Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. You do not know.
  (Mr Evans) I have been in to see Tony Lloyd. Whilst you are right on the 680 process, we are wrong to separate this one item out. The length of time for most of our export licences is unacceptable. You are talking 50 days for 40 per cent of our export licences; that is one third of a year. The lead time on our products varies between three and six months. The customer goes away.

  41. I understand that and that is what I am worried about. I have great concerns. I want to make sure I have it right. Really the products you produce cannot be used in torture or anything like that. They are straightforward.
  (Mr Evans) Any product, if you use it adversely, could be used. We make mag-tef flares which are very high temperature flares going off aircraft for distracting missiles. If you stick that in an enclosed environment, it would cause a lot of damage to somebody. Yes.

  42. There is no obvious reason then for any real delay.
  (Mr Evans) No.

  43. That is the point I am trying to get to.
  (Mr Evans) I would be wrong to say to you that if it was used for another reason ... I do not believe this particular product falls into that category but we do make products which are used for decoying missiles off aircraft which give off very hot signatures because they simulate the engines to give the missiles something else to go for. If they were used in a different type of environment, yes. It is the same if you picked up this bottle and rather than drank it smashed it over somebody's head. It is a different application.

  44. How many days do you think that would take to get a licence?
  (Mr Evans) I have no idea. It would probably take 100 days to explain what it was.


  45. On this question of Colombia, is it the customer or is it the equipment? There are two elements here to this. There is also the sense in which the kind of equipment you are talking about could have dual use. It is portable, it gives off a big bank, it can be used for various purposes. Are you confident that the customer in Colombia, the Colombian authorities, are necessarily the kind of people with whom responsible companies would want to deal?
  (Mr Evans) We sought advice from DESO on this and their advice was that this was acceptable and they endorsed the form 680. We follow all the procedures.

  46. Do you think that DESO are necessarily the best people to ask, given that their job is to assist in the selling of arms? Do they have the same high standards?
  (Mr Prest) The 680 procedure is actually inter-departmental. It is not purely DESO and MOD. It is effectively a pilot of the export licensing system.
  (Mr Garland) It emanates from DESO because you have to go to DESO, but it is then circulated.
  (Mr Prest) They are the point of approach, unlike for a licence where the DTI is the licensing authority. It follows an inter-departmental evaluation process in a group which used to be called the arms working party. I do not know whether it still is.
  (Mr Evans) Of which the Foreign Office is part.
  (Mr Prest) On which the Foreign Office sits. It receives the same inter-departmental consideration as the subsequent licence application.
  (Major General Sharman) I was going to add another Colombia point. Clearly there is a sensitivity in the Foreign Office about certain countries and certain products. I became specifically involved in another example; in that case it was machine guns for Colombia to be fitted onto patrol boats via a Spanish shipyard. The licence was eventually, after a very long time, for the sort of reasons you have been hearing about, raised to ministerial level and was refused. I then intervened on behalf of the Association by writing to all the three interested Secretaries of State. The refusal was overturned and the licence was granted because we were able to argue, together with support from officials, that the end use, even though it was machine guns, which clearly have a dual use, was for stopping drug smuggling. I understand the sensitivities in the Foreign Office but clearly it could be far better for Mr Evans if they were to turn round and refuse him so he did not waste more time and money trying to pursue a cause which in the end has been lost anyway. That is our main point.
  (Mr Garland) My company manufactures personal protection equipment. We are the biggest in the UK and one of the biggest in Europe and one of the leading technically in the world of manufacture of body armour and helmets and shields. I do not have the same horror story as David Evans. We have applied for nine export licences in the last 12 months because we have an open individual export licence which allows us to sell to many countries backed up by an end-user certificate. Of the nine applications we have made only one has been within the target date of 20 working days. Last year, after much ground work, we obtained an order through a Hong Kong merchant for mainland China. This was for 1,000 helmets which were going to be followed by many, many more thousands. We applied on 23 April 1997 and it was rejected on 13.8.97. It took over four months for rejection. Of course I appealed. In the reason for rejection it was said that it could be used for internal suppression. I do not know how a helmet can really be used for that purpose. We have one category. We do not deal in arms, we do not deal with anything except the products we manufacture which are things to stop knives, fragments and bullets. Apart from this question of the delay in getting an answer, in our business we know you wait for two or three years, you get the order and then they want it in two or three weeks, it is traditional stuff. Of course if you then get a delay in obtaining the export licence, they think you are using it as an excuse for not meeting your obligations. We also lost two orders for the United Nations, UNHCR, because of delays. That to my mind is beyond comprehension. I fail to see why an application with an end-user certificate from the United Nations could not go through on the nod.

Mr Morgan

  47. Both Mr Evans and Mr Garland refer to losing orders. Do you have any idea to where you lost the orders? Do they tend to be specific countries? How effective is the licensing procedure in those countries? How long do your competitors have to wait? Do they need to wait at all in fact?
  (Mr Evans) It varies across the globe. In Colombia we lost it to the USA who, I would suggest, have a far more rigid export licensing control than most. In fact they have actually introduced IT. You can review an export licence on the Internet and query where your export licence is. The Department of Trade and Industry looked at IT in late 1997 and asked for volunteers from industry, which we gladly volunteered as we should love to speed the process up. It floundered because we could not understand, having put it on the computer, why they wanted us to pack the information onto disks and send it to them anyway. That is another area one should be looking at. It varies. If you take Israel for example, on their equivalent of a form 680 to the customer the Government will actually promote the firm. Different countries have different attitudes towards export licensing and we lose it to a variety of different countries across the globe. We export to over 80 countries worldwide. We come up against a variety of competitors and we follow the licensing procedure religiously despite the delays.

Ms Perham

  48. Just to touch on the legal framework, the effect of placing the export control regime on a clearer statutory footing is to open up the possibility of judicial review of the decisions. Would you envisage that happening? Have any of you felt so aggrieved by what we have been talking about, refusals or similar actions, as to contemplate you might want to do that? Or would you think that would add to the delays if there were judicial reviews of decisions?
  (Mr Prest) It takes us into new territory. We would not feel capable at this juncture of speaking for the entire industry on the question of judicial review. It must be possible to envisage circumstances in which companies felt so aggrieved and felt a decision was so inexplicable that they might ask for judicial review. I can certainly envisage that happening, which could of course lead to further delay, but it could also perhaps lead to a rectification of an incorrect decision if one had been made.
  (Mr Salzmann) I agree that companies would want to resort to that if they felt aggrieved.
  (Mr Evans) Our preference would be to take the existing system and improve it and build a partnership with Government in an open forum so that we could get things done in an expedient manner. If we go down that route, then it will incur delays and additional costs quite frankly once you get lawyers involved.

  49. As you said, once you have lost it, that is it.
  (Mr Evans) We would prefer to look at the existing systems and how they satisfy everybody and speed them up and work as a team quite frankly and we are quite prepared to do that.

Mr Butterfill

  50. There are some examples in legislation where a failure to give a decision by a given time gives an immediate right of appeal; on planning legislation for example there is a statutory period. Would you like to see something like that where you have a statutory period within which you must be given a decision and then a formal appeals and procedure with again a time limit on it if you are not given a decision? Would that help?
  (Mr Evans) Yes.
  (Mr Prest) I think I am right in saying that DMA made a specific proposal on this.
  (Mr Salzmann) Yes. In the section on the appeals procedure we suggested that there should be a right for companies to appeal not just on cases where refusal had been given, but also when delays had been experienced in the processing system.

  51. What time limit would you want to impose? What would be reasonable?
  (Mr Prest) It is for discussion. It would not be reasonable to say that the Government was in default if a licence was not issued within 20 working days. There are many cases which are more complex than that.

  52. It would depend on the case.
  (Mr Prest) It would depend on the case but there would need to be something longer than 20 days but considerably less than some of the cases which have been described here.
  (Mr Evans) We would support the principle.

Mr Baldry

  53. Appeal to whom?
  (Mr Prest) That is an interesting question in itself and a separate point. Expanding a little on what David Evans was saying about the amount of knowledge within the Government machine on some of the equipment and licence issues, it is the case that because of the length of the communication chain ... DTI is the licensing authority but on many issues the main policy input actually comes from other departments. On issues of whether it causes technical security problems or whether it is likely to cause difficulties for our own armed forces, obviously the MOD has views. On foreign policy interests to do with regional stability or whether the recipient is a nasty piece of work either towards his neighbours or towards the internal population, obviously the Foreign Office have the primary input. There is an inter-departmental procedure which is on the whole conducted in writing and I cannot speak for the procedure with certainty, although I did actually work inside it myself many years ago because I was an MOD civil servant administering export licences 20 years ago. At that stage—and it probably has not changed that much—the inter-departmental committee met very seldom and it was mostly done by correspondence. That opened up considerable opportunities for delay obviously but also for misunderstanding. Very often there was a single point of technical authority in the MOD for evaluating what equipments would do and what the security status of particular equipments was and at the time it was grossly overloaded and also prone to make judgements with no dialogue with the company, which itself must be fundamentally wrong. To make a judgement about the capability of equipment without a sensible dialogue with the company which makes it does not seem sound administration. At the moment there is not much dialogue of that sort. One of our proposals would be that in an appeals procedure there should be a formal appeals procedure for refusals involving an inter-departmental committee at an official level high enough to review the decision which has already been taken. One of our contentions—certainly we put this forward from Alvis—is that where a company requests it, it should have the right to explain its case personally to a small committee of that sort because a number of the arguments, particularly related to what an equipment actually does and how it is capable of being used, can only be exposed properly by the company itself in dialogue with the individuals. There is no process of that sort at the present time.

  54. I happen to have been at the other end of this process and have had to do with submissions indeed relating to machine guns on boats, exactly those kinds of things. It seems to me that what one has here is quite a lot of these applications clearly can be dealt with very speedily. However, you do get quite a number which are very difficult. They are very difficult not least because you do actually have to take advice from quite a lot of people, not least the high commissioner or the ambassador in the country concerned, the defence attache« in the country concerned, quite a number of other people. Maybe what we have to look at is how one finds some system for signalling to you that these are exceptional cases or difficult cases and some process which enables you to understand that they are being dealt with in that way which then means that civil servants have to deal with all the others properly and speedily. It is quite difficult to see how you can get a system where you take responsibility away ultimately from Ministers having to take these decisions and then sticking by them. Ultimately at the end of the day, Ministers are going to have to be accountable for the decision they took on whether machine guns should go.
  (Mr Prest) I do not think we would argue that it should not be a matter ultimately for ministerial decision. Ideas of an export control ombudsman have been put forward but I do not think that we as the DMA have pushed that particularly hard. Plainly ultimately this is a matter of Government policy. What we are really saying is that there should be some formal review procedure at a higher level, which could be ministerial, could be at a more senior official level; once an initial refusal has been given to review a case the evidence can be properly put and the arguments properly put. We are certainly not suggesting it should be taken out of Government's hands; though some people have suggested that, we are not.
  (Major General Sharman) Very few licences are refused. It is a reflection of the fact that the legitimate industry is very responsible in what it applies for and an unofficial control system works. Few licences are refused but I take entirely the point that what we should like is a situation where there is a time limit, as short as possible. We believe that would deal with the vast majority of cases. After that time the company should then be formally notified that a licence is contentious and is going to be referred, to whomever it is going to be referred to, and with some estimate of how long that process will take. At one time last year, while officials were trying to grasp with interpreting and understanding the ethical foreign policy dimension that Mr Cook announced, some 30 per cent of licences were being referred to Ministers—we believe that is far fewer now. Again something providing the opportunity for a company to have an input into the debate at some stage is also important.

Mr Berry

  55. Licence applications not refused in the past include, according to the evidence we have received, exports by Chemring subsidiaries of tear gas and plastic bullets to the Kenyan security forces. These were used against pro-democracy and human rights campaigners and indeed were used in the storming of the Anglican cathedral in July of last year in Nairobi when tear gas canisters were thrown inside the cathedral. Do you expect exports of that kind to continue in the future? Have you noticed any change in our Government policy towards such applications since, for example, May last year?
  (Mr Evans) The products in the incidents you referred to were covered by an approved export licence. We have not provided any to that country since 1994 and we have noticed quite a difference in the attitude towards CS products on the basis of what has happened possibly in Kenya. I would argue that there are countries which use CS products in a reasonable manner to control civil unrest rather than the way that they were used in Kenya. Certainly we do not endorse that. It should be used in an open atmosphere. We are the only UK source of CS for the UK Government for training purposes. I would argue that in certain countries, if you did not provide them with CS gas the alternative is a lethal bullet. There is the dilemma.

  56. I think you have confirmed that the example I gave is the kind of example where you approve of the fact that such exports should be licensed.
  (Mr Evans) Absolutely.

Mr Cunningham

  57. May I come back to something you were discussing earlier about the difficulty in relation to licences from the Foreign Office or for that matter the DTI and the timescale involved. What about repair and maintenance, for example you may sell a product abroad but it has to come back to this country to be repaired? Do you have to go through that procedure? Are there many delays in that area?
  (Mr Evans) Our products tend to be one-off products used and not repaired and maintained.

  58. It does happen in certain industries.
  (Mr Prest) I am not expert on all the technicalities. I think I am right in saying that the broad position is that unless you hold an open individual export licence which would enable you to ship spares and equipment in support of a particular type of equipment in a territory, if you received a damaged assembly back for repair in the UK you would then have to re-apply for a fresh export licence in order to export it to the country concerned. I believe that is currently the case today.
  (Mr Salzmann) Yes. Also if goods are returned to the UK, you would need an export licence to send them back again. Also if goods are returned to the UK and you needed to send a sub-system back to an overseas supplier for repair, you would need to apply for an export licence for that, to send it back to the overseas supplier from whence it came in the first place.

  59. The question really is how difficult is it to acquire that new licence, given the fact that you must have had a licence originally to export it back to this country or wherever? Do you experience these difficulties or is it relatively easy if you have to get another licence, given the history, to get it fairly rapidly? Earlier the point was being made about delays, you want appeals systems and all sorts.
  (Mr Prest) It depends very much on a case by case basis and the status of the territory at the time in the eyes of the UK Government from a policy point of view. In many cases it would be very routine; in other cases it might not be routine. It is another area where there should be some more detailed attention in an industry/DTI working group of some sort to look at the mechanics of this and how the process could be streamlined without threatening the Government's ability overall to exercise the controls it wants to do. Certainly the system at the moment is more cumbersome than it needs to be in our opinion.

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