1.1  COMMITMENTS

  1.1.1.  The origin of the criteria lies in the document "Labour's Policy Pledges for a Responsible Arms Trade", issued in February 1997. The first of the eight pledges stated that

  "A Labour Government will not issue export licences for the sale of arms to regimes which might use them for internal repression or international aggression, nor will we permit the sale of weapons in circumstances where this might intensify or prolong existing armed conflicts or where these weapons might be used to abuse human rights."

  1.1.2.  This commitment was restated verbatim in the document "Road to the Manifesto" (p 14). The Manifesto itself stated that "Labour will not permit the sale of arms to regimes that might use them for internal repression or international aggression."

1.2  THE REVIEW

  1.2.1.  On 8 May 1997, the Foreign Secretary wrote to Cabinet colleagues proposing a review of the criteria used to consider arms export licence applications. in order to fulfil the commitments described above. The fact of the review was announced to Parliament in answer to a written Parliamentary Question on 22 May (text of question and answer at Annex A)[29]. FCO officials involved in providing advice to the DTI on export licence applications were instructed that pending the outcome of the review they should assess licence applications against the Manifesto commitment outlined above, as well as the existing criteria; that they should err on the side of caution, submitting to Ministers on any sensitive cases; and that they should consider postponing the provision of advice to the DTI on any particularly sensitive applications until after the outcome of the review.

  1.2.2.  The review was taken forward by officials from the FCO's Non-Proliferation Department in consultation with colleagues in interested FCO departments and other Government Departments (primarily the DTI, the MoD and DFID). Following interdepartmental agreement on the conclusions of the review, the Foreign Secretary announced the new criteria to be used in considering arms export licence applications on 28 July 1997 in answer to a written Parliamentary Question (text of question and answer at Annex B).

1.3  THE FOREIGN SECRETARY'S ANNOUNCEMENT

  1.3.1  The announcement and the criteria together provide a balanced overview of HMG's policy on arms exports. The Foreign Secretary's statement opened with the assertion that "The Government is committed to the maintenance of a strong defence industry which is a strategic part of our industrial base as well as of our defence effort." This, together with the statement in paragraph 3 of the criteria that "full weight should be given to the UK's national interests", confirms HMG's view that responsible arms exports bring substantial economic and security benefits.

  1.3.2  The Foreign Secretary stated that the criteria would be applied when considering applications for licences to export goods controlled under Part III of Schedule 1 to the Export of Goods (Control) Order 1994, also known as the UK Military List. This covers all categories of conventional weapons and also paramilitary and an internal security equipment (eg water cannon and some types of protected vehicle). The reference in the statement to "advance approvals for promotion prior to formal application for an export licence" relates to the MoD-administered Form 680 process under which companies can seek official approval for the promotion of specific equipment in specified markets (although they still need to apply to the DTI for a licence to export the equipment). The criteria are also applied to applications to export dual-use goods (ie those controlled under Council Regulation (EC) 3381/94 and the Dual Use and Related Goods (Export Control) Regulations 1996), when there were grounds to believe that the end-user of the goods would be the armed forces or internal security forces of the recipient country. A further application of the criteria, not covered in the statement, is to decisions on exports of military goods by the Government, for which no licence is required.

  1.3.3  The Foreign Secretary stated that the Government considered that it would not be "realistic or practical" to revoke licences issued by the previous administration. The background to this statement is that there were over 20,000 such licences valid and in force on 28 July 1987.

  1.3.4  Finally, the Foreign Secretary stated that the criteria would not be applied mechanistically and that individual applications would be considered case-by-case. In practice, this means that policy is to consider all applications on their merits, according to the nature of the equipment and the end-use and end-user. The need for consistency with previous decisions is a major factor, but does not imply automaticity (ie licence applications are not refused or approved simply because similar applications have been approved or refused).

1.4  THE CRITERIA

  1.4.1  Paragraph 2 sets out the UK's international obligations and commitments in the non-proliferation and export control field. These are the cornerstones of HMG's strategic export control policy. sub-para (d) sets out existing international guidelines and criteria for conventional arms exports (texts at Annex C).

  1.4.2  Paragraphs 1 and 4-9 are central to the realisation of the commitments outlined in paragraphs 1.1 and 1.2 of this Memorandum. The statements that a licence will not be issued if the arguments for doing so are outweighed by concern that the goods might be used for internal repression or international aggression (paragraph 1), and that HMG will not issue a licence if there is a clearly identifiable risk that the equipment in question might be used for internal repression (paragraph 4b)), are fully in line with these commitments. They also represent a clear tightening of previous policy, which was to refuse a licence if the equipment was "likely" to be misused: the terminology used in the new criteria represents a lowering of the burden of proof when considering the possibility of misuse. In addition, unlike their predecessors the new criteria provide guidance on equipment which might be used for internal repression (paragraph 5). Similarly, paragraph 9 provides guidance on the factors to be taken into account when considering the risk that the intended recipient might use the equipment aggressively against another country.

  1.4.3  These paragraphs are frequently misinterpreted or misquoted. Critics of decisions to issue certain licences often claim that HMG has contravened its own policy of not selling arms to regimes which are guilty of internal repression. The criteria make it clear that the key factor is the risk that the particular item of equipment covered by the export licence might be misused for internal repression or international aggression. The general record of the recipient country (or end-user) in respecting human rights and fundamental freedoms is taken into account, but primarily in order to inform the assessment of how the end-user might use the equipment in question.

  1.4.4  There has also been some criticism by NGOs of the final part of paragraph 5(b), that the end-use of equipment which has obvious application for internal repression can be legitimate, such as the protection of the security forces from violence. The thinking behind this statement is that even security forces in repressive countries sometimes have to face terrorist or criminal violence, and it would be wrong to deny them the means to protect themselves against this. By definition, however, the end-use of the equipment cannot be legitimate if it also includes use for acts of internal repression. The final part of paragraph 5(b) is therefore consistent with the commitment in paragraph 4(b).

  1.4.5  Some NGOs have also criticised the use of the term "internal repression" on the grounds that it is not clearly defined or internationally recognised, and hence might not cover the gamut of possible human rights abuses. In fact paragraph 7 gives (for the first time) a clear steer on the meaning of the term, and underlines that it does include "suppression or major violation of human rights and fundamental freedoms".

  1.4.6  Paragraph 10 underlines that in addition to the risk of equipment being used aggressively against another country, the effect of the proposed export on regional stability should also be taken into account. Judging the effect of a particular export on regional stability is necessarily an inexact science, although the criteria provide some guidance on the factors to be considered. The UK has recently introduced in the Wassenaar Arrangement (an export control arrangement involving 33 countries) a paper setting out criteria for assessing whether a particular transfer is likely to be destabalising; these will also be used domestically to help inform judgements on the regional stability criterion.

  1.4.7  Paragraph 11 underlines that the risk of diversion will also be taken into account. Work is in hand on ways to minimise this risk and an announcement will be made in due course.

  1.4.8 The final part of the Foreign Secretary's statement noted that the Government would provide for parliamentary consideration of the application of the criteria by reporting annually on the application of the UK's strategic export controls. The first such report will be published soon.

1.5  APPLICATION OF THE CRITERIA

  1.5.1  Licences to export arms and other goods where export is controlled for strategic reasons are issued by the Secretary of State for Trade and Industry through the DTI's Export Control Organisation. All relevant individual licence applications are circulated by the DTI to other Government Departments with an interest as determined by the latter in line with their policy responsibilities. This means that different departments have lead responsibility for providing advice on those aspects of the criteria related to their policy responsibilities. Hence the FCO leads on the provision of advice relating to paragraphs 2, 3( c), 4-10 and (in concert with DFID) 11 (c). The MoD leads on paragraphs 3 (a), (d) and (e) (insofar as the latter concerns the defence industry), and 12. The MoD also leads on risk of diversion (paragraph 11, other than sub-para (c)), though the FCO also sometimes comments on this aspect.

  1.5.2.  Following the start of the review of the criteria, there was a delay in the processing of some export licence applications, due to the need for caution pending the outcome of the review (see 1.2.1 above). After the announcement of the new criteria, these delays continued given the importance and sensitivity of initial decisions on the application of the criteria and the consequent need for frequent Ministerial involvement. With experience, the application of the criteria has become easier. It is now clear that the policy of applying the criteria carefully and rigorously need not ipso facto result in delays in considering licence applications. The policy of case-by-case consideration allows sufficient flexibility to make sensible and consistent decisions on difficult cases.

2.1  COMMITMENTS

  2.1.1.  As with the review of the national criteria, the origin of work on the EU code of Conduct lies in the eight policy pledges on the arms trade issued in February 1997. The fifth of these pledges stated that:

  "Labour will work for the introduction of a European Code of Conduct setting high common standards to govern arms exports from all European Union Member States."

  2.2.1.  Similar commitments were also made in the Road to the Manifesto and the Manifesto itself. The commitment was reaffirmed by the Foreign Secretary when he announced the outcome of the review of the national criteria (see Annex B).

2.2  WORK TOWARDS THE CODE

  2.2.1.  A first draft of a Code of Conduct was prepared by FCO officials and agreed with other interested Government Departments in September 1997. The draft set out detailed criteria for export licensing decisions by Member States. These were based on the eight EU Common Criteria for Arms Exports, the first seven of which had been agreed by the European Council in 1991, with the eighth being added in 1992. The draft elaborated the Common Criteria using language from the UK's new national criteria and the OSCE Principles Governing Conventional Arms Transfers.

  2.2.2.  The other key element in the draft was the proposal for a "no-undercut mechanism". Under this, Member States would circulate details of licence applications refused; if one Member State was considering licensing an export essentially identical to that denied by another Member State, it would first have to consult the denying partner. The draft specified that the final decision on whether to issue a licence would rest with the Member State concerned. HMG's view was (and is) that a binding no-undercut mechanism would not have been appropriate in view of the differences in Member States' national arms export policies (eg the Portugese national embargo against Indonesia, the UK's national embargo against Argentina and Sweden's very restrictive policy on arms exports to the Gulf). But the requirement to consult before a potential undercut offers Member States the chance to exert considerable moral pressure on others not to licence exports which they had denied.

  2.2.3.  It was felt that one of the key factors in achieving agreement on a Code of Conduct would be the attitude of France, as the second largest arms exporter in the EU (behind the UK) and also one of the Member States most attached to the principle of national discretion in export licensing decisions. In August 1997, the French Prime Minister had indicated his support in principle for a Code of Conduct and his desire to work with the UK on the issue. It was therefore decided to try to secure an agreed Anglo-French draft which could then be circulated to other EU partners. The Foreign Secretary wrote to his French counterpart to this effect, and discussions with French officials on the UK draft began in October. At the same time, we also shared our broad ideas on the Code informally with other Member States and with interested NGOs.

  2.2.4  The agreed Anglo-French draft was circulated to EU partners on 23 January. As we were entering sensitive negotiations with partners, there was no intention to publish the text. In the event a group of NGOs who had formed a coalition to campaign on the Code (Amnesty International, OXFAM, Saferworld and the British American Security Information Council (BASIC) published a leaked copy of the draft (text at Annex D). It is therefore open to those with an interest to compare the original draft and the final version of the Code.

  2.2.5  After three rounds of discussion in COARM, the CFSP Working Group on Conventional Arms Exports, the draft was submitted via the Political Committee to the General Affairs Council (GAC). The GAC reached political agreement on the Code on 25 May and formally adopted it on 8 June (text at Annex E), thus achieving the objective of agreement during the UK Presidency.

2.3  THE CODE

  2.3.1  The third paragraph of the preamble underlines the fact that the detailed criteria set out in the Code are intended to represent minimum standards.

  2.3.2  Each Criterion in the Code begins with a chapeau which is the text of the relevant 1991-92 Common Criterion.

  2.3.3  Criterion One is essentially identical to paragraph 2 of the UK's national criteria.

  2.3.4  Criterion Two, on respect of human rights, is essentially identical to paragraphs 4-7 of the national criteria. The main addition is the commitment by Member States to exercise "special caution and vigilance" in issuing licences to countries which have committed serious human rights violations. In the UK's view this indicates that such licence applications need to be considered with particular care, but not that there is a presumpton of denial.

  2.3.5  The wording of Criterion Three is based on that in the OSCE Principles Governing Conventional Arms Transfers.

  2.3.6  Criterion Four is the equivalent of paragraphs 8-10 in the national criteria.

  2.3.7  Criterion Five essentially reproduces paragraphs 3(a), 12(a) and 12(d) of the national criteria, while emphasising that these factors do not affect the application of the criteria dealing with human rights and regional stability.

  2.3.8  Criterion Six has no direct equivalent in the national criteria. Most of the language is drawn from the OSCE Principles, though the recipient country's attitude towards international organised crime and international humanitarian law are new factors.

  2.3.9  Criterion Seven is essentially identical to paragraph 11 of the national criteria, but adds that the recipient country's ability to exercise effective export controls should also be taken into account when considering the risk of diversion.

  2.3.10  Criterion Eight is similar to paragraph 11(c) of the national criteria, although the consideration is now whether the proposed export would hamper the development of the recipient country ("undermine the economy" in the national criteria). The requirement to take into account relative levels of military and social expenditure is also new. NGOs had pressed for the Code to specify a presumption of denial if the intended recipient was considered to spend more on defence than on health and education. It was felt that this would be unnecessarily prescriptive and too difficult to judge accurately, but that a more general reference to the issue would be useful.

  2.3.11  Paragraph 1 of the Operative Provisions specifies that, as with the UK's national criteria, Member States will consider licence applications on a case-by-case basis against the criteria in the Code.

  2.3.12  Operative Paragraph 5 specifies that the Code will operate initially on the basis of national control lists. In practice all bar one of these will cover all goods and technology on the Wassenaar Arrangement Munitions List, which 14 Member States are committed to control as a result of their participation in the Arrangement, plus whatever goods Member States choose to impose national controls on. (The reason the Code does not specify the Munitions List as the basis for its operation is that France regards this as being a reference list only). Experts are due to meet soon to begin work on a common list of military equipment to which the Code will apply.

  2.3.13  Although the ideas in Operative Paragraph 8 were not covered in the original draft, the UK supported their introduction and would have preferred an even greater degree of transparency in respect of the operation and application of the Code.

  2.3.14  Operative Paragraph 10 is similar in effect to paragraph 3 of the national criteria, but the shorter and less detailed treatment of the factors which may argue in favour of an export reflects the reluctance of some Member States to spell out these factors in a "restrictive" Code.

2.4  HMG'S ASSESSMENT OF THE CODE, AND OTHERS' VIEWS

  2.4.1  HMG's basic view of the Code was set out on 3 June in a statement by Mr Fatchett, Minister of State for Foreign and Commonwealth Affairs, in response to a written Parliamentary Question (text of question and answer at Annex F). The Code is one of the major Common Foreign and Security Policy achievements of the UK's EU Presidency. It should be seen in the context of the previous lack of progress in harmonising Member States' arms export licensing policies, and of Member States' widely differing interests in this area. Against this background, agreement on the most detailed and comprehensive set of internationally-agreed criteria and on a no-undercut mechanism of a kind never before applied by a group of states to their conventional arms exports represents a significant achievement. UK objectives for the Code—that it should be as restrictive as our national criteria, but not more so—were also met. As a result the Code should help to ensure a level playing field for UK exporters while ensuring that our own licensing policy should remain basically unchanged.

  2.4.2  NGOs and other interested parties have generally welcomed the Code as a worthwhile first step in increasing responsibility and transparency in decision-making by Member States on applications for arms export licences, while criticising it for a number of perceived loopholes and omissions. The main criticisms are dealt with below.

  2.4.3  It is suggested that the Code is weakened as a result of not having been adopted by a legally-binding Joint Action or Common Position. HMG believes that this will not hinder the operation of the Code and that the formula of a Council Declaration, by which the Code was adopted, represents a solemn political commitment by Member States.

  2.4.4  It has also been argued that the no-undercut mechanism is too weak, in that it allows only for bilateral consultation before a potential undercut and bilateral notification afterwards. HMG believes that the mechanism is enough to deter Member States from undercutting others' denials without serious consideration of all the factors. It establishes for the first time the principle that a Member State should know if one of its refusals might be undercut by another, and gives it the chance to dissuade the other Member State.

  2.4.5  Finally, the Code has been criticised for not addressing certain issues, including brokering and trafficking, licensed production overseas, end-use controls and parliamentary scrutiny of export licence applications. These criticisms fail to recognise that the Code focusses on setting high common standards for legal exports by EU Member States. The Code was never intended to cover every aspect of defence exports, or to dictate the internal licensing procedures to be followed by Member States. The UK is addressing some of the above issues nationally, including through the DTI White Paper on Strategic Export Controls.

2.5  IMPLEMENTATION OF THE CODE

  2.5.1  Paragraph 11 of the Code's operative provisions commits Member States to use their best endeavours to encourage other arms exporters to subscribe to the principles of the Code. Associated States and EFTA countries have aligned themselves with the criteria. In addition, Member States including the UK have disseminated details of the Code to other non-Member States. But some Member States are reluctant to encourage other arms exporters to associate themselves more formally with the Code, or to become involved in the consultation mechanism.

  2.5.2  The UK and Germany have circulated first tranches of denial notifications. We understand that other Member States plan to do so soon. As yet the UK has not been involved in any consultations on potential undercuts, and are not aware of any between other Member States.

  2.5.3  COARM has asked experts to meet, probably in October to begin work on a common list of military equipment to which the Code will apply.

  2.5.4  Operative paragraph 8 provides for an annual review of the operation of the Code, to identify any improvements which need to be made. Member States have started to discuss the timing of the first review and future reviews. The UK intends to play a leading role in the review process.

  2.5.5  As the criteria in the Code and the UK's national criteria are broadly similar, HMG is considering whether to maintain the two sets in parallel or to adopt a single set of criteria based on those in the Code.

19 October 1998