Examination of Witnesses (Questions 133
- 159)
MONDAY 19 MAY 2008
MR MALCOLM
WICKS MP, MR
JOHN DODDRELL
AND MS
JAYNE CARPENTER
Q133 Chairman: Good afternoon. Minister,
could I ask you to introduce yourself and your colleagues, please?
Mr Wicks: I am
Malcolm Wicks, Minister of State at the Department of Business
and Enterprise. I am accompanied by John Doddrell, who is the
Director of Export Control Organisation, and also Jayne Carpenter,
who is our Head of Policy at ECO.
Q134 Chairman: Thank you for your
initial response to the public consultation on the review which
we found very interesting. Perhaps you could clarify what the
Government's current timetable is for completing the review and
for any subsequent legislation?
Mr Wicks: I think the review has
been a useful process and I am looking forward to discussing with
my colleagues some of the outstanding issues with you. Our starting
point would be our belief, which I hope the Committee share, that
we have one of the most rigorous export control organisations
in the world, but of course we are not complacent. We have now
made a number of further steps. We have extended extraterritorial
control on small arms, MANPADS,[1]
which I remember discussing with one or two Members of this Committee
when I last appeared before it, and also certain cluster munitions.
These will come into force on 1 October 2008. Our target for introducing
any further changes necessary for issues still under discussion
is 6 April 2009. As you know, there are a number of issues that
are outstanding. As things stand, we do not think there will be
a need for primary legislation, although the issue of a register
and whether it should be published could require primary legislation.
We will continue to involve the Committee as fully as we can in
the review and we will shortly send the Committee the draft legislation
to implement the next set of changes, including those on small
arms. Later in the year we will send the Committee the draft legislation
to implement the further changes.
Q135 Chairman: The changes that you
plan to introduce on 1 October—the ones you have just mentioned—the
draft provisions will be before the Committee well before the
recess. Is that right?
Mr Wicks: Yes, that is our plan.
Q136 Mike Gapes: This is topical
in some sense. In the 1990s the US Commerce Department recorded
that 50% of complaints that they received were about defence bribery,
even though that was only about 1% of world trade. We have had
evidence from Transparency International, who have said that the
arms trade was one of the top three sectors in the world for bribery.
When the Government through the Export Credits Guarantee Department,
which you have ministerial responsibility for, assesses an application,
what checks are made about whether there is a potential for bribery
and corruption?
Mr Wicks: As you have said, the
ECGD take these matters most seriously. As a matter of UK Government
policy, we are fully signed up to fighting corruption. We also
subscribe to the OECD[2]
position and where there is any evidence to hand that there could
have been bribery or corruption my colleagues at ECGD take that
very seriously indeed.
Q137 Mike Gapes: You are saying you
would need the evidence in advance. You would not, for example,
ask for a declaration from the exporter that the transaction has
not been tainted by, or associated with, bribery and corruption?
Mr Wicks: Where there is public
knowledge, or indeed private knowledge, which suggests that there
could have been bribery or corruption, we would act on that. Whether
as a matter of procedure we ask about that, I would need to take
advice from officials who are not those that are with me today
and perhaps write to the Committee about that.
Q138 Mike Gapes: When you do, can
you also look at the question about why, when we do export licences,
we do an assessment for risk of diversion or whether the goods
might be used for internal repression and why we should not also
have an assessment as to why, if we do not, there should not be
a check or declaration with regard to bribery and corruption?
Mr Wicks: You are asking there
about the ECO?
Mike Gapes: The ECGD, and the ECO checking
on ECGD. You have ministerial responsibility overall for these
matters.
Chairman: I think the point Mr Gapes
was making was that ECGD has explicit ways of discouraging bribery,
including inviting clients to make it perfectly clear that they
are clean. I think the initial point was why are not the same
approaches adopted in relation to arms exports—that a licence,
for example, is not granted unless there is a clear assurance
given that there is no bribery involved? Was that your point,
Mike?
Q139 Mike Gapes: Yes, it was. Transparency
International said that there should be a series of tests for
arms exporters like publishing the names of advisers and intermediaries
and the due diligence test before appointing anybody as an agent
with regard to an arms sale. Does the Government have a view on
that? Would that be a sensible way forward or would it be impractical?
Mr Wicks: It is an interesting
question which I have been reflecting on, as you say, Mr Gapes,
the contrast with ECGD. I suppose we would argue at the moment
that our main focus has to be on the potential risk presented
by the export, not on the general process by which the contract
was won. That is our primary purpose to present risk. There could
be a danger of diffusing that focus. Obviously any company is
subject to the law of the land and the law is clear about bribery
and corruption. We do not, as far as I know, enquire into a whole
range of potential criminal activities on the part of the exporter.
We are trying to make sure that weapons, et cetera, do not get
into the hands of bad countries or bad people. I am willing to
take the advice of the Committee on this one.
Q140 Chairman: Repeating Mike's initial
point, the reason for his question is that all surveys we have
seen put the arms trade in the top two or three activities globally
in relation to bribery. That is the reason. We are not just picking
on it but the evidence is there that there have been real issues.
Mr Wicks: I would have thought
prima facie that is likely to be the case. I am not naïve
about that. I suppose it is a question of whether this Committee
therefore, after you have reflected on this, feel that this should
be another role of the ECO itself; whether that is going too far,
what would be the capability that we would require from that and
we certainly would not have the expertise at the moment to investigate
bribery and corruption. The ECGD, which is essentially making
a judgment about a financial support essentially for a company,
is in a slightly different position and perfectly properly they
take bribery and corruption very seriously.
Q141 Mr Singh: Taking that issue
a little further but in a different context, the OECD has launched
an investigation into our failures of complying with anti-corruption
and bribery protocols. According to my brief, the scale of the
investigation is huge involving 114 sessions. Is this any kind
of indication that we have been systematically failing in areas
of anti-corruption and bribery?
Mr Wicks: There is one high-level
case at the moment where the Attorney General is the person to
discuss that.
Q142 Chairman: The high-level case
is presumably the suspended SFO[3]
investigation into BAE Systems al-Yamamah. Is that correct?
Mr Wicks: I thought Mr Singh was
referring to that. Is that right?
Q143 Mr Singh: I am referring to
that as well, yes. Do you think there is a systematic failure
on our part to have these protocols in place?
Mr Wicks: We are very committed
to the OECD protocols. There has been that high-level case where
suspension of the SFO enquiry was certainly controversial. I have
to leave that to colleagues because it is not a matter for me
or within my jurisdiction. It is a matter for the Attorney General.
I think we have to be most careful to ensure that we implement
such protocols; indeed, our own policy is that we want to see
an end to bribery and corruption in all areas of trade and certainly
in this very difficult area of the arms trade.
Q144 Mr Singh: The Secretary of State
last year in giving evidence to this Committee indicated that
this was just a routine issue by the OECD and that it was bound
to happen in any case, but the Phase Two programme which I think
only three other countries have been subjected to—Ireland,
Japan and Luxembourg—would you now accept that this is actually
a very serious investigation and that it is not routine at all?
Mr Wicks: It seems like a serious
investigation and BAE Systems of course asked Lord Woolf to do
the work that has recently reported. I do not want to go into
too much detail as I do not know the detail, but clearly BAE Systems
saw an issue, there clearly is an issue there and they now want
to move forward, I assume, by implementing the detailed recommendations
of Lord Woolf. That is a sensible position for that important
British company to take.
Mr Singh: We will see what comes out
of that investigation.
Q145 Sir John Stanley: Minister,
as you know, when the Government first extended extra-territoriality
to trafficking and brokering, the Committee was very critical
of the extraordinarily limited extent to which this was done.
As you know, it was done initially to apply only to instruments
of torture and to long-range surface-to-surface missiles over
ranges in excess of 300 km with nothing in between. The Committee,
I believe entirely justifiably, said that the Government had conceded
the principle of extra-territoriality but virtually none of the
substance. Minister, I appreciate that it may seem somewhat churlish
now that the Government has made a further significant step in
the right direction still to be critical, but as I am sure you
will understand very well, and no doubt you have read the debate
that we had in Westminster Hall on March 27, and you may possibly
have looked at my own offering in that debate, the present position
is still absolutely riddled with anomalies. I set out in that
debate the anomalies that continue to exist—the fact, for
example, that you have some mortars which are now within extra-territoriality
and other mortars of a slightly larger calibre that are outside,
you have some missiles in, some missiles out and so on. What I
would like to ask you, Minister, is this: is the Government at
this stage prepared to adopt the recommendation that this Committee
has been putting to the Government now for over a three-year-plus
period and to fill in the gaps in the criminal law in this area
to extend extra-territoriality to all the items that are broadly
within the definition of weapons, bearing in mind that all we
are seeking here is to ensure that British residents overseas
who seek to breach arms controls in a way that would be criminal
offences if committed from within the UK are themselves made liable
to the criminal law? I believe surely that is a principle that
the Government would wish to accept and endorse and would the
Government now carry it through fully in policy terms?
Mr Wicks: May I say through the
Chair, Sir John, that I would never accuse any Committee Member
of being churlish, not least because I listened to you very carefully
on MANPADS when I last came before the Committee and took your
advice, so there is no churlishness anywhere there I do not think.
I think we have moved in the right direction on small arms which
many people in the past have described accurately as the true
weapons of mass destruction in places like Africa. We have moved
forward on that and on MANPADS and on cluster weapons. It is a
question of do we now need to move further. There is a working
group, as you may know, involving some of the NGOs[4]
and the industry who are looking at this to see whether some consensus
can be reached and then no doubt advice can be put to both this
Committee and to Government. As far as I am concerned, the door
is wide open on this for us to take further steps should we deem
that necessary. I guess in all of these things it is a question
of degree. Perfectly properly under British law we reserve extra-territorial
interventions for some of the most heinous crimes that exist—we
track down paedophiles, for example—and, perfectly properly,
those British people dealing in lethal weapons are also tracked
down. I stand ready to join in the debate and take further advice
on this.
Q146 Sir John Stanley: As you will
have seen from the Committee's previous report, we did attach
as an appendix advice which I was very helpfully given by the
House of Commons Library listing the complete legislation on extra-territoriality
since the 19th century. If you have been able to look at that
particular appendix you will have seen that there is already on
the statute book extra-territoriality provisions for matters which
I think most of us would regard as being very much less serious
than a flagrant violation of an arms trade embargo. I think you
will agree with me that the area is extremely well precedented.
I have not heard from you any justification in terms of any particular
weapon or weapons system as to why you believe there should be
some exception for not making the ambit of criminal law applicable
to somebody who trades in such a weapon overseas when it would
be a clear criminal offence if they made that same trade from
within the United Kingdom. Do you wish to offer any defence of
that position?
Mr Wicks: No. You have not heard
that from me because I have an open mind on that issue alongside
my open door. I do not have an empty mind but I have an open mind
and I want to take further advice on it. I would have thought,
given that the key stakeholders—both the NGOs and the industry—are
looking at this, it would be sensible to see what conclusions
they reach.
Q147 Chairman: We would welcome that
and by the same token you appreciate the strength of the Committee's
view.
Mr Wicks: I do, yes.
Q148 John Battle: Could I shift the
focus to extension of the extra-territorial controls to transporters,
because that working group you have referred to has argued that
transportation of Category 2 items should be subject to control,
not least because I think they say "the roles of broker and
transporter can be tightly linked, with the dividing line between
them difficult to draw ... " so perhaps transportation should
be a supporting activity that is controlled under the new Category
2.[5]
What is the Government's view on that?
Mr Wicks: It follows what I was
saying earlier to Sir John, we will still carry out some research
to establish which supporting activities should be controlled
in relation to the new Category 2 trade controls which, as you
have said, include small arms. There may well be a case to include
transport services because obviously transport services are vital
to this trade, so we are certainly looking at this.
Q149 John Battle: Does your research
into it include an estimate of the cost to UK transporters, for
example, of extending the new Category 2 to them, almost like
pre-empting the defence line that they will come up with that
you will put us out of business and you have not estimated the
costs of this? Has any work gone on in that domain?
Ms Carpenter: We would be required
to provide a case impact assessment before introducing any new
controls. We tried as part of the consultation to get evidence
on costs going forward for options that were included. We did
not get quite as much as we had hoped but we are still working
with the industry to try and get costings that are as accurate
as possible.
Q150 John Battle: Are the difficulties
in enforcing the law still looming as an insuperable barrier?
Mr Wicks: I think that is what
has made us cautious on this one and why we need to look at the
implementation issues very seriously. There are some quite serious
difficulties about this but I certainly recognise the integral
nature of transport when it comes to this kind of arms dealing.
I promise that we will look at it again before reaching a definitive
conclusion.
Q151 Mr Borrow: Moving on to the
issue of a register of arms brokers, which I think the Committee
has recommended in the past, on that particular occasion the position
of the Government was that they were not persuaded that a register
of arms brokers was necessary and there was some concern about
the range of operational details for actually setting up such
a register. I would be interested in (a) whether the Government
has any problems with the principle of the registering of arms
brokers, and (b) if there are operational matters, what those
operational matters are that are preventing the setting up of
a register?
Mr Wicks: First of all, we are
not opposed to the idea of a register in principle—I can
see certain advantages—but I am advised that there are some
practical difficulties and we will have to consider those before
reaching a conclusion.
Mr Doddrell: It is something that
we are looking at. We do see advantages for a register in terms
of increasing compliance, particularly if it is linked to some
kind of awareness test in relation to the controls that people
would have to satisfy us before they could be registered that
they understood what the controls are. There is also a potential
advantage in that if somebody commits a particular offence, demonstrates
that they are not a suitable candidate to be conducting business
in this area, the register would provide a means of preventing
them from going about that activity in future, so there are advantages.
The things that we need to look at are precisely what the criteria
would be to accept somebody on the register; what the mechanism
would be for removing them and stopping them from continuing their
practice in that area; whether we might charge a fee for people
being on the register; whether the register would be a public
document freely published and made available or whether it would
be something that would be just available for the department itself,
and perhaps a final point to make on this is that there is a real
balance on this as to whether the benefits in the terms that I
have outlined outweigh the extra regulatory hoop that we will
be imposing on business that they would have to go through in
order to go about their business.
Q152 Mr Borrow: Would you agree with
me that arms traders as against arms manufacturers are less likely
to be aware of the full implications of the licensing arrangements
for the exports of arms and therefore a register would be that
extra hurdle for companies to get over would in itself increase
the knowledge and increase compliance?
Mr Wicks: I have no empirical
evidence to make a judgment on that. I do not know if it exists.
Q153 Mr Borrow: When Mr Doddrell
was mentioning one of the advantages of having a register being
the fact that it would mean that arms trading companies would
be more aware of the regime under which they had to operate and
obviously the Committee has heard from the past the argument that
simply setting up a register would improve compliance from arms
traders. The second point I would raise is Belgium, France and
Sweden already operate registers of arms traders. Presumably the
department is looking at the systems they have in place when working
out these operational arrangements that need to be sorted out
before we can introduce such a system in the UK?
Mr Wicks: There is different practice
across Europe and we will look at that.
Q154 Mr Borrow: Are there any lessons
that you have picked up so far?
Mr Doddrell: We have looked at
the register in Sweden that I know is published. One of the issues
I was asking Swedish counterparts about was whether that had led
to any action by groups who are active in this area against perhaps
legitimate firms and their employees who might be named on such
a register and they have not got experience of that. I think that
was a useful lesson that we drew. There is also the question that
was implicit in what you were saying, Mr Borrow, as to whether
we should draw the line at a register of brokers or whether there
was any merit in extending the concept to a register of exporters
as well, which is another thing that we would want to look at
before coming to a decision on this.
Mr Wicks: We hope to come to a
decision on that before the summer recess.
Chairman: We are very grateful that you
are looking into this in such detail.
Q155 Mr Borrow: If I could touch
on the open licence regime, the UK Working Group on Arms has considered
that that regime is too light a touch and the suggestion that
they have been making is that open general licences should only
be available to those companies that are correctly applying good
internal compliance procedures and that there should be a requirement
for advanced notice of trades made under an open licence. Would
you agree that the regime is too light a touch and the suggestions
that they make would make an improvement to the existing system,
or is that something you are looking at at the moment?
Mr Wicks: I do not think we do
accept that argument. We do not accept that open licences are
any higher risk than other licences. After all, open licences
are granted only for lower risk transactions and certainly they
are carefully assessed against our key criteria. I do not think
we do accept the initial assumption.
Q156 Mr Borrow: Coming back to the
specific case, which is the John Knight case where the company
involved breached the extra-territorial controls and Mr Knight
was sentenced to four years in jail. I understand that the company
is still registered for open licences and that Mr Knight intends
to continue to use them, which does raise this issue that if someone
is operating with an open licence in areas that are not considered
to be high risk, but that the company itself is evidently not
complying with other aspects of the arms control regime, is it
appropriate for that company or that individual to be given an
open licence?
Mr Wicks: Two things: first, I
would have thought the fact that Mr Knight is now in prison shows
that enforcement can work which is a good thing. Second, because
of the anomaly that really you have pointed to we have set up
a review of this. We had our lawyers look at what could be done
and I am pleased to be able to tell the Committee that a notice
to exporters has been issued setting out the circumstances where
the Secretary of State may consider suspension or revocation of
open general licences for individual exporters. The notice sets
out the circumstances where the Secretary of State may consider
it appropriate to take speedy action to suspend or revoke such
licences. John Knight has now been advised that his company, Endeavour
Resources, is suspended forthwith from the use of the Open General
Trade Control Licence for a period of four years from the date
of his conviction. We have learned lessons, I think. I am bound
to point out also that HM Prison Services rules—I hope this
is no surprise to anyone—do not permit convicted prisoners
to run a business when in prison.
Q157 Chairman: Obviously it was thought
necessary to suspend the licence in any event.
Mr Wicks: Yes.
Q158 Chairman: Congratulations to
those who successfully prosecuted and got this person sentenced.
There is no doubt that the John Knight case was a major achievement
in enforcement of the legislation, but as you say, Minister, notwithstanding
the fact that one does not normally allow people to run businesses
from prison, you kindly assured us that he can no longer use those
licences because of action that you have taken. That is belt and
braces and we are very keen on that.
Mr Wicks: Yes. It is an important
thing to have done.
Q159 Chairman: We ask the question
because we did raise this with the Revenue's prosecution service
and they rightly referred us to you. We have heard no announcement
that this licence had been suspended, so we are delighted.
Mr Wicks: We had to look at the
legal issues and it has taken a while.
1 Man-Portable Air-Defence Systems Back
2
Organisation for Economic Co-operation and Development Back
3
Serious Fraud Office Back
4
Non-Governmental Organisation Back
5
Ev 55 Back
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