When a foreign-controlled or foreign-controlled company objects to the restrictions on access to classified information imposed by the SSA, it could request the use of a proxy agreement or voting trust agreement. However, foreign investors may object to the use of this Proxy Agreement or voting Trust Agreement, as these FOCI mitigation plans deprive foreign investors of much of the control of the company. Therefore, they are less popular options than the special security agreement. On May 11, 2016, the Defense Security Service (DSS) released a new guide on reducing and managing operations related to companies bound by a Foreign Ownership, Control or Influence Reduction Agreement (FOCI). Navigating the Affiliated Operations Plan: A Guide for Industry describes how companies can determine if they can participate in related transactions, submit an Affiliate Operations Program (AOP), and ensure that they reduce potential risks appropriately. When developing a PDO, an entity should describe all the operations and services it wishes to share with associated enterprises, as well as the potential risks associated with cooperation and how these risks will be mitigated. The guide stresses that in the absence of special circumstances, a PDO must be made available before a company can start using related transactions. We can discuss a customer`s options and recommend an approach to mitigate the FOCI and maintain the authorization to release the security of the facility. We also refer our clients to qualified candidates for director, agent or proxy positions.
In addition to one of the mitigation measures mentioned above, companies active under FOCI are generally required to implement an Electronic Communication Plan (ECP). Since electronic communications plans are generally the most laborious and resource-intensive guidelines to implement, we have devoted another page to this issue. An advisory resolution is the most widely used FOCI mitigation instrument. It is the least restrictive for the company`s activity and easy to implement. However, if the foreign company owns the business or can send a representative to the company`s board of directors, one of the most restrictive FOCI mitigation measures must be applied. If a company is owned or controlled by a foreign entity, a special security agreement (SSA) can be used to reduce foreign ownership, control or influence of Foreign Ownership, Control or Influence (FOCI). Although the implementation is longer and more complicated than the mitigation measures mentioned above, the Special Security Agreement (SSA) is a popular choice. It can reduce security risks to foreign ownership or foreign control and allow the foreign company to appoint representatives to the company`s board of directors, which the more restrictive proxy agreement (PA) and the Voting Trust Agreement (VTA) do not allow. However, one of the drawbacks of the special security agreement is that it provides restrictions for the types of secret national security information that the company can access. When compiling a PDO, the entity is presumed to use DSS formatted templates available at www.dss.mil/Portals/69/documents/foci/AOP_Guide_51116.pdf. In completing the application, an entity should provide DSS with a description of the common service, the potential risks associated with the cooperation, the company`s mitigation measures and details of an internal control carried out by the company, as well as an external audit carried out by DSS. When describing the service, the downgraded company should contain the following details: according to the decision of the board of directors, the least restrictive FOCI reduction agreement is the Security Control Agreement (SCA).
Many years ago, the Security Control Agreement (SCA) was more popular than the highly restrictive Voting Trust Agreement (VTA). Today, however, the Voting Trust Agreement has fallen out of order – most likely due to the offense of its implementation for businesses – and the Security Control Agreement is now the least used FOCI action plan to reduce. . . .