Cablegate: June 25, 2008 U.S.-Russia Joint Data Exchange


DE RUEHC #0958 2661448
O 221442Z SEP 08



E.O. 12958: N/A

REF: 07 STATE 097376

1. (SBU) Summary: On June 25, a U.S. interagency delegation
led by State/L conducted talks at the Russian Ministry of
Foreign Affairs in Moscow to discuss liability provisions in
the JDEC Memorandum of Agreement (MoA). Failure to resolve
liability and taxation issues has been an impediment to the
implementation of the U.S.-Russia JDEC and Pre-Launch
Notification System (PLNS) agreements since their signature
and entry into force in 2000. On June 25, the Russian legal
experts agreed to use the "Joint Statement on Liability and
Taxation Provisions" - that Acting U/S Rood presented to DFM
Kislyak on May 19 in Oslo - as the basis for subsequent
negotiations. The U.S. and Russian legal and policy experts
made significant progress and the Russian side agreed ad ref
to the liability provisions in the U.S. text - except as they
related to possible claims against U.S. contractors. After
initially resisting, the Russians agreed to a waiver of
state-to-state claims and a qualified waiver of claims
against USG personnel per the U.S. proposal, but asserted
that U.S. contractors (especially those working on the
construction of the JDEC) should not receive the same
protections and instead should be subject to an insurance
regime and Russian law. DoD,s Office of General Counsel
will assess the Russian position on U.S. contractors to
determine whether it is consistent with the protections from
exposure for U.S. contractors in other agreements/contexts
and what language adjustments might be possible. (Both
delegations agreed that in any event Russian subcontractors
would be subject to Russian law.)

June 25 Morning Session

2. (SBU) U.S. Head of Delegation John Arbogast opened the
meeting by reviewing the background and rationale for the
liability section of the proposed U.S. JDEC "Joint Statement
on Liability and Taxation Provisions." Russian Head of
Delegation Alexander Bavykin said that Mr. Arbogast's review
was useful in laying out the history of the issue and the
U.S. approach and expressed the hope that the U.S. and
Russian delegations could narrow their differences even if
full agreement was not reached. He added that it was
important to have the JDEC functioning in the near future.
Further, for the Russians, liability was the most
complicated issue, while taxation was less complicated. In
laying out the Russian perspective, Bavykin said that the
Russians understood that the portion of the U.S. draft
dealing with liability had been drawn from the 2006 Plutonium
Disposition Liability Protocol and that while this language
was fine for dealing with nuclear matters, Russia was
doubtful about applying its principles in the JDEC context
because the JDEC did not involve nuclear materials. Arbogast
replied that the United States had tailored its draft so that
there were no provisions that were nuclear specific and that
the U.S. draft provided a framework for dealing with
contingencies that could create liability concerns. He added
that in drawing from the Plutonium Disposition Protocol the
U.S. did not want to suggest that the risks of JDEC
activities were in any way comparable to nuclear activities.
He emphasized that the U.S. goal was to take already
negotiated provisions in the context of a U.S.-Russian
cooperative activity and to apply them to the cooperative
activity of the JDEC. Arbogast also noted that to achieve
complete liability coverage, the U.S. wanted to add a
provision that incorporated the NATO-Russia Partnership for
Peace Status of Forces Agreement (PfP SOFA) which would for
example cover the issue of third-party claims. (NOTE:
Although Russia agreed to be bound by the PfP SOFA in August
2007, its application and the significance of certain Russian
"understandings" are currently being discussed within NATO
forums.) Bavykin said that Russia saw liability as being
mainly connected with the construction of the JDEC and asked
what was the nature of damage the U.S. could foresee that
would give rise to liability. Arbogast replied that the U.S.
did not foresee catastrophic damage occurring during either
the construction or operational phase, but there were things
that could go wrong as is the case with any activity.
Examples given included a drunken visitor to JDEC destroying
computer equipment; an accident in the facility,s parking
lot; or a design defect in the facility that contributes to
collateral damage to the surrounding area in the case of a
terrorist attack on JDEC. He added that incidents such as
this, while unlikely, could happen and that we should have a
liability regime in place to deal with them -- just as with
any other cooperative activity between governments.

3. (SBU) Russian HOD Bavykin said that the existing
U.S.-Russian JDEC Joint Statement on Privileges and
Immunities (P&I) covered the question of liability.
DOD/OGC-Carl Tierney responded that there was individual
liability and state-to-state liability and that the P&I Joint
Statement protected individuals while the U.S. draft Joint
Statement on Liability and Taxation addressed state-to-state
claims. Bavykin asked whether the discussion was about
state-to-state liability or contractor liability. Arbogast
replied that the discussion was about both and that the U.S.
wanted a liability regime in place that afforded basic
protection while providing a framework for resolving any
liability issues that arose. Bavykin responded that he did
not see any problem in the state-to-state relationship
involving liability - he did not foresee Russia suing the USG
during construction - but that in dealing with contractors
and subcontractors there needed to be a different model. He
added that there would be nothing unusual about the JDEC
construction site and that it was not necessary to invent any
liability provisions. Liability for contractors should be
protected against by insurance (e.g., for car accidents) and
governed by Russian law, not an international agreement.
Arbogast replied that it was not just a question of
contractors because USG employees would be at the site. He
added that it was a common feature of
government-to-government agreements to have liability
provisions and that the plutonium disposition protocol's
provisions did not only apply to catastrophic events but also
to normal activities that are part of a cooperative effort.
It therefore made sense to have these provisions apply to the
JDEC's type of cooperative activity. Bavykin again raised
the point that if the JDEC did not involve nuclear damage,
there was no need to apply the Plutonium Disposition
Protocol. He said that the MFA could not go to the Duma and
say that Russian or foreign firms would be immune from
liability; the MFA could not justify this position.

4. (SBU) Arbogast suggested that the discussion focus on
government-to-government claims. DOD/OGC-Tierney noted that
both the U.S. and Russia were parties to the PfP SOFA in
which they had agreed to a state-to-state liability waiver.
MOD Col. Il'in said that the PfP SOFA dealt with joint
military exercises or operations within the context of the
PfP, but that JDEC activities have nothing to do with the PfP
and that the JDEC was a bilateral activity whose purpose is
to minimize the risk of use of nuclear weapons. Tierney
responded that the USG takes a broader view of the PfP SOFA's
application in the sense that the U.S. viewed U.S. personnel
in a receiving State as covered by its provisions even if
they were not involved in PfP activities. He added that
without the JDEC agreements the U.S. would look to the PfP
SOFA by default, since it is a multilateral agreement both
the U.S. and Russia have agreed to and that Russian personnel
in the U.S. for JDEC activities would also be covered by it.
Tierney said that the PfP SOFA is a baseline in that if
issues arose that were not covered by the U.S. draft Joint
Statement, the PfP SOFA would provide guidance. He added
that it was a framework among allies - a model for
cooperative relations around the world -- that the U.S. was
not seeking advantage from its liability provisions and that
while there may never be a claim, we need a structure in
place just in case claims arise. Bavykin replied that there
was agreement on having liability provisions but that the
question was what kind of liability provisions were

5. (SBU) Arbogast noted that the understanding coming out of
the June 27-28, 2007, JDEC plenary meeting (reftel) was that
the Plutonium Disposition Liability Protocol provisions would
be the basis for further deliberations. He asked if the
discussion could proceed on that basis and on the basis of
Russian comments to the U.S. draft. Col. Il'in responded
that it was only agreed at the June 2007 meeting that legal
experts should review the Plutonium Disposition Protocol
approach. Arbogast replied that the U.S. approach was that
both sides have agreed to certain basic liability provisions
not only in the plutonium disposition context but also in the
PfP context and that the U.S. approach was fair, workable,
and took into account the nature of JDEC activities. A lot
of hard work had gone into the PuD liability agreement and it
does reflect a real cooperative approach, with a great
emphasis on consultations. He added that the liability
provisions of the U.S. draft were not unique to the plutonium
disposition protocol, that these provisions fit the JDEC
context, and that they should not be hard to explain to the
Duma or anyone else.

6. (SBU) Bavykin said that the problem with the U.S. approach
was not the waiver of government-to-government liability, but
the waiver of liability for contractors and he asked whether
Russian firms would be free from liability. Arbogast asked
if it was possible to view state and contractor liability
separately and that if the U.S. text modified its references
to contractors, would the Russians agree to the U.S. draft as
it relates to claims against the USG and its employees.
Bavykin replied that he would favorably recommend this to
his superiors. He added that he did not know whether this
would be approved. Arbogast said that this would be a good
step forward and that the U.S. would want to see the Russian
approach regarding contractors. In summarizing his position,
Bavykin said that it was fair to state that (1) both
governments would not sue each other in relation to
construction work and the activity of the JDEC once it is in
place; (2) contractors' activities being predominantly
construction or related activities would not be covered by
the liability provisions but by provisions of Russian law;
and (3) U.S. government personnel working at the JDEC would
enjoy the privileges and immunities of U.S. Embassy personnel
in Moscow. OSD/MDP - Phil Jamison noted with regard to
contractors that it was the U.S. understanding from the JDEC
negotiating record that the vast majority of contractor
personnel would be Russian subcontractors (not covered by the
U.S. draft's liability waiver) with a U.S. prime contractor
managing the project. Bavykin responded that it would be
necessary to take into account all the elements of our
agreements and to look at the situation in terms of a new
JDEC site to assess the work responsibilities of the
different types of contractors and their liability status.
Arbogast said that the U.S. delegation was pleased to have a
meeting of the minds on governmental claims.

June 25 Afternoon Session

7. (SBU) At the start of the session, Russian HOD Bavykin
gave the U.S. delegation a copy of a four-point paper he had
prepared over the lunch break entitled "Preliminary Views on
Civil Liability Issues as Possible Grounds to Elaborate
Relevant Provisions in a Document to the JDEC Memorandum of
Agreement." It included the three points above plus a fourth
stating that paragraph 4 of the U.S. draft Joint Statement
(which sets out five basic provisions such as non-waiver of
sovereign immunity) shall be construed as applying to the two
governments only (and not contractors). Arbogast commented on
each without agreeing expressly to the formulations, and
observed primarily that the provision dealing with
contractors and their coverage under Russian law would have
to be studied further back in Washington. (NOTE: DoD,s
Office of General Counsel will assess the Russian position on
U.S. contractors to determine whether it is consistent with
the protections from exposure for U.S. contractors in other
agreements/contexts and what language adjustments might be
possible. Both delegations agreed that in any event Russian
subcontractors would be subject to Russian law.)

8. (SBU) U.S. HOD Arbogast suggested a brief discussion of
where things stood regarding the taxation provisions of the
U.S. draft and observed that in the past the Russians had
said that once liability was resolved taxation should not be
a problem. He asked Bavykin to give a sense of any problems
the Russians saw with how taxation was addressed by the U.S.
draft. Bavykin said that he was a specialist in liability,
that he had not looked carefully at the U.S. taxation
language, but that he did not see any major problems and that
Col. Il'in could speak to taxation. Col. Il'in noted that
the U.S. taxation language was not within the MOD's
competence but was within the jurisdiction of the Ministry of
Finance. He added that as with the liability language,
references to contractors would have to be removed from the
taxation language. He also noted that the word "any" would
have to be replaced in the sentence mentioning waiver of
taxes and fees for any equipment, supplies, materials or
services brought into Russia to implement the JDEC MoA. He
recommended replacing "any" with "necessary." On the
question of removing reference to contractors in the taxation
language, Tierney responded that a potential problem with
this approach was that it went to the aspect of the JDEC
involving shared costs and that the U.S. could end up bearing
more costs than Russia.

9. (SBU) Arbogast said that the U.S. delegation would be
returning to Washington with the understanding that Russia
accepted the U.S. draft with the exception of the bracketed
liability language on contractors and that the taxation
language would need further review. Bavykin replied that
this was basically the case and that his delegation had no
problem accepting the approach laid out in the U.S. draft
with the adjusted language. Arbogast asked if there would be
any Russian adjustments beyond the reference to contractors.
Bavykin said the Russians would like to reserve the right to
introduce changes in other areas of the draft. He added,
that while in principle accepting the concept of the draft,
they still wanted to review it carefully and that changes
might go beyond what had been discussed but would not
challenge the overall approach of the U.S. draft. (NOTE: The
PfP SOFA provision (para 9) of the U.S. draft might also end
up being a recommended deletion by the Russian side, in view
of the strong views expressed by Col. Il,in on the subject.)

10. (SBU) Arbogast inquired as to whether the U.S. could
expect a response in two weeks on the taxation provisions.
Bavykin replied that it might take more than two weeks to
provide a response on liability as well as to get the
response of the Ministry of Finance and other relevant
agencies. Col. Il'in said that a Russian delegation could
not go to Washington in July to discuss JDEC taxation issues
and that responses from Russian tax agencies would be
conveyed through diplomatic channels. Arbogast raised the
possibility of having a meeting on taxation in early August
in Moscow if a U.S. delegation went there to discuss JDEC
site facility issues.

11. (U) Participants:

United States

John Arbogast - State Department Office of the Legal Adviser,
Head of Delegation
Phil Jamison - OSD Office of Missile Defense Policy, Deputy
Head of Delegation
Carl Tierney - DOD/Office of the General Counsel
CDR Nadeem Ahmad - Joint Chiefs of Staff Office of Legal
Bradley Martin - U.S. Strategic Command
Steve Rosenkrantz - State Department Office of Missile
Defense and Space Policy,
Delegation Executive Secretary
Margaret Hawthorne - Head of Political External Section, U.S.
Embassy, Moscow
Yuri Shkeyrov - Interpreter, Department of State

Russian Federation

Alexander Bavykin - Deputy Director MFA Legal Department,
Head of Delegation
Alexander Borisov - Councilor, MFA Legal Department
Alexandra Kotsuybinskaya - MFA Legal Department
Vladimir Lapshin - Senior Councilor, MFA North America
Sergey Kashirin - Councilor, MFA Security and Disarmament
Affairs Department
Col. Yevgeny Il'in - MOD
Col. Vadim Stalinsky - MOD
Col. Viktor Grigorenko - MOD

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