Examination of Witnesses (Questions 100
- 119)
THURSDAY 20 MARCH 2008
MR OLIVER
SPRAGUE, MS
MARILYN CROSER,
MR ROY
ISBISTER AND
MR MARK
PYMAN
Q100 Sir John Stanley: We would be
very grateful for the Victor Bout material you offered to the
Committee. Do any of your colleagues highlight any particular
loopholes beyond that?
Mr Sprague: I would like to reinforce
what Roy said about how we fully support the small arms and light
weapons as a good way to start but we are repeatedly told here
what is important is the evidence base. What does the evidence
tell us about what brokers are doing? If you look back to the
case of John Knight, the allegations that surfaced in 2004, the
documents that Amnesty International produced to the Government
were a series of end-use certificates with John Knight's name
on it for the Government of Sudan. On those end-use certificates
were a number of items which you would not want to be brokering
uncontrolled and they were multiple launch rocket systems, tanks,
various armed vehicles and artillery systems. Yes, there were
small arms and light weapons on them. There was a consignment
of pistols from a Brazilian manufacturer but the majority of those
end-use certificates by a now convicted British broker were not
small arms and light weapons. I do think the evidence points to
the fact that brokers are increasingly offering a whole range
of military equipment on the list, not necessarily the entire
Military List but there are clearly items such as tanks, vehicles,
rocket launch systems and helicopters which you may want to control.
Q101 Richard Burden: Continuing on
the end-use theme, obviously there have been controls in place
for some time regarding end use for components associated with
different forms of weapons of mass destruction. A law is now being
made to strengthen things as far as torture equipment is concerned.
NGOs have suggested that it should go beyond that, that we should
be looking towards effective end-use controls on items that could
find their way into anything that would end up on the Military
List. You probably heard the representatives of EGAD say if you
tried to do that in the way suggested it would paralyse industry.
How do you think that the kind of system you are suggesting would
actually work if there was an obligation on exporters to make
reasonable inquiries where they had suspicions, or they were alerted
to suspicions by the Government? What would they be required to
do particularly if they did not have any staffing or operation
in the country where the end use is going to happen?
Mr Sprague: From the evidence
before you might be under the impression that all of British industry
is involved in selling non-licensed components for the development
and manufacture of weapon systems. I do not believe that is the
case but I do believe there are certain instances where specific
non-controlled military equipment is incorporated into military
systems. I think that the concept of supplying end-use controls
on these things is already established. It is increasingly being
established, as we have heard, in the dual-use regulations. Non-listed
items into military systems going to embargo destinations are
covered. It is covered for WMD.[13]
It is going to be covered for the torture equipment. The test
in the torture equipment is quite interesting. The test is about
knowledge or the Government informing; it is not about suspicion.
I do not think we are saying there has to be a suspicion that
these things are possible. There has to be knowledge or being
informed by a competent authority that this is the case. In the
appendices to your last year's report there is memorandum from
the Foreign and Commonwealth Office, I could be mistaken, about
the infamous Land Rover case and the follow-up from what happened
in Uzbekistan. They are already running an informal military end-use
control system which goes way beyond what we would be arguing
for. You may wish to ask the Government for more details about
it. Whether it goes beyond just the case of Turkey, Land Rover
as a company are informing BERR, the ECO, of all exports of non-licensed
vehicle kits going to Otokar in Turkey for turning into military
vehicles and then passing information about onward export from
Otokar to other destinations. That is working across all of Land
Rover's arrangements. There are similar arrangements in place
for Pakistan and Malaysia for example. If that system is working
then there is already recognition within government that military
end use controls of this nature need to be applied.
Q102 Richard Burden: Moving to a
slightly different issue, this a question to Mr Pyman which relates
to things that Transparency International have said particularly
in relation to the A Q Khan case. You were very much of the opinion
that what that case demonstrated was that the British system is
built around pre-licensing checks and not a lot goes on in terms
of checks after the goods have been exported. Could you perhaps
say a little bit more about that, either in relation to that case
itself but also lessons you learnt from that to improve the situation.
Mr Pyman: Our concern is not that
the A Q Khan saga brought up British companies. Our concern is
that, if we are worried about diversion, and, from our perspective,
corruption causing diversion, without some degree of knowledge
or some degree of auditing, you are very much in the dark as to
whether this is a tiny problem, a medium problem, or a huge problem.
I recall the surprise when the A Q Khan saga came to light. For
us, it is a very simple issue, that we would really hope to see
some kind of post end-use checking of what has happened to a percentage
of the licences, which would not necessarily pick up an A Q Khan-type
of issue but it would certainly give you a much more sound base
to know whether there is an issue of substance or whether it was
remaining at lower, acceptable levels.
Q103 Richard Burden: How would that
system of checking work? What would it look like?
Mr Pyman: The nearest analogy
is the system that the US has with the Blue Lantern programme.
You have a little set of red flags to say "Do we have any
reason for concern about this particular export?" If you
do, then you follow up in a small percentage of the cases to see
whether you were right or whether you were wrong. In the case
of the US system, it is very modest. If I remember rightly, they
have about 70,000 licences a year and they check around 600 or
700, and of them they find with about a quarter or a third there
is something wrong. To me, that would be a model and it would
work through the representations overseas through the UK Government
offices.
Mr Isbister: Just to pick up on
that, the 600 or 700 checks that they do include pre-licence and
post-licence checks, so the number of post-licensing checks is
even lower than that. So it does not seem unduly burdensome.
Q104 Mr Hamilton: You will have heard
me earlier putting questions to the representatives of EGAD about
the al-Yamamah contract. I also mentioned the Secretary of State
for Defence's evidence to this Committee on 17 January. At that
evidence session we put to him Transparency International UK's
proposal for the enhanced monitoring of the new al-Salam contract.
He responded that he did not accept the proposal and it was unnecessary.
Transparency International then stated to us that "There
will be a body of opinion in Saudi Arabia that will welcome higher
confidence in the integrity of this contract, given the damage
and embarrassment caused by the al-Yamamah contract. There is
no reason why both Governments cannot agree on measures to show
that al-Salam is a `perfectly proper contract'. This will require
a degree of independent verification. We urge the Committee to
impress upon the Government the importance of working pro-actively
with their Saudi counterparts to agree such measures."[14]
My first question to you really is why is it—is there any
particular reason why defence exports are more likely to be tainted
with corruption than, say, civil exports?
Mr Pyman: We think they are more
likely to be tainted with corruption. The evidence is mostly corruption
perceptions evidence: if you look at the Transparency International
Bribe Payers index in 2002, it is the one that asks many thousands
of businessmen "In which sectors do you find the most bribes
to be paid?" and the top three sectors are public construction,
then arms, then oil. That would be a fairly wide evidence base.
If you look at similar surveys—the Americans have done something
similar—that come up with the top three or four industries
at risk, of which arms is one. One of their mechanisms is that
their Commerce Department has a mechanism by which companies can
register complaints about bribery. In the second half of the 1990s
50% of the complaints were about defence bribery, even though
that is only about 1% of world trade. You hear the same thing
borne out when you speak to either government officials or defence
officials, who say that in the past bribery has been an extremely
common practice. That is changing, but to us, that is enough evidence
that says yes, defence is more at risk.
Q105 Mr Hamilton: You mention the
top three being construction, defence and oil. Is that because
the contracts in those areas are much, much higher than, say,
other civil exports, the actual individual contracts? Is that
the reason?
Mr Pyman: I think it is partly
the nature of the contracts. All three of those are large, irregular
contracts and that always offers more opportunity. In the case
of construction, there is such a huge volume of large-scale construction
contracts, and that is not true of arms. In the case of arms,
the historical issue has been much more around secrecy, that if
they are not openly competed and there is not open pressure on
the contracts, it is that much easier to pay bribes or influence
the outcome.
Q106 Mr Hamilton: Can I just come
back to the point you made about al-Yamamah and Saudi Arabia?
You said that there will be a body of opinion in Saudi Arabia
that will welcome higher confidence in the integrity of this contract—that
is the new contract—given the damage and embarrassment caused
by al-Yamamah. Can you identify that body of opinion? Where is
that opinion? Saudi Arabia is a very closed society. Who will
express that opinion in a society that is not really very free?
Mr Pyman: Can I answer that in
a roundabout way?
Q107 Mr Hamilton: Please do.
Mr Pyman: Firstly, one of my tasks,
as the leader of the defence work for Transparency International,
is to meet with a lot of defence ministries around the world on
this subject, whether it is the Defence Minister or the equivalent,
the Permanent Secretary, and we have been astonished at how many
of them are interested in addressing this problem of corruption
in defence. They see it as a historical problem, with all sorts
of reasons of Cold War politics and the like, and they see it
as a problem that they are increasingly trying to address because
it wastes huge amounts of money and because the national security
aspects of the country are compromised if the Defence Ministry
is seen to be corrupt. That is a general comment and it applies
to Middle East countries as well as countries in other parts of
the world. Secondly, we have asked a lot of people in relation
to the Saudi contract what would be the best way of restoring
the UK's reputation for anti-corruption, and the regular answer
has come back that even if there is no solution to all the saga
around al-Yamamah, at least make it very clear going forward that
there is integrity around the new contract, and that includes
people with very good knowledge or very good information from
the Middle East. No government is a uniform composition of views,
and in Saudi Arabia there is clearly change. Just last week when
King Abdullah was opening the Shura Council, he announced very
clearly that, as part of addressing the needs and concerns of
society, they would amongst other things be setting up a national
committee for protecting integrity and addressing corruption.
Does that mean defence? I do not know. It might well not, but
is it a sign of significant change in the society? Yes, it is.
Q108 Mr Hamilton: The question I
asked the previous witnesses was: do you think that the failure
of the SFO to prosecute on al-Yamamah and the corruption allegations
there has damaged the British reputation for fighting corruption?
Do you think it has?
Mr Pyman: Yes, I do, but it is
not specifically a defence issue. If we speak to people in countries
or people in large UK businesses, our feedback is yes, it has
damaged the image of UK anti-corruption, which generally has been
rather good. Has it specifically damaged it in defence? That is
a much narrower question and I do not have enough industry discussions
to give you a representative answer.
Q109 Mr Hamilton: Would other witnesses
on the panel agree that we have been damaged by this?
Mr Isbister: I do not think we
are experts in that but I seem to recall some conversations, possibly
in South Africa, about a very negative response to the inquiries
into the large South African procurement on the back of what had
happened with the Serious Fraud Office investigation.
Q110 Chairman: May I briefly ask:
were you astonished when the former Secretary of State for Defence
said that you either bribed and got the deal or you did not bribe
and you did not get the deal in relation to UK arms exports to
Saudi Arabia in the past?
Mr Pyman: When we hear reports
like that, or when we speak to companies, we get a very common
answer, which is that 10 years ago, 20 years ago, yes, that was
common. It was common not just in relation to the UK but in relation
to defence companies selling and governments receiving. Is it
becoming less common today? Yes, we believe so, and there are
many reasons we could go into as to why that should be the case.
Q111 Sir John Stanley: I want to
point out a paradox on cluster munitions and I hope you may be
able to give us your views as to how the paradox may be overcome.
As you know, cluster munitions, unexploded, are identical physically
to all intents and purposes and have exactly the same effect on
civilians as anti-personnel landmines. As far as anti-personnel
landmines are concerned, we went through a period where people
gradually became aware that the moral case for banning them was
superior to the military case for retaining them and, as a result
of pressure around the world and some very high-profile support
for the campaign, we achieved the International Convention. We
are nowhere near that as far as cluster munitions are concerned,
and those of us who have been to see the clearing of cluster munitions
in southern Lebanon, where we saw the largest ever use of cluster
munitions unexploded in the fastest space of time, when we had
the war in southern Lebanon, realised what a terribly dangerous
form of weapon these are, and there have, of course, been the
predictable numbers of civilians who have been killed or have
been maimed for life. I would like to ask you what are your views
as to what more the British Government can be doing to try to
put the same degree of international momentum behind a ban on
cluster munitions as was successfully achieved in getting a ban
on anti-personnel landmines.
Ms Croser: There is a growing
international momentum behind the call for a ban on cluster munitions.
There is a conference coming up in Dublin in May at which it is
very likely that a treaty will be negotiated and agreed. The UK
Government have been involved in this process, the Oslo process,
and were one of the original 46 signatories to the Oslo Declaration.
They have also since then seemed to suggest a preference for pursuing
the CCW process, the Convention on Conventional Weapons process,
over the Oslo process. However, the CCW has failed to make inroads
into making progress. What we do not want to see is the UK Government
seeming to use the CCW as an excuse for not really getting right
behind Oslo in the way that it should do. The UK Government have
attempted so far to argue for certain exemptions within the treaty,
exemptions based on type of munitions, transition periods, as
you just described, and possible exemptions based on joint operations
involving states that would not be party to such a treaty. We
really want the UK to be right at the very heart of developing
a new ban on cluster munitions. We do not want them to be at the
edges, in discussions about exemptions. This is a new, international
instrument, widely supported by developing countries, that will
lead to the better protection of civilians in conflict and the
UK Government should really be driving that forward.
Sir John Stanley: Do any other witnesses
want to contribute to what the British Government might do more?
Thank you.
Q112 Malcolm Bruce: There have been
concerns specifically about the supply of arms and inappropriate
equipment to Burma, particularly given the problems last year.
The International Development Committee actually went to Thailand
and visited a refugee camp on the Thai-Burma border, and, in the
context of that report and your own memorandum, were concerned
that actually the Indian Government seemed to be remarkably unconcerned
about what it supplied to Burma, and actually possibly less concerned
than the Chinese. The first question I want to ask is, in your
own memorandum you quote The Hindu and the fact that the
Indian Government sold BN-2 `Defender' Islander maritime-patrol
aircraft to Burma. When the UK protested about this, an unnamed
senior naval officer was quoted as saying "We should tell
the UK where to get off."[15]
Subsequently they took a different attitude when the EU intervened
on equipment, military helicopters, supplied by other Member States—Belgium,
France, Germany, Italy and the UK. Why do you think the Indian
Government was more receptive to the EU than it was to the UK?
Mr Isbister: The obvious difference
between these two cases is that the UK does not place any contractual
re-export limitations on equipment that moves from the UK, and
amongst the six EU Member states who had equipment or technology
which makes up variants of those military helicopters, some of
those states do place re-export controls in the contracts and,
of those six, Italy probably has the tightest controls. For India
to export those helicopters to Burma, they would have been in
contractual breach in that case, and that would not have been
the case with the UK.
Q113 Malcolm Bruce: You say the UK
Government do not do it. Do you mean they never do it as a matter
of policy?
Mr Isbister: Certainly it is almost
never. There may be exceptional cases.
Q114 Malcolm Bruce: Should they not
do it?
Mr Isbister: Absolutely, and you
have had the then Foreign Secretary giving evidence to this Committee,
saying that in this case of the aircraft going from India to Burma,
with the benefit of hindsight, maybe we should have acted differently.
Q115 Malcolm Bruce: We still have
no control over it given that they have just transferred two more,
I understand.
Mr Isbister: Two sets of two have
gone.
Q116 Malcolm Bruce: I just leave
on the table the fact that, again, our Committee expressed concern
that the world's largest democracy seemed to be very happy to
supply weapons to the world's most oppressive regime. It does
not reflect well, I have to say, on the country.
Mr Isbister: In the last few months
it has been reported that the Indian policy on supply to Burma
has changed. It was initially reported, I think in the Washington
Post, that India had stopped supplying arms to Burma. There
was a policy of not supplying arms to Burma. That has since been
corrected, as I understand, to say India is still willing to supply
to Burma but is looking at possible exports more carefully and
has not transferred equipment in recent months.
Q117 Malcolm Bruce: I thought that
transfer of the two aircraft took place in January.
Mr Isbister: It has been reported
in a couple of different places. I have seen it reported as taking
place in 2007. It is often difficult to track exactly when these
things happen.
Q118 Malcolm Bruce: It was reported
in Jane's Defence Weekly on 16 January under the headline "Indian
arms sales to Myanmar remain under scrutiny".
Mr Isbister: I am not sure if
the transfer took place in January or whether it was just reported
in January.
Q119 Malcolm Bruce: To finish on
that issue, what about China? Again, we picked up some sensitivity
that the Chinese, after all, are looking to get water and energy
supplies out of Burma. There is some awareness that an unstable
Burma with the possibility of disruption of those supplies is
not in China's interest. The implication was that China asks more
questions than India does. Is that in fact the case and, in the
circumstances, do you think it is sensible for the UK and Europe
to be talking about the restoration of arms sales to China, particularly
perhaps not only in light of Burma but recent events in Tibet?
Mr Sprague: It is probably best
for me to answer the first part of that question. I will come
on to China in a minute but if we look at the sending of military
and police equipment to Burma, it is not just China and India.
We produced a report in the autumn and it fingers a number of
governments. For example, the Russians between 2002 and 2007 sent
100 artillery systems; the Ukrainians in 2004 sent a number of
armoured vehicles; Serbia and Montenegro in 2004 sent large artillery
systems. It is a global problem. China is a significant supplier.
It was reported that they supplied at least 400 military trucks
in 2005, and you only need to look at the TV images and the press
images to see those trucks in operation, involved in serious human
rights violations. China is not exempt from the globalisation
arguments that we have been talking about, because the two manufacturers
that supplied this equipment, a Chinese company called Dongfang
and another company called First Automobile Works have co-operation
agreements with American and German companies to supply. We do
not know that American and German components are in these actual
vehicles. Burma is a very closed society and we cannot get in
to look at the vehicles, but there is a reasonable risk that that
is the case. They clearly do co-operate in supplying components
to these two companies. A similar thing with the Ukrainian example
of armoured vehicles. The Ukrainian company themselves still claim
that those vehicles have been developed in co-operation with Germany
and America for transmission systems and—
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