UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To
be published as HC 254-iii
House of COMMONS
MINUTES OF EVIDENCE
TAKEN BEFORE
COMMITTEES ON ARMS EXPORT CONTROLS
STRATEGIC
EXPORT CONTROLS
Monday 19 May 2008
MR MALCOM WICKS, MR JOHN DODDRELL
and MS JAYNE CARPENTER
Evidence heard in Public Questions 134 - 219
USE OF THE TRANSCRIPT
|
1.
|
This is an
uncorrected transcript of evidence taken in public and reported to the House.
The transcript has been placed on the internet on the authority of the
Committee, and copies have been made available by the Vote Office for the use
of Members and others.
|
|
2.
|
Any public use
of, or reference to, the contents should make clear that neither witnesses
nor Members have had the opportunity to correct the record. The transcript is
not yet an approved formal record of these proceedings.
|
|
3.
|
Members who receive this
for the purpose of correcting questions addressed by them to witnesses are
asked to send corrections to the Committee Assistant.
|
|
4.
|
Prospective witnesses
may receive this in preparation for any written or oral evidence they may in
due course give to the Committee.
|
Oral Evidence
Taken before the Committees on Arms Export
Controls Committee
on Monday 19 May 2008
Members present
Roger Berry (Chairman)
John Battle
Mr David S Borrow
Mike Gapes
Linda Gilroy
Mr Bernard Jenkin
Mr Mark Oaten
Sir John Stanley
________________
Witnesses:
Mr Malcolm Wicks MP, Minister of State for Energy, Department for
Business, Enterprise and Regulatory Reform, Mr John Doddrell, Director,
Export Control Organisation, Department for Business, Enterprise and Regulatory
Reform, and Ms Jayne Carpenter, Assistant Director, Export Control
Organisation, Department for Business, Enterprise and Regulatory Reform gave
evidence.
Q134 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.
Q135 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, is 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, 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.
Q136 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.
Q137 Mike
Gapes: This is topical in some sense. In the 1990s the US Commerce Department
recorded that 50 per cent of complaints that they received were about defence
bribery, even though that was only about one per cent 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 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.
Q138 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.
Q139 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?
Q140 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.
Q141 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.
Q142 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.
Q143 Chairman: The high level case is presumably the suspended SFO investigation
into BAE Systems al-Yamamah. Is that
correct?
Mr Wicks: I thought Mr Singh was
referring to that. Is that right?
Q144 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.
Q145 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.
Q146 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 the range 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 you 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 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.
Q147 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 see 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.
Q148 Chairman: We would welcome that and by the same token you appreciate the
strength of the Committee's view.
Mr Wicks: I do, yes.
Q149 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.
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.
Q150 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.
Q151 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.
Q152 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 has been 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 (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.
Q153 Mr
Borrow: Would you agree with me that
arms trade 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.
Q154 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 operates 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.
Q155 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.
Q156 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 suggestions 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.
Q157 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: "Please tell the
Committee that the 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 will set out the circumstances
where the Secretary of State may consider it appropriate to take speedy action
to suspend or revoke such licences." He
explained the procedures, et cetera.
"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.
Q158 Chairman: Obviously it was thought necessary to suspend the licence in any
event.
Mr Wicks: Yes.
Q159 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.
Q160 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.
Q161 Chairman: Is it possible that, in future, automatically somebody who is put
in prison for breach of arms export control rules will automatically have
licences taken away? Why does this not
happen automatically? You are looking
puzzled, Minister, but we are puzzled.
Mr Doddrell: One of the strengths of the
register is that somebody can be struck off the register. The principle of the open general licence is
somebody can just register by a click on the internet and so it is not
something that has generally been factored in, but we have dealt with it now
and will do so again in future.
Mr Wicks: Obviously you are right and
crooks should not have licences and we will try to remove them as speedily as
possible from crooks who have been proven to be crooks.
Q162 Mr
Borrow: Whilst someone can be in breach
of the regulations and have an open licence, there is an argument that if there
is a breach by that individual of the regulations which leads to some
suspension or some sort of punishment, whether it is prison or not, that ought
really automatically to lead to an examination and suspension of that open
licence, because they may have a breach which is not of the open licence but of
something else that they are doing and there ought to be a mechanism which
automatically examines what their status is in terms of open licences.
Mr Wicks: Yes. We have been looking at this and my
colleagues may want to add something.
The majority of non-compliance cases are usually minor record-keeping
errors, incorrect references on documentation.
There should be full compliance.
I think these are always reported to HMRC.
Mr Doddrell: I can confirm what the
Minister has said that any compliance reports from all of our visits to
companies are referred to HMRC and if there are any breaches then they are
referred and it is up to HMRC to consider whether to take any action or indeed
to prosecute the company involved.
Q163 Mr
Oaten: Does a minor non-compliance
show up against their registration? For
example, on eBay your grade gets worse and worse the more non compliances there
are, and there comes a tipping point. I
just wondered whether there was a first warning, a second warning which shows
against the licence so we get a sense of how good or bad they are?
Ms Carpenter: There is a compliance rating
system which is updated after every compliance visit which runs on a
traffic-lights system.
Q164 Mr
Oaten: Is that public for people to
see?
Ms Carpenter: No, it is an internal system that our compliance officers use and
they can copy it to other people in licensing.
Q165 Mr
Oaten: But if one wanted to look and
check the appropriateness of somebody you would not then see that information?
Ms Carpenter: If you worked in the ECO or in Customs, for example, you would be
able to see it. It is not a public
system at the moment.
Mr Wicks: I am not complacent about
this and I think we need to improve. We
have now been able to reallocate some resources to compliance. You will recall that when you visited ECO we
told you about the introduction of SPIRE, the new system. That does free up some resources. I am advised that in the last year the
compliance team has increased by over 30 per cent so that more companies can be
visited each year.
Q166 Mr
Jenkin: Minister, how do you actually
tell what has been exported under an open licence?
Ms Carpenter: We cannot tell what has been exported under an open licence. Compliance auditors check during their
compliance visit what licences have been used for; that is open general
licences or open individual licences.
What we do not do is collect together statistical information which
shows everything that has been exported on open licences.
Q167 Mr
Jenkin: The complaint the Committee
received from Amnesty International is that there is an incompatibility between
the customs database and the customs CHIEF system in the way ECO registers
exports and that the very cumbersome problem of reconciling these records is
not something you even attempt to do because it is not the purpose of the
licence.
Q168 Ms
Carpenter: There is a link between our new
IT system and CHIEF, the customs operating system.
Q169 Mr
Jenkin: Is this used for
spot-checking and audits rather than checking generally what people are
exporting?
Ms Carpenter: My understanding is that it is used for spot-checking.
Q170 Mr
Jenkin: The UK Working Group has
given us evidence that, in 2004, five per cent of open licences were seen to
have been misused and in 2005 eight per cent and in 2006 11 per cent. Is this because you are doing more checking
or is the situation getting worse and how are you addressing this?
Mr Doddrell: Two points, if I may, Mr
Jenkin. The first point is that the
interface between SPIRE and the CHIEF system was not operating fully to begin
with. It is now operating fully and this
provides a connection between what is being exported from the customs officer
and a link into whether the exporter has the appropriate open licence that he
is registered for under the SPIRE system.
To an extent the links between customs and ECO are now tied up on
that. The second point is that we are
concerned about levels of non-compliance in relation to use of open general
licences. Partly this has come about
because more people are using the open general licences and we now have the
mechanism in place to remove entitlement to use open general licences if there
are persistent breaches, so there would be a real incentive on exporters to get
it right, make sure that they are following the rules, otherwise their
entitlement to use an open general licence will be withdrawn.
Q171 Mr
Jenkin: Perhaps you could explain to
me as a novice what is the open general licence actually intended to
achieve? Are we actually achieving
it? The rising misuse of open general
licences would suggest that that is not the case.
Mr Doddrell: I can certainly try to
explain what it is intended to achieve.
It is intended to apply to those areas where we are talking about low
risk goods going to low risk countries where, if an individual licence
application was made to the ECO, the licence would invariably be granted. It is an attempt to take that burden out of
the system by providing a general licence so that all the exporter needs to do
is to register to use it on the internet.
This has a great advantage to industry because it means that they do not
need to go through the process of applying for each licence on a case by case
basis. It also has advantage for the
export control organisation because it means that we do not need to worry as
much about this low risk stuff going to low risk destinations and we can
concentrate our efforts and our resources on goods that are of real concern
going to destinations that are problematic from our point of view.
Q172 Mr
Jenkin: If an open licensing system
operates effectively it would be good for the defence industries because it is
low cost of compliance and good for government because again a low cost of
enforcement. What representations have
you received from industry about this, because I should imagine the rising
incidence of non-compliance is causing them a concern that these rather easier
arrangements are going to be taken away from them if they continue to be
abused. What do they say about it?
Mr Wicks: It is fair to say, as you
have indicated, Mr Jenkin, that the industry sees this system of open licences
as a major advantage. After all, we are
trying to get the balance right between real risks and what is sensible
regulation for legitimate exporters for the sensible function of the UK
economy. I think it is fair to say that the
industry is concerned that this licence arrangement can be maintained. You are right in that non-compliance puts it
into disrepute.
Q173 Mr
Jenkin: Have they been making any
suggestions of how it should be better managed?
Mr Doddrell: They very much supported our
proposal that we should be able to withdraw the rights of individuals to use
open general licences if over a period of time they are shown to be
persistently non-compliant.
Q174 Mr
Jenkin: What about monitoring of
non-compliance and catching non-compliance because at the moment you are
working basically on a spot check basis?
Mr Doddrell: We have strengthened our team
of compliance officers. As we have
already said, we have substantially increased the number of compliance visits
that we undertake every year and every company that is registered for an open
general licence will be covered by the compliance programme, so sooner or later
their breaches will come to our attention and we will take action then.
Q175 Mr
Jenkin: The industry supports that?
Mr Doddrell: The industry supports that.
Q176 Mr
Jenkin: Do you have a kind of anonymous
hotline - a Crime Stoppers feeding of information, no names, no pack drill? Do you have any arrangements like that? The gossip in the industry - it is a fairly
tight knit industry and I should imagine there is a fair amount of chat?
Mr Doddrell: We do occasionally have
representations made to us along those lines and we would follow up and
sometimes they can be vexatious complaints so we do have to be careful not to
react immediately in an over the top manner, but we would look into it and
certainly follow up.
Mr Jenkin: Maybe we should take representations from
industry on this question.
Q177 Chairman: Industry had an interesting comment to make on penalties for
non-compliance when they gave evidence to us in March. Mr Hayes from EGAD told the Committee on 20
March: "If I was to contrast the
situation in the United States with the situation in the United Kingdom,
working as I do with both systems frequently, the main difference, from a
company's perspective, is that non-compliance with the UK system can make
economic sense, but non-compliance with the US system never makes economic
sense." Is that not a sad comment on the
effectiveness of our export control system?
Mr Wicks: Maximum penalties available
to courts, as you know, Mr Berry,
in terms of non-compliance goes up to a ten-year prison sentence or an
unlimited fine. I think I was receiving
advice that those levels of fine and prison sentence are in line with Home
Office guidelines, as you would expect.
I guess the actual sentence will be a matter for the court.
Q178 Chairman: The Government has increased the sentence. The Government deserves credit in my book as
it used to be seven years and it is now ten years. You have increased the maximum penalty and
yet we have one of the key people in the defence manufacturing community in
this country who works both in the UK and in the States who says that in the
States there is never any financial incentive whatsoever to break the rules; in
the UK he comes across countless examples where breaking the rules can make
economic sense. Can somebody look at
it? The risk of prosecution and the
penalty that you are likely to incur if you are successfully prosecuted are the
two things that presumably determine whether or not you have an economic
incentive to comply. Can the Government
please look at these two issues? There
have been recent examples of successful prosecutions that we are very pleased
to see. There has been real achievement,
no question about it, but it is deeply worrying when a spokesperson for the
defence manufacturers tells us of that contrast. Whether it is the judges you need to have
words with, I do not know and it is not for me to say, but are you as shocked
as we are to be told that by somebody who knows?
Mr Wicks: I am not shocked because I am
always being told in my job that there is another country that does things
better - that is part of the nature of politics - so, while not shocked in that
sense, I am interested, Mr Berry,
and we will investigate. As you say,
there have been a number of successful prosecutions in recent times here in the
UK
but we will look at the point you have raised with us.
Q179 Chairman: I have just been reminded by our clerk, and I should recall this
myself, the Committee has recommended in the past that the Commission on
Sentencing Guidelines looks at this and they have said no, or the Government's
response to our recommendation was that they have decided not to look at
this. Would it be possible to revisit
the issue via the Commission on Sentencing Guidelines, Mr Doddrell, and to look
at it again? The United States
is not just a country plucked out of thin air; it is a country with which many
manufacturers have dealings and knowledge of.
Mr Doddrell: I believe that we may have
turned the corner on this, Dr Berry, in that the last few cases have resulted
in significant prosecutions and sentences, particularly to mention that Mr
Knight actually appealed his conviction and the judge, in considering and
overturning Mr Knight's appeal, set out some quite useful guidance on how
sentences should be applied in cases of conviction under the arms control legislation. That is something that we would want to
consider as well.
Q180 Chairman: Obviously the Committee has yet to consider this report and we may
raise this again. Some have suggested
that, rather than relying exclusively on a criminal law prosecution, the
Government amend primary legislation to allow it to proceed through civil
courts, as for example happens in the case of Germany and Israel, where the
evidential basis is not quite as high as for a successful criminal
conviction. Has the use of civil
penalties been considered by the Government?
Mr Doddrell: We have been looking at this
very carefully with customs and will be planning to make an announcement if
ministers agree in the coming months.
Part of this is suspending people's right to use OGELs - that is part of
it - but also whether financial penalties can be imposed perhaps with a
slightly less onerous burden of proof then if one had to go through a formal
process in the courts. There may well be
a place for that in the regime and we have done a lot of work on it and an
announcement will be coming forward in the not too distant future.
Mr Wicks: Figures that will be
published in our next report show that the number of seizures has
increased. We were moving in the wrong
direction at one stage but I am advised that that has now been reversed. In 2006/7 there were 44 seizures by HMRC and
in 2007/8 the figure is likely to be significantly higher and we will be reporting
on those figures in our next annual report.
Q181 Mr
Oaten: We have spoken earlier on
about some of these minor mistakes and minor errors that take place. There is no fine attached to any of those at
the moment?
Mr Doddrell: There would be if Revenue and
Customs decide to prosecute.
Q182 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.
Q183 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.
Q184 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 of 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 joined events with them in order to target the most appropriate people.
Q185 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 AQ Khan or whoever it is; we are actually dealing
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.
Q186 Mr
Oaten: 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.
Q187 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.
Q188 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.
Q189 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.
Q190 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.
Q191 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.
Q192 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
say 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.
Q193 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?
Q194 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.
Q195 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.
Q196 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.
Q197 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.
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.
Q198 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.
Q199 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 had 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?
Avies 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,
subsidies 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.
Q200 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.
Q201 Sir
John Stanley: Could you not confirm that the
only grounds for a criminal prosecution at the moment would be in relation to
individuals who are presently resident in the UK and knowingly have participated
or assisted in this particular breach of trafficking and brokering regulations?
(Pause)
Q202 Chairman: May I help? As I understand
it, this is an EU embargo so it is covered in terms of UK persons
under existing legislation. If a UK person was
not directly involved but it was a company that is a wholly-owned subsidiary of
a British company and it is subsidiaries we are talking about. If the current legislation automatically
caught subsidiaries, we would not need to have this conversation. As we are having the conversation I am
assuming it does not. If it is true that
a British subsidiary is transferring these arms to Mugabe, I assume the
Government will want to look at ways of trying to prevent this from happening
again.
Mr Wicks: I will investigate very quickly and write to you as
Chairman of this Committee within a week.
If that is a holding letter because we need to make further enquiries,
then it will be a holding letter. I will
come back to you as soon as I can.
Chairman: Sir John tells me that I have misinterpreted his question.
Q203 Sir
John Stanley: Ultimately criminal
prosecutions are against individuals unless you are into something like
corporate manslaughter. The question I
put to you, Minister, or to your officials, is can you confirm that the only
basis for making a prosecution at the moment under criminal law, as it now
stands, would be against an individual resident in the UK and present in the UK
who knowingly had connived or participated or assisted in this particular
breach of an arms embargo and the existing criminal law would not extend to any
such person who was outside the territory of the UK when these offences were
being committed?
Ms Carpenter: If there was a UK
person involved, and these were military goods going to Zimbabwe, it
would be a criminal offence whether the person was in the UK or outside
the UK.
Mr Wicks: I will investigate further
and will write to you.
Q204 Sir
John Stanley: It is a very complicated area
and it would be very helpful if you would like to write further to the
Committee in response to the questions we have been putting to you on this
point.
Mr Wicks: Yes, I have said that I will
write. It may not be a full letter but I
will tell you where I am with this within a week.
Q205 Linda
Gilroy: What a lot of these questions
show is just how complicated it is to do what I think we all agree we want to
do and the UK Working Group on Arms has drawn attention to the single action
catch-all clause used in Germany - I am not even going to try and pronounce
it. Under this provision, even without a
licensing requirement or prohibition, any border crossing, international action
or illegal act can be prohibited or prevented.
As I understand it, that can include in particular export or transit if
the security of the Federal Republic of Germany, the peaceful co-existence of
nations or the external relations of Germany are threatened. Has the Government made an assessment of the
"single action" catch-all clause used in Germany?
Mr Wicks: Yes, we have. The advantage of it is that the German
approach obviously gives the German authorities significant flexibility. The other side of the story, however, is that
it gives virtually no certainty to exporters about what is and what is not
controlled. What we would like to do is
to negotiate an approach through the European Union and that is what we are
seeking to do. It is difficult to assess
timescales on this for the usual reasons.
It includes a level of support within the Commission and the role of
Presidency and other Member
States, but that would be
our preferred approach. However, we are
still considering the case of enhancing military end use control and we aim to
clarify our position in a further response later this year.
Q206 Linda
Gilroy: Later this year you will be
in a position to let us know more precisely what changes you would like to see
and how long they will take to secure.
In all of that will you be weighing up the other downside for industry
which you have mentioned - the one that comes along with the German approach -
but it seems to me that with the UK approach, as we have just been discussing,
we go down the path of increasing complexity and, as you have mentioned, the
German approach does have the advantage of simplicity. Will you be weighing those two things up as
you proceed to estimate what further military end use controls through the EU
might achieve?
Mr Wicks: Yes and other factors will be
weighed up too. You mentioned complexity
- not this Committee, but I am always struck that the politician is sometimes
asked for more controls and simplicity at the same time. They are two other things that we need to
balance.
Q207 Linda
Gilroy: What I am trying to say here
is you have got on the one hand the German approach which does have an element
of simplicity to it; no doubt it may bring its own complexities but it does
seem to have some aspects of simplicity that could be an advantage, whereas
with all of the things we have just been discussing it does take us down the
path in our endeavour to meet the objectives we have of increasing regulation
and controls, which is always a path which has burdens for industry in it. I am sure that they too will want to weigh up
the relative pros and cons of that. A
key component of end use controls would be an obligation on government to
monitor the use to which items exported are put and to alert exporters to use
of concern and we have discussed that already.
Is the Government not just willing but also capable of running such a
system?
Mr Wicks: It would certainly be a tough
system.
Ms Carpenter: Could I ask you to clarify the question?
Q208 Linda
Gilroy: We have already discussed
this to some extent but is the Government not just willing but capable of
running a system which monitors end use controls? That is the path that we feel we need to go
down and we have discussed it already in earlier questions, but we have also
discussed the capacity issue on what that would do. I am really asking as well as being potentially
willing to improve on these aspects of it, is the Government capable and can it
develop the capacity?
Ms Carpenter: To run another end use control?
Q209 Linda
Gilroy: Yes.
Ms Carpenter: It is a good question. We do have some experience of running end use
controls. We know that they do present
some difficult issues and they can be quite complex, but they do offer a very
effective approach in areas where you want to target the controls quite
closely. As Dr Berry said, end use is the most important
issue in these cases.
Q210 Linda
Gilroy: Do you have the capability to
monitor that? We have just seen some
examples in earlier questions of how difficult it is. It is back to the quid pro quo thing
in terms of the comparison with the German approach - which is the better of
two? The one which gives you flexibility
in circumstances where you determine it is needed, or one where you try to dot
all the I's and cross all the T's? Does
it bring certainty? I am not sure that
it does?
Q211 Chairman: Part of the review of the legislation and everything is about the
balance between control simplicity and sourcing, et cetera.
Mr Wicks: I have said that we will
clarify our position.
Q212 Mr
Borrow: On the idea that has been
floated of a single export control agency, EGAD and the UK Working Group on
Arms have both come up with this suggestion.
I know there is some hesitancy within government. I just wondered whether ministers would be
prepared to commission a study into the viability of merging those bits into a
single agency just to see whether there is a possibility that it would be
better than the existing system?
Mr Wicks: Our position at the moment is
that we do not see the case for it. We
think there could be considerable extra overheads associated with it. My own experience is that it is often
tempting in any area which cuts across departmental or agency boundaries to say
why not bring it all together, would it not be more sensible? I am not sure that it would. I think there are issues to be explored as to
whether, for example, licensing and enforcement should be in the same
agency. I can see arguments why that
probably would not be a sensible thing.
We do not see this as a priority or even as a desirable move.
Q213 Mr
Jenkin: Can you say precisely what
the transfer of DESO from the MOD to UKTI was intended to achieve?
Mr Doddrell: My understanding was that it
was to enable the defence industry to take more advantage of the very wide
network that UKTI has available right across the world, including the expert
staff in overseas' posts who have a good knowledge of the local market
conditions which make this whole infrastructure available to the defence sector
as well.
Q214 Mr
Jenkin: I think this is more a policy
question for the Minister.
Mr Wicks: The DTI, as it was, is the
Department of Trade and Industry. We
have very considerable expertise in both inward investment and outer
investment.
Q215 Mr
Jenkin: But industry was not actually
clamouring for this change; on the contrary, industry was dismayed when this
change was announced.
Mr Wicks: I hear what you say. I have not looked at all the views of
industry on this one but I think there must be considerable arguments to be had
for bringing this aspect of defence into the department, UKTI, which has a
considerable reputation in assisting companies and exporters. I have seen this myself in bioscience and in
the energy sector.
Q216 Mr
Jenkin: This is nothing to do with
some sort of perceived internal conflict within the Ministry of Defence that
somehow it was not right for the Ministry of Defence to be promoting defence
exports? It was not a sort of scruples
thing?
Mr Wicks: I am not aware of that but I
have seen it more from the DTI Department of Business and Enterprise point of view.
Q217 Mr
Jenkin: Would it be possible for you
to do a customer satisfaction survey, say after a year of this? We are now more than a year after this
change. Could you ask your business
customers/defence industry customers whether they are satisfied with the change
or whether they would like it to be changed back?
Mr Wicks: I do not immediately see that
as a priority for taxpayers' money.
Q218 Mr
Jenkin: It need not be very expensive. I would just invite them to write to you with
their views.
Mr Wicks: My concern is more select
committee satisfaction and I am not sure I am doing terribly well most of the
time.
Q219 Mr
Jenkin: The advice the select
committee receive from, for example, Jane's Defence Weekly - I will not bore
you with reading the excoriating article that was written, they describe that
previously it had been a centre of excellence - I do not want to detain the
Committee unnecessarily but there was widespread dismay in the defence
industries at this change. Should we not
check that they are going to be happy with the new arrangements? Could he set out perhaps in a letter what
improvements the defence industry is actually hoping to see?
Mr Wicks: I think it is best that we
make a success of the new arrangements. The Department of Business Enterprise,
formerly the DTI, is a centre of excellence when it comes to trade and I think
it will bed down very well.
Chairman: We will have to call time, I am afraid. Minister, I thank you and your colleagues
very much indeed for all you do and for this afternoon. It has been a very useful session. We have had productively rather more
discussion than simply a question and answer session. It has been very helpful to the Committee and
we greatly appreciate it.
