USAID freeze: what are the legal implications for UK INGOs?

President Trump’s recent executive order, Reevaluating and Realigning United States Foreign Aid has rocked the international development community.

The order mandates a 90-day pause in U.S. foreign aid assistance, with a view to aligning US aid to President Trump’s foreign policy agenda. It was swiftly followed by stop-work orders for existing programmes.

With billions of dollars of US foreign assistance at stake, INGO leaders and legal teams will be responding rapidly to these events, which could have a significant impact on life-saving programmatic work, as well as wider organisational stability.

Beyond the immediate practical considerations, what are the legal and regulatory implications for INGOs based in the UK?

How the freeze might impact UK INGOs

USAID contracts will be governed under US law, and many in the sector will be grappling with their terms to understand the extent to which they are impacted by recent developments, and what opportunities for recovery and challenge there might be.

For INGOs based in the UK, the impact could be direct – from USAID paid directly to the UK entity and distributed internationally – or indirect, through losses sustained by members of the wider international federation, or the impact on communities served by the UK entity.

We know that these organisations will be grappling with the immediate and long-term practical and policy impacts of the shift, and what the future of USAID or the State Department’s spending internationally might look like, as significant furloughs and cuts hit the USAID agency itself – conscious that this could shape the humanitarian and development community’s work for the years to come.

Regulatory and governance implications

In the more immediate term, INGOs will be conscious of the additional regulatory and governance implications here. We know those organisations affected will be thinking of:

Programmatic delivery

• Just how widely the waiver for life-saving aid can be drawn.
• How to pause programmes in the most responsible way for communities you work with, including weighing up the merits of seeking to retain capacity should the pause be lifted compared with seeking to minimise costs now to mitigate losses should recovery not prove possible.
• Employment law considerations in-country, where local law will often not permit termination or furlough at-will in the same way as some US states; and staff safety and security.
• How relationships with partner organisations and wider stakeholders may be impacted, and whether sub-contracts and sub-grants enable prime contractors to flow-down the suspension or pause, and how liability for costs is allocated.
• Assessing whether other funds can be reallocated or additional funds raised to address funding gaps, e.g. from other government funders (FCDO and European funders) and private foundations, particularly where those funders already part-fund programmes also due to receive USAID funding, or from emergency public fundraising campaigns, particularly on programmatic areas which might receive particular public support.
• Crisis management and consideration of solvency risk, directly – where USAID forms a significant portion of organisational funding – and for partners.
• Governance implications, and ensuring appropriate trustee involvement and serious incident reporting, given the language of the Charity Commission for England and Wales’s serious incident reporting guidance, which states that the following will be reportable:

You should report any significant financial loss due to other causes, where this threatens the charity’s ability to operate and serve its beneficiaries, or where the charity’s financial reserves are not sufficient to cover the loss. For example: […] loss of significant institutional donors, public funding or key delivery contracts that threatens the charity’s ability to operate and being unable to replace these in order to ensure the charity’s survival.

• Possible campaigning and advocacy options, both here in the UK – liaising with other affected organisations to communicate with FCDO and others – and internationally, including in the US (navigating the application of the US’ Foreign Agents’ Registration Act).

Looking to the future

• Considering when and how to seek to align programmes with shifts in US government policy during the suspension and review period.
• Exploring new funding options for programmes which are not picked up or renewed after the end of the pause.

At Bates Wells, we recognise that this will be a disruptive and challenging time for your organisations. If it would be helpful to think through your overall approach, and the particular UK governance and regulatory overlay, our specialist International NGOs team at Bates Wells would be happy to offer a one-off consultation without charge (or to introduce you to trusted specialist US law advisors). Please get in touch with Suhan Rajkumar or Stephanie Biden if we can support.

An earlier version of this blog appeared on Bates Wells’ website, here.