3 Review of export control legislation
Introduction
23. As detailed in our previous Reports, the
origin of the Export Control Act 2002 was the Report of the Scott
Inquiry published in February 1996, which criticised the export
control regime at that time for its lack of accountability and
transparency. The report recommended that "the present legislative
structure, under which Government has unfettered power to impose
whatever export controls it wishes and to use those controls for
any purposes it thinks fit, should […] be replaced as soon
as practicable".[26]
Following a White Paper on Strategic Export Controls[27]
in 1998 and the draft Export Control and Non-Proliferation Bill
in March 2001,[28] the
Export Control Act 2002 (as the draft Bill became) passed all
its parliamentary stages and received Royal Assent in 2002. As
the 2002 Act was primarily an enabling power the new export control
regime was enacted under secondary legislation which came into
operation on 1 April 2004.
24. As detailed in the Introduction to this Report,
the outcome of the Government's Review of export control legislation
has been the production of three tranches of secondary legislation.
In previous years we commented on early drafts of the Export Control
(Security and Para-military Goods) Order 2008 and the Trade in
Goods (Categories of Controlled Goods) Order 2008 which restructured
Trade Controls into Categories A, B and with the aim of aligning
them more effectively with the relative risks of the items they
controlled. In advance of the third draft Order (which covered
aspects of transport, transit and transhipment as well as trade
controls on light weapons and missiles), our last Report made
specific recommendations on brokering, trafficking, extra-territoriality,
transport and ancillary services, and torture end-use control.[29]
Since then, the Government has announced decisions on the implementation
of legislative changes on these matters.
25. We noted that both the Export Group for Aerospace
and Defence (EGAD) and the UK Working Group on Arms praised the
Export Control Organisation (ECO) for the way in which it conducted
the Review. The UK Working Group on Arms said "there has
been a welcome willingness on the part of [ECO] to engage in
a meaningful and sustained consultation with stakeholders."[30]
EGAD said:
We believe that the ECO is to be warmly commended
for the open and transparent way in which it has undertaken the
review— whilst we, in Industry, might not have agreed with
all of the proposed changes and the way that they have been introduced,
the ECO has clearly gone out of its way to try to frame and implement
new regulations which are proportional to the perceived threat.[31]
Extra-territorial controls
26. In our 2007 and 2008 Reports we concluded
that the Government should bring forward proposals to extend the
extra-territorial provisions of the export control legislation
to encompass trade in all items on the Military List. In addition,
all residents in the UK and British citizens overseas should obtain
trade control licences, or be covered by a general licence, before
engaging in any trade in the goods on the Military List.[32]
The reason for this was the view that it was desirable to bring
within the ambit of the law activities, which if they had been
carried out in the UK without a licence, would be criminal activity.[33]
The Committees recommended the use of general licences for categories
of trade between specified countries, or in certain activities
such as advertising, to cover British citizens working overseas
for reputable organisations so as not to undermine their employment
prospects.[34]
27. Through the three tranches of secondary legislation
resulting from the Review, Government has introduced the following
new three tier system:
- Category A goods include torture
equipment and cluster munitions, and other goods the supply of
which is inherently undesirable. Any person within the United
Kingdom, or a United Kingdom person anywhere in the world, is
prohibited from supplying or delivering, or doing any act calculated
to promote the supply or delivery of, Category A goods without
a licence from the Secretary of State.[35]
- Category B goods include small arms, light weapons,
man portable air defence systems (MANPADS) and other goods in
respect of which there is legitimate trade, but which on the basis
of international consensus, have been identified as being of heightened
concern. Any person in the United Kingdom, or a United Kingdom
person anywhere in the world, is prohibited from transferring,
acquiring or disposing, or arranging or negotiating a contract
for the acquisition or disposal of Category B goods without a
licence from the Secretary of State. Financing, insuring, advertising
and promotion for Category B goods will not be controlled, but
active or targeted promotional activities aimed at securing a
particular business deal will be.[36]
- Category C goods includes any item on the Military
List but which are not category A or B goods. Trading between
two countries in Category C goods is only controlled if carried
out from within the UK.
28. Whilst we welcomed the creation of Category
B, and UK control over extra-territorial transactions of people
based in the UK and of British citizens overseas carrying out
legitimate brokering in arms, in our last Report we concluded
that the restriction of Category B to trading on items causing
"heightened concern" was problematic as the subjective
definition was likely to throw up inconsistencies.[37]
29. Our more recent comments on the draft Export
Control Order 2009 included a recommendation that the draft Order
should not be enacted until it was revised to bring the trade
in all goods on the Military List within Category B (see Annex
1). This was not accepted by the Government as the Order was introduced
in 2009 without the change.[38]
30. In its Response to our 2008 Report, the Government
stated that the further extension of trade controls on activities
by UK persons anywhere in the world to cover other weapons currently
in Category C was being considered by NGO and industry stakeholders,
with the aim of making a joint proposal for Government to consider
further, with the possibility of implementing the proposals in
further legislation at a later stage.[39]
31. When questioned further on whether extra-territorial
provisions of the export control legislation should be widened
to encompass trade in all items on the Military List, Ian Pearson
told the Committee that Government, NGOs and industry had a shared
responsibility in considering further changes to the legislation:[40]
I have to say that further measures need to be
based on evidence of risk; they need to be proportionate and workable;
and target activities of real concern in an effective way. We
are not at the stage yet where there has been a consensus in terms
of taking these matters forward. We still want to continue to
work with stakeholders to come up with proposals for any further
extensions which we believe are workable.[41]
32. In answer to the question on whether all
groups on the Military List ought to be within Category B, Ian
Pearson said: "I think you would need to look at whether
that would impose a disproportionate burden on industry […]
If consensus [between stakeholders] cannot be reached, then, as
I have said, it will be for the Government to form a view."[42]
33. When asked how discussions with the industry
on widening Category B controls were progressing, Roy Isbister
of Saferworld said:
[NGOs] have been in discussions [with EGAD] for
some time, and we have probably got as far as we can together,
talking about the way that you could possibly use registration
and flexible record keeping as a way of extending the scope of
extraterritorial control to allay business concerns about bureaucratic
burden […] We now need to get back together with Government,
because obviously it is not for us to make the decision and there
are some questions that only Government can answer[...][43]
The Government has let us work, I suppose, at
our own pace to a large extent, though they do inquire how we
are getting on. I would not say they are putting pressure on
us, but then I think it would be unfair to say that industry and
NGOs have been pushing this forward just as fast as we can and
that the Government have been slowing us down.[44]
34. The Export Group for Aerospace and Defence
(EGAD) questioned the Committees' previous recommendation that
extra-territorial control be extended to all Military List goods:
the potential impact for UK nationals employed
by perfectly legitimate and responsible overseas firms (such as
Boeing, EADS, Lockheed Martin, Raytheon and Thales, etc, etc,
etc) could be very great, despite the fact that they must undoubtedly
very greatly outnumber those (potentially globally very few) UK
traffickers and brokers whose irresponsible activities we all
want to catch and curtail. Without a clear and concise definition
of what HMG regards as being "trade" which is licensable,
many perfectly responsible activities undertaken on behalf of
these legitimate companies would be caught.[45]
35. In evidence to us, David Hayes, Chairman
of EGAD questioned why the UK thought that it could effectively
"police the world" through extending extra-territorial
controls and sought further clarification how it would work in
practice.[46] Ms Bernadette
Peers, a Member of EGAD's Compliance Support and NFO Liaison Sub-committees,
questioned whether there was a level playing field for UK companies
operating in trafficking overseas. She also questioned whether
BERR and the FCO had the resources to enforce compliance or to
properly inform UK employees working overseas of the changes in
the UK legislation.[47]
However, Mr Hayes told the Committee that EGAD accepted the reality
that extra-territoriality was upon them—but did not believe
that it was effective or the best way of achieving the end. Despite
this, EGAD intended to continue its dialogue with NGOs and Government
to determine how best extra-territoriality could be implemented
whilst minimising the burden on legitimate industry.[48]
36. It appears from the evidence that we have
received that NGOs and industry have gone about as far as they
can go in their discussions on their own on possible extensions
to extra-territoriality. We
conclude that the Government must now take the initiative and
set a deadline for NGOs and industry to bring forward draft proposals
for consideration on the further extension of the trade controls
on activities by UK persons anywhere in the world to cover other
weapons. We recommend that Government reports back to the Committees
on progress on this work by the end of October 2009.
ANTI-VEHICLE LANDMINES
37. In its written submission to us, the UK Working
Group on Arms raised the specific issue of anti-vehicle landmines
(AVMs) which had been omitted from Category B, but for which they
considered there were "compelling humanitarian and security
arguments" for stricter controls on brokering and transport.
For example, the use of AVMs in improvised explosive devices against
civilians and UK forces in Iraq and Afghanistan.[49]
The Working Group told the Committee that it thought that AVMs
ought to be included in Category B as a "matter of urgency."[50]
In 2006 the UK had signed a joint declaration with 19 other countries
that it would adopt certain practices as national policy in connection
with AVMs (which included that it prevent the transfer of AVMs
to any State that had not stated the same policy).[51]
38. Bill Rammell explained to us why AVMs were
not in Category B:
The reason for that is that Category B occurs
where there is an international consensus about the degree of
concern. Not only does that not exist; but explicitly we did
not achieve that. That is why we have gone down the road of trying
to take individual actions in concert with 19 other states. However,
I do not shut the door on Category B listing, if we could
achieve it at a later stage; but because there is not that international
consensus, we have not achieved it.[52]
We achieved internationally the consensus on
anti-personnel land mines, and because it is similar technology
and there are similar concerns, in principle we would like to
stop the sale of anti-vehicle land mines. We are not in a position
to be able to do that at the moment[...][53]
[…] we are dealing with competitiveness
and industrial concerns, not to create an un-level playing-field,
and that is why we have gone down the route we have. We have
made a number of specific commitments that I think clean up and
police the export of anti-vehicle land mines.[54]
Andrew Massey, Head of the Arms Trade Unit added:
"When we talk about licensing of anti-vehicle land mines,
we are only aware of one licence since November 2006, which was
an export to Sweden where the AVMs were actually going to be disposed
of. I do not think we are talking about a major problem in terms
of export control from the UK."[55]
The then Minister wrote to us subsequently to confirm that 25
countries had now aligned themselves with the statement of 2006
on Anti-Vehicle Mines.[56]
39. The Working Group did not accept the Government's
argument that there was not an international consensus as AVMs
being of heightened concern and so could not be included into
Category B. They said:
[…] if you look at cluster munitions, there
is now an international prohibition on cluster munitions, although
a number of notable governments do not accept that prohibition,
and yet cluster munitions are still included in Category A. Obviously
there are a number of humanitarian security concerns around AVMs:
the way that they prevent the movement of civilian vehicles, including,
for instance, ambulances, aid vehicles; the fact that they can
be triggered by civilians on foot, not just people in vehicles;
the ease with which they can be transferred, similarly to small
arms light weapons; and, also, as people have discussed this morning,
the potential risk of the use of parts of AVMs in the IEDs (improvised
explosive devices).[57]
40. EGAD in response to the evidence given by
the Minister on 22 April, wrote to the Committees on 22 May 2009
and shared an email that it had sent the Government on 22 December
2008 where EGAD stated that it supported the NGOs' stance on the
possible inclusion of AVMs in Category B of the UK's trade controls.
It also stated that the impact on UK industry would be minimal
and therefore EGAD would have no objections to the subject being
re-examined by the Export Control Organisation.[58]
41. We are convinced by the UK Working Group
on Arms' argument that there is a compelling case for anti-vehicle
landmines to be included in Category B particularly as this stance
is supported by EGAD. We
recommend that the Government extend Category B to include anti-vehicle
land mines as a matter of priority.
Transport and ancillary services,
transit and transhipment
42. In our Report last year we concluded that
the Government should decide whether or not to include the control
of transport and ancillary services within Category B. We also
concluded that the Government ought to consider which services
to include, how to control them and the duties and liabilities
that could reasonably be placed on those providing ancillary services.[59]
In its Response to our Report, and the End of Year Response published
later that year, the Government stated that it had decided that:
- finance or insurance services
in support of movement of Category B goods would not be controlled;
- general advertising and promotion of Category
B goods would not be controlled, but active or targeted promotional
activities aimed at securing a particular business deal would;
- certain activities relating to transport are
controlled depending on the risk associated with the goods. Therefore,
whilst all activities associated with transport of Category A
goods will be controlled, the sole provision of transport in relation
to Category C goods will not be controlled;
- the supply and delivery of Category B goods between
two third countries will be controlled, and individuals involved
in arranging transport will also be controlled. However, the provision
of the transport service will only be controlled in certain circumstances.
For example, a UK transport provider who is sub-contracted by
a UK entity to provide a driver and a vehicle to move controlled
goods would not be controlled.[60]The
Government decided that requiring transporters of Category B goods
between countries overseas to provide documentary evidence that
those goods had been appropriately licensed by the overseas authorities
would be too burdensome for the transport providers to do in practice,
and
- licences would always be required for Category
A goods transiting or transhipping the UK, and licences would
be required for Category B goods for a specified list of destinations
of concern.[61]
43. These changes were incorporated into the
draft Export Control Order 2009 which was sent to the Committees
for pre-legislative scrutiny. We wrote to BERR on 22 October 2008
questioning the need to exclude from the provisions UK sub-contractors
to a UK concern that provides transport services as we believed
that if they were included it would increase the effectiveness
of the controls. We also asked what powers the Government had
to seize goods in transit which did not fall within the specified
categories, and how often the Government had seized goods under
the then existing powers.[62]
The answers to these questions have not been provided.
44. The UK Working Group on Arms told the Committee
that controls on transit and transhipment have been improved with
the introduction of the Open General Transport Licences (OGTLs)
in addition to the licences for specific shipments of Category
A and B items. However, the Working Group thought that the controls
are "quite complicated and confused across different jurisdictions",[63]
with frequent confusion over which party to a shipment was responsible
for ensuring compliance with transit regulations—with the
risk that non-compliance could occur as a result.[64]
It wanted to see the UK Government engage in outreach to try to
simplify transit across different jurisdictions to enable more
effective international regulation. [65]
The Working Group also questioned in what circumstances the list
of destinations of concern would change (and how often could that
happen) and whether that list of destinations referred to the
final destination of the shipment, or all the intermediate destinations
along the route.[66]
Roy Isbister also noted that:
[…]the law on transit now ranks sensitivity
in part based on whether the goods are classed as Category A,
Category B or Category C. However, the licence, the open general
transhipment licence, seems to use a different system of judging
the sensitivity of equipment, so some Category C goods (for example,
military vehicles and components for military vehicles) seem to
be regarded as more sensitive and to get lumped into the small
arms/light weapons category. I am a bit confused about what the
Government's thinking is. It would be good to have clarity that
the same system is used from the law right down to the level of
the licence.[67]
45. We welcome the improved controls that have
been introduced by the Government on transport and ancillary services,
transit and transhipment.
46. We recommend that the Government
should provide the Committees in its Response to this Report with
more information, as previously requested, on the reason why it
decided to exclude from the provisions of the draft Export Control
Order 2009 UK sub-contractors to a UK concern that provides transport
services, on what powers the Government had to seize goods in
transit which did not fall within the specified categories, and
how often the Government had seized goods under the then existing
powers.
47. We also recommend that the
Government should provide information in its Response to this
Report on what practical steps it is taking to simplify transit
across various jurisdictions and to ensure that transport providers,
and parties to shipments, are aware of the relevant regulations.
We further recommend that the Government should specify also in
its Response whether, and how often, the list of destinations
of concern would change and whether that list of destinations
referred to the final destination of the shipment, or all the
intermediate destinations along the route.
Register of arms brokers
48. In our Report last year, we again concluded
that the EU Common Position on the control of arms brokering adopted
on 23 June 2003 provided best practice and we reiterated our recommendation
from previous Reports that the Government establish a register
of arms brokers.[68]
This followed evidence from the then Minister of State for Energy,
Malcolm Wicks MP that BERR was "not opposed to the idea of
a register of arms brokers in principle" and that he could
see certain advantages of a register.[69]
John Doddrell, Director of the Export Control Organisation told
the Committee "we do see advantages for a register in terms
of increasing compliance" but BERR would have to decide on
practical considerations for entry onto the register and also
its administration.[70]
In its Response to our Report, the Government stated that it was
not yet fully convinced that the benefits of a pre-registration
system would outweigh the burden that it would impose on the industry.[71]
49. We raised again the question of a register
of arms brokers with Ian Pearson.[72]
Perhaps unsurprisingly given the Government's view, he told us
that responses to consultation on the issue had been very mixed,
and that in practice, a register did exist for BERR through the
Government's electronic system for processing export licences—SPIRE.
Mr Pearson raised the question of the administrative burden that
would accompany a pre-licensing registration system, a point which
was expanded upon by John Doddrell, who described it as "another
hoop which an exporter has to go through before they can apply
for a licence".[73]
50. We were told that a pre-licensing registration
system was still under consideration, but time was needed to assess
the impact of introducing such a system and to consider what information
would be required, and whether or not the register would be limited
to traders and brokers or extended to exporters.[74]
When asked whether a conclusion on whether to introduce a system
would have been reached by January 2010, the Minister's reply
was only "Possibly".[75]
This level of uncertainty surprised us, and we found the Minister's
explanations for the delay in reaching a decision on whether or
not to introduce a register for brokers unconvincing.
51. As described in paragraphs 20-22, the list
of UK brokers given to us by the Ukrainian Deputy Minister for
Foreign Affairs raised concerns that UK brokers could be exporting
arms to countries for which there are FCO policy restrictions
without the knowledge, or supervision, of the UK Export Control
Organisation or the FCO. We
conclude that the justification remains for the need for an additional
element of vetting, whether through a separate system, or by some
modification of the electronic export licence processing system.
We repeat our recommendation made previously that the Government
establish a register of arms brokers, the need for which was further
confirmed by the Committees' visit to Ukraine.
End-use control for torture equipment
52. We concluded last year that the Government
was right to seek to introduce an end-use control on equipment
used for torture, or to inflict inhuman or degrading treatment,
through the EU, in order to ensure that controls on torture equipment
where also implemented across the EU and so that UK exporters
could not circumvent the control simply by temporarily exporting
from other nearby EU countries. However, if this was not possible
to achieve end-use controls through the EU, we recommended that
it be introduced by the UK.[76]
53. The Government's Response in November 2008
to our Report stated that the Government had made good progress
in taking this forward with the Commission and other Member States,
but if it was not possible to achieve through the EU, the Government
accepted that it would consider introducing the end-use control
on torture equipment unilaterally.[77]
Shortly afterwards, in its End of Year Response in December 2008,
the Government stated that it would be meeting the Commission
in early 2009 to discuss the introduction of a control where the
exporter would be required to submit an export licence application
where they had reason to believe, or had been informed, that the
items could be used for capital punishment, torture or other cruel,
inhuman or degrading treatment. This control would supplement
the current list of items already controlled by EC Reg 1236/2005.[78]
54. In evidence to the Committee, Jayne Carpenter,
Assistant Director of the Export Control Organisation, said that
initial indications were that there was a good deal of support
amongst other Member States for the UK proposals. However, the
slow pace of the European process would mean that it would take
some time before the UK Government considered the alternative
of unilateral controls.[79]
We recommend that the Government
should provide the Committees in its Response with an update with
its progress in pursuing end-use controls on torture equipment
through the EU.
Re-exports
55. In previous Reports we have highlighted the
issue of maritime patrol aircraft which were exported from the
UK to India and then sold by the Indian government to Burma. We
concluded that this undesirable outcome would not have been prevented
by pre-licensing checks on a "friendly" country, but
could have been avoided if a standard requirement of licensing
had been in place that export contracts for goods on the Military
List contain a clause preventing re-export to a destination subject
to UN or EU embargo. Several other EU countries (Austria, Belgium,
Bulgaria, Finland, France, Germany, Italy, Poland, Romania, Spain
and Sweden) use re-export controls to some degree. In addition
we recommended that the contracts included a subrogation clause
allowing the UK Government to stand in the place of the exporter
to enforce the contract in the British or Foreign courts.[80]
56. In its Response to the Committees' last Report,
the Government rejected the recommendation of re-export clauses.
It stated that the existing licensing process was sufficient:
The Government considers all export licence applications
rigorously, against our Consolidated EU and National Arms Export
Licensing Criteria, taking full account of the prevailing circumstances
at the time of application and other announced Government policies.
This consideration takes account of the risk of diversion to undesirable
end users, including the risk of diversion to countries subject
to EU or UN embargoes, and also consideration of the recipient
countries' attitude towards international agreements/commitments.[81]
The Government is not […] attracted by the
idea of using subrogation clauses in the way in which the Committees
suggest. There are legal difficulties in doing so because of the
limits of UK jurisdiction, as well as difficulties in enforcement.
It is also difficult to see what a subrogation clause achieves
that cannot be achieved by other means—for example, by refusing
applications from the exporter to the end user in question on
the grounds of risk of diversion (Criterion 7). [82]
57. In January 2009, BERR gave evidence to the
Committee on the efficacy of the licensing system in assessing
the risk of re-export. Ms Jayne Carpenter, Assistant Director
of the Export Control Organisation, said that before licence were
issued, UK diplomatic posts overseas were asked to comment on
the applications. That could involve them looking at the application
documentation and physically going to see where the end-user entity
was located and assessing what sort of operation they have set
up.[83] The then Economic
and Business Minister, Ian Pearson, reiterated the Government
position:
Our view has always been as a government that
the introduction of a no re-export clause on licences is not necessary
or feasible and would be onerous to operate and virtually impossible
to enforce […] there is I think a commonsense view that this
would be a desirable thing to do but in practice there are some
very serious practical legal barriers.[84]
However, the Minister added that he would be interested
in seeing an assessment of how legally effective the no re-export
clauses used by EU countries were.
58. When asked what end-use monitoring was undertaken
by the Export Control Organisation (ECO) after the licence was
issued to ensure that controlled goods were not exported to an
undesirable location or misused, Ms Carpenter said where there
were a variety of different reporting mechanisms on end use: reports
from FCO Posts overseas, NGOs, human rights organisation reports,
media reporting, intelligence reports. However, it was not possible
to check everything: "Given that we issue 10,000 or 12,000
licences a year, there is a limit in practical terms to the extent
to which we can monitor the end use of every exported item".[85]
59. After the evidence session, in a letter dated
19 February to the Committees, the Minister reiterated the Government's
view that controlling re-export clauses would be problematic.
He pointed out that the Government already had the power to revoke
licences if it had evidence that an exporter was sending military
equipment or technology to a licensed production facility that
was using it to breach an arms embargo. The Minister claimed that
re-export clauses would not add anything to the process other
than an administrative burden to the exporters and the ECO, specifically
in the case of licensed production facilities overseas:
[I]n reality we would still lack any further
power to stop equipment from the licensed production facility
reaching sensitive destinations […]stating that something
should happen in a contract is no guarantee that it will happen,
and we would usually only become aware of breaches after the equipment
in question had been exported. By that time, it would be too late
to apply for an injunction to stop the export […] there would
be no guarantee that any injunction would be enforceable in the
country of the licensed production facility.[86]
60. In a subsequent letter, the Minister was
able to provide the Committee with an example of where Government
policy had changed towards an end user and destination as a result
of information received from sources. One such example was Mapna
Turbine Blade Company, for which licences had been granted in
the past.[87]
61. When the then Minister for State at the Foreign
and Commonwealth Office, Rt Hon Bill Rammell MP, gave evidence
to us on 22 April 2009 he too repeated the Government view that
re-export clauses would ask UK exporters to do something that
is beyond their control and would be beyond the UK Government's
legal jurisdiction.[88]
When asked how other EU Member States use re-export clauses, Andrew
Massey, Head of the Arms Trade Unit, told us:
When I talk to my colleagues sitting around the
COARM table in Brussels and say to any of them, "Okay, guys,
this is all very well—when was the last time you tested
it?" they all said, "We have never actually put it to
the test". Then I ask them, "Do you think it is enforceable?"
and there is then much staring at their toecaps. The reality
is that they have this legislation there, but in my experience
none of them have any confidence that if they went to apply it,
it would make any difference. They do not believe that it is
enforceable.[89]
- The UK Working Group on Arms
remains opposed to the Government's position on re-export clauses
and gave evidence to the Committees in March on the use of re-export
clauses. Roy Isbister of Saferworld told the Committee, that in
the case of the maritime patrol aircraft sold by India onto Burma,
the Indian Government had told the UK Government that there had
been nothing in the contract to say that the aircraft could not
be sold on to Burma.[90]
- We are minded to take further evidence on the
use of re-export clauses by other countries
64. We conclude that, despite
the Government's view that it considers that non re-export clauses
would an unnecessary burden as they would be difficult to enforce,
the requirement to have a non re-export clause in contracts for
the supply of controlled goods would send a clear message to both
parties to the contract that re-export to certain countries is
unacceptable. We recommend that the Government gives further consideration
to blocking this demonstrable loophole in its arms export controls
regime.
LICENSED PRODUCTION OVERSEAS
65. In previous Reports we have concluded that
existing controls over licensed production overseas were inadequate
and needed to be extended. We had considered the option that Government
had set out in its 2007 Consultation Document that export licences
for supplies to licensed production facilities or subsidiaries
could be made subject to conditions relating to the relevant commercial
contracts.[91] After
further consideration, we recommended in our last Report that
the Government make export licences for supplies to 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.[92] The Government
Response to our Report stated that it had concluded that there
was no convincing case for enhancing controls on the exports of
controlled goods specifically in relation to licensed production.[93]
We conclude
that we do not agree with the Government's decision not to enhance
controls on the exports of UK controlled goods produced under
licence overseas and we recommend that the Government should explain
in its Response why it came to this decision and whether it will
reconsider its policy.
Military end-use controls and
the "single action" clause
66. End-use controls already operate in relation
to items or technology that:
are or may be intended […] for use in connection
with the development, production, handling, operation, maintenance,
storage, detection, identification or dissemination of chemical,
biological or nuclear weapons or other nuclear explosive devices
or the development, production, maintenance or storage of missiles
capable of delivering such weapons.[94]
67. However, the current Military End-use Control
does not control complete items that, whilst not strategically
controlled, could nevertheless be of significant use to the military
in an embargoed destination; neither does it control any exports
to non-embargoed destinations, some of which might be of considerable
concern.[95]
68. The Committees' 2008 Report recommended that
the Government bring forward proposals for a systematic military
end-use control regime.[96]
The Government's Response stated that it was seeking an expansion
of the current EU Military End-Use Control which would require
licences for goods:
which the exporter knows are intended for use
in listed destinations by the military, police or security forces,
or has been informed by the Government that the goods are or may
be so used, where there is a clear risk that the goods might be
used for internal repression, breaches of human rights, or against
UK forces or those of allies.[97]
It is possible that the exports on the list provided
to us in Ukraine would fall into this category. It was also intended
that the control should be extended to apply beyond embargoed
destinations, to additional listed destinations that are of heightened
concern. The Government intended to hold further consultation
with industry and NGOs on the wording of the proposed new control,
including whether it would be workable in practice, with the intention
of the UK negotiating changes at EU level.[98]
69. Oliver Sprague of Amnesty International told
the Committees that the NGOs were concerned that the control would
not cover components parts, and questioned whether the proposals
would cover the export of assembly kits of vehicles.[99]
In its submission, the UK Working Group on Arms expressed disappointment
at the slow progress of the proposals, particularly as the Government
announced its decision in February 2007 to develop EU policy in
this area.[100] The
Working Group provided examples of cases where it believed that
uncontrolled UK-made parts and components for military and security
equipment being used in regions of instability: Land Rover vehicles
used by Azeri military and UK traders allegedly involved in transfer
of electronic components for Improvised Explosive Devices (IEDs)
in Iraq.[101]
70. In our last Report we examined the "Einzeleingriff",
or "single action", clause used in Germany, whereby
the transfer of an unlisted item could in principle be refused.[102]
Although the NGOs thought that this approach would have
advantages, EGAD and the Government had reservations. The then
Minister told us that use of the clause had given the German authorities
flexibility, but gave rise to uncertainty for exporters about
what is and what is not controlled.[103]
We also considered whether the ML6 category of the Military List
should be amended to cover utility and transport vehicles supplied
for military, security or police use, including those supplied
as complete items or in kit form, and the ML10 category should
be amended to cover utility and transport aircraft supplied for
military, security or police use. The Government Response to our
Report accepted that there was a case for tightening controls
on the export of non-controlled goods but stated that its aim
was to achieve this through expanding the EU Military End-use
Control.[104]
71. We are concerned that, since our last Report,
the Government does not appear to have made much progress in its
discussions with the industry on its proposals for an amended
EU Military End-use Control. Our visit to Ukraine, and the information
we received there about the possible exports made by UK brokers
to overseas armed forces and police, has heightened our concern.
We recommend that the Government
report back to the Committees by the end of 2009 with further
detail on the discussions that have taken place with industry
and a timetable for introduction of its proposals for an amended
EU Military End-use Control.
End-user undertakings
72. The Export Group for Aerospace and Defence
(EGAD) raised the issue with us in evidence that some of its members
had encountered difficulties when seeking End-User Undertakings
from the Ministry of Defence at the request of other EU Member
States. In particular, EGAD stated that extent of knowledge and
understanding of export control issues was variable amongst Integrated
Project Teams at the Ministry of Defence—to the extent that
the exact definition of "End-User" were greatly misunderstood.
This has led to the MOD refusing to sign End-User Undertakings
for intra-EU trade that are required of exporters by other EU
Member States.[105]
73. We recommend that the Government
ensure that Integrated Project Teams in the Ministry of Defence
who deal with UK exporters are fully aware of the regulations
surrounding End-User Undertakings.
Research
74. We have in our past three Reports highlighted
the need for the Government to commission independent research
into the operation of the export control system.[106]
In our Report last year we repeated the recommendation of
the previous year that the Government carry out a government-wide
assessment of the effectiveness of the operation of export control
legislation since 2004 and that the Government in responding to
our Report produce detailed evidence to demonstrate the effectiveness
of export controls.[107]
To assist the Government, we highlighted a number of areas
where we considered further research would be profitable:
- what volume and categories
of the goods falling within definitions on the Military List and
in the dual-use regulations were being exported without licences
in breach of export controls;[108]
- the extent to which dual-use goods not subject
to control were exported from the UK and were then incorporated
into equipment which had it been exported from the UK would have
been subject to export control;[109]
- whether the controls on the transfer of software
were adequate, practicable and enforceable;[110]
and
- the reasons for the small numbers of applications
for trade control licences from British citizens overseas.[111]
75. The Government's Response to our last Report
repeated the argument of previous years that the public consultation
on the Review of export control legislation, the Government's
own analysis, responses from COARM Member States to a UK questionnaire
and consultation with Non-Governmental Organisations (NGOs), industry
and the Committees provided evidence of the effectiveness of the
system, and had fed in to the Review.[112]
However, it also stated that once the Review had been concluded,
the Government would take "a closer look" at the issue
of the extent to which industry is aware of, and complies with,
export controls. The Government was still considering commissioning
a study but first needed to be certain that this would "add
value to existing analysis, and would represent value for money."[113]
The Response stated that any study commissioned would not be primarily
about quantification of levels of non-compliance with strategic
export controls, but would focus on "how to best implement
and enforce strategic export controls and raise industry's compliance
and awareness, so as to provide a basis upon which to review,
and potentially re-focus, Government's awareness activities."[114]
76. In our previous Report, we accepted that
answers to such questions in the Consultation Document may have
been useful but we pointed out that the respondents were self-selecting
and the answers to some measure were unstructured. We were therefore
not surprised that the Government said that it "did not get
quite as much as we had hoped"[115]
in response to the 2007 Consultation Document.[116]
77. When asked in January 2009 whether the Government
was still considering whether or not to commission a study, Ian
Pearson, the then Economic and Business Minister, told the Committee
that he would like to see a study happen, specifically "I
do think that it would be a sensible use of public money to have
a study that looked at non-compliance in the dual-use sector."[117]
We are disappointed that the Government still has not made a formal
decision on whether or not to commission research. We
repeat our recommendation that the Government take steps to demonstrate
the effectiveness of the export control system through the commissioning
of independent research.
26 Report of the Inquiry into the Export of Defence
Equipment and Dual-Use Goods to Iraq and Related Prosecutions
(The Scott Report) HC (1995-96) 115, Vol IV, Chapter 2, para K2.1 Back
27
Department of Trade and Industry, Strategic Export Controls
White Paper, Cm 3989, July 1998 Back
28
Department of Trade and Industry, Consultation on Draft Legislation:
The Export Control and Non-Proliferation Bill, Cm 5091, March
2001 Back
29
HC (2007-08) 254, paras 24-33 Back
30
Ev 71 Back
31
Ev 58 Back
32
Defence, Foreign Affairs, International Development and Trade
and Industry Committees, First Joint Report of Session 2006-07,
Strategic Export Controls: 2007 Review, HC 117, para 76,
HC (2007-08) 254, para 31 Back
33
HC (2007-08) 254, para 28 Back
34
HC (2007-08) 254, para 31 Back
35
Trade in Goods (Categories of Controlled Goods) Order 2008 (SI
2008/1805) Back
36
Export Control Act: Review of Export Control Legislation (2007)-
Government's End of Year Response, pp 4-5 Back
37
HC (2007-08) 254, para 31 Back
38
Export Control Order 2008 (SI 2008/3231) Back
39
Cm 7485, p 4 Back
40
Q 2 Back
41
Q 1 Back
42
Q 4 Back
43
Q 79 Back
44
Q 80 Back
45
Ev 60 Back
46
Qq 105, 106 Back
47
Q106 Back
48
Q107 Back
49
Ev 72 Back
50
Q 78 [Marilyn Croser] Back
51
Statement by HE Mr Bent Wigotski, Ambassador, Denmark at the Third
Review Conference of State Parties to the Convention on Certain
Conventional Weapons, Geneva, 17 November 2006, www.unog.ch Back
52
Q 199 Back
53
Q 202 Back
54 Q205 Back
55 Q208 Back
56 Ev109 Back
57 Q78 Back
58 Ev
109 Back
59
HC (2007-08) 254, para 33 Back
60
Export Control Act: Review of Export Control Legislation (2007)-Government's
End of Year Response, p 5 Back
61
Cm 7485, p 6 Back
62
See Annex 1 Back
63
Q 82 Back
64
Ev 73 Back
65
Q 81 Back
66
Q 81 Back
67
Q 82 Back
68 HC(2007-08)254,para36 Back
69 HC(2007-08)254,Q151 Back
70 HC(2007-08)254,Q151 Back
71 Cm7485,
p 6 Back
72 Q24 Back
73 Qq24-26 Back
74 Q26 Back
75 Q33 Back
76
HC (2007-08) 254, para 38 Back
77
Cm 7485, p 7 Back
78
Export Control Act 2002, Review of Export Control Legislation
(2007)-Government's End of Year Response, p 6 Back
79
Q 36 Back
80
HC (2007-08) 254, paras 39-40 Back
81
Cm 7485, p 7 Back
82
Cm 7485, p 8 Back
83
Q 39 Back
84
Q 38 Back
85
Q 39 Back
86
Ev 65 Back
87
Ev 84 Back
88
Q 191 Back
89
Q 192 Back
90
Q 89 Back
91 HC(2006-07)117,para238 Back
92 HC(2007-08)254,para42 Back
93 Cm7485,pp7-8 Back
94 CouncilRegulation(EC)No.1334/2000,SettingupaCommunityregimeforthecontrolofexportsofdual-useitemsandtechnology,(theDual-UseRegulation),Article4.1,22June2000,www.berr.gov.uk/files/file8989.pdf Back
95 Cm7485,p8 Back
96 HC(2007-08)254,para46 Back
97 Cm7485,pp8-9 Back
98
Cm 7485, p 9 Back
99
Q 73 Back
100
Ev 74 Back
101
Ev 74-75 Back
102
HC (2007-08) 254, para 43 Back
103
HC (2007-08) 254, Q 204 Back
104
Cm 7485, pp 8-9 Back
105
Ev 109 Back
106
Defence, Foreign Affairs, International Development and Trade
and Industry Committees, First Joint Report of Session 2005-06,
Strategic Export Controls: Annual Report for 2004, Quarterly
Reports for 2005, Licensing Policy and Parliamentary Scrutiny,
HC 873, paras 76 and 100; HC (2006-07) 117, paras 25-32; HC (2007-08)
254, paras 22-23 Back
107
HC (2007-08) 254, para 23, HC (2006-07) 117, paras 29 and 31 Back
108
HC (2005-06) 873, para 76; HC (2006-07) 117, para 25 Back
109
HC (2005-06) 873, para 100; HC (2006-07) 117, para 25 Back
110
HC (2006-07) 117, paras 90-91 Back
111
HC (2006-07) 117, para 59 Back
112
Cm 7485, pp 3-4 Back
113
Cm 7485, p 3 Back
114
Cm 7485, p 3 Back
115
HC (2007-08) 254, para 23, Q 149 Back
116
The responses were published at http://www.berr.gov.uk/europeandtrade/strategic-export-control/legislation/export-control-act-2002/review/page42883.html Back
117
Q 61 Back
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