US Grounds BAE Export Applications

The US State Department has put a hold on all new applications for export licences by BAE Systems in the wake of the company’s recent criminal plea agreement to settle long-running bribery allegations.
It says it wants to establish what impact the UK armsmaker’s agreement last month with the Department of Justice will have on the enforcement of export controls of defence equipment.
The move could hamper BAE’s ability to export products with sensitive US-made content on key defence programmes.
Europe’s largest defence contractor pleaded guilty in a US district court on March 1 to charges that it conspired to defraud the US, made false statements about its anti-bribery compliance programme, and violated rules governing arms controls.
A State Department official confirmed that there was a “temporary administrative” hold on applications by BAE. The department is accepting applications but not completing them until a final policy decision has been taken. Existing licences remain unaffected.
Several large programmes that involve BAE, including the pan-European Eurofighter Typhoon, contain US-made technology.
Although most applications from the UK are approved, officials and executives are often frustrated at the time it can take.
It is not clear whether the department’s temporary measure applies to BAE plc or its US subsidiary, BAE Systems Inc, or both. However, the DoJ has stated that the defence company’s US division was not involved in BAE’s criminal wrongdoing.
Documents filed by the DoJ in connection to BAE Systems’ $400m (£265m) plea agreement state that the criminal activities described “do not relate to or represent any conduct of” the company’s wholly owned US subsidiary, BAE Systems Inc.
Under the terms of the deal, the UK parent agreed to maintain a compliance programme to detect and deter violations of anti-bribery laws. The agreement did not involve the US subsidiary because, the DoJ said, the group already operated under a special security agreement that restricted BAE Systems plc from “influence and control over the day-to-day activities and management of US operations”.
BAE said: “With regard to the US Department of State, we understand that there has been no change to existing export licences and agreements, and that export activities may continue under existing authorisations.”
A spokesman for BAE in the US said: “It is further our understanding that the Department of State is continuing to staff and process our pending and new applications as the department reviews the BAE Systems plc settlement with the DoJ. We refer you to the Department of State on the timing of the issuance of new licences and we look forward to engaging further with the State Department to resolve any remaining issues.”

By Sylvia Pfeifer and Stephanie Kirchgaessner – Financial Times