Examination of Witnesses (Questions 66-121)
MR MARK PRISK MP, CHRIS CHEW AND TOM SMITH
24 JANUARY 2011
Q66 Chair: Minister, may we
welcome you to the first ministerial oral evidence session of
the Committee on Arms Export Controls? We also welcome your colleagues,
Mr Tom Smith and Mr Chris Chew.
Minister, I want to start by asking a question
that I know you won't take personally in any way, because it is
not meant in that way. The last report to this Committee and the
House by the four Departments came under the names of the four
Secretaries of State—David Miliband, Lord Mandelson, Douglas
Alexander and Bob Ainsworth—and it was a substantial document
of about 100 pages. The first report from the new coalition Government
comes from yourself and junior Ministers in the other Departments—Alistair
Burt, Alan Duncan and Nick Harvey—and it is half the size.
I appreciate that size is not everything, but the Committee might
conclude from that that the coalition Government attach less weight
to arms export controls and arms control policy than the previous
Government. How do you respond to that?
Mr Prisk: Thank you, Sir John,
for your welcome. I wouldn't, and I certainly never have in my
career before politics, measure the position of an organisation,
let alone a Government, on the length of their documents, nor,
indeed, on the specific signatories to a document. You will know
that we are very keen to ensure that, while we promote exports
vigorously as a Government, those exports must nevertheless be
responsible exports. If the initial response to your substantive
report is short, I hope that is because it is concise rather than
insubstantial. Generally speaking, I hope that that will be a
welcome quality in a Minister, although I will leave whether I
achieve being concise but not insubstantial this afternoon to
you and your fellow Committee members to judge.
Q67 Chair: What is the significance
that under the previous Government this report was signed off
by the four Secretaries of State—the four Cabinet Ministers—but
that under this Government that is not the case?
Mr Prisk: Personally, I would
not place any significance on that. If that is something that
the Committee feels is inappropriate, I will certainly take it
back and report it to my Secretary of State. I am sure that Mr
Burt, when he is before you, will wish to do so as well. My own
personal view is that, when it comes to the details of how export
controls are handled, Ministers of State, such as myself and others,
are closely involved and have very good support from our Secretaries
of State. I would not suggest to you that the fact that the signatories
are not Secretaries of State means that somehow this is of no
interest to the respective Secretaries of State of the Departments
of which the Members present represent their Select Committees.
Chair: Thank you. Malcolm Bruce has some
questions on the new Government's policy in this important field.
Q68 Malcolm Bruce: Good afternoon,
Minister. I was taken to task after the last evidence session,
which was with the industry and NGOs, because we asked them about
the export promotion policy of the Government and were told that
the target markets are basically the United States and the European
Union. One of the NGOs that wasn't present complained that it
was actually a much wider market than that, and we have since
received a list of the Government's priority markets. It includes
Algeria, Iraq, Libya, Pakistan—these are the ones that I
have identified—and one might include Saudi Arabia and Mexico
in brackets. In other words, these are not immediate, natural
allies. What is the Government's policy, and what safeguards are
there in promoting exports to countries such as the ones that
I have identified?
Mr Prisk: If I may, Mr Bruce,
you are absolutely right to ensure that that full list is there.
Our view is that defence exports are legitimate—I suspect
that that is also the view of many members of the Committee—not
least if one looks at the UN charter, which is very clear that
nations have the right to defend themselves. Sometimes, they will
be in areas where there is considerable tension or, indeed, where
there has been conflict—that is understood. We will wish
to make sure that British manufacturers, who are successful, can
export successfully, but that we will always look at this with
due care and with particular attention to the risks in the market
and the risks with the regime involved. Obviously, we will look
at the local region into which the exports are being promoted,
but the key issue is that we must always, and will always, seek
to comply with our international obligations and the due process
of law and make sure that we have taken the greatest care to look,
for example at the question of the end-user, which is always very
challenging.
Q69 Malcolm Bruce: Why do
you think that the industry and, indeed, some of the NGOs were
of the opinion, and comfortable with the fact, that you should
promote arms exports and the arms trade? Clearly, some NGOs are
totally opposed to the arms trade, but the ones we were talking
to were not in that category. My response to them was that if
we're talking about the EU and the United States, most of us are
fairly comfortable, but some of the countries I have identified,
which are on the Government's target promotion list, would, I
think, be more questionable. First, was the industry trying to
mislead us, or has it been misled? Secondly, what assurances can
the Government give the wider public and those of us who, although
not opposed to export promotion, are concerned that we might be
selling to countries that are not entirely stable, where we cannot
really be sure that exports will be used properly or will not
be illegally passed on?
Mr Prisk: That's an entirely legitimate
concern, so I wouldn't be surprised if NGOs looked at a list and
asked themselves whether the risk in country A or country B is
acceptable. That has to be a judgment call based on the information
one has. What I'd go back to is the fact that there are clear
consolidated criteria in this area around where exports can and
cannot be undertaken and what we will not support. The criteria
obviously relate to the issues that we're all worried about—things
such as the promotion of international terrorism, internal repression
or, indeed, cases where it's clear that there's a danger that
the UK's national security could itself be jeopardised.
There is a wish in the new Government to grow
manufacturing. As part of that, we recognise that we have strong
UK manufacturers in the defence and security fields. We want to
support those, where the end-use and the end-user are legitimate.
We will follow, as have previous Governments, the appropriate
criteria. We want to make sure that, while we're enthusiastic
to ensure that British businesses can do well abroad, we do not
short-circuit in any way the appropriate processes and laws.
Q70 Malcolm Bruce: Finally,
Sir John, may I just home in on what's happened in the last couple
of weeks in Tunisia? Are we really comfortable that Algeria and
Libya are proper markets for promoting UK exports in the present
climate?
Mr Prisk: We must always judge
each country on the basis of the information—open information
and other information—that the Government have, and I am
sure the right hon. Gentleman understands that. That risk assessment
has to change as events change. Had we had this conversation three
weeks ago, events in Tunis would not perhaps have raised that
issue. Other countries on the list may suddenly become even more
pertinent. The appropriate approach is to make sure that we look
at the risk in each country on a case-by-case basis and use that
judgment accordingly.
Q71 Malcolm Bruce: So this
is a working list?
Mr Prisk: This is a list that
we are working to, yes.
Q72 Thomas Docherty: Can I
tease out your thinking a bit more, Minister? If I heard you correctly,
you said that there were growing markets for exports. Could you
expand a bit on whether you see those as existing markets with
further opportunities? Is this a case of new technologies that
UK companies had not previously sold? Is it a combination of the
two?
Mr Prisk: Inevitably, it is a
combination of the two, in the sense that it's a question of the
opportunities that are there and of UK businesses being able to
export to those places. They then need to make a judgment about
that. Our view would be that we need to make sure that they are
doing their job properly, and we are then able to support them
where we're confident that they are doing that and that the end-use
and the end-user are legitimate. All those considerations have
to come into play.
Q73 Thomas Docherty: If we
separate the existing contracts that are being extended from new
types of contract, would it be right to say that the Government,
for obvious reasons, would be more comfortable with an extension
of existing contracts, because you broadly know what is involved
with that and there are perhaps additional challenges or additional
levels of scrutiny that would be needed for new markets or new
types of contract?
Mr Prisk: Inevitably, when you're
trying to make an assessment of the risk, if it's an established
business with an established transaction with a known end-user
for an established use, clearly the risk is different from the
risk if it's a new user, a new technology or a new market. Again,
this is why I think that a case-by-case approach, looking carefully
at the different elements of risk that exist within any transaction
so that we can understand that they are genuinely compliant with
our treaty obligations, is the appropriate and sensible approach
to take.
Q74 Nadhim Zahawi: Minister,
how important does BIS consider the promotion of UK arms exports?
How important is that to BIS?
Mr Prisk: Our view is that this
is an important part of the overall wish to see an increase in
the export of manufacturers' goods and services. Clearly, manufacturing
makes up already, as a whole, over half the UK's exports, so it
is an important part of our economic strategy.
Q75 Nadhim Zahawi: What is
the role of BIS in co-ordination? We know from one of the quotes
from the Secretary of State for Defence that "we will seek
to increase Britain's share of the world defence market."
Is co-ordination led by the Ministry of Defence? How does co-ordination
work? In an earlier evidence session, one of the manufacturers
said that obtaining export licences is a bureaucratic nightmare.
Is that something that your Department focuses on versus, say,
the Ministry of Defence?
Mr Prisk: There are two issues
here, and this is why the Trade Minister leads on promotion and
the Business Minister leads on export control—so that we
get that distinction, which is an important one. In terms of the
promotion, that obviously is central to UK Trade and Investment
and the Trade Minister, although obviously the Ministry of Defence
and other parts of Government will be involved. In terms of the
export-control process, that is the direct responsibility of the
Export Control Organisation. I'll ask its director, Mr Smith,
who's sitting on my right, to respond. We are aware that the number
of licence applications has increased quite substantially. As
a new Minister, I'm certainly keen to make sure we have an efficient
process, but we also have to recognise the balance between an
increase in demand, which there has been in licence applications,
and the pressure on resources, so we need to look at how we can
be more efficient. There's room for improvement in that area,
and we're very mindful of that. I don't know whether Mr Smith
wants to add to that.
Tom Smith: Absolutely there is
room for improvement. What I would also say, though, is this.
Since I took over the ECO, I've looked at our main competitor
systems—for example, in the USA, France and Germany. Our
customers tell us that we compare very well—for example,
because we're the only export licensing authority in the world
to have full end-to-end electronic export licensing. I think our
processing times compare very well and our use of open licences,
which don't require prior approval for exports, compares very
well; I think we're a world leader. But yes, there's quite a bit
of work still to be done in terms of improving what we do and
boosting efficiency.
Mr Prisk: It's worth bearing it
in mind as well that nearly two thirds—64%—of applications
in the last year were dealt with in our target area of 20 days.
We're aiming for 70%, so there's work to do, but we need to achieve
a careful balance here. I'm talking about being thorough, so that
we don't fall into the trap of not doing our work appropriately
given our need to ensure that we don't breach our international
legal obligations, but equally making sure that business can do
its job properly.
Chair: Thank you, Minister. We have a
lot to try to get through and we have you for only an hour, so
we shall move on as quickly as we can if that's all right. Margot
James has some questions on the ECO.
Q76 Margot James: My questions
follow my colleague's questions on the ECO. You have alluded to
the rising number of applications and the increased demand. The
Export Group for Aerospace and Defence told us at our last hearing
that the ECO is resourced to process around 10,000 licence applications,
but that 17,000 applications are expected. You are shaking your
head, Mr Smith. Is that not the case?
Tom Smith: I don't know where
the figure of 9,000 to 10,000 comes from. Volumes of export licences
have gone up year by year and, through a variety of efficiency
measures, we have coped with that very well. We struggled a bit
in 2010, which is why we fell slightly short of our processing
target. The figures on median processing times for licences showed
that we had a couple of wobbles over the course of last year where
the median processing time went up from about 13 days to 19 days,
and that was where a lot of the concerns from industry came from.
Overall, if you look at the past year, the worst you can say is
that, on average, it took a couple more days in 2010 to process
an export licence that it did in 2009.
Q77 Margot James: That is
certainly not the impression that this Committee received from
the Export Group for Aerospace and Defence, so there does seem
to be a big disconnect between what you are telling us—no
doubt, absolutely as you see it—and what we are hearing
from other organisations. In addition to that, on a visit to Birmingham,
the BIS Committee visited a firm that was manufacturing and exporting
things that might be for dual use. It told us that it was an absolute
nightmare even to find out if you needed an export licence, and
that God help you if you did. There is a big disconnect here,
which the Minister might care to look into at some point.
If I could just go on to the issue of charging,
we understand that you are considering charging companies for
these licences, and I wonder what your view of the pros and cons
of that is.
Mr Prisk: Let me just come back
to the issue. I read the evidence that you had, and it is clearly
something that I want to keep a firm eye on. I need to be careful
to ensure that the ECO can do its job and that we don't go in
any direction that is dealing with illegitimate or inappropriate
end users or end uses while, at the same time, making sure that
the organisation is efficient. I am mindful of that balance and
I would certainly want to talk to the various trade bodies involved.
With regards to charging, as the numbers of
licensing applications have grown substantially and, inevitably,
as Government have pressures on their resources, the question
is whether the taxpayer should pick up the full balance of that
process—as citizens, we require Government to impose effective
export controls on military equipment and so on—or whether
businesses should contribute to that process, if only to make
sure that they then get an even higher quality of service. This
is one of the areas where if a service is free, the treatment
or engagement of it will be different than if it has a charge
related to it, even if it is a de minimis charge. It is not the
intention of the Government to do anything that would be any more
than seeking to look at the possibility of charges for the costs
of the service. This is not intended to be some sort of back-door
charge over and above that, and we would want to consult industry.
We must look at the balance of these issues to see whether, in
fact, there is a different finance model which would make more
sense.
Q78 Margot James: Will you
also update us on the review that you are undertaking on the open
general licensing system? We have heard that some quite large
companies have decided not to use the system at all because it
is so complicated.
Tom Smith: I have also read the
evidence that was given to you by the representatives from the
Export Group for Aerospace and Defence. What they were referring
to was the introduction of the new military goods open general
export licence. Overall, the evidence that I have seen—obviously
I have looked very closely at this—suggests that this new
open general licence has, on balance, been very successful. We've
had 333 new companies signing up to use it, and it was only introduced
in September. For an open general licence, that is quite impressive.
I've also heard a few voices, including some
of the people who gave evidence to you, saying that it is very
complicated. So I'm not getting carried away but, obviously, what
I am looking to do is to tackle the whole complexity and ease
of use point. That is precisely one of the things that the review
of open licensing, in relation to which we met business representatives
last Thursday, is intended to do. We want to check that OGELs
are written in plain English, that they are easy to understand,
that the conditions are standard and that there isn't overlap.
We also want to ensure that the coverage is right and that we
cover all the types of export licence in relation to which, in
practice, we always end up saying yes, rather than covering those
that pose risks to the security or foreign policy agenda of the
UK.
Chair: We come to the US-UK defence trade
co-operation treaty. I call Mike Gapes.
Q79 Mike Gapes: Minister,
you are aware that this treaty has a very long history and that
great efforts were made to get it finally ratified in the United
States but, in practice, isn't it a damp squib? We had evidence
that it would only be beneficial to a very small number of companies,
and it was doubtful whether it represented a sea change in UK
defence exports to the US. Would you agree?
Mr Prisk: Inevitably, any treaty—as
you rightly say, Mr Gapes, this one has been on the cards for
some time and goes back through this Government and the previous
one—relies on the willingness of the various parties involved
to fulfil that treaty in full. There has been a long debate about
just how two way the street is across the Atlantic in terms of
military exports. I am aware that Mr Burt of the Foreign Office
will be reporting—or giving evidence—to you shortly.
I suspect that he will want to set out the Foreign Office's view
on this. I wouldn't take such a negative view as you have perhaps
expressed there, Mr Gapes. There is an opportunity; we have that
treaty in place; now we've got to make it work. Like most treaties,
it relies on being persistent and making sure that the treaty
works in full.
Q80 Mike Gapes: What benefits
will it tangibly bring to UK exporters?
Mr Prisk: If we have set out a
proper process, as we have, by which that trade can be genuinely
pursued—in the past, it has tended to be rather word of
mouth or informal—that gives us a stronger opportunity to
press the case for good UK manufacturers.
Q81 Mike Gapes: We were told
by the Export Group for Aerospace and Defence that our own Government's
ECO places obstacles in the way of exports of UK equipment to
the United States, but that comparable obstacles from the US to
the UK do not exist.
Mr Prisk: I would like to see
some examples of that from the industry and to have the opportunity
to discuss that with them.
Q82 Mike Gapes: We did have
some examples quoted. They talked about laptops in particular
and technology of that kind.
Tom Smith: If I remember, what
the industry reps were talking about was the question of cryptography
exports generally. Cryptography is a complex area and is something
on which we work with businesses on an ongoing basis to get the
detail right. It is something where we have recently introduced
a new open general export licence to remove the requirement to
apply for licences from a wide range of cryptographic goods. The
question about whether our system or the US system is better is
a matter of opinion. I have met some companies who say one and
some who say the other. That is a fair challenge that we are continuing
to address.
Q83 Mike Gapes: Perhaps you
will write to us on that.
Finally, I understand that although the US has
now ratified this arrangement, it has set up some kind of consultation
internally as to how it will work in practice. What are we doing
to prepare our manufacturers—our industry—to take
advantage of the treaty, so that we can make sure that the US
doesn't by other means bring in restrictions that we thought had
been lifted by getting this agreement?
Tom Smith: Basically, we are now
in the implementation phase of the treaty, which will involve
my team and the MOD working together to work with the industry
to go through the detailed arrangements of the treaty—for
example, how the approved list of companies will work—precisely
to try to maximise the benefits.
Q84 Mike Gapes: When will
that come into effect? Do you know?
Tom Smith: I think that the process
is going forward during the next six months, isn't it?
Chris Chew: Yes, the process is
ongoing now. I do not know the target date for having the treaty
fully implemented, but that work is ongoing.
Tom Smith: I know that in shorter
time we are planning to bring in a new open general licence precisely
for exports to the US under the treaty. So it will not happen
all at once, but the whole process of engagement with business
will take place over the next few months.
Q85 Mike Gapes: So, by the
middle of the year we can expect some things to be better?
Tom Smith: Certainly the arrangements
will be in place. Quite when the benefits start flowing will partly
depend on industry's readiness to take it up.
Q86 Richard Burden: Minister,
what proportion of companies do you reckon are compliant with
arms export regulations?
Mr Prisk: There is a lot of evidence
in this area and inevitably that is a very difficult number to
judge. You will be aware that in 2009 we had a survey that was
looking at a limited sample—coming into this as a new Minister,
I looked at the evidence—and the reality is that, like a
lot of these surveys, it relied on people being compliant to fill
in the form and therefore inevitably it was partial. So, I think
there is a problem with that.
What we have tried to do—certainly, it
is my approach here—has been to encourage the ECO and the
Government as a whole to focus on increasing awareness. That is
because an exact robust measurement of knowing how many appropriate
businesses—the number of which we may not be able to calculate—are
able and willing to comply is a very difficult number to secure.
It is like asking what is the total of x and y when you do not
actually know what either x or y add up to. So we have tried to
focus on the awareness side of things and to strengthen that.
In the last year, there has been quite a substantial amount of
progress in that area, in terms of reaching out to business.
So the aim is not necessarily to try to be confident
that you have got a robust statistic but rather that you are continually
working with industry to ensure that as many businesses as possible
are indeed compliant. So it is difficult; it is slightly like
searching for a needle in a haystack, if I may say so.
Q87 Richard Burden: Perhaps
we could come back in a minute to what is being done to raise
awareness. I am glad that you said that about statistics, because
it troubled me a little bit that the survey showed that an estimate
of 80% of companies were compliant but it also showed that only
40% of companies had any knowledge of the SPIRE system, which
is the way you go about getting a licence. I did not see how you
can have only 40% that know how to do it but 80% are compliant.
Given the fact that, whatever the total number, there is a big
variation between those two figures, what are the Department or
the ECO doing to try to get their statistics to be a bit more
robust, because that contradiction rather hits you in the face,
doesn't it?
Mr Prisk: Let me just tell you
what we are trying to do in terms of raising awareness and I will
ask Mr Smith or Mr Chew to comment on some of the statistical
aspects of this. I felt that it was important that we should be
looking at awareness. So, over the last year, the ECO has been
responsible for some 40 seminars, going out and engaging with
industry, particularly trying to focus on the sectors that we
know are more likely to find those seminars relevant. The ECO
has also been focusing—quite rightly, I think—on work
with chambers, trade bodies and so on, expanding that work. The
ECO has had 16 separate events to ensure that it is informing
and advising prospective businesses that could be involved with
this work, and ensuring that it is available to them.
That kind of work is something that we as Ministers
need to engage with as well, to get this message across. It is
the best way of getting the profile up, so that businesses realise
what they need to do, understand how to do it and have the right
information available to them.
I do not know whether you want to touch on the
statistics.
Chris Chew: In terms of the
statistics, the survey was targeted at companies that manufacture
or sell certain types of goods, and we found that only 40% were
exporting. So, if a company is not exporting, there is no reason
why it would have heard of SPIRE. You can argue the figures any
way you like, but we looked at companies that manufacture because
we wanted to find out if there were companies out there that were
completely outside any knowledge of export control. We looked
at a very broad range of businesses, and we found that when you
look at the numbers of people who export versus the numbers that
have heard of SPIRE, it is probably not that unusual to see the
numbers that we did.
Tom Smith: To address the particular
contradiction that the business group, I think, highlighted—namely,
this number compliant with export controls and this number have
heard of SPIRE—I think that 53% said that they had heard
of SPIRE. What we do not know is how many of the other 47% export
controlled goods. We selected companies based on customer tariff
codes, and you cannot tell from those codes whether a good is
controlled. If you take a digital camera, for example, if it meets
a certain specification it is export controlled and if it falls
below that specification it is not. That is the problem that we
have in getting the statistics together. So, what we go on is
all the intelligence that we get from all kinds of sources, about
where people think that there is a compliance problem, but inevitably
the data tend to be more qualitative than quantitative.
Q88 Richard Burden: Finally,
on the criteria that licensing officials use, do they use the
EU common position or the consolidated criteria of 2000?
Tom Smith: We work according to
the consolidated criteria—those are the ones that are laid
down in UK law—but in practical terms there is little or
no difference. The main difference highlighted by the NGOs was
the question of international humanitarian law under one of the
criteria. I checked that specifically with the Foreign Office
experts who look at these kinds of cases, and they assured me
that they do, in practice, address considerations of international
humanitarian law. It is not specifically spelled out in our criteria
that that is what happens, but in practice that is what they do.
Q89 Richard Burden: Why not?
As it's in the common position, why don't you just adopt that
position?
Tom Smith: We will. There is going
to be a revision of the consolidated criteria fairly soon and,
when we do that, precise alignment of the criteria with the common
position is, I think, one thing that will be looked at very closely.
Q90 Chair: Are you giving us a particular
date for that? This is quite an important issue.
Tom Smith: It is. I do not know
precisely; you might wish to ask our Foreign Office colleagues.
Q91 Chair: We'd like a written
note from you, Minister, perhaps with your FCO colleague, on the
timetable for producing that alignment between the common position
and the consolidated criteria.
Mr Prisk: Certainly, Sir John.
I'll speak to Mr Burt personally to make sure that we get that
sorted out.
Chair: Thank you. We're going to turn
now to the question of reinforcement, first on the civil side—civil
penalties.
Q92 Chris White: Minister,
as I am sure you know, since April the Government have had in
place a revised compound penalty system, expanding its use for
minor breaches of export controls. What is your assessment of
that revised scheme?
Mr Prisk: Well, to be fair it
is early days, and clearly it is something that is principally
under the aegis of Her Majesty's Revenue and Customs in terms
of operation. But, we have seen a number of cases brought with
a range of fines, one, as I understand it, in the region of £500,000.
So, so far so good. My view is that it takes a little while—perhaps
a year or so—especially as the frequency of different types
of cases is not necessarily consistent. You tend to need a period
in order to get an understanding of how it works in different
instances, and it can take a little while, I suspect, before we
have a rounded knowledge as to whether this is working as well
as we would like it to.
Q93 Chris White: So, do you think
that businesses are aware of the new criteria?
Mr Prisk: The short answer is
that one would have to ask the businesses to check on that, but
it certainly is an important part of our communication. I would
imagine, given that it was the wish of Her Majesty's Revenue and
Customs to go in that direction, that it would also be doing so.
Tom Smith: It does publicise it.
Q94 Chris White: Finally,
what would your view be regarding the naming and shaming of people
who break the new rules?
Mr Prisk: Which type of people,
before I answer that?
Q95 Chris White: The people
who have broken the new criteria.
Mr Prisk: I think what's important
is that when someone is found to have broken those criteria and
they are fined, it's in the public domain, and that may be made
crystal clear. I think that's the best way of doing it. Whether
we go beyond that—I think it would be of questionable value,
to be honest with you.
Q96 Chair: Sorry, Minister,
could you clarify that? Are you saying that you are making the
fact that penalties have been imposed public but not referring
to the name of the company, or are you saying that you think it's
appropriate to name the company that has received the civil penalty?
Mr Prisk: I am saying that I think
the penalty, the compound fine, is sufficient.
Q97 Chair: Without naming
the company. That is your view, is it?
Mr Prisk: Yes.
Q98 Chair: May I ask one further
question on this? We had criticisms from the EGAD people. They
said to us, "We have absolutely no idea what criteria it"—that
is, your Department—"uses for imposing the penalty
or how the penalties are arrived at." I think it's very important
that the Government are transparent as to the criteria they are
using and how the calculations are done. Can you give us an assurance,
Minister, that that will happen?
Mr Prisk: Certainly. I think we
hear a variety of opinions on that, I have to say to you, but
if that is their concern, it's certainly my assurance to make
sure that the people who should be aware are, and I will certainly
be establishing whether in fact that is followed across Government.
Chair: Thank you. May we now turn to
the issue of enforcement with criminal penalties?
Q99 Katy Clark: The Export
Group for Aerospace and Defence also told us that they thought
the best way to raise compliance was for there to be publicity
about and, basically, vigorous criminal prosecution of those who
have not complied. Is that something you agree with?
Mr Prisk: Again, we have to be
clear as to which particular crimes we are talking about. Clearly,
the most significant ones need to be dealt with in the most rigorous
way possible.
Q100 Katy Clark: Basically
I think what they were saying was that whatever else Government
do, the most effective way of getting companies to comply is for
them to see companies being prosecuted in the courts. The fear
associated with that raises awareness of the system. Do you agree
with that?
Mr Prisk: I do. I think you are
quite right, especially in terms of the larger businesses, where
their reputation is a very important part of their value as a
business. They will be very mindful of the fact that prosecution
can be very damaging in that context, let alone financial or other
considerations.
Q101 Katy Clark: So what further
steps are you taking to press criminal charges against those who
breach export regulations?
Mr Prisk: Our view at this stage
is that we want to deal with each on a case-by-case basis, where
we have robust evidence. Again, I would say that I am always anxious
not to try to come up with a rule, because the moment you do that
in this area, it seems to me that immediately, either there is
an exception that avoids the thing you're trying to deal with
or the rule does not work effectively. What we would try to do
is make sure that we look at these matters very carefully, on
a case-by-case basis.
Q102 Katy Clark: But what
we do know from all our experience is that the more resources
you put into these issues and the more staff time that goes into
investigation, the more cases you will be able to take forward,
because we know people are not complying with the regulations
now. Are extra resources and extra funding being put to HMRC for
this work?
Mr Prisk: Not
only is HMRC involved, but the City of London police are already
involved, particularly in terms of the whole question of bribery
and the related issue. Also, in the last 12 months, we have seen
a record number of prosecutions, and I think it is fair to say
that, inevitably, that has been very resource-intense.
Q103 Katy Clark: So has there
been extra funding?
Mr Prisk: Inevitably,
having had additional prosecutions, we have been able to make
sure they have had the resources needed to do that, yes.
Q104 Chair: To what do you
attribute the fact that you have had a record number of prosecutions?
Mr Prisk: I
pay tribute to the officials who are involved in this process.
Whether it's simply their work or whether there has been a growth
in the market overall and therefore, perhaps, a commensurate increase
in illegitimate activity on the edge of that market is difficult
to judge, but I think it's fair to say that officials have been
able to bring record numbers of prosecutions, and they should
be commended for that.
Chair: We shall turn
now to pre-licence registration of UK brokers and so-called "brass-plate
companies".
Q105 Anas Sarwar: I have a
brief question: why are the Government not copying other EU countries
in introducing a pre-licence register for arms brokers and brass-plate
companies?
Mr Prisk: We do not have a completely
closed mind on this issue. Our view is that while, obviously,
the common position in the EU allows or permits member states
to establish such a register, the question is whether it would
make any difference to the kind of rogues we are trying to deal
with here. I think it is important to question whether, if they
are not applying for appropriate trade licences, they will, in
reality, apply to a register of brokers. I have my doubts. There
can be a case for looking and keeping this under our attention—as
it were—but I have to say that I am quite sceptical as to
whether this would work in practice. We are dealing with people
who are not reasonable or usually law-abiding; therefore, if they
are not complying with the licence arrangements, I very much doubt
they will comply with a register of this kind.
Chair: May we now turn to extraterritorial
controls? Penny Mordaunt will question you on this one.
Q106 Penny Mordaunt: Do the
Government accept Amnesty's argument that there is a case for
putting things such as military vehicles, attack helicopters and
combat aircraft into category B, thus increasing the controls
on those items?
Mr Prisk: Our worry is that, in
essence, extraterritorial trade controls should, on the whole,
be the exception rather than the rule. If one had a wholesale
approach to this, the danger is that we would be asking ourselves
to believe that beyond our jurisdiction we could realistically
maintain such controls, and I am not convinced. There could be
an argument, and we are in discussions with Amnesty about the
practicalities of each of the elements you have talked about.
Indeed, last summer—August, I think—we put in place
such an extension for anti-vehicle landmines. We have followed
what Amnesty has said, and I want to look at it more carefully.
Q107 Penny Mordaunt: Is it
possible to outline a rough timetable of those discussions with
Amnesty?
Tom Smith: Discussions are sort
of on an ongoing basis. Obviously, we saw the evidence that Amnesty
gave in December to the effect that it wanted to move forward
with these specific items. I have been meaning to contact Amnesty
and the other NGOs pretty soon in any case to invite further proposals
in this area. We would then want to get round the table with business
as well. Because I do not know precisely what the arguments and
the complexities might be at this stage, I would be slightly wary
about committing to an outcome, let alone a timetable. We are
not sitting on this; there is no merit in delay.
Q108 Penny Mordaunt: I wonder,
Chair, whether once a timetable is set and there are some meetings,
it would possible for us to hear about them or receive an outline
of the timetable in writing?
Mr Prisk: Sir John, I would be
happy to try to set that up for the Committee.
Q109 Chair: This is a very
significant issue for this Committee, as it has been for previous
Committees almost since the inception of the Committee on Arms
Export Controls. We wish to be kept closely informed by the current
Government on the development of policy on this subject. There
is a further question I want to put to you, Minister: the Committee
has not taken a view yet because it's only just been formed,
but its predecessor Committees always found it inexplicable that
across a wide range of extraterritorial legislation, which covers
organised crime, drugs, child abuse and so on, Governments of
the day have had no difficulty in accepting the proposition that
UK residents, if they commit such crimes overseas, which would
be criminal offences in the UK, should face criminal prosecution
for those crimes. The Committee finds it inexplicable why the
Government of the day would not accept that a UK arms dealer,
who manages to go overseas and take part in an arms trade, which
would be a criminal offence in the UK, should not face criminal
prosecution. We cannot understand, as a matter of principle, why
some arms should be the subject of extraterritoriality and some
not. Taking the most extreme and ludicrous example—but I
put it to you anyway—as the legislation stands at the moment,
if a UK resident sells a ground-to-ground missile overseas, which
is in excess of 300 km in range, he or she faces a criminal prosecution.
If they sell the same missile that is 299 km in range, they escape
criminal prosecution altogether. Can that be a sensible basis
for legislation?
Mr Prisk:
I understand that point of principle, and as you say, that is
an extreme example. Nevertheless, it is one that makes the case
and I appreciate that.
In principle, Governments have taken the view
that in cases of terrorism or murder, clearly extraterritorial
controls and the ability to enforce the law should be considered.
They have tended to take the view, and I think it is an appropriate
one, that a wholesale ban in this field would be incredibly difficult
to enforce and might undermine the other work that we are doing
to deal with the particular rogues in this field. As I say, however,
my mind is not wholly closed in this area. I think we want to
make sure that we are engaged properly in having a dialogue, but
I note the strongly held views that you have expressed, Sir John,
not least on behalf of the Committee as a whole.
Chair: I hope, Minister, that you will
reflect as to whether the enforcement of a total application of
extraterritoriality in this area is any more difficult than the
present legislation, under which extraterritoriality applies to
the totality of drugs and the totality of child abuse, entirely
rightly.
May we move on to end use controls? Malcolm
Bruce has some questions on this.
Q110 Malcolm Bruce: The Government
had been negotiating to amend the EU regulations on military end
use, specifically for whole items, and for items which were going
to countries where there might be question marks. Is that process
ongoing?
Perhaps before you answer that, I could link
it to the specifics of torture end use, where there was a slightly
different situation. There was an undertaking that the Government
would negotiate for an amendment to the EU regulations, but they
would consider acting unilaterally if that were not agreed. Can
you indicate what the status of the negotiations is, and whether
this Government take a different view between the two?
Mr Prisk: The Commission is progressing
with regards to the broader picture, and we are encouraging it
to do so, but we cannot force its hand in that context. However,
we have been very positively engaged with encouraging it to do
so on the broader question.
On the question about execution—
Q111 Malcolm Bruce: I will
come to that. I am asking just about instruments of torture at
the moment.
Mr Prisk: Okay. Torture is an
area on which we, as a country, have a strong position. We said
to the Commission that, if it wishes to, it can make progress
on the current situation, and we support the position that it
has taken regarding an EU-wide torture end use control.
Q112 Malcolm Bruce: Would
the Government consider acting unilaterally if there were not
an EU agreement? The indication had been—
Mr Prisk: With respect, I probably
ought to let Mr Burt, who leads on foreign policy, lead on that,
rather than me.
Q113 Malcolm Bruce: That would
be helpful.
Mr Prisk: Absolutely, I understand
that.
Q114 Malcolm Bruce: One issue
that is obviously in your Department's responsibility is the recent
revelation that sodium thiopental and other drugs were being exported
to the United States, among other places, for use in lethal executions.
It came to light in 2010 that batches of the drug were being exported
by Dream Pharma and, at that point, a restriction was imposed.
We now learn, however, that supplies had been sent to Arizona,
and we have heard today of further supplies.
Can you indicate first of all when this
information came to light from the Department's point of view;
how long it took to take action; when that action took effect;
and whether the revelations that are now coming out about supplies
being used today pre-date or post-date those restrictions?
Mr Prisk: With regard to sodium
thiopental, the Secretary of State received a request at the end
of October of last year about its potential ban in the light of
apparent evidence regarding its use for execution. We looked at
that carefully and put in place an order that came into force
on 30 November, which we debated in the House, I think, on the
29th, so that for end use in the United States sodium thiopental
was indeed under full control. We have gone slightly further—this
comes back to the point I was raising with regard to the EU—and
we have also pressed the EU officials to seek an adoption of an
export control across the EU in that instance. When we looked
at the United States, this was a substance that actually was not
being used for any purpose other than execution, so it was a relatively
straightforward decision.
The less straightforward decision relates to
the other two substances that I know were part of the item that
I heard about this morning on the radio, which I suspect hon.
Members and right hon. Members also heard. The substances have
of course been the subject of some previous allegations. This
relates to potassium chloride and—I am demonstrating my
O-level chemistry here so I will need to read this carefully—pancuronium
bromide. These two, alongside sodium thiopental, are the substances
that are alleged to have been exported by Dream Pharma. We have
received a request from Reprieve with regard to this matter. That
is the organisation that has been talking on the radio and to
other people. Our view is that at this stage there is no suggestion
that anyone has broken the law, because those two substances are
under consideration but are certainly not under any control. I
would also say that potassium chloride and pancuronium bromide
are slightly different from sodium thiopental, for the simple
reason that if you look at most NHS hospitals they are used perfectly
legitimately on a routine basis. So they have potential uses other
than the one that we are all concerned about.
Having received the request from Reprieve, we
have sought to undertake a prompt and concise consultation with
the industry to look at what the unintended consequences might
be were we to pursue a potential control in the United States.
That will conclude very shortly, and then the Secretary of State
will have the evidence to make a decision as to what we do next.
Q115 Malcolm Bruce: There
is slight concern and surprise in this. The surprise, I suppose,
is that the United States—which after China is the greatest
practitioner of state execution—has preferred this method
and, despite having the largest pharmaceutical and drug industry
in the world, does not have the capacity to produce these drugs
for itself, and that they are apparently difficult and rare enough
to have to be sourced from outside. In addition, the Government
said that an export licence would be refused if the Department
had any suspicions that the drug would directly or indirectly
be used to facilitate the death penalty. Again, we are getting
the information from sources outside Government, which imply that
the UK supplier was completely aware of what was being used and
said that he was happy to help. That is something that he may
have to live with himself. What is the status of knowledge? If
I may say so, Minister, you are leaving me less than reassured
that it will not happen again, or indeed that we are in control
of the situation—or that as of today anybody is prevented
from exporting a batch for these purposes.
Mr Prisk: Where an allegation
is made, we have to investigate it thoroughly and robustly, because
sometimes there may be an instance where the allegation is incorrect,
or there may be other evidence that the person in question is
not aware of. I am aware also of some of the allegations about
the supplier, Dream Pharma. We have an inspection system through
the Medicines and Healthcare products Regulatory Agency to make
sure that businesses are appropriate. Those inspections are robust
and I regard them as very important. They are looking at the business
as well as looking at the materials—in this case the drugs
concerned. We will shortly have the conclusion of our consultation
with the industry. I think we just have to balance, here—and
I do understand it's a very sensitive issue, and a very significant
and important one; we just need to make sure that in wanting to
stop an illegitimate use, as many people would see it, we do not
proceed to destroy a perfectly legitimate trade that takes place
elsewhere. And that's why, I think, before we rush into a control
order we need to make sure that we have looked at the implications
of us banning the export of those substances to the United States.
So that's why we're just taking some care; but with respect,
we received an allegation and request to ban sodium thiopental
at the end of October and on 30 November the ban was in place,
so we can and do act promptly.
Q116 Malcolm Bruce: One assumes
therefore what's been revealed today was supplied prior to that
date.
Mr Prisk: Yes.
Q117 Malcolm Bruce: And that
you are confident that no further supplies could be made, or would
be made, other than criminally.
Mr Prisk: Yes, what I'm saying
is—you are quite right, and perhaps I hadn't gone back into
that point—the supplies in question were made before the
control orders were in place. Certainly, we have had no evidence
that anything other than that has been the case in this instance;
but we will obviously look at the substances to make sure that
we're satisfied that the current arrangements are appropriate.
Q118 Chair: Minister, the
allegation that was made on the "Today" programme this
morning was that the Secretary of State and your Department were
too slow in acting on the information that was given, and that
a substantial consignment of sodium thiopental was taken out of
the Acton premises and sold off to the US in the period between
when you were notified of the trade and applying the control order.
Can you respond to the point that you were too slow? And can
you give us, perhaps in writing afterwards, because you may want
to look at the documentation, the precise date when the order
left the country?
Mr Prisk: Well, I heard the allegation
made on the radio, like you, Sir John. I think that the fact that
the request for the control order occurred at the end of October,
and the action took place by the end of November, is a reasonable
period of time. Had it been three or four months, I think the
allegation might carry greater weight, but we will certainly undertake,
as you have requested, to come back to you with the dates, and
so on, so that you can see precisely what was undertaken within
the Department, and particularly by the ECO.
Chair: Thank you very much. Just one
final topic, if we can cover the important issue of bribery and
corruption reasonably rapidly.
Q119 Ian Murray: We've heard
a little bit already about the EU common purpose, and Transparency
International has been looking at perhaps introducing a ninth
criterion to that, in order to cross-cut the rest of the criteria
that are in place, where clear corruption practices exist in a
country. What would your view be on this proposal, and do you
think there's any realistic opportunity of that being pursued
by the EU and coming into force?
Mr Prisk: I don't think it's something
that we would be minded to support, and I doubt whether it would
be successful. I think on the whole we've got to distinguish here
between dealing with the risks of an unacceptable use or an illegal
use, and how a contact is secured, and they're actually two distinct
things, so I think we shouldn't confuse in law those two different
elements. My instinct is that this is something that is unlikely
to progress, and it's not something that we would support.
Q120 Ian Murray: So just to
pursue that point, in terms of the corruption criteria, where
would that be sought specifically with the common purpose regulation?
Mr Prisk: That depends on whether
you're talking about, as I have said, the way in which a deal
is secured. The questions in my mind are, "What is the use
we're dealing with? Who is the organisation we're dealing with?
What are the country and region? And what are the potential risks?"
I regard those as being distinct from the specific issue of corruption.
I think once we start confusing those two as being one and the
same, there's a danger of actually losing our focus on making
sure that we're involved in responsible and legitimate exports.
Q121 Ian Murray: There's been
some significant talk in the papers and in previous reports of
this Committee about criterion 8 methodology and how that refers
directly to bribery and corruption. Criterion 8, as I understand
it, refers mainly to developing countries, so if the corruption
issue being looked is not in a developing country, how would that
fit in and how would it be dealt with?
Mr Prisk: I am just reminding
myself of the various criteria. Criterion 8 is, as it says, very
much focused on the question of "the technical and economic
capacity of the recipient country". My view is that, as they
stand, these various criteria—we went through them to be
confident about them when starting as Ministers—are quite
robust. Therefore, they serve the purpose very well.
Chair: Minister, thank you very much
to you and your colleagues, Mr Smith and Mr Chew. We will await
the additional material that you have offered. If we have any
additional written questions we want to follow up regarding your
evidence, we shall send them to you. Thank you very much indeed.
Mr Prisk: Thank you, Sir John.
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