Examination of witnesses (Questions 20
- 39)
THURSDAY 4 MAY 2000
MR PETER
HAIN, MR
PAUL HARE
and MR IAN
BAILEY
Mr O'Neill
20. How much financially was at stake?
(Mr Hain) Not very much. I understand, and I stand
to be corrected by my officials, that we are talking about tens
of thousands of pounds, so it is not—
21. So the legal consequences of this, the court
case that would flow from it, the loss of face to British Aerospace,
all the other things, were really trivial, so this assumes a different
sort of significance. You say it is an isolated case but it assumes
the greatest significance because it is the only one.
(Mr Hain) I understand that.
22. So why persist with it?
(Mr Hain) The decision was announced by the Prime
Minister on 9 February. The situation has changed and we have
now if you like, in your terms, brought this exception into line
with the general policy.
23. It took a hell of a long time for the decision
and it flies in the face of the European commitments that we have
given and for which you claimed credit for having created.
(Mr Hain) We could trawl other countries' policies
but if you look at Britain's record in the DRC in this respect
I do not think anybody has done any better than we have. I would
have thought a lot of other European countries might have done
worse. As regards the code which we brought in in 1997 and subsequently
got adopted in more or less similar terms in Europe, one of the
interests here is the defence industry's interest and that has
to be taken into account when you weigh up all the different matters
in a decision like this. Just to correct what I said—as
I said, I sought advice from officials—the seven contracts
were of a value of £300,000-£500,000, so a bit more
than I suggested.
Chairman
24. All these contracts were with British Aerospace,
or were there contracts with other companies?
(Mr Hain) I am not sure about that. Clearly the planes
were supplied by British Aerospace but they have in turn suppliers
in the normal way, various contractors and so on. We are happy
to give you details in writing on that if that would help.
25. The reason for my factual question is that
we are not clear whether these contracts were existing contracts
or new contracts to deliver spares. Were they existing or new
contracts?
(Mr Hain) The original contract was obviously for
the supply of the aircraft and the obligation is to provide spares
under that. I think they were existing contracts. Yes, they were
existing.
26. Please consult officials. We just want the
facts.
(Mr Hare) Yes, they were related to existing contracts.
27. Related to existing contracts?
(Mr Hare) It was implicit in the existing contracts
that they would be supplied.
Ann Clwyd
28. During the questioning of the Foreign Secretary
yesterday somebody congratulated the Government lawyers for their
creativity, suggesting that now they find they can cancel contracts
and that it is possible to refuse spares. Is it not the case that
this has always been possible, that if the human rights situation
in a country has deteriorated, from the time that the original
contracts were agreed or the original licences were agreed, it
has always been possible for the Government to refuse the delivery
of things which they had agreed to deliver and to refuse spare
parts? This is something you could always have done, for instance
in the case of Indonesia. There is a contrast between the arguments
that are now being put and the arguments that were being put during
the time of questioning on the same weapons to Indonesia, but
these things were always possible, Minister. Is that not true?
(Mr Hain) In principle the British Government could
have taken that action at any time. However, it is a decision
which is not simply based on our assessment of the internal human
rights situation, though that is very important, more important
for this Government than it has been for any of our predecessors.
Again it is necessary to get that acknowledged. But there are
other factors. There are the legal constraints on us. There are
the defence industry constraints. There are a number of other
factors which we have to take into account as the Foreign Office
along with our fellow departments which you shadow around this
Committee.
29. But in this case it has been made clear
that there appeared to be no contractual obligations which make
it impossible to cancel licences or to refuse to deliver spares?
(Mr Hain) I would agree that the Government has the
ability to override in this case BAe Systems' contractual obligation
to keep planes it sold flying by providing spares and other defence
interests or trade interests or development interests for that
matter which we take into account in all the four departments
involved. Of course ultimately it is possible simply to sweep
those matters aside but I do not think you do that lightly or
in any kind of casual way. You do it assessing each decision very
carefully against all the different criteria we laid out in our
code in 1997 which included all these matters.
30. I want to take issue with you over your
distinction between supplying spares and you mentioned the spare
parts but not lethal equipment. It was spare parts in this case
for Hawk aircraft, but Hawk aircraft are potentially lethal equipment,
so how can you draw that distinction?
(Mr Hain) The distinction that I was drawing, and
I am sure the record will make this clear, is on new lethal equipment.
If we had been faced with a decision either in February or at
any time since the conflict broke out in the Congo to supply Hawk
aircraft, with spares or not (and yes, of course the Hawk plane
is a piece of lethal equipment and I agree with you on that),
a new licence application to do that, of course the answer would
have been no. There would not have been any question about it.
Indeed, as I read out, there were a number of other lethal forms
of equipment including sub-machine guns which we did not license
after that conflict had broken out. The distinction is between
new lethal equipment and, bearing in mind all the other considerations,
exporters' obligations to honour an existing contract.
31. But it is rather a spurious distinction.
(Mr Hain) Those are your words, Mrs Clwyd. I think
it is a distinction that the Government has to take into account
from time to time on each individual licence. Ultimately we are
potentially under duress of judicial review on any of these decisions.
We cannot simply announce them on the back of an envelope as it
were. They have to be carefully considered.
Chairman
32. I want to just nail down the line of the
questioning and get it clear in our minds what the facts are of
the situation. You said a minute ago that British Aerospace had
a contractual obligation to keep the Hawks flying. Is that the
factual contractual position and that is what led to the sale
of the spares?
(Mr Hain) In this sense, that when British Aerospace
supplies one of its planes, in this case a Hawk, it does so on
the basis that the purchaser expects that to be an operational
aircraft and its reputation worldwide would be damaged if that
aircraft started falling out of the sky.
33. I just want to know whether it was a contractual
matter. This is the nature of our Committee. This is what we have
been set up to do, to scrutinise the detail. Was it a contractual
obligation for British Aerospace which, if you had not allowed
the spares to be sent, would have been a contractual breach of
contract of British Aerospace's obligation to keep the Hawks flying?
Please consult any officials you like.
(Mr Hain) Indeed. We want to get this right. It is
as I have said, although I can provide more detail, that British
Aerospace Systems' contract for the sale of Hawks is to supply
spares for 15 years after delivery, so it was a contractual obligation
as I indicated previously in general terms. What we recognise
in these exceptional circumstances that we have been confronted
with is the possibility of breaking that contractual obligation.
34. So as from the statement yesterday that
obligation will no longer stand?
(Mr Hain) Yes indeed. For example, if I just give
you information which you have not asked for but in the interests
of openness I am happy to provide, there are 11 standard individual
export licence applications mainly for Hawk spares pending. Those
will be refused. There are then 18 open individual export licence
applications in respect of Zimbabwe, 15 for military goods and
three for dual use goods. Those will obviously be refused as a
matter of course. I am sorry: the dual use ones will be looked
at. The others will be immediately refused. The three which we
are not sure about whether they are dual use or not will be carefully
considered, but if they have a military angle then of course they
will be refused.
Mr Rowe
35. When the Government changes the policy and
overrides a contractual obligation on whom does the financial
disadvantage fall? Does it fall on the company or does it fall
on the Government? If it falls on the Government, on whose departmental
budget does it fall?
(Mr Hain) I stand to be corrected by officials but
I would assume that it falls on the company unless the decision
has been taken in a way that is not defensible, in which case
we are open to judicial review.
36. So it is the company which carries the £300,000
loss?
(Mr Hain) Would have carried it. Of course those licences
were agreed.
37. In that particular case that was the agreement.
(Mr Hain) Indeed.
Chairman
38. I think I have got it clear from what you
have told us, that it was a binding contractual obligation by
British Aerospace to deliver these spares. Why therefore earlier
did you keep on using the word "implied" in the context
of a contract? It was not implied if it was a clear contractual
obligation to deliver these spares.
(Mr Hain) In this sense, Chairman, that each spare
part or group of spare parts that the company wishes to provide,
in this case to the Hawks in Zimbabwe, requires a licence application
and that licence application has to go through the very strict
criteria which we have established as a government. That is what
I meant by "implied". It does not just go through automatically,
albeit it is part of the contractual obligation by the company
to the purchaser. That is what I meant by that.
Mr Worthington
39. There would be discussion within Government
but at the end of the day it is the Foreign Secretary who makes
the decision, is that right, on these matters?
(Mr Hain) The DTI is the licensing authority, the
ultimate decider in these matters. Clearly with an issue like
this, and this goes for all exports, particularly with very big
foreign policy implications, the Foreign Office's views are very
carefully taken into account. What essentially happens is that
the MoD, the Foreign Office and the Department for International
Development make recommendations to the DTI. We all make recommendations
to the DTI and the DTI as it were clears those.
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