Foreign recipients of U.S. defense weapons continue to violate contractual agreements, resulting in the killing of civilian populations and transfers of arms to terrorist organizations. As defense weapons being manufactured and internationally exported continue to become more sophisticated and lethal, U.S. and international concerns for recipient contractual violations should proportionally increase. If for no other reason besides national security, action must be taken to mitigate future risk of violations. The United States holds numerous laws and guidelines to facilitate detecting and mitigating the misuse of exported defense weapons; however, the recent and historical evidence of violations indicate improvements should be implemented.
This Note proposes implementing required contractual clauses to create greater incentive to abide by handling and use requirements agreed upon by both parties. Furthermore, this Note discusses the use of a clause to incentivize a recipient through monetary reductions in asset holdings or foreign aid and implementing a clause to require automatic termination of contract based on violations of mishandling or misuse. Finally, this Note will present a framework that will afford greater mitigation of misuse through incentivizing recipient parties to ensure authorized handling and use of defense weapons post transfer.
Just after 4:00 am on February 24, 2022, lights extinguished from guard stations and live feed from webcams ceased at the border crossing from the Russian-controlled Crimea Province into Ukraine. As Russia commenced a three-sided offensive attack before sunrise, several Ukrainian cities felt the wrath from Russian bombardment of missiles and artillery. The invasion was initiated with an estimated 190,000 troops and had a self-evident Russian goal of swiftly seizing Kyiv, the Ukrainian capital, and deposing Ukrainian President Volodymyr Zelenskyy. According to the previous U.S. Chairman of the Joint Chiefs of Staff, retired General Mark Milley, in less than a year after the invasion, it was estimated that Ukraine and Russia had sustained a combined 200,000 military casualties.
Russia’s assault on Ukraine ignited a burning desire for many western allied nations to aid Ukraine in defending its territorial and political sovereignty. The United States authorized an almost 2000 percent increase in weapons exports to Ukraine from Fiscal Year 2021 to 2022. U.S. assistance to Ukraine consists of billions of dollars and thousands of highly sophisticated weapons. The weapon systems and military equipment sent by the United States to Ukraine include “javelin and Stinger missiles, HIMARS rocket launcher systems, and Switchblade unmanned aerial systems.” Following the mass influx of weapons into Ukraine, news outlets have raised concerns over allegations that defense weapons are being misused and ending up in the illegal arms market. The massive uptick in weapons flooding into Ukraine should present concerns relating to the nation’s ability to maintain accountability and proper use of weapons as full-scale war consumes the country.
The concern of mishandling and misuse of defense articles reaches well beyond Ukraine. Ongoing issues persist regarding weapons exported to Saudi Arabia and the United Arab Emirates (UAE) after U.S. defense articles “found their way into the hands of fighters linked to al-Qaeda and Iran.” Additionally, Saudi Arabia and the UAE used U.S. defense articles to participate in the killing of hundreds of civilians during the ongoing conflict in Yemen.
For human rights and U.S. national security reasons, weapons ending up in the hands of separatist groups, terrorist organizations, or adversarial nations should be at the forefront of U.S. concerns. Recognizing the risks posed by weapons exports, the United States has constructed a body of statutes, regulations, guidance, and contractual agreements for exporting and recipient parties. The export of U.S. defense articles is controlled by two statutory acts: the Foreign Assistance Act (FAA) of 1961 and the Arms Export Control Act (AECA) of 1976. These two statutes control any government-to-government or private corporation-to-foreign recipient transfers, sales, or leases of U.S. defense articles. Additionally, all U.S. defense article exports are controlled by two regulations—(1) the U.S. Munitions List and (2) the International Traffic in Arms Regulations (ITAR), which provide instructions and requirements for transporting arms.
Despite U.S. efforts to mitigate the misuse of weapons exported to foreign recipients, numerous instances of misuse and mishandling indicate a continued problem. Thus, the United States should adopt mandatory contractual agreements that provide a greater financial incentive to recipients of defense articles to mitigate further arms export violations. This Note argues that by using mandatory financial incentives and termination clauses, the United States would create a higher burden for violating weapons export contracts and a higher probability of contractual compliance.
In recognizing the complex nature of transferring weapons internationally, this Note understands that attempting to prevent all violations of weapons export agreements would be an idealistic fiction. It is important to acknowledge that there are political and national security reasons for sending weapons to recipients that have the potential to violate arms export agreements, such as supporting allies in need like Ukraine. It may seem enticing to cut all weapons exports to eliminate the risk of weapons falling into the wrong hands; however, an equally concerning result would likely occur—cutting off defense capabilities to political allies that help ease U.S. national security threats from Russia, Iran, and others. This Note is best understood as an attempt to reduce the number of future incidences of prohibited use and potential trafficking of U.S.-origin defense weapons. The suggested clauses would help dissuade recipients from prohibited use or mishandling of sophisticated and lethal weapons.
In illustrating this point, the Note will (1) provide an overview of current statutes and regulations involving end-use monitoring and contractual agreements; (2) illustrate the historical and ongoing issues of weapons misuse; and (3) suggest legislation that mandates the use of clauses outlining a recipient’s reduction in U.S.-owned debt, reduction in U.S. foreign assistance, and the immediate termination of export agreements upon notification of end-user violations to help reduce further instances of mishandling and misuse.
The U.S. defense article export policy focuses on “advancing the protection of human rights, supporting nonproliferation, and strengthening stability.” Accordingly, the United States maintains strict requirements for exporting defense articles to foreign recipients and maintains rigorous end-use-monitoring standards even after the exported weapons arrive at their destination. This section will discuss (a) general pre-transfer requirements to receive U.S. defense articles, (b) post-transfer monitoring programs, and (c) the consequences of violating end-user agreements.
U.S. defense articles are exported to foreign recipients through one of two structures: foreign military sales (FMS) that comprise government-to-government transfers; and direct commercial sales (DCS) that comprise U.S. commercial firms transferring defense articles to an authorized foreign recipient. In either means of transfer, the U.S. government mandates the use of specific contractual agreements to better mitigate misuse by recipients and unintended access to U.S. defense articles by hostile actors.
Before exporting U.S. defense articles, the foreign recipients are required to contractually agree to the following:
The U.S. government also requires foreign recipients to agree to use exported defense articles only for “internal security” or “legitimate self-defense,” and return defense articles that are “no longer needed for the purposes for which furnished.” Furthermore, the foreign recipient must “furnish necessary information” and permit review and observation of exported defense articles.
Based on the difficult nature of verifying proper use and handling of exported defense articles, the end-use-monitoring (EUM) of such articles “sold, leased, or exported under [the AECA] or the Foreign Assistance Act of 1961” is required. To make EUM feasible, the Act requires that a recipient receiving defense articles on the U.S. Munitions List to contractually agree to terms and conditions that the U.S. government reserves the right to maintain, and verify the use of such weapons within the agreed upon purpose and terms. The EUM programs are facilitated through contractual clauses in Letters of Offer and Acceptance (LOA) for FMS and in licensing agreements for DCS.
Ultimately, U.S. policy is to ensure that national security and foreign policy are key considerations for the nation when exporting U.S. defense articles. Thus, before their exporting, the recipient is made aware of all obligations to maintain suitability to receive those articles.
Following the export of U.S. defense articles, the EUM programs facilitate investigations and verifications of reported violations and subsequent reporting to appropriate U.S. authorities. The United States maintains two EUM programs for exporting defense articles: the Golden Sentry program for FMS and the Blue Lantern program for DCS. Both EUM programs are overseen by the Department of State (DoS) and ultimately possess many of the same backstops, with the exception that the Department of Defense (DoD) plays an integral part in implementing and monitoring FMS transfers. The EUM programs focus on detecting contractual violations of use agreements where the end recipient uses defense articles for unintended purposes, transfers to unauthorized third-parties, or fails to maintain security over the defense articles with “substantially the same degree of security protection afforded . . . by the U.S. government.”
Both EUM programs are set up to enable inspection of exported defense articles and coordinate investigations based on information provided through U.S. agencies or externally reported information. All potential end-use violations require reporting through the DoS and, when related to FMS, through the appropriate DoD channels. After a reported violation, the President and Congress are to be promptly informed about the asserted violation.
The EUM programs may be distinguished based upon the quantity of the transactions and the probability of physical inspections post-transfer. Defense article transfers that fall under the Blue Lantern program represent approximately 38,000 cases annually, which excludes the number of modifications to existing agreements for the given year. The three-year average of DCS authorizations by the DoS from Fiscal Years 2020 to 2022 was “$127.1 billion.” Additionally, for Fiscal Year (FY) 2022, the value of authorized DCS contracts increased to $153.7 billion, which “represents a 49% increase, up from $103.4 billion in FY2021.”
Conversely, the DoS “process[es] approximately 1,500 new FMS cases annually,” which excludes modifications to existing agreements. The three-year average of FMS authorizations by the DoS and implemented by the Defense Security Cooperation Agency from Fiscal Years 2020 to 2022 was “$45.8 billion.” Thus, the difference between the programs is that the Blue Lantern program covers approximately twenty-five times more transactions and roughly three times the dollar amount as compared to the Golden Sentry program.
Subsequently, the two EUM programs use different forums for inspection and monitoring end-user compliance with the terms and use of the contract. As per DoD policy, the Golden Sentry program offers two post-delivery monitoring options: “Routine” EUM and “Enhanced” EUM. All defense articles provided to foreign recipients through FMS will require Routine EUM. In addition, Enhanced EUM is required for defense articles listed in the Security Assistance Management Manual (SAMM) Table C8.T4, or as indicated during the transfer approval process. All Routine EUM checks are required “during regular visits to partner nation installations in performance of their security cooperation duties.” Enhanced EUM entails a higher level of verification and security assessment for specially designated defense articles and munitions as per DoD policy and risk posed by the defense article. The enhanced monitoring is based on the notion of “trust with verification” and “requires physical security assessments of the storage facilities and serial number inventories of designated defense articles to verify compliance with the transfer conditions.” Individuals located in U.S. embassies are the leading force in checking end-use compliance through “100% annual serial number inventories to verify compliance with transfer agreements.” The Golden Sentry program contains a robust inspection team at its disposal consisting of the Defense Security Cooperation Agency, which manages the Golden Sentry program, the Combatant Commands that are regionally located throughout the world and charged with conducting inspections and accountability checks, and the Security Cooperation Organizations, which encompasses all DoD offices to help conduct site inspections for accountability and site security.
Alternatively, the Blue Lantern program ensures compliance with defense export rules and policies through “pre-license, post-license/pre-shipment, and post-shipment checks to verify the bona fides of foreign consignees and end-users, and confirm the legitimacy of proposed transactions.” In 2021 alone, DoS employees, U.S. embassy personnel, and contractors performed inspections and checks in over seventy countries. The Blue Lantern program uses a Special Compliance Officer or Internal Special Compliance Officer for the “institution of a policy of denial, debarment, comprehensive audits, or institution of a ‘cradle-to-grave’ export tracking system.”
In sum, the EUM programs provide the United States with detection and notification of end-use violations post-export of U.S. defense articles. The programs facilitate the verification of accountability and use requirements stipulated in pre-export agreements.
A variety of consequences may arise from a foreign recipient violating an end-use agreement. A foreign recipient violating an end-use agreement enables the Secretary of State to “revoke, suspend, or amend licenses or other written approvals whenever such action is deemed to be advisable.” Also, a foreign recipient may face temporary denial orders relating to licensing approvals needed for the receipt of U.S. defense articles. The United States may deny all “privileges of a company or individual to prevent an imminent or ongoing export control violation.” Denial orders enable cutting off the “right to receive or participate in exports from the United States.” Thus, a denial order can be used to prevent the U.S. licensing of defense article exports, which if used in the long term would pose a significant impact on a foreign recipient that violates its export agreement.
Additionally, based upon national policy or legal basis, the President, or Congress through a joint resolution, may determine the recipient ineligible for continued or future exports. Following an ineligibility determination, the recipient will remain ineligible indefinitely unless the President gives a determination that the violation has ceased and the recipient has provided satisfactory assurance that it will not occur in the future. Criminal penalties also exist under the AECA, which indicates that violators may face fines or penalties up to $1 million per violation, and up to twenty years in prison.
Despite extensive EUM programs, clear guidance on prohibited actions, and potential consequences, a persistent disregard remains for specified end-user requirements. For Fiscal Year 2021, the DoS outlined in its Blue Lantern EUM report to Congress that thirty percent of completed inquiries by the DoS resulted in “unfavorable” findings. Of the seventy-seven unfavorable cases reported to Congress, only one was recommended for removing all licenses. Moreover, only eight countries, and an additional sixteen regions of separate countries, are prohibited from receiving U.S. defense articles.
The aforementioned forms of deterrence appear insufficient to properly incentivize recipients based on the continued unfavorable findings reported to Congress by the Golden Sentry and Blue Lantern EUM programs. The data suggests that foreign recipients are not properly incentivized to abide by their contractual agreements given the high numbers of unfavorable findings in the EUM programs every year. Further, the lack of consequences felt by contractual violators indicates an insufficiency in the structure of the export programs. The current system, despite its checks and balances, remains demonstrably inadequate in providing sufficient incentive to foster “the protection of human rights, supporting nonproliferation, and strengthening stability.” There continues to exist large scale issues relating to the misuse and proliferation of U.S. exported weapons.
Notwithstanding the penalties described in the previous section, end-use violations are still commonplace. This section examines cases which demonstrate the necessity for improving the current U.S. arms export system. Further, this section stands to convey that violations occur with some of the United States’ largest importers of defense articles. This section will discuss (A) Saudi Arabia’s violations of contractual agreements and misuse of U.S. defense articles and human rights violations; (B) the UAE’s violations of contractual agreements in conduct related to the Yemenis war and unauthorized transfer of U.S. defense articles; (C) Mexico’s issue with maintaining possession of weapons and human rights abuses; and (D) the risk of misuse and mishandling from flooding Ukraine with U.S. defense articles.
Saudi Arabia provides one of the most comprehensive cases in recent history of a foreign recipient violating end-user agreements of possession and use requirements after receiving U.S. defense articles. Saudi Arabia illustrates the complex situation that occurs when a U.S. ally breaches the contractual obligations for receipt of U.S. origin weapons. While Saudi Arabia continues to be a credible deterrence to the U.S. national security threat of Iran, it remains in the best interest of the United States to supply defense articles to “further deter Iran’s interference in the internal affairs of other countries.”
However, over the last decade, Saudi Arabia has facilitated the weapons transfer to militant groups fighting in Yemen, which violates required contractional obligations of nonproliferation of U.S. defense articles. The post-export transfer of U.S. weapons by Saudi Arabia has facilitated the arming of terrorist groups and the killing of civilians and children. Instead of halting the export of defense articles to Saudi Arabia, the United States continues to send billions of dollars in defense weapons to Saudi Arabia.
As the United States carries on exporting defense articles to its ally Saudi Arabia, the Saudi government continues to be subject to numerous claims of human rights violations. In 2016, Saudi Arabia-led coalition forces conducted an airstrike in a crowded area using U.S. exported bombs and “killed at least 97 civilians, including 25 children, in northwestern Yemen on March 15, 2016.” The bombing was “indiscriminate,” “unlawful,” and likely a human rights violation. Investigators at the scene of the bombing found discernible pieces of a “GBU-31 satellite-guided bomb, which consists of a US-supplied MK-84 2,000-pound bomb mated with a JDAM satellite guidance kit, also US-supplied.” The U.S.-exported defense articles enabled “[o]ne of the deadliest strikes against civilians in Yemen’s year-long war”.
In another explicit violation, Saudi Arabia-led coalition forces used U.S. defense articles in the bombing of a wedding, where weapons experts identified “a retractor mechanism” that is used specifically for the set of “US-made GBU bombs.” Additionally, the bomb was also linked to Raytheon Technologies Corp. through a serial number that “indicates it is a wing assembly part from a GBU-12 Paveway II guided bomb.”
Even still, Saudi Arabia continues to violate export agreements requiring defensive use only and non-proliferation as “[a]t least 87 civilians were killed by airstrikes from the Saudi-led coalition in Yemen using weapons supplied by the UK and US between January 2021 and February 2022.” Corroborating this claim, another source indicated the same instance as “[w]eapons supplied by the United Kingdom and the United States and used by a Saudi-led coalition fighting in war-torn Yemen killed at least 87 civilians and wounded 136 others in just over a year.”
In 2016, within the first two years of Saudi Arabia initiating its military operation in Yemen, Senator Bob Corker, Chairman of the Senate Foreign Relations Committee, initiated a short-term hold on exporting defense articles to Saudi Arabia to ease regional tensions. Ultimately, the hold on weapons sales lasted eight months, and Saudi Arabia continues to violate export agreements as the death toll of civilians killed by U.S. defense articles continues to rise.
Recently, there appeared to be some consideration of holding Saudi Arabia accountable for its export agreement violations. President Joe Biden stated in early 2021 that the “ending [of] all American support for offensive operations in the war in Yemen, including relevant arms sales” to Saudi Arabia. The President’s position has since changed, as he authorized “the sale of over $4 [billion] of defensive systems.” While the continued export of defense articles following violations of export agreements is discouraging, the administration’s statement in 2021 illustrates the United States’ understanding that Saudi Arabia violated its export agreements through the offensive use of U.S. defense articles. As a souring conclusion to this case study, the United States authorized exporting one billion dollars worth of Patriot Guided Missiles to Saudi Arabia for Fiscal Year 2023.
The Saudi Arabia example demonstrates the inadequacy of the current U.S. defense article export system to effectively incentivize end users into contractual compliance, as Saudi Arabia’s misuse and mishandling of defense articles continued over numerous years and caused significant loss of civilian life.
In a related example to Saudi Arabia’s export agreement violations, the UAE committed similar violations of its own accord. The UAE is another strategic ally that helps reduce U.S. national security concerns relating to Iran. Unfortunately, the UAE has received similar treatment for its violations of end-user agreements.
After contractually agreeing to the terms and conditions that prohibit the misuse and proliferation of defense articles, the UAE facilitated the transfer of multi-million-dollar up-armored vehicles to a terrorist group fighting in Yemen. Additionally, the UAE has also been implicated in the transfer of weapons to Saudi-UAE-coalition forces that resulted in the death of civilians. Upon questioning, DoD indicated that the UAE had not obtained “permission to hand over US weaponry to other factions on the ground.”
Subsequent to the continued breaches of export agreements by the UAE, a motion was brought before the U.S. Senate to disapprove proposed sales of U.S. defense articles to them. Senator Rand Paul inquired at the Senate floor:
Can a lasting peace be purchased with more weapons? Will selling sophisticated fighter jets and weaponized drones bring more stability to the Middle East? Is it wise to pour fuel on the fire that burns in the Middle East?
The Senate today is debating with these joint resolutions whether to disapprove of the announced sale of 50 F-35s and 18 Reaper Drones to the United Arab Emirates, a country that has recently taken encouraging steps specifically toward Israel, but with an overall record that should give concern.
Notably, the Senator raised the issue of the UAE’s “undisciplined and sloppy” bombing campaign in Yemen and the “approximately 7,000 civilians killed in Yemen and over 10,000 wounded.”
The bill ultimately failed to pass, and, just over a year later, the United States announced the export of a multi-billion-dollar Terminal High Altitude Area Defense System to the UAE. The UAE example illustrates where the United States knows of misuse and mishandling of defense articles over numerous years and yet continues to deliver weapons despite contractual compliance issues. Thus, the UAE case further illustrates the inadequacy of the current U.S. defense article export system to effectively incentivize end-users into contractual compliance when Congress cannot forgo the sale and export of weapons to an end-user with a clear history of violations.
Since the government of Mexico declared war on drug cartels in 2006, the nation has experienced death rates that rival any active warzone and averages over 30,000 deaths per year since 2018 related to the war. Mexico represents one of the top twenty countries authorized for DCS of U.S. defense articles and yet remains a consistent issue for the DoS regarding concerns of human rights violations based on government actions. Between 2020 and 2021, Mexico was authorized to receive over one billion dollars in U.S. defense articles. While the United States has national security reasons for supplying the Mexican government with weapons and training to combat violent drug cartels, the United States also has a responsibility to ensure transferred defense articles are properly maintained and not used to carry out human rights violations.
Over the last decade, the Mexican government has been implicated in multiple human rights violations, which include “torture, extrajudicial killings, and forced disappearances.” One of the most notable instances occurred in 2014 with the disappearance of forty-three college students in Guerrero, Mexico. The attack on the students was carried out by the local police “armed with AR6530 rifles, a model variant of the AR-15, legally supplied through licensed shipments from Colt.” Additionally, Mexican federal officials were implicated in the disappearances, whether by “commission or omission.” One military general was implicated based on his knowledge of the situation and his allegedly ordering the assassination of six of the forty-three students that were kept in a warehouse. As of 2021, only the remains of three students have been identified.
In 2015, the National Human Rights Commission in Mexico found that federal police officers murdered twenty-two people, five of whom were killed with “Dillon Aero guns mounted on Black Hawk helicopters.” Mexico purchased sixteen Dillon Aero guns from the United States for just over a million dollars in 2013 and, then, another twenty-eight between 2015 and 2016. Thus, based on the extrajudicial killings while using Blackhawk helicopters and U.S. manufactured guns, Mexico clearly violated its contractual obligations of end-user-agreements for the purchase of U.S. defense articles.
In addition to ongoing issues of human rights abuses, Mexico shows a consistent problem of maintaining possession of received defense articles. Federal and state police in Mexico managed to allow the loss or theft of 20,000 firearms between 2006 to 2017. The number of stolen and missing firearms from the police force “amounts to nearly one-fifth of the firearms police acquired in the state during the same period.” The inability to maintain accountability of 20,000 firearms is further indication of Mexico’s noncompliance with required end-user agreements aimed at the nonproliferation of U.S. defense articles.
The case of Mexico demonstrates a continued theme of inadequacy by the current U.S. defense articles export system in properly incentivizing end users into contractual compliance, as the defense articles continue to flow into a country with weapons proliferation issues and human rights abuses. The U.S. national security interests in ensuring criminal cartels are handled within Mexico before crossing the border is self-evident; however, when U.S. defense articles exported to Mexico end up in the hands of cartels or used for extra-judicial kills, greater compliance incentives are unmistakably needed.
As indicated in the Introduction, the war in Ukraine presents a developing situation that will remain a focal point for future issues relating to the millions of sophisticated and lethal weapons imported from around the world. Here, deeper consideration will be paid to arms proliferation concerns regarding the mass quantity of U.S. weapons flooding into Ukraine.
Concerns of mishandling the seemingly countless defense articles being exported into Ukraine should give significant cause for concerns relating to illegal transfers and black-market sales. Some see the mishandling of defense articles in Ukraine as a foregone conclusion, making analogies to weapons sent to Afghanistan, where “weapons ended up on the black market including anti-aircraft Stinger missiles, the same kind the US is now providing to Ukraine.”
While some indicated concerns of Ukraine’s use of defense articles may lack a level of certainty, the corruption scandal exposed in January 2023 brings a certain level of credibility to those fears. The corruption incident included multiple government officials after fixing “contracts for restoring facilities battered by Russian missile strikes.” Given the small number of U.S. military forces present in Ukraine to inspect and ensure proper accounting takes place, greater concern should be given to accusations of misuse or unauthorized transfers. Additionally, furthering concerns of unauthorized transfers, European exporters are also sharing fears of export infractions, believing that weapons sent to Ukraine may have already made it into the hands of the Finnish “criminal underground.”
Given a forty-nine percent increase in U.S. exported weapons from Fiscal Year 2021 to 2022 is “primarily due to authorizations adjudicated in support Ukraine’s efforts to defend itself,” significant attention should be given to assertions of mishandling or misuse of defense articles. Ultimately, Ukraine could pose the worst example of export violations through misuse and mishandling in the future. Thus, it is imperative that the United States takes appropriate action to ensure end users are properly incentivized to abide by handling and use agreements.
Here, solutions will be provided to help address the issue of continued noncompliance illustrated above. This Note provides further steps that should be taken to garner more compliance following the export of defense articles that would result in little cost to the U.S. government and foreign recipients abiding by their contractual terms and conditions. Each of the three proposed contractual clauses will broaden the scope of consequences for recipient noncompliance and make it more difficult for the United States to overlook violations. Provided below are justifications and descriptions for the three proposed clauses: (A) a compensation for misuse clause through debt reduction, (B) a compensation for misuse clause through financial assistance reduction, and (C) a termination clause.
First, Congress should require a financial incentive clause in agreements for the export of U.S. defense articles that ties the foreign recipient’s holdings of U.S. debt to the total contractual agreement price. This connection would enable a broader encouragement to the receiving party to abide by the contractual terms and conditions. While other penalties and fines pose a credible deterrence at times, there can be significant difficulties enforcing the fines and penalties given the complexities posed by foreign sovereign nations. A clause having a foreign sovereign agree to an automatic reduction of U.S. debt holdings upon contract violations affecting national security and human rights allows an expedient means of recovery upon end-user violations. Recovery in the form of debt cancellation cannot compensate for unjustified killing and loss of civilian life; however, the proposed clause will serve as an additional deterrence to the current contractual and legal forms in place.
Provided below is a template for the suggested clause to better illustrate and understand the proposed scope and gravity of the financial incentive clause for proportional reduction in recipient held U.S. debt.
Financial Incentive Clause for Proportional Reduction in U.S. Federal Debt Holdings: This Agreement will provide the exporting party compensation in the form of debt reduction in accordance with this section for contractual violations.
(1) A contractual violation under this section is specified as, any violation of contractual terms and conditions relating to misuse or mishandling that results in
a. the unauthorized proliferation of received items or services under this Agreement as determined by U.S. Department of State findings, or
b. the recipient was found to use the exported items obtained through this Agreement in the furtherance of a human rights violation as determined by an International Human Rights Tribunal or the U.S. Federal Judiciary.
(2) A finding of contractual violation will provide the exporting party cause to obtain compensation in the form of asset reduction from the recipient’s U.S. debt holdings. The reduction in debt holdings will be in proportion to the sum price of this Agreement.
(3) No other provision found in this Agreement may supersede or negate the effects of this section.
This clause will pose a greater incentive for foreign recipients of U.S. defense articles to maintain accountability of lethal and sophisticated arms through the deterrence of financial asset reductions. For potential foreign recipients that own U.S. debt holdings, the financial incentive clause will be a required component to receive U.S. defense articles. As of January 2023, over thirty-nine foreign nations hold more than seven trillion dollars of U.S. treasury securities. Thus, the recovery through debt cancellation based on the entire contractual amount of the mishandled defense articles would produce a realized cost potentially in the billions of dollars. As opposed to requiring payments by the violating party, the debt reduction clause has the added benefit of expediency and ease of allowing the United States to immediately reduce debt holdings. Additionally, the clause would accomplish more than deterrence alone; it would compensate the United States for costs incurred relating to national security risk.
This clause will not apply to all the highest risk recipients of U.S. defense articles, but it will apply to many of the highest dollar amount recipients of U.S. weapons like Saudi Arabia and the UAE. As of December 2022, Saudi Arabia holds $119 billion of assets in the form of U.S. debt. If Saudi Arabia would have been subject to a U.S. debt reduction financial incentive clause, they would have lost roughly $290 million in their U.S. debt holdings after the killing of at least eighty-seven civilians between 2021 and 2022 with the U.S.-produced GBU-39 SDB I munitions.
By mandating a financial incentive clause in all export contracts for U.S. defense articles to recipients holding assets in U.S. debt, a greater deterrence exists to further mitigate the trade, sale, misuse, or mishandling of U.S. weapons. Thus, this clause should be required for all export contracts where the recipient owns assets in U.S. debt.
Recognizing the limited number of foreign recipients with U.S. debt holdings, it is necessary to provide alternative financial incentives. A financial assistance reduction clause will include a significantly larger group of foreign recipients. In 2022, the United States provided 212 countries and regions foreign assistance, which totaled 70 billion dollars in obligations. Even Saudi Arabia received foreign assistance totaling around $3.3 million. Thus, by coupling the debt reduction clause and foreign assistance obligation reduction clause, there are extremely limited countries that the United States provides weapons to that would not be subject to these clauses.
Provided below is a template for the suggested financial assistance reduction clause to better illustrate the proposed scope of proportional reduction in foreign assistance obligations.
Financial Incentive Clause for Proportional Reduction in U.S. Foreign Assistance Obligations: For contractual violations specified under this section, this Agreement will provide the exporting party compensation in the form of reducing the U.S. annually specified foreign assistance provided to the recipient in accordance with this section.
(1) A contractual violation under this section is specified as any violations of contractual terms and conditions relating to misuse or mishandling that results in:
a. the unauthorized proliferation of received items or services under this Agreement as determined by U.S. Department of State findings, or
b. the recipient was found to use the exported items obtained through this Agreement in the furtherance of a human rights violation as determined by an International Human Rights Tribunal or the U.S. Federal Judiciary.
(2) A finding of contractual violation will provide the exporting party cause to obtain compensation in the form reducing the U.S. annual foreign assistance obligated for the recipient in proportion to the sum price of this Agreement.
(3) No other provision found in this Agreement may supersede or negate the effects of this section.
Based on the language of the proposed mandatory clause, foreign recipients of U.S. defense articles are provided a clearer incentive to refrain from contractual violations. The recipient would agree to expedient means of providing compensation for contractual violations through foreign assistance reductions. Subsequently, the EUM programs governed by the DoS could efficiently identify misuse or mishandling of defense articles by recipients for purposes of recovering compensation under financial assistance reduction clause. For ease of application and cost effectiveness, the DoS could submit findings of material violations through the Directorate of Defense Trade Controls annual report or in the DoS’s 655 Report to Congress.
For instance, if Ukraine is found under either EUM program to have mishandled or misused U.S. defense articles in a manner that caused the nonauthorized transfer to third parties, the twelve billion dollars in U.S. foreign assistance obligations to Ukraine would be proportionally reduced. Thus, the reduction in foreign assistance will cause a direct and expedient consequence to violating contractual terms and conditions. This clause would also provide the benefit of expediency and ease of allowing the United States to immediately reduce obligations based on end-user violations. Ultimately, by enabling timely recovery of substantial compensation after violations occur and greater assurance of cost by recipients through reduction in financial assistance, this clause would provide a better deterrence of misuse and mishandling U.S. defense articles.
Further benefit could be achieved by implementing a termination clause that would act in conjunction with the financial incentive clauses stipulated above. Through mandating termination through a separate and distinct clause from other contractual provisions allowing cancellation or termination, the foreign recipient and the United States would be put on greater notice of its obligations and consequences if contractual violations occur. Contract termination will be required after a finding of misuse or mishandling through either the Golden Sentry of Blue Lantern EUM programs, thereby shifting the bar for ceasing contracts in favor of supporting human rights and national security interest. A termination clause shifts the burden from proving why a contract should be cancelled, to why a contract should be maintained after a showing of a foreign recipient’s contractual noncompliance. In only allowing continuation of the contractual agreements after producing written justification for nontermination by the DoS, Congress, or the President, it would create a stronger appetite for terminating contracts relating to the misuse or mishandling of U.S. defense articles.
The clause would need to provide a clear metric of when a termination will occur. Stipulating that a violation of mishandling or use in a non-authorized manner would constitute sufficiency to invoke the “Termination Clause.” Establishing violations on the findings under the DoS’s annual reports depicting infractions and violations under the Golden Sentry program and Blue Lantern program would provide for clear guidance within the current system already in use. In essence, a foreign recipient of U.S. defense articles designated within the U.S. Munitions List would be found in material violation of contractual agreement if the recipient is deemed “unfavorable” in the DoS’s Defense Trade Controls annual report or in their 655 Report. A termination clause should read similar to the following:
Termination for Noncompliance: This Agreement to provide U.S. Defense Articles listed under the U.S. Munitions List will be terminated at any point if deemed appropriate under this section:
(1) For purposes of this Agreement, a termination of contract will occur if: (a) the recipient materially breaches the Agreement; (b) the recipient willfully fails to abide by written U.S. policy regarding the export of defense articles and the recipient has been given a reasonable opportunity to comply with such policies and is unable to remedy the failure to comply; or (c) the conviction of, the indictment for (or its international procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a human rights violation at an International Human Rights Tribunal or the U.S. Federal Judiciary.
(2) Notwithstanding the foregoing and any other provision contained herein the “termination for noncompliance” clause, the following clauses of this Agreement shall remain in effect and shall survive the termination of this Agreement: Financial Incentive Clause for Proportional Asset Reduction, and Financial Incentive Clause for Proportional Reduction in Financial Aid.
Requiring a termination clause in export and purchase agreements for defense articles would help induce statutory and regulatory compliance by foreign recipients. The termination clause in U.S. defense article agreements would enable efficient, effective, and clear understanding of what standards foreign recipients will be held. Specifically, a termination clause would mandate foreign recipient parties such as Saudi Arabia, the UAE, and Mexico to answer for violations of contractual terms mandated by the AECA.
Thus, the strength of adding a termination clause to contractual agreements would enable bringing into effect the full force and intention of the U.S. policy on transfers of defense articles. The termination clause proposed can induce more effective deterrence than the current regulations or statutes that have been demonstrated to allow continuation of contracts over numerous years of violations.
As the United States continues to develop and export more sophisticated and portable defense articles throughout the world, further mitigation becomes exponentially more important. The recommendations of this Note should be implemented for considerations of international civilian life and to help reduce U.S. national security risk from misplaced or misused defense articles. If mitigating factors and policies remain the same as weapons become smaller, less detectable, more easily transported, and more lethal, it will be through luck alone if the United States is not physically touched by the weapons that it exports. The solutions proposed in this Note will not mitigate all risk, nor is it feasible to do so, considering the unending complexities of armed conflicts. However, the options provided will facilitate a reduction in risk through implementing strong cost deterrence.
The issue of contractual violations by foreign recipients receiving U.S. defense articles should be at the forefront of concerns for U.S. policy makers and the international community. If the United States desires to be the “global leader in advancing the protection of human rights, supporting nonproliferation, and strengthening stability,” improvements to the current defense export system must be implemented.
