Quadripartite Select Committee First Report

3  2004 Annual Report on Strategic Export Controls and Quarterly Reports for 2005

Quarterly reports on strategic export controls

25. In 2004 the Government introduced quarterly reporting on its licensing decisions as well as continuing to produce an annual report on strategic export controls. In 2005 the arrangements settled down and we have been able to survey a complete year's quarterly reports as well as the United Kingdom Strategic Export Controls Annual Report 2004.[35] The new arrangements are a considerable improvement on annual reporting and are strong evidence of the Government's commitment to enhanced scrutiny of export licensing decisions. Licensing data are now published much sooner than before: as the Government promised,[36] the newest information is now three months old and the oldest six months old, compared to six months and 18 months respectively under annual reporting. The Government produced the quarterly reports for 2005 within a reasonable time after the end of each quarter and has made them available on the Internet.[37] In addition, it has supplied confidential reports to the Committee to accompany each quarterly report. We have found our work scrutinising strategic export controls easier as we are able to spread the workload across the whole year as we focus on each quarterly report, and we can ask questions while items are current.

Annual reports on strategic export controls

26. The effect of the change to quarterly reporting has, in our view, highlighted a number of areas where further changes are required. The 2004 Annual Report was published in July 2005.[38] At 184 pages long the printed report was considerably shorter than previous annual reports.[39] The saving has been achieved by jettisoning the summaries of goods covered by licences issued in 2004 from the printed version; this information is now only available from the quarterly reports published on the Internet or on a CD-ROM. We detected no groundswell of opinion against this arrangement. Indeed, it is likely that those who want to review export licences will have access to the Internet or a computer on which to read the CD-ROM, and electronic searches are now more efficient than searching paper documents. But we were concerned that the Government failed to produce the CD-ROM simultaneously with the printed version of the 2004 Annual Report. Without the detailed information available on the CD-ROM the usefulness of the 2004 Annual Report was dissipated. 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.


27. The UK Working Group on Arms suggested to us that the Government should go further and produce a database of all licensable decisions:

While these developments have been welcome, for the moment the Government has failed to take advantage of all the opportunities afforded by modern electronic data-management tools. Rather than making available online discrete pdf-based copies of three-month chunks of licensing data (as is currently the case), far preferable would be to maintain a fully searchable, periodically-updated database of all licensable decisions. At present, historical analysis of licensing electronic practice to an individual destination country is a laborious task. Even worse would be analysis of licensing decisions with regard to a particular military list category or equipment type. Effective transparency involves more than provision of data; it also requires that information should be made available in formats which suit the users' needs.[40]

28. We concur with the view of the UK Working Group. 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.


29. We recognise that a database will not be available immediately. As a first step we have considered whether changes could be made to the information on the CD-ROM. The detailed information about export licences supplied on the CD-ROM which accompanied the 2004 Annual Report reproduced the data in the four component quarterly reports. We recommend that, to assist the reader, the data on future CD-ROMs be consolidated into a single document covering the whole year.


30. The UK Working Group on Arms suggested to us that "the shift to quarterly reporting creates an opportunity for fresh thinking on the content of the annual report".[41] We go further. 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.

31. After we had examined the 2004 Annual Report and formed the view that the switch to quarterly reports needed to be reflected in changes in the content and layout of the Annual Report, we wrote to the Government. The then Foreign Secretary replied on 19 January 2006 that he would welcome any comment the Committee wished to send about future annual reports.[42] We responded to his invitation with a list of detailed comments in March in time, we hope, to assist with the preparation of the 2005 Annual Report. The Foreign Secretary replied in June 2006:

On the format, we are exploring how to make the actual printed report focus more on the policy aspects of export controls and the various regimes. We also have in mind to provide all statistical data in an electronic form. We will of course seek to avoid a repeat of last year and ensure that both the hardcopy report and the CD are published simultaneously. We also plan to make the CD more user friendly, and to have the consolidated statistics it contains made available on the Internet at the same time.

Altering the format and content of the report will, we hope, create a better understanding of how we approach our export control and export licensing commitments. It will also better reflect the advances we have made in the provision of better and more real-time information to both Parliament and public. We feel this is a natural development for the report. I hope that the Committee will agree that our thinking on proposed changes represents a further step in ensuring that our Annual Report on Strategic Export Controls remains a prime example of open government. I very much see this process of review and improvement as an on-going process, and would value the Committee's continued engagement on this issue.[43]

We are encouraged by the Foreign Secretary's reply which points towards changes to the annual report that will meet some of our concerns and those of others.

32. We received evidence on the content of the annual report from the UK Working Group on Arms, who have extensive experience of examining the data in annual and quarterly reports. They explained the problems they had analysing the data on export licences:

Criticism regarding UK strategic export practice typically focuses on a limited number of licences to a limited range of destinations. But it is in no-one's interest that the Government is subject to criticism for arms transfer licensing decisions that, if more information were publicly available, would not be regarded as problematic. As one way of avoiding spurious objections to the Government's decisions, it might therefore prove useful for the annual report to include a brief narrative explanation of the Government's export licensing practice for certain destinations either where this has been subject to criticism or where the Government anticipates that criticism may be forthcoming. Such a narrative could include:

(a) 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;

(b) summary information on the types of transfer authorised during the reporting period and an explanation of how these reflect the Government's stated commitments.[44]

Our own experience in scrutinising the Government's decisions and policy on strategic export controls in the annual and quarterly reports chimes with that of the UK Working Group.

33. We identify two additional areas where improvements to the annual report would assist scrutiny. First, section I of the 2004 Annual Report,[45] "Policy Issues Relating to Strategic Export Controls", provides an overview of policy with a focus on recent international developments. The section would be of greater assistance if it were expanded to provide an assessment in general terms of the effectiveness of strategic export control policy during the year covered by the report and an analysis of the market and the demand for goods and technologies subject to export control. (We accept that it would not be advisable to highlight gaps in the report, and request this information be supplied under a security classification to the Committee.) We found it instructive to compare the Annual Report on Strategic Export Controls with the Government's 2005 Human Rights Annual Report, which gives as its objectives:

to provide detailed information for Parliament and other specialised readers outside Government on the FCO's activities over the past year to promote human rights abroad. At the same time we want this report to be accessible to non-specialist readers who have a general interest in foreign policy or human rights. But whoever the reader, the report has the same objective: to provide those outside the Government with a tool to hold the Government to account for its commitments.[46]

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.

34. Secondly, as we have explained, we have scrutinised the enforcement of strategic export controls in some detail this year. The question of resources is central to enforcement but we have found little published information about the resources devoted to enforcement. We noted, for example, during the Westminster Hall debate on strategic export controls on 16 March 2006, in response to concerns about the organisational arrangements within the Foreign and Commonwealth Office for the management of export control, the then Minister for Trade claimed that the Foreign and Commonwealth Office "have transferred resources to bolster our export licensing team".[47] Neither the original provision nor the extra resources was set out in the 2004 Annual Report on Strategic Export Controls and so we have no figures upon which to measure the size of the increase. 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.

35. 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.

36. As we noted there is a dearth of information on the resources deployed to enforce export controls. 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.


37. The annual and quarterly reports contain a large number of figures, and analysis of these figures is central to our scrutiny of strategic exports. We accept that the figures in the annual and quarterly reports are not the equivalent of financial transactions which have been subject to professional audit. We have, for example, been prepared to accept that the figures for export licences in the 2004 Annual Report for a particular country do not reconcile exactly with the figures for that country in the four quarterly reports for 2004.[48] In our view, however, a legitimate function of scrutiny is the extrapolation of the trends from the figures and the identification of exceptional figures, and we have considered whether the presentation and quality of the data in the annual and quarterly reports can be improved.

38. Section II of the 2004 Annual Report, "Export Licensing Decisions during 2004" contains summary data on the numbers of licences processed during the year. The data are set out in prose which is difficult to follow or is confusing. We give two examples:

  • On Standard Individual Export Licences (SIELs), the 2004 Annual Report states: "During the period [2004, we assume] 9,116 SIEL applications were processed" and then, apparently as an explanation of this figure, the text continues: "6,730 SIELs were issued, 3 were revoked and 148 were refused. A further 1,353 applications were rated as no licence required (NLR). In addition, 11 SITLs[49] were issued; none were revoked or refused".[50] But these figures do not add up to 9,116; they add up to 8,245 and so are 871 short.
  • On Open Individual Export Licences (OIELs), the 2004 Annual Report states: "During the reporting period [2004, we assume] 538 OIELs were issued, 11 applications for OIELs were refused in full and 1 OIEL was revoked".[51] But in a memorandum to the Committee the Government stated that 806 applications for OIELs were received in 2004.[52] It therefore appears that the number of applications received exceeded those processed by 256 in 2004.

39. There may be explanations for these apparent disparities but our point is that they are not included in the annual report and their absence confuses and frustrates the reader. 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.


40. In their last report our predecessor Committees recommended that "the Government should keep open the possibility of asking industry to gather data on actual exports".[53] In reply the Government did "not believe that it is appropriate to impose additional burdens on industry in order to collect information which is not of direct relevance to the licence application procedure".[54] 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.

41. On the data currently provided in the annual and quarterly reports, EGAD, when they gave evidence to us on the operation of the export controls, explained how exports against standard licences were over-reported:

you are required to present [the licence] to Revenue and Customs so that the licence can be decremented because the licence says that you are allowed to export 100 widgets to Afghanistan, say, and you send your first 50 widgets in a container to Afghanistan and you send with the freight forwarder said licence and Customs send the licence to Afghanistan, so then the company has to apply for another licence for the remaining 50. What is supposed to happen is that you present the licence to Customs, Customs cross off 50 and write in '50 left', send it back to the company and the company then use it for the next consignment. What, however, happens is that there is an over-recording of exports both in terms of value and quantity and that makes your reports perhaps inaccurate, shall we say, because if the company has applied for a licence for 100 widgets, exports 50 and then has to apply for another licence for the remaining 50, the company is recorded as having exported 150 widgets, whereas they were actually only exporting 100, so there is an administrative snag there.[55]

EGAD added that "it happens a lot. It is a major problem for companies".[56]

42. We consider that the new evidence from EGAD throws further doubt on the data currently at figures 2.4 and 2.5 of the 2004 Annual Report on the value and volume of exports and justifies a re-examination of the need to collect data on actual exports. It is also relevant to cite the point we make at paragraph 60 that a greater use of open licences will take more goods, especially dual-use goods, out of figures currently recorded, albeit with some inaccuracy, in section II of the annual and quarterly reports. 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".


43. Our predecessor Committees were concerned about the absence of full information on Standard Individual Trade Control Export Licences (SITCLs) and Open Individual Trade Control Export Licences (OITCLs) in quarterly reports.[57] As it undertook in its response to the Committees' report in 2005,[58] the Government has provided information on the goods summaries licensed under SITCLs and OITCLs with the 2004 Annual Report on strategic export controls. Summaries of goods licensed under SITCLs and OITCLs were contained on the separately available CD-ROM and were also published on the website with the annual and quarterly reports.[59]

44. The information in the format that it was presented with the 2004 Annual Report was, in our experience, difficult to analyse and this underlines the point we made at paragraphs 27 and 28 for a fully searchable database of all licences which allows the user to sort the licences by both country of origin and destination and by goods.

The Channel Islands and Isle of Man

45. When EGAD gave us evidence on the operation of the export control system we asked about the application of the system to the Channel Islands and the Isle of Man. EGAD told us that "they are a sort of hybrid because you do need an export licence to export stuff to the Channel Islands".[60] We asked whether there had been cases where companies in the Channel Islands had imported huge amounts of arms from the UK and then those arms had been moved elsewhere and EGAD told us that "there is more than a suspicion"[61] and that "there have been reports that companies based in the Channel Islands have purchased arms, which is surprising when you would not presume that companies in the Channel Islands would want to purchase large numbers of assault rifles, for example".[62]

46. We have not been able to find annual reports on strategic export controls produced by either the Isle of Man or the bailiwicks in the Channel Islands. We asked the Government about the application of strategic export controls to, and by, the Channel Islands and the Isle of Man, and it replied:

Section 11(3) of the Export Control Act 2002 states that the removal of goods to the Isle of Man shall not be regarded for the purpose of the ECA 02 as an exportation of those goods. The Export of Goods, Transfer of Technology and Provision of Technical Assistance Order at 2(1) states that 'exportation' is defined as 'any destination outside the UK or the Isle of Man". In other words, any export of strategic goods from the Isle of Man is subject to the same controls as exports from the mainland.

The Channel Islands are not included in the scope of the ECA 02. Therefore, any transfers of strategic goods to the CI's are deemed to be exports for the purposes of UK strategic export controls and are subject to all the normal licensing procedures. Exports from the CI's to other—non-UK—destinations are a matter for the CIs government.[sic] In practice, the government [sic] of the CIs will consult HMG before exporting strategic goods. It is understood that strategic exports from the CIs are very limited.[63]

47. 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.

Specific cases raised

48. Continuing the method of work of our predecessor Committees, as well as the process of taking oral and written evidence on policy, we raised questions on the applications for licences set out in the four quarterly reports for 2005 as well as questions on policy, specific countries and other matters. In a number of instances we followed up the answers with supplementary questions. Where the answers have no security classification and arrived before consideration of this Report was completed we have published them as memoranda with this Report.[64] The answers have been useful and have assisted us to carry out scrutiny of the Government's decisions to issue, or withhold, export licences.

49. We have asked the Government on a number of occasions for the justification for granting a licence which, prima facie, appears to have difficulty meeting the criteria in the EU Code on Arms Exports.[65] In many of these cases we have been given the standard response by the Government, the gist of which is that all export licences are assessed on a case by case basis against the consolidated EU Code on Arms Exports and National Export Licensing Criteria and that a risk assessment took place at the time of application was considered.[66] We consider that such answers do not assist the scrutiny of the licensing decisions. We are frustrated by the Government's refusal to expose more of its deliberations to us, especially as it supplies commercially sensitive information about end-users on request by the Committee.[67]

50. 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.

35   Cm 6646 Back

36   Cm 6638, p 4 Back

37   At http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1119522594750  Back

38   Cm 6646 Back

39   The 2001 Annual Report was 418 pages (Cm 5559), the 2002 Annual Report was 503 pages (Cm 5819) and the 2003 Annual Report was 496 pages (Cm 6173). Back

40   Ev 88 Back

41   Ev 88 Back

42   Government's letter dated 19 January 2006. Not printed. Back

43   Ev 162 Back

44   Ev 88 Back

45   Cm 6646, pp 3-7 Back

46   Cm 6606, back of front cover Back

47   HC Deb, 16 March 2006, col 519WH Back

48   One reason appears to be the treatment of temporary licences. Back

49   Standard Individual Transhipment Licences Back

50   Cm 6646, p 9 Back

51   Cm 6646, p 10 Back

52   Ev 126, para 22 Back

53   HC (2004-05) 145, para 45 Back

54   Cm 6638, p 6 Back

55   Q 219 (Mr Wilson) Back

56   Q 220 (Mr Wilson). See also Ev 80 for further evidence of inaccuracies in declarations made to HMRC. Back

57   HC (2004-05) 145, para 41 Back

58   Cm 6638, p 5 Back

59   At http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1089131553823  Back

60   Q 207 (Mr Wilson). The 2004 Annual Report for Strategic Export Controls (Cm 6646) contains information on exports to the Channel Islands at p 45. Back

61   Qq 207-09 Back

62   Q 210 Back

63   Ev 167 Back

64   Ev 126, 154, 156, 157, 167  Back

65   HC Deb, 26 October 2000 , col 203W and http://www.fco.gov.uk/servlet/Front?pagename=OpenMarket/Xcelerate/ShowPage&c=Page&cid=1014918697565  Back

66   For example, Ev 126, para 18, Qq 276, 289-92 Back

67   We return to this issue at paragraph 153. Back

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