------------------------------------------------

Note:  The above figures refer to the combined quantities marketed
       from the West Bank and Gaza Strip to Israel and vice-versa.
       The Palestinian Authority will notify Israel the apportioning
       of these quantities between these areas concerning the
       quantities pertaining to the Palestinian produce.

11. The Palestinians will have the right to export their agricultural
    produce to external markets without restrictions, on the basis of
    certificates of origin issued by the Palestinian Authority.

12. Without prejudice to obligations arising out of existing
    international agreements, the two sides will refrain from
    importing agricultural products from third parties which may
    adversely affect the interests of each other's farmers.

13. Each side will take the necessary measures in the area under its
    jurisdiction to prevent damage which may be caused by its
    agriculture to the environment of the other side.

14. The two sides will establish sub-committees of their respective
    official veterinary and plant protection services, which will
    update the information and review issues, policies and procedures
    in these fields. Any changes in the provisions of this Article
    will be agreed upon by both sides.

15. The two sides will establish a sub-committee of experts in the
    dairy sector in order to exchange information, discuss and
    coordinate their production in this sector so as to protect the
    interests of both sides. In principle, each side will produce
    according to its domestic consumption.


                             Article IX

                              INDUSTRY


1.  There will be free movement of industrial goods free of any
    restrictions including customs and import taxes between the two
    sides, subject to each side's legislation.

2.  a. The Palestinian side has the right to employ various methods
       in encouraging and promoting the development of the
       Palestinian industry by way of providing grants, loans,
       research and development assistance and direct-tax benefits.
       The Palestinian side has also the right to employ other
       methods of encouraging industry resorted to in Israel.

    b. Both sides will exchange information about the methods
       employed by them in the encouragement of their respective
       industries.

    c. Indirect tax rebates or benefits and other subsidies to sales
       shall not be allowed in trade between the two sides.

3.  Each side will do its best to avoid damage to the industry of the
    other side and will take into consideration the concerns of the
    other side in its industrial policy.

4.  Both sides will cooperate in the prevention of deceptive
    practices, trade in goods which may endanger health, safety and
    the environment and in goods of expired validity.

5.  Each side will take the necessary measures in the area under its
    jurisdiction to prevent damage which may be caused by its
    industry to the environment of the other side.

6.  The Palestinians will have the right to export their industrial
    produce to external markets without restrictions, on the basis of
    certificates of origin issued by the Palestinian Authority.

7.  The JEC will meet and review issues pertaining to this Article.


                              Article X

                               TOURISM


1.  The Palestinian Authority will establish a Palestinian Tourism
    Authority which will exercise, inter alia, the following powers
    in the Areas.

    a. Regulating, licensing, classifying and supervising tourist
       services, sites and industries.

    b. Promoting foreign and domestic tourism and developing the
       Palestinian tourist resources and sites.

    c. Supervising the marketing, promotion and information
       activities related to foreign and domestic tourism .

2.  Each side shall, under its respective jurisdiction, protect,
    guard and ensure the maintenance and good upkeep of historical,
    archaeological, cultural and religious sites and all other
    tourist sites, to fit their status as well as their purpose as a
    destination for visitors.

3.  Each side will determine reasonable visiting hours and days for
    all tourist sites in order to facilitate visits at a wide variety
    of days and hours, taking into consideration religious and
    national holidays. Each side shall publicize such opening times.
    Meaningful changes in the opening times will take into
    consideration tourist programs already committed to.

4.  Tourist buses or any other form of tourist transport authorized
    by either side, and operated by companies registered and licensed
    by it, will be allowed to enter and proceed on their tour within
    the area under the jurisdiction of the other side, provided that
    such buses or other vehicles conform with the EEC technical
    specifications [I. currently adopted.] All such vehicles will be
    clearly marked as tourist vehicles.

5.  Each side will protect the environment and the ecology around the
    tourist sites under its jurisdiction. In view of the importance
    of beaches and maritime activities for tourism, each side will do
    its best efforts to ensure that development and construction on
    the Mediterranean coast, and especially at ports (such as
    Ashqelon or Gaza), will be planned and carried out in a manner
    that will not adversely affect the ecology, environment or the
    functions of the coastline and beaches of the other side.

6.  Tourism companies and agencies licensed by either side shall
    enjoy equal access to tourism - related facilities and amenities
    in border points of exit and entry according to the regulations
    of the authority operating them.

7.  a. Each side will license, according to its own rules and
       regulations, travel agents, tour companies, tour guides and
       other tourism businesses (hereinafter - tourism entities)
       within its jurisdiction.

    b. Tourism entities authorized by either side, will be allowed to
       conduct tours that include the area under the jurisdiction of
       the other side, provided that their authorization as well as
       their operation will be in accordance with rules, professional
       requirements and standards agreed upon by both sides in the
       sub-committee mentioned in para 9.

       Pending that agreement, existing tourism entities in the Areas
       which are currently allowed to conduct tours that include
       Israel, will be allowed to continue to do so, and Israeli
       authorized tourism entities will continue to be allowed to
       conduct tours that include the Areas.

       In addition, any tourism entity of one side that the tourism
       authorities of the other side will certify as fulfilling all
       its rules, professional requirements and standards, will be
       allowed to conduct tours that include that other side.

8.  Each side will make its own arrangement for compensation of
    tourists for bodily injury and property damages caused by
    political violence in the areas under its respective
    jurisdiction.

9.  The JEC or a tourism sub-committee established by it shall meet
    upon the request of either side in order to discuss the
    implementation of the provisions of this Article and resolve
    problems that may arise. The sub-committee will also discuss and
    consider tourist issues of benefit to both sides, and will
    promote educational programs for tourism entities of both sides
    in order to further their professional standards and their
    ethics. Complaints of one side against the behaviour of tourism
    entities of the other side will be channelled through the
    committee.

Note:  It is agreed that the final wording in the last sentence in
       para 4 will be adopted according to the final wording in the
       relevant provisions of the Agreement.


                             Article XI

                          INSURANCE ISSUES


1.  The authorities, powers and responsibilities in the insurance
    sphere in the Areas, including inter alia the licensing of
    insurers, insurance agents and the supervision of their
    activities, will be transferred to the Palestinian Authority.

2.  a. The Palestinian Authority will maintain a compulsory absolute
       liability system for road accident victims with a ceiling on
       the amount of compensation based upon the following
       principles:

       (1) Absolute liability for death or bodily injury to road
           accident victims, it being immaterial whether or not there
           was fault on the part of the driver and whether or not
           there was fault or contributory fault on the part of
           others, each driver being responsible for persons
           travelling in his vehicle and for pedestrians hit by his
           vehicle.

       (2) Compulsory insurance for all motor vehicles, covering
           death or bodily injury to all road accident victims,
           including drivers.

       (3) No cause of action in tort for death or bodily injury
           resulting from road accidents.

       (4) The maintenance of a statutory fund (hereinafter - the
           Fund) for compensation of road accident victims who are
           unable to claim compensation from an insurer for the
           following reasons:
           (i) the driver liable for compensation is unknown;
           (ii) the driver is not insured or his insurance does not
           cover the liability involved; or
           (iii) the insurer is unable to meet his liabilities.

    b. Terms in this Article will have the same meaning as in the
       legislation prevailing at the date of signing of the Agreement
       concerning compulsory motor vehicle insurance and compensation
       of road accident victims.

    c. Any change by either side in the rules and regulations
       regarding the implementation of the above mentioned principles
       will require prior notice to the other side. A change which
       might substantially affect the other side will require prior
       notice of at least three months.

3.  a. Upon the signing of the Agreement the Palestinian Authority
       will establish a Fund for the Areas (hereinafter - the
       Palestinian Fund) for the purposes detailed in para 2(a)(4)
       above and for the purposes detailed below. The Palestinian
       Fund will assume the responsibilities of the statutory Road
       Accident Victims Compensation Fund in the West Bank and the
       Gaza Strip (hereinafter - the Existing Fund) regarding the
       Areas, according to the prevailing law at that time.
       Accordingly, the Existing Fund will cease to be responsible
       for any liability regarding accidents occurring in the Areas
       from the date of signing of the Agreement.

    b. The Existing Fund will transfer to the Palestinian Fund, after
       the assumption of the above mentioned responsibilities by it,
       the premiums paid to the Existing Fund by the insurers for
       vehicles registered in the Areas, pro-rata to the unexpired
       period of each insurance policy.

    4. a. Compulsory motor vehicle insurance policies issued by
       insurers licensed by either side will be valid in the
       territories of both sides. Accordingly, a vehicle registered
       in one side covered by such a policy will not be required to
       have an additional insurance coverage for travel in the areas
       under the other side's jurisdiction. These insurance policies
       will cover all the liabilities according to the legislation of
       the place of the accident.

    b. In order to cover part of the liabilities which may incur due
       to road accidents in Israel by uninsured vehicles registered
       in the Palestinian Authority, the Palestinian Fund will
       transfer to the Israeli Fund, on a monthly basis, for each
       insured vehicle, an amount equal to 30% of the amount paid to
       the Israeli Fund by an insurer registered in Israel, for the
       sat-ne type of vehicle, for the same period of insurance
       (which will not be less than 90 days).

5.  In cases where a victim of a road accident wishes to claim
    compensation from an insurer registered by the other side or from
    the Fund of the other side or in cases where a driver or an owner
    of a car is sued by a victim, by an insurer or by the Fund of the
    other side, he may nominate the Fund of his side as his proxy for
    this purpose. The Fund so nominated may address any relevant
    party from the other side directly or through the other sides'
    Fund.

6.  In the case of a road accident in which neither the registration
    number of the vehicle nor the identity of the driver are known,
    the Fund of the side which has jurisdiction over the place of the
    accident will compensate the victim, according to its own
    legislation.

7.  The Fund of each side will be responsible towards the victims of
    the other side for any liability of the insurers of its side
    regarding the compulsory insurance and will guarantee their
    liabilities.

8.  Each side will guarantee its Fund's liabilities according to this
    Article.

9.  The two sides will negotiate within three months from the date of
    the signing of the Agreement a cut-off agreement between the
    Existing Fund and the Palestinian Fund concerning accidents which
    occurred in the Areas prior to the date of the signing of the
    Agreement, whether claims have been reported or not. The cut-off
    agreement will not include compensation for Israeli victims
    involved in accidents which occurred in the Areas prior to the
    date of the signing of the Agreement.

10. a. The two sides will establish immediately upon the signing of
       the Agreement, a sub-committee of experts (hereinafter - the
       Sub-Committee) which will deal with issues regarding the
       implementation of this Article, including:

       (1) Procedures concerning the handling of claims of victims of
           the one side from insurers or from the Fund of the other
           side;

       (2) Procedures concerning the transfer of the amounts between
           the Funds of both sides as mentioned in para 4(b) above-,

       (3) The details of the cut-off agreement between the Existing
           Fund and the Palestinian Fund, as set out in para 9 above;

       (4) Any other relevant issue raised by either side.

    b. The Sub-Committee will act as a continuous committee for
       issues regarding this Article.

    c. The two sides will exchange, through the Sub-Committee, the
       relevant information regarding the implementation of this
       Article, including police reports, medical information,
       relevant statistics, premiums, etc.. The two sides will
       provide each other with any other assistance required in this
       regard.

11. Each side may require the re-examination of the arrangements set
    out in this Article a year after the date of the signing of the
    Agreement.

12. Insurers from both sides may apply for a license to the relevant
    authorities of the other side, according to the rules and
    regulations regarding foreign insurers in the latter side. The
    two sides agree not to discriminate against such applicants.



Done in Paris, this twenty ninth day of April, 1994



For the Government of Israel                 For the PLO

Finance Minister Avraham Shohat              Abu Ala (Ahmed Korei)
.

----------------

al@mashriq

980606/bl