FMS and DCS

The Court of Appeals for the Fourth Circuit recently published a decision that expanded on its prior Trimble ruling that a foreign government customer cannot sue a U.S. contractor in the Foreign Military Sales (“FMS”) context (at least in U.S. courts).  In BAE Sys. Tech. Solution & Servs., Inc. v. Republic of Korea’s Def. Acq. Program Admin., 884 F.3d 463 (4th Cir. 2018), the Korean government claimed that BAE Systems Technology Solutions & Services, Inc. (“BAE”) breached a side agreement that BAE executed with Korea (the “BAE-Korea Agreement”).  The BAE-Korea Agreement, which was separate from the FMS agreement between the U.S. and Korea (the “U.S.-Korea Agreement”), required BAE to use its best efforts to negotiate favorable pricing terms in the FMS transaction between the U.S. Government and Korea, and permitted the courts in Korea to hear disputes arising under the agreement.

BAE secured a favorable declaratory judgment from a U.S. district court to the effect that it had complied with the best efforts undertaking, and the Fourth Circuit affirmed on the broader ground that enforcing the BAE-Korea agreement would be contrary to the policy of the Arms Export Control Act (“AECA”) and the principles laid down by the Fourth Circuit in the 2007 Trimble decision, which held that foreign customers in an FMS transaction cannot sue U.S. contractors under a third-party beneficiary theory.  However, both courts declined to enjoin Korea’s lawsuit in the Korean courts.

The Fourth Circuit’s decision suggests some guidance for U.S. contractors about entering into similar FMS side agreements in light of both U.S. and foreign litigation risks.
Continue Reading Fourth Circuit Further Defines Scope of Contractor Risks in the FMS Sales Context

U.S. and Israeli defense industries are anxious for details of a ten-year, $38.8 billion military assistance package that was signed in Washington this past September. Whether the terms of the aid package are upended entirely or left mostly unchanged by the current incoming administration will have far reaching consequences on…
Continue Reading Private-Sector Opportunities – and Challenges – in the New $38.8B U.S.-Israel Military Assistance Package

A recent opinion by the U.S. Court of Federal Claims (the “Court”)—Hyperion, Inc. v. United States, No. 14-870C, — Fed. Cl. — (Mar. 18, 2015)—is noteworthy for two reasons. First, it illustrates the “international agreement” exception to the Competition in Contracting Act (“CICA”). This exception permits the U.S. Government to award a contract to a U.S. contractor without full and open competition, even on a sole-source basis, when procuring items for a foreign government, in accordance with the “written direction[]” of the foreign government—as can occur through foreign military sales (“FMS”). In full, it states:

The head of an agency may use procedures other than competitive procedures [] when . . . . the terms of an international agreement or a treaty between the United States and a foreign government or international organization, or the written directions of a foreign government reimbursing the agency for the cost of the procurement of the property or services for such government, have the effect of requiring the use of such procedures other than competitive procedures.

10 U.S.C. § 2304(c)(4). Second, the opinion and its procedural history raise thorny questions about whether bid protest challenges to FMS solicitations and awards are consistent with the goals of the bid protest process and U.S. foreign policy.
Continue Reading Recent Application of “International Agreement” Exception Raises Questions Regarding Bid Protest Challenges to Foreign Military Sales

Despite other areas of disagreement involving the defense budget and U.S. military strategy in the Middle East, the Obama Administration and Senate Republicans might be uniting to fast-track the sale of U.S. defense articles and services to U.S. allies fighting against the Islamic State of Iraq and Syria (“ISIS”). Consider three recent developments involving Jordan.
Continue Reading Increasing U.S. Sales of Defense Articles and Services to Jordan