CONCLUSIONS AND RECOMMENDATIONS
Introduction
1. We recommend that
the Government should keep under close review the operation of
secondary legislation under the Export Control Act. We hope to
have the opportunity to submit our views on any future proposals
of substance under the Act. (Paragraph 10)
General considerations
2. We conclude that
the effectiveness of the Government's proposals is to be judged
by how well they are able in practice to discourage trade in military
goods and technology where it is undesirable without also discouraging
trade that the Government wishes to promote. An ability to do
this depends in the first instance on having reliable methods
of distinguishing between "legitimate" and "illegitimate"
trade. (Paragraph 23)
3. We conclude that
a further test of the proposals will be how effectively they can
be enforced against those who have no regard for the letter of
the law. Only effective enforcement will dissuade such people
from involvement in trade in military equipment and technology.
(Paragraph 24)
4. We conclude that
existing controls on exports of military goods from the United
Kingdom are not obviously an appropriate template for all of the
areas of activity that the Government intends to control through
secondary legislation under the Export Control Act. We recommend
that the Government should take care to recognise the essential
differences between physical exports on the one hand and, on the
other, electronic transfers, which are not physical, and brokering
activities, which are not exports. Different sorts of activity
may require different sorts of control. (Paragraph 29)
Arguments for further control: trafficking and
brokering
5. We conclude that
it would be a missed opportunity if the Government failed to regulate
all UK citizens and companies who are involved in trafficking
and brokering activities abroad which, if conducted in the UK,
would not be granted a licence. (Paragraph 48)
6. It would be thoroughly
desirable to criminalise the activities of a British citizen supplying
small arms to rebel forces in an area of conflict, or medium-range
missiles to a rogue state. Such activities are precisely those
that need to be controlled. Under current Government proposals,
they will not be. We recommend that the Government should seek
to extend extraterritorial control to all trafficking and brokering
which, if conducted in the UK, would not be granted a licence.
(Paragraph 50)
7. We conclude that
there are a number of areas, including the illicit trade in small
arms and light weapons, in which enough international consensus
exists to make extraterritorial jurisdiction in such cases both
reasonable and enforceable (Paragraph 52)
8. We conclude that
while extending extraterritorial jurisdiction over any aspects
of the arms trade will pose practical difficulties, it is not
clear that it will be substantially more difficult to enforce
this jurisdiction more broadly over undesirable aspects of the
arms trade than to enforce it only in those areas to which the
Government is already committed. (Paragraph 52)
9. We recommend that
the Government should ensure that transportation agents are brought
within the ambit of the secondary legislation in all circumstances
in which the undesirable transfer of arms may be involved. (Paragraph
56)
Arguments for further control: Licensed production
overseas
10. We recommend that,
within two years of its introduction, the Government should assess
the effectiveness of the secondary legislation in regulating licensed
production facilities, and that it should take steps to introduce
direct controls on such facilities if these prove to be warranted
in the light of this assessment. (Paragraph 65)
11. We conclude that
the Government may not have enough information about licensed
production facilities abroad to assess the likely impact of these
facilities on the proliferation of military equipment. We therefore
recommend that the Government should consider requiring further
information from British exporters about the licensed production
facilities that they intend to establish abroad, and that this
information should be used in the assessment of relevant licence
applications. (Paragraph 66)
Minimising the burden on business
12. We recommend that
the Government, in cooperation with industry, should draw up clear
guidelines on what transactions will and will not require a licence
under the new controls. We further recommend that the Government
should seek to ensure through these guidelines, and legislative
refinement if necessary, that the number of additional individual
licence applications received under the new controls remains within
reasonable limits. (Paragraph 75)
13. We conclude that
where trade is already subject to robust and principled regulation
abroad, it would be superfluous, bureaucratic and potentially
anti-competitive to subject UK citizens and companies to the requirements
of a second regulatory system. The basis on which the Government
proposes to introduce an Open General Trade Licence seems to us
to be sound. (Paragraph 78)
14. We recommend that
the Government explain in its response to this Report why it might
be appropriate to include a country as a permitted destination
on the Open General Export Licence for technology, but not on
the Open General Trade Licence, or vice versa. (Paragraph 79)
15. We recommend
that new EU member states should only be included in the Open
General Trade Licence when their export control systems reach
a state of robustness comparable to that of existing member states.
(Paragraph 80)
16. We recommend that
the Government should consider how open licensing might best be
extended to minimise the regulatory burden on legitimate business,
and in particular to ensure that new business is not lost. (Paragraph
81)
17. We trust that
industry and Government between them can devise a pragmatic system
for record-keeping which is both sufficient to show compliance
and avoids imposing an unreasonable burden on industry. (Paragraph
87)
18. We recommend that
the Government should look again at the record-keeping requirements
for intangible transfers and brokering, to ensure that they are
relevant to the activities being recorded. (Paragraph 88)
19. We recommend that
the Government should consider licensing transfers of technology
by reference to the status of the recipient of the technology
rather than merely by reference to their location. (Paragraph
92)
20. We recommend that
the Government should ensure that foreign visitors to the United
Kingdom are brought effectively within the scope of the new controls
in respect of record keeping in as much as this is possible. (Paragraph
96)
21. We recognise the
great importance of trade fairs to the British defence industry.
We conclude that there is a danger that the new regulatory framework
will make it difficult for participants at trade fairs in the
UK to take advantage of spontaneous business opportunities, and
therefore that the Government needs to ensure that its licensing
system does not prevent such events from flourishing. We recommend
the broadest appropriate use of open licensing for trade fairs,
and we further recommend that the Government should consider having
a procedure in place at major trade fairs to expedite licence
applications made at short notice. (Paragraph 97)
22. We expect to see
prior to implementation of the controls a revised Regulatory Impact
Assessment, agreed with industry if possible, which more accurately
reflects the costs of compliance. (Paragraph 100)
23. We recommend that
the Government should ensure that transitional periods for implementing
secondary legislation under the Export Control Act are not unduly
protracted, but that it should also consider representations from
industry for a modest delay in implementation. (Paragraph 103)
24. We conclude that
the efficient administration of the new controls will be crucial
to their success. We recommend that the Government should ensure
that it has sufficient surge capacity to deal with unexpected
demand for licence applications and information, especially when
the new controls are initially introduced. (Paragraph 106)
Other concerns
25. We recommend that
the Government should ensure that the secondary legislation does
not in any way impede the expeditious provision of support to
the British armed forces, those equipping them and servicing that
equipment, and their allies in combat and training operations.
(Paragraph 110)
26. We recommend that
the Government should explain in its response to this Report whether
the provisions as currently drafted on the use and disclosure
of information would in any way legally inhibit the Government
from providing information to Parliament or its Committees, in
confidence or in public. If there is any doubt, the relevant provisions
should be extended to include Parliament and its Committees. (Paragraph
112)
27. We conclude that
the Government's decision to increase the maximum penalties for
the most serious offences under the Export Control Act is welcome.
This is fully warranted given the profound impact that the irresponsible
proliferation of military equipment has on the lives of countless
people. (Paragraph 113)
28. We recommend that
the Government should ensure that it will be able to call companies
and organisations to account, as well as individuals, where there
is corporate responsibility for an offence. (Paragraph 114)
29. We recommend that
the Government should ensure that all secondary legislation under
the Export Control Act is compliant with the European Convention
on Human Rights. (Paragraph 116)
30. We recommend that
the Government should describe in its response to this Report
the steps that it has taken to limit the vulnerability to judicial
challenge of the administrative appeals system against licence
application refusals. (Paragraph 118)
31. We recommend that
the Government should find time for a debate in a Standing Committee
of the House of Commons on secondary legislation stemming from
the consultation. We also reserve the right to look at the secondary
legislation ourselves. (Paragraph 121)
Conclusion
32. The Government's
proposals for secondary legislation under the Export Control Act
are a welcome if overdue series of measures to set the existing
licensing regime on a permanent statutory footing and to extend
and modernise the strategic export control system.
But there is a loophole in the proposals as they
stand. Their central purpose should be to ensure that those who
are involved in the trade in arms can only do so legally where
their activities are sanctioned by the state. The Government has
chosen to regulate British arms traders and brokers located abroad,
but only in an incomplete set of limited circumstances. The arm
of the law should reach out to British subjects based overseas
who are involved in all those aspects of the arms trade which
any civilised nation would regard as reprehensible—including
the proliferation of small arms. We acknowledge that there are
real practical problems in attempting to extend national jurisdiction
over actions carried out abroad. In our view they are worth attempting
to solve. But it makes no sense to try to solve these problems,
as the Government proposes, for oversized handcuffs, but not for
small arms.
At the same time, the proposals risk enmeshing legitimate
business in a web of unnecessary bureaucracy. To avoid this, open
licensing should be widely applied, and record-keeping requirements
should rely as much as possible on information that industry would
hold regardless of the Government's regulations. The Government
should ensure that open licences can easily be suspended or revoked
if they are used as cover for reprehensible activities—and
ensure that this fact is widely known.
If the Government is serious about making its legislation
as effective as possible in preventing undesirable proliferation
without putting a brake on legitimate industry, it may have to
think outside the box of conventional export controls. The Government
should think again about whether intangible technology is best
controlled at the moment of export, or at the moment of transfer;
and about whether brokering activities, which may not involve
an export at all, might not be best controlled as in the USA,
by licensing the people who carry out the activities, rather than
the activities themselves. The new regime proposed by the Government
looks much like the existing regime on physical exports, but it
will regulate activities which are not exports and are not like
exports. While the consultation document is a brave attempt to
square this circle, perhaps what is needed is another shape altogether.
(Paragraphs 122-125)
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