Examination of Witnesses (Questions 60-79|
31 JANUARY 2006
Q60 Linda Gilroy: Could I just ask
for your observations on the reply I received earlier from the
defence representatives in which they were saying that the weight
of the export licensing control regime actually actively discourages
overseas investment and overseas subsidiaries?
Mr Sprague: Obviously, we are
not involved in the actual detailed discussions that industry
and the licensing regime may have, but from where we sit clearly
the defence industry is global. There are examples from all over
the place and not just in the UKthere are French companies
working on helicopter development in India, Germany is very, very
significant in transmission systems, engines, power packs for
military vehicles, you have two Austrian small arms companies
seeking to do joint ventures and assembling plants, we have Glock
moving assembly into the United Arab Emirates, a couple of years
ago Steyr were announcing or there was talk about (though this
might have actually not happened) moving the entire production
of Steyr assault rifles to Malaysia. So this is not just a UK
phenomenon, it is a global phenomenon, and the evidence shows
that it is happening.
Linda Gilroy: It is a bit difficult
to understand their response; it is probably worth probing them
a bit more at some point.
Chairman: We can certainly write to them
Q61 Mr Borrow: I take the point that
there is a problem, I also take the point that it is difficult,
but I have not heard any ideas as to how to solve the problem.
Mr Isbister: One of the ideas
was to use catch-all clauses more effectively, so using this case
as an example, these are civilian components but if they are for
use within a product which will eventually be a military product,
then it should be a case of the exporter raising the hand and
saying this is what we are doing, do we need a licence for this,
so it is using that system rather than building up a massive control
Chairman: If you could provide a further
brief written submission on that, it would be incredibly helpful
so that we can consider that further.
Q62 Malcolm Bruce: To what extent
is this licensing of exports internationally just what is going
on in every industry and to what extent is it de facto
or intentionally trying to get round licensing controls, and have
you got any evidence of the distinction? The industry is likely
to say everybody is doing it.
Mr Isbister: I do not think I
could comment. Related to this and to your question it is not
just a case of the deliberate intention to avoid export controls
which is problematic, it is because of this cascading effect that
I spoke about, what might at first glance appear to be something
that does not need particular attention. The second stage down
the line and the third stage down the line might need particular
attention, so this is why at the licensing stage there needs to
be much closer attention paid to downstream risks, what the potential
cascades are and how you can set up a structure to try to address
this, even post-export by using the US type system of re-export
limitations, production quotas and that kind of thing.
Q63 Chairman: Thank you very much.
Mr Thomas, thank you for your two written submissions. Can we
deal first with the one in relation to Ashok Leyland? It would
be very helpful if you could briefly summarise that case but perhaps
then, more importantly, advise the Committee what lessons you
draw from that in terms of appropriate export controls.
Mr Thomas: Very briefly what happened
was Ashok Leyland, which is a subsidiary of the Hinduja Group,
part of Land Rover Leyland International Holdingswhich
is a UK companyadvertised on their website in February
2005 that they had just secured a contract to provide military
vehicles for the Sudanese Defence Ministry, for knock-down kit
military vehicles that would be assembled in a plant near Khartoum.
That appeared on their website, it was announced at IDEX, which
is an arms fair, it appeared in Jane's Defence Weekly and
was reported in a whole plethora of Indian newspapers. Because
of the fact that there are four UK residents or nationals on the
board of Ashok Leyland, the Indian company, that would therefore
put them in the frame legally if they had anything to do with
that deal for Ashok Leyland, the Indian company, to provide trucks
for Sudan, an embargoed destination. I spoke to the BBC about
that and was given the go-ahead to start investigating it, we
approached the company posing as potential buyers, we spoke to
people who are involved in the Hinduja GroupAnders Spare
and Dheeraj Hindujaboth of whom intimated that they were
aware of the deal and were involved in the deal. This would therefore
put them within the scope of the law. The BBC, Newsnight,
then approached the Hindujas who initially issued very contradictory
statements saying that they knew nothing about the deal, that
they were not involved in it. There were six lawyersI do
not know what the collective noun for lawyers is, but I probably
should not be saying itand basically they intimidated the
BBC from broadcasting that piece. They changed the line throughout
the investigation, throughout their discussion with the BBC, saying
that they were not military vehicles because they did not have
armour-plating, they then changed it to say they were not military
vehicles, they were not going to the Sudan Defence Ministrywe
said "Well, it is on your website" and they said that
is wrong. We said the guy who signed the contract said they were
defence vehicles, they said that was wrong, so they continually
shifted their line on this until eventually they said "If
you broadcast this you will need to put up the licence fee to
get the money we are going to take off you in libel." There
are several questions to ask about that. The question about the
BBC caving in to the intimidation of a company is not perhaps
for this Committee, but I think there are three big areas. One
is why did Customs not pick up on the publicly available material?
The stuff was on the website, it was announced in Jane's,
it was announced at an arms fair, there was plenty of information
out there. Why was it that this was not picked up on? Sudan, as
everyone knows, is an embargoed destination, we are all aware
of what has gone on and what continues to go on in Darfur. I spoke
to a gentleman from that region who said that the Sudanese government
issued military trucks of this type to the Janjaweed who used
them to get across the terrain; the gentleman I spoke to had witnessed
attacks on villages with trucks of this type being used to support
the Janjaweed, so these are part of the logistics of that genocide.
Given that, why was it that Revenue and Customs could not do that
simple act of putting two and two together? Why could they not
pick up on that publicly available material? The second point
about that in my belief is the Hindujas' ever-changing line warrants
an investigation by Customs. I do not think one will be forthcoming
and we have to ask, given that it probably will not occur, given
that they ignored the signs that were already there, why is that
the case, why is it that Customs have not investigated and are
likely not to? People that I have spoken to have indicated that
the Revenue and Customs have not got the staff to deal with it,
and I draw the Committee's attention to the Regulatory Impact
Assessment that was done by the ECO in 2002 about calculating
the extra costs that the new regulations on export control would
bring to Customs; they estimated it would be approximately between
£200,000 and £300,000 and there were no additional IT
or training costs envisaged. The year before, just by comparison,
Her Majesty's Government announced an additional £90 million
to be given to enforcement agencies specifically to target and
work on drug trafficking and people trafficking; so on the one
hand we have £90 million and on the other hand we have £200,000
to £300,000. That works out at about 0.5 to 0.8 per cent
of the budget going to track and enforce arms compared to people
and drug smuggling. That probably is actually at the root of it:
HMRC does not appear to have the budget and staff to deal with
it. The final part of the Ashok Leyland saga and the questions
that it throws up are on subsidiaries. The only reason that Ashok
Leyland could be investigated and this matter brought up was because
British nationals or residents were involved on the board of Ashok
Leyland, the Indian company. That subsidiaries are exempted as
separate legal entities from the action and divorced from the
parent companies I think is a major problem and one that needs
to be addressed. When you previously asked what would the difficulties
be in this, the US managed to do this; the US, I believe, actually
have control over a subsidiary company, they require licences
from the subsidiary company and if they do not get those licences
there are fines on the parent as well as the subsidiary. If the
US can do this and not impair their industry, then I see no reason
why the UK cannot.
Chairman: Thank you, that is very helpful.
Could I ask if Oxfam or Saferworld have similar examples? This
is clearly a case where the allegation is of a UK citizen participating
in brokering an arms export to an embargoed country. Are you aware
of any other examples that spring to mind? It is safe to say things
here actually; I advise you to choose your words slightly more
carefully outside of this room of Parliamentary privilege, but
whilst you are here you might as well say it. I have been advised
to be careful, sorry.
Mr Hoyle: Slander everybody.
Q64 Chairman: It was a serious question
because I am interested in the extent to which you have evidence
that this may not just be a one-off. Is there any evidence?
Mr Bruce: Did the deal go through?
Mr Thomas: The Hindujas announced
that the contract had fallen through, which I regard as a bonus.
Mr Isbister: I would like to point
out of course that in terms of brokering the deal does not have
to be consummated, if you like, for you to require a licence,
so it is not that the law takes effect once the deal is done,
it is at the negotiation stage.
Mr Thomas: I know there is one
other example. I do not know if Ollie wants to mention the Knights
case in Sudan at this stage, but I know there was a gentleman
who was found to be brokering the export of military equipment
to Sudan who was exposed in The Sunday Times for doing
that. Again, the reply when questions were asked about that, about
whether it was going to be investigated, was that the authorities
have made the appropriate investigations and have said that it
is not worth investigating further. One thing I should add to
that is I know the reporter who covered that story has copies
of end-user certificates and has a whole pile of information that
actually implicate the gentleman involved in the supply of military
equipment to Sudan and that that gentleman has not been approached
at all by any government agency whatsoever to ascertain what information
Chairman: I am sure you have passed your
evidence on to the appropriate government authorities. We will
certainly pass on the evidence in this Committee to the appropriate
government departments and ask for a response because clearly
that is important. You have raised a number of key issues that
we need to consider.
Q65 Mike Gapes: Can I get back to
this point about extraterritoriality because in the previous part
of this meeting we asked the question to the defence manufacturers
and they said you would not be happy if the US was imposing extraterritoriality,
and I can remember years ago the argument between the then Conservative
government and the US administration about Cuba, and there was
also the Soviet gas pipeline issue many years ago where American
legislation was deemed to apply to anybody involved in a company
which had relations with that American company. It does raise
a complex issue of relationships, and if we take that position
of saying that our law applies extraterritorially in every other
country, then it does set a precedent which I think has lots of
other implications, and I would just be interested in the reaction
of you as exponents in this campaign to that issue?
Mr Sprague: Let us talk about
extraterritoriality for brokering and trafficking especially with
small arms. It was a Government manifesto commitment in either
2000 or 2001 to regulate the activities of brokers and traffickers
wherever they are located. In this particular case, because of
the way the arms trade works, these controls are needed and necessary
and I still do not know why the Government has chosen not to do
it for all cases. I know that there are issues around embargoes
and that there are currently extraterritorial controls that apply
to embargoes, but there is a only a handful of countries where
that applies, there is an awful lot of other destinations where
the supply of small arms and light weapons could do a great deal
of damage but where there is no extraterritorial control. At least
in that area, therefore, there does need to be an extraterritorial
dimension to our controls. We are in discussion with our colleagues
in industry, as you heard recently, and we hope there may well
be some movement there, but we are not at a stage yet to see whether
we have reached common agreement. We are intending to do so for
the 2007 review of the current UK legislation that the DTI is
going to start some time in 2007, and we are going to be pressing
again very hard for extraterritorial controls in this area.
Mr Thomas: Can I add one very
small point to that question? Yesterday I actually talked to an
Italian magistrate, a guy called Mr Marpelli who works in Monza.
You might be familiar with the case study here, he was the gentleman
who was responsible for trying to prosecute a Ukrainian Israeli
passport-holder in Italy, who was found in a hotel room with drugs,
about half a million dollars worth of diamonds, end-user certificates
that were false, trade shipment documents and photographs of the
goods arriving which showed the movement of arms through Bulgaria
into Sierra Leone and Liberia. He said that the man actually admitted
that he did it and he was working for Charles Taylor; so he had
the documents (all three sets), he had the diamonds, he had the
drugs, he had the gentleman who even confessed that, yes, he had
done all of this, and there was nothing he could do. There was
no law he could prosecute him under and there was no extraterritorial
laws that the suppliers of those weapons could use to actually
bring a prosecution. I would argue that that is a case worthy
Q66 Mr Hamilton: Not even falsifying
Mr Thomas: The only thing they
got him on was the cocaine.
Q67 Chairman: Thank you for that.
I would like to move on, Mr Thomas, to your second memorandum
submitted to the Committee. There you say that UK companies may
have assisted in the sale of electroshock guns and batons. A number
of things arise from that. Do you believe it is companies being
ignorant of the law or do you believe that HM Revenue and Customs
are not proactively looking at these areas?
Mr Thomas: That is two questions.
Firstly, in the cases that I was working on over the past year
nearly all the people said that they were not aware of the law
at a point when they were confronted about the illegal nature
of their actions; however, several of them had also intimated
that they wished to conceal their activities and did not want
them to become public, which perhaps suggests that they were aware
that what they were doing was illegal. One of the companies, TAR
Ideal, which was at the DSEi fair, whose brochures had electroshock
weapons and leg irons in them, actually said that their brochures
had been seen by the organisers who were quite happy with them.
It is very difficult to judge whether they genuinely did not know
the law or whether they were merely saying that to try and lessen
any effect of their actions.
Q68 Chairman: The Government has
told this Committee that "[A] trade licence is required for
any act calculated to promote the supply or delivery, between
third countries outside of the UK, of `Restricted Goods' which
include torture equipment. This does therefore impinge on the
advertising and promotion of such equipment by foreign exhibitors
at trade fairs in the UK."
Mr Thomas: Fantastic.
Q69 Chairman: First of all, do you
welcome that statement?
Mr Thomas: Of course I do.
Q70 Chairman: Good. Are there any
other parts of the law in that area that you think need to be
clarified, because I think there have to be some doubts about
Mr Thomas: In regards to?
Chairman: Arms fairs and the advertising
or brokering of instruments of torture.
Mr Thomas: At one point the DTI
did say that promotional materials would be exempted, so the Government's
clarification here is incredibly welcome, that if it is advertised
then it does breach the law. This is torture equipment, everyone
in this room knows what they do, everyone in this room has been
to meetings and heard reports of what they get up to; it is absolutely
vitally important that we make a huge statement that says this
is not acceptable in any way or form, and this includes the advertising
of this equipment and the potential sale of it at UK arms fairs.
I am very pleased and delighted that the Government has said that.
Q71 Chairman: I have two very quick
final questions, Mr Thomas. You obviously attended, as your evidence
indicates and is the basis of part of what you just said now,
the DSEi arms fair in Docklands in September last year. Did you
come across any other potential breaches of UK export laws?
Mr Thomas: I remember seeing the
Chinese delegation there, which was quite interesting. When we
see the Chinese delegation being taken around the DSEi arms fair,
with a British guard of honour, it seems to me very contradictory
that on the one hand the British government is saying we have
imposed a policy embargo on certain military equipment, we will
not sell it to you; however, we will introduce you to gentlemen
Q72 Chairman: We have written to
the MoD very recently to enquire about that. Is there anything
else we should be pursuing based on the arms fair?
Mr Thomas: There are issues on
the arms fair which relate to a whole range of things. Why are
people there? They are there to make contacts. That is what they
are there to do and I have spoken to arms dealers who have said
it is not an A plus B equals C situation; you do not display at
the arms fair and people come up to you and say "Great, here
is a contract", this stuff will take ages and ages to develop.
We have to be very, very vigilant on all the products that the
companies produce that exhibit there, whether they exhibit them
there or not, because certainly one of the cases I found was that
people did not actually exhibit or have any promotional material
that indicated restricted goods, but they were quite happy to
discuss deals about it under the counter. That should be something
that HMRC should also be aware of.
Q73 Chairman: Finally from me, as
you know, since 1997 there has been a ban on the export of instruments
of torture, and at the time the Government listed quite specifically
what they defined as being instruments of torture. This is an
issue that has cropped up on a number of occasions since then,
but do you have a view about the items on the list? Are there
things that, for example, should be on the list that are not,
or things that are on the list perhaps that should not be there?
Mr Thomas: I think it is very
problematic, because if you itemise exactly what is on the list,
what constitutes torture equipment, you then come across immediate
difficulties. There are things that can be used which are not
on that list which are used all around the world as items of torture.
I would like to just show the Committee one of them, which with
any luck I have in my pocket here. There is a group of students
who are in the room here who have been working with me, they are
part of an amnesty group at an Oxford school, and we have been
working together on some of the items that are included on the
list, and these are not, these are what we managed to get hold
of. These are thumb cuffs and you can see that basically they
have serrated edges on the inside and you put someone's thumbs
inside them. There have been substantial reports on them being
used by the Chinese in Tibet, and they are also applied behind
the back, so you can imagine that that would be an extremely painful,
degrading and ill-treating process. These are not included on
the current list; wall cuffs are not included on the current list;
sting sticks, which are made in Chinathey are about two
to three feet long, they are a metal rod with barbs all around
it. There is no earthly reason, other than to do severe damage
with them, for these things to exist. It is perfectly legal for
meindeed the studentsto go and broker these things.
That is incredible, that we are in a state of affairs where that
kind of activity can come along after the statements made by Robin
Cook and after the moves made in 1997.
Chairman: Thank you. Before we move on,
Robert, you had a question.
Q74 Robert Key: Mr Thomas, did you
have any difficulty getting those through the House of Commons
Mr Thomas: No, I approached the
police beforehand and asked them if I might do this and they said
that would be completely fine. They asked me who I was, why I
wanted to bring them in and whether I
Q75 Chairman: They phoned me to say
did I know the man and I said "Yes, he is giving evidence
to the Committee this afternoon." They asked me was I prepared
to vouch for him and I said yes.
Mr Thomas: Thank you.
Q76 Robert Key: May I ask one little
question because it is really interesting to me and I expect a
lot of other people. Mr Thomas, what in your judgment motivates
people who want to do this sort of exporting and brokering? It
is not just money, is it, because the examples you have given
us are not very big sums of money, so why do they do it?
Mr Thomas: These things will be
used as part of a bigger order. You will often get military kit
that is coming in, it might be that we want so many batons, we
want so many truncheons, we want holsters, we want holders, we
want radio communications, we want knapsacks or camel-bags which
can provide water, we want a whole range of things, and these
will be part of that. It is simply bread and butter, I think that
is the reason why people will do it.
Q77 Mr Hamilton: Can Mr Thomas pass
these around so that members of the Committee can have a look
Mr Thomas: I would urge members
of the Committee not to play with them. I wonder if I could make
just a brief point on restricted goods. Because the EU regulation
on torture equipment is going to come into effect at the end of
July, that means that the restricted goods that we have already,
i.e. electroshock guns, leg cuffs, are going to be potentially
removed from the restricted category. We do not know which category
they are going to go into and it could mean that actually the
DTI and the ECO are going to abolish the leg cuff and electroshock
items from the restricted category, and I would urge the Committee
to look at that as a matter of great importance.
Chairman: We certainly will do that.
Q78 Sir John Stanley: Thank you,
and thank you for your steer about the possible inadequacy of
the list of torture equipment, but I would like now to turn to
the wider policy issue which is the ambit of the extraterritorial
controls applying to trafficking and brokering. Can you tell us,
so that we have it for the record, if there is any logic or indeed
responsibility in the Government's present legislation to confine
these controls to torture equipment and to long-range missiles,
but nothing in between?
Mr Thomas: No, I do not see any
logic in that at all.
Q79 Sir John Stanley: Do you find
it a responsible policy given the trafficking and brokering in
weapons that goes on around the world?
Mr Isbister: The Government has
made much of the factor that this is a complex area and that is
true, it is a complex area, but again that does not mean that
you simply walk away from it, and we have raised I suppose as
a compromise the idea of at least introducing small arms and light
weapons into this. One of the arguments put forward which Mr Gapes
referred to is the idea of a precedent et cetera. When
the Export Control Bill, as it then was, was going through the
debate, before it became the Export Control Act, these arguments
were rehearsed at great length. The Home Office had a set of rules
or standards that it applied, hoops that you had to jump through,
six of them, to qualify for extraterritorial control. We in the
UK Working Group, working with lawyers, came to the conclusion
that on five of these six counts the extraterritorial controls
on arms brokering fit and I think it was, in theory, that you
only needed to hit one or two of them to reach that level. That
argument was never countered, I never heard an argument against
that, but when you talk about precedent and the difficulties that
causes, on the issue of arms brokering there is precedent. The
US has strong extraterritorial controls, Finland does, Poland
does, Estonia does, Belgium does, other countries have semi-extraterritorial
controls. The EU common position on the control of arms brokering
encourages states to look at introducing extraterritorial controls,
so I think we can move forward on this, but given the intransigence
so far of the Government on this, this is where we think that
especially if we can agree with industry on this, if we can present
a united front on small arms and light weapons, maybe we can make