Quadripartite Select Committee First Report

Conclusions and recommendations

1.  We conclude that much has been achieved in the area of strategic export control, but there is still a great deal to do. Drawing on the work of our predecessor Committees and our own experience since the start of this Parliament we intend to make a contribution to the review of the legislation which the Government has announced will take place in 2007. We conclude that this will be a good opportunity to take stock of progress since the Scott Inquiry and the enactment of the Export Control Act 2002. It will also be an opportunity to examine the effectiveness of the legislation and whether changes need to be made to meet the challenge of increased globalisation of the defence industry, the fast pace of technological developments and the threat from terrorists. (Paragraph 5)

2.  We conclude that the Government recognises the need to respond to our questions in a timely manner. (Paragraph 9)

3.  In the light of this year's evidence sessions, we conclude that it is necessary for us to take evidence directly from the Export Control Organisation and the Revenue and Customs departments. We intend to repeat this practice next year. (Paragraph 10)

4.  We have concluded that our approach now should be to send written questions to the Government once we have reviewed each quarterly report on strategic export controls and to raise specific issues as they arise. It is our intention that this arrangement will spread the work and prevent a bottleneck of questions concentrated after the publication of the annual report on strategic export controls. As a consequence of the general election in 2005 and the time it took to establish the Quadripartite Committee in 2005-06 the arrangement has not yet fully bedded down but we expect it to be fully developed in 2006-07. (Paragraph 11)

5.  While we recognise that, exceptionally, the ministerial reshuffle in May 2006 delayed some replies to our written questions this year, we recommend that, to assist our work, the Government agree to reply fully—other than in exceptional circumstances—to our letters on the quarterly reports within six weeks. We are confident that such an arrangement will allow the Government and us to plan work and to avoid past misunderstandings and difficulties. (Paragraph 12)

6.  We recommend that the Government dispense with the use of the "In Confidence" designation when responding to our questions on strategic exports and that it provide a detailed statement, not a general restatement of the criteria, of the application of government security classifications to correspondence on strategic export controls and that it also explain its reasons for changing the classification on the letters concerning exports to Iraq. (Paragraph 15)

7.  Building on the useful oral evidence session with the Minister of State at the Department of Trade and Industry we conclude that we should visit the Export Control Organisation in 2006-07, to see it in operation. (Paragraph 16)

8.   To assist the Government's review of export control legislation scheduled for 2007, we conclude that we should carry out, and have completed, a review of the operation of the legislation in time for it to be taken into account by the Government's own review. To assist our examination of the export control legislation, we recommend that the Government produce and publish its terms of reference for its review of the legislation by October 2006. (Paragraph 17)

9.  We conclude that in 2006-07 we should carry out a review of export controls taking the form of post-legislative scrutiny of the Export Control Act 2002 and the secondary legislation made under the Act. (Paragraph 18)

10.  We conclude that a prior scrutiny model for certain sensitive (or precedent-setting) arms export decisions—along the lines suggested by the UK Working Group, on a trial basis for transfers to countries under or recently under embargo—should be developed. (Paragraph 21)

11.  Because of the constraint of time we have not considered in detail the contentions concerning the accuracy of the MoD's 2003 memorandum refuting allegations that bribes had been paid by the Defence Sales Organisation and we conclude that we should consider the issue further next session. (Paragraph 24)

12.  We recommend that the printed version of the annual report on strategic export controls and the CD-ROM containing the accompanying detailed information be published simultaneously, ideally in the future the CD-ROM be enclosed with the annual report. (Paragraph 26)

13.  We recommend the Government evaluate the production and maintenance of a fully searchable and regularly updated database of all licensable decisions with a search facility that would allow the user to sort licences by country and by goods. (Paragraph 28)

14.  We recommend that, to assist the reader, the data on future CD-ROMs be consolidated into a single document covering the whole year. (Paragraph 29)

15.  From our own examination and use of the 2004 Annual Report we conclude that the effect of the switch to quarterly reporting and the production of a CD-ROM to accompany the annual report left the printed annual report, as produced for 2004, largely redundant and on its own to be of little value to the informed reader. (Paragraph 30)

16.  We conclude that the Human Rights Annual Report and its objectives provide an exemplary model for improvement to future annual reports on strategic export controls. We recommend that the Government take the Human Rights Annual Report as a model for making improvements to the content of future annual reports on strategic export controls. (Paragraph 33)

17.  We recommend that future annual reports on strategic export controls set out in a consistent and systematic manner the resources made available by the Government to implement and enforce strategic export controls and details of enforcement actions. (Paragraph 34)

18.  At the time that we are considering this Report the 2005 Annual Report on Strategic Export Controls has not been published. We therefore reiterate here the points which we have made to the Government as well as drawing on the UK Working Group on Arms' evidence.

a)  We recommend that the section that was section I of the 2004 Annual Report, which provides an overview of policy, be expanded to assist the informed reader to:

i.  include an assessment of the effectiveness of arms control policy and enforcement during the year covered by the report, including a review of risks and of areas where improvements are required;

ii.  provide an analysis of trends in, and volumes and values of, strategic exports;

iii.  identify areas where the Government has concerns about the supply of arms and the adequacy of its controls;

iv.  set out changes in policy since the last annual report; and

v.  provide a detailed overview of outreach and assistance to overseas countries.

b)  We recommend that the "country by destination" section of future annual reports provide, for each country, a summary of export policy with tables containing total figures for arms exports and licence applications as follows:

i.  a statement on the general arms transfer control approach or policy toward the recipient state, along with any policy changes that have occurred over the year;

ii.  a table providing the total number of applications and value of Standard Individual Export Licences (SIELs) for the previous year and a breakdown by quarter for the current year; and

iii.  summary information on the types of transfer authorised during the reporting period and an explanation of how these reflect the Government's stated commitments. (Paragraph 35)

19.  We conclude that information on the administrative resources and staff employed to enforce export controls and for outreach in the UK and overseas, which straddles several departments, should be consolidated and presented in future annual reports. We recommend that this information be set out either as a separate chapter in the report or in a revised and expanded version of section II of the current report. (Paragraph 36)

20.  We recommend that the Government review the presentation of summary data currently set out in section II of the annual report and that the summary data be set out consistently in tables with commentaries analysing the trends to be drawn—or, if necessary, explaining those not to be drawn—from the figures. We recommend the section also include:

a)  tables showing, for the current year and previous year, the number of applications received, applications processed, the number of compliance checks (including visits to companies) carried out and appeals received;

b)  the refusals information currently set out separately in electronic format, plus summary data for the previous year; and

c)  details of enforcement action (disruptions, prosecutions, compounding and warning letters, which are explained in chapter 5) with total figures for the current year and previous year. (Paragraph 39)

21.  We accept that it is undesirable to increase the burdens on industry to gather data on exports but we consider that the information may be available from other sources. We recommend that the Government investigate whether data could be obtained from a function of the internal compliance programme software, which companies routinely use, in order to minimise the time required to collect and transmit the data. (Paragraph 40)

22.  We recommend that the Government review how to improve its reporting of goods exported under open licences, including more detailed and more accurate information on quantities, values, end-use and end-user information and whether the goods are intended for "incorporation". (Paragraph 42)

23.  We have several concerns about strategic export controls to and from the Channel Islands and the Isle of Man. First, there is a disparity in status: the Isle of Man is subject to the Export Control Act 2002 but the Channel Islands are not. Second, the 2004 Annual Report contains on page 72 an Open Individual Export Licence to the Isle of Man. We assume that this was issued by the Export Control Organisation in error. Third, we are not aware that the bailiwicks in the Channel Islands produce annual reports on strategic export controls. We recommend that the Government clarify that future UK annual reports on strategic export controls cover both the UK and the Isle of Man and require the bailiwicks in the Channel Islands to produce their own annual reports or annex them to the UK report. The reports covering the Channel Islands should explain the criteria against which applications for licences are considered and provide identical data to that provided in the UK annual and quarterly reports. (Paragraph 47)

24.  We recommend that, on the request of the Quadripartite Committee for explanation of a decision to grant a licence and therefore, by implication, that the export licence meets the European Code of Conduct on Arms Exports and National Export Licensing Criteria, the Government provide a short resume—under a security classification, if necessary—of the considerations which informed its decision. (Paragraph 50)

25.  We conclude that the work of the Export Control Organisation is so sensitive and critical to ensuring that strategic exports are effectively regulated in the UK that the Export Control Organisation must remain within the public sector under government control. We recommend that the Government endorse this conclusion. (Paragraph 53)

26.  We conclude that the staff in the Export Control Organisation and other government departments responsible for processing export licences should be congratulated on their achievements during a period of retrenchment which, we expect, was unsettling and potentially distracting. (Paragraph 55)

27.  We are concerned that the published median figure of 15 days for the time taken to determine Standard Individual Export Licences for the final quarter (October-December) of 2005 was inaccurate; the correct figure was 13 days. An error of 15% in a key figure which does not appear to have been noticed until we queried it is not acceptable. We conclude that it casts doubt not only on the Export Control Organisation's systems for recording information but also whether senior management review such data. Furthermore, we conclude, if there is a substantial increase in median times taken to determine applications in 2006, even to a level within the 20 day target, that would be strong evidence of a deteriorating service by the organisation in immediate need of remedy. We conclude that we should continue to monitor the efficiency and effectiveness of the Export Control Organisation's service to industry. (Paragraph 56)

28.  If it is the case that the Export Control Organisation is operating at the limit of its capacity—and given the recent cutbacks we would expect this to be the case—we recommend that the Government give an assurance that additional resources will be found by the Government to deal with any unplanned pressures—for example, an increase in applications for licences. (Paragraph 57)

29.  We drew the following conclusions from our exchanges with the Government about the statistics on applications for licences received:

a)  they underline the points we have made at chapter 3 on the shortcomings of the presentation of the statistical data about export licences;

b)  the reduction in the number of Standard Individual Export Licences since 2002 appears to have assisted the Export Control Organisation to attain its targets; and

c)  the upward trend in Open Individual Export Licences may not have been as strong as we anticipated last year and we shall review the figures again next year. (Paragraph 59)

30.  We conclude that freezing open licences at their current levels and at their inconsistent maximum terms risks directing maximum scrutiny at exports which pose far from the maximum risk to the UK's policies on arms exports. We therefore conclude that a moderate change in the balance between open and standard licences and a change to a consistent maximum duration for all Open Individual Export Licences—for example, three years—is acceptable provided the Government can address, and assure us, on three issues. First, that there will be no softening of the criteria applied to consideration of applications for Open Individual Export Licences. Secondly, the Government provides assurance that companies are subject to rigorous internal compliance requirements and to regular audits to verify their implementation. Thirdly, the Government will address the lack of transparency in the reporting of open licences in the annual and quarterly reports on strategic export controls. (Paragraph 60)

31.  Having taken a decision to keep the Export Control Organisation in the public sector we conclude that there is now a duty on the Government to provide adequate resources for its development and that it would be unacceptable to attempt to muddle through with minimal investment. As a first step we recommend that the Government set out the IT functionality that the Export Control Organisation needs and the investment required to deliver these functions with a clear plan for provision and implementation of the new information technology systems. We request a detailed briefing from the Department on its plans for information technology in the Export Control Organisation. (Paragraph 62)

32.  We recommend that the Government ensure that the proposed upgrade to the information system in the Export Control Organisation meets the current best practice of EU countries and expected changes in requirements for the publication of data in annual reports. (Paragraph 63)

33.  We recommend that the Export Control Organisation address and rectify the problems which EGAD has identified with the new Goods Checker. The problem with the Goods Checker also underlined to us that outreach to industry must make clear that the Goods Checker is one of many components of a company's comprehensive internal compliance programme and cannot on its own provide the necessary assurance to a company that it is complying with strategic export controls. (Paragraph 64)

34.  We conclude that integration of the Export Control Organisation's and HM Revenue and Customs' electronic systems, and in particular commodity codes, would strengthen strategic export controls. We recommend that the Government produce a plan to link up licensing and customs processing electronically, to standardise commodity codes and to allow HMRC to access the licensing database and expertise. (Paragraph 65)

35.  We conclude that outreach to UK industry is critical to the operation and control of strategic exports and we recommend that the outreach programme be expanded significantly. (Paragraph 69)

36.  We recommend that:

a)  the Government expand the programme of overseas outreach led by the Foreign and Commonwealth Office and supported by HM Revenue and Customs and the Department of Trade and Industry;

b)  review the staff and resources provided for overseas outreach; and

c)  subject to the outcome of any review of the EU pilot programme, press for a full EU programme of outreach.

In addition, to ensure that provision is made for staff and resources for outreach to overseas countries, we recommend that this work be recognised as falling within the core tasks of licensing and enforcement officers and that budgets and resources are provided for this purpose, and set out in the annual report on strategic export controls. (Paragraph 74)

37.  We recommend that the Government carry out research to establish the volume and categories of the goods falling within definitions on the Military List and in the dual-use regulations but which are being exported in breach of export controls without licences. In addition, we recommend that the Government produce an analysis of the reasons that these goods are exported in breach of export control. We recommend that the results of the research and the analysis are published. We conclude that these estimates and analysis are critical to inform the review of the legislation in 2007. (Paragraph 76)

38.  We conclude that the Government's response to the challenge of the Internet as an arms emporium is too passive and fails to take account of the role it now plays in promoting and facilitating commerce and exports across the world. We recommend:

a)  that the Government produce a strategy for policing and monitoring potential breaches of export control by companies using the Internet to advertise and facilitate transactions;

b)  that responsibility for policing the Internet be allocated to an agency; and

c)  that members of the public are encouraged to report potential breaches of export control on line using the Internet. (Paragraph 82)

39.  We conclude that, as is the case with other industries, within the defence industry there are contractors who, either through ignorance or deliberate intent, breach the rules on strategic exports and that the authorities need to seek out these breaches and the perpetrators. We recommend that, as well as providing guidance and attending arms fairs, the Government actively seeks out breaches of export controls at arms fairs. (Paragraph 86)

40.  We recommend that the Government establish a pilot programme of end-use monitoring focusing on cases where it has identified some degree of risk—though not sufficient to withhold the issue of a licence—when considering an application for an export licence and to report the outcome of the exercise in 2007. (Paragraph 91)

41.  We recommend that the Government draw up a proposal for an EU wide system of end-use monitoring and that it canvass the proposal with other governments in Europe. (Paragraph 93)

42.  We recommend that the Government commission research to establish the extent to which dual-use goods not subject to control are exported from the UK and are then incorporated into equipment which had it been exported from the UK would have been subject to export control. We recommend that the results of the research and the Government's analysis of the results are published. We further recommend that the work is completed in time to inform the review of the legislation in 2007. (Paragraph 100)

43.  HM Revenue and Customs assured us that the failure to include arms exports on the "Customs Confidential" website was an oversight and that it was not symptomatic of its general approach to strategic export controls. We welcome this assurance and conclude that we should review this matter again next year. (Paragraph 105)

44.  We note HMRC's confirmation that the estimate that five additional staff were needed to implement the legislative changes which came into operation in 2004 has proved to be correct. It raises the question: how significant a change the Export Control Act 2002—and the secondary changes enacted under it—made to the enforcement of strategic export controls? We recommend that those reviewing the controls in 2007 address this issue. We conclude that staffing levels in HMRC are a matter we should continue to review and that, if we return to the question of staffing, it is useful to have established "base-lines" for staffing levels against which future requirements and changes can be measured. (Paragraph 108)

45.  We recommend that HMRC inform us of the outcome of their discussions on EGAD's concerns about exporters of dual-use goods who are unaware of the requirements of the Export Control Act 2002. We recommend that HMRC review the effectiveness of their policy on checks to target the exporter who inadvertently but persistently exports dual-use goods in breach of the 2002 Act. (Paragraph 111)

46.  We recommend that the Government review the resources that it provides for market analysis and surveillance of dual-use goods and that it explores with EGAD and interested parties the establishment of an industrial export control association in the UK. (Paragraph 112)

47.  We are concerned to discover that no agency of government appears to be enforcing the intangible transfer of technical information (so-called intangible technology transfers, ITT) which may be in breach of strategic export controls. We recommend that the Government include the review of the operation of the controls on ITT as part of their review of the operation of export control legislation in 2007. (Paragraph 115)

48.  We recommend that the Government publish details of the amounts paid in compounding for breaches of strategic export controls, with details of those who have agreed to pay. We recommend the information be published in the quarterly reports on strategic export controls. We intend to examine further the question of warning letters in future reports. (Paragraph 118)

49.  We recommend that HMRC examine how other EU countries' experience in prosecuting export control breaches be exchanged and built upon more systematically. (Paragraph 119)

50.  We recommend that the review in 2007 examine whether the evidential tests and requirements in the export control legislation are impeding the prosecution of breaches of the controls on strategic exports and whether the Revenue and Customs departments need greater powers to compel questions to be answered and documents produced when investigating alleged breaches of strategic export controls. (Paragraph 124)

51.  We recommend that the Sentencing Guidelines Council conduct a review of the guidelines on sentences for breaches of export control as a priority. (Paragraph 126)

52.  We recommend that the Government explain, in general terms, the resources devoted to gathering intelligence and how intelligence is sought and reviewed in trafficking and brokering cases. (Paragraph 131)

53.  On trafficking and brokering, there are two issues which we conclude that the review of legislation in 2007 should address:

a)  whether the Export Control Act 2002 provides an adequate vehicle for prosecution of trafficking and brokering breaches of export control; and

b)  whether there is a reasonable prospect of obtaining evidence in trafficking and brokering cases to mount a prosecution. (Paragraph 133)

54.  We recommend that the Government in their reply to this Report give details of the steps that have been taken to implement the EU Common Position on Brokering. (Paragraph 134)

55.  To address the problem of producing evidence in brokering cases, we conclude that there is a case for greater regulation of brokers operating in the UK requiring all arms brokers to be registered, for registration to be dependent upon a broker meeting defined standards and requirements and that, where a person who is not registered carries out any brokering activity, he or she should be guilty of a criminal offence. We recommend that the Government bring forward a proposal to require the registration of arms brokers. (Paragraph 136)

56.  We conclude that the revisions to the EU Code on Arms Exports as described by the Minister are welcome and we congratulate the Government for its part in securing the changes to the Code. We conclude that the revisions should strengthen the Code and should ensure greater consistency, responsibility and transparency in the exports of arms across the EU. It is therefore all the more frustrating that the implementation of the revised Code has been blocked by certain EU member states. We appreciate that there is little that the Government can do other than work with other states to achieve the consensus within the EU necessary to allow the implementation of the new measures. We express the hope that during 2006 the revisions will be implemented. (Paragraph 141)

57.  We conclude that the recommendations produced by the peer review on the implementation of EU Council Regulation 1334/2000 have identified a number of areas which need to be addressed urgently. Specifically, Regulation 1334/2000 needs to be amended to comply with UN Security Council Resolution 1540 of 2004 in respect of transit and brokering controls for weapons of mass destruction and to improve information exchange among EU countries about dual-use licences issued. We shall monitor progress on the implementation of the review's recommendations. (Paragraph 144)

58.  We recommend that the Government report the outcome of any measures relating to undercuts that it proposed during its Presidency of the EU in order to increase transparency and coherence. We recommend that the Government publish the total number of UK undercuts along with a summary of the issues in future annual reports on strategic export controls. (Paragraph 145)

59.  Given the Government's assessment of human rights in Saudi Arabia, we recommend that all applications from Saudi Arabia should be considered more carefully. (Paragraph 152)

60.  We conclude that transparency in this important area can be improved if the Government takes two steps. First, as we recommend at paragraph 50, the Government should, on the request of the Quadripartite Committee for an explanation of a decision to grant a licence, provide a short resume—under a security classification, if necessary—of the considerations which informed its decision. We anticipate making such a request where it appears to us that an application may not meet the criteria in the EU Code on Arms Exports. Second, we recommend that in those exceptional cases where the Government decides to attach weight to the National Export Licensing Criteria, in order to issue an export licence, the Government identify the licence in the quarterly report on strategic export controls and explain the factors that justify its decision. (Paragraph 153)

61.  We welcome the Government's proposal to provide additional information about strategic exports to countries of concern in future annual reports on strategic export controls. We recommend that in responding to this Report the Government set out the selection criteria for placing countries on a list of those giving rise to concern. In our view the starting point should be those countries listed as "Major countries of concern" in the Human Rights Annual Report but supplemented with those countries that have received a denial from the UK government or any EU government because an export would breach the EU Code on Arms Exports. We recommend that the Government explain in future annual reports the reasons for granting licences for exports to countries on the list. Finally, we conclude that the list may provide a means by which the Government could improve transparency in the reporting of open licences by providing detailed information on dual-use exports to countries of concern. (Paragraph 155)

62.  We recommend that the Government explain the policy—that no weapons, equipment or components which could be deployed aggressively in the Occupied Territories will be licensed for export from the UK to Israel—in its reply to this Report. It would assist us if the Government gave examples of the equipment to which, in the light of the policy, it has refused to grant export licences. (Paragraph 158)

63.  We recommend that the Government explain how the teams in Tel Aviv and Jerusalem who are observing the use to which exported equipment is put carry out their work and how their work differs from end-use monitoring. (Paragraph 160)

64.  We recommend that the Government continue to press for the implementation of the toolbox. (Paragraph 163)

65.  As currently envisaged, we understand, the toolbox will only provide for the exchange of information about items on the Military List. We recommend that, in particular if the toolbox were to be applied to China, effective monitoring of post-embargo licensing decisions across the EU cover dual-use items as well as those on the Military List. (Paragraph 164)

66.  We consider that the political will to maintain the arms embargo against China is weakening within the EU and that rather than lift the embargo it is being allowed to wither on the vine. We are concerned that it has become an embargo in a category of its own, increasingly at odds with the terms and scope of other more recent embargoes. As a first step we recommend that the UK Government clarify the status and scope of the embargo on China. (Paragraph 166)

67.  We do not downplay the serious dilemma the Government faces in respect of China: how far to engage and make concessions to a government seemingly impervious to calls to respect human rights but which has the potential to undermine arms control across the world. Nor does the Government's 2005 Human Rights Annual Report show a country clearly moving towards the rule of law underpinned by respect for human rights. We share, however, the serious reservations of our predecessor Committees about lifting the arms embargo on China. The embargo may be an imperfect tool and it may be losing its bite but it has a symbolic value which has worth. It was imposed because of the gross abuse of human rights carried out by the Chinese Government in 1989 and we conclude that without clear evidence that China is prepared to respect human rights and behave with responsibility on arms exports the embargo must stay. We recommend that the Government work within the EU to maintain the arms embargo on the People's Republic of China. We further recommend that the Government stay in close contact with its US counterparts on this issue and explain US sensitivities to its EU partners, as part of its broader efforts to strengthen trans-Atlantic ties and to ensure the embargo stays effective. (Paragraph 169)

68.  Having handled some of the items and examined photographs of the others we conclude that thumb cuffs, wall cuffs and sting sticks can have no function other than to be used as instruments of torture or to inflict cruel, inhuman or degrading treatment or punishment. In our view the case for banning these items immediately is overwhelming. Indeed, given these items can be purchased via the Internet the change is overdue. We therefore recommend that thumb cuffs, wall cuffs and sting sticks be added as soon as possible to the list of items which cannot be transferred or brokered from the UK or trafficked by British citizens anywhere in the world. (Paragraph 173)

69.  We conclude that the introduction of EU Regulation No. 1236/2005 prohibiting trade across the EU in items of torture is a significant and welcome development. We are, however, disappointed that the commendable lead which the Government has taken in banning the trade in items of torture since 1997 will, with the commencement of the Regulation, be frozen and the only scope for adding to the list is via the EU. We recommend that the Government explain why it did not obtain a derogation which will allow it to add to the UK's banned list and that the Government press the EU to add sting sticks to the controlled list as soon as possible. (Paragraph 176)

70.  We recommend that the Government bring forward a proposal for a torture equipment end-use control to apply to items capable of "dual use" as instruments of torture or to inflict cruel, inhuman or degrading treatment or punishment as well as for benign purposes and seek an amendment to the EU Regulation No. 1236/2005 to give effect to the proposal. (Paragraph 178)

71.  We invite the Government to respond to the findings in the US Government report that China and Russia have breached undertakings and guidelines on missile proliferation and recommend that the Government explain what action it took during its Presidencies and subsequently to remedy these breaches. (Paragraph 179)

72.  We conclude that the Government has used its Presidencies of the G8 and EU to achieve solid progress in a number of areas. We are disappointed that there were no significant breakthroughs but this was not the Government's fault; we recognise that progress at the international level in export controls takes time. (Paragraph 180)

73.  We endorse the Working Group's assessment of the former Foreign Secretary and wish to put on record our appreciation of the part Mr Straw played in promoting the International Arms Trade Treaty. (Paragraph 182)

74.  We conclude that the Government has been successful in promoting and helping to build up momentum for an International Arms Trade Treaty and we give it credit for that. We recommend that the Government build on the impetus that has been achieved and give top priority to achieving a treaty under the auspicious of the UN as a matter of urgency. (Paragraph 183)

75.  We conclude that the International Arms Trade Treaty must:

a)  be founded on the existing principles of international humanitarian and human rights law, if it is to achieve the objective of setting clear standards for the transfer of arms;

b)  cover the trade in all conventional arms, including dual-use goods and technologies; and

c)  include an effective and transparent mechanism for monitoring and enforcement, if decisions to authorise the transfer of arms are to be taken by national governments.

We conclude that the value of a treaty which does not meet these requirements is open to serious question. Indeed, a treaty based on the lowest common denominator that not only fails to meet some of these requirements but also weakens the export control system in the UK or EU will be of questionable value. (Paragraph 186)

76.  We recommend that the Government produce the evidence to back up its claim that the Export Control Act 2002 is stopping the United Kingdom being used as a base for undesirable arms transfers. We recommend that the review of the legislation in 2007 examine, and report upon, the strength of this claim. (Paragraph 191)

77.  We recommend that the Government set out the terms under which the review of the extra-territorial controls on brokering and trafficking will be carried out in 2007. More specifically, we recommend that the Government detail:

a)  the criteria it will apply to consideration of the case for extending the extra-territorial controls on brokering and trafficking in controlled goods;

b)  the weapons that will be included in the review, in particular, confirm that it will examine the inclusion of MANPADs, rocket-propelled grenades and light automatic weapons as well as small arms; and

c)  whether the review will consider the need for registration of brokers.

We conclude that no logical case can be made for including some controlled goods within the Government's extra-territorial control on brokering and trafficking whilst excluding others. We therefore further recommend that all controlled goods should be included. (Paragraph 195)

78.  We also recommend that the Government detail how it intends to implement the requirements on brokering and trafficking in UN Security Council Resolution 1540. (Paragraph 196)

79.  We recommend that the Government bring forward proposals for consideration during the 2007 review of the legislation controls to regulate:

a)  British companies proposing to license the production of weapons overseas; and

b)  exports from overseas subsidiary companies in which a majority shareholding is held by a UK parent or where UK beneficial ownership can be established. (Paragraph 199)

80.  We conclude that there are grounds for deep concern about the protectionist tendencies of elements within the US Congress. (Paragraph 203)

81.  With the loss of the ITAR waiver, we conclude that the Government's priorities should now be to put in place arrangements which will allow the transfer of goods and technologies from the US to ensure that not only the Joint Strike Aircraft programme is not impeded but also to assist those companies that would have benefited from the transfer of unclassified defence items, technology and services. We request that the Government explain its policy and approach to securing the expeditious transfer of goods and technologies from the US to the UK. (Paragraph 204)

82.  We, like our predecessor Committees, welcome the improvement to the UK's export control as a result of the legislation passed in 2002 and the secondary legislation made under the Export Control Act 2002. We conclude that the review scheduled for 2007 provides a timely opportunity to take stock, to test our assumptions about the improvements that have been achieved and to address areas where changes may be required. We look forward to a full and comprehensive review. (Paragraph 205)

83.  The next year will be critical for the International Arms Trade Treaty. We conclude that the Government has shown skill in promoting the treaty and can take credit for helping to build the momentum that has been achieved. The treaty offers an important opportunity to prevent what the Government has described as the irresponsible sales of conventional arms, which have resulted in the deaths for thousands across the world. We hope that by our next report we shall be able to report further significant progress. (Paragraph 206)

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