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Issue Brief #3620 on Budget and Spending

June 5, 2012

The Broken Budget Process: Two House Legislative Proposals

By

It is becoming increasingly clear that the World Intellectual Property Organization (WIPO) has transferred technology to North Korea and Iran that are prohibited by United Nations Security Council sanctions and U.S. law. These violations have spurred a State Department investigation and were raised at a House of Representatives Judiciary Committee hearing on June 27. The U.S. should hold the leadership at WIPO accountable and prevent repetition at WIPO or any other U.N. organization.

WIPO’s Mission

WIPO is a U.N. specialized agency with 185 member states focused on establishing international standards for protecting and facilitating access to intellectual property. WIPO administers 24 treaties establishing standards for patent, copyright, and trademark matters. The U.S. rightly supports most, if not all, of these treaties and efforts that strengthen protections for the intellectual property of American companies and citizens.

WIPO has been charged by its member states with providing developing countries with technical assistance, technology transfer, and policy advice. Broadly speaking, this effort is targeted at improving developing country adherence to legal norms and obligations embedded in WIPO-administered agreements on intellectual property, enhancing domestic governance and law enforcement for intellectual property, providing appropriate access to intellectual property, and implementing policies to bolster opportunities for their citizens to register and benefit from their intellectual property.

WIPO, North Korea, and Iran

Both Iran and North Korea are members of WIPO and are among the developing countries targeted by WIPO under the organization’s development agenda. These interactions are sensitive because Iran and North Korea are subject to significant sanctions enacted by the U.N. Security Council—which are binding on all U.N. member states and all U.N. organizations, including WIPO—barring sale, transfer, or other provision of equipment or material that could be used to advance their nuclear or ballistic missile programs.[1] Nonetheless, WIPO has conducted 48 specific technical assistance programs for Iran and 16 for North Korea.[2]

In April 2012, Fox News reported that WIPO (with Chinese cooperation) had shipped “computers and sophisticated computer servers to the government of North Korea” in a manner designed to “bypass safeguards specifically created by U.N. authorities to prevent a repeat of previous U.N. scandals involving shipments to North Korea.”[3]

The purpose of the computers was reportedly to allow North Korea to set up a modern patent office and allow it to more easily access WIPO’s database of more than 2 million patents. The transfer of the computers and equipment was approved and completed by WIPO in November 2011.

WIPO member states reportedly learned of the North Korean transfer only after the fact. Bank of America and the U.S. Office of Foreign Assets Control blocked the payment for the computers out of concern that it was in violation of U.S. law banning certain exports to North Korea. A letter from Moncef Kateb, president of the WIPO Staff Association, to the U.N. Joint Inspection Unit confirms that WIPO member states were kept in the dark:

Member States have not been consulted and have no knowledge of the project. Thus, they were not given an opportunity to review or object to it. The project was allegedly approved directly by the Director General.

The Staff Council is extremely concerned by the fact that WIPO staff may be implementing a project in violation of two UN Security Resolutions related to Sanctions against the DPRK and possibly in violation of staff’s own international obligations, and their national laws.[4]

The letter reportedly led to a direct meeting with Director General Francis Gurry by representatives from the U.S. and other countries. The U.S. State Department also initiated an investigation of the issue.

WIPO legal counsel Edward Kwakwa wrote a legal memo to Gurry stating that “WIPO, as an international organization, is not bound by the US national law in this matter.”[5] However, the computer manufacturer, Hewlett-Packard, is subject to U.S. law, and by transferring the computers to North Korea, WIPO is in violation of its contractual obligations.

Kwakwa repeatedly asserted that it is “unlikely” that U.N. sanctions “restrict the computer transfer” but never indicated that WIPO actually consulted the sanctions committee to determine this fact. Moreover, while the memo asserts that there is “no provision excluding general computer technology” in the sanctions, the analysis neglects to address the possibility that the computers could be prohibited as a dual-use item.

The U.S. has indicated that it is also investigating WIPO shipments of sensitive technologies to Iran, including 20 Hewlett-Packard computers.[6]

Victor Cormas, a member of the U.N. Panel of Experts assessing the Security Council sanctions on North Korea from 2009 to 2010, strongly criticized WIPO’s actions: “They are walking through the cracks and loopholes of the sanctions regulations. There should be some recognition that international organizations themselves are obliged to follow the rules.”[7]

Next Steps

Congress and the Administration are right to be concerned about alleged acts by WIPO to circumvent sanctions on North Korea and Iran. However, direct action against WIPO is likely to be ineffective. WIPO’s funding structure—which relies principally on private payments and fees for service from businesses rather than member state contributions (in 2011, the U.S. provided only $1.2 million to WIPO)—is unusual in the U.N. system and undermines the ability of the U.S. government to impose financial penalties and incentives on the organization. The U.S. could withdraw from WIPO,[8] but for the minimal cost of WIPO dues, it is better for the U.S. to retain the oversight privileges of membership.

Thus, the U.S. should exploit less direct steps to address the current situation and prevent repetition:

  • The State Department should complete the independent investigation of all WIPO activities in countries under Security Council sanction, and Congress should hold a hearing on the report’s conclusions;
  • The U.S. representative to WIPO should call for the immediate dismissal of Gurry and Kwakwa for failing to alert the member states about the Iranian and North Korean transfers, failing to alert the Security Council sanctions committees about the transfers, and facilitating WIPO’s violation of its contractual obligations with Hewlett-Packard;
  • The U.S. should call on the Security Council to issue a statement reminding all U.N. specialized agencies, funds, programs and other bodies that they are bound by Security Council sanctions and that the sanctions committees must receive advance notice of any transfer of goods, equipment, technology, or individuals to sanctioned countries;
  • The U.S. should also draft a Security Council resolution requiring complete and immediate cooperation and transparency by all U.N. organizations in investigations into alleged violations of Security Council sanctions;
  • The U.S. should demand that the Secretary-General adopt a policy that U.N. immunity from domestic prosecution will be immediately waived when credible evidence is presented of U.N. staff violating or assisting in the violation of Security Council sanctions; and
  • The U.S. should also explore the possibility of giving the Chief Executives Board for Coordination (CEB)—which is made up of the heads of all major U.N. funds, programs, and agencies under the chairmanship of the Secretary General—institutional responsibility for transmission of sanctions information to U.N. bodies and require that they report any and all contacts with sanctioned member states to the CEB, which, in addition to the U.N. organization, would be charged with alerting the Security Council of these activities.

Cause for Concern

The evidence indicates that WIPO transferred technology to North Korea and Iran that could be used by those regimes to advance their nuclear and missile programs. These actions may violate U.N. sanctions, and the U.S. is right to investigate these actions.

Regardless of the outcome, however, the leadership at WIPO has demonstrated grave lapses in judgment in failing to alert the member states and the sanctions committees of these transfers and should be held accountable.

Moreover, the U.S. should take steps to forestall similar incidents by WIPO or other U.N. organizations through the Security Council and urge changes in U.N. policy to enhance transparency and accountability.

Brett D. Schaefer is Jay Kingham Fellow in International Regulatory Affairs in the Margaret Thatcher Center for Freedom, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.

Show references in this report

[1]Alison Acosta Fraser and Patrick Louis Knudsen, “The Ryan Budget: Confronting the Nation’s Spending Crisis,” Heritage Foundation Issue Brief No. 3546, March 21, 2012, http://www.heritage.org/research/reports/2012/03/ryans-budget-confronting-the-nations-government-spending-crisis.

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