The Trade and Industry Committee has agreed to the following Report:—

Past Inquiries

22. The operation of strategic export controls, and analysis of weaknesses in the system of controls, have been matters of interest to our predecessors. In its Report of March 1992 on Exports to Iraq: Project Babylon and Long Range Guns the Committee inquired into a tangled web of events between 1988 and 1990, which ended with the detention of eight huge steel tubes at Teesport and the arrest of a number of people involved.[1] The Committee's conclusions were critical of several aspects of the performance of DTI's Export Control Organisation (ECO). In June 1996 the Committee published its Report on Export Licensing and BMARC, following a debate in June 1995 in which the allegations of diversion to Iran of naval cannon exported by BMARC to Singapore in the late 1980s had in effect been referred to the Committee.[2] The Committee examined export licensing procedures in some detail, both as they had been in the late 1980s, and as they were at the time; and came to a number of critical conclusions.

Scott Report and Green Paper

23. In November 1992, following the collapse of the prosecution of Matrix Churchill executives for alleged export control offences in relation to the export of machine tools to Iraq in the 1980s, an inquiry was established by the Government into the Export of Defence Equipment and Dual - Use Goods to Iraq and Related Prosecutions, undertaken by Lord Justice Scott. His Report was published in February 1996, and was highly critical of both the statutory basis for strategic export controls — the Import, Export and Customs Powers (Defence) Act 1939, passed as emergency legislation on the outbreak of the Second World War — and many of the procedures and practices followed by departments in operating those controls.[3] His recommendation of a comprehensive review was accepted by the then Government, which published a Green Paper on Strategic Export Controls in July 1996 .[4] This sought responses by the end of October 1996, to be followed by more detailed consultation in late 1996 and early 1997. The 36 responses to the Green Paper were placed in the Library in February 1997 and subsequently published as a departmental volume in June 1997.[5] These responses have been very useful in preparing this Report.[6]

White Paper

24. The new Government came to power with a number of commitments designed to be implemented quickly without the need for legislation, primarily the agreement and publication of new criteria in considering applications for export licences — announced in July 1997 —and the adoption of an EU - wide Code of Conduct, formally agreed in June 1998. It was not until 1 July 1998 that it published its White Paper on Strategic Export Controls, seeking written comments by the end of September 1998.[7] These responses — 54 of them — were made publicly available on 30 November 1998.[8] Copies were made available to the Committee in confidence on 17 November, and have assisted the preparation of this Report. Legislation in the 1998 - 99 Session should technically be possible, although responses to the White Paper in some areas, particularly proposed new controls over the export of intangibles, raise genuinely complicated issues requiring resolution. The Minister assured us that legislation would be introduced when parliamentary time was available.[9] We note that the Queen's Speech makes no reference to the Bill. Given that almost 3 years have passed since all parties accepted the strong recommendation in the Scott Report that there should be a new legislative framework for strategic export controls, and that controls are still being operated under a barely refurbished piece of emergency legislation from 60 years ago, we hope that time can be found for such largely uncontroversial legislation.

Inquiry

25. We decided to inquire into the proposals in the White Paper and related matters as part of a wider programme of inquiries into matters connected with ethical trading, and to take forward some of the detailed concerns raised by our predecessors. Fortunately, we have not had to delve into the intricacies of particular past cases. We have benefited from the results of the Government's own inquiries into two recent cases involving trafficking of arms in contravention of UN embargoes: in 1995 to Rwandans in Zaire by Mil - Tec, an Isle of Man - based company, and in 1997 - 98 to Sierra Leone by Sandline, a UK company.[10] We have also been aware of the inquiry into Foreign Policy and Human Rights undertaken earlier this year by the Foreign Affairs Committee, although the results of that inquiry were unfortunately not available to us in drawing up this Report. The Committee heard oral evidence on 10 November 1998 from Amnesty International UK (AIUK) and Saferworld: the Defence Manufacturers Association (DMA): the Joint Electronics and Telecommunications Security Export Control Committee (JETSECC) of the Federation of the Electronics Industry: and the Minister at the DTI responsible for the ECO, Barbara Roche MP, and her officials. We also benefited from a most instructive informal briefing and visit to the ECO's offices where we were able to see for ourselves the processing of licence applications. We are grateful to all those who have assisted in the inquiry.

Annual Report

26. The new Government is also committed to the production of an Annual Report on UK strategic exports, setting out the state of export controls and reporting — hopefully in greater detail than has been the case in the past — on their application. We await its publication with interest and some impatience. The 1998 White Paper suggested that it was "likely that various Select Committees will wish to examine the Annual Report which, in turn, may lead to a parliamentary debate".[11] Several Select Committees are potentially concerned, primarily Defence, Foreign Affairs, International Development and ourselves. As we reported to the House in conjunction with the Defence Committee in July 1998 "we consider that to leave such scrutiny to the individual exertions of each of these committees would risk confusion, and would be likely to result in effective scrutiny being lost in the gaps between committees ..... . It is for all the committees involved, working through the Liaison Committee to propose any sort of new joint mechanism. At this stage, we emphasise our joint belief that it would be desirable to have some definite mechanism for effective consideration of these matters by select committees."[12] Proposals are being considered for some form of joint consideration, which we hope will bear fruit in due course. We have therefore refrained in this Report from anticipating the possible outcome of such joint inquiry, and from attempting to lay down in advance of its publication a detailed template for the first Annual Report. The experience we have gained of the process of licensing as a result of this inquiry will however be of obvious assistance in scrutiny of the Government's Annual Report in due course.

Multilateral controls

27. From our examination of the White Paper, the responses made to it and the evidence submitted to us, it is clear that it would be foolish to examine the UK system of controls in isolation from those of our allies and partners. Although there remain a few areas where the UK pursues a purely national policy — such as the arms embargoes on Argentina and Iran, or in subjecting some goods to dual - use controls beyond those in multilateral regimes[13] — or where there is within an international embargo a significant degree of national discretion — notably the rather loosely phrased EU arms embargo on China — for the most part UK controls operate as part of an array of interlocking and overlapping multilateral regimes, under the auspices of the EU, OSCE and UN. The EU's role has significantly expanded through adoption, albeit only as a Council Declaration rather than a legally binding Joint Action or Common Position, of the Code of Conduct on Arms Exports. The Wassenaar Arrangement, formally launched in July 1996, with the aim of promoting transparency and greater responsibility in transfer of conventional arms and dual - use goods and technologies, offers great opportunities for concerted international action not yet fully realised. The 33 participating states include several states implicated in recent cases of UN sanctions breaches. Other arms exporters such as China, Brazil and South Africa are not participating. We hope that the Annual Report will include details of work underway within the Wassenaar Arrangement, including efforts to increase the number of participating states, and to pursue cases where there would seem to have been a failure of control by participating states.

28. Such internationalisation makes the system far stronger, but also more rigid, since any change has to be agreed by a large number of other national and international authorities. It also facilitates constructive comparison with arrangements in other nations. Evidence from non-governmental organisations (NGOs) referred to arrangements for parliamentary scrutiny in the US, Canada and Sweden: to rules on registration of dealers in Germany: to the operation of licensing by default in France: and to end - use controls operated by Belgium and other countries.[14] If, as we envisage, there develops a coherent form of UK parliamentary scrutiny of strategic exports, it will hopefully be possible to learn from such examples, and to develop a constructive relationship with similar bodies in other national parliaments.

2  Third Report of 1995 - 96, HC 87 Back

3  HC 115 of 1995 - 96 Back

4  Cm 3349 Back

5  HC Deb, 20 February 1997 col 725w: HC Deb, 5 June 1997, cols 236 - 7w: URN 97/752 Back

6  They are referred to by reference to the respondent and date as e.g. "AIUK, 1996" Back

7  Cm 3989 Back

8  HC Deb, 30 November 1998, col 55w Back

9  Qq 83ff Back

10  HC Deb, 21 January 1997, cols 536 - 7w: Report of the Sierra Leone Arms Investigation, HC 1016 of 1997 - 98 Back

11  Cm 3989, 2.1.7 Back

12  HC 675, para 62 Back

13  Ev, p149 , A1 Back

14  See in particular evidence from Saferworld, Ev, pp 154 - 6 Back