Further memorandum from the Department
of Trade and Industry
1. Could the Quadripartite Committee have
a copy of the finalised terms of reference for the Government's
review?
A copy of the finalised terms of reference is
attached [see Appendix 1].
2. What are the criteria for referring applications
for export licences to the Department for International Development?
What proportion of applications are referred to Department for
International Development? How does the Department for International
Development determine whether an application is incompatible with
the technical or economic capacity of the recipient country? Why
are so few applications refused on the grounds that they breach
criterion 8 of the EU Code of Conduct on Arms Exports?
The Department for International Development
(DFID) is the lead department for advice on sustainable development
considerations as defined in Criterion 8 of the Consolidated Criteria.
Licences are referred to DFID by DTI for an assessment against
Criterion 8 when the destination is on a list of countries where
sustainable development is most likely to be an issue, and (for
SIELs and SITCLs) the value of the licence is above a certain
threshold, determined on a country by country basis. The destination
list is made up of those countries which are eligible for concessional
loans from the World Bank's International Development Association
(IDA), taken to represent the world's poorest. This list is kept
under constant review to take account of changing circumstances.
DFID can also request to see licence applications for other countries
which are of interest in relation to other criteria.
The proportion of licences sent to DFID for
advice during any particular period depends on the mix of country
destinations for which applications were made. During 2005, 1.6%
of SIEL applications and 35% of OIEL applications were referred
to DFID for advice.
DFID's assessment of license applications takes
into account four main areas. These are economic capacity; levels
of military expenditure; technical capacity and the least diversion
of resources; and the legitimate security and defence needs of
the recipient country. A number of questions are posed in order
to make a judgement in each area. For example, an assessment of
economic capacity would focus on the impact of the arms import
on the financial and economic resources of the recipient country
in the immediate, medium and long term. An assessment of technical
capacity, on the other hand, would examine whether the recipient
country has the requisite skilled personnel to use and maintain
the equipment. Where there may be factors that cause concern,
DFID will use the professional expertise available to it to make
a judgement on a case-by-case basis, if necessary taking into
account cumulative purchases by the country concerned.
Criterion 8 is intended to pick up on high value
Export License Applications (ELAs) to the poorest countries. Since
the Government receives relatively few of these, we would not
expect to see regular refusals of ELAs on Criterion 8 grounds.
It should be noted that, through the F680 process, we are often
able to deter prospective exports before they reach licence stage.
Where Criterion 8 is likely to be a consideration, we routinely
warn exporters of this.
3. Have any orders made under the Export
Control Act 2002 or Government decisions on licences (refusal,
approvals or revocations) been subject to challenge in the courts?
If there were, what was the outcome?
The Government has not been challenged in court
about any of the orders made under the Export Control Act 2002,
or about any licensing decisions made since those orders came
into force. The Government is currently subject to a Judicial
Review application, but at this stage it would not be appropriate
to provide further details in this document.
4. During Commons Committee Stage of
the Bill in July 2001 the Minister of State at the Department
of Trade and Industry (Nigel Griffiths MP) said:
The guidance referred to [... ] in clause
8 [now section 9] [... ] is guidance about announced policy, and
about the way in which existing or future obligations concerning
licensing decisions should best be carried out in furtherance
of agreed policy. The consolidated [EU] criteria in themselves
count as guidance [... ] If there were to be changes to the criteria,
the Government would announce them, and it would be for Parliament
or parliamentary Committees to consider any changes in the usual
way. Of course the Quadripartite Committee would have a role in
scrutinising any changes with Ministers. Any other guidance issued
under clause 8 could also be subject to parliamentary consideration
in that way. (Debate in Standing Committee B on 19 July 2001 on
Amdt no. 20)
Can the Government confirm the statement made
by Mr Griffiths? What arrangements would the Government put in
place to consult the Quadripartite Committee? For example, would
the Government invite to the Quadripartite Committee to review
and report within a specified time?
The Government can confirm that where new guidance
about the exercise of licensing powers becomes necessary,—which
would include, for example, any changes to the Consolidated EU
and National Arms Export Licensing Criteria—this would be
announced by the Government. It would then be open to Parliament
or individual Members to ask Ministers questions about those changes
following their announcement, and the Quadripartite Committee
to do likewise, either as a specific response to the announcement,
or as part of the Annual Report scrutiny process and linked evidence
sessions.
5. In its reply to the Quadripartite Committee's
report on the draft bill, the Government said that "offences
involving the transfer of technology within the UK are likely
to be the responsibility of the territorial authorities"
(Cm 5218, p 8). Please define territorial authorities.
The territorial authorities in this instance
would be the Police.
6. The Committee requests an update of the
tables on page 9 of the 2005 Annual Report on strategic export
controls giving seizures for 2005-06 and successful prosecutions
for the first nine months of 2006-07.
Please see the update information below. If
there are any further prosecutions this year, HMRC will provide
details to the Committee.
| Financial year
| HMRC seizures |
| 2000-01 | 120
|
| 2001-02 | 80
|
| 2002-03 | 67
|
| 2003-04 | 63
|
| 2004-05 | 37
|
| 2005-06 | 34
|
| |
Financial
year |
Goods
|
Destination | Person or company concerned
|
Penalty |
| 2000-01 | Five-ton crane,
a 12-ton heat furnace and a quantity of Aluminium
| Pakistan | Abu Bakr Siddiqui
| 12 months suspended |
| 2001-02 | |
| | |
| 2002-03 | |
| | |
| 2003-04 | Aluminium | Pakistan
| David Lee Nicklin of
AM Castle & Co Ltd
| £1,000 fine (strict liability offence)
|
| 2004-05 | Aircraft parts |
Iran | Saroosh Homayouni
| 18 months imprisonment suspended for two years; banned from being company director for 10 years; asset forfeiture order for £69,980.
|
| Body Armour | Pakistan
| Praetorian Associates | £2,500 fine
|
| 2005-06 | Body Armour | Kuwait, Iraq,
Saudi Arabia
| Vestguard UK Ltd | £10,000 fine
|
| 2006-07 | Body Armour
and Helmets
| Kuwait and Iraq | Peace Keeper International Ltd
| £10,000 plus £1,600 costs |
| 2006-07 | Military
Helmets and
Flak Jackets
| Kuwait, for use
in Iraq |
Winchester
Procurement Ltd | £8,000 plus £500 costs
|
7. During the Export Control Bill's passage much debate focussed on the criteria which had to be met before extra-territoriality provisions could be incorporated in legislation. In 1996 the Home Office published a review of extra-territoriality jurisdiction—Review of policy on extra-territorial jurisdiction, 23 July 1996—which recommended that extension of jurisdiction to UK nationals could be considered in certain circumstances where at least one of six factors was present. Can the Government confirm whether the 1996 review still informs the Government's approach to extra-territoriality? What are the factors and considerations against which the Government will consider proposals to extend extra-territoriality?
| | |
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The report of the Interdepartmental Steering Committee reviewing
the policy on the assumption of extra-territorial criminal jurisdiction,
"Review of Extra-territorial Jurisdiction", published
in 1996, concluded that the preferred approach was the development
of a set of policy guidelines which would create a framework within
which decisions as to whether or not legislation should have extra-territorial
effect could be taken, once a particular need could be established.
A set of six guidelines, were set out in the report. They are:
where the offence is serious; where, by virtue of the nature of
the offence, the witnesses and evidence necessary for the prosecution
are likely to be available in UK territory; where there is international
consensus that certain conduct is reprehensible and concerted
action is needed involving the taking of extra-territorial jurisdiction;
where the vulnerability of the victim makes it particularly important
to be able to tackle instances of the offence; where it appears
to be in the interests of the standing and reputation of the UK
in the international community; and where there is a danger that
offences would otherwise not be justiciable.
These guidelines were intended by the Committee to inform
official consideration of proposals for extra-territorial criminal
jurisdiction. They will inform the forthcoming 2007 review of
export controls, but one in addition, when considering any proposals
to extend extraterrirotial export controls, the government will
have regard to other factors such as the likely effectiveness
of assuming extra-territorial jurisdiction in addressing the perceived
problem and any practical enforcement issues, including resource
implications. Thus, the fact that an offence satisfies one or
more of the six guidelines would not necessarily mean that the
government will extend extraterritorial control in the relevant
area.
8. Have the prosecuting authorities used the extra-territorial
powers provided under the Export Control Act 2002 to initiate
any prosecutions? If they have, what was the outcome? What course
of action would the prosecuting authorities take where a UK person
abroad was committing an offence in a country from which extradition
is, for all legal or practical purposes, impossible? Is the difficulty
of enforcement of extra-territorial powers in any given country
one of the criteria used in considering the grant of a licence
in the first place?
The extra-territorial powers provided under the Export Control
Act 2002 have not been used to initiate any prosecutions. If a
UK person abroad was committing an offence in a country from which
extradition is, for all legal or practical purposes, impossible
then, assuming that HMRC had managed to accumulate sufficient
evidence to prosecute, and RCPO considered prosecution to be in
the public interest, an arrest warrant would be issued. The arrest
warrant would be available if the suspect came into any country
where we had an extradition agreement. The difficulty of enforcing
extra-territorial powers is not one of the criteria taken into
consideration when considering an export licence application.
9. During the Commons Committee Stage of the Bill the
Minister of State at the Department of Trade and Industry (Mr
Griffiths) said:
[T]he Government consider the amendment [to license production
overseas] unnecessary because the Bill already gives us effective
powers. It provides for significant control over the practical
means by which licensed production arrangements are established
and maintained. Such arrangements typically depend on the company
in the UK that licenses the manufacture of its products supplying
component parts or production technologies to the overseas producer.
Where the product is manufactured under licence and has a potential
military end use, an export licence will, in most cases, be required
before the equipment and technology necessary for the establishment
and further operation of the licensed production facility can
be supplied. (Debate in Standing Committee B on 18 October 2001
on NC no. 2)
Can the Government explain how the arrangements to which Mr
Griffiths drew attention have worked since 2004? Once a licence
to export technology overseas has been granted, what control does
the UK Government have over the production facility? Can the Government,
for example, prevent the overseas facility selling equipment made
in the plant to an irresponsible or objectionable parties?
The Government assesses all applications on a case by case
basis. Where the Government has concerns about the transfer of
equipment and/or technology for the establishment or ongoing supply
of an overseas production facility, it can refuse an export licence
application. If an application is approved, and subsequent information
comes to light that casts doubt on its veracity or appropriateness,
the licence can be revoked. Any subsequent application for the
export of equipment and/or technology to the same end-user would
have the new information factored into the assessment. Although
the Government does not have jurisdiction over overseas subsidiaries
of UK companies, other than where the extraterritorial provisions
of UK export controls apply, the rigorous assessment of both items
related to initial set up and ongoing supply at the licensing
stage, as outlined above, ensures that licences are only issued
where they are consistent with the Consolidated EU and National
Arms Export Licensing Criteria and other announced Government
policy.
10. To what extent, if at all, are tailored provisions
inserted into licences to deal with concerns about the activities
of a particular licensee? Could such provisions be used, for example,
to dictate the terms of a licence granted by a UK company to an
overseas company for the manufacture of products with a potential
military end use? More generally it would assist the Quadripartite
Committee if the Export Control Organisation could explain the
extent to which it issues tailor-make licences, if at all.
The ECO does, in a small number of applications, insert special
provisos into licences. This happens where the ECO risk assessment
of the end user and destination is satisfactory but certain steps
need to be taken by the UK exporter to reduce specific risk elements,
or protect the security of UK equipment before it reaches its
destination. Provisos might then be inserted by the ECO to advise
the exporter to, for example, remove sensitive elements of the
equipment prior to export or ensure that the export moves through
agreed routes and methods. The ECO will insert provisos only where
they can be discharged by the UK exporter, and relate to events
within that exporter's control. Provisos cannot be used where
they can only be discharged by overseas entities.
Whilst this has not been done to date, there could be scope
for using provisos to influence contractual arrangements between
UK exporters and overseas customers. The difficulty here would
be that whilst a proviso might ensure that the UK exporter drafted
a contract in an acceptable way, it could not guarantee that the
overseas customer adhered to the terms of that contract and so
would not be a completely reliable way of ensuring that undesirable
sales did not occur. The Government will however, consider the
scope for using provisos in this way during the Government's forthcoming
review of the Export Control Act 2002 and will invite contributions
both from key stakeholders, and more widely during the course
of the public consultation.
11. How accurate were the predictions made in the Regulatory
Impact Assessment that the effect of the legislation would be
an additional 1,000 SIELs per year, an extra 100 OIELs and an
additional 1,500 SITCLs?
The number of additional SIELs and OIELs predicted by the
RIA has not in fact materialised. This is due to a number of factors.
Chiefly, SIELs and OIELs that already licensed the export of technology
in a physical form at the time the new controls came into force,
were automatically extended to cover the export of that technology
electronically. Other measures, such as the introduction of new
OGELs to cover, amongst other things, electronic transfers and
personal use of technology overseas by employees of UK companies,
also helped to reduce the number of new applications and ensure
that the burden on UK businesses was proportionate. The number
of SITCLs received since 2004 is also less than predicted, due
mainly to use of the Open General Trade Control Licence (OGTCL).
It is possible that industry's original estimates which influenced
the RIA calculations, were based on the number of transactions
to be brought under control, which, in the event, proved to be
significantly less than the number of actual licences needed,
due to the above proactive measures.
12. Section 7(2)(b) of the Export Control Act 2002 provides
that the Secretary of State may make an order which may "amend,
repeal or revoke, or apply (with or without modifications) provisions
of any Act or subordinate legislation". What limits apply
to the exercise of the powers at section 7(2)(b)?
Section 7(2)(b) applies to Orders imposing export, transfer,
technical assistance and trade controls. Since the powers in section
7(2)(b) can be applied only in relation to these four themes,
this applies practical limits to the subject matter where section
7(2)(b) can come into play. In addition, Orders imposing export,
transfer, technical assistance and trade controls are subject
to the normal parliamentary procedures, usually through negative
resolution, although in some circumstances positive approval is
required.
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