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March 09, 2010 

Remarks at Today's State Department Briefing Fail to Clear Up Confusion Over Dealing With BAE Systems

As has been reported there is a great deal of confusion in the U.S. defense trade community about dealing with BAE Systems plc and their U.S. affiliates in light of the company's guilty plea last week to a conspiracy charge in connection with certain statements made to the U.S. Government. The fundamental legal question for U.S. companies is whether they are permitted by section 127.1(c) of the ITAR to continue to engage in defense-related transactions with BAE Systems given that the company appears to be "ineligible" as a result of the guilty plea.

At today's press briefing State Department spokesman P.J. Crowley was asked by a reporter about the BAE Systems licensing issue and, not surprisingly, his answer did not go very far in resolving this issue.  As noted below, Mr. Crowley noted that the State Department is "assessing the implications that the plea will have on the statutory debarment and resulting policy of denial" and that "it would be inappropriate for [State] to make decisions on pending export applications at this time." He noted that this meant that "applications for export will be delayed if those applications involve BAE Systems PLC or any of its subsidiaries." The complete text of the exchange is below:

QUESTION: A question on export licenses. In reference to a specific company, I got a query from someone from another bureau about an export license being put on hold for a defense contract. Does the State Department have a particular hold on all export licenses at the moment? I know you guys are reviewing – you have an interagency review on export controls. Is that affecting the application for export licenses?
MR. CROWLEY: Export licenses writ [sic] large?
QUESTION: Yeah, that’s what I’m wondering. I mean, this was in reference to a specific defense contractor, a British defense contractor.
MR. CROWLEY: Well, so, is your question about that specific contractor?
QUESTION: Yes. Can I ask about the (inaudible)?
MR. CROWLEY: (Laughter.) No, you’ll say – I got the impression that we were holding --
QUESTION: Well, I’d like to ask about BAE’s application for --
QUESTION: -- an export license being put on hold, and then specifically, is this something that is affecting everybody or just them?
MR. CROWLEY: Let me talk more specifically. I’m not aware of any blanket hold on all export licenses. On March 1st, BAE Systems plc pled guilty in U.S. District Court for the District of Columbia to conspiracy involving violations of several U.S. laws, including the Arms Export Control Act. The State Department is studying the judgment and the plea agreement between the Department of Justice and BAE Systems plc, which BAE entered into to settle issues related to violations of the export – Arms Export Control Act. We are assessing the implications that the plea will have on the statutory debarment and resulting policy of denial. Though no final determinations have been reached, our analysis indicates it would be inappropriate for us to make decisions on pending export applications at this time. But for further information on the plea agreement, I refer you to the Department of Justice.
QUESTION: Can you explain what that means? You said we’re assessing implications the plea will have on the statutory something-something. What was that?
MR. CROWLEY: What this means is only that their applications for export will be delayed if those applications involve BAE Systems plc or any of its subsidiaries.
QUESTION: Thank you.
Until this issue is resolved once and for all by the State Department's Directorate of Defense Trade Controls, U.S. companies should consult section 127.1(c) of the ITAR and their export controls counsel for guidance on how to proceed.




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