Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


APPENDIX 10

Letter to the Chairman from the Secretary of State for Trade and Industry

  Thank you for the opportunity to appear before the Committee to give evidence on the secondary legislation to be made under the Export Control Act. I hope the Committee found my evidence helpful. You will recall that I agreed to write to the Committee giving clarification on a number of points.

  In response to a question from Sir John Stanley on how the legislation would apply to a company transporting arms to an embargoed destination from one overseas country, via another country, I undertook to provide a legal memorandum setting out how the chain of activity would be caught by the Export Control Act and the draft Orders. This is attached[30]

  I also undertook to give a written response on two specific points raised during the course of my evidence: firstly to respond to the concern raised by the Defence Manufacturers Association (DMA) in their evidence to the Committee with regard to support for the UK's Armed Forces; and secondly on whether a UK person employed by an overseas transport company engaged in transporting arms to an embargoed destination would fall within the ambit of the trade controls.

  On the first issue, the DMA expressed concern in their written evidence to the Committee that the new controls could have an adverse effect on the operational effectiveness of our Armed Forces. It is of course vital to ensure that the operational efficiency of our Armed Forces is maintained once the Export Control Act is implemented. We will work closely with both the Ministry of Defence and industry to ensure that this is the case. We have asked industry to provide us with specific examples to help us in our consideration of this matter.

  On the second issue, Mr Kevan Jones gave an example of an individual working overseas as a pilot, co pilot or load-master for a Ukranian air transport company engaged in transporting arms to an embargoed destination. I can clarify that under the draft secondary legislation a UK person working as an employee or on a freelance basis for an overseas company engaged in transporting military equipment to an embargoed destination, or in transporting torture equipment or Long Range Missiles to any destination, would fall within the scope of the trade controls. The extraterritorial scope of the controls on trade to embargoed destinations, and in torture equipment or Long Range Missiles, applies to UK persons anywhere in the world and in any capacity.

  I hope this is helpful. I am of course happy to clarify any further points arising from my evidence should you wish me to do so. I look forward to seeing your report.

Annex

RESPONSE TO QUESTION RAISED BY SIR JOHN STANLEY MP DURING THE QUADRIPARTITE COMMITTEE HEARING 3 APRIL 2003

  1.  During the Secretary of State's evidence on 3 April, Sir John Stanley asked "for a full explanation as to whether the wording of section 5 brings within it companies such as Foyle Air transporting arms to rebel forces in Sierra Leone from the Ukraine via Burkina Faso". The Secretary of State offered to send a legal memorandum on how the chain of activity described by Sir John would be caught by the Act and the orders as drafted.

EXPORT CONTROL ACT 2002

  2.  Sir John Stanley makes mention of what was clause 5 of the Export Control Bill. This clause is now section 4 of the Export Control Act 2002 (trade controls). Section 5 of the Act, to which Sir John also refers, contains general restrictions on control powers.

  3.  Under section 4 of the 2002 Act the Secretary of State may, by order, make provision for or in connection with the imposition of trade controls in relation to goods of any description. Trade controls are defined by section 4(2) as including the prohibition or regulation of the movement of any goods. The power to impose trade controls is limited by section 4(4). Essentially, the power can only be exercised for the purpose of imposing controls corresponding to the controls that may be imposed under sections 1 and 2, or in relation to any directly applicable Community provision. The power is also expressed as being subject to section 5 of the Act. By virtue of section 4(8), trade controls may be imposed on acts done outside the United Kingdom, but only if they are done by a United Kingdom person, or under the control of such a person. United Kingdom person is defined by section 11 as meaning a United Kingdom national, a Scottish partnership or a body incorporated under the law of any part of the United Kingdom.

  4.  Section 5(2) of the Act allows controls of any kind to be imposed for the purpose of giving effect to any Community provision or other international obligation of the United Kingdom. Under section 5(7) trade controls may be imposed in relation to any description of goods within one or more of the categories specified in the Schedule to the Act for such controls.

  5.  Paragraph 1 of the Schedule to the Act allows for trade controls to be imposed in relation to military equipment; goods on which military technology is recorded or from which it can be derived; or goods intended, designed or adapted for use in the development or production of military equipment. Under paragraph 2(4), trade controls may also be imposed in relation to any goods the movement of which (amongst other things) is capable of having a relevant consequence. The relevant consequences are set out in the table at paragraph 3(2).

DRAFT SECONDARY LEGISLATION

  6.  The draft Trade in Controlled Goods (Control) Order ("the Trade Order") sets out the way in which the Government intends to exercise the powers in the Act in relation to trade controls. Article 3(2) of that Order prohibits (except where a licence has been granted) the supply or delivery of restricted goods (as set out in the Schedule to the Order) by a person in the United Kingdom where that person knows or has reason to believe that his action or actions will, or may, result in the removal of those goods from one third country to another. Article 3(3) contains a similar prohibition on a United Kingdom person acting anywhere in the world outside the United Kingdom and the Isle of Man.

  7.  The draft [Embargoed Destination] (Sanctions) Order provides for restrictions on the supply or delivery of controlled goods to an embargoed destination. Article 3(1) prohibits (except where a licence has been granted) the supply or delivery of controlled goods to any person or place in the embargoed destination by a person in the United Kingdom. Article 3(2) contains a similar prohibition on a United Kingdom person acting anywhere in the world. Controlled goods will be those goods covered by the embargo.

  8.  For completeness it should be noted that paragraphs (2) and (3) of article 4 of the Trade Order impose restrictions in relation to the acquisition or disposal of controlled goods but that, by virtue of article 4(5)(a), these restrictions do not apply to any person whose sole involvement in relation to such goods is to provide, or agree to provide, transportation services.

EFFECT OF THE ACT AND THE DRAFT SECONDARY LEGISLATION ON TRANSPORT OF GOODS

  9.  Sir John is concerned that the word "transport" does not appear in the Act. However as noted above, section 4(2) allows trade controls to be imposed by order to prohibit or regulate the movement of goods. This expression would include, but not be limited to, the transportation of goods. Consequently it is possible to impose trade controls on the transportation of goods in the secondary legislation, subject to the restrictions on the control powers referred to above.

  10.  The draft secondary legislation also does not use the word "transport", referring instead to the wider concepts of "supply and delivery". The effect of the draft secondary legislation is that the following transportation activities will require a licence insofar as they constitute supplying or delivering:

    —  The transport of restricted goods from one third country to another under the Trade Order; where any act in relation to that transportation is done in the United Kingdom or is done by a United Kingdom person anywhere in the world. The expression United Kingdom person has the same meaning as given to it in the Act and therefore includes a body incorporated under the law of any part of the United Kingdom;

    —  The transport of controlled goods to an embargoed destination, where any act in relation to that transportation is done in the United Kingdom or is done by a United Kingdom person anywhere in the world.

  11.  Turning to the example that Sir John Stanley gives, Sierra Leone was an embargoed destination. As is set out above, the supply or delivery of goods covered by an embargo to such a destination by a United Kingdom person would require a licence. Carrying out the activity without a licence would be an offence under article 6 of the draft Embargoed Destinations Order. The penalties applicable for such an offence are set out in article 6 and include, upon conviction on indictment, an unlimited fine or a term of imprisonment not exceeding 10 years or both.

15 April 2003


30   Annex. Back


 
previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2003
Prepared 20 May 2003