Examination of Witnesses (Questions 180
- 199)
MONDAY 19 MAY 2008
MR MALCOLM
WICKS MP, MR
JOHN DODDRELL
AND MS
JAYNE CARPENTER
Q180 Mr Oaten: But at this moment
there is no fine.
Mr Doddrell: It would not be a
penalty. Yes, they would be in breach of their licensing conditions
and therefore would be breaching the law and Revenue and Customs
could decide to bring a prosecution. The difficulty in this area
is that when we are talking about relatively minor, purely administrative
offences for goods where the licence would have been granted anyway,
then the courts might decide that they would not impose a penalty
for that and the Revenue Prosecutions Office might not be willing
to take it to court because the prospect of getting a significant
worthwhile result was not great.
Mr Wicks: Sometimes we are, as
I said earlier, only talking about minor record-keeping errors.
We do not want to see such errors, we need to think this through
but I do not think we would want to prosecute in all those cases.
Q181 Mr Oaten: I know a large number
of companies that make slightly minor admin errors in their returns
are pretty well picked up on by Customs and Excise and charged
a great deal of penalties for that. It happens all the time by
Customs and Excise.
Mr Doddrell: There may be a financial
loss to the Exchequer in the tax context.
Mr Wicks: I think we want proportionate
responses to our exporters, many of which are doing a good job.
Q182 Mike Gapes: Changing the focus,
last year the Committees in our report expressed concerns at the
Government's "light touch" towards academic institutions
and pointed out that very few academics and scientists in academia
seem to be aware of the legislation and many who seem to be aware
of it seem to ignore it. We were very concerned that the Government's
response to us said that you were taking our concerns seriously
and that you were going to meet with the representatives of academic
organisations and produce a plan to raise awareness and understanding.
Can you update us what has happened since our report and your
response and are you satisfied where we are now or do we need
to do more?
Mr Wicks: One of my colleagues
may add more information but this is an important area for obvious
reasons. Can I emphasise again that the academic sector is required
to adhere to UK export controls in exactly the same way as any
other sector so it is covered by the law. I guess in practice
our main area of concern rightly has been about the potential
transfer of technology that could be used for the weapons of mass
destruction, so controls in this area are not lacking. However,
I think we do realise that there is a significant problem, as
we acknowledged earlier, which is partly about lack of awareness
of export controls and we are working with the academic community
on an improved awareness strategy. Perhaps one of my colleagues
could give some details of that.
Ms Carpenter: We have met with
the Royal Society and Universities UK and have been working with
them on a strategy. Our awareness team has I think planned some
joint events with them. One of the main problems with the sector
is for us targeting the people who need to know about this and,
for example, one of the suggestions that the people we met had
was that we should look more at targeting registrars than doing
broad based awareness, so that is something that we are doing.
We have an ongoing discussion with them about the best sorts of
events to put on and how one might do joint events with them in
order to target the most appropriate people.
Q183 Mike Gapes: We have an absolutely
huge higher education sector in this country. We have hundreds
of thousands of foreign students and we also have academics on
secondment and links between institutions and we have the internet
and the ability for people to email all kinds of stuff which we
might not necessarily want to get into the wrong hands. We are
not just dealing here with individuals, are we, the next generations
A Q Khan or whoever it is; we are actually dealing with a situation
where somebody at a relatively low level could inadvertently and
foolishly transfer some information to another institution or
individual somewhere in the world which was then useful. It is
not the actual hardware you are sending—it is the plans.
What can we realistically do to stop this? Talking to registrars
in itself is not going to solve the problem, is it?
Mr Wicks: One thing we do is to
prevent students where there are legitimate concerns from entering
the country to attend courses where such technology might be imparted.
I am advised that this is now achieved by the recently introduced
comprehensive and compulsory academic technological approval scheme.
Q184 Mike Gapes: Is that run by the
Border and Immigration Agency by any chance?
Ms Carpenter: Yes, it is connected
with the visa.
Mr Oaten: I will not make a comment on
that. I have some issues with that organisation but this is not
the place.
Q185 John Battle: Could I switch
to the question of the re-exports because in the Committees' report
last year there was a recommendation that it should be a standard
requirement of licensing that export contracts for goods on the
Military List contain a clause preventing re-export to a destination
subject to UN or EU embargo. I am a new member now but apparently
this Committee raised the issue with the former Foreign Secretary,
Margaret Beckett, and raised particularly the re-export of maritime
patrol aircraft from India to Burma, explaining that it might
have been better to have included a clause in the export contracts
that prevented re-exporting them. I think the Foreign Secretary
at the time accepted that. We just wonder why that proposal to
require that clause has not formed part of the Government's response
to the 2007 Review of Export Controls. Has it been dropped or
are you still continuing with it?
Mr Wicks: First of all, where
we understand that goods will be re-exported by the recipient
country we assess the risks associated with that. There was the
case of helicopters being re-exported from India to Burma and
of course none of us wish to see anything being exported to Burma.
We have been assured that the Indians have assured us that they
had no intention of supplying the helicopter to the Burmese. If
I read that correctly on the original application it would have
said "for re-export to Burma". That, apparently, was
not the intention. We would not have been able to have picked
that up.
Q186 John Battle: Why not an initial
clause to build it in to the terms of the agreement? Is there
a legal barrier to that or are there practical difficulties?
Mr Doddrell: I think it is the
practical difficulties. Once the goods have left the UK it is
very difficult to stop them going anywhere else. Our preferred
approach for some time has been to factor all these considerations
into the initial licensing decision, and if we judge that there
is a risk that helicopters going to a recipient in India would
then be re-exported on to Burma then our preferred approach is
to stop them going to India in the first place.
Q187 John Battle: You do not have
to monitor them as it is retrospective, is it not, if the clause
is there? If you have a clause saying "if you re-export this
gear you are in trouble with us when it comes to your next contract",
you do not have to be following the trail of where the goods are
being sold.
Mr Wicks: I do not think it would
always be illegitimate for a re-export to take place though, would
it? It would to those countries but as a general provision that
kind of thing happens.
John Battle: You are saying that you
would have to list the countries under the caveat.
Q188 Chairman: In India, for a start,
Ashok Leyland were going to export military vehicles to the Government
of Sudan, as we all know, and thankfully our extra-territorial
controls because a UK citizen or two could have been involved
and those exports did not take place. With respect, India has
some form on arms exports. The second point is that does not the
United States as a matter of course have a re-export clause in
its arms export controls for precisely this reason, that it just
deals with a situation that could arise where British arms end
up in completely the wrong place for want of a single re-export
clause that requires that to be authorised? Is it that difficult?
Mr Doddrell: You are right, Dr
Berry, the US does have this in. I return to the point that we
factor the consideration into the initial application for an export
licence. One of the points we would take into account is the effectiveness
of the export control regime in the recipient country and if the
export was going to a country, for example, like Germany where
we might have full confidence in the export controls in that country,
we would say we do not need to monitor the onward transition of
the UK goods because we have confidence in the German regime to
do it. If it is going to a country that has a less effective export
control regime then if we are in doubt we will say do not allow
the goods to go there.
Q189 Chairman: We do export to countries
that we do know have either tried to or successfully exported
to countries subject to EU and UN embargoes.
Mr Doddrell: We would not then
allow the export to go at another time. If it went to a recipient
in India that was then exporting to a country that we would not
want the goods to go to, then we would be aware of the type of
business that that company was doing and we would look very carefully
at any further export licence applications that mentioned that
particular company.
Q190 Mr Borrow: In the arms defence
sphere a lot of the goods that are being exported have a very
long shelf life and therefore if we are exporting a military plane
from BAE or a submarine or a warship or something, that could
still be available for re-export by the country that we have sold
it to in 20 or 30 years' time when the regime in that country
is very different than it is now and therefore we are being asked
to make an assessment now of the sort of regime that would be
in place in 15-20 years' time in a country with whom we may have
very good relationships with now—it may be a good strong
democracy—and it would be an insult to that country to say
we are not treating you in the same way as we treat Germany and
therefore it seems to me that if we had a standard clause in contracts
which says that if you want to re-export this particular piece
of equipment at some time in the future when you want to update
a piece of kit you need to come back to us and ask us for permission
to re-export it. I would have thought if we had that as a blanket
clause you are not insulting India or any other country by treating
them differently than you treat Germany and you are not making
an assessment on what their regime will be like in 20 years.
Mr Wicks: It all comes down to
the practicalities of this, does it not? In that example where
you are saying a perfectly reasonable country now turns nasty,
yes, but I suppose nevertheless the implication of your recommendation
is that they would not be so nasty that they would not abide by
an agreement with the UK Government not to re-export. I am seriously
thinking about the practicalities of this.
Q191 Mr Borrow: Countries who maintain
relatively reasonable relationships with the UK, but if there
is not a legal clause in the contract they will to say irrespective
of our good relationships with HMG, we feel perfectly free to
sell this ship or helicopter to whoever we like, whereas if there
was a clause in the original contract, because that government
may well wish to continue to buy from us and we may very well
wish, or certainly my British Aerospace workers in Lancashire
may very well like to continue to make aircraft that could be
sold to that country, we need to maintain a good relationship
but also to make sure that things do not get into the wrong hands.
Mr Wicks: Let me look at this
again. Mr Berry, I do not know whether your Committee want to
look at this again to look at the practical implications of this?
Q192 Chairman: We will do, yes.
Mr Wicks: There is a general theme
here, is there not, which interests me and that is, given our
overall objectives which I summarised earlier in a very simple
way by saying we do not want bad countries with bad people to
get control of weapons while protecting the legitimate right of
people in decent countries to arm their forces and their police
and while protecting a major industry here in Britain, there is
then that subsidiary question as we seek to meet those objectives,
as opposed to the kind of ideals which we can all subscribe to,
what is it reasonable to expect the UK Government to be able to
do. That gets us into perfectly legitimate (no pun intended) territory
about extra-territoriality and these issues. It also gets us into
the realms of monitoring and what is practical as opposed to purely
good principle.
Q193 Chairman: I agree with that.
You must agree also that the only thing that matters in relation
to arms export controls is end use. The only thing that matters
is where arms go and how they are used. How they get there, all
the steps on the way, the things we try to control to prevent
nasty things happening, it is the ultimate end use of arms that
is concern—that is the only reason any of us are bothered
about it—so that is why we keep going back to ways in which
a handful of unscrupulous people can actually get round existing
controls.
Mr Wicks: Yes.
Mr Jenkin: There is one other consideration
which is that we do not want an export regime which is so cumbersome
and onerous that we are effectively doing away with thousands
and thousands of jobs needlessly. It is about a balance to be
struck.
Q194 Chairman: In terms of a policy
that seeks to constrain arms exports, the purpose of that policy
is the end use of those things. That is the ultimate thing—where
does the stuff end up? If it is not in country X, it is country
Y, then you should be concerned about country Y.
Mr Wicks: I certainly agree that
we must do our best to control the end use.
Chairman: In pursuit of that theme, Mark
is desperate to come in on another aspect of this end-use issue.
Q195 Mr Oaten: It is another one
where is it realistic to be able to do something and what can
we practically do on the issue of licence production overseas
and when the Committee looked at this last year we were concerned
to find there were some inadequacies in the system and felt that
there was a need to perhaps extend the number of controls on licence
production overseas. I think we got the impression from the Government's
initial response on public consultation that maybe it is something
that you were keen on and thought there was something which needed
to be done to tighten things up, but more recently in your final
commentary on that I think you decided that the debate is more
evenly divided and probably coming down against the idea of having
any extra controls in this area.
Mr Wicks: At the moment the door
is open. We are not convinced about the practical impact of that.
That is our position.
Q196 Mr Oaten: Is the view really
that if something were to go wrong the penalties that follow afterwards
are probably enough control at that point than having to put something
up front?
Mr Doddrell: We have quite a lot
of control on what goes to licence production activities anyway
under the existing controls because any technology transfer that
would go from the parent company to the licensed producer overseas
would fall within the controls. Usually if people are manufacturing
under licence overseas they require parts from the UK or machinery
from the UK and all of that would be controlled. There is a lot
that is already controlled anyway. The argument as to whether
we could extend it—I think we are at the point of not being
convinced that we would get that much more out of an extension
of the controls that would justify the additional burden that
we were putting on legitimate businesses.
Q197 Mr Oaten: The door is not quite
open; it is shutting a little on that.
Mr Doddrell: We went into the
initial consultation in a completely open way. The responses to
the initial consultation did not convince us that it was a route
to go down but, as the Minister has said, the door is not finally
shut.
Mr Wicks: It relates to the issue
about military end use which is an issue we are considering.
Q198 Chairman: At this point could
I raise the issue of overseas subsidiaries, which is a similarly
important issue. The Committee has urged the Government to consider
the position of UK subsidiaries overseas. An example in the press
today illustrates the nature of the problem. According to some
press reports I have seen, the arms that have finally arrived
in Zimbabwe from China, some might say the Government's efforts
to discourage the South African community from importing them—there
has been a lot of campaigning by government and trade union against
this—the word is that these arms have now arrived in Zimbabwe.
I have seen some online accounts indicating the name of the company
that has shipped these arms into Zimbabwe and a suggestion that
it is a subsidiary UK company. This is an EU embargoed destination.
If a UK national has been involved then under our existing extra-territorial
rules that person could be subject to prosecution for a criminal
offence, but if no UK person has been directly involved, but it
is a subsidiary UK company, it is not breaking the law. This is
another example that suggests, does it not, Minister, that we
ought to look carefully again at UK subsidiaries and the extent
to which their activities in the arms trade ought to be, in some
circumstances, more closely controlled? Avient Aviation is the
name online.
Mr Wicks: Can I say our general
position on this but I will look at the implications of that case.
On overseas subsidiaries we believe that we already have significant
controls in this area. We can already control the supply of controlled
goods and technology that an overseas subsidiary is likely to
require so goods from this country; subsidiaries often need goods
from this country if they are UK-owned. We are also looking at
whether we can enhance controls on non-controlled goods under
the military end-use control, but we do believe to attempt to
directly control the activities of overseas subsidies—in
effect to treat them as though they are based in the UK—is
not legally viable and would be virtually impossible to enforce.
It comes back to the practicality issues here.
Q199 Sir John Stanley: Minister,
I wonder if you are able to give us further clarity on the point
that the Chairman has raised. My understanding is that if offences
have been committed by a UK resident in relation to this particular
cargo, even assuming that the cargo is made up of small arms,
MANPADS, I do not know whether there are cluster munitions—obviously
I do not know what is in the cargo—but under present legislation,
given the fact that your new legislation will not come into effect,
as I understand it, until 1 October, these British residents,
if they have conducted this trade from overseas would entirely
escape the criminal law. Can you tell us whether that is the case
and does that not further reinforce the case for the extension
of extra-territoriality which we have been calling for?
Mr Doddrell: We would need to
look at the details of the case and consider whether there has
been a breach under existing UK law and, if there is, whether
a prosecution could be brought. I do not have the full details
of the case so I am not at this moment in time in a position to
say definitively whether an offence has occurred or not, but clearly
the changes to the legislation that we are making will extend
the capability of the Government to act in cases like this.
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