Memorandum submitted by The Defence Manufacturers'
Association (DMA)
EXECUTIVE SUMMARY
INTRODUCTION
The DMA welcomes the publication of the DTI's
White Paper on "Strategic Export Controls", which it
regards, in general, as being a well thought-out appraisal of
possible proposals for the introduction of more modern and effective
legislation on the matter. However, we have major concerns over
the suggested controlling of intangible transfers and trafficking
& brokering, and would strongly urge that these are temporarily
put to one side, for the time being, to allow for greater detailed
consideration, whilst the rest of the legislation is proceeded
with as expeditiously as possible. It must also be pointed out
that Industry is far more concerned with the actual practicalities
of the rationalisation of the procedures associated with the export
licensing system, rather than the overall legislation on Strategic
Export Controls.
PARLIAMENTARY SCRUTINY
We believe that the White Paper sets out proposals
for exactly the right balance of openness and Parliamentary scrutiny,
without impinging upon potential commercial confidentiality concerns,
allowing greater transparency with regard to the statutory elements
of legislation, but not of individual cases. We are not convinced
that Industry's major concern with licensing, the issue of speed
of processing, would be improved if Parliamentary scrutiny of
individual applications was allowed.
PURPOSES OF
STRATEGIC EXPORT
CONTROLS
We believe that the release, on 28 July 1997,
of the Statement by the Secretary of State for Foreign & Commonwealth
Affairs on the "Criteria Used in Considering Conventional
Arms Export Licence Applications" has obviated the need for
the purposes of strategic export control having to be set out
by the DTI in secondary legislation.
WEAPONS OF
MASS DESTRUCTION
We fully support the Government's proposals
to try to introduce effective controls to counter the threat of
proliferation of weapons of mass destruction. However, again,
some clarification is required. We believe that controls on NBC
protective material need to be eased.
TRANSFER OF
TECHNOLOGY BY
INTANGIBLE MEANS,
TRAFFICKING AND
BROKERING, AND
ENFORCEMENT
Whilst we support the principle that some form
of control should be introduced on the transfer of technology
by intangible means, and on trafficking and brokering, we strongly
advise caution and very careful consideration as to how best this
should be done. We seriously query the DTI's estimate of the workload
which will result due to the introduction of such controls, and
the resources that will be needed to cope with this. We strongly
urge that this aspect of the legislation be delayed for detailed
discussion and debate, as laws have to be enforceable and practicable
to be effective, and we have considerable concerns over the proposals
as they appear in the White Paper.
PRESCRIBING EXPORT
LICENSING PROCEDURES
IN LEGISLATION
AND RATINGS
ADVICE
We support the proposal to prescribe export
licensing procedures in legislation, and we welcome the proposals
with regard to the Ratings advice service. We believe that the
Ratings service must be speeded up.
POWER TO
REQUIRE INFORMATION
FROM COMPANIES
WHERE THIS
IS NEEDED
TO MEET
THE UK'S
INTERNATIONAL OBLIGATIONS
We would ask that any measures to try to require
information from companies where this would be needed to compile
data in order to meet the UK's international obligations be introduced
in such a way as to impose the very least possible additional
administrative burden on British companies. We would query why
this is necessaryfor licensable goods, the DTI is given
full detailed information anyway!
TIME LIMITS
FOR PROCESSING
LICENCE APPLICATIONS
We are deeply disappointed at the rejection
of the Green Paper's proposal for the establishment of formal
time limits, the lack of which causes serious problems for many
companies. We still believe that an open-ended system is archaic
and prone to abuse by officials, and would argue that some form
of time limit is necessary. However, in the interim, whilst that
campaign still oes on, we support the Government's efforts to
try to make the existing system as efficient as possible, and
will provide whatever assistance we can to bring Industry's knowledge
and experience to the discussions on how this can best be achieved.
GIVING REASONS
FOR REFUSING
EXPORT LICENCES
We still believe that more fulsome reasons for
refusal should be able to be given to companies than is currently
the case in many instances.
APPEALS
We welcome the Government's proposals for the
establishment of a formal appeals procedure. We would have prefered
the establishment of a fully independent system. It is essential
that whatever system that is introduced is fast in operation.
COVERAGE OF
CONTROLS IN
EXPORT OF
GOODS CONTROLS
ORDERS
We will believe that the scope of coverage of
the controls in the Export of Goods Controls Orders should, and
must, be reduced. The rules should be targeted on countering the
activities of unscrupulous miscreants, and avoid unnecessarily
burdening the overwhelming majority of companies, whose activities
are quite responsible.
END-USE
MONITORING
We believe that Industry cannot be made more
responsible for end-use control than it currently is. We welcome
the Government's attempts to seek a common approach on end-use
control with the EU and signatories of the Wassenaar Arrangement,
and hope that this will result in the adoption of a common, standard
format for end-user statements.
LOCATION OF
EXPORT LICENSING
AUTHORITY AND
CHARGING FOR
EXPORT LICENCES
We welcome the fact that the DTI is to retain
its responsibility as the central coordinating authority on export
licensing. We welcome the rejection of the proposal that charging
be introduced for export licences. We would strongly urge the
enhancement of the resources tasked with licence processing.
CONCLUSION
We believe that Industry has an urgent need
for new legislation to be introduced at the earliest possible
opportunity. However, we wish to reiterate that we strongly urge
that the proposals on intangible transfer and trafficking and
brokering are put to one side for the time being, for further
detailed consideration, whilst the rest of the legislation is
enacted separately as soon as possible. The Government must endeavour
to avoid rushing in hastily thought-out and ill-defined legislation
on this. British exporters must not be allowed to be put at a
commercial competitive disadvantage by the UK's own Government,
as this could prove to be counter-productive.
THE RESPONSE TO THE PROPOSALS CONTAINED IN
THE DEPARTMENT OF TRADE & INDUSTRY'S WHITE PAPER ON "STRATEGIC
EXPORT CONTROLS", PUBLISHED ON WEDNESDAY 1ST JULY 1998
INTRODUCTION
The Defence Manufacturers Association (DMA)
welcomes the release by the Department of Trade and Industry (DTI)
of its White Paper on "Strategic Export Controls", pursuant
to the July 1996 Green Paper on the same subject. The DMA also
welcomes many, although not all, of the proposals that the White
Paper contains. We fully recognise the realities of the current
export controls situation, and agree with the summary contained
in the "Risk Assessment" section on page 24 of the White
Paper.
We are grateful for the statement right at the
start of the White Paper (at 1.1.1) that the Labour Government
wishes to re-state:
". . . our support for a strong UK defence
industry."
which re-iterated previous similar statements
from Government officials, including, amongst others, that of
the Secretary of State for Foreign & Commonwealth Affairs,
in the preamble to the 28 July 1997 announcement on the "Criteria
Used in Considering Conventional Arms Export Licence Applications",
in which it was stated 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 our defence effort."
Whilst we were pleased to read in the White
Paper's Foreword by the former President of the Board of Trade,
that:
". . . the Government is aware that exporters
need export licensing procedures that are both clear and consistent.
. ."
we would also strongly argue that another vital
element is missing from this statement, and that, as we stated
in our response to the Green Paper (see Annex G):
"Speed of response is essential"
and:
"The key words, from Industry's view,
in the quote (at 2.4.1) from the Scott Report are that ".
. . export licences will be dealt with expeditiously and with
fairness to exporters"."
We note that the Government also recognises
the significance of these words from the Scott Report, which are
quoted in the White Paper (at 4.1.1).
All responsible defence companies accept the
vital necessity of the underlining policy of export controls.
It is the mechanics of the system, and how it operates, which
causes concern for Industry, especially with regard to the timescales
involved in the processing of export licence applications, rather
than any serious questioning of the need for an export control
system. Industry recognises the difficulty of the task confronting
Government agencies in trying to protect the UK's strategic interests
whilst at the same time assisting exporters, although this can
result in what we have previously described as "Governmental
schizophrenia", or "the British Government speaking
with forked tongue". However, we still feel that more must,
and can, be done to improve the functioning of the system.
One general observation that we would like to
make is that the White Paper actually appears to have little obvious
linkage to the "Report of the Inquiry into the Export of
Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions"
(the Scott Report), many of whose recommendations appear to have
been ignored. [Note: A copy of a DMA Notice summarising some of
the recommendations of the Scott Report on export controls matters
is attached at Annex A, for reference] [20]
We warmly welcome the fact that the Government
is intending (as stated in 1.3) to introduce new primary legislation
on Strategic Export Controls. We fully supported this proposal
from the Green Paper, stating in our response that:
"The present situation, in which the
legislation dates back to 1939, is extremely unsatisfactory and
unhelpful for British Industry, and we believe that new legislation
is required. To maintain the 1939 legislation and resulting "Cold
War" regulations would be ridiculous, for all of the well
thought out and rational reasons contained within the Scott Report
(Paragraphs K2.1 to K2.20)."
We believe that this proposed new legislation
has been long overdue, and welcome the fact that the Labour Government
and the officials at the DTI have been prepared to take on this
task. We hope that, despite the tight restrictions on Parliamentary
time which the Government faces, such new primary legislation
will be able to be introduced at the earliest possible opportunity,
after detailed and considered reflection has taken place, given
the urgent need with which Industry regards the whole matter of
export controls and licensing. However, as we stated in our response
to the Green Paper:
". . . Industry is more concerned with
the practical aspects of the mechanics of the system, rather than
with policy matters. The key issues for Industry are:
(1) How should the system be
rationalised?
(2) How would a new, replacement
system work?"
We are still convinced that this is the case,
and welcome the comments (at 4.4.2) about the efforts that the
Government is taking:
". . . to improve the turnaround
of licence applications . . . "
We stand ready, in collaboration with other
Industrial organisations (such as the Confederation of British
Industry and other Trade Associations), to assit the Government,
and its officials in the Departments involved, in any way with
the:
". . . comprehensive review of the procedures
by which the ECO processes licence applications, the main aim
of which is to establish how the ECO could process export licence
applications more efficiently."
as referred to at 4.4.2 in the White Paper. We believe
that we could bring the knowledge, expertise and experience of
Industry to the debate as to how the licensing system can be made
more efficient. We hope that, in such a collaborative partnership
between Government and Industry, involving constructive discussions
intended to make the system work more efficiently, we should be
able to devise a "smart licensing" system, better able
to cope with the modern commercial needs of Industry, and ready
to face the challenges of the Twenty-First Century, without undermining
the effectiveness of the UK's strategic export controls system,
and the Government's ability to control and prohibit undesirable
exports. It must be recognised that British Industry is highly
responsible, as demonstrated by the negligible number of licences
that are refused each year. It is essential to avoid the situation
in which UK firms are tempted to decide to apply for just one
more licenceone to ship their whole manufacturing plant
and infrastucture overseas to a nation whose export control system
is less burdensome! We can assure the Government that Industry
wants to be as helpful as it possibly can in this matter, and
to be as constructive and positive in assisting in framing an
export control system that achieves the necessary measure of control
and counter to proliferation.
PARLIAMENTARY SCRUTINY
We believe that the intended adoption of a negative
resolution procedure for the introduction of Parliamentary scrutiny
of the Export of Goods Control Orders is a pragmatic and realistic
practical solution to this issue, whilst imposing the minimal
possible burden on scarce Parliamentary time. It will enable the
Government to continue to achieve the essential ability to respond
rapidly to fast-developing situations around the World.
We are delighted that the HMG has rejected (at
2.1.7) the proposal that:
". . . there should be parliamentary
scrutiny of individual applications either before or after the
decision on whether to grant a licence has been taken."
This whole suggestion (described at 2.1.6),
which we are sure has had very strong support from some Non-Governmental
Organisations (NGOs) in their responses to the 1996 Green Paper,
and for which there has been much political lobbying, was one
which caused considerable concern for Industry, for all of the
practical and sensible reasons quite cogently argued in the remainder
of 2.1.7. We argued in our response to the Green Paper that:
". . . Industry would not want Parliamentary
scrutiny of individual export licences, and believes that there
must be sensible safeguards on political and commercial confidentiality
in individual cases. Greater Parliamentary scrutiny on export
control matters and increased public accountability must not create
opportunities for unrepresentative pressure groups unduly to influence
policy or decisions. It is important to maintain a pragmatic,
realistic and rational approach to defence exports and to avoid
being swept along by the idealistic and emotive arguments of a
vocal minority."
Before this the DMA has expressed its concerns
on a similar matter, in response to a request for views from the
MoD(UK) of 26 March 1996, on the subject of the disclosure of
information on defence exports, in a letter of 8 May (a copy of
which is to be found at Annex B).
We are grateful that the Labour Government has
taken these serious concerns on board and had the political courage
to make what is a vitally important policy decision on this issue,
in recognition of the potentially very damaging effects for British
Industry if Parliamentary scrutiny of individual export licence
applications has been introduced.
We are not convinced by the arguments for allowing
greater scrutiny of individual export licence applications by
Parliament, or its practicability. As far as we are aware only
the USA and Sweden have such Parliamentary scrutiny, which is
restricted to exports over a certain threshold value. The introduction
of such scrutiny in the UK would tie up already scarce Parliamentary
time, with an average of some 50 individual export licence applications
having to be considered each working day (or some 370 each working
day if shipments currently covered by the open licensing system
were also to be scrutinised, as some would wish), and the necessity
for Parliament or a special Parliamentary Committee having to
sit to assess and consider export licence applications all year
round, with no respite for any of the traditional Parliamentary
recesses being allowed. We also wonder what additionality MPs
could bring to the process of considering and assessing export
licence applications that is not available from the knowledge
base of Government officials within the DTI, MoD(UK) and FCO,
that would compensate for the inevitable slowing down of licence
processing that would be bound to result, as well as the potential
compromising of confidentiality.
We support the Government's commitment to greater
transparency (at 1.1.1) in the field of strategic exports and
welcome the plan to publish an annual report on the state of strategic
export controls and their application, and other measures which
have been introduced (described at 1.2.1 and 2.1.8). We particularly
welcomed the release, on 28 July 1997, of the Statement by the
Secretary of State for Foreign & Commonwealth Affairs on the
"Criteria Used in Considering Conventional Arms Export Licence
Applications" (copy at Annex C)[21],
which clearly demonstrated the Government's commitment to enhanced
transparency. Our response to the Green Paper argued that greater
transparency was essential, and we are pleased to be able to support
the Government in these endeavours.
However, we recognise the potential implications
of the Freedom of Information Act (also referred to at 2.1.8),
and the ways in which this could result in attempts being made
to create a greater degree of openness and discussion on individual
export licence applications and export contracts than the companies
and/or customers involved may feel to be desirable. We addressed
these concerns in our response to the December 1997 consultative
White Paper on the Freedom of Information Act (copy at Annex D),
and will endeavour to do so again when details of the actual resulting
legislation are released. We feel that it should be pointed out
that the USA's legislation on Freedom of Information, which is
constantly alluded to by those demanding greater openness and
held up to be a consummate example of such a system, specifically
excludes export licensing related information, on commercial confidentiality
grounds.
PURPOSES OF
STRATEGIC EXPORT
CONTROLS
In our response to the Green Paper, we stated
that:
"It would be desirable to see the Purposes
laid down in some form. If the legislation is to be clarified,
then the Purposes behind the policy should also be made clear.
Also, if Industrialists are to be open to prosecution for non-compliance,
they ought to be entitled to know the criteria against which the
judgement has been made. However, there are arguments against
the stated Purposes being given the force of legislation due to
the need for a more flexible system, recognising fluid changes
in World affairs. Therefore, we believe that the Purposes should
be set down as guidelines contained in an annex to legislation,
rather than in actual legislation itself."
We are still convinced that this is the case,
and are reassured that HMG has agreed with this practical observation,
stating (at 2.2.2) that it will:
". . . propose that new primary legislation
should make provision for the purposes of strategic export control
to be set out in secondary legislation."
We believe that the proposed affirmative resolution
procedure for Parliamentary scrutiny of the Purposes of Export
Control is the most effective way for this to be undertaken.
We notice that the list of stated purposes (at
2.2.3) shows some differences from that contained in the Green
Paper and to the Scott Report's list of Purposes (on page 1765,
paragraph K2.18), which can be compared thus:
Scott Report |
Green Paper | White Paper
|
complying with international treaty obligations
| to adhere to the UK's international obligations and commitments, eg international arms embargoes
| To adhere to the UK's international obligations and commitments, including international arms embargoes and international control regimes
|
| to prevent the proliferation of weapons of mass destruction and of missiles and unmanned air vehicles capable of delivering weapons of mass destruction
| To prevent the proliferation of weapons of mass destruction and of missiles and unmanned air vehicles capable of delivering such weapons
|
protecting the UK's Armed Forces | to ensure the security of the UK, its dependencies and its armed forces abroad, and of allied countries
| To safeguard the UK's security interests and those of allies and EU partners
|
| to avoid contributing to internal repression and instability within the country of destination of the licensed goods
| To avoid contributing to internal repression
|
| | |
Scott Report | Green Paper
| White Paper |
| to take into account the economic and technical capability of the recipient country, and to achieve the least diversion for armaments of human and economic resources
| To avoid seriously undermining the economy of the recipient country
|
avoiding the assistance of foreign human rights abuses
| to avoid contributing to human rights abuse
| |
avoiding the assistance of aggression by foreign countries
| to avoid contributing to the prolongation or aggravation of existing armed conflicts between states
| To avoid contributing to international aggression
|
| to preserve international and regional stability
| To avoid damaging regional stability |
avoiding the assistance of serious crime in foreign countries
| to avoid contributing to terrorism and serious crime
| To avoid contributing to terrorism and crime
|
| to avoid re-export or diversion of goods, likely to prejudice purposes (a) to (i)
| |
preventing terrorism | |
|
| |
|
From this comparison it can be noted that Scott only recognised
some of the White Paper's Purposes as being legitimate.
We stated in our response to the Green Paper that:
"We believe that the definitions of the Purposes are
too vague and imprecise, and would be very susceptible to arbitrary
and negative interpretation by officials. It is undesirable for
there to be any ambiguities which allow decisions to be made without
sufficient justification. It is not just the nature of the rules
which is important, but equally important is the question of how
they will be interpreted by officialsIndustry wants predictability
in export controls, so that companies always know exactly where
they stand. What is needed is the establishment of unambiguous,
qualified objectives governing the export of very specific and
narrowly defined goods which are of key strategic importance and
concern. Such tighter definitions will, by their very nature,
make licence processing simpler and quicker for all concerned."
We believe that the FCO's existing "Criteria Used in
Considering Conventional Arms Export Licence Applications",
being a far more detailed listing, is more in line with Industry's
needs than the new list provided of Purposes by the DTI, which
continues to be vague and imprecise. For instance, the White Paper's
statements "To avoid damaging regional stability" and
"To avoid contributing to terrorism and crime" require
the much tighter and detailed definition than the FCO's list of
Criteria provides, and we would recommend that the latter are
used instead. Apart from the bureaucratic inefficiency involved
in maintaining two separate lists, there is also the danger that
some confusion could be engendered as a result, despite being
consistent with both the Criteria and the EUs Code of Conduct
(as stated at 2.2.4).
This does not mean that the FCO's Criteria is a document
with which we have no quibblesit is broadly in line with
the Green Paper's list of Purposes, and an examination of the
DMA's response to that section of the Green Paper (see Annex G)
[22]will illustrate some
of the concerns that we had about both that, and, by implication,
the FCO's Criteria. The FCO's Criteria is not perfect, in our
view, but it represents an important and valuable development
in the drive towards greater transparency.
Another reason why we are happier with the FCO's Criteria
than with the DTI's list of Purposes of Strategic Export Controls
is an intellectual one: such a list should, by definition, be
restricted to strategic concerns alone, and some of those included
in the White Paper's list do not, strictly speaking, really represent
strategic matters, which should purely concern the protection
of the UK's strategic interests. For instance, as we stated in
our response to the Green Paper:
"Whilst all of the Purposes listed may be very laudable
in themselves, it has to be seriously questioned whether some
of them (Purposes (d), (e), (f), (g), and (i) especially) are
really strategic concerns, in the strict meaning of the word,
and, therefore, belong in a list of `Purposes of Strategic Export
Control'. Are these Purposes a proper subject for strategic export
control legislation, or should this be concerned purely with those
national interests outlined in Purposes (a), (c), and (j)? This
does not mean that we favour the export of goods which would be
used for these purposes, but merely that we do not believe that
the UK's strategic export controls system is a legitimate/appropriate
means to control their trade."
These Purposes are important considerations, but are not
strategic concerns. We do not want goods which will be used for
internal repression and torture, for instance, to be exported
from the UK, or support this taking place, but this does not represent,
strictly speaking, a strategic concern for the UK. Therefore,
the deletion of this from the, now unnecessary, list of Purposes
of Strategic Export Control, but its continued retention in the
FCO's Criteria, so that, de facto, Government officials do take
this into account when assessing export licence applications,
would appear to deal with this satisfactorily on a working level.
We are happy that some of our observations about the Green
Paper's list of Purposes appear to have been accepted: for instance
our observation that Purpose (d) "to avoid contributing to
internal repression and instability within the country of destination
of the licensed goods" and Purpose (f) "to avoid contributing
to human rights abuse" were an unnecessary duplication, has
been recognised by the dropping of Purpose (f) from the White
Paper's list. Nevertheless, we would still query the continued
inclusion of some of the other Purposes.
For instance, in our response to the Green Paper we pointed
out that:
" . . . we believe that Purpose (b) is superfluous,
as the UK's commitment to countering the threat of proliferation
of weapons of mass destruction is already fully enshrined in our
international treaty obligations (eg the Nuclear Non-Proliferation
Treaty, The Nuclear Suppliers Group, The Chemical Weapons Convention,
The Biological and Toxin Weapons Convention. The Australia Group
and the Missile Technology Control Regime), as already covered
by Purpose (a)."
We still believe that this is the case, and would welcome
clarification from HMG as to why this purpose is necessary.
We are a little surprised at the dropping of the Green Paper's
Purpose (j), dealing with the threat of re-export or diversion,
as this was one Purpose with which we cannot perceive that anyone
responsible can have any objections, and is an increasingly important
subject of concern for Governments around the World, eg the BMARC
(Project "LISI") affair. This is clearly demonstrated
by the inclusion of this purpose under Criterion Seven of the
"EU Code of Conduct on Arms Exports" [see Annex F],
signed on 8 June 1998. Therefore, this Purpose's omission from
the White Paper's list of Purposes is confusing, to say the least.
In our response to the Green Paper's inclusion of Purpose
(e) we stated that:
"We note that Purpose (e) could be used contrary to
the Scott Report's conclusion (at K2.20) that the maintenance
of a technology gap between the UK and other nations is not a
legitimate purpose of export control. Concerns based on the control
of technology should, in our view, be a matter for the owner of
any intellectual property rights. With regard to Purpose (e) it
could also be argued that it is not the place of the UK to try
to decide, on either economic or technical grounds, what other
countries should be allowed to purchase. We also question the
practicalities of how and by whom such a judgement could be made."
Whilst we welcome the exclusion from the White Paper of the
technical aspects of Purpose (e), we do continue to have some
concerns over the stated Purpose: "To avoid seriously
undermining the economy of the recipient country" in
the White Paper, whilst fully recognising and supporting the principle
involved and the importance of the underlying policy upon which
it is based.
Given the scale of business needed for this to be applicable,
there are only a handful of larger contracts (and British companies)
which could be affected by this Purpose. Such large contracts
would have considerable political and economic importance and
it is difficult to envisage a Government refusal of a licence,
given that the contracts involved will only have been secured
with considerable Government support, both from DESO, the British
Embassies or High Commissions involved, and quite possibly from
appropriate Government Ministers. Also we feel that, in general,
such contracts would almost certainly involve the companies seeking
financial support from the Export Credits Guarantee Department
(ECGD) to cover the salesby the time it gets to this stage
HMG should really have made such decisions about the possible
undermining of the economy of the customer, and not at the later
stage when an export licence application has been submitted.
We query whether it is really the place of HMG to take it
upon itself to decide what it believes that other countries can
afford to purchase, and also what the end result of such a decision
would be (ie would the customer simply go to another supplier,
elsewhere?). We stated in our response to the Green Paper that
the letters of refusal from the DTI, when export licence applications
had been rejected, should:
" . . . contain a statement that our Western allies
will similarly be prepared to abstain from supplying the goods
in question. If HMG cannot do this, it should have to demonstrate
why a refusal is still appropriate. Export controls are only an
effective instrument if the goods in question cannot be obtained
from elsewhere. We believe that one of the criteria used in processing
licence applications should be consideration of whether any foreign
competitors (which companies could list on the licence application
forms) would be likely to take advantage of a refusal from HMG
and supply the goods sought."
We still believe that this should be the case, and that it
would be especially necessary in circumstances in which a licence
has been refused on economic grounds.
WEAPONS OF
MASS DESTRUCTION
British Industry fully recognises and supports HMG's attempts
to try to control the proliferation of weapons of mass destruction
Worldwide, in appreciation of the extreme threat that these activities
generate for all. We stated in our response to the Green Paper
that:
"...there may be some applicability of the Chemical
Weapons Convention to the Nuclear and Biological spheres...
and are pleased that this observation has been accepted
in the White Paper (at 3.1.3), and that moves will be made along
these lines for the introduction of equivalent prohibitions and
controls on the nuclear and biological weapons sectors. Such is
the seriousness of the whole subject of the threat of proliferation
of such weapons, and their technologies, that HMG will have the
full support of all responsible companies in its efforts to try
to curb this threat.
We fully support the proposals outlined at 3.1.2 for it to
be made an offence for:
...anyone in the UK or a UK person abroad to aid, abet,
counsel or procure a foreigner overeseas to develop, produce or
use a chemical weapon."
and for similar controls to be introduced on assisting
in military preparations for the intended use of chemical weapons.
We have noted the statement (at 3.1.3) that:
"In the case of nuclear weapons, we propose that the
leiglsation should exempt involvement in the official nuclear
weapons programmes of countries that are members of NATO."
It has occurred to us that this could be constrained further,
in an effort to be seen to be countering proliferation, to "...members
of NATO who are existing nuclear weapons powers", unless,
of course, HMG wishes to be able to assist non-nuclear NATO members
to be able to devleop the capability. Also, we question whether
the above definition ("
.members of NATO. ")
is deemed to include France, whose status, as a member of NATO,
has been a matter for debate since 1996, when it withdrew from
NATO's integrated military organisation. We beleive that clarification
on this matter is required. As one of NATO's only three nuclear
powers, France's exclusion as a possible market for British companies
on a minor technicality resulting from its exact relationship
with NATO would, naturally, be unwelcome. Therefore, the removal
of any posssible ambiguities in this matter would be welcome,
and it occurs to us that this could be achieved by the stating,
in an annex to scondary legislation, specifically which countries
are permissible.
We would argue that one related aspect that needs to be reassessed
in the question of liberalising controls on the export of NBC
protective materiel, which we feel strongly needs to be looked
at carefully. In our response to the Green Paper, we stated that:
"There is also the "grey area" of civil
defence equipment, for the protection of civilian populations
(eg Nuclear, Biological and Chemical (NBC) protective materiel),
and it has to be questioned whether such purely defensive
protection equipment should be controlled as rigorously as it
is. The availability of such defensive materiel is unlikely to
exacerbate proliferation tensions. The Aum Sect's activities in
Japan have clearly demonstrated the ease with which simple chemical
weapons technology can be obtained (including from the Internet)
and produced, and efforts to try to control the supply of equipment
designed purely to protect against such weapons need to be re-examined.
"
We would like to take this opportunity to reiterate that
it can be argued that the supply of such materiel can help to
counter and deter NBC weapon proliferation, rather than, as British
Governments have traditionally seemed to believe, encourage it.
We must state our continued opposition to the use of the
highly ambiguous words:
".. grounds for suspecting .."
in section 3.1.4 of the White Paper, as is used in the current
end-use (or "catch-all") clause, which we believe to
be too vague. We have no arguments when companies have knowledge
or have been told by Government officials, but do have concerns
about the use of the above term and the fact that companies can
be put in jeopardy of legal prosecution as a result. A failure
to suspect may be naive, on occasion, when seen with the benefit
of 20 : 20 hindsight, but should not be a potential criminal offence,
liable to result in the threat of prosecution. The proposed extension
of the controls to cover intangible transfer makes this issue
even more contentious in our view.
We would question why it says on page 23 of the White Paper
that:
"The new legislation would provide for similar
provisions [prohibitions on the involvement in developing,
producing or using weapons of mass destruction] in relation
to most nuclear weapons
."
and would suggest that clarification would be essential as to
what nuclear weapons were included and what were excluded in the
provisions of the new legislation.
TRANSFER OF
TECHNOLOGY BY
INTANGIBLE MEANS
We believe that Industry fully understands the reasons why
HMG is seeking to try to bring under some sort of control the
whole issue of intangible transfer of technology, one aspect that
was totally missing from the Scott Report. In the DMA's response
to the Green Paper we stated, on this issue, that:
"These concerns are easy to state, but impractical
to enforce due to the complexity of the issue. Multinational companies
have plants and divisions all over the World, which are increasingly
being linked on the "Information Super Highway". Whilst
there may be scope to make some of these activities illegal, this
would be very difficult to enforce, and the wording of any legislation
would have to be very clearly defined. Introducing such legislation
might signal to the International Community that the UK is taking
steps to try to control such activities, but in a very real sense
such measures would be impractical. It would be impossible to
train all of the personnel involved on "The Web" adequately
on export controls and how they apply to their activities. We
also wish to point out that, if HMG wanted companies to keep lists
of what they transferred, this would be quite onerous."
We feel that these arguments about the practicability of
enforcing the controls are still true, but accept that efforts
should be able to be seen to be being made to try to control these
activities. Trying to monitor intangible traffic of information
(by e-mail, fax or orally) from companies could prove to be almost
impossible for the firms themselves, let alone HMG. We welcome
the fact that the Government apparently recognises (at 3.2.1,
last sentence) the potentially significant enforcement difficulties
that may result, and so has decided to introduce narrowly-focused
controls, which may have a greater chance of practicability. We
fully support the need to have a limited scope for these controls,
if they are to be enforceable, and that this focus must, of necessity,
be on the areas of greatest concern and threat (eg weapons of
mass destruction, etc). The new controls should endeavour simply
to close any loopholes that are perceived in the existing legislative
instruments (The Chemical Weapons Act 1996 and the Official Secrets
Act).
It does have to be stated that it is seemingly illogical
that, at present, you need a licence to post or hand carry hard
or computer disc copy of such technical documentation overseas,
but do not require it for e-mailing or faxing exactly the same
information to exactly the same recipient. Either technical documentation/information
needs to be controlled or it does not, and if it does, then the
controls must be seen to apply to all methods of potential transmission,
in all forms. Therefore, we fully support the proposed objective,
as outlined in (2c) on page 23 of the White Paper, which neatly
summarises the situation, and the proposals contained at 3.2.2,
in relation to dual-use goods.
We also support the proposals contained at 3.2.3 with regard
to electronic networks, such as the World Wide Webagain,
either such technical information is worth controlling or it is
not, and if it is, then all formats for its dissemination should
be controlled. It does have to be pointed out in this particular
sphere that the main potential threat comes not from companies,
but, rather, from individuals, as firms would have nothing to
gain from putting technical information "on the Web".
The potential threat posed by these activities was made quite
clear from an edition of the BBC's "Panorama" programme
at the end of July 1998 on biological weapons which featured an
American individual who was uploading on to the Internet precise
details on how to prepare simple biological weapons from readily
available materials.
As we stated in our response to the Green Paper:
"It would be impossible to train all of the personnel
involved on "The Web" adequately on export controls
and how they apply to their activities."
It would seemingly be even more difficult to try to educate
private individuals in this regard, and to police their activities,
but efforts should be undertaken to try to do so.
However, whilst Industry accepts the spirit of the proposals,
we have a number of major concerns about them. Any resulting legislation
would have to be extremely carefully worded in order to avoid
a potential nightmare, not just for Industry, but also for HMG,
and other sectors that could be affected by the legislation (such
as Academia). So much on-going activity will, potentially, be
affected. The post-sale servicing and maintenance of software,
providing updates and support of on-line instruction manuals,
providing training for overseas personnel are just some of the
many areas that will be affected, and which are regarded by the
Defence Export Services Organisation as essential integral parts
of the necessary "package" to supply and support high
tech exports required for UK Industry to remain competitive.
The modern defence industrial World is one in which there
is, and will continue to be, increasing emphasis on European Industrial
rationalisation, collaborative joint ventures, multinational teaming
arrangements, collaborative research and development, global electronic
commerce and local production to satisfy offset obligations. Such
activities cannot function effectively, or, possibly, even viably,
with constant bureaucratic interference and delays caused by attempts
to try to control exchanges of information. The practicalities
of the modern business environment must be recognised and not
impeded.
We trust that HMG will undertake to study closely the system
in force in the USA on intangible transfer, to assess how this
system works and glean any lessons that may be learnt from it
and the practical lessons that the US Government and the companies
affected by these regulations have gained from their experiences
in operating with the system, whilst framing the UK's own controls.
Whilst we recognise that the USA has controls on intangible transfer,
we feel that we should point out that it also has set timescales
for licence processing and the granting of licences by defaultaspects
that HMG appears to be strongly opposed to introducing over here,
but which can help officials by easing the potential workload
arising from such widely-cast controls.
We would strongly urge that any such controls are only introduced
after multinational agreement on the implementation of such measures
across the EU (and elsewhere), and are not just imposed on the
UK.
It will be essential to ensure that such regulations as are
introduced are very carefully worded, and that full account is
taken of their potential implications for spheres such as Academia.
In our response to the Green Paper we stated that:
"The reference to possible Government attempts `.
. . to control students being admitted to a course of study. .
. ' is somewhat concerning as we believe that export controls
are a matter for Government and Industry and not for Academia."
We still believe that this is the case, and are concerned
that the proposals could have an impact on the UK's high-tech
academic institutions, whose activities and training are essential
for the UK's future technological development, but are frequently
heavily dependent for their viability on overseas students (and
their fees). Any ill thought-out legislation that was introduced
and hand an impact on such institutions' continued survival and
activities, would inevitably affect the UK's technology base for
the future.
We feel that the introduction of such controls should be
delayed, to allow for detailed consideration and consultation
as to how such measures can be effective, policed, but as unobtrusive
as possible. We are concerned that this period for consideration
could delay the new legislation on strategic export controls,
and so would argue strongly that this aspect of the White Paper's
proposals be put to one side, to allow for the rest of the legislative
proposals to be proceeded with as expeditiously as possible. When
such controls are introduced, we feel that the only remotely effective
means for this will be by the creation of new Open General Export
Licence (OGEL), but stand ready to assist in any way with the
proposed further consultations.
TRAFFICKING AND
BROKERING
As with the issue of intangible transfer of technology, we
believe, as we stated in our response to the Green Paper, that:
"It is also seemingly impossible to control the
activities of `brokers'."
However, we fully recognise that some attempt to do so must
be undertaken. This became particularly clear in late-1996, when
the activities of the Isle of Man-based company Mil-Tech Corporation
in Rwanda came to light, and, thus, brought the whole issue of
brokering sharply into focus. Following this, the DMA submitted
an unsolicited short paper to the DTI in which we stated that:
"This has been a matter of concern to the DTI
and HMC&E for some time, and was raised in the DTI's Consultative
Document on `Strategic Export Controls', when suggestions were
sought as to how this might be controlled. The recent revelations
concerning the activities of `Mil-Tec Corporation' have brought
these problems into an even sharper focus, and are likely to result
in greater efforts being made to control similar brokering activities.
It has been suggested that brokering should be brought into the
scope of the UK's Export Licensing System, or even that attempts
should be made to put a complete stop to the activities of brokers
. . . Introducing legislation on this matter, the wording of which
would have to be very clearly defined, would signal to the International
Community that the UK is taking steps to try to control such activities,
but we are concerned that HMG may be rushed into introducing some
hastily and ill-thought out legislation.
"It must be recognised that there are responsible
brokers and there are irresponsible ones, and to try to put a
complete stop to these activities would be an over-reaction, which
could have an adverse effect on the British economy, as not all
brokered deals involve purely foreign-sourced equipment, but can
frequently involve a mixed package of British and foreign material
(eg the Al Yamamah programme with Saudi Arabia involved an undertaking
from British Aerospace to supply Pilatus PC-9 basic training aircraft
from Switzerland as part of the overall package). What is needed
is some way in which to control brokering activities, rather than
prohibiting them, whilst recognising that controls would be largely
impractical to enforce. HMC&E has responsibility for enforcing/policing
the UK's export controls system, but its resources are such that
it is only able to make random spot checks at the UK's ports of
departure. How exactly HMC&E could effectively police shipments
going through third nations is not quite clear. Controls which
are unenforceable will not be effective in deterring companies
like Mil-Tec Corp.
"The introduction of some kind of controls is
necessary. We believe that what is needed is some means that enables
HMG to prosecute transgressors if (in the very unlikely event
that they are) such brokers, activities come to light. We do not
believe that requiring such activities to be licensed through
the DTI is practicable."
Despite our observations about the practicability of enforcing
and policing such controls, we support the Government's efforts
to try to do something about this issue, and to be clearly seen
to be doing so. We are pleased that the Government has avoided
the impetus to prohibit brokering altogether, but is simply seeking
to try to bring it under some sort of control. Therefore, we support
the proposals contained at 3.3.2, but would merely reinforce the
necessity, as identified in this paragraph of the White Paper,
for the goods to be covered by these controls to be very clearly
defined. This will be essential for all concerned: for instance,
it says on page 24 (section 2d), in reiteration of comments at
3.3.2, that:
"The new powers would be used to impose similar
controls on trafficking and brokering of: . . . certain types
of equipment for which there is clear evidence of their use in
torture."
As an examination of reports from Amnesty International clearly
reveals, there are a great many means used by repressive regimes
around the World, to torture victims, some of which involve the
use of extremely mundane items. Therefore, clear definition of
exactly what items are to be covered by these controls/prohibitions
will be essential.
We fully support the proposals outlined at 3.3.3, which appear
to us to be the logical way in which to proceed, and are happy
that the Government perceives the problems that could result,
thus not imposing controls on all goods that are subject to UK
export controls, but endeavouring to focus on what needs to be
controlled as a matter of priority.
We would, however, advise caution in the introduction of
such controls, as they could easily affect the vital appointment
and use of agents and local representatives by British companies
(for instance in the NBC protective material sphere), thus putting
them at a competitive disadvantage to their overseas rivals.
As with the issue of Intangible Transfer of Technology, we
feel that the introduction of such controls should be delayed,
to allow for separate detailed consideration and consultation
as to how such measures can be framed and introduced, whilst not
delaying the rest of the legislative proposals.
ENFORCEMENT
We fully agree with the proposal outlined at 3.4.1 for HM
Customs and Excise to be given the powers to enable it to police
the proposed controls on intangible transfers and trafficking/brokering,
as well as for the requiring of access to information.
In our view such laws will be impractical to enforce, in
many ways. Effective laws are ones that can be policed and, thus,
deter potential wrong doersones which cannot be effectively
policed will be ignored by potential miscreants whilst imposing
a burden on law abiding, responsible firms.
We realise that HMG has acknowledged the potential difficulties
that will result from trying to enforce controls on intangible
transfer, trafficking and brokering, etc. However, we are not
quite convinced that HMG fully realises the potential scale of
the difficulties and workload that may result, and have serious
concerns at the potential impact on HMG's licensing resources.
On page 26 of the White Paper the DTI gives (under "Other
costs") its estimate of the potential impact of enforcing
the new, proposed legislation. These are estimated to be, for
the DTI ". . . equivalent to one new member of staff at
the licence processing level at a total cost of £25,000 per
annum.", and for other Government Departments ".
. . involved in the licensing process . . . either a similar or
lower level than this.", whilst, specifically to cope
with the proposals on intangible transfers, trafficking and brokering
would entail HM Customs and Excise requiring ". . . additional
resources, estimated as likely to be in the region of £500,000
per annum." (We would question how much of a "guestimate"
this latter figure represents).
We are concerned that this may well prove to be a significant
underestimate of the resource costs required, and we fear that
the new controls on intangible transfer, trafficking and brokering,
etc alone could result in a considerable upsurge of enquiries
and an avalanche of additional export licence applications from
companies and others (such as Academia) who may perceive themselves
to be potentially affected by the new regulations, unsure as to
exactly what the new regulations were and seeking to "play
safe". If this were to happen, it would, naturally, have
a potentially serious impact on the export licensing system as
a whole. Even if some kind of Open Licensing (especially an OGEL,
which would be essential) was introduced to try to alleviate the
potential problem, we are still convinced that a much greater
burden is going to result than the White Paper implies.
With regard to the potential costs of the new controls for
Industry, and the White Paper's request for inputs from companies
on this (at 1.5.1, and on pages 25-26), we have strongly encouraged
our Members to submit their best estimates to the DTI on this
matter, and hope that this elicites sufficient response for a
meaningful assessment to be able to be made. However, we believe
that it is inevitable that an increase in the complexity and scope
of the licensing regime will, by its very nature, increase the
costs of compliance for companies.
Whilst we know that the proposals with regard to intangible
transfers are in line with US regulations, we are deeply concerned
that HMG is not fully aware of the potential for problems and
the scale of the workload that will result. The potential for
the increased flow of applications could have severe and damaging
resource implications for HMG departments, as well as slowing
down the system, to the detriment of both HMG and Industry.
We believe that it should be the responsibility of the companies
themselves to try to control the flow of such informationin
many ways they should be seeking to so so in any case, in order
to protect their own commercial interests. We believe that, in
the long-term, it will be essential, and is inevitable, that the
onus of responsibility will be passed on to Industry. As we stated
in our response to the Green Paper:
"Anyone who wants to can easily beat a system
which relies overwhelmingly on companies' honesty. A more effective
system will involve HMG resources being redeployed to undertake
the proactive seeking out of the dishonest with more effective
policing of the system. We have formulated a proposal for a `Self-Assessment'
scheme as a possible export controls mechanism, which would merely
be a logical extension of the OIEL system. This would involve
companies at the start of each year submitting details of proposed
exports in the 12 months ahead, at the end of which time senior
company representatives would sign self-assessment forms stating
what goods had been shipped, with prior notification to DTI, to
which `safe' customers. These executives could then be held personally
and legally accoucntable for any deceit that was uncovered."
We believe that our proposal for the "Self-Assessment"
scheme (copied at Annex E) should be re-visited and considered
as a way in which the Open Licensing system can be further expanded,
in an effective and efficient way.
We would be happy to try to assist HMG to try to identify
alternative potential solutions, aimed at assisting HMG to achieve
its aims, without (unnecessarily) adversely affecting Industry's
interests and activities.
PRESCRIBING EXPORT
LICENSING PROCEDURES
IN LEGISLATION
We stated in our response to the Green Paper that:
"There is a need for a clearly written and transparent
procedure to be published explaining how the system works, but
there could be provision in primary legislation for HMG to issue
secondary regulations to cover this. There would be concerns over
what would be included in the legislation, as subsequent amendments
would be very difficult to introduce under Parliamentary legislative
procedures. We would not want anything whose nature is inflexible."
Therefore, we fully support the White Paper's conclusion
(at 4.1.1) that:
"The Government considers that there could be
merit in setting out the basic elements of the licensing process
in primary legislation but not detailed procedures. The latter
are, in the Government's view, best included either in secondary
legislation, or in guidance material as at present, or a mixture
of the two."
RATINGS ADVICE
We are delighted that the White Paper proposes (at 4.2.1)
that:
". . . there may be a case for decisions given
in writing in response to an export licence application that no
licence is required (NLR decisions), being made legally binding
. . . [thus, meaning that] . . . a recipient of an NLR decision
or a third party would be able to rely upon it in civil proceedings
. . ."
We believe that this will be most strongly welcomed by Industry.
Also to be strongly welcomed by Industry is the possibility, as
outlined at 4.2.1, that:
"It would also have the effect of making `licence
required' decisions subject to judicial review."
There are many smaller sub-contractors involved in the supply
of components, etc, who would welcome any system that enables
them to appeal against a decision that their goods are licensable,
when there is some element of doubt in their own minds on the
matter.
One other aspect of the Ratings system which also needs to
be addressed, in our view, is the question of the speed of responseat
present in many cases it is actually quicker for companies to
go through the full process of applying for an export licence
than it is to get a ratings decision. Therefore, many companies
find it quicker (and safer) to apply for a licence when they are
in any doubt as to their goods' licensabilitythis is inefficient,
unnecessary, burdensome and only succeeds in slowing down the
whole licensing system due to the need to deal with and process
such nugatory applications. A faster decision making system for
Ratings is clearly required.
POWER TO
REQUIRE INFORMATION
FROM COMPANIES
WHERE THIS
IS NEEDED
TO MEET
THE UK'S
INTERNATIONAL OBLIGATIONS
We agree that the proposal (at 4.3.2, and on page 24 at (2e))
that information should be sought from companies is necessary,
and are merely concerned that the system itself (as outlined at
4.3.3) should not transfer a burden on to Industry. We accept
that Government will need to require information from companies
to enable it to meet its international obligations, and would
merely ask that the system adopted for this should impose the
minimal possible burden on Industry, as promised on page 24 at
(2e). We would, however, ask what possible additional information
it is that could be required that is not already included in the
export licence application itself.
However, we seriously question the necessity for applicants
to have to reveal the details of contract values on export licence
applications, at least below a threshold that could be relevant
to the issue of undermining the economy of a recipient country.
The need to try to protect such highly sensitive commercial information,
in an era when Freedom of Information is coming to the fore, will
be of paramount importance for companies. Efforts must be made
to ensure commercial confidentiality in this regard, and the removal
of the unnecessary requirement upon companies to provide such
pricing information from the export licence application form would
assist in this.
TIME LIMITS
FOR PROCESSING
LICENCE APPLICATIONS
Whilst we warmly welcome the White Paper's statement (at
4.4.2) that:
"We . . . recognise the importance to industry
of licence applications being dealt with promptly . . . "
We are extremely disappointed that the White Paper has rejected
(at 4.4.1) the proposal contained in the Green Paper (at 2.4.10)
for the adoption of formal time limits, which we had most enthusiastically
endorsed in our response. All responsible companies accept that
the vital principles behind export controls are sensible and soundit
is the processing (and, especially, the time that this takes)
that exasperates firms. We argued in our response to the Green
Paper that:
"HMG should have 20 working days in which to
review an individual export licence application, after which the
licence is automatically granted if no objection has been raised.
This timescale (of 20 days) has been the DTI's own stated target
turnaround timescale for some time now . . . . There should also
be a time limit for further detailed examination of a `problematical'
application, which we would suggest should be an additional period
of 20 working days . . . . Further, we would like to see timescales
laid down for the various stages of the processing procedure .
. . . We recognise that HMG officials would not welcome being
subjected to a system that incorporates a deadline, but Industry,
by the very nature of its business activities, has to deal with
deadlines that are imposed by customers and, therefore, any Government
functions that have a direct bearing on companies' ability to
meet these deadlines, as export licensing does, should reflect
these commercial realities and, similarly, be subject to deadlines.
Commercial deadlines confronting companies are far more complex
than those faced by HMG's export licensing officials, in that
they have to balance information on timescales on a whole range
of matters, including: delivery, production, material procurement,
shipping, letters of credit, etc, as well as possible delays in
the processing of export licence applications. Due to delays in
the current open-ended system, companies are increasingly having
to take considerable commercial risks in the ordering of materials
and components and the commencement of production runs in advance
of export licences being approved if they think that they are
likely to be granted, in order to try to keep delivery times as
short as possible. We are convinced that a 20-day turnaround timescale
is not unrealistic, and that having such a deadline would have
the benefits of helping to concentrate officials' minds wonderfully
on the task in hand and imbuing them with a greater appreciation
of Industry's sense of urgency."
The rejection is probably one of the biggest disappointments
to be found in the White Paper for British Industry, which, given
the increasingly competitive nature of the World market, very
strongly wants and needs, tight timescales to be set, rather than
for there to be a continuation of the current archaic, nebulous
open-ended system, which appears to prompt the attitude "the
decision is going to take as long as it takes". We feel that
it must be pointed out that the UK's two major defence exporting
rivals, the USA and France, have both now in place systems for
the granting of licences by default, and we feel that HMG should
endeavour to examine carefully these nations' experiences with
their systems, before dismissing the concept out of hand.
We understand the concerns of Government that a system in
which licences are granted by default after a set timescale could
result in unwelcome exports "slipping through the net",
yet would like to point out that this would only be due to bureaucratic
incompetence and inefficiency, in that such an application ended
up at the bottom of some civil servant's in-tray and was not actioned,
and query why it is necessary to make Industry suffer from this.
Surely the Government should be endeavouring to try to erradicate
such bureaucratic inefficiency and, thus, remove this concern
from consideration. The current system allows companies to have
to be the victims of the repercussions and effects of bureaucratic
inefficiencies, leading to delays in processing licences and,
in some cases, lost orders (and jobs) as a result. This is symptomatic
of a negative licensing system, in which a "yes" decision
can put the Government officials involved in peril of censure
and losing their jobs, if the benefit of hindsight (with which
so many critics are blessed) shows that this decision was questionable,
whilst a "no" decision will not do so (although it may
jeopardise the jobs of workers in the companies involved), no
matter how "safe" the proposed export would have been.
There is a genuine need by Industry for very fast turn around
of licence applications. If the British Defence Industry is to
continue to be competitive in the highly lucrative World market,
it cannot continue to function effectively whilst hampered by
an archaic open-ended export licensing system, in the modern commercial
World. We believe that the risk of unwelcome exports "slipping
through the net" in the granting by default system is greatly
outweighed by the potential risk of loss of orders (and jobs)
resulting from bureaucratic inefficiency. The truth that no-one
has ever dared to state is that no full-proof export control system,
which makes it impossible for there to be unwelcome "slippages",
has ever been devised by anyone, and almost certainly never can
be. We are not convinced that a system of granting by default
is, if operated properly and efficiently, any more prone to "slippages"
than the current open-ended one that is being operated at presentand
it would appear that the US and French Governments agree with
this observation. We refuse to believe that our Government officials
who deal with export licensing are less capable than those of
our major trading rivals.
We are convinced that it must be possible to introduce an
efficient administrative system for assessing export licence applications
which would considerably, if not totally, undermine the validity
of the concern about the accidental granting of undesirable licences
by default. The introduction of some kind of "triage"
control upon initial receipt of applications could achieve this.
It is quite clear that the overwhelmingly vast majority of export
licence applications received are completely non-contentious,
due to the nature of the goods involved and the fact that the
customer is considered to be "safe" (despite HMG's refusal
to admit that it is possible to identify "good guys"
and "bad guys"), and, therefore, that they require minimal
scrutiny. In these cases the time taken is purely for the administrative
processing of paperwork. The introduction of some kind of triage
control on initial receipt would allow such non-contentious licences
to be granted by default and enable the DTI and its advisers in
MoD(UK) and FCO to concentrate on the more contentious applications,
which do need careful assessment and consideration.
If the introduction of formal time limits is now regarded
as being no longer a viable option by HMG, as appear to be the
case, it will be essential to ensure that the existing open-ended
system is made as efficient as possible, and to examine how this
can best be achieved. To this end we welcome the Government's
efforts (as outlined at 4.4.2) to increase the speed of the system,
although this does little to address the fundamental problems
of timescales, and would strongly encourage the opportunity for
discussions between Government Departments and Industry on how
this can best be done further. We firmly believe that for this
comprehensive review to have any success, Industry should have
an input to the discussions. Certainly the US Presidential Advisory
Board on Arms Proliferation Policy (as quoted in our response
to the Green Paper) has recognised the invaluable contribution
that Industry has to play in framing new export control regimes.
We question whether the DTI's long-standing 20 working day
turn around timescale for "circulated" licence applications
still retains any legitimacy in the modern, highly competitive
business World, and in the face of developments in modern communication
technology, and are convinced that shorter timescales should be
achieveable. We know that both the MoD and FCO have stated in
the past that their own target turn around timescale are "10
working days", and are convinced that, even if these cannot
be reduced further, as they run concurrently, it should be possible
to reduce the remaining 10 working days to meet the DTI's overall
target timescale, during which its own officials administer the
system, without adversely affecting the system and producing overly
hurried decisions. With the proper introduction of more modern
technology (eg greater use of e-mail), we are sure that an export
control system fit for the 21st Century can be created.
It has to be pointed out that the modern global commercial
world can frequently require extremely rapid turn-around times,
especially with regard to the provision of spares for the repair
of unserviceable equipment. For instance, in the aviation sphere,
customers can frequently demand a 24-hour turn-around time for
vital spares to repair an aircraft. Companies need firm, predictable,
guaranteed, rapid delivery timescales, especially for the post-sales
support of equipment. If British suppliers gain a reputation that
they cannot achieve such levels of efficient customer service
support due to the UK's export licensing requirements, this will
fatally undermine their future export sales efforts, to the detriment
of the national economy. The MoD(UK)'s Defence Export Services
Organisation (DESO) has recognised the vital importance of the
provision of adequate post-sales spares and logistic support,
and has been pushing this theme to Industry for a number of years
now. If this is to be achieved, then an export licensing system
which can permit this must be an essential component. British
companies must be able to offer customers a quick and reliable
response time to meet the latters' needs, if they are to be allowed
to compete successfully in the highly competitive modern commercial
world, in which the market-driven demands of "faster, cheaper,
better" predominate.
We recognise that pushing for faster turnaround timescales
could result in more refusals being given, as officials have always
stated that the quickest and easiest answer is always going to
be "no". What is needed is a means to try to improve
and shorten the timeframe without increasing the rate of refusals.
We would be happy to discuss ways in which this could be achieved,
without alarming the Government or undermining the effectiveness
of the export control system. We have a number of possible suggestions,
taking into account the Government's opposition to granting by
default. For instance, could it not be possible to establish a
time limit (we would suggest the DTI's target 20 working days)
beyond which a company has a right to demand to know exactly what
specific reasons there are for the application being delayed,
rather than the current situation in which the DTI desk officer
involved simply "fobs" the company off with a meaningless
and uninformative statement that "the application is with
our advisers" and/or to demand to know specifically with
whom the application is "sitting", so that they can
contact the official involved direct to discuss the matter? The
introduction of such measures would greatly increase the transparency
of the system.
GIVING REASONS
FOR REFUSING
EXPORT LICENCES
Whilst we accept, as stated in the White Paper (at 4.5.1),
that:
"it is already standard practice for the ECO to give
in all cases reasons for refusal which are as full as possible
. . ."
we believe that many companies have had actual experience of receiving
extremely uninformative letters of refusal from DTI, which go
into little, or no, detail as to the grounds on which a refusal
was deemed to be appropriate. We feel that we must reiterate our
comments in our response to the Green Paper that:
"Even in the most sensitive cases, it should be possible
to provide formal explanations for refusal indicating which aspect
of the application led to its refusal, without compromising any
intelligence sources. Companies do not want or need to know the
details of the sources of any intelligence, but would find it
invaluable to receive any information on dubious customers (eg
if the proposed consignee is merely a front organisation for "undesirables").
Also, it is palpably absurd that defence companies, very many
of whom will be "X-Listed", with named security control
officers (and most of whose senior executives will have security
clearance and be signatories of the Official Secrets Act) and
are, thus, approved to receive, handle and store classified material,
cannot, apparently, be trusted with any information that might
even hint at the existence of an intelligence source."
We would still strongly argue, as stated in our response
to the Green Paper, that it should, at the very least, always
be possible to identify the specific DRI Purpose(s) of Strategic
Export Control and/or FCO Criteria Used in Considering Conventional
Arms Export Licence Applications that the proposed sale would
infringe to the company involved. We recognise that HMG must endeavour
to try to safegard its intelligence sources, but are convinced
that more fulsome reasons can be given to companies without revealing
the details of the source of any information.
On this matter, we are sure that Industry will hope that
the proposed, forthcoming Freedom of Information Act will result
in a greater degree of openness and transparency than many are
currently experiencing.
However, we feel that we should point out that, such is the
negligible number of refusals given per year, that this issue
is, in many ways, of far less overall importance than that of
delays in the export licensing system, which afflicts a very much
larger number of licence applications, and creates much greater
problems for Industry.
APPEALS
We are delighted that the Government has accepted (at 4.6.2)
that:
". . . some formalisation of the appeals process is necessary
. . ."
Whilst, as we argued in our response to the Green Paper,
Industry would have prefered:
". . . an administrative appeals process, which should
be completely independent of the original decision makers . .
. "
and we argued for the appointment of an independent Export Control
Ombudsman. We regret that the proposed system is not fully independent,
but are not implacably opposed to the creation of the suggested
inter-departmental appeals committee, which may be able to perform
the necessary task and which the Scott Report recommended, and
we will be keen to evaluate, on the basis of practical experience,
how this committee performs in practice.
We are happy that the Government has accepted our observation
that:
". . . there would be grave concerns over whether
such officials would overturn a decision made by their . . . Secretary
of State/Minister."
and states in the White Paper (at 4.6.2) that:
"Where an export licensing decision had been taken
by a minister, the appeal should also be considered at ministerial
level."
Short of a fully independent appeals procedure, this would
appear to be the only practical way in which such decisions can
be appealed against by companies, with any chance of success.
We agree with the statement (at 4.6.4) that reference should
be made in primary legislation to the right to launch an appeal,
and also concur (at 4.6.4) that the details of the appeal procedure
should be set out in secondary legislation, as this will aid in
the perceived transparency of the system. we are grateful that
the Government should be apparently endeavouring to formalise
the existing appeals procedure before the introduction of new
primary legislation, in recognition of the need for the appeal
system to be introduced, as described, as soon as possible.
We are grateful that the White Paper accepts (at 4.6.2) the
need for speedy decisions in any appeals procedure, and agree
that the system as outlined should, probably, be able to achieve
this better than some other possible systems might have been able
to do. We are also pleased to see (at 4.6.1) that the committee
would exclude those officials who had been involved in handling
and assessing the original application, and the commitment (at
4.6.2) that full reasons for a decision to uphold a refusal would
be provided in writing to the appellant.
We would be extremely surprised if companies needed to take
as long as the suggested (at 4.6.3) 28 days timescale in which
to lodge an appeal, although we are grateful that Government has
decided to give companies such a long period in which to consider
whether to appeal or not. We regard this timescale as being not
only "reasonable", but actually quite generous
(and probably unnecessarily so)! Given the great importance with
which companies regard the issue of licences being processed as
fast as possible, we believe that a shorter timescale for companies
to make the simple decision as to whether to appeal or not is
probably appropriate.
We feel that it should be pointed out that during the period
in which a company is contemplating whether to appeal or not there
should be a moratium on any announcement being made by anyone
about the refusal. The last thing that companies want is a repeat
of the situation in September 1997 when statements by the Secretary
of State for Foreign & Commonwealth Affairs about a number
of very recent export licence refusals (including one for armoured
Land Rovers for Indonesia) fatally undermined the chances of success
of any possible appeals that the companies involved might have
been considering raising.
We are grateful that the Government has rejected (at 4.6.3)
the suggestion for the granting to:
". . . third parties the right to appeal against a
licence being granted."
and also that the Government has rejected (at 4.6.3) the possibility
of charging appellants for raising an appeal.
On one other important point, as we stated in our response
to the Green Paper:
"Companies should have the right of appeal, not only
for refusals but also on the grounds of unreasonable delays .
. . "
If the suggested introduction of formal time limits has,
as is apparently the case, been firmly rejected, we believe that
this element will be even more important, and strongly commend
its most earnest consideration. The ability to appeal against
excessive delays would be welcomed by Industry.
COVERAGE OF
CONTROLS IN
EXPORT OF
GOODS CONTROLS
ORDERS
We are extremely disappointed that there is no intimation
in the White Paper (especially at 5.1) of any efforts being made
to try to reduce the scope of coverage of the Export of Goods
Control Orders, or to introduce clearer categorisations of the
goods covered. In our response to the Green Paper we argued forcefully
for the scope to be reduced, stating that:
"The question of the scope of the controls really
goes back to the very heart of the philosophical debate on the
"Purposes of Strategic Export Controls". The trend over
the last five decades, as successive Governments have become confused
between licensing criteria and genuine defence and security considerations,
has clearly been towards a more all-embracing export control regime,
covering increasing numbers of goods to all destinations, and
this trend must be reversed. The UK's export controls system should
only really concern itself with sensitive goods and key critical
technologies going to a few sensitive destinations, thus focusing
on exports that it is essential to control. We would like to see
a system introduced whereby only applications for sensitive, strategic
goods to questionable/diversion-prone destinations have to go
through the full processing procedures. Better "targeting"
of the system is essential, and the DTI's efforts of late to remove
a number of areas where individual export licences were required
have been warmly welcomed by Industry.
". . . It clearly should be possible to reduce the
scope of current controls by a very large proportion through more
efficient targeting. Industry fully appreciates the need for careful
scrutiny of applications of a genuinely sensitive nature, but
the current system is too wide ranging for the available bureaucratic
resources to cope efficiently. Resources must be redeployed for
concentration on applications which do require a high degree of
scrutiny and it is essential to avoid the considerable nugatory
effort, both for HMG and Industry, in implementing full licensing
procedures for sales which are non-contentious and, thus, are
going to be approved anyway."
The problem is a very simple onethe existing HMG resources
tasked with assessing and processing export licence applications
are insufficient to cope with the current scale of workload involved
in a consistently efficient manner. Therefore, for the system
to achieve the level of efficiency required, HMG should increase
the resources that it deploys in export licence processing or
reduce the level of the workload involved, either by reducing
the scope of the controls or by reducing the level of scrutiny
to which applications are subjected. We are not convinced that
HMG will fund additional resources or be prepared to contemplate
reducing the level of scrutiny with which it examines licence
applications. Therefore, the scope of current controls should
be reduced, to create a more focused system which will be more
efficient and less unnecessarily burdensome, both on Industry
and on HMG.
We have a number of recommendations as to how this could
be achieved, most of which were refered to in our response to
the Green Paper (see Annex G).
The need to apply for export licences in order to return
goods to an original overseas supplier is seemingly ludicrousit
achieves nothing in the way of preventing proliferation or controlling
technology falling into the "wrong" hands, but adds
considerably to the burden both on Industry and HMG. An Open General
Export Licence (OGEL) covering the export of goods for repair
or replacement to the original supplier would make sense, in our
view.
Also, having to go through the full licensing system for
the temporary export of small numbers of goods for overseas demonstrations
or for exhibitions, makes little practical sense in our view,
and we are convinced that an OGEL covering this would also be
advisable.
We are happy with the recommendations (at 5.1.1) to try to
define in clearer and tighter terms phrases such as "specially
designed" contained within the EG(C)O and welcome the suggestion
that this may result in these definitions being adopted internationally.
We would like to extend an offer from Industry to assist in any
way with this definition process. We believe that clear definitions
are always essential, as it is vital to try to avoid a situation
in which ill-defined wording allows implementation to be open
to interpretation by minor officials.
With regard to the proposed military end-use (or "catch-all")
control (at 5.1.2), we would like to state that, in our view,
the European Commission has already gone just about as far as
it is sensible to do so along these lines, and we would not welcome
efforts by HMG to go further than this. We are very wary of the
potential introduction of such a military end-use control and
would strongly urge Government to allow Industry to be brought
into the consultative discussions on this proposal.
END-USE
MONITORING
Industry fully supports the need to counter the threat of
diversion, which aids the activities of proliferators. As part
of the Government's ongoing review of end-use controls, and in
line with the stated (at 5.2.1) aim to:
". . . seek co-operation to build a common approach
on effective monitoring of end-use within the European Union and
under the Wassenaar Arrangement."
we hope that they will be considering our suggestion, in our response
to the Green Paper, that:
"It would assist Industry if there was a standard
format for end-user statements, and we suggest that there could
be scope for the Western European Union (WEU) to consider introducing
such a harmonised format. At present the USA and France do have
(very similar) stated formats, and that of the French could easily
be used as the model for a proper, WEU-wide, harmonised end-user
certificate, thus putting into common use a system which is already
accepted and familiar Worldwide. If it was not possible for the
WEU to introduce such a system. HMG should consider introducing
its own version, closely based on the French and US models."
Such an initiative would be in line with the Government's
stated aims, and would be of considerable benefit to Industry.
With regard to end-use control, we would re-state, as we
said in our response to the Green Paper, that:
"We wish to re-emphasise that Companies cannot be
made more responsible for end-use control than they already are."
Better monitoring of end-use can only really be done effectively
by Government, utilising the resources that it has at its disposal.
It is also important that the Government avoids introducing any
measures that would simply serve to alienate very important overseas
customers.
One other aspect of end-use control which causes us some
concern is the way in which the current requirements for end-user
undertakings can severely hamper British sub-contractors seeking
to supply goods to overseas prime contractors for equipment which
may be being produced speculatively, and, thus, with no exact
firm knowledge as to who the final end-user is going to be, or
for instances in which the prime contractor involved may, for
confidentiality reasons, be loath to let a UK sub-contractor know
who the customer is going to be. Any means of end-use control
must be introduced by some non-burdensome means, and must not
hamper Industry, being multi-lateral in nature so as not to put
the UK at any kind of disadvantage, in recognition of the practical
commercial realities of the modern business world.
LOCATION OF
EXPORT LICENSING
AUTHORITY
We are delighted that the Government has accepted (at 5.3.3)
the arguments, which we, for one, put forward in our response
to the Green Paper, and at variance to the recommendations of
the Scott Report (as summarised at 5.3.1), that:
"We believe that there should continue to be one central
coordinating authority for all licence applications, and that
this authority should continue to be the DTI (the department responsible
for the promotion of UK exports) . . ."
We fully concur with the comments (at 5.3.2) about the undesirability
of having a number of Government departments being responsible
for export licensing, without one central, coordinating authority.
However, we would still continue to argue, as we stated in
our response to the Green Paper, that:
". . . we believe that the DTI's resources within
the ECO should be enhanced . . ."
At present Government officials' lack of understanding of
Industry's needs and problems, as well as their frequent lack
of technical knowledge, is a major cause of the delays in processing
applications. There is a clear lack of resources, especially evident
during periods of heavy workload of in holiday seasons, which
desperately needs to be addressed.
One way to help to remedy this lack of technical knowledge
is to allow, and encourage, direct communications between the
DTI's advisers in MoD(UK) and FCO, who assess and process the
applications, and the companies concerned. There are great frustrations
caused by the current lack of direct communication when problems
or queries arise. Direct, informal contact, which we are sure
in an era of "Open Government" should be being encouraged,
would help both sides enormously over issues where simple clarification
is needed. Many in industry fail to understand the great reluctance
of Government officials to be exposed to the companies involved
directly(most) Industrialists do not bite (often). Officials
must fully understand what it is that they are being asked to
assess in order to make correct decisions, and, naturally, the
greatest reserve of such expert knowledge to assist in this lies
with the companies themselves.
It is essential that the staff in the Government departments
concerned are of as high a calibre as possible. In recognition
of the vital importance of the role that they are performing.
We would query whether it is the quantity of staff that is lacking,
rather than their variable quality which needs to be addressedwe
are convinced that the same, or, even, a smaller, number of staff,
of uniformly high calibre, and with the necessary greater technical
knowledge, could make the system function more effectively and
efficiently. We would suggest that "pools" of technical
knowledge be established within the DTI, with staff being allocated
either to look after specific companies or technologies or countries.
We also wish to restate our comments from our response to
the Green Paper with regard to the need for a programme of education
for HMG officials on Industry's needs, so that they have a much
greater understanding and appreciation of what these are and why
companies regard the speed of licence processing as being so important.
We would be happy to co-operate in such a process in any way.
CHARGING FOR
EXPORT LICENCES
Naturally, we are delighted that the Government has rejected
(at 5.4.1) the proposal contained in the Green Paper (at 2.4.16)
for the possible introduction of charges for exporting licences.
Industry warmly welcomes this decision and congratulates the Government
for avoiding the temptation to introduce such a system.
MISCELLANEOUS COMMENTS
We would question whether the list of two potential Options
(on page 24) for dealing with the situation is really exhaustive,
or whether other options might not be able to be perceived and
formulated. We seriously doubt whether the proposals put forward
in the White Paper are really the only option to doing
nothing, and letting the current unwelcome situation drag on,
as is.
We welcome the fact that the Government states (at 3.3.3)
that it seems to have some faith in the export control laws of
other countries, whilst it rejects the suggestion of introducing
"licence-free" zones encompassing "safe" countries
in whose export licensing procedures HMG has confidence, which
we put forward in our response to the Green Paper, due to the
potential threat of diversion and re-export.
As previously stated, one aspect of the current licensing
system which Industry firmly believes should be actioned is the
question of companies' access to the DTI's "advisers",
in MoD(UK) and FCO. At present when companies attempt to enquire
about hold-ups with licence applications, all that the DTI desk
officer will (or can) tell them is that the application is "with
our advisers". This lack of transparency is wholly unsatisfactory,
especially in an era of "Open Government", and we feel
strongly that there would be considerable benefit for both sides
if the advisers could be encouraged to allow this traditional
barrier of annonymity to be breached to allow more direct access
to the companies involved, especially when they have queries about
a licence application and need clarification or more information.
We would again like to reiterate our query on the necessity
for pricing information to be included on the export licence application
form. Such information, which is highly commercially sensitive,
is completely irrelevent for the assessment of all expect for
the very largest value applications, which are extremely few in
number. It has to be pointed out that there are no similar controls
on the export of civil goods to the same destinations. The requirement
for the inclusion of nominal pricing information can (and does)
only create administrative problems for companies (especially
with HM Customs and Excise officers if there are discrepancies
caused by exchange rate fluctuations, etc in the period between
the submission of the licence application and the actual shipment),
without adding any value to HMG's deliberations in consideration
of the applications, which should only be concerned with the technology,
nature and quantity of the goods involved. This could well be
exacerbated following the introduction of the Freedom of Information
Act, when companies will be concerned that this commercially sensitive
information may be able to be brought out into the public domain,
and, thus, into the hands of competitors.
CONCLUSION
It is essential that HMG looks carefully at the export control
systems operated by other countries, and the reviews that these
nations have been, and are, undertaking into their systems to
see what lessons can be learnt.
We would argue that not just legislation with regard to weapons
of mass destruction, but also in most, if not all, other areas
of export control, efforts should be made to ensure that (as described
on page 23, paragraph 2b)) there is minimal, if any:
" . . . impact on reputable businesses or individuals."
We believe that there is a need to ensure that there is a
clear distinction drawn between responsible, legitimate defence
companies, and unscrupulous traffickers.
We are convinced that, working in partnership, Government
and Industry should be able to frame an export control system
which is simplified and more transparent, and which meets the
essential needs of both without undermining the vital interests
of either.
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