House of Commons - Defence

Select Committee on Defence Fifth Report

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

The Licensing Process

We recommend that consideration be given to the Annual Reports indicating where a licence was refused or revoked for equipment which had previously been given F680 approval.

We recommend that there should be greater openness about Departmental inputs into the decision-making process on licensing applications. Information on the number of applications objected to by individual Departments should be provided to us in confidence, showing in how many cases an application was eventually allowed.

The Export Control Bill

We expect the Government to honour its commitment to giving time for our Committees to consider, and if necessary report on, the proposals for draft subordinate legislation and the draft guidance to be made under the Export Control Act.

Involvement of other Parties

We would encourage all interested parties to communicate with us their concerns relating to matters covered by our inquiries. It is essential for these Annual Reports to be subject to as wide and as close scrutiny as can be achieved.

Application of the Consolidated Criteria to Individual Cases and Countries

In both the cases relating to Sri Lanka and Zambia, we expect some monitoring of end-use to assure the Government that undertakings are being honoured and human rights violations are not occurring, and we recommend that the Government report to us on this monitoring.

We recommend that the Government should continue to encourage our EU partners to follow the UK's lead in publishing their national criteria for the application of the China embargo.

We conclude that if the situation in India and Pakistan in the Spring of this year did not fully engage Criterion Four, it is difficult to conceive of circumstances short of all out war which would do so. But Criterion Four is not activated only by the actual existence of armed conflict—it is of course engaged as a conflict prevention measure, and applied as such by the Government. The stand-off over Kashmir should in our view have led to its application with very great rigour, and we are surprised by the indication in the Foreign Secretary's letter that he was not personally involved in the approval of all applications to export military goods to the region during the period of greatest regional tension. While in the period covered by the Annual Report for 2000 the flow of conventional arms to India and Pakistan seems to us to have been appropriately controlled by case-by-case consideration, we are concerned that in recent months there is little real evidence of the terms of the Criterion being applied in proportion to the rise in regional tension. We also believe that when the situation had deteriorated as far as it had in the Spring, the Government should have been prepared to initiate moves to secure some international agreement on regional arms control.

The Government's statement of 15 April would appear to suggest that no weapons, equipment or components which could be deployed aggressively in the Occupied Territories would, for the time being at least, be licensed for export from the UK to Israel. We recommend that the Government in its response to this report confirms this is the case.

ITAR

Negotiations on the International Trade in Arms Regulations are vital to ensuring that the UK defence manufacturing industry is operating in a fair international environment. Their resolution should be pursued as a matter of urgency.

Format of the Annual Reports

We would welcome an annual memorandum from the DMA giving their assessment of the number of and reasons for withdrawals of licence applications.

The Defence Committee was assured during the course of its inquiry into the Six Nation Framework Agreement that there would be no reduction in transparency in licence applications as a result of the terms of the Agreement and this was confirmed by the previous Foreign Secretary in evidence to our predecessors. Until the precise terms of the GPLs are known, we cannot be certain that this will be the case. We will continue to monitor the use of Global Project Licences and the information given about them in future Annual Reports.

We recommend that the Government and Saferworld (and other interested parties) should consult further on this question of the inclusion of ratings in the reports and report to us the outcome of those discussions by the end of this year.

It is not always apparent what the underlying principles of classification are when information is provided to these Committees in confidence, and we recommend a restatement of these in the Government's response to this report. We would also recommend that the Government, in its response, sets out its preliminary assessment of the implications of the Freedom of Information Act for what it will be required to disclose about licences, and any implications this may have for the Annual Reports.

Administration of the Licensing Process

Delays in processing of applications can adversely affect the companies concerned and it essential that such effects are minimised. Performance of the Export Control Organisation continues to be below acceptable standards. The Government should take urgent steps to improve performance, particularly in view of the extra demands which may be made of the system as a result of provisions in the Export Control Bill, once it becomes an Act.

We remain concerned about the delays in settling appeals against refusals of applications for SIELs Given that our predecessors recommended a rethink of the appeals target in their report last year, and urged renewed efforts by the Government to meet an achievable but challenging target, we are disappointed at the lack of progress in the Government's review.

We recommend that the Government should consider the production of clear guidelines for, and clarification of, the circumstances under which end-use monitoring should be undertaken.

OIELs and SIELs

The statistics on the numbers of OIELs and SIELs issueddo not suggest to us that there is any obvious evidence of a change in the application of the policy outlined by the Government on which type of licence is appropriate. However, we recommend that the Government should examine ways in which more consolidated analytical information about OIELs (such as destinations covered and equipments covered) might be presented in the Annual Reports in order to allay any suspicions of abuse, and to discourage any temptation to relax controls.

Small Arms

We applaud the role played by the UK Government in working towards international agreement on the control of small arms. We welcome too, the inclusion in the Annual Report of details of surplus arms destroyed by the Government, and information on the number of small arms covered by standard individual licences agreed in 2000 on a country by country basis. We will re-examine the issue of trafficking in small arms and light weapons when we come to look at the draft proposals for subordinate legislation to be made under the Export Control Act.

Application of the Criteria on a Case by Case Basis

We accept that the Government is obliged to continue to assess each SIEL application on its own merits against the consolidated criteria and on a case-by-case basis. However, the Government has acknowledged that the cumulative effects of exports to a particular destination could be a relevant consideration in this assessment. To aid our review process, we recommend that the Government should consider including in its Annual Reports data on the value and quantities of controlled goods for each SIEL granted.

Tanzania

We fail to see the relevance of the Code of Practice to the provision of information in confidence to select committees of this House. We expect to receive shortly the summary of the cost-benefit analyses prepared within Government before the decision on the application to export an air traffic control system to Tanzania was determined.

We recommend that the Government explain the distinction in Criterion Eight between seriously hampering a country's sustainable development and seriously undermining its economy, if any, in its response to this report.

Coming to a clear definition of such a complex goal as ensuring that a proposed arms export would not seriously undermine the economy or seriously hamper the sustainable development of the recipient country will be far from easy, but we consider the importance of having clear criteria governing the export control regime as justifying the effort required to produce workable guidance on the application of Criterion Eight. We look forward to seeing substantial progress towards formulating clear guidance as to the interpretation and application of Criterion Eight under the provisions of the Export Control Act. We will be examining that guidance closely.

Export Controls and Collaborative Defence Manufacturing

We conclude that if paragraphs (b) and (c) of the additional factors to be taken into account in licensing decisions announced in the statement of 8 July were to be applied on a "case-by-case basis", they would suggest that the more insignificant a component is to a finished product, the more likely it is to be approved for export, while at the same time the more significant a component is to a finished product, the more likely it is to be approved for export. We recommend that the Government explain more fully these apparently conflicting considerations in its response to this report.

We recommend that the additional factors announced on 8 July are clarified to indicate whether they require Ministers to take account in determining licence applications only of the UK Government's defence and security relationship with the government of the "incorporating country", or also permit Ministers to take into account the implications of a contract for the UK's strategic industrial base and its commercial relationships with that country.

We recommend that the Government clarify, in its response to this report, the relevance of the quality of export controls in the "incorporating country" to licensing decisions relating to collaborative manufacturing products.

We conclude that the comments of our predecessors on the effectiveness of the US system of export controls should not have been called in aid to justify the decision of Ministers in relation to policy on the export of aircraft components to Israel via the USA.

We recommend that the implications of paragraph (e) of the additional factors to be taken into account in licensing decisions announced on 8 July are spelled out in greater detail in the Government's response to this report.

We conclude that the Government's announcement of 8 July has made it more urgent that efforts be redoubled to seek to secure harmonisation of EU and US policies on arms exports.

The Government's statement of 8 July claims that there is no common EU-wide policy about licensing strategic exports where it is understood that the goods are to be incorporated in products for onward export. Whether or not this is an interpretation of the terms of the Code with which the UK's European partners would all agree, we recommend that the Government, in its response to this report, sets out its view on the compatibility of the new factors announced on 8 July with the EU Code, and indicates what steps it intends to take to secure an EU-wide policy, or amendment to the Code, in respect of licence applications for goods where it is understood that the goods are to be incorporated into products for onward export.

We recognise the issue the Foreign Secretary was seeking to address in his announcement of 8 July—the challenge faced by the UK defence manufacturing industry in securing participation in and sustaining collaborative procurement projects, particularly those involving the USA—but we conclude that in his statement he identified a dilemma without doing enough to illuminate how it is to be resolved in future cases. We have outlined a number of concerns we have about the impact of the additional factors which are now to be taken into account in certain licensing decisions on the integrity of the UK's and the EU's export control regime—in particular about whether exports which would otherwise breach the first four of the Consolidated Criteria (and therefore the EU Code of Conduct) will now be licensed if they are to arrive in a destination via a third country rather than directly from the UK. We will be pursuing these concerns with the Government when we have received its response to this report.

We recommend that the Government's Annual Report for 2002 identify the number, destination and types of goods covered by licences where, in decisions to allow the export, the additional factors announced on 8 July played a part.

Prior Parliamentary Scrutiny

We conclude that several of the cases we have focussed on in this report starkly illuminate many of the shortcomings of retrospective scrutiny of licensing decisions.

We recommend that the Government, in its response to this report, come forward with proposals for a system of prior parliamentary scrutiny of export licence applications by a select committee, or committees, of this House.