Quadripartite Select Committee Minutes of Evidence

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 UK—there 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 and probe.

  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 list.

  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 Holdings—which is a UK company—advertised 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 Group—Anders Spare and Dheeraj Hinduja—both 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 lawyers—I do not know what the collective noun for lawyers is, but I probably should not be saying it—and 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 Ministry—we 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 he has.

  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 of consideration.

  Q66  Mr Hamilton: Not even falsifying certificates?

  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 that area?

  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 who will.

  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 China—they 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 me—indeed the students—to 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 security?

  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 at them.

  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 some progress.

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