Title: "State Department Legal Adviser Explains Pressler Amendment." Michael Matheson testified before the Senate Committee on Foreign Relations during hearings on the
interpretation of the Pressler Amendment concerning commercial arms sales to Pakistan. (920731)
STATE DEPT. LEGAL ADVISER EXPLAINS PRESSLER AMENDMENT (Text: Matheson Senate testimony, 7/30/92) (4940) Following is the text of prepared testimony given by Michael J. Matheson, principal deputy legal adviser, Department of State, on July 30 during a Senate Committee on Foreign Relations hearing on the interpretation of the Pressler Amendment concerning commercial arms sales to Pakistan. A text of a State Department paper explaining the U.S. government's interpretation of the Pressler Amendment follows Matheson's testimony.
(BEGIN MATHESON TEXT) Thank you, Mr. Chairman. I have been asked to explain the Administration's interpretation of section 620E(e) of the Foreign Assistance Act -- more commonly known as the Pressler Amendment -- with respect to commercial arms sales to Pakistan. The Amendment prohibits U.S. Government sales or transfers of military equipment or technology to Pakistan, as well as U.S. Government assistance to Pakistan. As you know, we believe that the Amendment does not, as a matter of law, prohibit the licensing of commercial arms exports -- that is, exports conducted by private parties and not financed by the U.S. Government. The Administration has, however, adopted a restrictive policy in the licensing of such exports to preclude the acquisition by Pakistan of new military capabilities or technologies, significant military systems, or technology upgrades to existing systems.
Before explaining the reasons for our position on the interpretation of the Pressler Amendment, I want to stress that this issue was addressed by the Office of the Legal Adviser in a timely and professional manner. We treated it as a question of statutory interpretation and not a political issue, and were not pressed by policy officials to reach any particular result. In fact, the Administration's licensing policy was developed only after we had advised there was legal flexibility, and the policy ultimately adopted was more restrictive than what we advised was required as a matter of law. We decided the issue of statutory interpretation in accordance with normal practice, and in accordance with the pattern we have followed over the years with respect to provisions of this type. We made no special exceptions for Pakistan.
Earlier this year, the Department informally provided the Committee with a paper which explained our interpretation of the Amendment in greater detail. This paper was drafted by the staff of the Legal Adviser's Office and personally approved by the Legal Adviser as the legal opinion of that Office on the question. I have attached a copy of that paper to my testimony, and would request that it be included in the record of this hearing.
I will not attempt to recite that paper in detail, although I would be glad to answer any questions the Committee may have about any aspect of it. Instead, let me highlight a few points.
First, the operative language of the Pressler Amendment does not deal with the licensing of commercial arms exports.
Like the rest of the Foreign Assistance Act, it is directed to the U.S. Government rather than to private parties; it constrains certain actions by the Executive branch. Specifically, it prohibits sales or transfers to Pakistan of military equipment or technology pursuant to the authorities contained in the Foreign Assistance Act or any other Act, if the President is not able to make the required certification.
But in commercial arms export transactions, the Government does not sell or transfer military equipment or technology.
Nor are such private sales and transfers authorized by any Act, and in fact they need no statutory authorization. The Arms Export Control Act only provides for Government licensing of such transfers, which the Executive branch has accomplished through the International Traffic in Arms Regulations. This difference between Government sales and commercial sales is a fundamental one which is reflected throughout the Foreign Assistance and Arms Export Control Acts.
The language of the rest of the Pressler Amendment (as well as the statutory section of which it is a part) supports this interpretation. The section itself is entitled "Assistance to Pakistan", and elsewhere the section makes clear that it is "assistance" to Pakistan that is the subject of the prohibition. In the absence of express language to the contrary, statutory references to "assistance" do not include the mere licensing of commercial arms exports, which do not receive the benefits of U.S. government contract, pricing, program and financial arrangements, as Foreign Military Sales (FMS) Sales and financing transactions do.
Second, the language of the Pressler Amendment is similar to a whole series of statutory provisions that have consistently been interpreted over the years as not applying to commercial arms exports. Many examples of these provisions are cited in our paper. To put the matter briefly, references in these statutes to sales or transfers under the authority of the Foreign Assistance Act, the Arms Export Control Act, or other acts, have always been understood and interpreted to mean sales conducted or financed by the Government, and not commercial exports licensed by the Government. To treat such references as applying to commercial arms sales would mean a clear change in the consistent practice of the Executive branch in interpreting and applying these statutes and would lead to results that the Congress never envisioned.
Third, where Congress has intended to cover the licensing of commercial arms exports, it has done so explicitly, recognizing that this is an unusual step. Examples of such provisions are cited in our paper. They typically include language specifically covering licensing of such exports, in addition to language covering sales or transfers under statutory authority. In enacting these provisions, Congress clearly has indicated an understanding that commercial exports were a separate category, and that a prohibition on sales under the authority of an act did not include a prohibition on licensing of commercial exports. Accordingly, when faced with legislation that referred only to transfers under statutory authority, we saw no basis as a matter of law for including commercial exports.
Fourth, we examined the legislative record of the Pressler Amendment to see whether Congress had indicated any intent to depart from this clear pattern. We found none. Rather, the record focuses on the effect of U.S. assistance programs and FMS sales on Pakistani actions in the nuclear area. The record suggests that Congress intended to reverse the effect of the waivers that the Executive branch had given to exempt Pakistan from sanctions under the nuclear non-proliferation provisions of the Foreign Assistance Act, but these sanctions do not include the suspension of commercial arms exports. We found no indication that Congress intended to go beyond this and to take the more unusual step of ending such private sales.
Given this history, we could not responsibly have advised our clients that the Pressler Amendment prohibited the licensing of commercial arms exports, and we did not do so. In fact, our clients chose not to go as far as we advised they were legally entitled to go in licensing commercial arms exports. They adopted substantial restrictions on licenses for commercial arms exports designed to prevent Pakistan from acquiring new military capabilities, and announced that the U.S. would not issue licenses for items not necessary to maintain and operate defense systems already in the Pakistani inventory as of the date of the aid suspension, October 1, 1990. They did this because they thought it was prudent policy and would be in keeping with the Congressional purpose in enacting the Pressler Amendment, and not because they thought they were legally obligated to do so.
Before concluding, I would like to clear up, for the record, several points that have been misstated in press reports on this subject. First, the suggestion had been made in some press accounts that the Administration concealed from Congress its interpretation of the Pressler Amendment and its policy on commercial arms sales until it came to the attention of Congress a few months ago.
In fact, the Department took care from the beginning to inform Congress of our interpretation of the Amendment, as well as the limits which the Department placed as a matter of policy on export licenses to Pakistan. In particular, our intention to continue granting licenses for limited types of commercial arms exports was clearly indicated in each of the unclassified quarterly reports to Congress under section 36(a) of the Arms Export Control Act, each of the Congressional Presentation Documents provided to Congress under section 25 of the Act, and the January 1991 issue of the Department's Defense Trade News (which was provided to a number of the members and staff of this and other Congressional Committees).
Second, it has been suggested in press accounts that the Inspector General's Office of the State Department had come to the conclusion that our interpretation of the Pressler Amendment was incorrect and that we were acting unlawfully. This is also not true. In response to these reports, the Inspector General issued press guidance on March 3, 1992, which stated that: "The Inspector General has not found any basis to object to the Legal Adviser's opinion, and has made no statement nor issued any report which would suggest otherwise."
Finally, the suggestion has been made that the Department adopted this interpretation of the Pressler Amendment as part of a search for "loopholes" to ease its impact on Pakistan. This is likewise not correct. The Department is carrying out all the requirements of the Amendment as we understand it. All FMS sales and deliveries of military equipment to Pakistan, all government-to-government transfers of military equipment and technology, and all forms of assistance (except certain humanitarian and anti-narcotics programs that are exempted by law from such prohibitions), have been suspended.
Commercial arms exports have been significantly restricted -- above and beyond what we believe is required by law -- to further U.S. non-proliferation policy. The United States has made its concerns about Pakistan's unsafeguarded nuclear program known to the Pakistani Government at all levels and continues to stress the absolute necessity for concrete actions before assistance and FMS sales can be resumed.
This concludes my presentation. I hope it has helped to put in better perspective our interpretation and application of the Pressler Amendment. We would now be happy to answer your questions.
(END MATHESON TEXT) (BEGIN TEXT OF STATE DEPT. PAPER) Pressler Amendment: Licensing of Arms Exports Pursuant to Private Sales On February 5, 1992, during hearings on another subject before the Senate Foreign Relations Committee, Secretary Baker was asked by Senator Pressler whether the "Pressler Amendment" concerning assistance and military sales to Pakistan applied to the licensing of arms exports pursuant to private sales. The Secretary responded that the Administration had concluded that it did not apply, but had adopted a restrictive policy on such licenses designed to preclude the acquisition of new military capabilities by Pakistan. This paper is a recapitulation of the reasons why a suspension of such licensing was not legally required by the Pressler Amendment.
The Pressler Amendment was adopted in 1985 as a new section 620E(e) in the Foreign Assistance Act (FAA). The Presidential certifications called for by this Amendment were made in the five years immediately following its adoption. However, the President was unable to make that certification for FY 1991, with the result that the prohibitions of the Pressler Amendment first took effect in October 1990 (the beginning of FY 1991).
Because the President was able to make the required Pressler Amendment certifications for FY 1986 through FY 1990, the Executive branch did not need during that period to resolve all the potential issues relating to the scope of its prohibitions. It is noteworthy, however, that during the first weeks of each fiscal year prior to the President's certification, the question did arise as to how the Amendment's prohibitions should be applied pending the President's decision. While it was decided that funds should not be obligated nor FMS sales made during such a period, there was never any serious suggestion that the licensing of arms exports pursuant to private sales had to be suspended or modified. This reflected the Administration's confident belief that the Amendment had no application to these private transactions.
The issue of whether the Amendment applied to licensing of such private exports was among those addressed within the Administration when it became clear that a certification might not be made for FY 1991, and again it was concluded that the Amendment did not apply, but that a restrictive policy should be adopted with respect to the licensing of private exports to preclude the acquisition of new military capabilities by Pakistan. This policy was restated in the January 1991 issue of the Defense Trade News (a bulletin provided to the defense trade community by the Department's Politico-Military Bureau), where it was reiterated that assistance and Government sales had been suspended because of the legal requirements of the Pressler Amendment, and that (though not required by the law) the Department would "consider only those license applications for defense articles and services that are necessary to maintain and operate defense systems already in the Pakistani inventory." As indicated in the following, the Department informed Congress of this position in a series of periodic reports called for under the Arms Export Control Act (AECA).
1. It is not reasonable to interpret the language of the Pressler Amendment as Prohibiting Executive branch licensing of arms exports pursuant to private sales.
The Pressler Amendment provides: No assistance shall be furnished to Pakistan and no military equipment or technology shall be sold or transferred to Pakistan, pursuant to the authorities contained in this Act or any other Act, unless the President shall have certified in writing to the Speaker of the House of Representatives and the Chairman of the Committee on Foreign Relations of the Senate, during the fiscal year in which assistance is to be furnished or military equipment or technology is to be sold or transferred, that Pakistan does not possess a nuclear explosive device and that the proposed United States assistance program will reduce significantly the risk that Pakistan will possess a nuclear explosive device.
Like the rest of the Foreign Assistance Act (FAA), the Pressler Amendment is directed to the U.S. Government rather than to private parties. But in a private arms export transaction (assuming the Government does not provide financing for the sale), the Government neither "furnishes assistance" to the recipient country, nor does it "sell" or "transfer" the items in question -- which are the only actions prohibited by the Amendment. By its plain language, the Amendment thus does not apply to Government licensing of such arms exports, and indeed has no apparent applicability to such private arms transactions at all. If the purpose of the provision were in fact to direct the Executive branch to cease granting export licenses in such cases, Congress would have enacted a direct prohibition on the granting of such licenses, as it has consistently done in other cases.
Furthermore, the Pressler Amendment does not prohibit sales or transfers generally, but only sales or transfers "pursuant to the authorities contained in" the AECA or any other act.
This is not relevant to private arms transactions. Neither the AECA nor any other act authorizes private arms sales and transfers, which do not require statutory authorization. Rather, section 38 of the AECA provides for the imposition by the President of licensing controls on the export and import of such items. Section 38(a)(3) specifically distinguishes this licensing process from "sales under the Act" -- language which the Act clearly uses to refer only to U.S. Government sales.
In addition, the rest of the Pressler Amendment (as well as the statutory section of which it is a part) confirms that it applies to U.S. Government assistance programs and not to private arms transactions. Under the Amendment, the President must certify not only that Pakistan does not possess a nuclear explosive device, but also that "the proposed United States assistance program" will reduce significantly the risk that Pakistan will possess a nuclear explosive device. Likewise, the Pressler Amendment is an amendment to section 620E of the FAA, which is entitled "Assistance to Pakistan", and the remainder of the section describes the purposes Congress hoped to achieve through U.S. "assistance" to Pakistan.
These references to U.S. "assistance" cannot reasonably be read to apply to the licensing of arms exports pursuant to private sales that are contracted, priced and financed through private arrangements, and which are not generally regarded as "assistance" to a foreign country. (This is in contrast to FMS sales by the U.S. Government, which do provide foreign purchasers the important benefits of U.S. Government contract, pricing and program arrangements -- as well, in many instances, of financing for the sales.)
2. Licensing of arms exports Pursuant to Private sales have consistently been treated as not covered by statutory language comparable to that used in the Pressler Amendment.
Statutory provisions in foreign assistance legislation referring to sales or transfers under the authority of the AECA or other acts, and not referring specifically to the licensing of private transactions, have consistently been interpreted as not applying to private arms exports. Some notable examples are:
-- Drug Producing countries. The prohibition in section 681 of the FAA on assistance to major illicit drug producing countries includes "sales...under the Arms Export Control Act" and does not specifically mention private transactions licensed under that Act. This prohibition has accordingly not been applied to such private transactions.
-- Countries violating the terms of U.S. military sales. The requirements of section 3(c) of the AECA with respect to countries that may have violated the terms of previous sales apply to "defense articles or defense services furnished under this Act, or any Predecessor Act"; private transactions licensed under these acts are not specifically mentioned. These requirements accordingly have not been applied to private transactions involving defense articles or services.
-- Notifications to Congress. The requirements of section 36(b) of the AECA with respect to notification of proposed sales to Congress apply to certain categories of offers "to sell any defense articles or services under this Act" and private transactions licensed under the Act are not specifically mentioned. These requirements accordingly have not been applied to such private transactions.
-- Prohibitions on specific countries. Section 728 of the International Security and Development Cooperation Act of 1981 prohibited various transactions with respect to El Salvador until certain certifications were made. Subsection 728(c) required the suspension of "all deliveries of defense articles, defense services, and design and construction services to El Salvador which were sold under the Arms Export Control Act" after the date of enactment of the section, but no specific reference was made to private transactions. Likewise, section 566 of the 1989 Foreign Operations Appropriations Act prohibited the issuance of "letters of offer and acceptance" to Qatar but made no specific reference to the licensing of private exports. These sections have not been applied to such private transactions.
The same is true with respect to the prohibitions on transactions with Panama contained in section 561 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1990. That section covered "sales...under the Arms Export Control Act" as well as transfers of defense articles by other agencies, such as the CIA, but did not mention private transactions. The section was accordingly not applied to such private transactions (although as a matter of policy, the Department did not issue licenses for private arms exports to Panama during the period of its applicability).
Congress is and has been well aware of the manner in which the Executive branch has consistently interpreted such statutory language. Each year, pursuant to a statutory requirement, the Executive branch submits periodic reports clearly identifying the countries which are expected to receive (among other things) FMS sales or private export licenses. In particular, Congress has been well informed of the precise manner in which these prohibitions have been applied in cases such as El Salvador, and has changed the scope of the prohibitions by further statutory enactment when it believed such changes were called for.
Since the prohibition in the Pressler Amendment took effect in October 1990, the Administration has clearly informed Congress of its intent not to discontinue granting export licenses for private arms sales to Pakistan (while at the same time maintaining a restrictive policy on issuing such licenses to prevent the acquisition by Pakistan of new military capabilities). For example, in each of the unclassified quarterly reports to Congress required under section 36(a) of the AECA since October 1990, the Administration included the amounts of arms exports to Pakistan pursuant to private sales.
The same is true with respect to the Congressional Presentation Documents for FY 1992 and 1993 that were provided to Congress pursuant to section 25 of the AECA, which listed the total anticipated value of such exports.
When Congress intends that provisions in foreign assistance legislation apply to private arms transactions, it consistently uses language making clear that intention.
The great majority of the provisions of U.S. legislation on foreign assistance and arms transactions apply only to Government sales, the use of U.S. funds for the financing of private arms sales, or other forms of U.S. assistance. On occasion Congress has also provided for the application of such provisions to private transactions not financed by the Government. Recognizing that this is an unusual step, however, Congress has consistently used clear and specific statutory language to do so. Some notable examples are:
-- Human rights violations. The provisions of section 502B of the FAA concerning governments which commit human rights violations are, under subsection (d)(2)(B), applicable to "sales of defense articles or services...under the Arms Export Control Act" and are, under subsection (d)(2)(C), applicable to "any license in effect with respect to the export of defense articles or defense services" of certain types "under section 38 of the Arms Export Control Act." Subsection (d)(2)(C) would have been superfluous if Congress thought "sales under the AECA" included the licensing of private exports under the same act.
-- Notifications to Congress. The provisions of section 3(d)(3) of the AECA concerning notification to Congress of consent to retransfers apply to certain defense articles or defense services, "the export of which has been licensed or approved under section 38 of this Act...." Similarly, the provisions of section 36(c) concerning notification of transactions apply to any "application by a person other than with regard to a sale under section 21 or section 22 of this Act for a license for the export of..." certain other categories of defense articles or services. These provisions are in clear and deliberate contrast to other notification provisions of the AECA, which refer to sales under the Act but not to private exports licensed under the Act.
-- Harassment of Persons in the U.S. Section 6 of the AECA, concerning countries engaged in harassment of persons in the U.S., states that "no letters of offer may be issued" to such countries, and then separately states that "no export licenses may be issued under this Act" with respect to such countries.
-- Countries supporting international terrorism. Section 40 of the AECA, which applies various sanctions to countries supporting international terrorism, also treats private transactions separately from sales under the AECA or other acts. Subsection (a)(1) prohibits "exporting or otherwise providing (by sale, lease or loan, grant, or other means), directly or indirectly, any munitions item...under the authority of this Act, the Foreign Assistance Act of 1961, or any other law...." Subsection (a)(4) separately prohibits "Providing any license or other approval under section 38 of this Act for any export or other transfer...of any munitions item...." Clearly Congress treated its prohibition in subsection (a)(1) on sales under the authority of the AECA or any other law as not applying to the licensing of private exports, which had to be separately covered in subsection (a)(4).
-- Prohibitions on specific countries. Sections 725 and 726 of the International Security and Development Cooperation Act of 1981 imposed prohibitions on various transactions with Argentina and Chile until certain certifications were made. Each of these sections contains a prohibition on sales of defense articles and services under the Act, and a separate prohibition on the issuance of export licenses for private transactions. This is in conspicuous contrast to Section 728 of the same act (noted above), which contains only a prohibition on deliveries of defense articles and services, and therefore has not been applied to private transactions.
Likewise, section 586G of the Foreign Operations, Export Financing and Related Programs Appropriations Act, 1991 contains in subsection (a)(1) a prohibition on "any sale with Iraq under the Arms Export Control Act" and, in subsection (a)(2), a separate prohibition on the issuance of licenses for the export to Iraq of any Munitions List items. Similarly, section 620(x) of the FAA, which imposed restrictions on transactions with respect to Turkey until certain certifications relating to Cyprus were made, applied by its terms to "all sales of defense articles and services (whether for cash or by credit, guaranty, or any other means)" and separately to "all licenses with respect to the transportation of arms, ammunitions, and implements of war...."
The legislative history of the Pressler Amendment confirms that it was meant to apply to U.S. Government sales and assistance, but not to licensing of arms exports Pursuant to Private sales.
Although the Pressler Amendment was enacted in 1985, it originated in the previous year. The Senate Foreign Relations Committee (SFRC) reported out the Pressler language in April 1984. The SFRC Report (S.Rep.No. 98-400) referred repeatedly to the prospective termination of the U.S. assistance program for Pakistan (e.g., p. 19, 59), but did not refer to private arms sales to Pakistan. It expressed a specific preference for the Pressler language requiring the additional certification that the U.S. assistance program for the fiscal year in question would reduce significantly the risk that Pakistan would possess a nuclear explosive device, stressing the importance of the U.S. assistance program as an incentive for Pakistani restraint.
Further, the 1984 SFRC Report states (at p. 19) that "This amendment extends the current standards for terminating assistance from detonation to possession of a nuclear device." This was a reference to section 670 of the FAA, which applies by its terms to U.S. assistance, including credits and guarantees for FMS sales, but clearly does not apply to the licensing of arms exports pursuant to private sales. Thus the Committee's statement shows its intent to apply the sanctions of other nonproliferation sections to Pakistan if it possessed a nuclear explosive device, but not to expand the scope of the prohibition to encompass private sales. During floor debates on this question, the proponents of action against Pakistan stressed the importance of suspending U.S. assistance and of the pending FMS sale of F-16s by the Government if the terms of the amendment were not met, but the licensing of private arms exports was not addressed.
No foreign assistance legislation was adopted in 1984, but in 1985 the Pressler Amendment was adopted as part of the 1985 foreign assistance legislation. The 1985 committee reports for both the Senate (S.Rep.No.99-34) and the House (H.Rep.No.99-39) were consistent with the description of the Amendment in the SFRC's 1984 report. The importance of the U.S. assistance program and FMS sales was stressed; but no mention was made of licensing of private sales.
The Senate report stated (at p. 14) the Amendment "is directed to Pakistan because that country is the only aid recipient with a statutory exemption from the existing nuclear non-proliferation requirements contained in Section 669 of the Foreign Assistance Act." (President Reagan had previously waived section 669 -- which deals with unsafeguarded transfers of enrichment equipment and technology, and section 670 -- which deals with unsafeguarded transfers of reprocessing equipment and technology, with respect to Pakistan. These sections apply by their terms to U.S. assistance, including credits and guarantees for FMS sales, but clearly do not apply to the licensing of arms exports pursuant to private sales.) Similarly, the House report stated (at p. 99) that "Pakistan is the only country for which waivers of sections 669 and 670 of the Foreign Assistance Act are currently in force; hence its particular attention to Pakistan." Once again, this confirms that the intent was to apply to Pakistan other statutory prohibitions concerning nonproliferation if it possessed a nuclear explosive device, but not to extend the scope of those prohibitions to private transactions.
We are aware of nothing else in the brief legislative history of the Pressler Amendment that is inconsistent with these conclusions. In particular, we are aware of nothing that would indicate that Congress thought it was taking the unusual step of suspending private arms transactions, which it has elsewhere done only with specific language and a clear indication of Congressional intent.
In fact, the Amendment technically does not even establish a comprehensive ban on FMS sales of "defense articles and services", which is the usual language adopted in such cases. The language of the Amendment covers only the more narrow class of "military equipment or technology," which would technically not cover non-military items sold under the FMS program for military use, or training in military techniques not involving the transfer of technical data.
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