ICP IA Development – Part I Legal Authorities and Key IA Drafting Principles

1. ICP IA Development – Part I Legal Authorities and Key IA Drafting Principles

2. Lesson Outline • Typical DoD ICP Legal Authorities • ICP Legal Authorities “Deep Dive” • Drafting ICP IAs – Key Principles

3. S&T, R&DorSystem Cooperation Typical Legal Authority Choices 10 USC 2350a AECA Section 27 AECA Section 65 AECA Section 27 AECA Section 65 10 USC 2358 Data Exchange Cooperative S&T or R&D Projects System Level Cooperation Partial/Full System Cooperation S&T and RDT&E Projects RDT&E MOU or PA DEA/IEA Program-Specific MOU • SSOI Objectives and Scope of Work Description: • S&T cooperative project • Program-related cooperative R&D projects or Tech Demos • System level cooperative program (R&D, Prod, Log, Product Upgrade)

4. Country Category Overview Member Nations of NATO • Albania • Belgium • Bulgaria • Canada • Croatia • Czech Republic • Denmark • Estonia • France • Germany • Greece • Hungary • Iceland • Italy • Latvia • Lithuania • Luxembourg • Netherlands • Norway • Montenegro • Poland • Portugal • Romania • Slovakia • Slovenia • Spain • Turkey • United Kingdom • United States Major Non-NATO Allies • Pakistan • Philippines • Republic of Korea* • Taiwan (treated as if it were) • Thailand • Tunisia (added July 10, 2015 • Afghanistan • Argentina • Australia* • Bahrain • Egypt* • Israel* • Japan* • Jordan • Kuwait • Morocco • New Zealand • *Original Designee Friendly Foreign Countries Determined by DoD on a case-by-case basis and notified to Congress during the OSD IA staffing process. Sweden is a good example.

5. 10 U.S.C. 2358 • Projects may be done by • Contract • Cooperative Agreement (most commonly DEAs/IEAs) • Grant • No country eligibility requirement (e.g. Russian Federation) • No explicit equitability requirement. But OSD (C) and DoD OGC imply this requirement.

6. 10 U.S.C. 2350a • Expands 10 U.S.C. 2358 by permitting: • Joint management • Pooling of resources • Sharing costs of claims • “Nunn” ICR&D money available for start-up only • Must be “equitable” (A&S/R&E, DoD OGC, OUSD(C) assess) • “Major non-NATO allies” (MNNAs) include countries designated by SECDEF with concurrence of SECSTATE • “Friendly foreign countries” (FFCs) include countries designated by SECDEF and notified to Congress on a case-by-case basis

7. AECA Section 27 (22 U.S.C. 2767) • Expands significantly on 10 U.SC. 2358 and 10 U.S.C. 2350a by permitting: • Cooperative production and follow-on support • Procurement of foreign defense articles • Participants to contract on behalf of each other • Dependable Undertaking • Participants to exchange funds • Jointly acquiring and disposing of property • Workshare and Offsets only in accordance with agreement/MOU • Eligibility – NATO, NATO member nations, FFCs (MNNAs = FFCs) • Must be “equitable” (A&S/R&E, DoD OGC, OUSD(C) assess)

8. 10 U.S.C. 2350b • 10 U.S.C. 2350b. “Cooperative projects under Arms Export Control Act: acquisition of defense equipment” • Enables DoD to implement authorities of AECA 27 • Example: Foreign partner may contract for requirements of the United States. Note that this and other “waivers” require the SECDEF (delegated to USD (A&S) to make a “determination and finding” that such contract “will significantly further standardization, rationalization, and interoperability.” This is not a pro forma approval. Common practice with Israel.

9. Cooperative R&D: Loans • May be a stand-alone loan agreement/MOU • May be part of a PA under an RDT&E master agreement/MOU • Newer RDT&E master agreements/MOUs include an annex for a model Equipment and Material Transfer Arrangement – a short-form loan instrument (1040EZ) • Note: R&D software is generally categorized as defense information, that may be exchanged under an IEA/DEA. Fielded software, especially modelling and simulation software, is categorized as a defense article, that would have to be loaned or sold.

10. Cooperative R&D: Loans/Leases • AECA Section 61 (22 U.S.C. 2796) – Loan and Leasing Authority • May loan or accept loan for the purpose of carrying out a program of cooperative research, development, testing, or evaluation • May lease defense articles to an eligible foreign country (every country except those on State Department bad guy lists) or international organization • The usual requirement for the lessee to pay does not apply to leases for Cooperative R&D • DSCA has promulgated a model lease • Generally used only for countries not eligible under AECA Section 65, i.e., not NATO and not MNNA: think Sweden

11. A&S/R&E International Agreement Legal Authority Functional Overview * This is only applicable if International Cooperative R&D (ICR&D) funds are not used for the procurement * * As part of an international agreement for a cooperative project or program; not as a stand-alone loan

12. A&S/R&E Legal Authority and Country Category Overview 10 U.S.C., Sections 2350b and 2350i are not shown in this chart as these legal authorities only enable specific actions on Cooperative RD&A programs conducted under AECA Section 27 legal authority * All IAs relying on AECA Section 27 authority require Congressional notification ** IAs relying on 10 U.S.C., Section 2350a authority with Friendly Foreign Countries require Congressional notification

13. Key Principles – ICP IA Drafting (1) • Always insist on writing the negotiating draft. Most of our international partners have become used to this. • Starting Point for IA Drafting: • IA Generator (4.0b – 7/7/2009) • Chapeau: AS, CA, NZ, UK • Non-Chapeau: Almost every other nation • Special Cases: Japan • Model Bilateral RDT&E Agreement (latest available version) • PA Template (from Master IA)

14. Key Principles – ICP IA Drafting (2) Two general rules: • The front half of the agreement – preamble; objectives; scope of work; management; money – needs to be agreement-specific. Note: Previous agreements provide examples and inform drafting, but should not be cut-and-pasted, then forgotten … don’t fire then forget • The back half of the agreement – definitions (actually in the front); financial; contracting; project equipment; disclosure and use of information; controlled unclassified information; security; third party sales and transfers; liability and claims; customs duties and taxes; settlement of disputes; amendment, termination, entry into force, and duration Note: Adhere to the IA Generator , as modified by current and accepted nation-specific practice.

15. Key Principles -- ICP IA Drafting (3) • Always consult prior agreements with the same nation. They will at least inform your drafting. • Avoid beginning a draft with previously negotiated compromiseseven with same nation(s) in similar context; let other nation(s) to propose/justify previously accepted text • Consult latest agreements approved by A&S/IC and DoD OGC • Warning: Refrain from assembling draft agreements by cobbling together from two or more existing agreements by way of simply cutting and pasting various provisions, then forgetting • This poses a risk of having incompatible and/or inconsistent provisions, e.g., for objectives, scope of work, and management

16. Key Principles – ICP IA Drafting (4) • Review and confirm RAD/SSOI legal authority choice(s): • Is 10 U.S.C. 2350a adequate? • AECA Section 27 required provisions, e.g., dependable undertaking, workshare, offsets, disposal of jointly acquired property, etc.? • Warning: Not all foreign partners are willing to use AECA Section 27 agreements if dependable undertaking provision is included (unknown contract claims liability/unknown amount) • Japan does not have necessary statutory/regulatory provisions • GE MOD excluded from RDT&E Agreement, but could add in a specific PA

17. Questions?