Memorandum from Mark Thomas
SUBMISSION OF
EVIDENCE ON
ASHOK LEYLAND
LTD AND
SUDAN
SECTION 1—BACKGROUND
The Indian company Ashok Leyland Ltd announced
on its company website on 16 February 2005 that it had signed
an agreement four days previously to supply 100 Stallion 4 x 4
army trucks to the Sudan Defence Ministry. The trucks were to
be supplied to GIAD Automotive Industry Co, the Sudan Government's
vehicle assembly unit in kit form. The GIAD factory is situated
near Khartoum. The announcement of the agreement was also made
at IDEX, the arms fair in Abu Dhabi and was reported in Jane's
Defence Weekly, March 23 2005: "Following its successful
introduction into Indian military service, Ashok Leyland commenced
an active export campaign for the Stallion during 2004, announcing
the first export sale of the type at IDEX 2005 in February. The
week prior to the show, Sudan had signed a contract for an initial
100 Mk III vehicles. These will be supplied from Ashok Leyland's
Hosur facility (near Bangalore) in complete knock-down form for
local assembly plus insertion of some local content." [45]
It was reported by a number of newspaper and
journals in India, Asia and UK including the Economist Intelligence
Unit. [46]
The UK military list of controlled goods includes
military vehicles under category ML6, being "Ground "vehicles"
and components , as follows: a. Ground "vehicles" and
components therefore, specially designed or modified for military
use."
Figure 1. Ashok Leyland Stallion 4x4 Mk
III truck. [47]
Ashok list the Stallion 4 x 4 under its defence
vehicle section of its company website and describes the Stallion
as "the workhorse of the army." Though the agreement
appears to be legal under Indian law, [48]under
UK law, to quote the Defence Manufacturers Association website,
"if the deal had involved the potential supply of the same
vehicles from the UK to Sudan then it would have been highly problematic
for a British export licence to have been issued to cover the
deal." The EU arms embargo on Sudan (introduced in 1994)
is covered under The Trade in Controlled Goods (Embargoed Destinations)
Order 2004 which states:
"No person shall directly or indirectly
a) supply or deliver; b) agree to supply or deliver; or c) do
any act calculated to promote the supply or delivery of any controlled
goods to any person or place in an embargoed destination."
The Ashok Leyland 1999-2000 Annual Report stated
that:
"The Company has been supplying Stallion
4x4 vehicles to the Indian Army. These vehicles performed creditably
during the recent Kargil conflict and the army has placed further
orders for these vehicles." [49]
Ashok is part of the Hinduja Group, who list
the company as a "flagship company." The UK company
LRLIH (also part of the Hinduja Group) owns a controlling interest
in Ashok.
The Ashok Leyland website lists the following
UK residents and nationals as being on their board of directors;
Dheeraj Hinduja—Vice chairman, Mr Hinduja is a UK citizen;
Mr Herbert Klingele a UK resident, also a director of LRLIH and
Machen Holdings Ltd; Mr Firoz Shami—a UK citizen, and Mr
Anders Spare, an alternate director and UK resident. It would
be illegal for UK citizens and residents to have any involvement
in the agreement between Ashok and GIAD for the intended supply
of Stallion 4 x 4 army trucks without a Trade and Brokerage Licence
from HM Government UK.
SECTION TWO—THE
NEWSNIGHT INVESTIGATION
I brought this story to BBC2 Newsnight and was
hired to investigate and report on any potential UK involvement
in the Ashok/GIAD agreement.
Posing as potential clients the Newsnight team
made contact with Mr Anders Spare and Mr Dheeraj Hinduja. Comments
made to the reporting team during the Newnight investigation by
Mr Anders Spare and Mr Dheeraj Hinduja indicated that both men
were aware of the Ashok deal with Sudan and that both men had
some involvement in that deal.
Mr Spare said "We've been, let's say, involved
behind the scenes." He also said "I have also personally
been involved to some degree in supporting this [Ashok/Sudan deal]
from here [UK]." And added that Mr Dheeraj Hinduja "knew
everything" about the deal and was involved in it. Mr Dheeraj
Hinduja stated, "initially whenever we develop new markets
and new customers we try and identify those for Ashok Leyland
and we were very closely involved in how that deal [Sudan] was
structured."
Transcripts of these recordings are listed as
items 1-4.
When approached formally by Newsnight Mr Spare
denied any knowledge of the Sudan deal other than what he had
seen in the press release, contradicting his statements and actions
during the secret filming. A copy of the transcript of this conversation
is included at the end of the report—as item 5.
Initially LRLIH responded on behalf of the directors,
and was signed amongst others by Mr Dheeraj Hinduja, "We
were not aware of "the deal" you refer to . . . ".
However, the letter went on to say " Now
that we are aware that there is at least the possibility of a
transaction that might require a licence under the trade(sic)
in Controlled Goods (Embargoed Destinations) Order 2004, we have
asked Ashok Leyland's management that the right course of action
should be followed and the Board be kept informed of all developments,
and if necessary the Cooperation Agreement be terminated."
The letter also stated that no transaction had
taken place between Ashok and GIAD. In an attached letter from
Ashok, the company stated "The Cooperation Agreement with
GIAD does not refer to any supplies to be made to the Army/Defence
Ministry of Sudan. On the contrary, the Agreement refers to GIAD
assembling the vehicles in the public and private sectors and
neighbouring countries." Though the letter also states, "[the
Stallion] 4 x 4 trucks: these are logistics/transport vehicles
suitable for commercial/civil and also defence applications."
However, in a reply to a Parliamentary Question
the Minister Malcolm Wicks issued a statement regarding the Stallion
4 x 4 trucks, on the 14 July 2005:
"From the information available on the company
website, it appears these vehicles are specially designed for
military use and therefore potentially require an export or trade
licence under ML6a of the UK's Military Control list. An export
licence would only be required if the goods were exported from
the UK, and a trade licence would only be required for the transfer
of the goods between third countries if there were some UK involvement,
as defined in the relevant legislation."
A lengthy exchange of legal letters took place
between the BBC and Dean and Dean, the solicitors acting for Mr
Anders Spare and Mr Dheeraj Hinduja. Dean and Dean stated that
the Stallion 4 x 4 trucks in kit form intended for Sudan were
not military trucks and not designated for the Sudan Defence Ministry.
Dean and Dean explained that the company was supplying "trucks
and buses for the public and private sector in Sudan. The BBC's
error is in supposing that the trucks are "military specification"
vehicles. They are not."
However, the company's own press release on
the company website stated the trucks were "army trucks"
and the supply was for the "Sudan Defence Ministry."
Dean and Dean stated that the press release was "wholly inaccurate."
Yet, in the company's own listing for the IDEX
arms fair catalogue in 2005 the company says: "A pioneer
in the design, development and manufacture of special vehicles
for the Armed Forces, the Company supports the modernisation of
the Indian Armed Forces by developing a host of modern special
application vehicles to address their special needs. These vehicles
include Stallion (4x4),"
Ashok's own promotional literature "What
Drives the Armed Forces" lists the Stallion 4 x 4, it "plays
the role of the workhorse of the army."
At the Dubai show, IDEX in 2005. the marketing
manager of Ashok said: "We are now aggressively looking at
marketing our defence vehicles in the overseas markets, particularly
Middle East and North Africa." And in a press statement dated
28 April 2005 from Ashok Leyland/Hinduja Group announcing their
annual report and share dividend, the statement reads, "Following
the order received from Sudan for its Stallion 4x4 army vehicles,
the company is actively pursuing sales prospects in several African
and Asian countries." [50]
Photograph [not printed] with caption: RIDING
HIGH: The Managing Director of Ashok Leyland, R Seshasayee, and
the Executive Director (Finance), K Sridharan, at a press conference
in Chennai on Thursday.
Dean and Dean replied to the BBC: "You
say our clients market these Stallion trucks as a military vehicle.
So they do. That is not the point. It is simply a commercial truck
which can well be used for military use."
When the BBC solicitor further enquired into
this Dean and Dean stated, "If a vehicle designed for military
use is adapted or fitted out for civilian use, it is not controlled
goods. Note the comparison with the Stallion truck, which was
put into production for use by the Indian army, but which has
been stripped of all of its military features in the form in which
it was destined for Sudan."
The BBC then asked to see the specifications
for the Stallion 4 x 4 intended for GIAD. Dean and Dean stated,
"No specifications were attached to the co-operation agreement
nor were any specifications prepared or exchanged with GIAD in
connection with the proposed agreement."
On 3 July Dean and Dean issued the first, of
numerous, statements indicating they would seek an injunction
on the broadcast of the investigation. No injunction was ever
sought though Dean and Dean did negotiate an agreement with the
BBC whereby the BBC would give the solicitors 48 hours notice
of any intention to broadcast the report and that the solicitors
would get to see the report before it was broadcast.
Dean and Dean wrote "If the BBC chooses
to ignore the truth of this matter, it could very well end as
the BBC's most expensive mistake ever." The threat of legal
action was made on several occasions including a letter to Mark
Thompson and Michael Grade from Lord Temple Morris who wrote in
his capacity as an advisor to the Hinduja Group.
After several provisional broadcast dates Newsnight
decided to broadcast the report on 20 October, listing the story
as appearing in that night's edition in its pre broadcast email
to viewers. The story was pulled two hours from broadcast after
a meeting with legal representatives of the Hinduja group.
The editor of Newsnight Mr Peter Barron explained
his reason on the Newsnight website, after an article appeared
in the Spectator magazine by Andrew Gilligan detailing the decision
to not show the report. Mr Peter Barron said the decision not
to broadcast the report was an editorial one, "The story
we'd ended up with would, I think, have been so complicated and
qualified as to be impossible to tell meaningfully." It is
hard to reconcile the truth of this statement with the fact that
the BBC was hours away from broadcasting the report and was not
concerned with any editorial problems then. It is my belief that
the BBC was intimidated into cancelling the broadcast.
SECTION 3—CONCLUSIONS
AND RECOMMENDATIONS
Regardless of the Hinduja's legal response to
the issues, the publicly available information (the initial Ashok
Leyland press release, report in Jane's Defence Weekly and a simple
cross check of the Ashok Leyland website list of directors and
UK Companies House) would indicate that the matter should have
been investigated by HMRC. To the author's knowledge HMRC were
not aware of the issue until Newsnight approached them. It
is important to assess HMRC's operational capacity in identifying
potential breeches and enforcing the law in this area. It
is my understanding that the investigation team for the "prohibitions
and restrictions" unit at HMRC, whose remit covers child
pornography to embargoed destinations, has a full time staff of
six. Given the complexity and apparent lack of investigations
in this area it would seem that the staffing levels in HMRC are
simply insufficient to do the job required.
The initial press announcement of the deal took
place at IDEX arms fair in Dubai 2005, attended by UK government
representatives, including DESO for example. The QSC should
establish what formal remit exists for reporting potential breeches
of legislation by government representatives at these types of
events and how they can be made more effective. If none exist
the government agencies involved should review this as a matter
of urgency.
LRLIH and Mr Spare indicated that they were
not aware of the law's requirements. While the QSC has considered
in the past the need for outreach programmes by the DTI there
are questions as to whether HMRC should take a role in running
information outreach programmes. The presence of HMRC at the
various international defence/police and security trade fairs
might be an appropriate place to contact those directly involved
in the industry and raising awareness of the law.
If the original website press release is correct,
in that the deal was for "army trucks" to the "Sudan
Defence Ministry" as Mr Anders Spare and Mr Dheeraj Hinduja
have clearly stated an involvement then there is a clear need
for the HMRC to investigate. As although Mr Dheeraj Hinduja and
Mr Anders Spare denied any involvement or knowledge of the Sudan
deal when formally approached by Newsnight, these denials are
hard to reconcile with their previous statements, like, "we
were very closely involved in how that deal was structured".
The DTI issued the following statement to Newsnight:
"All applications for trade licences are considered on a
case-by-case basis against the Consolidated EU and National Arms
Export Licensing criteria, taking into consideration the circumstances
prevailing at the time and other announced Government policies.
Among the factors taken into account in assessing applications
will be the destinations and parties involved, the nature of the
goods concerned, the risk of diversion, and the uses to which
the goods could be put (as well as the stated end use), and any
other relevant information.
The UK enforces rigorously the EU arms embargo
against Sudan. This is done by the scrupulous consideration of
export licence applications, the investigation of alleged breaches
and through dialogue with other states. The Government would only
issue a licence for the supply of or trade in military equipment
to Sudan in line with the exemptions to the embargo, for example
for humanitarian end-use."
The destination and the factory's links to
the Sudanese government would present significant difficulties
in granting a licence, as even a humanitarian purpose for "army
trucks" would demand a licence. The decision as to whether
or not the kit for Sudan would need a licence cannot be made solely
on the basis of the type of equipment being exported.
The contradictory statements made by Mr Dheeraj
Hinduja and Mr Anders Spare relating to the Ashok/Sudan deal raise
significant doubts on the accuracy of their later statements,
and indeed on the accuracy of statements made by Dean and Dean
on their behalf.
The Ashok website clearly says the Stallions
are "army trucks" for the "Sudan Defence Ministry."
[51]
Mr Anders Spare also indicates this is the case
(Section 2, item 3, extract 2).
The MD of Ashok Mr Seshasayee, at a press conference
to announce the company's annual share dividend, on 28 April 2005,
was quoted as saying "Following the order received from Sudan
for its Stallion 4x4 army vehicles, the company was actively pursuing
sales prospects in several African and Asian countries."
[52]
This also quoted on the company's website press
release of the same day and appeared in the SSKI India Research
(stock market analysis of the firm also dated 28 April 2005).
[53]
The claims that the Stallion 4 x 4 kits were
not military vehicles were elaborated upon in a letter from Dean
and Dean (dated 22 July 2005) "This truck [Stallion 4 x 4]
was subsequently specified for the Indian Army and incorporated
a significant number of features to meet the specific requirements
of the Army. Our clients have listed these features in the document
attached to this letter. These features are not present in the
trucks destined for Sudan, which were not designed for any military
purpose, but which were just a basic set of truck components and
aggregates, without the rear body, for local assembly." The
attached document lists items that the Stallion 4 x 4 kits did
not include:- black out lights, special cab storage requirements
eg rifle clips, roof hatch, radio Page suppression, twin fuel
tanks, pintel type tow hook, palm couplings. However, when Newsnight
asked to see the specifications for the trucks attached to the
GIAD agreement they were told on the 26 August 2005 , that "no
specifications were attached to the Co-operation Agreement nor
were any specifications prepared or exchanged with GIAD in connection
with the proposed agreement." It is hard to reconcile the
two statements, if there is no specifications how can the company
know what is and is not included?
The contradictions in the statements coming
from Mr Anders Spare, Mr Dheeraj Hinduja, the companies involved
and Dean And Dean provide good reason for HMRC to investigate
the deal. HMRC should conduct a full investigation into the exact
nature of the equipment being offered to Sudan and the role played
by Mr Anders Spare and Mr Dheeraj Hinduja in any deal.
TRANSCRIPTS OF
TELEPHONE CALLS
AND SECRET
FILMING
Item 1
Newsnight phoned Mr Cowsik in India, the export
manager of Ashok and the signatory on the Ashok/GIAD agreement.
Posing as a potential client Newsnight asked if there was anyone
in London who he could talk to regarding the Sudan deal. Mr Cowsik
named Mr Anders Spare who works for Sangam (a Hinduja Group company
based at New Zealand House, London). Newsnight phoned Mr Anders
Spare on the same day 25 May 2005 and asked him what he knew of
the deal in Sudan, Anders Spare said:
AS : . . . all the negotiations have taken place,
and there is an order signed. We're just waiting for the letter
of credit to arrive which is not a small issue in a country like
Sudan. But all the technical negotiations, there is nothing left,
it's just the money.
MT: Has Sangam been involved or just Ashok?
AS: No, this has been done directly by Ashok
Leyland.
MT: But you know about the deal.
AS: We've been, let's say, involved behind the
scenes.
MT: So you're completely across it?
AS: We are up to speed yes
Later in the same conversation:
MT: I saw that the Hinduja Brothers are involved
and this is the Hinduja company. Are they across the deal as well,
would they be able to meet the client because that would be quite
an impressive thing for the client?
AS: Well, erm, there are two . . . the Hinduja
family consists of four brothers which is of a generation . .
. let's say . . . between 60 and 65. And then they have four cousins
of next generation which is the third generation. In this case
the people involved in the transportation business, which is Ashok
Leyland, that's father and son, and they're both located in London,
so if they are available of course we can arrange a meeting.
MT: Fantastic, what are their names, which are
they?
AS: The name of the father is GP and the name
of the son is Dheeraj.
MT: Ok, that's great, and they're aware of the
project?
AS: Yes, well at least Dheeraj is well aware,
err yes, both are well aware of the project.
MT: So they're involved . . . that's great.
MT: And obviously if the client could meet them
that would be great.
AS: Yes we're totally committed to Sudan, no
doubt.
Item 2
Following the first conversation Newsnight spoke
to Mr Spare on a number of occasions, to further clarify what
Mr Spare meant by "involved behind the scenes" and to
what extent others might be involved in the Sudan deal. In the
conversation of 2 June 2005 Mr Spare said:
AS: Er as it happens so that I have also personally
been involved to some degree in supporting this from here. But
basically my function is to er . . . from a board level is to
strategise with the company. Er, normally we are not involved
in the operation of the company. So it is the company Ashok Leyland
itself that will make the quotes, that will negotiate the prices
and all that.
MT: OK great. So you are the person who knows
everything at this end of it.
MT: That's fantastic, so you are the person who
got the strategy together at this end of it?
AS: Yes, I can take let's say the political call
for the company and er I can also have a decisive influence on
the company, how they behave.
Item 3
Following these conversations BBC Newsnight
(posing again as potential clients, representing a charity that
needed Stallion 4 x 4 trucks for potential relief work in Sudan)
then arranged to meet Mr Spare. The meeting took place in a London
Hotel on 8 June 2005 and was secretly filmed. The following are
extracts from the conversations that occurred in the hotel room.
Extract One
MT: I know that Landrover Leyland, when we talked
on the phone, you said you had been involved, sort of behind the
scenes on this dealing of . . . near Khartoum and I wonder if
you might just talk us through that.
AS: Yeah, well this was . . . we had been looking
at Sudan for quite some time and this came in connection with
an exhibition in Delhi a couple of years ago, when we were approached
by a Sudanese party. As a matter of fact they were representatives
of this company, GIAD, visiting India because there were government
discussions between Sudan and India about financial assistance.
AS: And from there it went on and I remember
very well a visit made by the transport minister to our plant
in (INDISTINCT) just outside Bangalore, it was a Sunday, because
I was there the day after, I didn't meet him, but I was there
the day after because they were all charmed by him. And we established
a very good contact between the company and this transport minister,
also the management, the President of the company . . . is run
like an ordinary company.
AS: . . . President and managing director. Also
the Sudanese ambassador in Delhi was involved actively. We had
some competitors involved also, but for some reason, they picked
us. I think the reason was they had a close look at the vehicle
and found that this is the right vehicle, it's not too high and
not too low, it's right . . . well they can afford it . . . it's
a useful vehicle and it would serve their purpose.
MT: Landrover Leyland were involved across that
deal with Ashok?
AS: Well, we were . . . fundamentally this company
Ashok Leyland is operating on its own. I mean this is . . . err
. . . fully fledged company, they have an export department as
they call it, doing all this. But we are always trying to help
out from my side, I am on the board of Ashok Leyland and . . .
especially when it comes to creating relations and maintaining
relations, sometimes London is a very good place to be.
Extract Two
When asked if it was possible to order trucks
from the GIAD factory in Sudan Mr Anders Spare replied:
AS: I suppose so, I suppose so. This is for the
army [the current Sudan deal] and I'm absolutely convinced that
this is not one for true army purposes, this is more for civilian
purposes [the Newsnight proposed deal].
Extract Three
MT: And . . . how involved was Dheeraj in this?
AS: Oh he is very much involved, I mean we .
. . we're dealing with the company everyday.
MT: So he knows the factory, he knows the deals
. . .
Extract Four
MT: Have yourself and the UK end, do you need
licences to be doing this?
RN:(one of the Newsnight team) Yeah, I suppose
. . .
AS: We are not the seller, the seller would be
Ashok Leyland . . .
RN: So that's India, right.
AS: So, basically maybe this is not needed. That
is my guess . . . If it's not us . . . a UK company sending them,
there's no requirement for a licence, I would guess, I don't know.
Item 4
The following is an extract from a phone call
with Dheeraj Hinduja from 9 June 2005.
MT: Have you been actively involved in that North
Sudan factory?
MT: Right OK but you know the deal though
DH: Yes of course but our management really deals
with this and from our family side we don't really get involved
on the day to day affairs. But where there is an intervention
needed we're always there.
MT: OK so it would be fair to say that you have
an overview to it.
MT: I suppose that that would mean, basically
what the client wants to know is can we come to you if something
goes wrong, that is what it is all about.
DH: Of course, you have my number, I'm always
available, never a problem. You contact me directly. From our
family side we look after the activities of Ashok Leyland and
are very much approachable.
MT: OK that is great. Were you involved in the
strategy end of it, of how Ashok became involved in it, not the
day to day running?
DH: Oh of course of course, initially whenever
we develop new markets and new customers we try and identify those
for Ashok Leyland and we were very closely involved in how that
deal was structured.
Item 5
The following extracts are from that conversation
on the 23 June 2005—after formally contacting Mr Spare as
BBC Newsnight.
Extract One
MT: So no one from the British end of the Hinduja
Group has been involved in this Sudanese deal at all.
AS: As a matter of fact, I am not aware of the
deal at all except from press information. But I haven't verified
whether that was true or not.
Extract Two
AS: Ashok Leyland is a perfectly autonomous company.
Quoted on the . . . A quoted company in India and has a complete
set of management to run the operations and the business. If you
want some information about their business, that's where you should.
. . then you should talk to them.
MT: So you are not a director, you have not had
any dealings with the deal for Sudan . . .
MT: You only know about it through the press.
MT: You have had no involvement through it what
so ever?
AS: Well, involvement? Well as far as I know
from the press releases I have seen it is not a done deal. But
I am just guessing.
MT: So you don't know for sure whether it is
a done deal or not.
AS: From the press release it seems to be a negotiation
that has been going on, but I would . . . I mean Sudan how many
deals are being done in Sudan? I don't know of any.
MT: But you do know Ashok Leyland are doing a
deal there.
January 2006
45 Jane's Defence Weekly March 23, 2005. Ashok
Leyland expands its markets further. Back
46
Economist Intelligence Unit: Country ViewsWire, March 1, 2005.
India industry: Ashok Leyland to supply trucks to Sudan. Ashok
Leyland has signed an agreement to supply army trucks and buses
to the Sudan Defence Ministry in a deal worth US$10 million. The
company will initially supply 100 Stallion trucks and 100 Falcon
buses. The deal could develop into an annual supply of 500 trucks
and 500 buses. Ashok Leyland recently clinched a deal to supply
3,322 trucks to Iraq, the largest ever order for commercial vehicles
from India. The Hinduja group and Iveco, who together own 51%
of Ashok Leyland, recently signed a new shareholder agreement.
The new agreement is expected to significantly enhance cooperation
between ALL and Iveco, both in terms of exploring new markets
and sharing technology. Back
47
www.bharat-rakshak.com/LAND-FORCES/Army/Logistics/MV5.jpg Back
48
Ashok Leyland is registered under the Indian Companies Act, 1956
and is governed by Indian Laws. We have been legally advised that
the said agreement is not in violation of any Indian law. Back
49
http://www.ashokleyland.com/images/downloads/presentations/annualreport9900.pdf Back
50
http://www.hindu.com/2005/04/29/stories/2005042907691700.htm Back
51
http://www.ashokleyland.com/newsdisplay.jsp?newsid=100&year=2005&monthval=4
28 April 2005 [link originally supplied by Mark Thomas]. Back
52
http://www.hindu.com/2005/04/29/stories/2005042907691700.htm Back
53
Export growth could be a driver of volumes: ALL's export performance
has been quite strong in FY05. This included the Iraq order of
approx. 3,200 CVs in FYOS. The company has signed a US$10 million
agreeement with GIAD Auto, to supply 100 Stallion 4x4 army trucks
and 100 Falcon buses to the Sudan defence ministry. Back
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