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
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