Examination of Witnesses (Questions 80-99)
THURSDAY 3 APRIL 2003
MR ANDY
MCLEAN
AND MS
JULIA SAUNDERS
80. And they would all be UK based? (Mr
McLean) They are certainly UK companies and individuals, whether
they are all based in the UK I am not quite sure. (Ms Saunders)
What can happen is you can have a UK head office with your planes
based elsewhere, for example Ostend.
81. So you think regulation will catch those
sort of people? (Ms Saunders) The regulations do not
catch those people unless they are breaking UN embargoes.
82. You heard the industry earlier giving evidence
and one of their concerns was perhaps the unacceptable financial
burden of these added regulations. Have you any assessment as
to what the cost will be to British defence manufacturers? (Mr
McLean) With regards to transportation?
83. Transportation specifically but the whole
subject of regulation in general. (Mr McLean) I think
with regard to transportation what is generally coming to be recognised
internationally is that post-September 11 it is no longer an excuse
for air transporters and other freight companies to not know what
they are carrying or what the regulatory framework for those goods
are. We would strongly argue for the importance of regulating
transportation agents.
84. I cannot understand you connecting that
with what happened on September 11. On September 11 they were
ordinary civilian domestic air flights. (Mr McLean)
Yes, but it has recently come to light that the International
Transport Workers' Federation has raised the problem of ships
and airlines operating under flags of convenience potentially
being under the control of al-Qaeda operatives and supplying military
equipment into the Horn of Africa.
85. I accept that but if al-Qaeda were using
them they would not be regulated. We are talking about two different
things here. (Mr McLean) What I am talking about is
the world within which we live where being recognised increasingly
is the importance of ensuring that weapons do not fall into the
hands of rogue states or terrorist organisations. We should be
taking all the steps we can to increase the transparency and control
of those who are organising arms shipments and those who are moving
weapons.
86. What you are really saying is that you have
done no assessment at all about the financial burdens that might
be placed on legitimate defence industries. (Ms Saunders)
The answer to that is no. I was wondering which part of the controls
you were wondering about because the defence industry presumably
are submitting their estimates for the proposed controls. Did
you mean the further controls that we would like to see happening?
87. Yes. (Ms Saunders) I think it
would depend which level you went in at. In our section on transporters,
for example, we have suggested a number of options, the first
option being the most onerous which would be the requirement to
apply for a licence if a brokering or export licence was not already
in existence for that particular shipment. We have also suggested
other levels which would be easier entry points, for example starting
off with a register of transporters who would submit records of
what arms shipments they have made in a year. I would suggest
that would be a less onerous entry point if you wish to analyse
where controls can most effectively be placed. I cannot give you
a pounds, shillings and pence answer.
88. That is an old-fashioned answer. (Ms
Saunders) I cannot give you that because I think that would
be more appropriate for the industry itself to present. (Mr
McLean) If I could add to that. I think this conversation
illustrates one of the problems at the moment is that there is
a lack of transparency over who is involved in the trade, so establishing
a register would be a very formidable first step to shed some
light on what at the moment is a very grey area.
Mr George
89. I am not an expert on air transportation
but I have read lots of novels. Perhaps the people you are talking
about are pretty evil, often pilots running their own little aircraft
who can zip in and out, who are flying aircraft that would probably
breach any—any—minimum standards. Whilst the aim is
noble to catch British companies who might be indulging in this
often heinous act, is it not really an act of incredible utopianism
to assume that this is going to have even a marginal effect upon
transportation of illicit weapons, drugs or anything to areas
of the world which are exceedingly dangerous? There would be dozens
of countries where aircraft would be registered, there would be
so many pilots and companies who would not have the slightest
interest in complying with any decent principles whatsoever, so
is it not making this proposal a little utopian, a little, I would
not say silly? In no way is anybody endorsing what people are
doing, passing arms around and exacerbating already tense areas,
creating mayhem, but this is noble although truly, truly unworkable.
Please give me a chance of reconciling my conscience with this
because I would support it but, frankly, I think the chance of
it having any impact on the trade is slight. (Ms Saunders)
I am totally happy to be called both noble and silly if that is
what you really think. At the moment this is not illegal. The
way you phrased your question you were talking about illicit transports,
people doing things that are illegal, but the situation is because
it is not regulated there are no controls and unless it is breaking
a UN embargo it is not illegal. Therefore, we are talking about
people who are entirely legitimately moving cargoes around into
conflict zones which are not embargoed, of which there are many
around the world. I believe that there is a purpose for legislation
in defining what is legal and what is illegal and casting a light
on this grey area, and that in itself has a deterrent force for
those who, okay, there will always be in life a few people who
are happy to act illegally but you will find those who wish to
still retire to the UK, for example, who wish to remain on the
right side of the law and they will wish to play by the rules,
at least not be detected in breaking them. At the moment we are
in a situation of having no rules. (Mr McLean) Cases
have come to light but have not been able to be prosecuted because
of the lack of regulation. I think it is unfair to say that what
we are proposing will not make a difference. Indeed, when we put
these proposals to the air transportation agent we have mentioned
he said they would make a significant difference in terms of regulating
the trade.
Mr Howarth
90. Chairman, as a pilot myself I am bound to
defend the reputation of pilots generally, I cannot tolerate a
slur on those of us who fly aeroplanes. Given the complaint that
you have that there is a breach happening here and that it is
basically lawful at the moment and that you wish to close that
loophole, why, given the Government's strong position on this
issue, has it not taken up your suggestion? (Ms Saunders)
I would be very happy if you ask that question this afternoon
because I am afraid I cannot answer it. We have been arguing this
for a number of years.
Chairman
91. I will call Gerald this afternoon to ask
that very question. (Mr McLean) I wonder if I could
make one more point on arms brokering and trafficking, which is
that two of the main reasons which the Government has put forward
for not introducing more comprehensive extraterritorial controls
are to do with enforcement and to do with the issue of dual criminality.
These are both areas where in other pieces of very recently introduced
or currently under discussion legislation the Government is proposing
to go further. If I can just quote two things to you. As part
of the Antiterrorism, Crime and Security Act, the Government has
stated that "We have also considered whether we should go
further and extend nationality jurisdiction to such an offence
. . ." they are talking about corruption ". . . recognising
that this could send a strong deterrent message that the UK is
determined to act against corruption wherever it occurs. This
is a message that will have real persuasive and dissuasive force.
Whilst recognising the practical problems associated with the
prosecution of extraterritorial offences, the Government believes
that the balance of advantage rests with assuming jurisdiction
over its nationals for offences of corruption committed abroad".
That is one piece of legislation. There is also currently before
the House, I believe, a Private Member's Bill on female genital
mutilation and when responding to this the Minister, Hilary Benn,
said "Hon. Members will want to recognise the fact that the
Bill represents a significant extension of the present law because
it will go a step beyond the current established international
practice that dual criminality is normally needed, namely the
practice needs to be an offence in both countries to apply extraterritorially".
Those are just two pieces of legislation that the Government is
currently considering, one of which has been introduced, where
this principle has been overcome.
Chairman: Thank you very much. Let us move on
to your arguments on licensed production overseas.
Mr O'Neill
92. We took evidence in the last Parliament
from Stephen Byers when he was Secretary of State for trade and
industry and he said on the question of licensed production overseas:
"What is required is a system which ensures that the Government
knows when a licensed production facility is being set up, and
which ensures that the goods produced are not exported to countries
or end-users where the UK would not license them". The Government
has put forward some indirect controls already and are now proposing
to introduce additional ones. Why do you not think that these
new controls are going to be sufficient to do what you want them
to do or, alternatively, maybe I can start with Stephen Byers'
statement? Do you agree with Stephen Byers' statement? (Mr
McLean) Yes.
93. So what is wrong with what is coming forward
at the present moment? (Mr McLean) As we understand
it, the current proposals do not actually include any specific
controls on licensed production overseas. The Government put forward
two options in the initial consultation paper, neither of which
have made their way into the current draft. They are instead saying
that by enacting controls over the export of component parts that
is sufficient to control licensed production overseas. We think
that is incorrect and that you need to license the deal itself
because if you are only licensing the component part of the licensed
production facility you are in danger of missing the big picture.
94. On the other hand, without the components
you cannot have any goods at all. (Mr McLean) Yes,
but it would be quite possible for the components to be imported
to the production facility from a third country, so it would be
a UK company establishing the facility but drawing on technology
from a third country, in which case the Government would have
no control over what the UK company would be doing. Also, I think
the case which the Committee has heard previously with the Foreign
Secretary with the confusion over whether a licence had been granted
for the export of hawk components to India, that illustrates the
problem here. Under the proposed hawk deal the hawk jets were
to be built under licence in India and yet it appeared that the
Foreign Office missed the licence which would actually authorise
the export of the component parts. I think this issue shows that
without licensing the deal itself you can miss the bigger picture.
95. I take your point but we will leave that
aside for the moment. There are occasions when, of course, a licensed
production can be established and then add-on parts can be purchased
elsewhere which were never in the original deal, never in the
original contract. How do you police that? (Mr McLean)
How would you police the components coming from a third country?
96. Yes. (Mr McLean) I think the
important thing to police is the establishment of the deal.
97. With respect, there are a number of pieces
of military equipment which have the capacity to have add-ons
but which need not necessarily be that specific. You cannot do
anything about that. With respect, the obvious way around your
recommendation is not to talk about these things that could be
obtained from elsewhere which could change the character of the
kit that is being produced under licence. Would you agree with
that? (Mr McLean) If the deal itself was licensed and
the government set a limit, as the US does, on the number of weapons
manufactured under the licence, and also they always regulate
the subsequent export destination, it would not be such a relevant
concern as to whether there might be pieces of equipment coming
in from a third country which could add to the manufacturing capability
because already there would have been a government-to-government
agreement on the number of weapons manufactured and an ultimate
destination.
98. I think it is still rather difficult to
police the third stage when you have no control over it at all.
I just make that point. The other point that has been raised is
that the defence export business make the point that licensed
production agreements are a little bit like offset in some respects
and you can do production in the country and sometimes orders
will not be obtained if there is not some kind of licensed production
agreement. Would you agree with that? (Mr McLean) We
are not seeking to stop licensed production agreements, we are
just seeking to ensure that they are effectively regulated. The
US, as we have heard previously, is the main arms exporter and
the most successful in the world and yet they treat licensed production
agreements as physical exports. They require prior approval from
the State Department which puts limits on the production levels
and any sale to third countries are also prohibited without prior
US Government approval.
99. Is that because the US has got higher standards
than we have or it has got the ability to enforce whatever it
wants on the people to whom it is selling armaments? (Mr
McLean) I think it certainly has high standards in this respect.
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