The Export Control Bill
32. The UK's export control régime is about to undergo
a major revision. The legal basis of the present régime
dates from September 1939, when export controls were given statutory
force by the "emergency" Import, Export and Customs
Powers (Defence) Bill. That Act provided that it should continue
in force until "such date as His Majesty may by Order in
Council declare to be the date on which the emergency that was
the occasion of the passing of this Act came to an end, and shall
then expire...". No such Order was ever made. For over half
a century the emergency wartime powers granted by the Act were
used to control strategic exports.
33. After the fall of the Berlin Wall and the rapid reunification
of Germany in 1990, concerns began to mount in Government that
the Act might be susceptible to legal challenge on the basis that
the end of the Cold War meant that there was no continuing "emergency".
These concerns became urgent after the Act came into public prominence
following the Customs and Excise seizure of the notorious Iraq-bound
"Supergun" components at Teesside docks in April 1990
and subsequent legal proceedings. In December of that year the
Import and Export Control Act 1990 was passed which removed the
subsection which had provided for expiry of the 1939 Act. In effect,
it made the 1939 Act permanent. It remains, for the present, the
legal basis of the export control régime.
34. Following the collapse on 9 November 1992 of the prosecution
for alleged export control offences of senior executives of Matrix
Churchill Ltd, the
Government set up an independent inquiry by Lord Justice (now
Lord) Scott into exports of defence equipment and dual-use goods
to Iraq and related prosecutions. In his report, published on
15 February 1996, Lord Scott commented that the existing legislation
governing export controls lacked
... the provisions for parliamentary supervision and control
that would be expected and are requisite in a modern parliamentary
and recommended, amongst other things
... new empowering legislation in place of the 1939 Act and ...
an export licensing system and export licensing procedures suitable
for the peacetime requirements of a trading nation ...
35. Following the Scott report, the Government published a consultative
document on strategic export controls in July 1996.
After the change of Government in 1997, a White Paper on strategic
export controls was published in July 1998.
It contained proposals for a new legislative framework for strategic
export controls, for new controls on electronic transfers of controlled
technology and on provision of technical assistance, and for powers
to control trading in controlled goods, and for improvements in
licensing procedures. However, despite the urgings of the Trade
and Industry Committee,
no time was found for legislation in the following two sessions.
In February 2000, in our predecessors' first report as the Quadripartite
Committee, they expressed their dismay that "the Government
should not have afforded greater priority to bringing forward
a Bill to implement the recommendations made four years ago in
the Scott Report".
36. In March 2001 the Government published its draft Export Control
and Non-Proliferation Bill and accompanying texts.
Our predecessors conducted a high-speed inquiry into the draft
Bill, and published their Report in May 2001, just before the
general election was called.
Amongst other conclusions and recommendations, they noted
- That the proposed Bill was largely an enabling
Bill, and that the meat of the proposals being made will be in
the secondary legislation to be made under the Act. They recommended
that every effort was made to ensure that a draft consultative
version of the relevant secondary legislation was published before
the House is asked to give the Bill a Second Reading.
- That Orders proposed to be made under the Act should
first be exposed in draft and in confidence to the Quadripartite
Committee and, if then made and laid, the Government should undertake
to use their best endeavours to find time for a debate if the
Committee so recommended.
37. Following the 2001 general election, the Government introduced
the Export Control Bill in the Commons on 26 June.
Its response to our predecessors' report on the draft Bill was
not published until some time later.
The proposed draft orders were published in "dummy"
form, though not until after the second reading of the Bill had
taken place on 26 July.
Some of the"non-proliferation provisions of the draft Bill,
which had disappeared from the Bill as presented, were subsequently
introduced separately as Parts 6 and 7 of the Anti-terrorism,
Crime and Security Bill, introduced in the Commons on 12 November
2001 and already an Act.
38. The Export Control Bill has been radically rewritten during
its passage through Parliament,
not always with the consent of the Government. The main areas
of contention have been
- the application of the sustainable development
- provision for prior parliamentary scrutiny of licensing
- the extent of the powers to control intangible transfers,
especially with regard to constraints on academic freedom; and
- the extent of the controls on the extra-territorial
activities of persons trading in controlled goods.
39. We do not propose to discuss the Bill, or the Government's
response to our predecessors' report, in any detail in this report.
However, we note that as it presently stands the Bill will require
Ministers to issue guidance (which will reflect, or possibly just
reproduce, the Consolidated Criteria) about the matters which
will be taken into account when making licensing decisions, including
the issue of sustainable development. It will give power to Ministers
to make regulations and orders defining the goods which are subject
to controls (which will largely reproduce the existing lists)
and how the powers to control "intangible" transfers
and the provision of technical assistance overseas will be implemented.
It will also give power to Ministers to bring trade ("trafficking
and brokering") in controlled goods under statutory controlan
entirely novel power. There are also powers to make other regulations
creating offences and giving authorities the enforcement powers
necessary to underpin these controls. As the Foreign Secretary
commented, all this
will formalise and give statutory basis to the approval process
for licence applications, making it more transparent and more
"justiciable", both informally and, potentially, in
40. The detail of the orders and regulations to be made under
the Act, and the guidance to be issued, will be crucial components
of the new export control régime. Given the slower than
expected progress of the Bill, the Government was unable to publish
drafts of these for consultation and scrutiny by us before the
summer recess. 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.
41. In the meantime, the Annual Report we currently have under
consideration, and those for 2001 and 2002, will be made under
the existing control arrangements. We now turn to the Annual Report
|EXPORT LICENCES AND DEFENCE EXPORTS 1997 TO 2000
|Licence or Export Type Etc.
( year on year change)
( year on year change)
refused or revoked2
( + 52%)
issued or extended2
refused or curtailed2
|Total value of exports of military equipment2
|Estimated total defence export deliveries5
|Identified total defence export orders5
1 Data relating to licences for 8 months only (2 May to 31 December)
2 Source: Annual Reports on Strategic Export Controls
3 Corrected after Annual Report issued
4 Not published in Annual Report
5 Source: UK Defence Statistics 2001, Table 1.13
6 12 months data
The data on defence export values are difficult to interpret and compare because of the use of different categories of classification of goods and services. There is a detailed discussion of these problems in The Economic Costs and Benefits of UK Defence Exports, Chalmers, Davies, Hartley and Wilkinson, Centre for Defence Economics, University of York, November 2001, paras 13 to 19.