Examination of Witnesses (Questions 1-19)
MR OLIVER
SPRAGUE, MR
SIMON GRAY
AND MR
ROY ISBISTER
7 DECEMBER 2006
Q1 Chairman: Good afternoon. Welcome
to our witnesses; I will ask you to introduce yourselves in a
moment for the record. This is a public evidence session and hopefully
the transcript will be available on the Internet in about a week
(quicker if possible). Members of the Committee declared their
interests 12 months ago when they first joined the Committee.
If anyone has any interests they feel are relevant and have not
declared shout now, but I think it has all be done. Yes, good.
Welcome to the Working Group. Can I ask you to introduce yourselves?
Mr Isbister: I am Roy Isbister.
I work for Saferworld as the Team Leader on transfer controls
and small arms.
Mr Sprague: I am Oliver Sprague
and I am Programme Director for Amnesty International UK's arms
control work.
Mr Gray: I am Simon Gray. I work
for Oxfam GB as Policy Advisor on arms control.
Q2 Chairman: Thank you very much,
and thank you for your memoranda. I noted that you said it was
in a work in progress and formal review of the Export Control
Act does not start until May next year or thereabouts. You kindly
offered to submit further memoranda as you saw fit and we will
be very pleased to receive those obviously. As you know, we are
taking a broad look at the Export Control Act, including the primary
legislation. One of the purposes of the Act was to respond to
the Scott Report's recommendations about accountability and transparency
in this field. Could you briefly identify the areas where you
think accountability and transparency have been improved as a
result of the Act?
Mr Sprague: The short answer to
the question is yes. Clearly the Export Control Act 2002 and the
subsequent secondary legislation of 2004 is a major improvement
on what we had before which, as you all know, was legislation
dating back to 1939 which essentially said that export control
is the responsibility of the government, full stop. At least we
now have in law a section of relevant consequences so everybody
is clear about why we have export controls and the need to stop
undesirable activity. It is a shame for us that things like sustainable
development and, for Amnesty, a specific reference to torture
are not in the list of relevant consequences, but by and large
I think it is extremely important to have these things clearly
specified. I think it is also great that we have new controls
on things we did not have before. However whilst not comprehensive—and
I am sure we are going to come onto that—the new controls
on brokering, technology and intangible transfers are now included
in controls that we did not have before. If you look at the annual
reports it is clear that there are activities taking place that
are now licensed that were not before. In 2005, for example, there
were 71 trade control licences that were applied for for brokering
activities and five refused. Before 2004 none of those things
would have been controlled. I think it is also good that there
is a requirement that government has to be accountable and report
to Parliament on its export control policy every year. There are
areas which I think increasingly relate to what we would say would
be the globalisation of the defence trade where the national based
export control system has been slow to adapt and in many cases
has struggled to adapt. It is not just us who are saying that;
the Government, industry, other governments in Europe are increasingly
looking at issues of components (licence, production and subsidiary
companies).
Q3 Chairman: Excuse me for interrupting,
is this an issue of accountability and transparency or is this
an issue, in your view, of the regulations to control simply not
being there? I want to come onto some of these questions of policy
in a moment, but in terms of accountability and transparency are
there particular areas where you would be looking for greater
transparency and greater accountability as such?
Mr Isbister: Maybe I can give
an example of how this can be problematic. Incorporation would
be an example and this relates to the guidance. With the new Act
and with the consequences of export control we are very pleased
with that, but when the Act was going through Parliament we were
concerned about the way that actual guidance was issued to licensing
officials, et cetera, and we were calling for Parliament
to be more involved in the event that there were changes of substance
in the guidance, not changes in the number of copies of the licensing
application you have to send. We were looking for a resolution
procedure, affirmative or negative, from Parliament to be applied
to these changes. That, we thought, would improve accountability.
We were assured that this was not necessary and that consultation
would be entered into before any changes of substance were made
and yet within just a few months of the Act entering into force
new guidance was issued for cases of incorporation which, to our
mind significantly weakened the then existing guidance. This was
issued retrospectively so there was no consultation or debate
on this; there had already been licences issued under the new
guidance. This would be an example where there are improvement
in accountability and transparency that have not gone as far as
it should have done.
Chairman: Thank you, that is very helpful.
We will come back to that specific issue of incorporation a little
later on.
Q4 Mr Horam: In your response, Mr
Sprague, to the Chairman's initial question, you mentioned the
issue of sustainable development which is a very big issue, very
much in use these days, particularly in the context of climate
change and world poverty and so on. I just wonder how you see
sustainable development playing a role in arms export. What do
you really mean by sustainable in this context?
Mr Sprague: Last year I would
have answered that question seeing as I was representing Oxfam,
but I will hand over to my colleague.
Mr Gray: That is a really good
question. For us it is absolutely essential that there are sustainable
development criteria at the heart of the Government's export controls.
Q5 Mr Horam: I know that, but I want
to know what you mean by sustainable development in this context
of arms exports.
Mr Gray: I think we would see
sustainable development in two particular areas. The first one
is about preventing irresponsible arms transfers which we know
fuel conflict and which undermine security which therefore undermines
development. We see irresponsible arms exports as potentially
threatening development but there is the other side which the
Act addresses more which is about excessive and irresponsible
spending by developing countries in terms of arms purchases.
Q6 Mr Horam: They are spending so
much money on arms they cannot spend it on development.
Mr Gray: The economic and technical
capacity and whether that is comparable with the actual capacity
on the ground and whether the transfers that are going there will
actually be useful in aiding that country to increase its security
and look after its population.
Q7 Mr Horam: What would be a trigger
for your concern about sustainable development? Would it be the
sheer accumulation of arms in a particular country, for example?
Is that the sort of thing you would look at?
Mr Gray: If you look at the way
that criterion 8 of the EU Code of Conduct has been elaborated
there is a system of triggers which is based firstly on the amount
of the actual exports and the financial value of the export and
also the level of development of the country to which the export
is going. There is a kind of double filter system there. Then
once you have triggered the criteria then underneath that in the
elaboration there are a whole set of indicators which will allow
you to judge whether or not that transfer should go ahead.
Q8 Mr Horam: In other words there
is a clear framework in which you could regulate sustainable development
and bring it into account in this area.
Mr Gray: Yes, absolutely. If you
look at the table in the annual report—Table 3.2—which
actually documents the reasons for refusals of transfers we are
surprised that there are not any refusals against criterion 8.
We have been looking at some of the reasons why that might be.
I think that we would conclude that one of those reasons is certainly
that those applying the criteria are not applying the sustainable
development rigorously enough. Part of the basis for that is that
if you look across Europe at the Consolidated Report since 2003
there have been 52 refusals based on sustainable development and
the UK has just refused one back in 2003.
Q9 Mr Horam: So the UK is not paying
sufficient attention to the outcomes of sustainable development.
Mr Gray: We would want the Committee
to question whether or not there is sufficient rigour being paid
to the criteria of sustainable development given that there are
all these refusals going on across Europe but very few in the
UK. One of the suggestions might be for the Government to talk
to the French Government who, out of a total 52, have actually
been responsible for 42 of those refusals. It might be that the
French are applying the criteria in a slightly different way to
the UK.
Chairman: I do not know whether there
are particular exports that you have in mind, transactions that
you believe would fall foul of criterion 8. I am not asking for
an on the spot answer now, but if, over the next few weeks and
months, there are examples of transactions that give strength
to your argument on this we would be very pleased to hear from
you.
Q10 Mike Gapes: Can I ask you about
extra-territorial controls? Your memorandum to us—paragraphs
12 to 16—calls for an extension of extra-territorial controls
and new categories to be created. Can I put it to you that that
position is a little bit at variance with the evidence we have
had from elsewhere? EGAD say that extra-territorial controls are
virtually unenforceable and they have given us examples of conflicts
between national jurisdictions and difficulties in interpretation.
How do you respond to that?
Mr Isbister: I suppose this is
following up on something that Ollie said in answer to the first
question. This is one of the areas that is clearly difficult to
deal with and we have already had discussions (where industry
and government have been present) about the review and this is
one of the areas that is acknowledged as being difficult and in
need of further exploration. If we come back to first principles,
the Export Control Act—again as Ollie has said—is
about dealing with consequences and if the activity that has been
entered into by UK persons or by people or companies in the UK
has consequences that we consider unacceptable there has to be
a way found to deal with this. I think that we can but it is going
to be a long process; not too long, but it is going to be a complicated
process. As I have said, we have been having discussions with
industry and with government and the idea that there could be
a third category is something that everybody seems to think is
worthy of further exploration and explanation. We have the slightly
strange situation at the moment whereby items which can be considered
on occasions, a legitimate subject for transfer, lumped in with
the brokering goods that are clearly always beyond the pale, such
as torture equipment. But there are particularly sensitive goods
where a greater than average level of control should be applied
and one of the obvious ones is small arms and weapons for example,
which seem to be the weapons of choice in conflict and the type
of weapons that brokers are involved with all the time. The current
regime internationally is not dealing with this problem.
Q11 Mike Gapes: Is there not another
problem which is not specifically about categories of weapons,
it is actually about categories of countries or nationals of certain
countries? Some countries—the United States is one—apply
rules whereby if something is deemed to be exported onto somewhere
else it can actually lead to a prosecution because nationals of
that country are not permitted to be receiving exports from the
US. In those circumstances is it not going to be impossible for
us to get an international regime which covers all of these areas?
Mr Isbister: There is work internationally
to improve the controls on brokering but I think that is one of
the reasons why individual countries do have to do more to address
brokering. The controls on brokering as they exist at the moment
around the world are not strong enough. Individual countries do
have an opportunity to try to have more effect on their nationals.
Getting evidence, for example, from overseas is problematic but
if you introduce the licensing regime so that you require a licence,
for those people who do not get a licence what you have to do
is prove the connection with the deal—you have to prove
a single connection with that deal—and that they have stepped
outside the law. You do not have to trace that deal right from
the source to the final destination to find out whether someone
has been in breach of the law. For transfers to embargo destinations,
at the moment you have to prove that link right from the source
to the embargo destination before you can get a prosecution of
an individual, whereas if you extended the concept of extra-territoriality,
even if you could only prove that a deal made to a state bordering
an embargoed destination, if there is no licence you still have
grounds for prosecution.
Q12 Mike Gapes: The essence of this
is that there are some countries which have some approaches which
are at variance with our own approach and the logic of extra-territoriality
is if we in the UK are to apply the rule as regards nationals
of other countries being involved then similarly presumably our
government would therefore accept that whatever the US system
is should apply to UK citizens.
Mr Isbister: I think that is where
the use of open licensing and that kind of thing has to come in.
Yes, it is a difficult situation and it also involves speaking
with other states, but we should be working with partners not
necessarily all states of the world but with EU partners et
cetera. If we could agree a common regime with a certain number
of partners then we would go a long way to solve some of these
problems.
Q13 Mr Keetch: Moving on to transportation
and financial services, the 2002 Export Control Act gives the
Government powers to regulate these ancillary services but the
Government has chosen not to do so, except in restricted goods.
You have argued that the Government should be doing that. How
would the British Government physically do that with exports that
may not actually pass through the UK? How would you follow the
paper trail?
Mr Isbister: Transportation and
financial services are interesting because these are the types
of operations which touch on arms deals peripherally if you like,
it is not necessarily central to their business. If you set up
administrative structures and rules that they have to follow they
have a strong interest in following those because they do not
want to put their business at risk over individual transactions
that are going to cause them problems. It would seem to me that
they are a point of leverage to apply. Transporters operating
out of the UK have a raft of things that they have to look at
already—regulations covering hazardous goods, section five
requirements applying to the movement of firearms—so extending
that to look at export controls as a whole does not seem unreasonable.
I am sure you would not capture all circumstances; it is about
widening the net. If you had any transporter involved in moving
stuff through the UK or on behalf of UK persons who themselves
fall within the licensing regime, what they have to do is to find
out: is this good controllable? If it is, where is your licence?
The same would go for financiers.
Q14 Mr Keetch: You would be confident
that the Government could physically track those things; it is
possible to actually do that.
Mr Isbister: Yes, then you kick
into the whole enforcement and implementation side of things.
You have to put the resources in so that transporters and financiers
know that they are potentially subject to potentially random compliance
visits, especially if you are using intelligence based policing
and enforcement then pseudo-random visits would be made for a
purpose. You need to introduce that as well so that transporters
and financiers know that they do have to do their job properly
or there are risks that they run.
Q15 Mr Keetch: On the specific point
of restricted goods the Government tell us that they do do this.
Do you have any evidence that they are not doing that on restricted
goods or do you have any evidence that that regulation is falling
down?
Mr Sprague: Can I just go back
to one point that I think is relevant about your control of the
transport sector? The transport sector is regulated by a whole
raft of commercial practices (there are invoices, manifests, airway
bills) all of which should specify the movement of strategic goods
on them for a variety of reasons, so there is already an audit
paper trail through the transport sector of the movement of goods
from A to B. In that respect the harmonisation of that process
and bringing that process more within an export control situation
would be extremely helpful and, I would argue, not entirely difficult
to do. Back on your specifics, if you look in our submission this
year (and I think last year) Amnesty International did document
a case of a UK based transporter where we believed we had prima
facie evidence of a potential breach of embargo.
Q16 Mr Keetch: That is why I asked
you the question.
Mr Sprague: It is the movement
of strategic goods from one country into central Africa and a
UN panel of experts who have looked at the documents and have
concluded that in all likelihood the stuff was going to go to
the Democratic Republic of Congo. It appears to us from our own
sources, that the investigation that was done on the company was
to go around to offices and maybe have a quiet word with them.
There does not seem to have been an attempt to analyse the documents,
look at their computer records, look at their invoices, interview
the crew that were involved, take any other eye witness testimony.
It is quite interesting that this particular company—since
it has been involved in supplying 250 tons of munitions into central
Africa, the consequences of which are extremely likely to be very
serious indeed—has since been given two government contracts
to supply humanitarian goods, one to Haiti and one to New Orleans
for Hurricane Katrina. That, to me, does not send a very clear
message that being involved in the trafficking of weapons to conflict
zones is something you should not be involved in.
Q17 Mr Keetch: Is that the prime
example of where you would say that the implementation of that
regulation has not been done?
Mr Sprague: We can only go on
evidence when we come across it and that is one specific example
where we have evidence and documents that appear to me to be pretty
strong.
Q18 Mr Borrow: Moving onto the issue
of dual-use items, you have come forward with some proposals to
perhaps strengthen that area. How would this work?
Mr Gray: The idea that we are
proposing is around a military end-use catch-all clause. It is
clear from the work that we have been doing and a lot of research
work that went into a report on the globalisation of the arms
trade Arms Without Borders which was published recently.
The globalisation of the arms trade means that occasionally goods
that are of critical importance to the operation of the weapons
system will by-pass the licensing system as they are not falling
into any of the definitions or specifications on the control lists
themselves. We think that with a list based system inevitably
as new technology arises you are going to miss certain goods and
that a military end-use catch-all clause would help the Government
to actually control these items that are outside the dual-use
list. Whether or not it is reasonable for the Government to expect
a transporter to actually take an interest and responsibility
to actually report the fact that they think their item may well
be at risk of ending up in some sort of military system is a question
to which we would say the answer is certainly yes. The answer
is yes because the Government already expects exporters who are
producing and exporting goods which they think could be intended
for use in weapons of mass destruction in military systems destined
for countries under embargo or any military items that have been
exported from a state without authorisation from that state or
in violation of an authorisation should have to notify the authorities
that they think these parts may be ending up on these categories
and the authorities would then make a judgment on whether or not
the export should go ahead. It clearly places a responsibility
on exporters but we think the level of responsibility is fair.
We do not expect this to overwhelm the export control system and
without this we think that goods will continue to end up by-passing
the controls which you could reasonably expect the goods within
a final product to be caught by.
Q19 Mr Borrow: In effect you are
asking for exporters of dual-use products to ask questions as
to where that particular bit of equipment is to be made up.
Mr Gray: Yes.
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