By SMF, NARA, Date 5/17/00
1. Confidential entire text.
2. Summary: Thatcher may propose on September 29 that the two governments consider establishing an informal channel to facilitate consultation and negotiation of extraterritorial disputes, especially in the area of export controls. The objective would be to expedite the search for political solutions in such cases, while not forcing either side to compromise legal principles. The Foreign Office apparently is considering a kind of “extraterritoriality hot line” between the Deputy Secretary and British Minister of State Rifkind: we believe that the idea has merit and recommend that the President or the Secretary respond favorably if the issue arises during Thatcher’s visit.
3. [Following line redacted by releasing agency; approximately ten words, identifying the source] … told Econ Counselor that FCO has recommended to Thatcher that she propose to the President establishment of an informal consultative mechanism to handle sensitive export control cases and other matters which raise extraterritorial concerns.
4. According [two? words redacted] … HMG remains dissatisfied with the extraterritorial provisions of the present Export Administration Act (EAA); hopes that Congress will reduce the Administration’s authority to impose export controls for foreign policy reasons or at least exempt US foreign-based subsidiaries and non-US firms from its coverage; and further hopes that the President will sign such amended legislation, not veto it. Nonetheless, the British are realistic and realize that with time getting short and a strong anti-Soviet tide running in the US, a more “liberal” EAA is not likely now. An extension of existing legislative authority will mean, however, that disputes like the pipeline sanctions, the servicing of Libyan aircraft in the UK (the Field aviation case), and others will continue and may even intensify. Meanwhile, domestic pressures here will build for retaliatory steps and more frequent use of the blocking statute, the Protection of Trading Interests Act. [end p1]
5. To avert further extraterritorial disputes and minimize the damage of those that do arise, the FCO favors the development of an informal policy-level channel between the FCO and State which could provide early warning in cases raising extraterritorial concerns and thereby facilitate the search for pragmatic solutions while avoiding fruitless legal arguments about rights and obligations under our two systems.
6. In that regard, the FCO placed great store in a statement about extraterritorial disputes in the Ambassador’s July address to the London Chamber of Commerce entitled “US-UK Economic Relations: Conflict or Cooperation”. [Name redacted] … called us immediately after the speech and said that the Ambassador’s remarks were consistent with FCO views. The passage in question follows below: Quote:
The E.T. issue will be us for a long time, but our two governments can certainly come to further understandings about these issue and their implications for foreign commerce. In the case of the US and Britain, we held two rounds of discussions about extraterritoriality, one in 1981 and one earlier this year. While we made some progress, we have much work to do to establish a better framework for avoiding conflicts of law and for establishing procedures likely for resolving those that do arise. Personally, I would like to see an early resumption of those talks. To make the talks effective, I would recommend participation by policy-level officials from both sides. This would ensure that our governments take into account the political and economic implications of their actions, as well as law and legal precedent.
7. Accordingly, if Thatcher accepts FCO’s recommendations – [name redacted] … was confident she would – the Prime Minister would suggest the following to the President:
-- the failure to manage and coordinate effectively East-West trade policies can have a seriously adverse effect on West-West relations. The Administration’s [end p2] approach toward renewal of the EAA is especially troublesome.
-- HMG desires to avoid further disagreements over the extraterritorial reach of US export controls, as in the Siberian pipeline case.
-- The two leaders should search for practical means to resolve disputes, while avoiding the creation of any mechanistic, overly formal consultative/negotiating body.
8. Depending on the President’s reaction, she may then suggest that policy officials meet thereafter to discuss ways to manage extraterritorial problems. The purpose would be to establish a political process for discussing issues and for considering possible remedies. An “early warning system” might give both sides a period of quiet reflection to consider options before either government resorts to formal measures (e.g., the EAA or the Protection of Trading Interests Act).
9. [Name redacted] … indicated that British thinking about these issues had evolved out of the experience over the past two years. But it also reflects dissatisfaction with the “overly theoretical” discussions about extraterritoriality carried on between the two governments in 1981 and 1983. The British recognize that the US has no intention of renouncing the Sherman Act or the EAA, nor will the UK yield on the “territoriality principle” (as distinct from the US “effects doctrine” in antitrust cases and our position requiring US foreign-based subsidiaries to observe US laws and regulations even when they are in conflict with local legislation). Further discussions about ways to make our two legal systems consistent are likely to prove fruitless. Less ambitious goals are in order.
10. The FCO is still consideing what might be the most effective way to carry out the informal notification and consultation process. One possibility might be some link between Deputy Secretary Dam and Malcolm Rifkind, Minister of State in the FCO. Since both are lawyers as well as senior policy officials, this could prove a productive channel. [end p3]
11. Comment: We believe that even though HMG’s thinking about the management of extraterritorial disputes is not fully developed, the idea of an informal consultative channel at the policy level has merit. While not a cure-all, it would allow both sides some time to discuss a problem at the political level before the regulators and legal staffs on both sides of the Atlantic jump into the fray. Despite numerous obstacles, we have usually managed somehow to find pragmatic solutions to our extraterritorial disputes, but only after the exchanges have become heated and threats of retaliation are aired.
12. If the Prime Minister or the Foreign Secretary make this proposal in Washington, we recommend that the President or the Secretary George Shultz express interest in it and invite more detailed discussions among officials. Ultimately, we may find ourselves in the soup once again over another extraterritorial case, but an informal consultative mechanism along the lines described above, which would allow for early and frank discussion among policy officials about the political, economic and legal considerations in a particular case, might at least keep the pot from boiling over. End comment. Louis.