June 21st, 2007, London.

US-UK Defence Trade Co-operation Treaty: Key Elements Commentary --

Subject to Confirmation by US and UK

ELEMENT: AIM
* The purpose of the treaty is to create a
framework for closer defence and security
co-operation between the UK and US by reducing
restrictions to exchanges between the two
countries of defence goods, services and
information, while ensuring that there are proper
safeguards against unauthorised release.

COMMENTARY:
* The Treaty fulfils the desire of the President
and the Prime Minister to reduce barriers to
defence and security co-operation between the US and UK.
* Conclusion of the agreement now reflects the
importance of our co-operation in this field.
British and American forces continue to stand
shoulder to shoulder with each other in
operations overseas and we must do all we can to
enhance our ability to co-operate now and in the future.

ELEMENT: OBJECTIVES
* To strengthen and deepen the defence and
security relationship between the US and the UK.
COMMENTARY:
-- Greater interoperability between US and UK
armed forces and the two Governments has been a
long standing policy for both nations.

* To facilitate closer US-UK defence and security
co-operation to gain the benefits of greater
interoperability in the conduct of future joint
operations through more efficient and effective armaments programmes.
COMMENTARY:
-- As well as operating together around the
world, there are a number of existing US/UK
collaborative efforts aimed at developing future
capabilities. The treaty will also help these
efforts by making it simpler to transmit
sensitive information between the two governments.

* To leverage the respective strengths of the US and UK defence industries.
* To enhance the protection afforded to exports
made in course of achieving these objectives.
COMMENTARY:
-- The industry that supports the defence and
security efforts of the UK and US is increasingly
international, but has a particularly strong
bilateral aspect. Many also help these efforts by
making it simpler to transmit sensitive
information between major companies have
facilities in both America and Britain, and
supply both Governments. We wish to ensure that
industry's contribution to the defence and
security capability of both nations is as
effective and efficient as it can be, and believe
that removing governmental barriers will enable
co-operation at the industrial level to continue to flourish.
-- Currently, information and material supplied
by the US to the UK is usually passed under
individual export licenses issued by the US
Government to the exporter. This is protected by
the receiving company in the UK as part of its
contractual relationship with the US supplier,
but this protection is not subject to UK legal
constraints. In future, information and material
supplied from the US under the treaty will have a
UK security classification attached to it, which
means that its handling is subject to the UK
Official Secrets Act (OSA) and therefore
enforcement action by HMG in the event of any
transgression. This is a major departure for HMG,
which has hitherto not offered any UK-based legal
protection for the handling of material exported
under license from the US. The step is
particularly significant as the OSA covers any
unauthorised transmission of classified items,
irrespective of where it happens geographically
or of the nationality of the recipient, whereas
UK export controls apply only to the physical
transmission of items outside of the UK. The
significance of this step by HMG should not be
under-estimated, but the British government
believes it to be justified as an enabler for an
improvement in the flow of sensitive material between the UK and US.
-- The export of equivalent material from the UK
to the US is already covered by open licensing
arrangements, and has been for some years. The
protection of classified material owned by the US
and UK and shared with the other has for many
years similarly been covered by an overarching
security agreement between the two countries.

ELEMENT: SCOPE
* The Treaty will cover the transmission of
technical data, software, equipment items and
services, that are export controlled by the US
Munitions List, from US sources to HMG and to
authorised UK-based contractors and prospective
contractors, and the retransfer of these articles within a "trusted community."
COMMENTARY:
-- The US Munitions List (USML) details items
and related data and services, etc. that are
primarily designed for military purposes. Other
items that are subject to export control by the
US through other means, such as so-called
"dual-use" items are not covered by the treaty.

* The Treaty does not cover items that are listed
by the US for export control on other than the US Munitions List.
COMMENTARY:
-- Items that are listed on the USML but are
protected in the UK as dual use will be subject
to the same terms of and protection under the treaty.
-- All USML items, with a small number of
exceptions for highly-sensitive technologies that
will be agreed between the UK and US, will be
included in the coverage of the treaty. Subject
to final agreement, the exceptions are likely to
relate to low-observable technology and
countermeasures, "anti-tamper" technology and
communication security technology.
-- Items covered by the treaty can be
transmitted to authorised recipients (which the
treaty calls an "approved community") without
individual export licensing by the US or the UK
Governments. The same material may be freely
re-transmitted within the approved community, to
those who have a "need to know", without prior authorisation.

ELEMENT: PRINCIPLES
* UK and US Government End Use: The Treaty would
only cover transfers that are for the end use of
HMG and/or USG. Exports destined for other
countries would be subject to the existing regimes.
COMMENTARY:
-- Items that are destined for end-use outside
of the trusted community are outside of the scope
of the treaty and will remain subject to existing
export licensing arrangements in place in the US and UK.
-- Material provided in support of UK/US
cooperative co-operative [sic] defence and
security programmes, for USG-only end-use, and
for agreed HMG-only projects will be able to be
transmitted under the treaty without export licensing.
-- US and UK Government end-use includes use
outside of the geographical boundaries of the two
countries. Thus, articles covered by the treaty
may be shipped to operational theatres in support
of US and UK operations, or - for example -
returned to the US for repair - without further
authorisation, provided that the end use
continues to remain by the UK or US Governments.
-- Thus UK companies seeking to acquire US items
for incorporation into equipment destined for
re-export to a third country would continue to
have to seek US export approval for the US items,
and UK export approval as required.

* Qualifying Entities: Industrial contractors and
sub-contractors that would be eligible to receive
items under the agreement would be those that are
authorised do so by mutual agreement between the UK and US.
COMMENTARY:
-- A key criterion will be that any facility
should have been deemed to have receive items
under the agreement would be those that are
authorised to appropriate ability to handle
classified government material, both UK and US,
securely, in accordance with existing arrangements.
-- Access to information and material provided
under the treaty will be restricted to HMG or USG
personnel that meet appropriate security
standards and who have a need to know, and US and
UK nationals (including dual nationals) working
for companies that similarly meet appropriate
security standards and who have a need to know.
-- Authorised entities will remain entitled to
seek individual export authority for items that
they wish to transfer should they wish to do so.
In this case, the items will be considered to be
outside of the scope of the treaty and their
handling and control will be in accordance with
the requirements of the export licence, if issued.

* Handling of Received Items: HMG would treat,
and will require UK contractors and
sub-contractors treat, items received under the
agreement as classified material. Unauthorised
disclosures would be an actionable breach of the
UK Official Secrets Act (OSA) Official Secrets
Act. UK export controls will continue to remain
in force and will further control any proposals
to re-export items received under the treaty outside of the UK.
COMMENTARY:
-- Exports from the US under the treaty would be
marked appropriately by the US and classified
RESTRICTED on receipt in the UK. As classified
items they will then be subject to the terms of
the UK Official Secrets Act (OSA).
-- Disclosure to an unauthorised individual -
irrespective of geography or nationality - will
be subject to prosecution under the OSA.
Prosecutions for unauthorised disclosure may also
be pursued under US or UK export legislation where appropriate.
-- Anyone in the UK proposing to provide
classified information outside of the UK will be
required to state whether US-origin material
provided under the treaty is included. If it is,
they will be asked to provide evidence of US
authority for the proposed re-export. If this is
not forthcoming, no approval for the transmission
will be given. Anyone applying for a UK export
licence application will similarly be asked to
provide evidence of US authority to re-export any
material provided under the treaty, and the UK
will consult with the US on any cases where this is not forthcoming.
-- Transmitting and receiving entities will be
required to retain appropriate records regarding
the transmission and receipt of material, and to
provide appropriate notifications of such transfers where necessary.

* Proprietary Information
The Treaty does disturb any restrictions imposed
by the owner of proprietary information on the recipient of that information.
COMMENTARY:
-- As now, the passage of proprietary
information owned by the US or UK governments or
a UK or US company to a third party can only be
done with the agreement of the owner.

* Underpinning Arrangements: The treaty will be
supported by an agreed set of implementing
arrangements that will provide detailed processes for a range of issues.
COMMENTARY:
-- The US and UK governments will work
immediately on the detailed implementing
arrangements, which will be published when agreed.
-- Aspects to be covered in the implementing
arrangements include the process for accrediting
facilities and personnel to receive items, the
UK-only projects to which the treaty applies and
the arrangements for keeping this list up to
date, exceptions to coverage, and review
arrangements for the effectiveness of the treaty as a whole.

* Timescales: Entry into force will take place
following ratification of the treaty by the legislatures of both countries.
COMMENTARY:
-- Current plans are to agree the underpinning
implementing agreements within the next few
months, to seek ratification of the treaty in the
autumn of 2007, with a view to entry into force early in 2008.