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26 Mar 2009 : Column 164WH—continued

4.10 pm

The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): It is a pleasure to serve under your chairmanship, Sir Nicholas. I am pleased to have the opportunity to respond to the issues that have been raised during this high-quality debate. I congratulate my hon. Friend the Member for Kingswood (Roger Berry) on the way in which he has carried out his role as Chair, and the constructive way in which he presented the reports. As always, we have had some thoughtful contributions from the right hon. Member for Tonbridge and Malling (Sir John Stanley) and the hon. Member for Montgomeryshire (Lembit Öpik) and the hon. Member for Cotswold (Mr. Clifton-Brown), who speaks for the official Opposition.

I appreciate the acknowledgment by my hon. Friend the Member for Kingswood that substantial progress has been made on arms export controls over several years. I also appreciate the comments from the right hon. Member for Tonbridge and Malling saying that, in broad terms, the UK is in pretty full compliance with the EU’s consolidated criteria. He went on to raise issues concerning components, China, Israel and Palestine, and I will come to those shortly.

I support the comments made by the hon. Member for Cotswold in reference to the defence industry’s importance to the United Kingdom, not only as the bedrock of providing high-quality goods and services
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to our armed services, but through the role that arms exports and the jobs associated with them play in the UK’s economy. A key to the continuing success of the industry is good regulation, which is where effective licence controls are relevant. The UK can be proud of the standards that it sets and maintains, but it is important continually to be challenged. That is the purpose of this debate, and hon. Members do that regularly throughout the year. We may not always agree—I shall point out some areas where there are honest disagreements—but we will always engage, listen and consider thoroughly the reports that come from Committees.

Hon. Members will be aware that we are coming to the end of the post-implementation review of the controls introduced in 2004. We are grateful for the input of the Committees, NGOs and industry stakeholders. All parties were struck by the collaboration that we managed to achieve together, and I look forward to that continuing. We will soon have completed implementation of most of the changes coming out of the review. We have taken significant steps to strengthen export controls where there has been concern, and to fulfil commitments and our responses to the public consultation. Hon. Members will be aware that we have introduced controls on sting sticks, and fully extended extraterritorial controls to UK persons anywhere in the world trading in small arms and man-portable air defence systems—MANPADS. We changed the controls on cluster munitions, subjecting them to the strictest controls, and we have controlled both extraterritorial trading by United Kingdom persons and trading within the United Kingdom, in addition to the full range of support activities. On 6 April, legislation will come into force to extend the fully extraterritorial trade controls to light weapons and to tighten controls on the transport of those weapons and similar goods of heightened concern between overseas destinations, and controls on their transit or transhipment via the UK.

Officials have started work on pursuing our commitments on torture and military end-use controls at European level. Thanks to the positive and constructive engagement of our stakeholders, we have a strong package that will significantly enhance our controls where concerns have been expressed for a considerable time.

I want to refer to some significant successes over the past year or so, and to respond fully to the many points that have been made during this debate. I was pleased that when I appeared before the Committee, I was able to announce that we were proceeding with plans for the introduction of civil penalties. I am firmly convinced of their value, and hope that we can obtain the necessary consensus in government so that the process of introducing a regime can begin in earnest. We have also introduced procedures for companies or individuals to have their registration for open general export licences withdrawn if they have a poor compliance record, or for other appropriate reasons, such as being convicted of export control-related offences. The hon. Member for Cotswold raised that point.

There have been two major successful prosecutions. The hon. Member for Montgomeryshire mentioned John Knight, who was convicted of transferring machine guns between Iran and Kuwait, and sentenced to four years’ imprisonment with a confiscation order of £53,000. Mehrdad Salashoor was convicted of illegally exporting to Iran navigation equipment that could be adapted for
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use in missile guidance systems. He was sentenced to 18 months’ imprisonment with a confiscation order of £433,000.

On enforcement activity, we have increased the number of awareness events by 10 per cent. and the number of company training visits by 80 per cent. We are developing, and are about to launch, an online searchable database to improve access to publicly available licensing information. The industry and NGOs have been involved in the development and testing of the database, and we have offered to organise a demonstration for the Committees.

We introduced SPIRE on time and within budget, which was an outstanding achievement. Despite that introduction and a 35 per cent. increase in applications, we have exceeded performance targets over the past 12 months.

Hon. Members will be aware that a directive to simplify the terms and conditions for the transfer of defence-related products in the EU was adopted by the European Parliament on 16 December. It will now be considered for adoption by the Council of Ministers. Due to the efforts of the UK delegation, which included the Export Control Organisation, and representatives negotiating the directive, the Government believe that there will be few practical implications for the UK export licensing system, which remains robust.

Lembit Öpik: I listened with interest to the Minister’s comments about enforcement. I have been involved in a case—I cannot give names, because the case is continuing—in which people have been accused of terrorism and exporting equipment to a certain part of the world, allegedly for terrorist activity. It is obvious to me that the claim is preposterous, and I am pretty sure that they will be found innocent, but the case highlighted the difficulty of determining end use. Does the Minister have any observations—perhaps he is coming to this—on how we can enforce the matter fairly and more comprehensively so that we do not arrest the wrong people? I do not believe that the two people he cited are the only two who have broken the law.

Ian Pearson: I appreciate the hon. Gentleman’s point, and I will indeed say more about end use, but first I want to speak about progress on the introduction of an international arms trade treaty.

As hon. Members will be aware, a resolution co-sponsored by the UK resulted in the UN mandating work on a treaty. Earlier this month, the first of two sessions of an open-ended working group on an arms trade treaty took place at the UN in New York. The second session will take place in July 2009 and the working group will discuss areas on which there could be consensus. That is a key step towards achieving a globally agreed and robust arms trade treaty of a high standard, and that point was raised by several hon. Members.

Mr. Clifton-Brown: Will the Minister give an indication of the outstanding issues on the international arms trade treaty? What issues need to be resolved in order to establish such a treaty?

Ian Pearson: If I were to do that, we would run out of time before I had responded to all the other points raised during the debate. As the hon. Gentleman will be
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aware, it is a long-standing ambition of the United Kingdom to negotiate an international arms trade treaty. We have made some progress in getting discussions up and running. They still have a long way to go, but certainly the United Kingdom will continue to be enthusiastic about promoting an arms trade treaty.

Roger Berry: I am full of praise for the Government’s support for the international arms trade treaty and what they are doing. That is a very difficult task—no two ways about it. What does the Minister think about the concerns that NGOs have raised about the possibility of the scope of the treaty being so narrow as not to be worth supporting? As he knows, that concern has been expressed. Are the NGOs premature in their judgment, and if so, why?

Ian Pearson: I know that concerns are expressed by NGOs about the potential scope of the arms trade treaty. The position of the UK Government is that we want a treaty that has high standards and we will continue to push that as a policy. We certainly do not want to give up on what we believe is an important process. We will maintain a high level of ambition in the discussions that have been taking place, and will continue to take place, on the issue.

My hon. Friend the Member for Kingswood also raised the issue of a register or pre-licensing registration system. As he will be aware, the Government are not opposed to a register in principle. The hon. Member for Buckingham (John Bercow) suggested—I think that he has done so twice now—that we have kicked that issue into the long grass. No, we have not. In practice, we already have a register of traders. We have a comprehensive database and can use it at any time to show who is using trade control licences. We can use that information to direct our awareness-raising or compliance-visiting activity. What we do not have is a pre-licensing registration system under which traders must be vetted before they can be registered.

The ECO considered the issue closely and concluded that at this stage, the time is not right to introduce a full registration system. We are happy to consider the issue again once we see how well the initiatives that we are currently pursuing—such as clamping down on those who misuse open licences and focusing our awareness activity on traders—work in practice. It is right that we take time properly to assess the effect of those new initiatives, particularly bearing it in mind that we would be talking about a regulatory burden in introducing a pre-licensing registration scheme.

Roger Berry: Is the Minister saying that the Government have decided, therefore, at this stage that there will be no register, but that that decision might be reviewed in the light of future circumstances? I ask the question because my understanding was that the Government were still reviewing whether they supported a register, and I think that the Minister has just said that the answer is no, they do not support a register.

Ian Pearson: I am saying that we believe that at this stage it would not be appropriate to proceed with a pre-licensing registration scheme. We think that that
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would impose a burden on legitimate businesses and we want to see how the other actions that we are taking will work. We will review that decision when we have more information. It is right to take time to make that assessment.

My hon. Friend and others raised the important issue of end-use monitoring. Our position remains that the best means of ensuring that goods are not diverted is to conduct a rigorous assessment at the licence application stage. That includes careful examination of the information on the proposed end use and end user of the goods. As hon. Members will appreciate, UK diplomatic posts are regularly asked to check the accuracy of the information in the end-user documentation submitted in support of an application. Should that assessment identify an unacceptable risk, the application will not be approved.

The primary purpose of any monitoring of equipment once it has left the UK is to generate information to assist the risk assessment of other current or future applications that are similar. The Government believe that we already have adequate systems in place to do that. The use of military equipment in destinations of concern is monitored by UK overseas posts using a variety of information, including from the media, NGOs and intelligence reports. Those posts have standing instructions to report misuse of UK-origin defence equipment.

Given that the ECO issues about 10,000 individual export licences a year and that, in addition, a substantial volume of exports are made under cover of the open individual and open general export licences, the Government do not have the resources to monitor routinely end use overseas. It simply would not be practical for every export to have a British civil servant attached to it or to have a British person in post, meeting it at the border.

Roger Berry: Will the Minister give way?

Ian Pearson: I do not think that hon. Members will—

Roger Berry: Will the Minister please give way?

Sir Nicholas Winterton (in the Chair): Order. Is the Minister giving way? Yes, he is.

Roger Berry: I am extremely grateful to the Minister. When have the Committees ever suggested such a thing? We never have. We have said that most of our exports, for example, go to NATO allies and others and we have no serious questions in that respect. There are a number of destinations, however, where rather more end-use monitoring than the Minister admits takes place would perhaps be helpful. Will he please not caricature the Committees’ recommendations in that way? It is deeply offensive.

Ian Pearson: I apologise to my hon. Friend if I have offended him in any way. I was simply trying to make the basic point that the vast majority of export applications are uncontentious—there does not need to be comprehensive end-use monitoring—but in other situations a substantial resource commitment would be involved.

Mr. Clifton-Brown: Will the Minister give way?

Ian Pearson: The hon. Gentleman, to whom I will give way in a moment, mentioned defence attachés. As I think he is aware, defence attachés are tasked with making assessments of export licences as part of the
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licensing application process. The Government remain of the view that the best way to ensure that the system operates effectively is getting it right at the licence application stage of the process, rather than attaching civil servants to exports of particular goods.

Mr. Clifton-Brown: I agree that the best way of dealing with the matter is at the licensing stage, but surely the pragmatic way of enforcing the end use is this. Officials, whether in the Minister’s Department, the Foreign Office or the Ministry of Defence, will know perfectly well the countries where there is likely to be a problem and will know perfectly well the type of arms exports that are likely to be re-exported to those countries. Therefore, the effort should be made in the countries where there is likely to be a problem. In that way, the finite resources that any Government will have available to them can be used more effectively.

Ian Pearson: What the hon. Gentleman suggests would be a significant departure from current practice. We have debated the matter on a number of occasions, and the Government remain of the view that getting it right at the licensing and application stage must be the most sensible, logical, proportionate and cost-effective approach.

Lembit Öpik: I realise that the Minister has been intervened upon many times on this subject, but this is one of the key areas. Accepting that unscrupulous arms purchasers may be able to buy their weapons elsewhere if they cannot get them from the UK, does he nevertheless accept that some unscrupulous traders in this country may make the calculation that the odds are rather good? The profits are large, and the chance of being apprehended is relatively small. They are willing to take the risk. I stress again that there have been two significant prosecutions in the entire industry in recent times. It is not many.

Ian Pearson: It is not many, but we are not aware of widespread abuse of the UK’s export licensing regime. We have tough standards, and I like to believe that unscrupulous people of the sort that the hon. Gentleman mentions would not get through our licensing application process.

I turn to the question of tightening controls on the export of non-controlled goods through enhanced military end-use control arrangements, rather than additional legislation. We will be engaging with industry and NGO stakeholders in order to obtain their views on our proposals, so that we can ensure a level playing field throughout Europe. It is envisaged that an enhanced military end-use control would cover a wider range of goods than at present, and that it would apply to goods going to sensitive destinations rather than only to embargoed countries as at present. The hon. Member for Montgomeryshire spoke of a single action clause. My understanding is that what we propose for the enhanced EU military end-use control is similar.

As for the extension of extraterritorial trade control coverage from small arms and light weapons to other weapons or even the entire military list, the House will be aware that we are committed to and have prioritised the introduction of controls based on evidence of the associated risk. We have asked NGO and industry stakeholders to consider the case for extensions of controls to be applied to even more military goods. They hope to submit a proposal shortly, and we will meet them to discuss it. We will, of course, report on the
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proposal once it has been evaluated. As with all new regulation, we need to be satisfied that there is sufficient evidence of a problem to justify extending controls in that way, and that the additional burden on business will be proportionate to the risk.

My hon. Friend the Member for Kingswood also raised the question of anti-vehicle land mines. I am aware of the concerns that have been expressed about their being placed in category C of the new trade controls, rather than category B. Indeed, the matter was discussed when I gave evidence to the Committees. Their status as category C goods means that their export from the UK remains fully controlled. The principal effect of moving them to category B would be to control trading activities by UK persons operating outside the UK. No country has made a specific international commitment to make that change. Our commitments relating to the verification and monitoring systems governing the transfer of anti-vehicle land mines will be unaffected, regardless of whether they are in category B or category C. No doubt, however, we will continue to pursue the matter.

I wish to discuss briefly the no re-export clauses, a subject that was raised by several Members and mentioned during my appearance before the Committees. The Government remain unconvinced that it is necessary or feasible to require overseas entities to seek permission from the UK authorities in order to re-export items that are already outside the UK. Such a system would be onerous to operate and extremely difficult to enforce outside the UK’s legal jurisdiction.

In reality, re-export clauses would not increase our real-world powers; and we factor the risk of diversion or re-export to undesirable end users into our risk assessment at the application stage. We would not license the export unless it was consistent with the consolidated criteria. When applying for a seal, all exporters have to provide an undertaking from the end user that the goods will be used for the purposes stated in the undertaking. If the export is going to a consignee who intends to hold the goods in stock against future orders, he must state whether the goods will be re-exported from their original destination. In the latter case, that is factored into the licensing risk assessment.

Roger Berry: I am grateful to the Minister for giving way; he is being generous with his time. I do not doubt for a second the professionalism and commitment of the officials who make such decisions, and I do not doubt that it is best to do things properly at the beginning when deciding whether to grant a licence. However, examples have been given to show that, on the best information possible, it is still the case that arms can be exported to country A and subsequently from country A to a destination about which nothing was known, and one that we would have been appalled at if we had known. A re-export clause, as used by other countries, would surely send the clear signal that that would not be acceptable, and that we would re-examine their future licence applications far more rigorously. Why can we not do that?

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