Scrutiny of Arms Export Controls (2011): UK Strategic Export Controls Annual Report 2009, Quarterly Reports for 2010, licensing policy and review of export control legislation - Committees on Arms Export Controls Contents

Examination of Witnesses (Questions 66-121)


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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