Written evidence submitted by The Export
Group for Aerospace & Defence (EGAD)
CURRENT UK EXPORT
LICENSING SITUATION
EGAD recognises the importance of an efficient export
control system. This submission focuses on the mechanics of the
system, and how it operates, and particularly the timescales involved
in processing export license applications which has deteriorated
in recent years. Delays in processing licenses, by the Export
Control Organisation (ECO), has resulted in contractual penalty
clauses being enforced against UK companies. EGAD has received
an increase in the number of companies that have experienced such
delays over the last year. This situation does appear to be getting
worse and is affecting the reputation of companies within the
UK. This is a serious issue.
The number of applications that the ECO is processing
far exceeds the levels expected. In 2010 we understand that 17,000
license applications are expected by the ECO, compared to c.15,000
applications which were processed in 2009. Resources have been
allocated by the ECO on the basis of processing between 9-10,000
Standard Individual Export Licence (SIEL) applications per annum.
The ECO should be credited for managing such a large
increase, but this situation is clearly unsustainable. Furthermore,
it is at odds with the Government's ambition to increase UK exports.
The ECO and advisory departments are so focused on
processing SIELs that other aspects of the UK's export control
system, such as "Ratings" and processing of Open Individual
Export Licence (OIEL) applications is suffering.
EVIDENCE AND
IMPACT OF
DELAYS IN
ISSUING LICENCES
Some Members have now informed us that their customers
(including the United Nations) have become so disenchanted with
the delays in delivering equipment that they are seeking to purchase
what they need from outside the UK.
In addition, we are aware of at least one inward
investment decision which is at risk as a direct result of the
export control system. A UK-based company has been considering
returning manufacturing work to the UK from Latin America. This
would bring significant benefits in terms of jobs, export sales
and strategic capabilities. Having being persuaded of the business
case, the company is currently reconsidering this investment because
of the frustrations that they are already experiencing in other
areas of their business in working through the UK's export control
system.
From an Industry perspective there are two steps
which are necessary to improve the efficiency and maintain the
effectiveness of the current system:
(1) Increase the resources of the ECO and its
advisory departments so that they can cope with the increased
demand. Increased UK exports are an ambition of the Government
and deliver both jobs and greater income to the Exchequer in the
form of increased tax receipts.
(2) ECO and its partner organisations should
identify improvements in the current system for processing licensing
applications.
The Government's policy of proactively seeking to
encourage UK Industry to export more will result in further pressure
on our export licensing system, not only from defence and security
companies, but also from dual-use firms.
With some 98% of SIEL applications being successful
each year, there is a strong case for removing a large number
of current SIEL applications from the system and into the Open
General Export Licences (OGELs) process without undermining of
the effectiveness of our national export control system.
EGAD believes that the existing suite of OGELs needs
to be reviewed, to ensure that these licensing products are as
effective as possible.
UK/US DEFENSE TRADE
COOPERATION TREATY
After nearly three years of deliberation, the US/UK
Defence Trade Cooperation Treaty (as well as its US/Australia
equivalent) was ratified by the US Senate Foreign Relations Committee
(SFRC) on 21 September, and confirmed by the US Senate on 29 September
2010.
It aims to streamline and improve defence export
processes and allows for the export of defence articles, without
a license or other written authorisation, from the US to an "approved
community" of recipients in the UK and US and the subsequent
transfer of these articles within that community without further
US authorisation.
There is some uncertainty within industries on both
sides of the Atlantic on the full implications of ratification
and what steps companies need to take to benefit from the treaty.
The US Department of State announced that it intended to undertake
a formal public consultation immediately after the Treaty was
ratified, on its implementation.
As is usual with such complicated matters, the finer
details of the Implementation Arrangements, which were published
separately from the Treaty on both sides of the Atlantic in February
2008 need to be understood in detail. Some examples of the analysis
which is required by individual companies is set out below:
¾ The
equipment under consideration must not be on the very extensive
"Excluded Technologies" List, which was published in
early-2008;
¾ The
intended end-user for the items covered by the Treaty must be
either the UK and/or US Governments only; the Treaty will not
cover items for onward export to other third countries;
¾ The
UK companies who want to use the Treaty, including any and all
sub-tier suppliers and freight forwarders who receive Treaty items,
must be part of the "Approved Community", and, therefore,
have X-List Security-vetted status from the UK MoD;
¾ Individuals
within UK X-Listed companies who need to have access to the controlled
US technology must be UK citizens with SC Security Clearance from
the UK MoD.
At the behest of the UK MoD, A|D|S and EGAD are planning
on organising a series of half-day workshops in early-2011 to
brief UK firms so that they can be better informed on what the
impact of the Treaty may be on them and their commercial activities.
This will allow them to make an informed decision on whether they
want to apply to be part of the Treaty's "Approved Community".
November 2010
Written evidence submitted by Alistair
Burt Parliamentary Under-Secretary of State, Foreign and Commonwealth
Office
Thank you for inviting me to give evidence to the
Committees on Arms Export Controls on Monday 24 January 2011.
I am writing to follow up a number of issues in respect of which
the Committees have requested further information. For the convenience
of the Committees, I thought it best to provide a single reply
from HM Government. This letter therefore also serves as a response
to your letters of 1 February 2011 to Rt Hon Vince Cable MP and
Rt Hon Liam Fox MP.
ARMS TRADE
TREATY
I welcome the Committees interest in the Arms Trade
Treaty, an issue where cross party support has helped us to make
real progress. The Government is fully committed to securing a
robust and effective Arms Trade Treaty (ATT) and hence is keen
to ensure sufficient resources are in place for the negotiation
of the Treaty. I can confirm that multilateral arms control and
disarmament continue to be a high priority for FCO.
Following an internal reorganisation to our multilateral
diplomatic posts in Switzerland, the Responsibilities currently
held by the Ambassador for Multilateral Arms Control and Disarmament
have been redistributed to ensure that FCO resources are best
placed to service both Geneva and non-Geneva based work. When
the current ambassador's term ends in July 2011, we will continue
to retain a dedicated ambassador for the arms control and disarmament
work that takes place in Geneva via the post of UK Permanent Representative
to the Conference on Disarmament. However we have decided that
leadership of the UK delegation to the ATT negotiations, which
take place elsewhere, should revert to the head of Counter Proliferation
Department at the Foreign and Commonwealth Office in London who
will report to me as the Minister with lead responsibility. Hence
I can confirm that leadership of ATT work will continue at the
same level of seniority.
We will also continue to operate as a cross-government
team under an FCO lead, including experts from BIS, MOD, DFID
and others. This cross government team is proactively engaged
in our efforts to achieve a robust and effective ATT, and continues
to consult with, and draw in expertise from, NGOs and industry.
This consultation, which is at both a strategic and technical
level, greatly adds value to UK efforts on ATT by enabling us
to benefit from the expertise of others outside government, and
to work in a co-ordinated way as we approach the critical UN Negotiating
Conference on an ATT in 2012. I will be participating in a panel
discussion at an NGO Parliamentary Reception on the ATT on 16
February.
ISRAEL
There are three issues regarding UK exports to Israel
arising from the recent Evidence Session and earlier correspondence
relating to recommendation 23 (para. 141) of the CAEC's Annual
Report published in March 2010: clarification of current UK policy
concerning arms exports to Israel; the outcome of any investigations
by the Government into reports that UK origin military-listed
goods have been used by Israel in contravention of the Consolidated
Criteria; and what monitoring the UK Government carries out in
respect of the end-use of UK origin military-listed goods and
equipment.
I can confirm that UK policy on the export of controlled
goods and equipment to Israel has not changed since the Coalition
Government took office. All export licence applications to Israel
are considered on a case-by-case basis against the Consolidated
EU and National Export Licensing Criteria.
The Consolidated EU and National Arms Export Licensing
Criteria were announced to Parliament on 26 October 2000 by Peter
Hain MP the then Minister of State for Foreign and Commonwealth
Affairs. On 29 November 2000, the previous Government obtained
an assurance from Israel that UK origin equipment was not being
used in the Occupied Palestinian Territories (OPTs). Following
reports that Israel was in breach of this assurance in relation
to an incident in the OPTs in March 2002, the then Foreign Secretary,
the Rt Hon Jack Straw, made a statement on 15 April 2002, stating
that the UK "will no longer take the Israeli assurances given
on 29 November 2000 into account" and that the UK will "continue
to assess export licence applications for the proposed export
of controlled goods to Israel on a case-by-case basis against
the consolidated EU and national arms export licensing criteria".
In the period since 15 April 2002 all export licence
applications to Israel have been considered on a case-by-case
basis against the Consolidated EU and National Export Licensing
Criteria.
UK end-use monitoring of UK-origin military-listed
goods takes place in three important contexts. Firstly, the information
gathering process which takes place in making the case-by-case
assessment of each licence application. This takes account of
the past record of the stated end-user, particularly with regard
to the military-listed goods which are the subject of the application.
Secondly, detailed monitoring, review and reporting around incidents
of concern, the results of which are factored into judgements
about whether or not to revoke extant licences and issue new ones.
Thirdly, general monitoring takes place on a continuous basis,
with information received in-country being fed back to the export
licensing community and other relevant government departments
in London. FCO Posts abroad play an active and vital role in monitoring
and information provision in all three contexts, but information
from other government sources and non-governmental sources (for
example from the media and Gas) is also reviewed and used to ensure
the robustness of the UK's export controls.
SAUDI ARABIA
It is clear from the reports we have received that
Royal Saudi Air Force Tornado aircraft, supplied by the UK, were
used during the recent border conflict in 2009. We followed the
situation at the time closely and, after consulting a number of
information sources, conclude that the Saudi response and use
of British supplied military equipment was not inconsistent with
the UK's export licensing Criteria.
US/UK DEFENCE CO-OPERATION
TRADE TREATY
We welcome US Congressional approval of the Defence
Trade Cooperation Treaty and are grateful for the US Administration's
support in achieving this. The Treaty should simplify the export
licensing arrangements between the US and the UK for the end-use
of either Government, and improve interoperability and the delivery
of capability to our Armed Forces. Specifically, the treaty offers
benefits by removing the need, under certain conditions, for US
export licences under their International Traffic in Arms Regulations
(ITAR) for the export or transfer of certain categories of US-sourced
technology including both equipment and information. These conditions
are that the items must be destined for UK or US government end-use
and transferred only within an "Approved Community"
of UK and US government establishments and pre-approved Industry
facilities and overseas in support of operations. For exports
from the UK to the US under the Treaty, there will be a specific
open general export licence created.
Congressional agreement has enabled preparations
for implementation to begin. We need to consider the application
of the Treaty to programmes and projects, with industry, and to
understand the US regulations underpinning the Treaty to assess
how it can most fully bring benefits.
Key activities, to be conducted with the US, will
be developing and trialling the detailed processes, assessing
the applicability of the Treaty arrangements to current and planned
projects and considering applications to join the Approved Community.
There is a considerable amount of work which may take up to 12
months before the Treaty can come into force, The Government will
continue to engage with industry on implementation activities
through the Defence Industries Council.
I am aware that UK Industry representatives raised
concerns with the CAEC about the length of time it has taken to
adopt the Treaty and the possible benefits to industry of the
Treaty during their evidence session on 15 December 2010. Officials
at the MoD (who lead on the issue) are currently engaged in discussions
with the US State Department about the implementation of the Treaty;
we will keep the Committees updated with the progress of the necessary
implementation work as it progresses.
TIMETABLE FOR
ALIGNMENT OF
THE EU COMMON
POSITION WITH
THE CONSOLIDATED
EU AND NATIONAL
ARMS EXPORT
LICENSING CRITERIA
I can confirm that the EU Council Common Position
2008/944/CFSP "defining common rules governing control of
exports of military technology and equipment" is fully applied
in the UK strategic export licensing process. Whilst the wording
of the UK's Consolidated EU and National Arms Export Licensing
Criteria does differ in some minor respects from the EU Common
Position, particularly in relation to Criterion 2 and International
Humanitarian Law, in practice the licensing decisions we make
are fully in accord with the provisions of the Common Position.
We are currently examining these differences with a view to updating
the wording of the Consolidated EU and National Arms Export Licensing
Criteria before the end of 2011.
EU TORTURE END-USE
CONTROL
The UK proposal for the introduction of a Torture
End-Use Control has been with the EU Commission Legal Services
for some considerable time. The Head of FCO's Counter Proliferation
Department wrote to Richard Wright (Director Security Policy at
the ED Commission) on 5 April 2010 asking that the consideration
of the proposal be expedited. In its response, the Commission
highlighted a number of difficulties around a new control; specifically,
compatibility with WTO regulations, and the new twin track approach
to the legislative process post-Lisbon.
On 17 June 2010 the European Parliament adopted a
resolution on implementation of Council Regulation (EC) No 1236/2005)
concerning trade in goods which could be used for capital punishment,
torture or other cruel, inhuman or degrading treatment or punishment.
The issue is now back with the EU Commission for them to consider
further.
The UK's clear preference remains for an EU-wide
control and indications are that there is significant support
for our proposal. Although there are dearly a number of complex
issues here, we are hopeful that pressure from the EU Parliament
will help encourage the Commission to come forward with concrete
proposals. We will continue to monitor progress on this issue
and to make whatever interventions are appropriate, at an EU level,
to expedite the matter.
Should it prove impossible to secure an EU-wide control
(and we are certainly not at that point yet), we could consider
introducing a control at a national level. We would however need
to be sure that any proposed national control would be effective.
A national control would only cover exports and would not be a
trade control; the nature of the goods involved, such as rope
and other commercially available equipment, would mean that a
trade control of this type would be virtually impossible to enforce.
BRASS PLATE
COMPANIES AND
A REGISTER
OR BROKERS
In relation to recommendations 7 (para. 47) and 8
(para. 51), of the CAEC's Annual Report, published in March 2010.
I understand that my Hon Friend Mark Prisk MP, Minister of State
at BIS set out the Government's position on the general question
of a register of arms brokers, at the recent evidence session.
You asked specifically what options the Government
was considering to address the particular challenges posed by
brass plate companies. The Government's position is that any company
with a registered office address in the UK is a UK legal person
and therefore subject to UK law. However, it can in practice be
difficult to take enforcement action against a company which has
no meaningful physical presence in the UK. The Government is exploring
the possibility of using the Secretary of State's powers under
the Companies Act 2006 to ask the Court to dissolve a company
which is operating against the public interest.
There would of course need to be an adequate level
of evidence against a particular company before such a case could
be brought.
EU MILITARY END-USE
CONTROL
In relation to recommendation 9 (para.59) of the
CAEC's Annual Report, published in March 2010, there have been
no further discussions on this issue and we have nothing to report
to the Committees at this time.
NO RE-EXPORT
PROVISIONS
In relation to recommendation II (para.74) of the
CAEC's Annual Report, published in March 2010, I can confirm that
the revised requirement for End-User Undertakings was announced
to industry at the end of March 2010 and use of the revised Undertakings
became compulsory from 1 July 2010.
ISRAEL/GEORGIA/SRI
LANKA
In relation to recommendation 24 (para. 142) of the
CAEC's Annual Report, published in March 2010, I believe I have
addressed the concerns raised by the CAEC, both in the responses
I gave at the recent evidence session and also, on Israel, above.
CRITERION 8
In relation to recommendation 27 (para. 160) of the
CAEC's Annual Report, published in March 2010, I believe I covered
the concerns raised by the CAEC in the responses I gave at the
recent evidence session. Additionally, my officials have provided
the CAEC with a copy of the UK presentation made by DFID at
the Criteria 8 Seminar hosted by the Dutch Government on 24 November
2010 on the basis that its content and distribution is limited
to the CAEC only.
QUARTERLY REPORTS
I understand there are four outstanding questions
concerning specific licences (SIEL2008/003265, SIEL2010/005107,
SIEL210/001223 and SIEL2009/011222) which we have; as yet, been
unable to respond to because of difficulties matching the original
details in the CAEC's requests with information on our systems.
We are currently working to resolve these differences and to provide
the information requested. In order not to delay this response,
I would propose to include the answers to these questions as part
of the Government's response to the CAEC's questions on Quarter
3 2010.
CAEC VISIT TO
THE FOREIGN
& COMMONWEALTH OFFICE
I would also like to lake this opportunity to extend
again the invite to you and your Committee colleagues to visit
the FCO. Such a visit would enable the Committees' members to
meet FCO export licensing officials, to get a first-hand sense
of how the export licensing process works in practice, and also
get an update from the UK team working on UN negotiations towards
an ATT.
10 February 2011
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