GOVERNMENT AND THE SUPPLY SIDE OF
DEFENCE EXPORTS
64. In this section we follow up our comments of
last year on the Government's involvement in the defence export
market.[69] This occurs
through direct sales and disposals and through the promotion of
particular defence exports, usually by officials, but in some
circumstances by ministers. The main issue we seek to address
is how these activities sit with the Government's role in controlling
strategic exports.
Sales, gifts and other disposals
65. The Government disposes of substantial quantities
of military equipment. Between April 1998 and February 2004, the
MoD's Disposal Services Agency (DSA) sold 24 former Royal Naval
named capital ships, a variety of aircraft, including 23 Harriers,
9 Jaguars and 29 Tornados, and approximately 23,000 military vehicles.[70]
The DSA has recently sold two frigates to Romania, a frigate to
Chile and three transport aircraft to Austria.[71]
According to an article in Jane's Defence Weekly in October 2003,
recent DSA notices had announced the availability of AS90 self-propelled
guns, up to 25 Sea Harrier fighter aircraft, and Starburst close
air-defence missile systems.[72]
Some of this equipment is sold by auction. All exports of these
disposal sales (and most of this equipment is presumably exported)
are apparently covered by an appropriate licence.[73]
66. Our main concerns regarding sales and gifts are
"the criteria used by the Government to decide whether to
sell or give military equipment to others, and … the transparency
of these sales and gifts".[74]
The Government, uniquely, does not require a licence to export
military equipment, although much of the equipment that it sells
does receive an export licence, because normal practice is to
transfer ownership before the equipment leaves the UK. The Government's
reply to our Report last year seemed to state that under most
(if not all) circumstances, proposed sales and gifts were considered
against the Consolidated Criteria before being made.
67. What is unclear is whether the Government subjects
its own sales and gifts to the operative provisions of the EU
Code of Conduct. We recommend clarification in response to
this Report of whether denial notifications under the EU Code
of Conduct are taken into consideration when the Government considers
making sales and gifts against the Consolidated Criteria, and
whether consultations on proposed Government sales and gifts would
be initiated if a denial notification had been issued by an EU
Member State for an essentially identical transaction.
68. The Government has also explained that most (if
not all) Government sales are already included in the Annual Report,
and has undertaken to include gifts in the future.[75]
It is not always possible to tell from the Annual Report where
information relates to goods which have been sold by the Government.
This is, however, consistent with the Government's general approach
under which no-one applying for export licences is identified.
69. The Government has set out two circumstances
under which reporting of Government transfers might be more limited
than the reporting of exports requiring a licence. The first is
the issue of "Government Furnished Equipment (GFE) to a UK
contractor in support of a UK defence procurement programme …
using an Open General Export Licence".[76]
This is unproblematic: no goods exported under Open General licences
are included in the Government's Annual Reports, and it would
be odd to make an exception in this case.
70. The second category causes us more concern. The
Government has stated that, while it "may publish the broad
details of certain Government to Government agreements, some overseas
recipient governments may be sensitive about the reporting of
all the transfers of goods, and confidentiality undertakings may
form part of such agreements".[77]
We are unclear what this means in practice, but it seems to imply
at the very least that some sensitive goods are transferred to
overseas governments without an export licence being required,
and without appearing in the Government's Annual Reports at all.
For certain categories of equipment, the Government has undertaken
to make reports on imports and exports to the UN Register of Conventional
Arms. Those transfers not being reported presumably fall outside
these categories. We recommend that the Government should clarify
in its response to this Report under what circumstances transfers
of military goods to overseas recipient governments are not reported,
including clarification of the circumstances in which transfers
would not be reported because of sensitivity on the part of overseas
recipient governments or confidentiality undertakings. We further
recommend that the Government should give an indication of the
type, quantity and value of these unreported exports, preferably
in public, but in confidence if absolutely necessary.
71. We recommended last year that "in the interests
of transparency, future Annual Reports should include information
on all sales, gifts and other transfers of military equipment
by the Government to other end users abroad".[78]
In its reply, the Government stated that "the Annual Report
includes relevant information on those goods transferred abroad.
Information on sales is currently included either in the section
providing information on licences, or in the tables on exports".[79]
We recommend that in its reply to this Report, the Government
should also set out any circumstances of which the Committee has
not expressly been made aware in which information on the type
of equipment sold, gifted or otherwise transferred by the Government
to other end users abroad does not appear in the Annual Report
on Strategic Export Controls, either in the section on export
licence decisions or in Tables 7 or 8 of the Annual Report.
Gifting of military equipment using the Conflict
Prevention Pool
72. During last year's inquiry, we considered the
gifting of two Mi 17 support helicopters to the Government of
Nepal, paid for from the inter-departmental Global Conflict Prevention
Pool. In our Report, we supported the Government's decision to
provide the helicopters, with conditions limiting their use to
logistical, medical and humanitarian tasks. We concluded, however,
that the gift should not have been funded from the Global Conflict
Prevention Pool.[80]
73. In its reply, the Government did not accept this
conclusion. It stated that the supply
was part of an integrated package of assistance
for the Nepalese government, which was designed to increase Nepal's
security, reform and development capacity … agreed interdepartmentally
as part of a joint conflict resolution strategy for Nepal, aimed
at stabilizing the security situation and establishing a suitable
environment for a renewed negotiation process. The decision to
supply helicopters from the Global Conflict Prevention Pool (GCPP)
was taken in the context of that overall strategy.[81]
74. The Government also stated that it was "confident
that the ongoing GCPP package as a whole has so far provided a
constructive and beneficial balance of security, development and
governance assistance for Nepal, and is helping to influence the
developing peace process".[82]
75. In January 2004, it emerged through the Nepalese
press that an official at the British Embassy in Kathmandu had
announced plans to gift two second-hand Short Take Off and Landing
(STOL) aircraft to the Royal Nepalese Army (RNA), again funded
through the Global Conflict Prevention Pool.[83]
In explanation, the Government has stated that "although
the RNA human rights record still gives rise to various concerns
… the balance remains in favour of our continuing our non-lethal
security assistance plan through the Global Conflict Prevention
Pool as part of our strategy to influence RNA mentality and effect
behavioural change".[84]
76. Conflict prevention seems to have a rather looser
meaning within Government than it does in the wider world. The
Foreign Secretary has told us that "it is not an oxymoron
for us to use the global Conflict Prevention Fund to support,
for example, the operation of short take-off and landing aircraft
because sometimes you have to prevent conflict and its scale by
making use of military action" and he has stressed that "the
Conflict Prevention Fund is not a pacifist programme".[85]
We note that aspects of recent British military operations, including
most recently in Iraq, have been funded from the Ministry of Defence's
conflict prevention budget. Nonetheless, we continue to regard
it as somewhat perverse to pay for military equipment intended
to assist in offensive operations from a fund supposedly dedicated
to preventing conflict. We would have preferred the Government
to have accounted for the gifts under a different budget heading.
77. At issue last year was the fact that the Government
failed initially to request parliamentary approval for certain
gifts before they were made, as it is obliged to do. In this case,
the Government has assured us that it will "go through the
appropriate parliamentary procedure to request approval to proceed
with the gift", but only "once all the necessary details
regarding the intended gift … are settled".[86]
While there is no requirement for the Government to inform Parliament
before such details have been settled, it gives an unfortunate
impression to us and to others when information about a proposed
gift emerges through the media, rather than directly from the
Government. We recommend that where a Government official makes
an announcement to the public or media about a proposed sale or
gift of military equipment, the Government should inform us and
the House at the same time.
Promotion of defence sales by ministers
78. As we noted last year, "it is totally proper
and desirable that the Government should promote the sale of British
products abroad. But the export of defence equipment is not always
desirable, which is why the Government has a series of criteria
which it uses at the licensing stage to determine whether a sale
should take place".[87]
This year we have examined the activities of Government ministers
in promoting defence sales in 2002 and through most of 2003. We
have been provided with and are publishing information about 24
occasions on which Government ministers have promoted specific
defence sales.[88] We
have also been provided with information about a further 13 such
occasions,[89] details
of which we have been asked to keep confidential "because
of commercial sensitivities or to protect international relations".
[90] We recommend
that the Government should continue to keep us informed on a regular
basis of occasions on which Ministers promote specific defence
sales.
79. Ministerial promotional activities in 2002 and
most of 2003 concentrated on the sale of Hawk trainer jets to
India (the majority of meetings), Typhoon (Eurofighter) aircraft
to Singapore, Gripen fighter jets to the Czech Republic, a frigate
programme to Chile, and, apparently, the Joint Strike Fighter
to the USA. Of these, only the first is likely to be controversial.
We commented on the proposed sale of Hawk to India in our Report
last year.[91] All of
the 13 confidential promotion activities of which we have been
informed seem to have been appropriate, and highly unlikely to
be in breach of the consolidated criteria. We conclude that,
from the information we have seen, Government ministers appear
to be promoting defence exports predominantly in circumstances
which are unlikely to be contentious.
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