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Lord Trefgarne: My Lords, before the noble Lord sits down, perhaps I can ask him one question in relation to his remarks. He referred to the supply of arms to Iraq during the 1980s, which he went on to say kept the conflict going between Iran and Iraq. I was
one of the junior Ministers responsible for that policy for part of that time. Can he say to what arms he is referring?
Lord Ahmed: My Lords, I do not have the list of those arms. But it was reported in the press over many months, especially during the Gulf crisis, that most of the arms and machinery given to Iraq were supplied from European countries. Perhaps in the speech of the noble Lord he will give us some details about that.
Lord Trefgarne: My Lords, perhaps I may pursue that because this is an important point. In fact there were no arms supplied from the United Kingdom during that time. The noble Lord might like to do his research a little more carefully.
Lord Ahmed: My Lords, was machinery supplied to Iraq during that time?
Lord Hylton: My Lords, if my recollection is correct, I think that Hawk fighter training aircraft, which are capable of being converted for offensive purposes, were the point in question.
Lord Trefgarne: My Lords, they were not supplied. The application was refused.
6.19 p.m.
Lord Freeman: My Lords, having listened to the noble Lord, Lord Ahmed, I am sure that he, like me, in re-studying the Scott report, will improve his speed reading capabilities. I am sure that the answers to some of his questions and those on which my noble friend Lord Trefgarne sought to intervene might be revealed and answered comprehensively from that report.
I declare an interest as chairman of the United Kingdom's second largest defence manufacturer and exporter—Thales plc, for the benefit of the stenographer and perhaps also for the benefit of some of our customers!
The defence industry—I speak on behalf of the Defence Manufacturers Association—and certainly my company, support the Bill. It is a timely, well constructed Bill. I understand that my own company—there are 40 subsidiaries within the group—makes each year about 3,000 export licence applications to the DTI. Typically, they take between five weeks and six months to be processed. Therefore, we have a direct interest in the practical outcome of this legislation.
As my noble friend Lord Lang indicated, it is important also, even at Second Reading, briefly—I intend to be brief—to look at the practical implications of the Bill for industry. My noble friend Lady Miller drew attention to that from the Front Bench. She was absolutely right to do so.
Before I discuss the practical implications of Clause 2, I should say that I very much agree with what the noble and learned Lord, Lord Scott, said about prior parliamentary scrutiny of applications, not orders. I refer also to what I consider a knock-out
argument, for constitutional reasons, in introducing that procedure, against which the Government have rightly set their face. I place on record that from the defence industry's standpoint additional delays would only compound the problem we already have and with which the Government are trying to help by making sure that the export control procedure is as fast and efficient as possible.Further, I register a concern about the competitive position of UK applicants. I believe that the prior parliamentary scrutiny of applications would in some cases prejudice the competitive position of UK applicants. As I said, I shall discuss briefly Clause 2. I remind your Lordships that one of the key changes that will be introduced if the Bill is enacted—as I hope it will be—concerns the electronic transfer, typically by e-mail, of technology relating to military use. The dual-use provisions are already covered by European regulation implemented and obeyed in this country. That is one of the key new changes which significantly affects global companies such as Thales, BAe Systems and Rolls Royce. We estimate that unless the procedure is ameliorated we shall have to make 1,000 extra licence applications per annum as a result of the provisions of Clause 2.
I give noble Lords a simple example. An engineer sitting in our Basingstoke office working on a missile guidance system wants to consult his colleague in our Paris office or our Amsterdam office. At present he would send an e-mail seeking advice, guidance and opinions upon the software or the wiring diagram system for the missile. Under this legislation, unless a simplified solution is introduced, an export licence would be required. I suspect that that will be too big a burden for the Department of Trade and Industry.
I pay tribute to the staff of the DTI export control organisation as they work hard but they are meeting only two-thirds of their target for responding within 20 working days to standard export applications that have to be referred to the MoD, the DTI and DfID. I believe that it is unworkable to add this extra dimension with possibly only two extra staff unless we follow a simple solution which I put to the Minister. The Minister may not be able to respond to it in this debate as there will be consultation on the orders and the procedures to be followed which I very much welcome. Perhaps we can discuss the matter at that stage. I believe that the solution is to pursue what is called in the jargon, "open general licences"; that is to say, that companies, subject to regular audit by the DTI, are allowed to export certain technology to certain countries without having to make an individual application for a licence. I believe that that could comprise a solution.
We must consider the competitive position of British industry. My noble friend Lady Miller was right to draw attention to that. We are talking about moral principles—that is why I welcome the Bill—but we must also consider the practical implications. I thank the Minister, and through him the DTI staff, for all their help over the past 12 months. On behalf of
the defence industry I say that we look forward very much indeed to the consultation. We shall be constructive.6.25 p.m.
The Earl of Sandwich: My Lords, I, too, welcome the progress the Government are making in export control and the improvements made in another place since the draft Bill was published. I declare an interest as a trustee of Christian Aid which has long been connected with specialised charities such as Saferworld and Campaign Against Arms Trade. That is also an issue on which the Churches feel particularly strongly.
The case of Tanzania's air traffic control system has highlighted public concern about this Government's priorities. NGOs, including many in Tanzania, are indignant about the matter and one can see why given that substantial sums of debt relief have gone to that country. It took a long time to convince mainly Conservative governments that taxpayers do not want money set aside for education and health to disappear into hydro schemes or defence and thus into the balance sheets of large British companies. In this case we are talking about export licences, but the principle is the same when governments are faced with stark choices between military spending and development funded in part by debt relief.
Today, things should be different as we have a government who have declared themselves for the poorest. Yet British jobs and profits are at stake and compromises always have to be made. Pergau was a watershed, Narmada was another, and most recently the Ilisu dam in Turkey showed how corporations are still trying to push the boat out, and who can blame them? In the case of Ilisu, Balfour Beatty pulled out mainly for its own reasons, but one is that the ECGD has had to rethink its whole raison d'etre and mission statement.
I was delighted to receive a Written Answer from the Government on 20th December confirming that from 1st January all but two of the 26 OECD export credit agencies have agreed to raise their environmental standards for capital goods exports. That agreement for the first time obliges agencies to screen applications and review any projects which could have an adverse environmental effect, as happened at Ilisu. That was a UK initiative and a significant achievement in itself and one in which the US did not form part of the coalition. It is only an informal agreement and it will be a year or two before we know how well it is working. This is not the time to discuss ECGD but if the Government are to continue to promote transparent coherent policies among OECD members, we can look forward—I believe that this meets some of the points made by the noble Baroness, Lady Miller—to further harmonisation between the ECAs on export controls and issues such as outstanding non-concessional debt in countries such as Tanzania.
It is surprising that the Prime Minister chose to make the Tanzania decision against the advice of the World Bank which had advocated the civil system for
a quarter of the price, as my noble friend said, and contrary to two senior members of the Cabinet who should know a thing or two about development. I understand that there is still a possibility that a modified civilian version will be preferred which would secure some of the BAe jobs in the Isle of Wight. We all want to support British industry at a time of job losses and we should also respect decisions made by sovereign governments. It is never a clear-cut decision because there are genuine technical and military requirements in all these countries. But if the victories of Pergau and Ilisu are to mean anything, we must insist, as my noble friend Lord Joffe said, that our exports to indebted poor countries still trying to meet their basic needs should be appropriate to those needs.Turning to the new Bill, and remembering its origins in the Scott report, I applaud the determination of the Government to pursue those who deal in arms sales and exports to developing countries and exploit the vulnerability of societies which cannot always afford to control them themselves. The sale of Hawks and spares to Indonesia and Zimbabwe, whether or not they were inherited by this Government, are reminders of the contribution this Government continue to make to repression and human rights abuse abroad, as mentioned by the noble Baroness, Lady Ludford, and the noble Lord, Lord Ahmed.
My wife and I, on a recent visit to Israel, witnessed on a small scale the way in which we are still condoning the demolition of Palestinian homes with British-made equipment. The cynical growth of our trade in goods to Israel, which is in breach of agreements, regardless of their effect on the occupied territories, makes me wonder whether the Government are serious in their desire to resolve that dispute.
On Israel, I understand from Saferworld that the consolidated national and EU export criteria state that export licences will not be issued,
- "if there is a clear risk that the intended recipient would use the proposed export aggressively against another country or to assert by force a territorial claim".
However, the Government's annual report on strategic export controls for 2000 includes the following equipment as being licensed for export although, in the case of Israel, it can be put to potentially offensive use:
- "Demolition charges, general purpose machine guns, rifles, small arms ammunition and components for small calibre artillery ammunition, components for air-to-surface missiles, armoured fighting vehicles, armoured personnel carriers, combat aircraft, combat helicopters and tanks".
Returning to the Bill, the inclusion of sustainable development has been mentioned. It would be a small concession if the Government accepted that sustainable development, which featured in the draft
Bill, is just as important a consequence as a breach of human rights or national security. The argument that the matter is covered by guidance falls away, I am advised, because, contrary to what the Minister said, that provision could be altered without recourse to Parliament. The EU criteria would remain in force but would not be binding.The provisions on arms brokering by persons in the UK—that was discussed by the noble Lord, Lord Ahmed—has been widely welcomed because illegal traffic in small arms is a pernicious external cause of conflict in, for example, Africa. However, there is the lacuna that the noble Lord mentioned. The provisions will catch only deals that take place at least partly in the UK. That is contrary to the Government's manifesto commitment,
- "to control the activities of arms brokers and traffickers wherever . . . located".
As the Bill stands, British arms brokers who are based in this country could continue to sell arms without an export licence to groups carrying out terrorism or abusing human rights simply by signing deals outside the UK. That would surely defeat one of the important purposes of the legislation. There is also a lack of clarity about the degree of extra-territorial control of particular weapons under the Bill, and about the extent of future monitoring.
Finally, parliamentary scrutiny by the Quadripartite Committee has been widely welcomed—my noble and learned friend Lord Scott did not welcome it—although its work is only retrospective. I agree that there are obvious difficulties in examining complex rules by a joined-up committee in a way that does not delay the ordinary process of export licensing or infringe commercial confidentiality. I sympathise with some of the comments made by noble Lords on the Conservative Benches. Does the Minister agree with the committee and many parliamentarians that because such scrutiny currently takes place only after licences have already been granted, there is a case for prior examination of some—I emphasise that word—of the more sensitive applications? That would give Ministers the benefit of the advice of a highly regarded Select Committee on some of the most complex issues and would surely be more in line with the doctrine of greater openness and transparency in export control. I look forward to the Minister's comments.
6.34 p.m.
Lord Beaumont of Whitley: My Lords, I do not usually speak in your Lordships' House on the topic that is covered by the Bill. I do so today because in my small but growing and perfectly formed party, there has been a real move to write to me urging me to make a speech and to support amendments that have been discussed fairly widely in another place and in this House tonight.
I, too, am very disappointed that the criterion relating to developmental concerns, which was included in the draft Bill, has been dropped. I still do not understand why. There is currently no explicit reference to the impact of arms exports upon a recipient country's sustainable development. That
significant omission from the Bill is of particular concern because all other criteria, which are contained in the consolidated European code of conduct on arms transfers, and the national criteria, are set out in the schedule to the Bill. The significance of that omission was recently made apparent by the rift in the Government over the sale of a military air traffic control system to Tanzania, which several noble Lords have already mentioned. The decision to allow that transfer also demonstrates the need for powers of revocation, if necessary.The Bill as it stands is able to give the Secretary of State powers to issue guidance for consideration during the licence application process. However, that provision is inadequate because Parliament does not need to be consulted on changes relating to it. Therefore, the schedule must include explicit reference to the adverse effects on countries of cumulative arms exports. The cumulative effect is important because applications are currently assessed on a case-by-case basis. That does not take into account the cumulative impact of transfers on a country which may be considerably less apparent.
Another significant omission from the Bill is the absence of powers to control licensed production. The lack of controls on licensed production is a major loophole in current UK legislation. It enables a UK company to sell a foreign company the right to manufacture its weapons or equipment, thus bypassing our export controls. That is a huge disappointment and in this ever-increasingly globalised world, arms manufacturers can set up shop in any country that has weak arms controls and continue to export deadly weapons to repressive regimes or human rights abusers.
The risk of diversion highlights the need for stringent end-use monitoring. There are currently no provisions in the Bill to introduce stricter end-use controls. Without any such provisions, new powers to control brokering and/or licensed production would be hampered by the lack of controls to ensure that an export was being used by the intended recipient for its intended purpose and was not being transferred to a third party. We believe that end-use undertakings should be explicitly conferred through a legally binding agreement between the end-user and the exporter.
On the whole, this is a good Bill and we support it. However, some amendments are very necessary—they have been discussed by several noble Lords and I outlined some of them very briefly for the House's benefit. We welcome the Bill but we hope that the Government will listen to reason in Committee, as they often do.
6.39 p.m.
Lord Phillips of Sudbury: My Lords, I, like many noble Lords—indeed, like all of those who have spoken—commend the Government on the broad purport of the measure. Those of us who are lawyers recognise the difficulty of framing such legislation.
What I shall say will be said not in the spirit of hostility but with the wish to suggest that there may yet be ways to improve the measure.My first point—I shall not spend long on it because it has already been referred to—is to question whether the degree of delegation in the Bill involves the best arrangement. In particular, orders under Clauses 1 to 4 can currently be enacted by secondary legislation on negative procedures. However, given the importance of the orders, I believe that they should be made by affirmative procedure.
Secondly, reference was made by, I believe, the noble Lord, Lord Freeman, to the rather lame duck at the end of the schedule concerning cultural objects. That subject is something of a fish out of water in the Bill as the remainder relates to arms. But here the issue of cultural objects crops up in an isolated way, with no relevant considerations governing the type of order that can be promulgated in pursuit of preventing exportation. It seems to me that that item in particular requires an affirmative procedure if an order under the schedule is to be brought forward. I suspect that we shall receive a large number of representations from bodies outside this House with regard to that matter.
Thirdly, I am dubious as to whether the extent of criminal offences that can be created by Clause 6(1)(g) are not so serious as not to need an affirmative procedure to bring them in. Indeed, I wonder whether an indictable offence with up to 10 years' imprisonment is the type of new criminal offence that should be created by secondary legislation at all. However, I should be interested to hear the remarks of the Government.
Fourthly, I turn to orders in respect of Clauses 1 to 4 under Clause 6(2)(b). I shall read out that paragraph because the allowance which it sets out seems to me to be extraordinarily uncontained. The paragraph states that an order may,
- "amend, repeal or revoke, or apply (with or without modifications) provisions of any Act or subordinate legislation".
Fifthly, I draw the attention of the House to the deliberations of the Select Committee on Delegated Powers and Regulatory Reform. It had two bites at this cherry. The first, in April, was at the draft Bill stage. With regard to the power under Clause 11 to amend the purposes set out in the schedule, the committee said that it questioned whether granting such a power was appropriate. I believe that we need to hear more from the Government as to why they believe that it is appropriate. It seems to me that the power goes too far. The purposes set out in the Bill are at the very heart and essence of the matter. To allow them to be changed by secondary legislation is, I believe, open to severe question.
I now turn to the question of Israel. I simply want to endorse strongly the remarks already made by the noble Earl, Lord Sandwich. Perhaps the Government will respond to that.
With regard to the subject of the control of brokering, as I believe it is called, the suggestion has been made that we should take powers in the particular circumstances of this Bill to allow for extra-territorial prosecution in relation to offences committed abroad. I understand that the Home Office has six criteria against which the appropriateness of extraterritoriality is judged and that five of them are met in the case of this Bill. Given the relative ease with which the provisions of this measure could be circumvented by those intent on so doing by taking certain decisions out of the jurisdiction, I believe that the Government should review the matter. Again, I shall be interested to know what the Government have to say.
Perhaps I may now turn to my final point concerning an issue referred to by many noble Lords. I shall not name them all because virtually everyone has mentioned the matter. It is: why is sustainable development not one of the relevant considerations in the schedule? In his opening remarks, the Minister reassured the House that it is not necessary—I believe that that is a fair summary of what he said—for it to be set out in the schedule because it can be taken account of in the guidance to which regard must be had by the licensing authority. I hope that that is a fair summary. However, I believe that one is apt to reply, "If it is already there by the back door, why not put it in by the front door?".
I also believe that a clear and specific answer is needed from the Government in response to the issue raised by the opinion given by counsel in Matrix Chambers. They said that there is a difference between putting the matter in the schedule and putting it in guidance. I shall use their words. They say that, although in one sense the legal effect of including a matter in the table to the schedule is the same as the effect of including it in guidance because both are matters to which regard must be had in the exercise of a licensing function, the crucial difference is that the table and the other parts of the schedule set out the only purposes for which an order under Clauses 1 to 4 can be made. However much other matters must be taken into account, they cannot justify making an order for a purpose which is not listed in the schedule.
I believe that the reassurance that we on these Benches want to hear from the Government is that they cannot envisage a case or a circumstance in which the difference between placement in the schedule and placement in the guidance would be of practical effect. If that is so, none the less I urge the Government to take a leaf out of the book of the recently enacted anti-terrorism Bill. There, as I am sure, given the recent battle, noble Lords will recollect, under Sections 102 and 103 concerning the right of the Secretary of State to direct communications providers to retain communications data, the whole process has one main and significant control upon it; that is, the duty of the Secretary of State to consult before issuing the code of practice or, in this case, the code of guidance.
The consultation concerns the draft code—or, in this case, guidance—and requires the Secretary of State to consider any representations made in relation to the draft and, indeed, to consult specifically named
bodies. Again, I should be interested to know from the Government why that would not be an entirely suitable procedure to incorporate into this Bill, in particular as in his opening comments the Minister made considerable play of the fact that consultation will take place in the spring. Again, I believe that it would go some way to reassure the aid bodies which are considering this matter from the field, so to speak, that this Bill will take due account of sustainable development. I should have said at the beginning, but shall do so now, that I declare an interest in that my firm of solicitors acts for a number of the aid agencies that form the UK working group on arms which has been of such help to so many of us.6.48 p.m.
Lord Rea: My Lords, I apologise for not being present during my noble friend's opening speech and those from the other Front Benches owing to being caught up in a rigid traffic jam due to the closure of Islington High Street.
This necessary and welcome Bill has been in gestation since 1998. Getting the drafting right has obviously been a complex matter. It has also involved the need to consider the position of those with a number of legitimate—some might say "vested"—interests in arms exports. Here, the Bill has some similarities to the Tobacco Advertising and Promotion Bill, which also aims to reduce the distribution of a potentially lethal product and is facing rearguard opposition from the tobacco industry as it progresses through your Lordships' House.
To name a few of the interests which some fear may be adversely affected by the Export Control Bill, first and foremost is the defence industry, with some 97,500 of its employees directly or indirectly dependent on arms exports. It is felt by some that the diminution in orders resulting from the operation of the Bill may have a serious effect on national employment statistics, as well as affecting the viability of an industry of importance for national security. There is also concern about the possible effect of the Bill on the balance of payments through reducing exports of manufactured goods, in which of course the arms trade features substantially.
A recent report from the Centre for Defence Economics at York University, entitled The Economic Costs and Benefits of Defence Exports, commissioned by the Defence Select Committee, contains a detailed study of the effect of a sudden hypothetical 50 per cent reduction in arms exports—a worse case scenario—with a greater and more rapid reduction than is likely to follow if the Bill becomes law. Some of its conclusions are that the initial loss of nearly 49,000 jobs would be offset by the creation over a five-year period of 67,000 new jobs in non-defence employment.
The cumulative "one off" net adjustment costs over a five-year period would be between £0.9 billion and £1.4 billion, with an additional £1 billion to include the effects on the terms of trade. That would cease at the end of the period. However, there would be an ongoing cost to the Government of some £40 million to
£100 million per annum, which is about 0.2 to 0.4 per cent of the defence budget. Some of that could be offset by a reduction in government expenditure in promoting arms exports.It must not be forgotten that at the other end of any arms export deal there is the effect on the economics of recipient countries, many of whose budgets are already overstretched and failing to provide the basic infrastructure that they need to develop economically.
All these concerns arise even before considering the potentially, and too often actually, devastating effect of the weapons themselves. Noble Lords know only too well that the 50 or so conflicts since World War II have mainly been in the developing world, more often than not using weapons sold to developing countries by the industrial north, on both sides of what used to be the Iron Curtain.
With all these conflicting factors to consider, it is gratifying to see a Bill which allows for parliamentary scrutiny of a trade which too often has been associated with under-the-counter deals and secrecy. The recommendations of the inquiry of the noble and learned Lord, Lord Scott of Foscote, into the arms to Iraq episode provided the initial stimulus for the Bill; some of its features give effect to EU legislation on, for example, dual use items and will assist implementation of the EU code on arms exports which, as the noble Baroness, Lady Ludford, mentioned, is to the credit of the Government for getting it off the ground. I understand that the Bill is similar to legislation which has been adopted or is being prepared by several other European countries.
To emphasise the need for a Bill of this nature, it is worth pointing out that in the year 2000, of the 36.4 billion dollars total of arms transfer agreements worldwide, 29.4 billion dollars, or 69 per cent—more than two-thirds—were made with developing countries. Of actual arms deliveries, amounting to 29.4 billion dollars, 19.4 billion dollars, or 66 per cent—exactly two-thirds—were to the developing world. These figures are from the CRS Report to the US Congress on Conventional Arms Transfers to Developing Nations, published in August 2001, which was pointed out to me by Saferworld. To put these figures into context, the total overseas development aid disbursed from OECD countries in 2000 was 56.4 billion dollars. The value of arms transfers to developing countries was 19.4 billion dollars, representing 34 per cent of the aid given to those countries. The figures speak for themselves.
Other noble Lords have drawn attention to the recent case of the military air traffic control system for Tanzania, which has conveniently highlighted the need for some kind of reference to development issues when issuing arms export licences. That is why many voices, including, I am sure, the Secretary of State for International Development were she able to speak freely—of course, she usually does—want to see sustainable development, as many noble Lords have suggested, clearly re-inserted into the schedule of purposes in the Bill. The Bill as it stands allows the Secretary of State to include sustainable development
as a criterion, as it is in the guidance, if he or she wishes, but it would surely be better to have this on the face of the Bill in the schedule. Secretaries of State and governments change every few years but the need for this provision will continue.I hope that my noble friend will be able to say in his winding up speech that it is the Government's intention to bring forward an amendment to ensure that sustainable development is included in the schedule of purposes. If not, he can be sure that several noble Lords, including me, will be happy to bring forward such an amendment. There are several other areas, all mentioned by other noble Lords, where the Bill could be usefully strengthened to make it more effective. I shall not go into detail about them at this stage. There will be time in Committee to do that. The areas are as follows: allowing prior parliamentary scrutiny of export licences. At present only retrospective parliamentary scrutiny is possible, after licences have been granted. Prior scrutiny measures exist in some other countries, for example Sweden and the USA, without risk to commercial confidentiality, which is one of the main objections put forward. Provision for this could and should be included in the Bill.
There is the question of extraterritorial controls on the activities of brokers who are British nationals but who operate overseas. There are various ways in which this could be done effectively, and amendments to include them will doubtless be debated in Committee. It would of course be excellent if the Government could introduce them, if only because the drafting would be more acceptable.
There is also the question of controlling the sales of arms manufactured under licence from UK companies in overseas countries. It should be possible to insist that firms which grant such licences must stipulate that the arms produced do not contribute to destabilising accumulations of arms or breaches of international law.
Those are probably the most important issues which will be raised at subsequent stages of the Bill. Of course my noble friend could pre-empt amendments were he to come up with his own set. It is my hope that he will attempt to do just that. In the meantime, I strongly support the Bill, which, even as it stands, is a significant step forward.
6.58 p.m.
Lord Hylton: My Lords, like virtually all previous speakers, I welcome the Bill as a definite expression of the Government's will to strengthen control over arms exports and trading.
On the ground that the Foreign and Commonwealth Office has to deal with ill-advised exports and diverted end uses, it might have been preferable for the Bill to have come from that department. I hope, however, that it will be improved in Committee and that co-operation between the Department of Trade and Industry and the Foreign and Commonwealth Office, which has already increased, will become even more thorough and effective.
I outline two serious weaknesses in the Bill as presented. The first lies in the scope that it gives for British arms dealers to supply weapons to governments who abuse human rights or even to some terrorists groups. I say that because if our dealers broker arms transfers from within the United Kingdom they will be caught by the terms of the Bill. On the other hand, as the noble Lord, Lord Ahmed, pointed out, if they move to Dublin, Ostend or elsewhere—outside the jurisdiction of our courts—they will be free. Those of your Lordships who enjoy the novels of Trollope may remember what happened when duelling was banned in this country but was legal in Belgium. The sands of Blankenburge used to echo with shots in the early morning!
The Government appear not to intend to control the activities of our citizens or residents if they operate from overseas. As the noble Baroness, Lady Ludford, and my noble friend Lord Sandwich pointed out, that is clearly contrary to the Government's manifesto commitment, which is to control,
- "brokers and traffickers wherever they are located".
I understand—here I agree with the noble Lord, Lord Phillips of Sudbury—that the Home Office has six criteria to judge whether extra-territorial jurisdiction is necessary. On the five out of six criteria basis, I trust that the Government will produce or accept an amendment providing for extended jurisdiction—preferably on the face of the Bill.
The second weakness concerns the actual use to which exported arms are put. It is vital to ensure that arms are not diverted to brutal and possibly criminal governments, let alone to terrorist groups. Unfortunately, the Bill does not provide specific measures to control goods once they have been exported—a point made by the noble Lord, Lord Beaumont of Whitley. Good verification of end uses is most important given the instability of large sections of Africa—and, indeed, of some other continents. Will the Government consider how best that can be remedied and, in particular, what form of parliamentary scrutiny of end use would be most appropriate?
7.2 p.m.
Lord Redesdale: My Lords, like many noble Lords, I start by welcoming the Bill. However, we have been given an opportunity to set out a list of criteria that we want included. Considering all the points raised by noble Lords, I expect many amendments to be tabled, the most important of which must concern sustainable development, which has been mentioned by almost every noble Lord who has spoken.
I had prepared paragraphs to read on that issue, but as the Minister has already said that the Government are considering bringing forward their own amendment, which will obviously meet our
requirements, I shall not go into the detail behind sustainable development. However, along with the noble Lords, Lord Joffe and Lord Rea, I want such a provision included in the Bill. If the amendments tabled by the Minister do not meet our requirements, we may well table amendments on which we may even test the opinion of the House.Sustainable development is important because it goes to the heart of what the Bill was originally intended to do. Indeed, it would perhaps be the major test for the idea of an ethical foreign policy, which the Government proposed a few years ago. I do not say that by not including such a provision in the Bill the Government are in any way deviating from the high standards proposed by the Department for International Development. However, the fact that the provision is not in the Bill and that guidance alone will control the implications for sustainable development is unacceptable.
There are many pressures on the Government. Those difficulties are made clear by the air traffic control system for Tanzania. Many noble Lords say that the Government have already issued an export licence for the system. I do not believe that to be the case. I hope that the Minister will be able to tell us whether a licence has already been issued. If it has not, the concern shown by such august bodies as the International Monetary Fund and the World Bank, which do not believe the system to be a legitimate use of scarce resources in a developing nation, should not be ignored. A new system should be considered.
I have a couple of questions on the issue that I hope that the Minister will answer. The first is whether a licence has been granted. The second concerns jobs. It is said that selling the system will preserve jobs on the Isle of Wight. I fully understand the importance of the economy and jobs on the Isle of Wight, but there have been conflicting reports. People say that the system has already been built. If so, how can the sale preserve jobs?
We shall return to that matter in greater detail, but it is as well to remember the conflicting pressures on government. Perhaps that is the paradox referred to by the noble and learned Lord, Lord Scott of Foscote, of introducing export controls on the executive. The laudable aims of the DfID are somewhat different from the equally laudable aims of the DTI.
We should also like to consider prior parliamentary scrutiny. The noble Lord, Lord Freeman, said that he was glad that the Government had left such provision out of the Bill. I do not agree. The Quadripartite Committee has argued that there is a role for a parliamentary committee to scrutinise export licensing decisions before they are granted and provide advice to Ministers in difficult cases. A difficult case that I would cite is the refurbishment of artillery pieces in the territory of Western Sahara occupied by Morocco. If prior parliamentary scrutiny had been undertaken, I do not believe that that work would have been carried out. As the noble Baroness, Lady Ludford, pointed out, such prior scrutiny is already successfully carried out in the United States and Sweden.
I am especially concerned about controls on brokering, as were the noble Earl, Lord Sandwich, the noble Lord, Lord Hylton, and the noble Lord, Lord Ahmed, who is not in his place—again. For the first time, all persons in the United Kingdom who broker the transfer of arms from one overseas destination to another will require a licence for their activities. That is obviously a major step forward to be welcomed. However, it is perhaps time—maybe not in the Bill, although we will table a couple of probing amendments to discover whether it is possible—to consider whether it is legitimate for the Government to expect UK passport holders, whether working from these shores or from abroad, to apply for export licences under the criteria. Those with UK passports may broker overseas. Such a provision may be problematic, but the overseas activities of UK passport holders are already controlled in areas such as the sex trade. Our nationals may be tried in UK courts for such activities.
Another area, mentioned in particular by the noble Lord, Lord Beaumont of Whitley, is the control of end-use certificates and revocation of licences. This is a particular concern because there have been a number of cases of diversion of exported material to destinations other than those set out on the licence agreement. There is perhaps need for a more detailed look at the accumulative effect of exports to certain countries and regimes.
While we on these Benches support the arms industry when it is being responsible in its activities, I cannot help but bring to the attention of the Minister one small point which I find extremely interesting. I perhaps wear the hat of the spokesman for international development rather than that of the spokesman for defence. This debate has been conducted mainly by noble Lords whose interests lie in the international development field. I would like to mention a very interesting paper published by the University of York in November 2001. Two of the four authors are the chief economists in the Ministry of Defence. I can show the report to the noble Lord later. The executive summary states,
- "The study examines the economic costs and benefits arising from a 50% reduction (over two years) in defence exports to UK resident workers, shareholders and the UK Government. It concludes that the economic costs of reducing defence exports are relatively small and largely one off. It therefore suggests that the balance of argument about defence exports should depend mainly on non-economic considerations".
An area of the Bill that has not been studied in great detail is cultural goods, although it was mentioned by the noble Baroness, Lady Miller. I understand that reform of the export licensing system for cultural
goods, which was not the main reason for this Bill, contains very general enabling provisions. The Explanatory Notes merely tell us that,
- "It is envisaged that the DCMS will establish controls over the export of any goods . . . manufactured or produced more than 50 years before the date of exportation".
While all objects found in the soil or the territorial waters of the United Kingdom more than 50 years old require a licence regardless of their value, many are being openly offered for sale on Internet auction sites such as the e-Bay site, often priced in dollars, making it clear that they are likely to be sold abroad. I believe that the department needs to be much more pro-active in warning potential exporters of such objects of their legal obligation to obtain a licence. It can do no good to see the law so openly flouted.
Professor Palmer's panel considered these issues in its report published in December 2000. It recommended that there should be a significant tightening up of the export licensing system as regards cultural objects. I hope that that will be one of the purposes of the Bill. In particular, the report recommends that checks should be carried out on cultural goods imported into the UK within the past 50 years and that the export licensing unit of the DCMS should be strengthened with up to four additional staff in order to fill these additional responsibilities and that two of the staff should be experts in cultural objects.
The passage of this Bill will surely provide the occasion for implementing these recommendations. I would like to hear from the Minister what are his intentions. I realise that in asking the Minister those questions I am asking him to reply, as regards my previous remarks, on behalf of the DfID, and in this context for the DCMS.
7.16 p.m.
Lord Rotherwick: My Lords, as we have heard from many noble Lords, the Export Control Bill is the Government's attempt to implement the 1996 Scott report. We should note how, in Opposition, this Government consistently urged the last Conservative administration to bring legislation to the two Houses to tighten our export controls. Despite daily comment by the former Foreign Secretary as regards the Scott report, once in power this Government have allowed the matter to drift disgracefully. The Scott report was published in February 1996 and only now, nearly six years later, as my noble friend Lord Lang of Monkton,
pointed out, are we having a Second Reading of this Bill in this House. Clearly, the Government's management of this proposed legislation has, regrettably, not been as efficient as one might have hoped.This side of the House welcomes the Bill, but that welcome is qualified. As is the fashion today, this is essentially an enabling Bill, as my noble friend Lady Miller mentioned. The Government have decided that most of the detail will come through secondary legislation. That is certainly a bad principle for any government to follow as the executive gains ever more power at the expense of the legislature.
I would like to declare an interest as a fellow of the Industry and Parliamentary Trust which fellowship I have fortunately spent with BAe Systems. On a point of principle, the supply of defence equipment to our allies and friends around the world enhances Britain's influence overseas and reinforces stability for Britain's interests in the world's trouble spots. This importantly ensures other powers, who may be opposed to British interests, are denied such influence.
On an economic note, our own Armed Forces' defence requirements can be insufficient to support weapons development programmes without the manufacturers relying on additional overseas sales, unlike America's armed forces which create a massive internal market. We must not allow this Bill to diminish our defence industry and end up reliant on others. During Desert Storm our Armed Forces were dismayed to find that they could not rely on our European ally, Belgium, to supply our arms requirements. We must nurture our defence industry and not create a Bill to hamper it.
The Defence Manufacturing Association made the following comment:
- "One of our Member companies has in the past openly called the Export Control Organisation at the DTI to be re-named 'Her Majesty's Government Department for the Obstruction of Trade'".
Last week, the Prime Minister stated his intention that the United Kingdom should continue to be at the forefront of world affairs. In this House, we should encourage our defence industry, as a force for good in uncertain times, to secure international peace in our time. In the Department of Trade and Industry's December publication, The Forward Look 2001, Dr Lewis Moonie points out the importance of
- "the pivotal role that technology now plays in achieving this aim."
The United Kingdom has the fourth largest economy in the world, and we remain a major international manufacturing and trading nation. Our defence industry is second only to that of the United States of America. Given that the manufacturing sector has been in recession since the beginning of last year, it is essential that the Government do not add to the burden of regulation and bureaucracy any more than is necessary. The Government have certainly failed in that area over the past four and a half years, and we must ensure that the Bill does not further hamper competitiveness in such an important industry.
Parliamentary scrutiny was a key focus of the Scott report, which emphasised the need for greater accountability in strategic export control. The Bill will oblige Parliament to scrutinise secondary legislation and the Government to provide annual reports on licensing decisions. There is an important point at stake: we must insist that Parliament should retain more control than will be allowed by the Bill. It is not an ideological or political issue; the issue is control of the executive and the exercise of parliamentary prerogatives.
Noble Lords will be glad to hear that I shall not touch on the issue of sustainable development; we have more than covered that aspect.
The Government have said that they feel that the Bill is not the correct legislation through which to control mercenary activity. However, the Green Paper on mercenary activities, which was to have been published in November 2000, has still not seen the light of day. We need regulation that will draw a line between mercenaries who are despicable and those who are not. In Committee in another place, the Gurkhas were cited as an example, as some felt that that outstanding fighting unit had started out as mercenaries. Now, the Gurkhas fight under the colours of the British Army and are seen as anything but despicable. A line must be drawn that would leave genuine mercenaries free to protect democracy. Despicable mercenaries, such as those fighting for Al'Qaeda in Afghanistan, who have no noble reason to be in a war zone offering their service or expertise, would be prevented from getting involved or would, at least, be held accountable after the event.
At this time of fluidity in the international situation, when barriers are breaking down and there is greater freedom of movement, we need legislation, as soon as possible, to ensure that mercenaries who originate in this country are dealt with by this country. Other European Union nations complain that the United Kingdom is lax on that matter. The Bill gives us an opportunity to improve the reputation of the United Kingdom and, most importantly, to improve security for all of us.
The subject of the transfer of technology by intangible means has been touched on. Clause 2 provides general powers to impose controls on transfer
of technology. The intangible transfer of all military list technology will be covered, based on the controls recently introduced in relation to dual use goods.We support the Bill, although that support is qualified by a number of concerns. We are critical of the scope of the controls governing transfer by intangible means. It is conceivable that controls will be imposed on transfers between subsidiaries of companies and on the transfer of the control of technology by intangible means, including telephone and e-mail. That could mean that an employee using an e-mail or a telephone to communicate with another employee of another subsidiary could be transferring technology and committing an offence under the Bill. That would be a sweeping power and would be too all-encompassing. Like my noble friend Lady Miller, I shall be interested to hear how legislation will deal with the monitoring of telephone, e-mail and other communications.
We do not want the Government to overburden United Kingdom industry with regulation and red tape, as they have been so willing to do in the past. If new controls must be introduced, that should be done in such a way as not to impinge on the legitimate, free exchange of information. Nor should such controls give foreign competitors an unfair advantage over our industries by giving overseas buyers the impression that trading with the United Kingdom is too difficult and time-consuming. We must support all British industry, and we should be careful that any change to the export laws is sensible and necessary and not to the detriment of British firms.
I am sad to see that the noble Lord, Lord Ahmed, is still not in his place.
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