Export Control (Amendment) (No. 2)
Order 2011

The Committee consisted of the following Members:

Chair: †Mr David Crausby 

† Aldous, Peter (Waveney) (Con) 

† Banks, Gordon (Ochil and South Perthshire) (Lab) 

† Bingham, Andrew (High Peak) (Con) 

† Birtwistle, Gordon (Burnley) (LD) 

† Cooper, Rosie (West Lancashire) (Lab) 

† Donohoe, Mr Brian H. (Central Ayrshire) (Lab) 

† Hepburn, Mr Stephen (Jarrow) (Lab) 

† Heyes, David (Ashton-under-Lyne) (Lab) 

† Jones, Andrew (Harrogate and Knaresborough) (Con) 

† Maynard, Paul (Blackpool North and Cleveleys) (Con) 

† Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury)  

† Prisk, Mr Mark (Minister of State, Department for Business, Innovation and Skills)  

† Reid, Mr Alan (Argyll and Bute) (LD) 

† Roy, Lindsay (Glenrothes) (Lab) 

† Simpson, David (Upper Bann) (DUP) 

† Stewart, Iain (Milton Keynes South) (Con) 

Wollaston, Dr Sarah (Totnes) (Con) 

† Wright, David (Telford) (Lab) 

Ben Williams, Committee Clerk

† attended the Committee

Sixth Delegated Legislation Committee 

Tuesday 29 March 2011  

[Mr David Crausby in the Chair] 

Export Control (Amendment) (No. 2) Order 2011 

4.30 pm 

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk):  I beg to move, 

That the Committee has considered the Export Control (Amendment) (No. 2) Order 2011 (S. I., 2011, No. 580). 

It is a pleasure to serve under you today, Mr Crausby. The Export Control (Amendment) (No. 2) Order 2011 was made, laid before Parliament and came into force on 2 March. The order was made using powers under section 6 of the Export Control Act 2002. 

The order imposes export controls on unissued Libyan bank notes and on unissued Libyan coins. As a result, the export to any destination of such notes and coins is prohibited unless a licence has been first obtained from the Secretary of State for Business, Innovation and Skills. 

The order revokes and replaces the Export Control (Amendment) Order 2011, which was made and came into force on 27 February but which, for reasons of urgency, was not laid before Parliament until 28 February. Perhaps it would help hon. Members if I explained the background to the respective orders. 

On Friday 25 February, the Government became aware that a commercial printer in the UK had a contract with the Central Bank of Libya to print Libyan bank notes. The Libyans had then asked for an urgent delivery of the entire stock of outstanding notes, valued, we think, at nearly £900 million. Given the worsening situation in Libya, and the imminent imposition of the United Nations sanctions against the country and its regime, the Government judged that there was a very real risk that the regime would attempt to move state assets with the intention of keeping them for its own benefit if the regime failed, which was clearly against the interests of the Libyan people. 

There was also a risk that the assets may have been obtained by corruption. In both cases, we assessed that the movement of these funds could constitute money laundering. Therefore, we felt that there was an urgent need to prevent the supply of the bank notes, in order, first, to mitigate the risk that the money could be used by Colonel Gaddafi and his associates to support further violent repression of the population; secondly, to prevent Colonel Gaddafi and his associates from misappropriating the money for personal use, if and when he were forced from office; thirdly, to ensure that the money is kept safe for future legitimate use by Libya when those risks no longer exist. 

Clearly, we needed to act quickly. The printer had told us that, contractually, it had no grounds for delaying the payment. We considered a number of ways in which we could prevent the supply of the notes. As

hon. Members know, we were working hard at the UN for a Security Council resolution that would impose, among other things, an asset freeze. What we did not know at the time was whether that would specifically include the Central Bank of Libya or how long the discussion would take. We also considered whether it would be possible to take action under the Proceeds of Crime Act 2002. On consideration, we found that the Export Control Act 2002 allows the Secretary of State to make provision by order for or in connection with the imposition of export controls in relation to goods of any description. The Libyan bank notes were not in fact in circulation and therefore did not constitute legal tender, but in so far as they consist of paper notes, they are “goods” that can be controlled under the Export Control Act powers. We therefore decided that the use of those powers offered us the quickest and most robust method of preventing the supply of the notes. 

Officials in my Department therefore worked closely with Her Majesty’s Treasury and others to draft the legislation. Work on that continued on the Friday night and into the weekend. Because of the very real risk that the notes could be shipped at any time, it was essential that the order came into force as soon as possible. That meant bringing it into force on Sunday 27 February before it could laid before Parliament. In compliance with the requirements of the Statutory Instruments Act 1946, my Department wrote to the Speakers of both Houses setting out our reasons. The Export Control (Amendment) Order 2011 was laid before Parliament on Monday, the following day. 

Soon after that, the Government became aware that a further contract existed with another supplier, but in this case for supply of unissued Libyan coins. Although the value of the coins was significantly lower, we judged that the same risks of money laundering and misappropriation of state assets applied. We therefore made a new order, the Export Control (Amendment) (No. 2) Order 2011, which imposes export controls on unissued Libyan coins as well as the notes. The order was made, laid and came into force on 2 March. At the same time, the original order was revoked and replaced by the measure before us. 

The order was laid before Parliament pursuant to the procedure of the 2002 Act and unless approved by a resolution of each House within 40 days, it will cease to have effect. As hon. Members know, an order under section 6 can last for a maximum of six months. 

The situation in Libya, and the international response to it, is and has been changing rapidly, as we have seen only today. We are keeping the need for this order under review and if in due course it becomes clear that it is no longer required, it will, naturally, be withdrawn. I hope that the facts that I have set out will help the Committee, and I commend the order. 

4.36 pm 

Gordon Banks (Ochil and South Perthshire) (Lab):  I am grateful for the opportunity to contribute, under your guidance, Mr Crausby. I do not intend to delay the Committee long, but I have a few questions and points of clarification with which I hope the Minister can assist. The last time I was on a Statutory Instrument Committee, with a Minister with responsibility for consumer

affairs, I was accused of rattling off questions like a Gatling gun, so I will try to be more lenient with the speed of my delivery today. 

The Opposition welcome any action that seeks to protect the national interest or, as in this case, the lives and resources of the people of Libya, which are at stake here. The Minister said that the order covers bank notes and coins. Is there any reason why the original order did not cover coins, or was it an oversight? 

The Minister mentioned the number of producers, but the explanatory notes state that the number of UK companies with contractual orders and, dare I say, the ability to produce Libyan currency in the UK is very limited. Does he know the exact number that have the ability to produce such contracts apart from the ones that were so contracted for Libya? Has he spoken to the businesses involved to see how the order affects them? I understand that the impact assessment is still being drawn up. 

As the Minister suggested, there are people in Libya who may use its current troubles as a smokescreen to hide their own illicit activities. We support the Government in their actions to address the seizing of the assets of Gaddafi and his henchmen, but the producing firms are under some kind of legal obligation to their customer, even though it happens to be Libya. Are the firms involved in the production of these contracts sufficiently legally insulated to prevent any repercussions for UK businesses as a result of the order? 

The Minister referred to reports of the amount of currency that was ready to be delivered to Libya. I believe that a shipment of about £100 million of Libyan bank notes was seized relatively recently. Although he touched on the matter, may I press him on what the Government intend to do with the currency seized, either from the shipping company or the producers? Is it our intention to withhold it in safekeeping until the Libyan dispute resolves itself so that we disburse it back to its rightful owners? 

I have a general question. I understand that about £2 billion of Libyan assets have been seized in the UK. Can the Minister say whether that is a clear understanding of the numbers involved? The currency aspect of the order relates to UN sanctions. I presume that the order is wholly compatible with those, because I see no reference to that in the explanatory notes. 

The Minister said that the order creates a new category for compliance in respect of the Export Control Order 2008. Is this the first time that such non-strategic assets have been accommodated under that measure? On the

UN sanctions, I presume that the Minister took domestic legal advice before proceeding with this. I would be grateful if he could clarify that for the Committee. 

4.40 pm 

Mr Prisk:  We greatly appreciate the Opposition’s support for what we are trying to do. It is a practical measure that I think all hon. Members understand and support, which is welcome. The original order did not cover coins because on the Friday we were responding to the specific and imminent challenge of a £900 million shipment. The intention was not to try to make something all encompassing but to deal with that specific risk. Are we working with the businesses directly affected? Yes, absolutely. That is an important principle. In terms of the businesses being covered, it is important to remember that this a freezing of assets, not a change of ownership. The point at which those notes, which are still in the ownership of the Central Bank of Libya, would be in a position to be returned will be as and when matters settle, and the UN and the EU deem that the asset freezes can be relaxed. We will wait to see that and we want to work on an international basis. 

The shipment was not actually seized, though I know there were some press reports about that. The matter was first brought to the Government’s attention on, I think, 1 March. The manifest was logged with the port of Harwich and the assets there are being held securely but again, there is no question of a change of ownership but only of freezing notes and coins so that they cannot be used inappropriately. In due course, when there is a settlement and a legitimate Government and a legitimate arrangement, we will be in a position to resolve that. On the value of the assets, the precise number is moving. The £2 billion figure is in the public domain, but to be absolutely certain, I will double check with my colleagues and come back to the hon. Gentleman. 

The hon. Gentleman asked whether we were working in compatibility with the UN. The answer I think is yes. To return to the earlier point, I am advised, if I am reading this correctly, that the latest figure on assets is £12 billion. On the UN resolution, we very much wanted to ensure that we work with the UN, and the Government are taking a leading role in that approach. We want to ensure that, as the issue is resolved in due course, we will similarly be able to work on an international basis. The reason for the order was the need to deal with a very specific and substantial risk. We felt it was necessary to make sure that we had this legal certainty. I commend the order to the Committee. 

Question put and agreed to.  

4.44 pm 

Committee rose.