Select Committee on Defence Fourth Report


Individual licensing decisions during 2002

53. We have not been able to examine in detail all of the Government's licensing decisions during 2002, and where we have sought further information, this has not always been sufficient or clear enough to enable us to come to a judgement on the decisions taken. In those cases where we have sought further information, the Government has usually been able to satisfy us that the reasons for its decisions were well considered. In addition to those cases mentioned elsewhere in this Report, the following information may be of interest as an indication of the often fine judgements that are reached:

54. In a number of cases, licences were originally refused on the basis of the information available, but were allowed on appeal after further information emerged. The following are examples of the information on which successful appeals were allowed:

    a)  that components could not be incorporated into other equipment used to attack ground targets, as had previously been thought;

    b)  that the equipment was being tested on behalf of the Armed Forces of a different country;

    c)  that the intended end use of the equipment was for sporting purposes by the national Olympic Team.

General issues

Trends in the application of the consolidated criteria

55. The Government assesses licence applications against consolidated EU and national criteria.[51] We have looked in detail at two criteria which were rarely invoked before 2002. Criterion Three of the EU Code requires member states to take into account "the internal situation in the country of final destination, as a function of the existence of tensions or armed conflicts" when assessing licence applications.[52] Until 2002, this criterion was very rarely invoked by the British Government. Between 1999 (when the Government first published statistics on reasons for refusal) and 2001, licence applications were refused on the basis of this criterion only five times. In 2002, by contrast, the criterion was invoked 76 times.[53] The Government has informed us that "many possible factors" could have led to this change, "not all of which necessarily relate to the licensing process". These factors included "global issues and changing situations in particular destinations", but the Government has insisted that "there have … been no changes to the Government's assessment process, which would lead to these increases".[54]

56. The Government has identified for us the 76 licence applications which were refused on the basis of Criterion Three during 2002. Almost all were for export to one particular country. Similar applications might in the past have been refused under Criterion Two (relating to human rights and internal repression), but the grounds for refusing these applications under Criterion Three appear to have been sound.

57. The Government has also identified for us the 15 applications refused on the basis of Criterion Five, relating to "the national security of the UK, of territories whose external relations are the UK's responsibility, and of allies, EU member states and other friendly countries".[55] This criterion had only previously been invoked once since 1999. The refusals under this criterion were for export applications to a variety of destinations, mostly for equipment of possible interest to terrorists, and/or for equipment relating to chemical, biological and nuclear weapons. Such applications might previously have been refused under Criterion Seven (relating to undesirable diversion), but again, there seem to have been good reasons for refusing them under Criterion Five. We conclude that the Government's argument is credible that its more extensive application during 2002 of criteria relating to internal tensions abroad and the national security of the United Kingdom was caused by events in the wider world, rather than by a change in the Government's application of the consolidated criteria.


58. Criterion Eight of the EU Code refers to "the compatibility of the arms exports with the technical and economic capacity of the recipient country, taking into account the desirability that states should achieve their legitimate needs of security and defence with the least diversion for armaments of human and economic resources".[56] We have previously looked in some depth into the Government's interpretation of this criterion, and into the involvement of the Department for International Development (DfID) in the export licensing process.[57] DfID is the lead Department for advising on sustainable development considerations, and they carry out detailed assessments against Criterion Eight under certain circumstances, as set out by the Secretary of State for Trade and Industry in August 2002.[58]

59. We noted last year that "it is difficult for us to assess whether the Government is committed to the sustainable development criterion while it has never been used as the reason for refusing a licence".[59] In early 2003, for the first time, one licence refusal was made partly on the basis of Criterion Eight. This was for export to a country which qualifies for debt relief under the Highly Indebted Poor Country (HIPC) initiative.[60] The reason for invoking Criterion Eight appears to have been not only the cost of the goods involved, but doubt about whether the quantity of goods ordered could be consistent with the recipient country's legitimate defence and security needs.

60. Because of the Government's insistence that details of the refusal should remain confidential, there is only so much that we can say in a public Report. But there are two points of interest that emerge from this example:

    i.  In deciding whether Criterion Eight was relevant in this case, the Government took into account information on exports from third countries as well as from the United Kingdom. This is consistent with their statement that that "the cumulative impact of all arms imports to the destination country, not just exports from the UK" will be captured by the Criteria as a whole and by the indicators to be used under the sustainable development criterion.[61] As we noted last year, the sustainable development impact of a proposed export can be only be assessed in the context of the purchasing country's military procurement policy as a whole.[62]

    ii.  The second point of interest is in the context of how the Government defines the parameters of Criterion Eight. This example is an extreme one. We have previously considered at some length the Government's decision to license a military air traffic control system for export to Tanzania.[63] It was always arguable that Tanzania had a legitimate military need for such a system, even if the decision itself caused controversy. This case is different because it envisaged the export of such large quantities of goods that it would have been difficult to deploy them successfully, let alone to justify that deployment.

We conclude that the Government should give further consideration to its interpretation of the Sustainable Development Criterion.

61. We comment further below on the interpretation of Criterion Eight across the European Union.[64]

62. The 2002 Annual Report is the first to have been signed by all four Secretaries of State involved in the export licensing process. Previous Annual Reports had been signed by the Secretaries of State for Defence, Foreign Affairs, and Trade and Industry, but not by the Secretary of State for International Development. In 1999, when the International Development Committee recommended that Annual Reports should be signed by the Secretary of State for International Development, the Government replied that the Secretary of State did not "consider it appropriate that she should co-sign the report" at a time when DfID considered around 15 per cent of all export licence applications.[65] She remained "of the view that it would not be appropriate for her to sign the Government's Annual Report on Strategic Export Controls" in 2000, by when DfID had chosen to see fewer than five per cent of all export licence applications.[66]

63. In 2002, DfiD again considered under five per cent of all licence applications.[67] Given that DfiD's involvement in the licensing process, statistically at least, was continuing to diminish, it seemed an odd moment for the Secretary of State to choose to put her name to the Annual Report. The Government's explanation is that the Export Control Act of 2002 has "enshrined DfID's role in the assessment process" by making "explicit the need to consider sustainable development issues when assessing licensing applications".[68] Whatever the reason for it, we conclude that it is a welcome development that for the first time all four relevant Secretaries of State have put their names to the Government's Annual Report on Strategic Export Controls.


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.

51   For a fuller exposition of these criteria, see HC (2001-02) 718, paras 5-10. The criteria are published in full in the Government's Annual Reports on Strategic Export Controls. Back

52   European Union Code of Conduct on Arms Exports, Council Document 8675/2/98 (henceforth "EU Code of Conduct") Back

53   2002 Annual Report, p 14 Back

54   Appendix 13, q 30 Back

55   EU Code of Conduct Back

56   EU Code of Conduct Back

57   See, for example, HC (2002-03) 474, paras 107-115. Back

58   Appendix 13, q 26; HC Deb 19 September 2002, cc 309-311W  Back

59   HC (2002-03) 474, para 108 Back

60   The Government has asked us not to identify the country in question. Back

61   HC Deb 19 September 2002, Col 311W Back

62   HC (2002-03) 474, para 115 Back

63   HC (2001-02) 718, paras 119-134 Back

64   See para 114. Back

65   HC (1998-99) 55-I, para 152; HC (1998-99) 840 Back

66   Cm 4799 Back

67   Appendix 13, q 26; 2002 Annual Report, p 11 Back

68   Appendix 13, q 25 Back

69   HC (2002-03) 474, paras 92-106 Back

70   HC Deb 10 February 2004, cc 1328-1330W Back

71   Disposal Services Agency website Back

72   Jane's Defence Weekly, 1 October 2003, p 13 Back

73   HC Deb 10 February 2004, c 1327W Back

74   HC (2002-03) 474, para 92 Back

75   Cm 5943, pp 7-10 Back

76   Cm 5943, p 10 Back

77   Cm 5943, p 10 Back

78   HC (2002-03) 474, para 104 Back

79   Cm 5943, p 10 Back

80   HC (2002-03) 474, paras 85-90 Back

81   Cm 5943, p 7 Back

82   Cm 5943, p 7 Back

83   eg Nepali Times, 19-25 December 2003 Back

84   Appendix 14 Back

85   Qq 58 and 59 Back

86   Appendix 14 Back

87   HC (2002-03) 474, para 106 Back

88   Appendix 13, q 56 Back

89   Not printed Back

90   Appendix 13, q 56 Back

91   HC (2002-03) 474, paras 53-56 Back

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