Annex A
LICENSING OF EXPORTS/TRANSFERS TO THE UK
MoD
INTRODUCTION
This note comments on the issue of licensing
exports or transfers to MoD(UK), the Armed Services and other
Government agencies:
— specifically on the points raised
about weapons of mass destruction (WMD) in Recommendation 56 of
the Select Committee report and the Government's observations
on them;
— on technical support for H M Ships;
— on the licensing requirements of
support for H M Government more generally.
WMD
Following the evidence given by industry to
the Select Committee in April about the difficulties envisaged
in the operation of the new WMD controls, the DTI took urgent
action to mitigate them. This action included, as indicated in
the Government's observations:
— a revision of the OGEL (Exports or
Transfers in Support of UK Government Defence Contracts (sometimes
known as the Mod Cons OGEL) intended to cover technical assistance
or technology transfers related to "any relevant use"
(ie WMD) subject to MoD contracts;
— as assurance that technology incorporated
into hardware for delivery to the MoD was not licensable even
if the contractor had reason to believe that it would in due course
be used outside the European Union;
— a narrower definition of "relevant
use" in relation to defensive equipment such as filtration
systems or flying suits, the primary purpose of which is protection
and not handling (a "relevant use").
These developments were helpful and welcome,
albeit they would have been even more so had they taken place
six months earlier instead of only days before the new regulations
came into force. It is however important to understand their limitations:
— The Mod Cons OGEL covers only technical
assistance and technology transfers in relation to programmes
under contract to the MoD. It excludes pre—contract technical
discussions.
— "Blue Light" emergency
services are also excluded. This is more of a problem than it
may sound, since many have an explicit role in emergency deployments
outside the U K (which brings them within the scope of the controls).
Indeed they are already involved in advice, operational, planning
and technical meetings in many countries, in all of which they
may have to discuss issues which involve them in transfer of technology
and concept information.
— The narrowing of the scope of "relevant
use" in relation to defensive equipment is less helpful than
it might be since it does not apply to equipment incorporating
detection papers or other NBC detection kit, as most protective
suits do. We believe there is some inconsistency here between
the treatment of suits and the treatment of platforms, such as
ships or vehicles, which are not treated as for "relevant
use" if they carry detection/identification equipment.
— Industry lawyers are unanimous in
rejecting the DTI view that technology incorporated in hardware
for the MoD is not licensable even if it may subsequently be deployed
outside the EU. Industry also notes that Defcon 126 allows the
MoD to use technical information arising from a contract in a
collaborative programme with another government, which gives industry
more than adequate "reason to believe" that the technology
may be used outside the EU. While we intend to operate according
to the DTI view of the regulations, there is always the danger
that a revised legal opinion will at some point sweep a great
deal more activity within the scope of the controls. (See discussion
of Crown Immunity in paragraph 8 below.)
— The issue of support for allies has
not yet begun to be addressed.
4. There is still much work to be done therefore
to reduce the amount of bureaucracy required to support UK agencies,
as well as allies, in the area of "relevant use". Apart
from the more general proposals set out in paragraphs 8-10 below,
industry also believes there is scope for moving further to tighten
the definition of "relevant use", as has already been
done with defensive equipment. If ways could be found to exclude
equipment for the detection and identification of WMD from the
definition of relevant use, many of the bureaucratic difficulties
industry have described would disappear at a stroke.
SUPPORT FOR
HM SHIPS
An anomaly of the licensing system is that
the Mod Cons OGEL cannot be used for technical support of HM Ships
(because there is no way of knowing whether they are in the territorial
waters of countries covered by the Schedules of the OGEL). Industry
was therefore obliged to apply for individual licences to support
our own Navy.
The DTI has recently issued two new OGELs for
exports to UK forces deployed in embargoed and non-embargoed destinations,
respectively. These are intended to cover technical support for
HM Ships, though at the cost of a somewhat Alice in Wonderland
requirement for the vessel to state that it either is or is not
in the territorial waters of an embargoed state.
Industry welcomes the removal of the need for
individual licences in these circumstances. But we do not entirely
share the confidence of the DTI's lawyers that the communications
and supply staffs of naval ships and Royal Fleet Auxiliaries will
consistently comply with this opaque piece of bureaucracy when
requesting spares or technical advice. This will place our own
people in a dilemma about how to respond, especially if the matter
is urgent. Nor is it obvious how to comply when industry issues
unsolicited technical data to the fleet (updates for manuals,
flight safety information etc). Other problems include the practicability
of compliance when a ship is operating in and out of embargoed
waters (as could quite well occur in the Gulf, for instance) and
the support of allied warships especially in standing naval forces.
(On this last point, the DTI have commented in a letter that "it
was never the intention to provide allied warships with the same
level of cover provided to the UK government", which industry
regards as a curious way to treat our allies.)
LICENSING REQUIREMENTS
FOR THE
SUPPORT OF
H M GOVERNMENT
The Government Observations include the comment
that it not a new principle that dealings with the MoD or UK armed
forces in theatre may in certain circumstances be licensable.
This comment is misleading. Until 2003, it was believed, both
by Government and by industry, that transactions in support of
HM Government, broadly defined, were covered by Crown Immunity,
even if the goods concerned were not necessarily owned by the
Crown.
In January 2004, however, in response (we
understand) to revised legal advice, the DTI issued new guidance
which confined Crown Immunity to goods owned by the Crown, rendering
licensable goods or technology not owned by the Crown (including
leased items) exported in support of H M Government.
Like the Select Committee, industry believes
that to require licences to support our own armed forces cannot
have been intended by Parliament. OGELs are a panacea, not a cure.
The new legislation offered an ideal opportunity to clarify the
position by including an exception for UK government agencies
in the Order—indeed, industry made this proposal as soon
as the Consultative Document was issued in February 2003. This
opportunity was not taken by the DTI. Industry will be pressing
for a reconsideration of this policy in the forthcoming review
of the legislation, which in our opinion should start forthwith
rather than wait for the suggested two years.
December 2004
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