Defence Equipment and Industrial Cooperation

On 5th February 2000, William S. Cohen, United States (US) Secretary of Defense, and Geoff Hoon, United Kingdom (UK) Secretary of State for Defence signed the Declaration of Principles for Defence Equipment and Industrial Cooperation.

The Declaration establishes principles for improved co-operation in a number of key areas such as security of supply, export procedures, security, corporate governance, research, and promoting defence trade.

One of the most important principles is that UK industry doing business in the US should be treated no less favourably than US industry doing business in the UK.

The Declaration is designed to improve the arrangements for defence equipment co-operation and trade by removing unnecessary administrative obstacles. As such it responds to concerns which have been expressed by both Government and industry on both sides of the Atlantic.

Implementation arrangements which have been subject to further negotiations between the UK and US have been included in Annex VI and Annex VII of the US/UK Reciprocal Defence Procurement MOU (signed 2004) which relate to Security of Supply and the Flow of Technical Information respectively.

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DECLARATION OF PRINCIPLES FOR DEFENCE EQUIPMENT AND INDUSTRIAL COOPERATION

The Department of Defense of the United States of America
and
The Ministry of Defence of the United Kingdom of Great Britain and Northern Ireland

Declaration of Principles for Defence Equipment and Industrial Cooperation

The Governments of the United States of America and the United Kingdom of Great Britain and Northern Ireland have a longstanding cooperative relationship across a broad spectrum of defence activities, including strict enforcement of export policies for armaments and technologies; strong industrial security systems and compatible industrial security practices; close relationships in law enforcement and cooperation on industrial security matters and export control violations; and close relationships in intelligence sharing on matters of counterintelligence and industrial security, and countering economic espionage and export control violations. Moreover, the Department of Defense of the United States of America (U.S. DoD) and the Ministry of Defence of the United Kingdom of Great Britain and Northern Ireland (U.K. MOD) desire to maximize value for money in defence equipment acquisition, based on the principle of competition.

Our relationship is underpinned by the Memorandum of Understanding between the Department of Defense of the United States of America and the Secretary of State for Defence of the United Kingdom of Great Britain and Northern Ireland concerning Principles for Research, Development, Production and Procurement, dated December 13, 1994, and other bilateral arrangements and agreements.

Our past efforts to improve the level of defence equipment cooperation and trade have not realized their full potential. Nonetheless, we believe that it is fundamental to our common interests to enhance the environment for mutual defence equipment and industrial cooperation. We therefore intend to improve significantly the cooperative framework that will facilitate both traditional and new types of collaboration by our defence companies and a more integrated and stronger industrial base. It is also our intention to take the necessary steps to ensure that U.K. industry doing business in the United States will be treated no less favorably than U.S. industry doing business in the United Kingdom . We believe that this initiative will provide an important and welcome opportunity to enhance our mutual interdependence in the defence equipment field.

The U.S. DOD and U.K. MOD intend to apply the provisions of this Declaration and Annex to those matters within their respective areas of responsibility. They affirm the prerogatives of other agencies of their respective governments on certain matters related to this Declaration and Annex and note that in the case of the United States, the provisions of the Declaration and Annex do not apply to matters that are under the jurisdiction of other agencies of the government including the Department of State. They also note that within their respective governments there is ongoing work related to such matters to further the objective of cooperation between their governments, the outcome of which is not prejudiced by the provisions of this Declaration and Annex. They also affirm their desire to promote similar cooperation between each of them and other allies, both bilaterally and multilaterally.

Therefore, the U.S. DOD and U.K. MOD have reached the understandings reflected in this Declaration of Principles and its Annex attached hereto. The principles established in this Declaration and in the Annex to this Declaration, which is an integral part of the Declaration, are not intended to be legally binding, nor to entail new fiscal obligations on the part of either the U.S. DoD or the U.K. MOD, but to point the way to arriving at future arrangements or agreements which may be legally binding. It is further understood that these future arrangements or agreements may entail amendments to national laws or regulations.

Signed in duplicate at Munich, Federal Republic of Germany, on the 5th day of February 2000.

William S. Cohen
Secretary of Defense
United States of America Geoffrey Hoon
Secretary of State for Defence
United Kingdom of Great Britain and Northern Ireland

Annex

Purpose

1. The purpose of this Annex to the Declaration of Principles (Declaration) is to indicate the areas in which the U.S. DoD and the U.K. MOD ("the Participants") intend to find common solutions to the problems identified; to define the principles on which appropriate follow-on arrangements or agreements, or amendments to existing arrangements or agreements, will be based; and to establish a process and intended timescale for the negotiation of follow-on arrangements or agreements, or amendments to existing arrangements or agreements, to implement these principles.

2. This Declaration is intended to establish principles for future arrangements or agreements, or amendments to existing arrangements or agreements, which may cover the industrial, investment, and export sectors of defence in both countries.

3. The Participants have the firm intention to pursue the objectives of this Declaration and to adopt, where appropriate, specific arrangements or agreements, or amendments to existing arrangements or agreements between them, to underpin the effective application of the principles specified in this Declaration.

Harmonization of Military Requirements and Acquisition Processes

1. The Participants will seek better means to harmonize the military requirements of their armed forces. To this end, and proceeding from identified capabilities of common interest, the Participants will identify areas in which better harmonization is considered possible. In doing so, they will seek to make use of existing fora, wherever practicable.

2. The Participants will identify projects at an early stage for cooperative research, development, production, and procurement. (See Research and Development, below.)

3. The Participants will examine the possibility of harmonizing the procedures applicable to

armaments acquisition, so as to remove impediments to effective cooperation.

Meeting National Defence Requirements

1. Each Participant will require assurance that the other Participant will facilitate the supply of certain specified defence articles and defence services necessary to discharge their national security and foreign policy commitments. The Participants acknowledge that this assurance of supply is as important for industry as it is for governments, if industry is to adapt to the process of globalization.

2. The Participants recognize the potential for a degree of interdependence of supplies needed for national security. In order to achieve acceptance of this concept, the Participants will explore solutions for achieving assurance of supply for both Participants. These solutions may include obtaining assurances, some of which may be legally binding, relating to the supply of defence articles and defence services, including technical data, agreed upon by the Participants.
3. To further enhance this assurance, and with due consideration for the right of each Participant’s government to control the disclosure and use of technical information, arrangements will be considered to enable the other Participant to reconstitute, in exceptional circumstances to be defined, an indigenous supply of a particular defence article or defence service.

Export Procedures

1. The Participants confirm their desire to maintain a strong defence industrial capability as part of their industrial bases and the ability to export defence articles and defence services. Consistent with the intent of this Declaration, they will explore possible approaches to achieving greater transparency and efficiency in their national procedures for exports of defence articles and defence services.

2. The Participants will explore means of simplifying the procedures for export of defence articles and defence services between themselves for their own use.
3. The Participants desire to see an improvement in the efficiency of the procedures for exports of jointly produced military goods to third parties. They will therefore examine the scope for establishing a procedure based on mutually agreed lists of acceptable export destinations for jointly developed and produced military goods and technologies on a project by project basis. These lists would be updated on a continuing basis.

4. The Participants will seek to ensure that their national laws and regulations for defence exports to third parties are implemented in a spirit of cooperation and with maximum efficiency. They will reinforce their cooperation and promote convergence in the field of conventional arms exports. They will pursue necessary measures to harmonize their conventional arms export policies as far as possible and examine means of establishing common standards of implementation.

5. The Participants will establish a high-level council on export control and coordination measures, with a view towards accomplishing the preceding measures.

6. Pending agreements reached pursuant to paragraph 5, above, re-transfers by a Participant of defence articles and services, including technical information, originating in the territory of the other Participant will be made in accordance with existing agreements, arrangements, contracts and procedures between the Participants.

Security

1. The Participants recognize the need to ensure that adequate and appropriate security provisions for the protection of classified information are in force in any relevant U.S. or U.K. company, regardless of any multinational aspects of a company’s ownership or management structure. The Participants will endeavor to avoid placing unnecessary restrictions on the movement of staff, information, or material between the Participants or their industry.

2. The Participants will examine means to expedite the transmission of classified information between themselves or between their industries while maintaining the requisite degree of security protection.

3. In doing so, consistent with the General Security Agreement of 1961 between the Governments of the United States of America and the United Kingdom of Great Britain and Northern Ireland, the Participants will ensure that no classified information is passed to companies or persons not suitably cleared or needing to receive it; that no classified information originated by one Participant is passed to a third country national without the consent of the originating Participant; and no information carrying national caveats is passed to foreign nationals.
4. Consistent with the preceding paragraphs, the Participants will use their best efforts, both individually and working together, to lessen the administrative burdens placed on their industry in the establishment and oversight of industrial security measures.

5. The Participants intend to develop procedures to streamline the process for approving visits to government or contractor facilities by employees of the government or contractors of the other Participant that may involve access to classified information.

6. The Participants will jointly address security vulnerabilities posed by new technologies.

7. The Participants will endeavor to harmonize and streamline their security regulations.
Ownership and Corporate Governance

1. The Participants believe that the ownership of defence companies sited in the United States and the United Kingdom is a matter for the companies to determine, subject to the application of the relevant national merger control, anti-trust and other relevant laws. They wish to encourage the freest possible cross-border investment in defence-related industry.

2. While considering the implications for national security of any proposed international merger or acquisition, the Participants will not place unreasonable or unnecessary security restrictions on corporate governance.

3. The Participants will seek to establish arrangements or agreements whereby, on a reciprocal basis, each Participant will apply substantially the same standards in the granting of facility security clearances to companies that are organized and incorporated within its territory but are owned or controlled by entities within the territory of the other Participant, considering, among other factors, any connection with entities owned, controlled, or influenced by entities of any third country. These arrangements or agreements will include measures to address issues of corporate governance as well as security of information held by companies and compliance with national export control regimes.

Research and Development

1. The Participants recognize that technology, research and development are indispensable for maintaining an effective defence industrial base and therefore recognize the need to use the limited resources available for defence-related research and development in an efficient and effective manner.

2. In the context of this Declaration, the Participants intend to establish arrangements or agreements and make use of existing fora to:

(a) harmonize research and development programs and exchange information about national research activities where there are common interests with a view towards setting common objectives for research and development, avoiding unnecessary duplication of effort or major gaps in technology and technical capability, and making the most effective use of dual-use and commercial off-the-shelf (COTS) technology;

(b) increase cooperation in programs that follow-on from research activity, in particular by undertaking technological developments with each other; and

(c) ensure the adequate funding, and efficient cost sharing, of cooperative research and development.

Technical Information

1. The Participants confirm their desire to maximize the flow of technologies and technical information between themselves and between their defence-related industries. Accordingly, they will explore methods that could facilitate the flow of technologies and technical information between them and between their defence-related industries, while ensuring that the further flow of these technologies and technical information is strictly regulated by the governments. (See Export Procedures, above.)

2. These methods could include, where appropriate, the removal of unnecessary controls on the flow of technology and technical information, different ways to authorize the flow of technology, and different ways to optimize the exploitation for defence of technology investments.

3. The Participants will seek the establishment of arrangements relating to the disclosure, transfer, and use of technical information which will facilitate the efficient operation of U.S. and U.K. defence companies, consistent with proper safeguards. The Participants recognize that technical information received from the other Participant shall not be further disclosed without the authority of the owner and, in the case of classified or export controlled unclassified information, without the authority of that Participant under whose authority the information was created.

4. The Participants will encourage the harmonization of their laws, regulations, and procedures for controlling disclosure and use of technical information in the field of defence.

Promoting Defence Trade

1. The Participants will, on a reciprocal basis, endeavor to diminish legislative and regulatory impediments to optimizing market competition.

2. The Participants will endeavor to revise their acquisition practices to remove impediments to efficient global market operations and to support reciprocity of international market access for each other’s companies.
3. The Participants will give full consideration to all qualified sources in each other’s country in accordance with the policies and criteria of the purchasing government.

4. Each Participant will explore means to eliminate laws, regulations, practices and policies that require or favor national industrial participation in its defence acquisitions.

Timetable

1. Policy-level discussions concerning the principles underlying this Declaration and its Annex and the intended U.S.-U.K. cooperation and collaboration in facilitating the restructuring of their defence industry will be carried out by appropriate national authorities.

2. Working-level discussions will be held by working groups of subject matter experts, which may include representatives from other government agencies. These working groups may consult with the Participants’ defence industries, as appropriate.

3. It is the intent of the Participants that the agreements and arrangements, or amendments to existing agreements or arrangements, envisioned by this Declaration and its Annex be put in place as expeditiously as possible. Accordingly, they will endeavor to develop such agreements and arrangements so that they can be presented to the Secretary of Defense and the Secretary of State for Defence within one year after signature of this Declaration and its Annex. In addition, they will make periodic reports to the Secretary of Defense and the Secretary of State for Defence on the progress that is being made on achieving the goals of this Declaration and its Annex.