This issue highlights the FAA's expansion of its LAANC Program for commercial drone operation throughout the US, the publication of IFBEC's Model Business Courtesies and Hospitality Guidelines anticipated release of Transparency International's 2019 Defence Companies Anti-Corruption Index.

We also discuss two Firm resources of particular relevance to companies in the A&D industry, including country-specific hospitality guidelines developed for over 100 countries and customizable compliance e-learning tools to provide organization-wide training on a range of topics, including Data Privacy (GDPR), Anti-Corruption/Anti-Bribery, Export Controls and Trade Sanctions, and Competition and Antitrust Law.

Lastly, we comment on the Second Circuit’s recent Hoskins decision that limits the FCPA’s extraterritorial reach with respect to non-US nationals and its relevance to A&D companies with operations abroad.

In this issue:

The FAA announced that it added nine new companies to its Low Altitude Authorization and Notification Capabilities (LAANC) initiative. The press release is available here. The new companies, in addition to the five existing companies, will provide near real-time authorizations to small commercial drone operators to fly in controlled airspace near 500 airports. The FAA will open its application process for more LAANC partners in January 2019, and again in July 2019.

The LAANC initiative has greatly improved the airspace authorization process, allowing a small commercial drone operator to apply to one of the LAANC partners to fly in controlled airspace for operations under a certain altitude that will not interfere with manned aircraft. The LAANC system relies on airspace data, including UAS facility maps, which show the maximum altitude around airports where the FAA may approve operations in controlled airspace. The LAANC providers have FAA authority to approve the drone flight immediately and, in turn, the provider provides the flight information to the FAA.

Previous to the LAANC program, operators had to apply to FAA ATC to get approval under a 90-day approval process, regardless of the altitude of the drone operation. LAANC is considered to be one of the first steps towards the Unmanned Aircraft Systems Traffic Management System that will greatly facilitate drone flights throughout the US.

The nine new companies underwent the five-month application process to become a LAANC partner, consisting of four phases—(1) the application; (2) FAA submission review; (3) technical interviews; and (4) formal onboarding. The application includes an "onboarding application package" that includes, among other information—an approach to meet each operating rule, a demonstration of the company's capabilities to provide the LAANC services, and a completed Memorandum of Agreement with the FAA.

For additional information on the LAANC Program, please contact Kenneth Quinn or Jennifer Trock in the Firm’s Global Aviation Group.

Employee learning around corporate compliance obligations and the associated risks is essential for any organization seeking to create a culture of compliance.

Baker McKenzie Link offers a range of premium online training resources to support global organizations on managing risk. Our customizable compliance e-learning provides organization-wide training on a range of topics relevant to the A&D industry, including Data Privacy (GDPR), Code of Conduct, Anti-Corruption / Anti-Bribery, Export Controls and Trade Sanctions, and Competition and Antitrust Law.

Written and updated by Baker McKenzie lawyers, our e-learning is preeminent because of its high quality, relevant and timely content. Interactive features encourage understanding and compliant behavior, while a graded final quiz assesses how well learning objectives have been met. Customization, language and service options ensure consistent e-learning that has been tailored to each organization's specific training requirements. For more information visit Baker McKenzie Link or contact us for free trial access.

In October 2018, the International Forum on Business Ethical Conduct (IFBEC) published the Model Business Courtesies and Hospitality Guidelines (Guidelines). IFBEC is a nonprofit organization created by and composed of aerospace and defense (A&D) companies with the goal of promoting and developing global, industry-wide ethical standards for their industry. The Guidelines establish general principles for A&D companies with the goal of creating common understanding and agreement on acceptable practices related to provision of business courtesies and hospitalities.

The Guidelines set forth the "4R Rule":

  • Comply with the Regulations. Only offer business courtesies and hospitality that are compliant with applicable law and the internal policy of the receiving organization.
  • Be Reasonable. Courtesies that may be viewed as extravagant or call their appropriateness into question should be avoided altogether.
  • Be Responsible. When a specific or unique situation arises, IFBEC members are expected to use common sense, experience, and professionalism in evaluating whether a business courtesy or hospitality should be offered or accepted.
  • Keep Records. Business courtesies and hospitality must be offered transparently and documented.

The Guidelines can be found here. IFBEC made it clear that the guidelines are meant to complement individual company standards regarding ethics, with companies providing further clarification in their own documents. While model guidelines play an important role of setting uniform principles for acceptable industry practices, we believe that regulators would want companies to provide more specific rules.

Business courtesies play an important role in building relationships with business partners and customers. They can be useful for promotional and potential educational activities and for maintaining healthy business relationships, but they also present potential corruption risk. Companies must ensure that business courtesies are extended in compliance with applicable law and company internal rules and procedures.

In order to minimize the corruption risk associated with business courtesies, companies must have rules for providing hospitality and courtesies to government officials. It is also advisable to have rules for business courtesies and hospitalities for commercial relations. Such rules should explain what company employees can and cannot do. Most companies have rules that prohibit cash gifts and payments, impose frequency limits on hospitality for government officials, require that all hospitality have a legitimate business purpose and cannot be provided in order to obtain an improper advantage. The rules can also set forth general monetary limits for certain hospitalities, including meals, gifts and entertainment, and provide guidance on the provision of lodging, transportation and other gratuities.

When establishing internal rules, companies often struggle with striking the right balance between corruption risk and promotion of business objectives. A third relevant factor in this calculation is often related to the allocation of internal and external resources and the need to properly oversee and record business courtesies and hospitalities. The task of managing these competing priorities is particularly challenging for companies operating in multiple countries. These companies have to deal with different legal regimes in countries with varying cost of living, corruption risk, political conditions, and local practices and traditions. How this tension is resolved varies from company to company.

In our experience, companies fall into two broad groups. The first group consists of companies that have general rules and chose one standard monetary limit for business courtesies and hospitalities that applies globally. To accommodate multiple countries, such monetary limit tends to be low. Any courtesies and hospitalities exceeding the limit would require an approval. There are certain advantages to this approach. In particular, it is simple in application and administration and does not require investment in country specific guidelines. However, this approach may be perceived to be less business friendly because it imposes one limit without regard to local conditions. In particular, a business dinner in London would likely be more expensive than a business dinner in Hanoi. However, the applicable monetary limit would be the same. In reality, such approach may result in too many requests for exceptions or employees ignoring the rules.

The second group of companies develop country-specific guidelines that establish country-specific monetary limits based on local legislation and other factors. The main advantage of this approach is a tailored treatment of hospitalities in different countries based on local law and conditions.


Over the years, Baker McKenzie has assisted a number of major A&D companies with developing country-specific hospitality rules. In addition to compliance with local law, the rules also comply with the US Foreign Corrupt Practices Act and UK Bribery Act. We have worked with colleagues in our offices in over 100 countries around the world, as well as with correspondent firms, to research the gift and hospitality rules applicable to government officials and commercial relations.

Baker McKenzie works with its clients to develop a system of clear, straightforward rules for employees, enabling them to comply with both the company's standard rules, policies and procedures and the particular requirements of local law in each country where they are doing business. Wherever possible under local law, we build in safe harbors for reasonable meals and gifts under a certain amount in US dollars or local currency so that the business development personnel can provide reasonable and customary hospitality without the need for prior legal approval and the delay that such approval may cause.

Our clients have shared with us that an additional benefit from using this system -- with the attendant ongoing training, monitoring, and enforcement of the rules -- is that it helps to create and reinforce a culture of compliance throughout the company, as a result of the constant reminders of the requirements of these hospitality rules and the need to comply with them in the course of daily business development and commercial activities.

Because we have already developed and continuously this current body of hospitality research for over 100 countries, we can help companies develop their own set of country-specific hospitality guidelines, tailored to their particular needs and criteria in the countries where they are doing business, in a timely and cost-effective manner.

Transparency International's (TI) Defence Companies Anti-Corruption Index (DCI) sets standards for transparency, accountability and anti-corruption programs in the defense sector. First published in 2012, the DCI analyzes company policies, procedures and public transparency to drive reform and reduce corruption. The third edition, set to be published in 2019, will address 145 of the world's leading defense companies across 39 countries and base research exclusively upon publicly available information – reflecting TI's increased focus on transparency, public disclosure of information, and the practical implementation of anti-bribery and corruption programs.

Earlier this month, TI released for comment a draft Questionnaire and Model Answer document to allow companies to offer feedback and comments. TI welcomes feedback and comments from companies, governments, civil society and journalists through 2 November 2018. TI intends to finalize its methodology shortly thereafter, allowing companies to make improvements before TI's research for the next DCI begins in February 2019.

TI's 2019 DCI will be the subject of the Firm's November Aerospace & Defense luncheon on Tuesday, November 13, 2018.


On August 24, the United States Court of Appeals for the Second Circuit held that a non-resident, non-US national may not be held criminally liable for aiding and abetting or conspiring to violate the FCPA, unless he is an agent of an FCPA "issuer," an agent of an FCPA "domestic concern," or commits acts in furtherance of the scheme in the US. In United States v. Hoskins, the Second Circuit affirmed the district court's ruling that the government cannot use accomplice or conspiracy-related charges to extend liability under the FCPA beyond the explicit categories of persons identified in the statute. In other words, a person may not be guilty as an accomplice or a co-conspirator for an FCPA crime that he is incapable of committing as a principal.

The court's ruling is contrary to the historical position of the US DOJ and SEC, which have negotiated FCPA resolutions with companies who had zero US ties on the theory that the non-US company aided and abetted, or conspired with, a company that is an FCPA "issuer" or "domestic concern." It remains to be seen how Hoskins will affect the position of the DOJ and the SEC going forward.

Hoskins is potentially significant for aerospace and defense companies, which often have non-US subsidiaries that retain non-US third parties to assist in obtaining business from non-US governments.  Under Hoskins, these third parties - if bribes are paid to non-US government officials - would likely not have FCPA criminal exposure, as they would not be agents of an FCPA "issuer" or "domestic concern."  The third parties might be aiding and abetting, or conspiring with, the non-US subsidiary, but that conduct under Hoskins would not create FCPA criminal liability for the third party because the non-US subsidiary is likely neither a US "issuer" nor a US "domestic concern." On the other hand, the non-US subsidiary could have FCPA criminal exposure itself on the theory that it acted as an agent of an FCPA "issuer" or "domestic concern" if its parent falls into one of these categories. This means that companies should redouble efforts to ensure that their third parties are FCPA compliant, as they may no longer be able to depend on the long arm of US law to deter bribery by non-US third parties.

For further discussion on Hoskins, click here for Baker's client alert on the decision.

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