Examination of Witness (Questions
40-59)
IAN PEARSON
MP, MR JOHN
DODDRELL AND
MS JAYNE
CARPENTER
21 JANUARY 2009
Q40 Mr Bailey: In effect, it is very
difficult to have a totally comprehensive monitoring process.
Ian Pearson: It is not necessarily
very difficult but it would be hugely expensive and, again, I
think you would want to look at the proportionality of doing that.
Q41 Mr Bailey: Have you in recent
years revised your policy towards either a company exporting or
a country as a destination for these exports?
Mr Doddrell: Yes, we have.
Q42 Mr Bailey: That would imply at
least that it had been got wrong, to put it crudely, in a previous
assessment.
Mr Doddrell: I will try not to
sound like Sir Humphrey this time. Not necessarily. Situations
change over time and we continuously update and revise our policy
towards particular exports to reflect the circumstances of the
time.
Q43 Chairman: Would it be possible
to let the Committee have a note of some examples here. If for
whatever reason you are absolutely convinced it needs to be strictly
confidential, of course we can deal with that. We do that all
the time. A note of some examples on this would be quite useful.
Ian Pearson: One of the key things
to point out as well is that when we are assessing export applications,
we will look at the destination and the export licensing regime
of the country to which the goods are going to be exported and,
also, that country's record on a range of issues from human rights
to meeting international obligations as well. There are some countries
obviously about which we would not have any strong concerns.
Q44 Chairman: Of course, but it is
a question about changes in policy. The quarterly data and the
annual reports are a snapshot of where we are at some point in
time. This question raises a very interesting point about shifts
in policy as a result of experience. I dare say there is some
limitation for what can and cannot be said in public about examples,
but, either way, I know colleagues would be interested in a few
examples and perhaps a brief note might help on that.
Mr Doddrell: I am very happy to
provide that. I am thinking particularly of diversionary destinations,
where, as we close off one diversionary route, countries find
another way of getting what they want. This is an example of the
sort of thing I am referring to and I would be very happy for
the minister to write to you on that.
Ian Pearson: As an alternative,
if you would like it on an informal basis, it is my understanding
that it has been round about 18 months since the Committee visited
the Export Control Organisation, and if you wanted to have a further
visit and a session where these issues could be discussed, I would
be happy to arrange that.
Chairman: We would appreciate that. Perhaps
the note could be done and we could then think about fitting a
visit into our programme—which we would be keen to do.
Q45 Sir John Stanley: Minister, I
hope we can agree at least on this: do you agree that if a British
arms exporting company was able to establish licensed production
for a particular arms reference overseas and from that licensed
production facility overseas was able to export arms to destinations
that would not be approved of if they had been exported from the
UK that would represent a serious breach of arms control policy?
Ian Pearson: I certainly agree
with you that this is an important area. The extent to which we
could or should control licence production overseas, as you know,
featured very strongly in the 2007 review, and in the Government's
response we concluded that there was not a convincing case for
enhancing controls on the export of controlled goods specifically
in relation to licensed production. There is a stronger case for
enhancing controls on the export of non-controlled goods and the
cases of overseas production where issues have arisen have all
related to goods for military end use, which were not controlled
when exported from the UK, in embargoed or other destinations
of concern. This is an area where you will appreciate there are
some practical difficulties. To attempt to directly control the
activities of overseas concerns and, in effect, treat them as
if they were based in the United Kingdom is not legally viable
and would be impossible to enforce under international law. There
are some very real practical limitations here but within the limitations
that do exist clearly we want to make sure that our export controls
policy is followed.
Q46 Sir John Stanley: I myself cannot
accept that the difficulties to which you are referring are in
any way insurmountable or, indeed, in any way necessarily unprecedented.
The Committee's recommendation was quite clear, that the Government
make export licences for suppliers with licensed production facilities
or subsidiaries subject to a condition in the export contract
preventing re-export to a destination subject to UN or EU embargo.
That is a recommendation which is perfectly enforceable as a condition
of the Government granting the licence for production overseas.
It stipulates that that particular contract has to be coupled
with an undertaking from the recipient of the licence that they
will not export from the licensed facility overseas items to an
area which is subject to a UN or EU embargo. There is nothing
difficult contractually about making that a condition of the granting
of a licence.
Ian Pearson: I think there is
a difference between the extraterritorial controls that we have
over UK citizens and seeking to have extraterritorial controls
over companies. We have discussed the military end-use control
and our priority is to take that forward as an issue. With regard
specifically to the Committee's recommendation, we are still considering
whether including conditions relating to contracts on the licence
would add anything to the military end-use control. I have to
say that our current view is that it would potentially add significant
extra burdens without providing real additional control. The finished
goods, you have to remember, would still be outside the UK's control.
I have to say that I do think there are some practical international
law difficulties here that we need to recognise, while not disagreeing
with you about the practical purpose of what we are trying to
achieve here.
Q47 Sir John Stanley: Minister, perhaps
you need to take some further legal advice. We are talking here
solely about UK domicile businesses. The proposition is a very
simple one: if it is a UK-domiciled business, just as the Government
was announcing yesterday, the Government is perfectly able to
make a particular agreement with a UK-domiciled business subject
to particular conditions. We are asking that you make the granting
of a licence to such companies who have licensed production overseas
subject to your particular requirements about output not going
to countries that have a UN or EU embargo. There is nothing legally
difficult about it at all. I have to say that the answer you are
giving, with the greatest of respect, sounds to me like pure bureaucratic
mumbo-jumbo.
Ian Pearson: I disagree with that
entirely. Let me have another go and then I will let John say
something from his perspective. If you are talking about UK-domiciled
businesses that have a licensing agreement in a foreign country,
then there is the potential under UK law to be able to stipulate
some requirements that need to take place. But I have to point
out as well that the business that is operating in the third country
will be subject to that country's laws. The legal and ownership
structure rules would be quite easy to circumvent in many respects.
I just have to say that I think there are some practical, legal,
company law difficulties in terms of trying to apply UK company
law to companies in other territories.
Mr Doddrell: The only point I
would like to add to that, if I may, is that we should not underestimate
the extent of the controls that we currently have. If a company
wishes to set up a production facility in a country overseas to
make particular goods, weapons say, they would need to export
technology to that country, they would probably need to export
equipment for the manufacture in that country, all of which would
be controlled under the licensing arrangements as they stand.
If we have any reason to believe that that production facility
overseas would be used to supply countries where we would not
want the goods to go, then we would refuse the licence for the
transfer of the technology.
Sir John Stanley: With respect, it is
not a question of refusing a licence; the issue is once the licence
has been granted. The Committee is saying that it is a condition
of the grant of a licence. The Government includes in the conditions
the power to revoke the licence—which is the key point:
to revoke the licence—if there is transit of goods from
the licensed production facilities to countries that are subject
to an EU or UN embargo destination. It is very simple. The key
lever that the Government has is to build into the original conditions
pertaining to the licence the ability to revoke the licence if
that particular requirement is not met.
Q48 Chairman: We seem to be getting:
"Yes, we can," "No, we can't". Sir John has
made an argument, a very clear one I think, that he can see no
legal impediment to doing this. Could you perhaps write to us,
Minister, explaining what your advice is on what is wrong with
that argument?
Ian Pearson: Following on from
what Sir John has said—and I appreciate the strength of
feeling about this issue but also the argument that he makes—let
me take it away and look at it again.
Q49 Chairman: Thank you very much.
Minister, your predecessor told us that any changes arising from
the review of export controls would be implemented by April this
year. Is that still the case?
Ian Pearson: Yes, my understanding
is that that still is the case. We are on track to do that.
Q50 Chairman: Thank you for your
letter, by the way, but we will not go there.
Ian Pearson: I am sorry if there
was some feeling that we did not give as much time as possible
to matters.
Chairman: Yes. We will go on to dual
use.
Q51 Malcolm Bruce: It has obviously
been of concern to the Committee the extent to which we can ensure
that both the licence system and the potential exporters are really
connecting on the potential for abuse of products which could
be converted. That is well rehearsed. You have set up a working
group to consider the EU Council Regulation and the Government's
position has been that you did not think it would require domestic
UK regulation. What is the current state of that review? If it
has finished, as we are told it has, are you of the view that
it could be incorporated simply in the EU and that it does not
require legislation?
Ian Pearson: Dual use is certainly
an area where there is EU regulation under the EU dual-use regulation.
You are right to say there has been a Council Working Group review.
I think there was some hope that during the French Presidency
it would come to conclusions, but that has not been possible.
On the Council Working Group, as I understand it, the latest information
is that you will need to consider a Commission proposal of 5 January
this year. The Commission propose introducing licences to a range
of destinations for low value shipments, export after repair or
replacement, temporary export for exhibition, computers, chemicals,
telecoms and information security. The Working Group will also
need to consider its input into the new lines for action by the
European Union in combating the proliferation of weapons of mass
destruction and their delivery systems which was endorsed by the
Council on 8/9 December. There is still some more work for the
Council Working Group to do and we are playing our full part in
that.
Ms Carpenter: As to the question
of the need for UK legislation, the dual-use regulation has direct
effect in Member States and so it is not necessary to enact legislation
on top.
Q52 Malcolm Bruce: In terms of the
desire to ensure that we do not have embarrassments such as we
have had in the past, are you satisfied that the regulations will
be clear enough and give the necessary guidance to UK exporters?
Are you also satisfied that our own domestic arrangements will
be able to use it effectively?
Ian Pearson: We want to continue
to play a leading role in the discussions to ensure there are
improvements to the dual-use regulations. Obviously they are still
being discussed at the moment, so we do not know what the outcome
is likely to be, but I can certainly assure the Committee that
the UK will play an active part in those discussions.
Q53 Malcolm Bruce: Presumably it
remains an obligation on Member States once these regulations
are in place to provide effective means of communication.
Ian Pearson: Yes.
Q54 Malcolm Bruce: We have had deliberate
abuse, but I think that has been so well publicised that it is
not likely to happen again, but it is the inadvertent, naive,
middle-ranking supplier who gets caught up in it and does not
quite know. I want to ensure that this regulation and this process
has reduced the risk of that happening and is an effective means
of ensuring that it does not happen.
Ian Pearson: I agree with you
that those are sensible objectives and those are the sorts of
things that we would like to see as outcomes, because we want
to see a proportionate dual-use regulation that is fit for purpose
and that we agree on.
Q55 Chairman: We had a bit of difficulty,
as you know, in terms of understanding what was happening in relation
to the average time for dealing with SIEL applications and arising
from the fact that collectively the department was using the word
"average" to mean two different things—and I am
tempted to slip in a third, the mode, as well as the median and
the mean. Because one answer to a parliamentary question gave
the mean figure and the other data we had was the median figure,
it looked like things were getting worse. I am happy to accept
totally that the figures are not in terms of the time for dealing
with these applications, but it would be a good idea if people
stopped using the word "average" and just said whether
it was the mean or the median, or, indeed, the mode—a slightly
techy comment, but GCSE stats and all that!
Ian Pearson: I think we have clarified
any misunderstanding between ourselves.
Q56 Chairman: Yes, but we have a
script for interrogating you on this point.
Ian Pearson: We will try to make
sure that we are very clear and precise in terms of our use of
language in the future.
Q57 Chairman: Thank you. In terms
of the searchable database, is that still on course?
Ian Pearson: Yes, it is.
Q58 Chairman: I think we are going
to have a briefing on it.
Ian Pearson: Yes. It is on course.
In response to the Committee I can say today that we have accepted
its recommendation and we will be taking it forward. We hope that
the database will be available for public use later this year.
We have not yet settled on some of the detailed issues.
Q59 Chairman: Do we know what is
meant by the end of this year?
Ian Pearson: Certainly sometime
in 2009.
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