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House of Commons Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committees

House of Commons

Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committees

Scrutiny of Arms Exports (2012): UK Strategic Export Controls Annual Report 2010, Quarterly Reports for July to December 2010 and January to September 2011, the Government's Review of arms exports to the Middle East and North Africa, and wider arms control issues

First Joint Report of Session 2012–13

Volume I

HC 419-I

House of Commons Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committees

House of Commons

Business, Innovation and Skills, Defence,

Foreign Affairs and International Development

Committees

Scrutiny of Arms Exports (2012): UK Strategic Export

Controls Annual Report 2010, Quarterly Reports for

July to December 2010 and January to September

2011, the Government's Review of arms exports to

the Middle East and North Africa, and wider arms

control issues

First Joint Report of Session 2012–13

Second Report from the Business, Innovation and Skills Committee of Session

2012–13

Fourth Report from the Defence Committee of Session 2012–13 First Report from the Foreign Affairs Committee of Session 2012–13 Second Report from the International Development Committee of Session

2012–13

Volume I

Volume I: Report, together with formal minutes

Ordered by the House of Commons to be printed 2 July 2012

HC 419-I Incorporating HC 1697-i and -ii, Session 2010-12

Published on 13 July 2012 by authority of the House of Commons London: The Stationery Office Limited

£0.00

The Committees on Arms Export Controls

The Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committees are appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Business, Innovation and Skills, the Ministry of Defence, the Foreign and Commonwealth Office, the Department for International Development and any associated public bodies.

Current membership

BUSINESS, INNOVATION AND SKILLS: Mr Adrian Bailey*§, Mr Brian Binley, Paul Blomfield, Katy Clark*, Julie Elliott, Rebecca Harris, Margot James*, Simon Kirby, Ann McKechin*, Mr David Ward, Nadhim Zahawi*

DEFENCE: Rt Hon James Arbuthnot§, Mr Julian Brazier, Thomas Docherty, Rt Hon Jeffrey M. Donaldson*, John Glen*, Mr Dai Harvard, Mrs Madeleine Moon, Penny Mordaunt,* Sandra Osborne, Sir Bob Russell, Bob Stewart*, Ms Gisela Stuart

FOREIGN AFFAIRS: , Rt Hon Sir John Stanley* (Chair of the Committees’ concurrent meetings), Richard Ottaway§, Rt Hon Mr Bob Ainsworth, Mr John Baron, Rt Hon Sir Menzies Campbell, Rt Hon Ann Clwyd*, Mike Gapes*, Mark Hendrick, Andrew Rosindell, Mr Frank Roy, Rory Stewart*, Mr Dave Watts* (left Committee 25/6/2012)

INTERNATIONAL DEVELOPMENT: Rt Hon Sir Malcolm Bruce*§, Hugh Bayley, Richard Burden*, Mr Sam Gyimah, Richard Harrington, Pauline Latham, Jeremy Lefroy, Mr Michael McCann, Alison McGovern, Fiona O’Donnell*, Chris White*

* Member who participated in the inquiry leading to this Report § Chair of a participating Committee

Powers

The Committees are departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in Standing Order No 152. The powers of the Committees to work together and agree joint reports are set out in Standing Order No. 137A. These Standing Orders are available on the Internet via www.parliament.uk.

Publication

The Reports and evidence of the Committees are published by The Stationery Office by Order of the House. All publications of the Committees (including news items) are on the internet at

http://www.parliament.uk/business/committees/committees-a-z/other-

committees/committee-on-arms-export-controls/.

Committee staff

The current staff of the Committees are Keith Neary (Clerk), Vanessa Hallinan (Committee Assistant), and Alex Paterson (Media Officer)

Contacts

All correspondence should be addressed to the Clerk of the Committees on Arms Export Controls, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2420; the Committees’ email address is caecom@parliament.uk

Contents

Scrutiny of Arms Export Controls 2012

1

Report

Page

Summary

5

Glossary of Acronyms

9

Conclusions and recommendations

10

Extension of the Review to authoritarian regimes and to countries of concern worldwide

1 Introduction

25

26

2 The Government’s “United Kingdom Strategic Export Controls Annual Report

2010” (HC 1402)

28

3 The Committees’ Report of 2010-11 (HC 686)

30

The Committees’ Report and the Government’s Response (Cm 8079)

4 The Committees’ questions on the Government’s quarterly information on

arms export licences

Errors in export controls to Somalia

5 Arms export control legislation and procedures

30

32

33

34

Extra-territoriality

34

“Brass Plate” Companies

37

A pre-licence register of arms brokers

38

EU dual-use controls

40

EU end-use control of exported military goods

42

Torture end-use control and end-use control of goods used for capital punishment

44

Re-export controls and undertakings

48

Licensed production overseas

50

The Consolidated Criteria

51

6 Organisational and operational issues

54

Export Control Organisation (ECO)

54

Charging for processing arms export licences

54

Performance

56

Review of the ECO

59

Transparency of arms export licensing

60

Priority markets for UK arms exports

64

Trade Exhibitions

66

Enforcement

70

Compound penalties

73

Crown Dependencies

77

Combating bribery and corruption

79

International Development

81

2

Scrutiny of Arms Export Controls 2012

7 International arms control and co-operation

84

UK/US Defence Trade Cooperation Treaty

84

UK-France Defence and Security Co-operation Treaty

88

The Intra-Community Transfer (ICT) Directive on arms transfers within the EU

90

Cluster Munitions

91

Arms Trade Treaty (ATT)

94

The negotiation process

94

The UK Government’s role and policy

95

Sub-strategic and tactical nuclear weapons

99

Fissile Material Cut-Off Treaty

100

The National Counter-Proliferation Strategy for 2012–2015

102

8 Arms export control policies

103

Arms exports and human rights

103

Overseas Security and Justice Assistance (OSJA) Human Rights Guidance

103

Surveillance technology and equipment

105

Export of Tasers

106

Arms exports and internal repression

106

The Government’s Arab Spring arms export policy review

109

Arms export licence revocations

118

Countries of concern

122

Bahrain

122

Egypt

134

Libya

146

Saudi Arabia

148

Syria

150

Tunisia

152

Yemen

156

Argentina

160

China

161

Extension of the Review to authoritarian regimes and to countries of concern worldwide

168

Annex 1: The Committees’ quarterly licence questions and the Government

answers (2010 Q3 & 4, 2011 Q1, Q2, & Q3)

171

The Committees’ 2010 Quarter 3 (July – September) questions and the Government’s answers

171

The Committees’ 2010 Quarter 4 (October – December) questions and the Government’s answers

178

The Committees’ 2011 Quarter 1 (January – March) questions and the Government’s answers

186

The Committees’ 2011 Quarter 2 (April – June) questions and the Government’s

answers

194

The Committees’ 2011 Quarter 3 (July – September) questions and the Government’s answers

202

Annex 2: Extra-territoriality (Offences)

212

Scrutiny of Arms Export Controls 2012

3

Annex 4: EU Council Common Position (2008/944/CFSP)

221

Annex 5: The Government’s arms export licence revocations since 1 January

2011

228

Annex 6: Selected arms export licence approvals to countries in the Middle

East and North Africa of arms or components of arms which might be used to facilitate internal repression for the period 1 October 2010 until 31 December

2011

245

Annex 7: Selected arms export licence approvals to FCO “countries of concern” of arms or components of arms which might be used to facilitate internal repression for the period 1 January until 31 December 2011

249

Annex 8: Extant arms export licences to countries in the Middle East and North Africa for goods which might be used to facilitate internal repression253

Annex 9: Arms export licences to Argentina for the period 1 April 2010 until

31 December 2011

260

Annex 10: The Committees’ correspondence with Ministers

264

Annex 11: The Committees’ questions and the Government’s answers to the

Strategic Export Controls Annual Report 2010

267

Annex 12: National Counter Proliferation Strategy 2012–2015

338

Formal Minutes

344

Witnesses

347

List of printed written evidence

347

List of Reports from the Committee during the current Parliament

348

Scrutiny of Arms Export Controls 2012

5

Summary

For this year’s Report the Committees on Arms Export Controls (CAEC) have scrutinised in unprecedented detail the Government’s latest (2010) Annual Report on Strategic Export Controls, the Government’s quarterly information on individual export licence approvals and refusals, and the Government’s policies and performance on arms export controls and on arms control generally.

The Committees have also given intensive scrutiny to the Government’s review of the export of arms which might be used to facilitate internal repression, contrary to the Government’s stated policy, in the Middle East and North Africa. The Committees have extended the same scrutiny to the “Countries of Concern” named in the Foreign and Commonwealth Office’s 2012 Report on Human Rights as detailed in paragraph 269 and Annex 7.

We conclude that the Government was right to accept the Chairman of the CAEC’s representations on behalf of the Committees that to a substantial degree the Government’s answers to the Committees’ questions on the Government’s Quarterly arms export reports could be declassified and thereby made available to Parliament and the wider public in this Report as from Q3 2010 for the first time.

On extra-territoriality, the Committees continue to conclude that there is no justification for allowing a UK person to conduct arms exports overseas that would be a criminal offence if carried out by any person within the UK.

The Committees recommend that the Government states whether it is still the UK Government’s policy that it does not intend to prepare draft UK national legislation on torture end-use control and end-use control of goods used for capital punishment, and, if so, to explain why not.

The Committees conclude that the Government’s commitments to introduce greater transparency into the export licensing system are welcome.

The Committees conclude that the Government’s supervision of the “Defence and Security Equipment International” (DSEi) Exhibition in September 2011 to ensure strict adherence by the organising company Clarion Events of the terms and conditions of its Open Individual Trade Control Licence from the BIS was inadequate, as was the supervision by the company itself.

The Committees conclude that the Government’s unqualified confirmation that if it becomes aware of corruption in arms deals it will take appropriate action under the provision of the Bribery Act 2010, regardless of whether there is a risk of diversion or re- export under Criteria 7, is welcome.

The Committees recommend that the Government sets out what steps it will take in relation to UK-based financial institutions who may be financing, directly or indirectly, or investing in manufacturers of cluster munitions. The Committees also conclude that the Government’s decision to resist attempts to weaken the Convention on Cluster Munitions

6

Scrutiny of Arms Export Controls 2012

with draft Protocol 6 was welcome.

The Committees conclude that the Government has put at risk the UK’s previously leading role in the drafting and negotiation of the Arms Trade Treaty by failing to maintain continuity of FCO staff at a senior level with this responsibility. The Committees also conclude that the Government’s commitment to achieving an Arms Trade Treaty with the broadest possible scope, including ammunition, is welcome.

The Committees conclude that, whilst the promotion of arms exports and the upholding of human rights are both legitimate Government policies, the Government would do well to acknowledge that there is an inherent conflict between strongly promoting arms exports to authoritarian regimes whilst strongly criticising their lack of human rights at the same time.

The Committees recommend that the Government sets out what changes it will make to UK export control legislation and procedures to prevent surveillance technology and equipment being exported from the UK to repressive regimes who may use this technology and equipment to suppress human rights.

The Committees conclude that the Foreign Secretary’s statement to the Committees that there has been no change of policy on arms exports and internal repression by the present Government from that stated by the previous Government is welcome, the present Government’s policy being: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression.”

The Committees conclude that the Government’s repeated use of the phrase “crowd control goods” in the context of its arms export review is misleading given that “crowd controls goods” are generally associated with non-lethal equipment. The Committees recommend that the Government discontinues the use of the phrase “crowd control goods” in this context, which as well as being misleading is also profoundly disrespectful to the thousands of unarmed civilians in the Arab Spring countries who have courageously demonstrated for human rights and fundamental freedoms and have put their lives at risk in doing so.

The Committees conclude that the Government’s review of its policies and practices on arms exports following the Arab Spring should not have been carried out merely as “an internal review” and should instead have been the subject of public consultation in accordance with the Government’s stated policy of transparency on arms exports. The Committees further conclude that whilst the Government’s introduction of a new licence suspension mechanism is welcome, this is not sufficient to ensure that arms exported from the UK are not used for internal repression overseas because in many, if not most, cases the arms will have left the UK before suspension occurs.

The Committees conclude that whilst the Government’s revocation of an unprecedented number of 158 arms export licences following the Arab Spring is welcome, the scale of the revocations is demonstrable evidence that the initial judgements to approve the applications were flawed. The Committees recommend that the Government should apply

Scrutiny of Arms Export Controls 2012

7

significantly more cautious judgements when considering arms export licence applications for goods to authoritarian regimes “which might be used to facilitate internal repression” in contravention of British Government policy.

The Committees recommend that the Government continues to monitor all extant licences for arms exports to authoritarian regimes worldwide which might be used to facilitate internal repression in contravention of British Government policy and to make public promptly any further revocations that it makes.

The Committees recommend that the Government states whether it remains satisfied that none of the

97 extant UK arms export licences to Bahrain

124 extant UK arms export licences to Egypt

24 extant UK arms export licences to Libya

288 extant UK arms export licences to Saudi Arabia

9 extant UK arms export licences to Syria

47 extant UK arms export licences to Tunisia

11 extant UK arms export licences to Yemen

now contravene the Government’s stated policy that “The longstanding British position is clear: we will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression.”

The Committees conclude that the Government’s decision to tighten controls on the licensing of, and trade in (trafficking and broking), controlled goods and technology to military end users in Argentina is welcome. The Committees recommend that the Government states what steps it is taking to get the US Government, the Governments of EU Member States, and the Governments of other countries who export military goods, military technology and dual-use goods to Argentina to make the same change of policy as that announced by the British Government.

The Committees conclude that given the lack of clear progress on civil and political rights in China, the Government’s support for the EU Arms Embargo on China to continue is welcome.

The Committees conclude that the Government’s stated policy is to refuse arms export licences “which might be used to facilitate internal repression” and not merely to await internal repression becoming patently clear. The Committees therefore continue to recommend that the Government extends its arms export policy review from countries in the Middle East and North Africa to authoritarian regimes and countries of human rights concern worldwide.

Glossary of Acronyms

Scrutiny of Arms Export Controls 2012

9

ATT Arms Trade Treaty BIS Department for Business, Innovation and Skills CAAT Campaign Against Arms Trade CAEC Committees on Arms Export Controls

DFID Department for International Development DSEi Defence and Security Equipment International (Trade Exhibition) ECO Export Control Organisation (within the Department for Business, Innovation and Skills)

EGAD

EU European Union

Export Group for Aerospace and Defence

FAC

Foreign Affairs Committee

FCO

Foreign and Commonwealth Office

FMCT

Fissile Material Cut-off Treaty

ICT Intra-Community Transfer (ICT) Directive on arms transfers within the EU MoD Ministry of Defence OGEL Open General Export Licence OIEL Open Individual Export Licence OITCL Open Individual Trade Control Licence OPTs Occupied Palestinian Territories OSCE Organisation for Security and Co-operation in Europe OSJA Overseas Security and Justice Assistance SIEL Standard Individual Export Licence SIPRI Stockholm International Peace Research Institute SITCL Standard Individual Trade Control Licence SITL Standard Individual Transhipment Licence UKTI DSO United Kingdom Trade & Investment Defence & Security Organisation UKWG United Kingdom Working Group on Arms

Scrutiny of Arms Export Controls 2012

10

Conclusions and recommendations

Introduction

1. The Committees recommend that, given the far-reaching significance of arms export and arms control decisions for the Government’s trade, defence, foreign and international development polices, Oral evidence should continue to be given to the Committees on Arms Export Controls by the Secretaries of State. (Paragraph 4)

The Government’s “United Kingdom Strategic Export Controls Annual Report 2010 (HC 1402)

2. We recommend that the Government’s United Kingdom Strategic Export Controls Annual Report continues to be presented to the House of Commons by the Secretaries of State for Business, Innovation and Skills, Defence, Foreign and Commonwealth Affairs and International Development. (Paragraph 6)

3. We further recommend that the Secretaries of State should include in their Annual Report information, not already published by the Government, that will assist Parliament and the wider public in understanding the Government arms export and arms control procedures, legislation and policies. (Paragraph 7)

4. The Committees conclude that the extensive information provided by the Government to the Committees’ questions on the Government’s United Kingdom Export Controls Annual Report 2010 will be of considerable benefit to Parliament and the wider public. The Committees, however, recommend that the Government needs to eradicate the administrative error that led to the Government’s answers being significantly delayed. The Committees further recommend that in future Annual Reports the Government should publish Case Studies of licence applications that are of genuine policy difficulty, such as the previous Government’s 2008 Case Study of an application to export armoured personnel carriers to Libya. The Committees also recommend that the Government include in its Annual Report not only its information required for the UN Register of Conventional Arms but also the information submitted by the UK Government for the EU’s Annual Report of exports of military technology and equipment. Finally, the Committees also recommend that, following the Foreign Secretary’s decision to update sections of the FCO’s annual Human Rights report on the FCO’s website quarterly, the Government should state in its Response to this Report what quarterly website updating it will carry out on the United Kingdom Strategic Export Controls Annual Report. (Paragraph 10)

The Committees’ Report of 2010-11 (HC 686)

Scrutiny of Arms Export Controls 2012

11

The Committees’ questions on the Government’s quarterly information on arms export licences

6. We conclude that the Government was right to accept the Chairman of the CAEC’s representations on behalf of the Committees that to a substantial degree the Government’s answers to the Committees’ questions on the Government’s Quarterly arms export reports could be declassified and thereby made available to Parliament and the wider public in this Report as from Q3 2010 for the first time. The Committees recommend that both in the Government’s Quarterly arms export reports and in its answers to the Committees’ questions on those reports, the Government should provide the maximum disclosure of information on a non- classified basis consistent with safeguarding the UK’s security and trade interests. (Paragraph 18)

Errors in export controls to Somalia

7. The CAEC concludes that the Government was correct in informing the Committees of a potential breach by the UK Government of UN sanctions relating to three export licences issued for Somalia after 1 January 2009. The Committees recommend that in its Response to this Report the Government provides an assurance to the Committees that they will be informed, and informed promptly, of any future actual or potential breaches of arms export controls by the UK Government, whether in relation to embargoed countries or in relation to any or all UK strategic export controls that are in place. (Paragraph 21)

Extra-territoriality

8. The Committees conclude that the distinction made by the Secretary of State for Business, Innovation and Skills in his letter of 2 February 2012 between activities that are prohibited and activities that are subject to licensing is not valid in the context of arms exports and extra-territoriality. The export of all Category A and Category B military goods (as detailed in Box A) by any person within the UK, or a UK person anywhere in the world, without a licence from the Secretary of State is already prohibited and is a criminal offence. The Committees continue to conclude that there is no justification for allowing a UK person to conduct arms exports overseas that would be a criminal offence if carried out by any person within the UK. On enforcement the Committees continue to conclude that the enforcement of extra- territoriality legislation has already been accepted by successive UK Governments in relation to all Category A and Category B military goods. We further conclude that there is no reason why enforcement should prove any more difficult in relation to Category C military goods than in relation to all other areas detailed in Annex 2 to our Report where extra-territoriality legislation already applies. The Committees, therefore, continue to recommend that extra-territoriality is further extended to the remaining Military List goods in Category C. (Paragraph 29)

Scrutiny of Arms Export Controls 2012

12

“Brass Plate” Companies

9. The Committees conclude that the Government has failed to provide a substantive response to its recommendation in its 2011 Report regarding “Brass Plate” companies in the UK trading in arms from overseas locations with virtual impunity. The Committees repeat their previous recommendation that the Government states in its response to this Report what precise action it will take, including the results of its exploration of the possibility of using the Companies Act, to dissolve a company which is operating against the public interest. (Paragraph 33)

A pre-licence register of arms brokers

10. The Committees conclude that the Government should consider very carefully whether it should do more to protect access to the UK’s arms export licensing system by those arms brokers whom the BIS Minister, Mark Prisk, described to the Committees as “the kind of rogues we are trying to deal with here”. We, therefore, repeat our previous recommendation that the Government carries out a full review of the case for a pre-licence register of arms brokers, that its review includes a public consultation and is concluded with a Ministerial decision within four months of the start of the consultation. (Paragraph 38)

EU dual-use controls

11. The Committees conclude that the Government’s decision to make public its response to the EU Commission’s Green Paper on the EU’s dual-use export control system was welcome. The Committees recommend that the Government in its Response to this Report, and subsequently, informs the CAEC as to which of the UK Government’s proposed changes to the EU Dual-use Regulation have been successfully achieved, and also as to the outcome on the EU Commission’s proposed changes which the UK Government does not support. (Paragraph 43)

EU end-use control of exported military goods

12. The Committees recommend that the Government in its Response to this Report states the reasons as to why it has no plans to bring forward amendments to UK legislation necessary to implement a national military end-use control when the Government has stated in its response to the European Commission’s Green Paper on the EU dual-use export control system that the current military end-use control “is too narrow”. The Committees further recommend that the Government states in its Response to this Report whether the European Commission has accepted the British Government’s proposals for an expanded Military End-use Control as set out in the Foreign Secretary’s letter to the CAEC of 30 September 2011 and in the Government’s response to the European Commission Green paper on the dual-use export control system of the European Union, and if not what further steps the Government will now take. (Paragraph 48)

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13

Torture end-use control and end-use control of goods used for capital punishment

13. The Committees recommend that the Government in its Response to this Report:

a) sets out the specific changes it has made since coming into Office in the UK’s export control procedures and legislation either to prohibit the export altogether, or to make subject to export licensing and end-use control, items of torture equipment, including items used to carry out capital punishment, detailing the specific items concerned, the countries to which their export is now prohibited or is subject to export licensing and end-use control, and any expiry time limits set on the relevant procedures and legislation;

b) provides the CAEC with the outcome of the EU Commission’s review of the

content of the Annexes of Regulation 1236/2005 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment which was expected to be finalised by the end of 2011 and the UK Government’s view as to whether this outcome is satisfactory or requires amendment;

c) provides the CAEC with a copy of the UK Government’s submission to the EU Commission for the Commission’s broad review of the EU Torture Goods Regulation being carried out in the first half of 2012; and

d) states whether it is still the UK Government’s policy that it does not intend to

prepare draft UK national legislation on torture end-use control and end-use control of goods used for capital punishment, and if so, explains why not. (Paragraph 55)

Re-export controls and undertakings

14. The Committees recommend that the Government in its Response details the controlled goods, for which either the previous Government or the present Government approved licences for export, that it believes were subsequently re- exported for undesirable uses or to undesirable destinations, stating in each case the country to which the goods were originally exported and the eventual undesirable use or undesirable destination. (Paragraph 58)

Licensed production overseas

15. The Committees recommend that the Government in its Response to this Report states what breaches of UK arms export control policies it believes have occurred under both the previous and the present Government as a result of the export of UK- designed goods from licensed production facilities overseas, specifying in each case the description of the goods concerned, the country in which they were produced and the country to which they were subsequently exported. The Committees further recommend that the Government sets out in its Response what steps it will take to prevent UK arms export policies being breached as a result of the export of UK- designed goods from licensed production facilities overseas. (Paragraph 60)

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14

The Consolidated Criteria

16. The Committees recommend that in its Response to this Report the Government explains why its updating of the wording of the Consolidated and National Arms Export Licensing Criteria before the end of 2011, as stated in its previous Response (Cm 8079), was not achieved by that date and that it provides the updated wording in its Response to this Report. The Committees further recommend that in its Response to this Report the Government states whether it considers that the UK Government is fully compliant with each of the Articles in the EU Common Position 2008/944/CFSP of 8 December 2008 “defining common rules governing controls of exports of military technologies and equipment”, and, if not, to specify in which respects it is non-compliant. The Committees also recommend that as the EU Common Position is to be reviewed three years after its adoption, on 8 December 2008, the Government sets out in its Response the changes to the EU Common Position to which it will be seeking agreement. Finally, the Committees recommend that where the UK’s arms export policies are arguably more stringent than those set out in the EU Common Position, for example in the light of the Foreign Secretary’s Oral evidence to the Committees on 7 February 2012 with regard to exports which might be used to facilitate internal repression, the UK Government should adhere to its own policy. The Committees wish to be assured by the Government in its Response that this will be the case (Paragraph 65)

Charging for processing arms export licences

17. The Committees conclude that the Government’s decision not to introduce charging for the processing of arms export licences is welcome as a charging system would, at least in the public perception, have compromised the independence of the Export Control Organisation from the arms export industry. The Committees recommend that such policy decisions by Ministers are made known to the CAEC wherever possible when they are made and not in the course of Oral evidence by Ministers. (Paragraph 72)

Performance

18. We recommend that the Government in its Response to this Report:

a) sets out the specific steps it is taking to achieve its 20 and 60 working day targets

for both processing and determining appeals for Standard Individual Export Licences (SIELs); and

b) states whether it will be setting processing and determining appeals targets for

Open Individual Export Licences (OIELs) and Open General Export Licences (OGELs) and, if so, what these targets will be.

The Committees further recommend that the Government in seeking to meet its arms export licence processing and appeal targets must comply in all cases and at all times with its arms export control policies as stated in the relevant legislation and in the Consolidated Criteria, and the Committees wish to be assured by the Government in its Response to this Report that this will be done. (Paragraph 80)

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15

Review of the ECO

19. The Committees recommend that the Government in its Response to this Report:

a) sets out what specific aspects of the ECO’s performance it is reviewing, what

conclusions it has reached in respect of each aspect being reviewed and what specific action it is taking as a result; and

b) states when it will be providing the Committees with a further report on its review

of the OGEL system previously promised to be available at the end of 2011.

(Paragraph 84)

Transparency of arms export licensing

20. The Committees conclude that the Government’s commitments to introduce greater transparency into the export licensing system are welcome. The Committees recommend that the Government keeps the CAEC fully informed of the specific changes that will be made to achieve greater transparency of the export licensing system following the responses it receives to the Government’s Discussion Paper on Transparency in Export Licensing. (Paragraph 91)

Priority markets for UK arms exports

21. The Committees conclude that, notwithstanding the fact that the Chairman of the Committees wrote to the BIS Secretary of State on 21 November 2011 specifically requesting that the UKTI DSO’s final list of Priority Markets for 2011/2012 be made available to the Committees before Ministers gave Oral evidence on 7 February 2012, the Government was remiss in failing to ensure that the final Priority Markets list reached the Committees before Ministerial Oral evidence was given. The Committees recommend that in its Response to this Report the Government sets out fully the reasons why Libya and Saudi Arabia remain within the UK Trade and Investment Defence and Security Organisation’s Priority Markets list for 2011/2012 when both countries are also listed by the Foreign and Commonwealth Office in its latest Human Rights and Democracy Annual Report as being Countries of Concern. (Paragraph 95)

Trade Exhibitions

22. The Committees conclude that the Government’s supervision of the “Defence and Security Equipment International” (DSEi) Exhibition in London in September 2011 to ensure strict adherence by the organising company Clarion Events of the terms and conditions of its Open Individual Trade Control Licence from the BIS was inadequate, as was the supervision by the company itself. The Committees further conclude that it is a matter of much concern that the information that certain Category A items were being promoted on the Beechwood Equipment stand and that cluster munitions were being promoted on the Defence Export Promotion Organisation of Pakistan and the Pakistan Ordnance Factories stand was discovered by visitors to the exhibition and not by either the exhibition’s organisers or by the Government. The Committees recommend that the Government takes all steps

Scrutiny of Arms Export Controls 2012

16

necessary to ensure that no breaches of the terms and conditions of the BIS licence to the organisers of the next DSEi event in 2013 occur. The Committees further recommend that in its Response to this Report the Government states:

a) whether or not it considers the law in this area is satisfactory with particular reference to Article 21 of the Export Control Order 2008, and;

b) whether there is any mismatch in the Government’s interpretation of the relevant

law between that set out in the BIS Guidance on the Impact of UK Trade Controls on Exhibitions and Trade Fairs and that set out by the Secretary of State, Vince Cable, in his letters to the Committees of 13 February and 26 March 2012. (Paragraph 102)

Enforcement

23. The Committees recommend that the Government in its Annual Strategic Export Controls Report provides the same information on compliance for holders of Standard Individual Export Licences (SIELs) as it already provides in its Annual Report for holders of Open Individual Export Licences (OIELs). The Committees further recommend that the Government states in its Response to this Report:

a) in how many of the 134 cases of the Government’s seizures in 2010–11 of military

equipment, dual-use goods or goods subject to sanctions because of breaches of licence requirements have the cases been referred to the Crown Prosecution Service, and in how many of these cases have prosecutions been initiated; and

b) what it considers to be the main points of difficulty the Government has, including under present legislation, in achieving compliance with, and enforcement of, its arms export controls. (Paragraph 105)

Compound penalties

24. The Committees recommend that now the present compound penalty regime in relation to arms exports has been in operation for two years, the Government in its Response to this Report provides an assessment of its strengths and weaknesses as shown to date, and details the improvements it wishes to implement. (Paragraph

112)

Crown Dependencies

25. The Committees conclude that the MS Thor Liberty incident revealed how ships registered in the Crown Dependencies could provide a means whereby shipments of arms could occur that would be in breach of UK Strategic Export Controls if carried out by a vessel registered in the UK. The Committees recommend the Government in its Response to this Report states whether it will give consideration to bringing the Crown Dependencies within the ambit of UK Strategic Exports Control legislation. (Paragraph 117)

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Combating bribery and corruption

26. The Committees conclude that the Government’s unqualified confirmation that if it becomes aware of corruption in arms deals it will take appropriate action under the provisions of the Bribery Act 2010, regardless of whether there is a risk of diversion or re-export under Criteria 7, is welcome. (Paragraph 120)

27. The Committees conclude that an examination of the EU’s Common Position on arms exports, the text of which is set out fully in Annex 4 of this Report, shows that there are numerous grounds in the Common Position on which Member States should refuse an arms export licence based on the perception of the destination country, for example where the arms might be used to facilitate internal repression, where there have been serious violations of human rights, or where sustainable development would be seriously hampered. The Committees, therefore, do not accept the Government’s view that: “It would not be appropriate to base an assessment [of an arms export licence application] merely on the perception of corruption in the destination country.” The Committees continue to recommend that the Government gives full consideration to proposing the insertion of an additional Criterion into the EU Common Position on arms exports obliging Member States to assess the risk of bribery and corruption before approving an arms export licence to any country. (Paragraph 122)

International Development

28. The Committees recommend that the Government in its Response to this Report states whether the methodology it uses in relation to Criterion 8 has been changed from that at Annex C of the United Kingdom Strategic Exports Controls Annual Report 2007, and, if so, to provide the Committees with the complete text of the changed methodology. (Paragraph 125)

29. The Committees recommend that the Government provides in its Response to this Report the outcome of the Department for International Development’s consideration of its role in the UK’s arms export control system, including which are the most appropriate Criteria in the Consolidated Criteria on which it considers it should be consulted. (Paragraph 127)

UK/US Defence Trade Cooperation Treaty

30. The Committees recommend that the Government in its Response to this Report:

a) states when it will be providing the further note to the Committees as to whether

the Treaty processes are robust and effective following completion of the Pathfinder testing and Approved Community trials; and

b) sets out the latest position on the Government’s development of a Treaty-specific

UK Open General Export Licence (OGEL) for use by UK members of the Approved Community. (Paragraph 132)

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Trade Cooperation Treaty will reduce the UK Government’s controls over arms exports from the UK to the US, and the transparency of such exports to Parliament and the public. (Paragraph 135)

UK-France Defence and Security Co-operation Treaty

32. The Committees recommend that the Government in its Response to this Report sets out in what precise ways, if any, the coming into effect of the UK/France Defence and Security Co-operation Treaty will reduce the UK Government’s controls over arms exports from the UK to France, and the transparency of such exports to Parliament and the public. (Paragraph 139)

The Intra-Community Transfer (ICT) Directive on arms transfers within the EU

33. The Committees recommend that the Government in its Response to this Report states precisely what legislative and procedural changes the Government will be making to its arms export controls in order to implement and comply with the EU Directive on Intra-Community Transfers of defence-related products. The CAEC further recommends that the Government monitors compliance with the Directive by other EU Member States and reports back to the Committees on any breaches of the EU Code of Conduct on Arms Exports as a result of this Directive of which it becomes aware. (Paragraph 143)

34. Finally, the Committees recommend that the Government in its Response to this Report sets out what precise ways, if any, the coming into effect of the EU Intra- Community Directive will reduce the UK Government’s controls over arms exports from the UK to EU Member States, and the transparency of such exports to Parliament and the public. (Paragraph 144)

Cluster Munitions

35. The Committees recommend that the Government in its Response to this Report sets out what steps it will take in relation to UK-based financial institutions who may be financing, directly or indirectly, or investing in manufacturers of cluster munitions. The Committees conclude that the Government’s decision to resist attempts to weaken the Convention on Cluster Munitions with draft Protocol 6 was welcome. The Committees further recommend that the Government continues to strive strenuously for, as the Minister for Europe David Lidington has stated, “a world free of cluster munitions.” (Paragraph 155)

Arms Trade Treaty (ATT)

36. The Committees conclude that the Government has put at risk the UK’s previous leading role in the drafting and negotiation of the Arms Trade Treaty by failing to maintain continuity of FCO staff at a senior level with this responsibility. The Committees also conclude that the Government’s commitment to achieving an Arms Trade Treaty with the broadest possible scope, including ammunition, is welcome. The Committees further conclude that the Government’s statement that it

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is supportive of an Arms Trade Treaty addressing the issue of corruption is welcome, though in stark contrast to the Government’s refusal to accept the Committee’s recommendation that the EU Common Position on arms exports should also include the issue of corruption (see paragraph 122). The Committees recommend that the Government deploys the staffing resources required at a sufficiently senior level, necessary to achieve a comprehensive and effective Arms Trade Treaty. (Paragraph 165)

Sub-strategic and tactical nuclear weapons

37. The Committees recommend that the Government sets out in its Response whether it wishes to see any change in NATO’s policy of deploying tactical nuclear weapons in Europe, and whether it is taking any steps to facilitate multilateral reductions in US and Russian tactical nuclear weapons. (Paragraph 168)

Fissile Material Cut-Off Treaty

38. The Committees recommend that the Government in its Response to this Report sets out what policies it is pursuing to break the deadlock at the Conference on Disarmament in Geneva over the drafting of a Fissile Material Cut-off Treaty and whether it supports the transfer of responsibility for the drafting of this Treaty to the United Nations in New York. (Paragraph 172)

The National Counter-Proliferation Strategy for 2012-2015

39. The Committees recommend that the Government in its Response to this Report:

a) details the conditions that the Government considers need to be fulfilled to ensure a meaningful outcome to a conference on a Middle East Weapons of Mass Destruction (WMD) Free Zone;

b) sets out what precise steps the Government is taking to establish a verification regime for the Biological and Toxin Weapons Convention;

c) details the Government’s planned expenditure, and on what projects, under the G8 Global Partnership delivering chemical, biological, radiological and nuclear (CBRN) security improvements on the ground;

d) details the specific provisions in existing obligations and export control regimes which the Government considers needs to have their enforcement strengthened; and

e) details any areas in which the Government considers that the UK’s domestic security practices and export controls need to be strengthened. (Paragraph

174)

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Arms exports and human rights

40. The Committees conclude that, whilst the promotion of arms exports and the upholding of human rights are both legitimate Government policies, the Government would do well to acknowledge that there is an inherent conflict between strongly promoting arms exports to authoritarian regimes whilst strongly criticising their lack of human rights at the same time. The Committees further conclude that whilst the Government’s statement that “respect for human rights and fundamental freedoms are mandatory considerations for all export licence applications” is welcome, those considerations do not appear to have weighed sufficiently heavily on either the present Government or on its predecessor given the unprecedented scale of arms export licence revocations that the Government has made since the “Arab Spring” — the stated reason for revocation being in every single case “that this licence now contravenes Criteria 2 and 3”. Criteria 2 is headed “The respect of human rights and fundamental freedoms in the country of final destination”, and Criteria 3 is headed “The internal situation in the country of final destination, as a function of the existence of tensions, or armed conflicts.” (Paragraph 176)

Overseas Security and Justice Assistance (OSJA) Human Rights Guidance

41. The Committees recommend that the OSJA Human Rights Guidance is amended to make it prominently and unequivocally clear that if military or security equipment is being exported in an Overseas Security and Justice Assistance programme, the decision as to whether or not to approve such exports must be made solely and wholly in accordance with the Consolidated Arms Export Licensing Criteria and procedures. The Committees further recommend that the requirement on officials in the current guidance merely to consult the Consolidated Arms Export Licensing Criteria in such export cases should be replaced by a requirement to adhere strictly to the Licensing Criteria and procedures. (Paragraph 181)

Surveillance technology and equipment

42. The Committees recommend that the Government sets out in its Response to this Report:

a) what changes it will make to UK export control legislation and procedures to

prevent surveillance technology and equipment being exported from the UK to repressive regimes who may use this technology and equipment to suppress human rights; and

b) what action the Government is taking to prevent such exports from EU Member

States generally. (Paragraph 183)

Export of Tasers

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the Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs. Alistair Burt, on 9 February 2012. (Paragraph 185)

Arms exports and internal repression

44. The Committees conclude that the Foreign Secretary’s statement to the Committees that there has been no change of policy on arms exports and internal repression by the present Government from that stated by the previous Government is welcome, the present Government’s policy being: “The longstanding British position is clear:

We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression.” The Committees recommend that the Government adheres strictly to its stated policy on arms exports and internal repression for all export licence applications. (Paragraph 191)

The Government’s Arab Spring arms export policy review

45. The Committees conclude that the Government’s repeated use of the phrase “crowd control goods” in the context of its arms export review is misleading given that “crowd control goods” are generally associated with non-lethal equipment. The Committees further conclude that the Government’s use of the phrase “crowd control goods” to include “shotguns, small arms, semi-automatic pistols, assault rifles, sniper rifles, submachine guns, and ammunition, armoured personnel carriers, armoured fighting vehicles” is not one that would be acceptable to Parliament or to the wider public. The Committees recommend that the Government discontinues the use of the phrase “crowd control goods” in this context, which as well as being misleading is also profoundly disrespectful to the thousands of unarmed civilians in the Arab Spring countries who have courageously demonstrated for human rights and fundamental freedoms and have put their lives at risk in doing so. (Paragraph 197)

46. The Committees conclude that the Government’s review of its policies and practices on arms exports following the Arab Spring should not have been carried out merely as “an internal review” and should instead have been the subject of public consultation in accordance with the Government’s stated policy of transparency on arms exports. The Committees further conclude that whilst the Government’s introduction of a new licence suspension mechanism is welcome, this is not sufficient to ensure that arms exported from the UK are not used for internal repression overseas because in many, if not most, cases the arms will have left the UK before suspension occurs. The Committees recommend that the Government in its response to this Report sets out whether the “revised risk categorisation” proposed by the Foreign Secretary in his Written Ministerial Statement of 13 October 2011 will, or will not, be applied to arms export licence applications when initially made, and whether he will make public the “revised risk categorisation” and explain fully how it would be applied to arms export licence decisions. (Paragraph 207)

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judgements to approve the applications were flawed. The Committees further conclude that there were no significant changes in the repressive regimes concerned between the British Government’s approval of the arms export licences in question and the start of the Arab Spring in December 2010, and that the Arab Spring simply exposed the true nature of the repressive regimes which had been the case all along. The Committees recommend that the Government should apply significantly more cautious judgements when considering arms export licence applications for goods to authoritarian regimes “which might be used to facilitate internal repression” in contravention of British Government policy. (Paragraph 208)

Arms export licence revocations

48. The Committees recommend that the Government continues to monitor all extant licences for arms exports to authoritarian regimes worldwide which might be used to facilitate internal repression in contravention of British Government policy and to make public promptly any further revocations that it makes. (Paragraph 213)

Countries of Concern

Bahrain

49. The Committees recommend that the Government in its Response to this Report states whether it remains satisfied that none of the 97 extant UK arms export licences to Bahrain now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for assault rifles, sniper rifles, body armour, gun silencers, shotguns, small arms ammunition, pistols, weapon sights and equipment employing cryptography. (Paragraph 222)

Egypt

50. The Committees recommend that the Government in its Response to this Report states whether it remains satisfied that none of the 124 extant UK arms export licences to Egypt now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for body armour, weapon night sights, weapon sights, components for semi- automatic pistols, semi-automatic pistols, components for submachine guns, components for rifles, rifles, small arms ammunition, combat shotguns, assault rifles, sniper rifles, pistols and cryptography . (Paragraph 228)

Libya

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to Libya now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for all- wheel drive vehicles with ballistic protection and cryptography . (Paragraph 233)

Saudi Arabia

52.

The Committees recommend that the Government states in its Response to this Report whether it applies different or the same considerations in deciding whether or not to approve arms export licences to Saudi Arabia to those applied to other countries in the region and, if different, what those considerations are. The Committees further recommend that the Government in its Response states whether it remains satisfied that none of the 288 extant UK arms export licences to Saudi Arabia now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for:

Components for armoured fighting vehicles, components for armoured personnel carriers, armoured personnel carriers, ground vehicle military communications equipment, components for military combat vehicles, components for military communications equipment, components for water cannon, components for sniper rifles, components for weapon sights, weapon sights, gun silencers, small arms ammunition, sniper rifles, technology for military communications equipment, technology for sniper rifles, technology for the use of sniper rifles, assault rifles, components for assault rifles, components for general purpose machine guns, components for machine pistols, components for pistols, components for rifles, components for semi-automatic pistols, components for submachine guns, general purpose machine guns, machine pistols, pistols, rifles, semi-automatic pistols, submachine guns, hand grenades, components for machine guns, components for military support vehicles, military combat vehicles. (Paragraph 239)

Syria

53.

The Committees recommend that the Government in its Response to this Report states whether it remains satisfied that none of the 9 extant UK arms export licences to Syria now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for all- wheel drive vehicles with ballistic protection and cryptography . (Paragraph 244)

Tunisia

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to Tunisia now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for military support vehicles, all-wheel drive vehicles with ballistic protection, small arms ammunition and cryptography . (Paragraph 249)

Yeman

55. The Committees recommend that the Government in its Response to this Report states whether it remains satisfied that none of the 11 extant UK arms export licences to Yemen now contravenes the Government’s stated policy that: “The longstanding British position is clear: We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conflicts, or which might be used to facilitate internal repression” including those licences for all- wheel drive vehicles with ballistic protection, body armour, components and equipment for military cameras and cryptographic equipment and technology. (Paragraph 255)

Argentina

56. The Committees conclude that the Government’s decision to tighten controls on the licensing of, and trade in (trafficking and broking), controlled goods and technology to military end users in Argentina is welcome. The Committees recommend that the Government states in its Response to this Report:

a) what are the exceptional circumstances in which the Government is still willing to

consider approving export licences for military or dual-use goods being supplied to military end users in Argentina;

b) what licences for military goods to Argentine armed forces have been revoked;

c) what UK strategic export control licences for Argentina remain extant; and

d) what steps the Government is taking to get the US Government, the Governments

of EU Member States, and the Governments of other countries who export military

goods, military technology and dual-use goods to Argentina to make the same change of policy as that announced by the British Government. (Paragraph 258)

China

57. The Committees conclude that given the lack of clear progress on civil and political rights in China, the Government’s support for the EU Arms Embargo on China to continue is welcome. The Committees recommend that the Government provides in its Response to this Report an explanation as to why, according to the EU’s latest Report, the UK Government in 2010 gave a larger number of arms export licence approvals to China than any other EU Member State notwithstanding the EU Arms Export Embargo on China. (Paragraph 265)

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Extension of the Review to authoritarian regimes and to countries of concern worldwide

58. The Committees conclude that the Government’s stated policy is to refuse arms export licences “which might be used to facilitate internal repression” and not merely to await internal repression becoming patently clear. The Committees therefore continue to recommend that the Government extends its arms export policy review from countries in the Middle East and North Africa to authoritarian regimes and countries of human rights concern worldwide. (Paragraph 270)

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1 Introduction

1. The four House of Commons Select Committees that comprise the Committees on Arms Export Controls (CAEC) 1 are: the Business, Innovation and Skills Committee, the Defence Committee, the Foreign Affairs Committee and the International Development Committee. All members of the four Select Committees are entitled to attend committee meetings of the CAEC, although for practical purposes each of the four Committees usually nominates four members to serve on the CAEC.

2. The CAEC’s task throughout the year is to scrutinise the UK Government’s arms export control procedures and legislation, individual arms export licence decisions, arms export policies, and the UK’s role in international arms control agreements. To achieve this, the Committees have scrutinised in unprecedented detail the Government’s United Kingdom Strategic Export Controls Annual Report 2010 (HC 1402) 2 presented to the House of Commons in July 2011 by the four Secretaries of State. The Committees questions on the Annual Report and the Government’s answers are reproduced in full in Annex 11. The Committees have also scrutinised in detail the Government’s all important information placed quarterly on the website of the Department for Business, Innovation and Skills (BIS) on individual arms export licence decisions; the Committees questions on those decisions and the Government’s answers for the period Q3 2010 until Q3 2011 are reproduced in full in Annex 1. The Committees were, in addition, able to scrutinise the Government policies and performance on arms export controls as a result of information received in the Committees’ informal meetings and from a range of other sources and reports. We were grateful to those who submitted formal written evidence to our latest inquiry; these memoranda are reproduced in full in the evidence to this Report at Ev 33–62. A great deal of important written Ministerial evidence was also submitted in the course of the inquiry, mostly in response to questions from the Committees. This is listed at Annex 10 and reproduced in full in the evidence to this Report at Ev 62–183. A debate on the CAEC’s last Report was held in the House of Commons on 20 October 2011 during which a number of key issues were raised. 3

3. The Committees’ scrutiny for this Report culminated with two Oral evidence sessions held first with the UK Working Group on Arms (UKWG) 4 and the Export Group for Aerospace and Defence (EGAD) 5 ; and, second, with the Secretary of State for Business, Innovation and Skills, Vince Cable and the Secretary of State for Foreign and Commonwealth Affairs (FCO), William Hague. The complete texts of the Committees’ questions and the witnesses’ answers in the Oral evidence sessions can be found in the evidence to this Report at Ev 1–32.

1 From April 1999 until March 2008 the Committees were known as the “Quadripartite Committee”

2 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2010, HC 1402, 18 July 2011

3 HC Deb, 20 October 2011, cols 337-370WH

4 The UK Working Group on Arms comprises Action on Armed Violence, Amnesty UK, Article 36, Omega Research Foundation, Oxfam and Saferworld

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4. The Committees recommend that, given the far-reaching significance of arms export and arms control decisions for the Government’s trade, defence, foreign and international development polices, Oral evidence should continue to be given to the Committees on Arms Export Controls by the Secretaries of State.

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2 The Government’s “United Kingdom Strategic Export Controls Annual Report 2010” (HC 1402)

5. In the Committees’ 2011 Report we pointed out that the Government had apparently

downgraded the status of its Strategic Export Controls Annual Report. We noted that the previous Government had produced more substantial Reports and they had been presented to the House of Commons by the four Secretaries of State. In contrast the Strategic Export Controls Annual Report in 2009 had been presented to the House of Commons in July 2010 by four junior Ministers and was less substantial than previous Reports. When Ministers were questioned on this matter last year they argued that the Report was shorter than previous Reports because it was more concisely written. We recommended that the Strategic Export Controls Annual Reports should in future be presented to the House of Commons by the four Secretaries of State rather than by junior Ministers. 6 We were glad to note that following our recommendation, the United Kingdom Strategic Export Controls Report 2010 was presented to Parliament in July 2011 by the four Secretaries of State. 7 Additionally, we analysed the content of the last four Strategic Export Controls Annual Reports; two of which had been produced by the previous Government and two by the present Government. This analysis showed that the Reports produced by the present Government, while not having as many pages as the Reports produced by the previous Government, did have approximately the same content in the main body of the Report, but had significantly less information in the Annexes.

6. We recommend that the Government’s United Kingdom Strategic Export Controls

Annual Report continues to be presented to the House of Commons by the Secretaries of State for Business, Innovation and Skills, Defence, Foreign and Commonwealth Affairs and International Development.

7. We further recommend that the Secretaries of State should include in their Annual

Report information, not already published by the Government, that will assist Parliament and the wider public in understanding the Government arms export and arms control procedures, legislation and policies.

8. The Committees decided to scrutinise the Government’s United Kingdom Strategic

Export Controls Annual Report 2010 in unprecedented detail. The Committees’ questions were submitted by the Chairman of the Committees with his letter to the Foreign Secretary of 19 October 2011 requesting the answers no later than 30 November. 8 In the event the answers were not received until the Foreign Secretary’s letter to the Committees’ Chairman of 7 January 2012. 9 The Foreign Secretary said that this delay was due to administrative

6 Committees on Arms Export Controls, First Joint Report of Session 2010-12, 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, HC686, paras 5-6

7 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2010, HC 1402

8 Ev143 – Letter to the Foreign Secretary dated 19 October 2011

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error, for which he expressed regret. One of the Committees’ questions was why the Case Studies detailed in the Government’s Annual Report—body armour and night vision goggles to Afghanistan, a single armoured personnel carrier to Nigeria, and shields and body armour to Kyrgyzstan 10 —were all relatively non-controversial and insubstantial, compared to the previous Government’s 2008 Case Study of the decision to approve an export licence for armoured personnel carriers to Libya. 11 The complete text of the Committees’ questions and the Government’s answers can be found in Annex 11.

9. In his Foreword to the FCO’s annual Human Rights Report for 2011, published in April 2012, the Foreign Secretary said that the FCO would in future be updating sections of the report quarterly on the FCO’s website. 12

10. The Committees conclude that the extensive information provided by the Government to the Committees’ questions on the Government’s United Kingdom Export Controls Annual Report 2010 will be of considerable benefit to Parliament and the wider public. The Committees, however, recommend that the Government needs to eradicate the administrative error that led to the Government’s answers being significantly delayed. The Committees further recommend that in future Annual Reports the Government should publish Case Studies of licence applications that are of genuine policy difficulty, such as the previous Government’s 2008 Case Study of an application to export armoured personnel carriers to Libya. The Committees also recommend that the Government include in its Annual Report not only its information required for the UN Register of Conventional Arms but also the information submitted by the UK Government for the EU’s Annual Report of exports of military technology and equipment. Finally, the Committees also recommend that, following the Foreign Secretary’s decision to update sections of the FCO’s annual Human Rights report on the FCO’s website quarterly, the Government should state in its Response to this Report what quarterly website updating it will carry out on the United Kingdom Strategic Export Controls Annual Report.

10 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2010, HC 1402, pp 14–16

11 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2008, Cm 7662, pp 13–14

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3 The Committees’ Report of 2010-11 (HC 686)

The Committees’ Report and the Government’s Response (Cm 8079)

11. Government Departments agreed in 1978, following recommendations by the Select

Committee on Procedure, that replies should, if possible, be made within two months of the publication of a Report. 13 This principle was re-affirmed by the then Government in its response to the First Report of the Liaison Committee in the 1999–2000 Session: “The Government agree that Departments should respond [to Select Committee Reports] within two months, if possible and, if not, that they should warn Committees if delays are likely, and explain the reason for delay.” 14 A longer delay may be considered permissible in some circumstances when those circumstances have been explained to the Committee concerned. 15

12. We published our Report of last year on 5 April 2011. The Government’s Response in

Command Paper Cm 8079 was published on 7 July, three months rather the two months

after the Committees had reported.

13. The Chairman of the CAEC wrote to the Foreign Secretary on 18 July 2011 putting to

him a series of questions from the Committees arising from the Government’s Response and requesting the answers no later than 30 September. 16 The Foreign Secretary provided the Government’s answers with his letter to the Chairman of 30 September. 17 The letters

containing the Committees’ questions and the Government’s answers, which include information of interest to Parliament and the wider public are produced in full in the evidence to the this inquiry. 18

14. The Government’s response to each of the Committees’ recommendations on “Brass

Plate” companies, the Pre-licence registration of arms brokers and Extra-territorial arms export controls was: “We are giving careful consideration to the CAEC recommendations in the light of recent events and will revert later this year.” In the Chairman’s letter to the Foreign Secretary of 18 July the Committees asked when the Government would “revert” to the Committees on these three recommendations. 19 The Foreign Secretary in his reply of 30 September stated in respect of each of the three recommendations where the Government had said that it would “revert” back to the Committees, that; “The Government (the Department for Business, Innovation and Skills) will update the Committees regarding developments on these issues before the Committee start taking

13 Select Committee on Procedure, First Report of Session 1977–78, HC 588-I, pp lxxii - lxxiv

14 President of the Council and Leader of the House, The Government’s Response to the First Report from the Liaison

Committees on Shifting the Balance: Select Committees and the Executive, Cm 4737, May 2000, p 7

15 Erskine May, 24th edition (London 2011), p 837

16 Ev 63 – Letter to the Foreign Secretary dated 18 July 2011

17 Ev 67 – Letter from the Foreign Secretary dated 30 September 2011

18 EV 63 and Ev 67

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further evidence.” 20 In the event, no response was received to these three recommendations before the Committees took further oral evidence on 23 January 2012 and a response was produced only just before the Committees took evidence from both Secretaries of State on 7 February 2012, some ten months after the recommendations had been made.

15. We conclude that the Government’s responses to the Committees have been uneven—varying from timely, to somewhat delayed, to unacceptably delayed. We recommend the Government reviews its internal organisation and procedures for responding to the CAEC so as to ensure that the Committees always receive timely and substantive responses to their recommendations and questions.

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4 The Committees’ questions on the Government’s quarterly information on arms export licences

16. The Export Control Organisation (ECO) within the Department for Business, Innovation and Skills, publishes details of the arms export licences that have been granted, refused or appealed for each Quarter. These are known as the Pivot Reports. The information in these Reports is of great importance, and the Quarterly Reports are subject to detailed scrutiny by the Committees. This invariably results in the Committees putting a series of detailed questions to the Government, to which the Government provides answers to the CAEC.

17. The Committees wish to see the maximum disclosure by the Government of information about UK arms exports that is consistent with safeguarding the UK’s security and trade interests. The Chairman of the CAEC wrote to the Foreign Secretary on 24 October 2011 strongly resisting the Government’s decision to classify as “Restricted for CAEC eyes only” the entirety of its answers to the Committees’ questions on the Quarter 3 and Quarter 4 2010 Arms Export Licensing information provided by the Government. 21 The Chairman, Sir John Stanley, proposed a substantial declassification of the information the Committees had received. The Chairman wrote a further letter to the Foreign Secretary on 16 December 2011 pressing for a reply to his letter of the 24 October. 22 No reply having been received by the time the Foreign Secretary gave Oral evidence to the Committees on 7 February 2012, the Chairman again pressed the Foreign Secretary for the outstanding reply. 23 The reply was finally received in the Foreign Secretary’s letter to the Chairman of 21 February in which the Foreign Secretary accepted in large part the disclosure proposals put to the Government by the Chairman on behalf of the Committees. 24 The Committees’ questions on the Government’s arms export licensing decisions and the Government’s non-classified answers for Quarter 3 and Quarter 4 of 2010 and for Quarters 1, 2, and 3 for 2011 are set out in full in Annex 1 of this Report. This information is being made public in the Committees’ Report for the first time.

18. We conclude that the Government was right to accept the Chairman of the CAEC’s representations on behalf of the Committees that to a substantial degree the Government’s answers to the Committees’ questions on the Government’s Quarterly arms export reports could be declassified and thereby made available to Parliament and the wider public in this Report as from Q3 2010 for the first time. The Committees recommend that both in the Government’s Quarterly arms export reports and in its answers to the Committees’ questions on those reports, the Government should provide the maximum disclosure of information on a non-classified basis consistent with safeguarding the UK’s security and trade interests.

21 Ev 148 – Letter to the Foreign Secretary dated 24 October 2011

22 Ev 151 – Letter to the Foreign Secretary dated 16 December 2011

23 Q 108

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Errors in export controls to Somalia

19. The Parliamentary Under-Secretary of State at the FCO, Alistair Burt, wrote to the Committees on 6 February 2012 to inform the Committees that following their questions on the Quarter 2 2011 Report the Government had found that there had been a potential breach of UN sanctions relating to an export licence issued for Somalia. 25 The licence was for body armour for a humanitarian de-mining organisation. When the application was initially assessed the export had been considered as temporary when it should have been considered as permanent. Due to this error an incorrect exemption under the arms embargo was applied and the UN Sanctions Committee was not notified of the proposed export. Following discovery of this error a review of all export licence applications for Somalia was undertaken and a further two cases in 2009 where the Sanctions Committee should have been notified were identified. Both of these licences authorised the export of armoured vehicles for the protection of UNICEF staff.

20. The Minister advised the Committees that a review of export licences for a number of other embargoed countries from 1 January 2009 onwards had been carried out. He stated in his letter that: “I am satisfied that these three cases were isolated administrative errors and there is no wider systemic failure in our handling of export licence applications for embargoed countries.” 26

21. The CAEC concludes that the Government was correct in informing the Committees of a potential breach by the UK Government of UN sanctions relating to three export licences issued for Somalia after 1 January 2009. The Committees recommend that in its Response to this Report the Government provides an assurance to the Committees that they will be informed, and informed promptly, of any future actual or potential breaches of arms export controls by the UK Government, whether in relation to embargoed countries or in relation to any or all UK strategic export controls that are in place.

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5 Arms export control legislation and procedures

Extra-territoriality

22. Extra-territorial legislation enables UK persons to be prosecuted in the UK for actions overseas which, if carried out in the UK, would constitute a criminal offence. A substantial body of extra-territorial legislation already exists on the statute book. A summary of the legislation, indicating the position taken by successive Governments on this matter, is reproduced as Annex 2. Successive CAEC Reports have taken the view that in the matter as important as arms exports extra-territoriality should be expanded to all types of arms exports and that it would be irrational and inconsistent to apply extra-territoriality to some types but not to others.

23. The Government's current position on extra-territoriality with regard to arms exports, is set out in secondary legislation, most recently in the Trade in Goods (Categories of Controlled Goods) Order 2008. 27 The current system is based on a three-tier categorisation system where the full range of controls apply to Category A goods, but their scope is reduced for Category B and reduced still further for Category C. A summary of this system is set out below.

Box A

Category A goods consist of cluster munitions, and specially designed components thereof; and certain paramilitary goods whose export the Government has already banned because of evidence of their use in torture, including electric shock batons, electric-shock belts, leg irons and sting sticks. Any person within the UK, or a UK person anywhere in the world, is prohibited from supplying or delivering, or doing any act calculated to promote the supply or delivery of, Category A goods without a licence from the Secretary of State. These strict controls reflect the fact that the supply of many of these goods is inherently undesirable. Licences will not normally be granted for any trade in paramilitary goods listed because of evidence of their use in torture. However, as with physical exports of such goods, there will be rare circumstances in which one might be granted, (e.g. for the export of equipment for museum or exhibition display).

Category B goods consist of Small Arms and Light Weapons (including ammunition); Long Range Missiles (LRMs) capable of a range of 300km or more (Note: this includes Unmanned Air Vehicles (UAVs)), Man Portable Air Defence Systems (MANPADS), specially designed production and field test equipment for MANPADS, and specialised training equipment and simulators for MANPADS, and specially designed components for any of the above. Any person in the UK, or a UK person anywhere in the world, is prohibited from transferring, acquiring or disposing, or arranging or negotiating a contract for the acquisition or disposal of Category B goods without a licence from the Secretary of State. Financing, insuring, advertising and promotion for Category B goods will not be controlled, but active or targeted promotional activities aimed at securing a particular business deal will be.

Category C goods consist of all goods contained within Schedule 2 of the Export Control Order 2008 that do not fall into either of the two categories above, and certain substances for the purpose of riot control or self-protection and related portable dissemination equipment. Trading between two countries in Category C goods is only controlled if carried out from within the UK.

Source: Department for Business, Innovation and Skills, Review of Export Control Legislation (2007) Supplementary Guidance Note on Trade ("Trafficking and Brokering") in Controlled Goods (in effect from 6 April 2009), January 2009 and Explanatory Notes to the Trade in Goods (Categories of Controlled Goods) Order 2008

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24. The principle that extra-territoriality should be applied to arms exports was first conceded by the previous government when the Trade in Goods (Control) Order 2003 was given legal effect. 28 That Order introduced new controls on trade in military equipment between overseas countries (including 'trafficking' and 'brokering'). 29 Under the Order any person within the United Kingdom, or a United Kingdom person anywhere in the world, was prohibited from supplying or delivering, or doing any act calculated to promote the supply or delivery of, restricted goods without a licence from the Secretary of State. Extra- territorial controls (on the activities of United Kingdom persons anywhere in the world) were applied to trade to any destination in:

long-range missiles (over 300 km) and their component parts;

torture equipment the export of which had already been banned by the Government (including, for example, electric shock batons, and leg irons); and

to any embargoed destination. 30

25. From 1 October 2008 cluster munitions were added to the list of goods to be treated as Category A goods and Category B controls were widened to include small arms and man- portable air defence systems. 31

26. The then Trade and Industry Minister, Ian Lucas, told our predecessor Committees in a letter dated 11 February 2010 that Anti-Vehicle Landmines would be added to Category B and therefore their trade by UK persons would be subject to extra-territorial controls. 32 Our predecessor Committees had called for this change in their Report of March 2010 33 Additionally, as a first step towards targeted extensions, the letter detailed how NGOs had agreed to:

consider whether there are any particular goods that ought to be moved from Category C to Category B, based on the risks associated with trade in those specific items; and to consider whether there are particular countries of concern such that

28 The Order was made under the Export Control Act 2002.The Trade in Goods (Control) Order 2003 (SI 2003/2765)

29 The Order covered not only companies or people trading between overseas countries on their own behalf, but also

those negotiating contracts and arranging trade and related activities for a fee. The Order did not, however, control transportation, financial services, insurance or advertising-except where extra-territorial controls apply.

30 See Defence, Foreign Affairs, International Development and Trade and Industry Committees, First Joint Report of

Session 2002-03, The Government’s proposals for secondary legislation under the Export Control Act, HC 620, Chapter 4

31 Trade in Goods (Categories of Controlled Goods) Order 2008 (SI 2008/1805)

32 Committees on Arms Export Controls, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010):

UK Strategic Export Controls Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export control legislation, HC202, Ev 63

33 Committees on Arms Export Controls, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010):

UK Strategic Export Controls Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export control legislation, Ev 63. CAEC also called for anti-vehicle landmines to be added to the list of Category B goods, which prohibits any person in the United Kingdom, or a United Kingdom person anywhere in the world, from transferring, acquiring or disposing, or arranging or negotiating a contract for the acquisition or disposal of Category B goods without a licence from the Secretary of State. Anti-vehicle mines were added to Category B with the entry into force of the Export Control (Amendment) (No. 2) Order 2010 on 31 August 2010.

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trading Category C goods to those destinations ought to be subject to extra-territorial control. 34

Anti-Vehicle Landmines were added to Category B through entry into force of the Export Control (Amendment) (No.2) Order 2010, on 31 August 2010. 35

27. The CAEC’s conclusions and recommendations on extra-territoriality in its last Report (HC686) published on 5 April 2011 were as follows:

We conclude it is disappointing that the Government's discussions with the industry and NGOs have not resulted in extra-territorial controls being extended to include specific items in Category C. We recommend that the Government re-engages with NGOs and industry groups on this important policy issue and lets us know of the progress being made in its response to this report. We further conclude, as did our predecessor Committees, that there is no justification for allowing a UK person to conduct arms exports overseas that would be a criminal offence if carried out from the UK. We note that extra-territorial legislation already applies to a number of areas, including sexual offences against children and young people, war crimes, terrorism, torture, bribery and corruption and taxation. We conclude that there is no reason why enforcing extra-territorial controls in connection with arms export controls should be more difficult to enforce than in these areas. We recommend that the Government extends extra-territoriality to all items on the Military List in Category C. 36

The Government’s unacceptable delay of ten months in responding to the Committees’ recommendations on this issue is detailed in paragraph 14 above.

28. The Secretary of State for Business, Innovation and Skills in providing the Government’s response to the Committees’ recommendation on extra-territoriality stated in his letter of 2 February 2012:

On the specific question of extra-territorial law enforcement, I am always inclined to be wary of going too far down this route. I think extra-territoriality can be justified in the case of the most undesirable types of activity conducted by UK nationals overseas: in other words, normally activity that we would seek to prohibit, not activity that we would seek to license. I am not so far convinced that it would be right to extend the reach of UK law to cover all trade in defence goods, including the least sensitive, by UK nationals. But I am open to hearing your views on this point. 37

29. The Committees conclude that the distinction made by the Secretary of State for Business, Innovation and Skills in his letter of 2 February 2012 between activities that are prohibited and activities that are subject to licensing is not valid in the context of

34 Committees on Arms Export Controls, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010):

UK Strategic Export Controls Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export

control legislation, HC202, Ev 63

35 Export Control (Amendment) (No.2) Order 2010 (SI 2010/2007)

36 Committees on Arms Export Controls, First Joint Report of Session 2010–12, 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, HC686, para 57

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37

arms exports and extra-territoriality. The export of all Category A and Category B military goods (as detailed in Box A) by any person within the UK, or a UK person anywhere in the world, without a licence from the Secretary of State is already prohibited and is a criminal offence. The Committees continue to conclude that there is no justification for allowing a UK person to conduct arms exports overseas that would be a criminal offence if carried out by any person within the UK. On enforcement the Committees continue to conclude that the enforcement of extra-territoriality legislation has already been accepted by successive UK Governments in relation to all Category A and Category B military goods. We further conclude that there is no reason why enforcement should prove any more difficult in relation to Category C military goods than in relation to all other areas detailed in Annex 2 to our Report where extra- territoriality legislation already applies. The Committees, therefore, continue to recommend that extra-territoriality is further extended to the remaining Military List goods in Category C.

“Brass Plate” Companies

30. “Brass Plate“ companies are companies that do not have an operational presence in the UK but do have a UK-registered address. “They have no presence in the UK other than the brass plate, employ no UK nationals and no part of their activity is actually conducted within the UK.” 38 Our predecessor Committees first raised the issue of “Brass Plate” companies in their 2009 Report following their visit to Ukraine, when they were given a document containing a list of UK-registered brokers to whom the Ukrainian State Service for Export Control had granted licences for strategic exports. 39 The end-users on the list included countries for which there had been UK Government restrictions on the export of strategic goods. The CAEC was subsequently informed by the previous Government that four of the 12 UK-registered brokers on the list were “Brass Plate” companies. Our predecessor Committees raised the issue again in their 2010 Report when they recommended that the Government should “explore ways in which it would be possible to take enforcement action against Brass Plate companies, including consulting enforcement agencies in other countries on their approach to this problem.” 40

31. The Conclusion and Recommendation of the current Committees on Brass Plate companies in their Report published on 5 April 2011 were as follows:

We conclude that the Government's current examination of ways to tackle concerns about brass plate UK companies in the UK trading in arms from overseas locations with virtual impunity because of difficulties of enforcement is welcome. We recommend the Government tells us in its response what precise action it will take, including the results of its exploration of the possibility of using powers under the

38 Committees on Arms Export Controls, Government Response to the Committee Report, Scrutiny of Arms Export

Controls (2008), Cm 7938, p 6

39 Committees on Arms Export Controls, First Joint Report of Session 2008–09, Scrutiny of Arms Export Controls (2009):

UK Strategic Export Controls Annual Report 2007, Quarterly reports for 2008, licensing policy and review of export control legislation, HC178, paras 20-22

40 Committees on Arms Export Controls, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010):

UK Strategic Export Controls Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export control legislation, HC202, para 47

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38

Companies Act to dissolve a company which is operating against the public interest. 41

The Government’s unacceptable delay of ten months in responding to the Committees’ conclusion and recommendation on this issue is detailed in paragraph 14 above.

32. The Secretary of State for Business, Innovation and Skills, in providing the Government’s response to the Committees’ conclusion and recommendation on “Brass Plate” companies, stated in his letter to the Chairman of 2 February 2012:

Looking forward, the main challenge that I see in the area of arms brokers and “brass plates” is one of enforcement. The Government has had some successes in recent years. But it is an ongoing challenge: the fact that a company may be flouting the law does not necessarily mean that we can always catch them, gather evidence and present a case that will convince a court. 42

33. The Committees conclude that the Government has failed to provide a substantive response to its recommendation in its 2011 Report regarding “Brass Plate” companies in the UK trading in arms from overseas locations with virtual impunity. The Committees repeat their previous recommendation that the Government states in its response to this Report what precise action it will take, including the results of its exploration of the possibility of using the Companies Act, to dissolve a company which is operating against the public interest.

A pre-licence register of arms brokers

34. Article 4 of the EU Common Position 2003/468/CFSP on the control of arms brokering does not require the creation of a pre-licence register, but says that in addition to licences, “Member States may also require brokers to obtain a written authorisation to act as brokers, as well as establish a register of arms brokers.” 43 Such a register is considered best practice at EU and international level. At the international level, the Wassenaar statement on arms brokering 44 and the guidelines of the Organisation for Security and Co-operation in Europe (OSCE) also encourage states to develop registers. 45

41 Committees on Arms Export Controls, First Joint Report of Session 2010–12, 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, HC686, para 40

42 Ev 156 – letter from Vince Cable dated 2 February 2012, para 5

43 EU Council Common Position 2003/468/CFSP, 23 June 2003. Brokering is where someone arranges or negotiates

contracts (or agrees to do so) between other parties for trade in arms or components.

44 The Wassenaar Arrangement is presently composed of 40 countries (including the UK) and was established to

contribute to regional and international security and stability, by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies, thus preventing destabilising accumulations. Participating States seek, through their national policies, to ensure that transfers of these items do not contribute to the development or enhancement of military capabilities which undermine these goals, and are not diverted to support such capabilities.

45 The OSCE has established the Vienna Document which, among other things, requires the 56 participating states to

share information on defence planning and budgets and exchange information on their armed forces, military organisation, manpower and equipment systems. http://www.osce.org/fsc/74528

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35. In the last Parliament, our predecessor Committees repeatedly recommended that the Government establish a pre-licence register of arms brokers. 46 The then Government's repeated response was that it was not convinced of the benefits of such a register, especially when the electronic system for applying for licences (SPIRE) acted as a de facto register. However, the last Government also stated that it was “not opposed in principle to the idea of a pre-licensing registration system under which traders can be vetted before they can be registered.” 47 In 2009, the then Government said it would “be happy” to look at whether to introduce a register after it had assessed the effectiveness of other initiatives such as focussing awareness activity on traders and clamping down on those who misuse open licences. 48 The then Minister of State at the FCO, Ivan Lewis, told our predecessor Committees that the last review had been in 2007 and therefore “it may be worth having a look at it at some point in the near future.” 49 In response to our predecessor Committees' 2010 recommendation for a pre-licence register, the present Government said:

As things stand, the Government does not believe that the case for a pre-licensing register has been made. It is not clear that the extra layer of bureaucracy involved in a registration system would add to the effectiveness of the UK's trade controls. However, we will keep this under review in the light of any emerging evidence. 50

We were informed by the BIS Minister, Mark Prisk, during last year’s inquiry, that the Government did not have a “completely closed mind on this issue” and that “the question is whether it would make any difference to the kind of rogues we are trying to deal with here [ ]”

36. The Committees’ recommendation on establishing a pre-licence register of arms brokers in its last Report (HC686) published on 5 April 2011 was as follows:

51

We recommend that the Government carries out a full review of the case for a pre- licence register of arms brokers and that its review includes a public consultation and is concluded with a Ministerial decision within four months of the start of the consultation. 52

The Government’s unacceptable delay of ten months in responding to the Committees’ conclusion and recommendation on this issue is detailed in paragraph 14 above.

46 Committees on Arms Export Controls, First Joint Report of Session 2007–08, Scrutiny of Arms Export Control

(2008),HC255, para 36; CAEC, First Joint Report of Session (2008–09), Strategic Arms Export Control (2009), HC615, para 51; CAEC, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010), HC 202, para 42

47 Committees on Arms Export Controls, Government Response to Committee Report, Scrutiny of Arms Exports Controls

(2009) Cm 7698, para 7

48 Committees on Arms Export Controls, Government Response to Committee Report, Scrutiny of Arms Exports Controls

(2009) Cm 7698, para 7

49 CAEC, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010): UK Strategic Export Controls

Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export control legislation), HC 202, Q 76

50 Committees on Arms Export Controls, Government Response to Committee Report, Scrutiny of Arms Exports Controls

(2008).Cm 7938, p 5.

51 CAEC, First Joint Report of Session 2010–12, 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, HC686, Q 105

52 Committees on Arms Export Controls, First Joint Report of Session 2010–12, 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, HC686, para 46

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40

37. The Secretary of State for Business, Innovation and Skills, in providing the Government’s response to the Committees’ recommendation on establishing a pre-licence register of arms brokers in his letter to the Chairman of 2 February 2012 stated:

In terms of our overall approach to these issues, I think that the UK regulatory framework governing arms brokers is now broadly speaking in good shape. Those activities which should be licensable are licensable. 53

38. The Committees conclude that the Government should consider very carefully whether it should do more to protect access to the UK’s arms export licensing system by those arms brokers whom the BIS Minister, Mark Prisk, described to the Committees as “the kind of rogues we are trying to deal with here”. We, therefore, repeat our previous recommendation that the Government carries out a full review of the case for a pre-licence register of arms brokers, that its review includes a public consultation and is concluded with a Ministerial decision within four months of the start of the consultation.

EU dual-use controls

39. European Council Regulation (EC) No. 428/2009, the Dual-use Regulation, controls, at European Community level, the export, brokering and transit of dual-use items. The aim of the Regulation is to facilitate legitimate trade and to permit resources to be concentrated on the control of sensitive exports, transfers, brokering and transit of dual-use items, and the combat of fraud. The Regulation was adopted in May 2009 and is directly applicable to all Member States. End-use controls operate in relation to items or technology:

for use in connection with the development, production, handling, operation,

maintenance, storage, detection, identification or dissemination of chemical,

biological or nuclear weapons or other nuclear explosive devices or the development, production, maintenance or storage of missiles capable of delivering such weapons;

for military end-use in an embargoed destination; and

as parts or components of an illegally exported military item. 54

40. In July 2011 the EU Commission issued its Green Paper The dual use export control system of the European Union: ensuring security and competiveness in a changing world. 55 In the introduction to the Green Paper, the Commission stated that: “Since 1995, it has been commonly accepted that dual-use export controls constitute an exclusive competence of the European Union and form an integral part of the EU's Common Commercial Policy.” 56

53 Ev 156 – letter from Vince Cable dated 2 February 2012, para 3

54 CAEC, First Joint Report of Session 2009–10, Scrutiny of Arms Export Controls (2010): UK Strategic Export Controls

Annual Report 2008, Quarterly reports for 2009, licensing policy and review of export control legislation, HC202, para 52

55 European Commission Green Paper, The dual use export control system of the European Union: ensuring security and

competiveness in a changing world, COM(2011) 393 final

56 European Commission Green Paper, The dual use export control system of the European Union: ensuring security and

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41

41. In January 2012 the Department for Business, Innovation and Skills published its 20 page response on behalf of the UK Government to the EU Commission’s Green Paper. 57 In its response to the EU the Government highlighted the following changes it wanted to the proposals:

The Government suggested that if there was to be harmonisation of the Criteria in

Article 12 used by the Member States to assess dual-use licence applications that it

would prefer to see it done in a manner consistent with the Common Position. 58

The Government indicated that it thought that there was a current problem with delays in updating the EU control list which needs to be addressed. 59

The Government’s response on military end-use control is set out in paragraph 47 below.

42. The Government also indicated in its paper its opposition to or concern about the following proposals:

The Government said that “given that harmonisation is likely to result in

compromise between existing practices it is important to ensure it does not produce more dis-benefits than benefits.” For example, in the UK individual and global licences are generally valid for 2 and 5 years respectively while in other Member States validity periods of 1 and (up to) 3 years respectively are typical. The Government said

that it would have difficulty supporting a compromise which reduced the validity period of UK licences. 60

The Government indicated its opposition to the phasing out of National General

Authorisation under the proposal to introduce a new EU export control model based on a network of existing licensing authorities operating under more common rules. 61

The Government stated that it welcomed improved information exchange, however

it would want to ensure that the amount and type of information was proportionate to, and justified by, the objectives outlined in the Green Paper. It said that the proposals should ensure that the volume of such information is not so great as to prevent its effective use (i.e. to avoid “information overload”). 62

57 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012

58 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 14

59 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 15

60 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 11

61 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 16

62 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

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42

The UK Government does not support the phasing out of National General Authorisations as a whole. 63

The Government said that it was not convinced that any of the proposed alternatives to intra-EU controls, e.g. notification rather than authorisation, post-shipment verification or certified end-users, would provide the same level of assurance as a licensing requirement. 64

43. The Committees conclude that the Government’s decision to make public its response to the EU Commission’s Green Paper on the EU’s dual-use export control system was welcome. The Committees recommend that the Government in its Response to this Report, and subsequently, informs the CAEC as to which of the UK Government’s proposed changes to the EU Dual-use Regulation have been successfully achieved, and also as to the outcome on the EU Commission’s proposed changes which the UK Government does not support.

EU end-use control of exported military goods

44. In the Committees’ last Report published on 5 April 2011 (HC686) their conclusions and recommendations in relation to military end-use control were as follows:

We conclude it is disappointing that the Government appears not to have continued the previous Government's work and pressed for an expanded Military End-Use Control. We recommend that the Government immediately re-starts work in producing specific policy proposals and to ensure that it has the requisite support for them at EU level in time for the 2012 review of the EU Dual-Use Regulation. We recommend that the Government provides us with an update on how this work is progressing when replying to this report. We further recommend that the Government in the meantime makes the necessary amendments to UK legislation to rectify the present deficiencies in military end use controls. 65

45. In its response (Cm 8079), published on 7 July 2011, the Government said:

We continue to support an expanded Military End-Use Control and we now have a UK proposal that we can take forward. As part of the preparations for the 2012 review of the EU Dual-Use Regulation the European Commission intend to publish a Green Paper in June of this year. This will be followed by consultations with Member States, exporters and civil society organisations with a view to producing legislative proposals next year. We believe that effective engagement in this process offers the best opportunity for gaining broad support at EU level. In the meantime

63 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 17

64 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 19

65 CAEC, First Joint Report of Session 2010–12, Scrutiny of Arms Export Controls (2011): UK Strategic Export Controls

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43

we have no plans to bring forward the amendments to UK legislation necessary to implement a national military end-use control. 66

46. The Chairman, in his letter to the Foreign Secretary of 18 July 2011, put the following further request for information to the Government from the Committees:

Will the Government provide the Committees with details of the UK proposal for an extended Military End-use Control and of the EU Commission’s Green Paper as part of the preparation for the 2012 review of the EU Dual-use regulation? 67

The Government’s answer, in the Foreign Secretary’s reply of 30 September, was:

The UK proposal would be for an amendment to Article 4(2) of Council Regulation (EC) 428/2009 as follows:

An authorisation shall be required for the export of dual-use items not listed in Annex I if the purchasing country or country of destination is subject to an arms embargo decided by a common position or joint action adopted by the Council or a decision of the Organisation for Security and Cooperation in Europe (OSCE) or an arms embargo imposed by a binding resolution of the Security Council of the United Nations and if the exporter has been informed by the authorities referred to in paragraph 1, or has reason to believe, that the items in question are or may be intended, in their entirety or in part, for a military end-use. For the purposes of this paragraph “military end-use” shall mean:

Intended for military, paramilitary, security or police forces in a destination subject to an arms embargo or to an entity involved in procurement, manufacture, maintenance, repair or operation on their behalf.

An authorisation shall not be required if the items in question are medical supplies and equipment, food, clothing and other consumer goods” 68

47. The Department for Business, Innovation and Skills in giving the UK Government’s response in January 2012 to the European Commission’s Green Paper on the dual-use export control system of the European Union, said in relation to military end-use control:

Regarding the military end-use control our view is that the current control is too narrow. It currently only applies to transfers to embargoed destinations of unlisted items intended for a “military end-use” where “military end-use” is defined as: (i) incorporation into military-list items; (ii) use of production, test or analytical equipment for the development, production or maintenance of military items; or (iii) use of any unfinished products in a plant for production of military list items. In our view this means that we cannot prevent the export of complete items which are to be used as complete items. For example, we could prevent the export of an unlisted item

66 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, page 9

67 Ev 63 – Letter to the Foreign Secretary dated 18 July 2011

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44

intended to be used as a component in a military vehicle but we could not prevent the export of a complete civilian vehicle that was to be used by the military or internal security forces of the destination country even where that country is subject to arms embargo. It is also unclear whether the military end-use control permits us to prevent the export of an unlisted item that is to be modified for military purposes, either in the destination country or in an intermediate destination. We have come across a number of cases of this type. We would therefore like to see the Commission address this shortcoming when bringing forward proposals to amend the Regulation. We can provide draft text if necessary. 69

48. The Committees recommend that the Government in its Response to this Report

states the reasons as to why it has no plans to bring forward amendments to UK legislation necessary to implement a national military end-use control when the Government has stated in its response to the European Commission’s Green Paper on the EU dual-use export control system that the current military end-use control “is too narrow”. The Committees further recommend that the Government states in its Response to this Report whether the European Commission has accepted the British Government’s proposals for an expanded Military End-use Control as set out in the Foreign Secretary’s letter to the CAEC of 30 September 2011 and in the Government’s response to the European Commission Green paper on the dual-use export control system of the European Union, and if not what further steps the Government will now take.

Torture end-use control and end-use control of goods used for capital punishment

49. In 2008 the previous Government stated:

We will be asking the [EU] Commission to introduce a control where the exporter will be required to submit an export licence application where they have reason to believe, or have been informed, that the items could be used for capital punishment, torture or other cruel, inhuman or degrading treatment. 70

50. The Committees’ conclusion and recommendations in its Report (HC686) published

on 5 April 2011 were as follows:

We conclude that the slow pace of progress towards an EU torture end-use control is very disappointing. We recommend that in its response to this report, the Government provides detailed information on the parameters of the torture end-use control it intends to propose to the EU. We further recommend that the Government simultaneously prepares draft UK legislation on this issue for public consultation. 71

69 Department for Business, Innovation and Skills, Response from Her Majesty’s Government to the European

Commission Green paper on the dual-use export control system of the European Union, January 2012, p 12

70 BIS, Export Control Act 2002: Review of Export Control Legislation (2007)—Government’s End of Year Response’,

Department for Business Enterprise & Regulatory Reform, December 2008, page 6,

http://www.bis.gov.uk/files/file49301.pdf

71 CAEC, First Joint Report of Session 2010–12, Scrutiny of Arms Export Controls (2011): UK Strategic Export Controls

Scrutiny of Arms Export Controls 2012

45

In its Response to the Committees’ Recommendation the Government provided detailed information on the parameters of the torture end-use control it intended to propose to the EU and said that it would continue to press the EU Commission to bring forward proposals in this area. 72 However, when replying to the Committees’ request for draft UK legislation the Government responded: “Given that we consulted on this issue in 2007 we see no reason to do so again now, and we currently do not intend to prepare draft legislation.” 73

51. UKWG expressed alarm that progress on torture end-use control had “effectively stalled”, despite first being announced four years ago. They were pleased that the Government had taken unilateral action to place export controls on sodium thiopental, pancuronium bromide and potassium chloride for the use in lethal injections, but were concerned that this only covered exports to the United States and not to other countries where the drugs could be used to carry out executions. It pointed out that if the Government had “delivered on its 2008 commitments in this area” it would have been able

to control exports of these items as soon as it had become known that they were being used in executions. 74 The Government introduced a Statutory Instrument that came into force on 16 April 2011 that prohibited the export of pancuronium bromide, potassium chloride concentrate or sodium pentobarbital to the USA in addition to the existing prohibition on the export of sodium thiopental to the USA. The Order was due to expire on 13 April

2012. 75

52. On 12 April 2011 the BIS Minister, Mark Prisk, wrote to the EU High Representative Baroness Ashton as follows:

I am writing to inform you of the UK’s intention to introduce a control on the export of pancuronium bromide, potassium chloride and sodium pentobarbital to the US. This will complement our existing control on sodium thiopental. The UK Government calls on the Commission to propose an amendment to the Export of Torture Goods regulation to apply this control on an EU basis.

As you may know, the UK introduced a control on the export of sodium thiopental to the US in November last year. This followed the revelation that correctional authorities in the US had been sourcing this drug from the UK to overcome a shortage in the US.

The UK Government took the view, consistently with our stated policy of opposition to the death penalty, that we wished to prevent this trade. We also established that this measure would not hamper legitimate trade in sodium thiopental for medical purposes between the UK and the US: it was clear that there was none, nor any prospect of any. We took a deliberate decision to restrict the scope of this control

72 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, p 10

73 Government response to CAEC, First Joint Report of Session 2010-–2, 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, Cm 8079, p 10

74 Ev 54

Scrutiny of Arms Export Controls 2012

46

only to exports to the US: sodium thiopental continues to be used as an anaesthetic in medical procedures in a number of developing countries, so we did not wish to disrupt supply of this essential medicine by placing any kind of restriction on exports from the UK.

We have now, at the request of the campaigning group Reprieve, considered the case for extending this export control to cover the other drugs used in the US lethal injection process. Most US states that carry out lethal injection use a three drug cocktail consisting of sodium thiopental, pancuronium bromide and potassium chloride. Furthermore, the state of Oklahoma has carried out one execution using the veterinary anaesthetic sodium pentobarbital, and we understand that more states are considering changing their execution protocols to allow the use of this drug as an alternative to sodium thiopental.

Following a consultation with interested UK parties, we have again determined that a control on the export of these drugs to the US would not hamper legitimate medical trade. I have therefore decided to extend our control to cover these three additional drugs, and will shortly be laying the necessary Order before Parliament.

The UK Government has felt obliged to act at national level because of the urgency of the situation. However, we recognise the desirability of action at EU level to ensure that the playing field is level and that the controls imposed by individual Member States cannot be circumvented by movement of these drugs within the Single Market. Our preferred solution would be for an EU-wide control on the export of these drugs to the US (and indeed to any other country that practices lethal injection) to be incorporated into Regulation 1236/2005 (the “Torture Goods Regulation”).

My officials stand ready to discuss this with yours. We would also welcome the opportunity to explore the possibility of a horizontal “end use control” on the export of goods for the purpose of torture or capital punishment. 76

On 14 September 2011 Baroness Ashton replied:

Thank you for your letter. I would like to apologise for the delay in answering you but there have been a few developments on this issue.

In your letter, you suggested that an EU-wide control on the exports of pharmaceuticals used in lethal injections to the US and other countries applying the death penalty through lethal injection should be incorporated into Regulation (EC) No 1236/2005.

I would like to confirm that the Commission has started the process of reviewing the content of the Annexes of Regulation 1236/2005, which is expected to be finalised by the end of the year. Further examination of the need to review the scope of the Regulation will be undertaken shortly. 77

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47

53. When we asked the UKWG in the Oral evidence session on 23 January 2012 if they had

received any information about the EU Commission’s examination of the regulations on torture end-use controls Oliver Sprague (Amnesty UK) said that as he understood the situation, there had been no formal movement on the end-use provision. He continued:

Remember that it is wider than just the death penalty; it is about torture, cruel and degrading treatment, and the death penalty. It is a catch-all clause that says that if you are aware that your products will facilitate those prohibited acts, you need to seek a licence to do that trade. We have often argued that if action is not forthcoming at EU level, and given that it has been a commitment of the UK Government since 2008 to do so, they should introduce it nationally. I think the very fact that national action in the UK on sting sticks and electro-shock devices has had an impact in influencing the EU position on these things is reason to do it. 78

54. In the Oral evidence session with the Secretaries of State on 7 February 2012, we asked

Vince Cable what the UK Government would be doing to get the EU to toughen up the rules on torture end-use control. The Secretary of State replied: “We have got past the point of getting the principle accepted that there have to be tough end-use controls on torture equipment. The issue is now largely a technical one of definition and enforcement [ ]” The Head of Policy, Export Control Organisation, Chris Chew, added that the EU Commission would be carrying out a broad review of the EU Torture Goods Regulation in the first half of 2012. 80

55. The Committees recommend that the Government in its Response to this Report:

79

a) sets out the specific changes it has made since coming into Office in the UK’s export control procedures and legislation either to prohibit the export altogether, or to make subject to export licensing and end-use control, items of torture equipment, including items used to carry out capital punishment, detailing the specific items concerned, the countries to which their export is now prohibited or is subject to export licensing and end-use control, and any expiry time limits set on the relevant procedures and legislation;

b) provides the CAEC with the outcome of the EU Commission’s review of the content of the Annexes of Regulation 1236/2005 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment which was expected to be finalised by the end of 2011 and the UK Government’s view as to whether this outcome is satisfactory or requires amendment;

c) provides the CAEC with a copy of the UK Government’s submission to the EU Commission for the Commission’s broad review of the EU Torture Goods Regulation being carried out in the first half of 2012; and

78 Q 34

79 Q 69 [Vince Cable]

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48

d) states whether it is still the UK Government’s policy that it does not intend to prepare draft UK national legislation on torture end-use control and end-use control of goods used for capital punishment, and if so, explains why not.

Re-export controls and undertakings

56. The previous Government’s policy on “no re-export” controls and undertakings and its scrutiny by our predecessor Committees is summarised in paragraphs 71–75 of our Report (HC686) published on 5 April 2011. 81 Our recommendations in the Report were:

We recommend that the Government provides us with an assessment of how no re- export undertakings are working, and details of the Government's methodology for assessing their effectiveness. We also recommend that the Government provides us with information as to which other countries have no re-export clauses in their contracts, as opposed to in their undertakings, and the effects of such clauses. 82

The Government’s response was:

The change to no re-export undertakings appears to be working well, in terms of end users being prepared to sign off the new undertakings. The current clause appears to have created no additional burdens on either exporters or end users alike and therefore there has been no resistance to the clause in its current form.

It is not feasible for the Government to track all UK origin goods once they have been exported. We rely on reporting from our overseas posts and other sources regarding cases where UK origin goods have been re-exported in undesirable circumstances. Such reports are very rare. So far it is not possible to judge whether the introduction of the revised End User Undertaking has impacted on this.

We interpret the word “contracts” in this question to mean “export licences”. From our discussions with other Governments, we do not sees a simple distinction between the use of licence conditions and the use of end-use undertakings. The primary focus of all European export licensing systems is the assessment, carried out at the point of export, of the risk of diversion, with an obligation on the exporter to declare any knowledge that the have that the goods are destined for re-export. To our knowledge, The United States is the only country that imposes legal penalties for re- export on an extra-territorial basis. To assess the “effectiveness” of this regime is a complex question: for example, it has been suggested that the extra bureaucracy of the US re-export regime may deter some overseas customers from buying controlled US goods. 83

81 CAEC, First Joint Report of Session 2010–12, 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, HC686, paras

71–75

82 CAEC, First Joint Report of Session 2010–12, 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, HC686, para 79

83 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, pp 12–13

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49

57. On 26 May 2010, Lord Alton of Liverpool introduced his Private Member’s Re-Export

Controls Bill in the House of Lords. The purpose of the Bill is to “make provision for the regulation of the re-export of military equipment and goods further to their original exportation from the United Kingdom.” The Bill proposed an amendment to the Export Control Act 2002 under which the Secretary of State for Business, Innovation and Skills would be required to make an order to prohibit or regulate the re-export of controlled goods subsequent to their original export from the UK. The Bill completed its passage through the House of Lords on 12 January 2011 and moved to the House of Commons, where it received its First Reading on 27 January 2011. Lord Alton contacted us before the Oral evidence session with the Secretaries of State on 7 February 2012 informing us that the Government had declined to provide time for the progress of the Bill in the House of Commons and had opposed the use of the special Standing Committee procedure for the expedition of Second Readings of Private Members Bills. When we asked Vince Cable whether the Government business managers were blocking consideration of Lord Alton’s Re-Export Controls Bill, the Secretary of State replied that he hoped that the Bill was not being blocked, but that he did not know. 84 In his letter of 8 March 2012 the Secretary of State said that the Government did not want goods originating from the UK, once exported, to be re-exported for “undesirable uses”, but believed that the Government controls re-exportation through the current export licensing system. He re-iterated that the risk of undesirable re-export is assessed in the licence application (Criterion 7 of the Consolidated Criteria). Where the risk of re-export to an undesirable country is high the licence would not be granted. He stated that: “If a re-export of concern comes to light we can and do factor that in to our assessment of subsequent licence applications for similar goods to that destination.” He continued:

Once a good has left the UK, it is in practice under the jurisdiction of the destination country. We would be claiming that UK export controls applied, whereas in reality we would have no powers to enforce them. We are concerned that the effect of Lord Alton’s proposals would be to impose statutory obligations (backed by criminal penalties) on persons outside the UK, solely on the basis that they had purchased UK origin goods and technology. In our view such obligations would go against the UK’s long-standing opposition to extra-territorial jurisdiction, and would in reality be unenforceable and therefore ineffective. 85

58. The Committees recommend that the Government in its Response details the controlled goods, for which either the previous Government or the present Government approved licences for export, that it believes were subsequently re- exported for undesirable uses or to undesirable destinations, stating in each case the country to which the goods were originally exported and the eventual undesirable use or undesirable destination.

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50

Licensed production overseas

59. Our predecessor Committees scrutinised the risk of breaches of UK arms export control policies occurring as a result of the export of UK designed goods from licensed production facilities overseas. They last addressed this risk in their Report (HC202) published on 30 March 2010 in which paragraphs 75–77 read as follows:

In previous Reports we have concluded that existing controls over licensed production overseas were inadequate and needed to be extended. We had considered the option that Government had set out in its 2007 Consultation Document that export licences for supplies to licensed production facilities or subsidiaries could be made subject to conditions relating to the relevant commercial contracts. 86 We also recommended that the Government make export licences for supplies to licensed production facilities or subsidiaries subject to a condition in the export contract preventing re-export to a destination subject to UN or EU embargo. 87

The Government rejected the case for enhancing controls on the export of controlled goods in relation to licensed production. 88 In its Response to our 2009 Report, the Government explained that it considered enhanced controls unnecessary as the export of controlled goods to overseas Licensed Production Facilities already required an export licence, and exporters applying for a licence were asked to declare whether the export was for the overseas production. 89 However, the Government acknowledged that there was a stronger case for enhancing controls on the export of non-controlled goods:

The cases of overseas production where issues have arisen have all related to goods for military end use in embargoed or other destinations of concern, where the goods were not controlled when exported from the UK. The Government, therefore, considers that the most effective way of tightening controls on the export of non-controlled goods would be through an enhanced Military End-Use Control. 90

60. The Committees recommend that the Government in its Response to this Report states what breaches of UK arms export control policies it believes have occurred under both the previous and the present Government as a result of the export of UK-designed goods from licensed production facilities overseas, specifying in each case the description of the goods concerned, the country in which they were produced and the

86 CAEC, First Joint Report of Session 2006–07, Strategic Export Controls: 2007 Review, HC117, para 238

87 CAEC, First Joint Report of Session 2007–08, Scrutiny of Arms Export Controls (2008): UK Strategic Export Controls

Annual Report 2006, Quarterly reports for 2007, licensing policy and review of export control legislation, HC254, para 42

88 Government response to CAEC, First Joint Report of Session 2007–08, Scrutiny of Arms Export Controls (2008): UK

Strategic Export Controls Annual Report 2006, Quarterly reports for 2007, licensing policy and review of export control legislation, Cm 7485, pp 7-8

89 Government response to CAEC, First Joint Report of Session 2008–09, Scrutiny of Arms Export Controls (2009): UK

Strategic Export Controls Annual Report 2007, Quarterly reports for 2008, licensing policy and review of export control legislation, Cm 7698, pp 6–7

90 Government response to CAEC, First Joint Report of Session 2008–09, Scrutiny of Arms Export Controls (2009): UK

Strategic Export Controls Annual Report 2007, Quarterly reports for 2008, licensing policy and review of export control legislation, Cm 7698, p 7

Scrutiny of Arms Export Controls 2012

51

country to which they were subsequently exported. The Committees further recommend that the Government sets out in its Response what steps it will take to prevent UK arms export policies being breached as a result of the export of UK- designed goods from licensed production facilities overseas.

The Consolidated Criteria

61. The Consolidated Criteria, announced on 26 October 2000 by the then Minister of State in the FCO, Peter Hain, are the consolidation of the UK’s national criteria and the 1998 EU Code of Conduct on Arms Exports. The Consolidated Criteria are set out in full in Annex 3, below. On 5 June 1998 the European Union adopted the EU Code of Conduct on Arms Exports. Following a review of the 1998 Code of Conduct, it was replaced on 8 December 2008 with the EU Council Common Position “defining common rules governing controls of exports of military technologies and equipment” (2008/944/CFSP). The EU Common Position is set out in full in Annex 4 below. The UN states that the Commons Position “constitutes a significant updated and upgraded instrument”. 91 The Stockholm International Peace Research Institute (SIPRI) states on its website that the “EU Code of Conduct and EU Common Position were aimed at harmonizing EU member states arms export policies in line with agreed minimum standards. They contain common criteria which member states agree to apply when issuing arms export licences as well as mechanisms of information exchange and consultation.” 92

62. Article 1 of the EU Common Position is as follows:

Article 1

1. Each Member State shall assess the export licence applications made to it for items

on the EU Common Military List mentioned in Article 12 on a case-by-case basis

against the criteria of Article 2.

2. The export licence applications as mentioned in paragraph 1 shall include:

— applications for licences for physical exports, including those for the purpose of licensed production of military equipment in third countries,

— applications for brokering licences,

— applications for ‘transit’ or ‘transhipment’ licences,

— applications for licences for any intangible transfers of software and technology by means such as electronic media, fax or telephone.

Member States’ legislation shall indicate in which case an export licence is required with respect to these applications.

91 UN Programme of Action Implementation Support System, http://www.poa-iss.org/RegionalOrganizations/10.aspx

92 Stockholm International Peace Research Institute:

http://www.sipri.org/research/armaments/transfers/controlling/eu_common_position

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52

The wording of the Criteria One to Eight in Article 2 of the EU Common Position mirrors, but is not identical to, the wording of Criteria One to Eight of the UK Government’s Consolidated Criteria, which also adds other factors.

63. The Committees’ Conclusions and Recommendations in its Report (HC686) published on 5 April 2011 were as follows:

We conclude that the Government's timetable of before the end of 2011 by which the wording of the UK's Consolidated Criteria will be updated to be wholly consistent with the EU Common Position is too protracted. We recommend that the Government sets itself a much shorter timetable in which to conclude this updating and to inform us of the revised timetable in its response to this report. We further conclude that, while the consolidated criteria appear robust their application seems to be less so. We therefore recommend that the Government ensures that the EU Common Position is rigidly and consistently applied. 93

The Government’s Response (Cm 8079) stated:

The Government does not accept that there is any evidence that the application of the Consolidated Criteria is in anyway less robust that the EU Common Position. Nevertheless, it will update the wording of the Consolidated and National Arms Export Licensing criteria before the end of 2011 and this work will be completed as soon as practicable this year. 94

Notwithstanding what was said in the Government’s Response, the updating of the Consolidated Criteria was not completed by the end of 2011.

64. At the Oral evidence session on 7 February 2012 we asked the Foreign Secretary, William Hague, in terms of harmonising EU Member States’ arms export policies, what changes, if any, he would like to see to the Consolidated Criteria and the EU Common Position on arms exports. The Foreign Secretary replied:

There is good co-ordination in Europe. There is a monthly meeting in Europe about the enforcement of the consolidated criteria. Of course, there are differences between the consolidated criteria and the EU common position. They principally relate to criteria in both documents concerned with respect for human rights, but the EU Council common position is fully applied in our export licensing process. The decisions we make are fully in accord with the provisions of the EU common position, so, from a policy point of view, I am satisfied with that. It does require regular, rigorous co-ordination to make sure that the effect of the policy is approximately the same across the whole European Union. 95

65. The Committees recommend that in its Response to this Report the Government explains why its updating of the wording of the Consolidated and National Arms

93 CAEC, First Joint Report of Session 2010–12, 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, HC686, para 36

94 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, p 8

Scrutiny of Arms Export Controls 2012

53

Export Licensing Criteria before the end of 2011, as stated in its previous Response (Cm 8079), was not achieved by that date and that it provides the updated wording in its Response to this Report. The Committees further recommend that in its Response to this Report the Government states whether it considers that the UK Government is fully compliant with each of the Articles in the EU Common Position 2008/944/CFSP of 8 December 2008 “defining common rules governing controls of exports of military technologies and equipment”, and, if not, to specify in which respects it is non- compliant. The Committees also recommend that as the EU Common Position is to be reviewed three years after its adoption, on 8 December 2008, the Government sets out in its Response the changes to the EU Common Position to which it will be seeking agreement. Finally, the Committees recommend that where the UK’s arms export policies are arguably more stringent than those set out in the EU Common Position, for example in the light of the Foreign Secretary’s Oral evidence to the Committees on 7 February 2012 with regard to exports which might be used to facilitate internal repression, 96 the UK Government should adhere to its own policy. The Committees wish to be assured by the Government in its Response that this will be the case.

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54

6 Organisational and operational issues

Export Control Organisation (ECO)

Charging for processing arms export licences

66. In the Committees’ inquiry last year we asked whether the Government had any plans to introduce charging to companies for the processing of licences. At that time EGAD had said that a statement from the Government confirming that they had no intention of introducing charging for licences “would be a great help to the industry, which is extremely worried about the rumours that there may be charges for licences." 97 When the BIS Minister, Mr Mark Prisk, as part of the inquiry, was asked about the possibility of charging, he said:

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. 98

However, the Government’s response to the Committees’ Report said:

In the longer term, we are exploring an alternative model whereby ECO is funded by its customers. We consider that his might be the best way of ensuring a high quality licensing system in future as the volume of licensing activity continues to increase. We expect to hold a full consultation on this later in the year. 99

67. During the Westminster Hall debate on 20 October it was stated that it could be

attractive for the Government and the Treasury to change the funding system for ECO. 100 The Chairman of the Committees, Sir John Stanley, said that “the Government was

and is

made the responsibility of the arms exporting industry.” There were possible “risks and dangers in going down that route because a crucial feature of the ECO is its clear independence.” The Minister was questioned whether a change in the charging mechanism “might change public perception from seeing the ECO as an independent watchdog to seeing it instead as a poodle of the arms exporting companies. That would be detrimental to the perception of our UK arms export controls.” 101

68. In responding to the debate the BIS Minister, Mr Mark Prisk, said:

considering a proposal whereby that funding is taken out of public expenditure [

]

97 CAEC, First Joint Report of Session 2010–12, 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, HC686, Q 63

98 CAEC, First Joint Report of Session 2010–12, 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, HC686, Q 77

99 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, page 7

100 HC Deb, 20 October 2011, col 337WH

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55

Charging is an idea that we have explored with exporters, but only as part of the wider question of how we best reform the service to ensure we deliver the best kind of service without diminishing the quality of the controls that have been debated in this Chamber. What I would say is if and when—and I emphasise “if” and “when”— that subject becomes a formal Government proposal with a timetable, we will launch a full public consultation.

He accepted the point about the need to ensure that the consultation reflected the independence of ECO. 102

69. We asked EGAD for its views on the prospect of ECO charging for the approval process for arms export licences. David Hayes (EGAD) said that it recognised the problems that ECO had, but that the proposals put forward by ECO would have been “unworkable”. He informed us that the “figures being bandied about” were £300 for a Standard Individual Export Licence (SIEL) and £3,000 for an Open Individual Export Licence (OIEL). However, this pricing structure did not take into account the value of the goods requiring the licence and that a situation could arise where the fee for the licence for a “£10 widget could be £300.” He commented that the “economics of that just do not make sense.” Mr Hayes suggested that such circumstances would drive the manufacturing of that type of product out of the UK as it would not be viable. He surmised that companies in the dual- use sector could arrange for the licence to be applied for in Italy or the Czech Republic when the goods were physically exported from the UK. He considered that the proposal had not been “particularly thought out in terms of the impact or the feasibility.” Mr Hayes also pointed out that applying a charge on companies that made licence applications would only affect companies that were compliant and would exclude “rogue” companies that were operating “below the radar”. This would encourage non-compliant companies to stay below the radar and “get even lower.” He said that: “They would avoid the cost of compliance altogether and enjoy an increased competitive advantage over the companies that were complying.” 103 Bernadette Peters (EGAD) suggested that a source of revenue for the Government could be gained through the fining of agents or exporters who made false or incorrect entries: this would also improve enforcement. 104

70. When we asked the BIS Secretary of State whether consultation on charging for processing licences would be taking place, Vince Cable replied:

We are not proceeding with this. We have decided not to introduce charging for the foreseeable future. The decision has been made, so the whole consultation process is not necessary. We may return to it, but for the foreseeable future we are not introducing charging. 105

71. When we asked what had informed the policy decision, Vince Cable told us that there were “pros and cons” regarding charging. He said that there was a high administrative cost of processing licences and for the Department to maintain a high-quality level the user fee

102 HC Deb, 20 October 2011, col 363WH

103 Q 49 [David Hayes]

104 Q 49 [Bernadette Peters]

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56

would have been a “sensible way” of doing so. However, there would have been an additional burden by introducing charging, particularly on small and medium-sized companies and the Government wanted to avert that. 106

72. The Committees conclude that the Government’s decision not to introduce charging for the processing of arms export licences is welcome as a charging system would, at least in the public perception, have compromised the independence of the Export Control Organisation from the arms export industry. The Committees recommend that such policy decisions by Ministers are made known to the CAEC wherever possible when they are made and not in the course of Oral evidence by Ministers.

Performance

73. The Government’s Response to the Committees’ 2011 Report (HC686) stated that an improvement in processing had taken place in the first quarter of 2011 with 72% of Standard Individual Export Licences (SIELs) processed within the Government’s target of 70% processed within 20 working days. 107 However, the quarterly arms export licence reports produced by ECO show that performance since the first quarter of 2011 has fallen again.

Table1: SIELS processing performance quarterly within 20 days

 

2010

2010

2010

2010

2011

2011

2011

2011

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

% of SIELs processed within 20 days

59

61

64

61

72

62

62

60

Source; BIS Quarterly Reports: 2010 Q1 – 2011 Q4

74. In his contribution to the Westminster Hall debate on the Committees 2011 Report Toby Perkins MP said:

Given the extent of the cuts to UK defence budgets and the tremendous pressure they are putting on the UK defence industry, it is vital that licence applications be processed in a timely fashion when our defence industry attempts to trade with trusted nations that present no large-scale concerns. The defence industry reports that contracts have been lost in cases where there were no worries about the licence application, but the process simply took longer than it should have. Business vital to this country’s defence industry is being lost as a result of bureaucratic failure. 108

75. The Minister responded by saying: “The volume of licensing activity has increased

significantly, which is partly because legitimate defence exporters have been getting their

job right. At the same time, [

the Export Control Organisation has made considerable

]

106 Q 80

107 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, page 7

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improvements in its efficiency. However, we are in a very tough public expenditure climate and efficiency savings can, of course, only take us so far.” 109

76. The Government’s performance target for the processing of SIELs is to process 70% of

applications within 20 working days and 95% within 60 working days. 110

Table2: SIELS Processing Performance Annually

 

2006

2007

2008

2009

2010

Number processed

n.a.

9,647

12,729

14,187

16,723

Processed within 20 working days

82%

79%

73%

73%

63%

Processed within 60 working days

99%

98%

95%

94%

94%

Source: United Kingdom Export Controls Annual Report 2010, United Kingdom Export Controls Annual Report 2009, United Kingdom Export Controls Annual Report 2007.

The Government has a target of processing 60% of appeals within 20 working days from receipt of all relevant information from the appellant and 95% in 60 working days. These targets do not apply to appeals concerning goods that are controlled solely because of UN Sanctions. 111

Table 3: SIELs Appeals Performance Annually

 

2006

2007

2008

2009

2010

Appeals processed within 20 working days

58%

61%

69%

68%

51%

Appeals processed within 60 working days

83%

100%

90%

91%

93%

Source: United Kingdom Strategic Export Controls Annual Report 2010, United Kingdom Strategic Export Controls Annual Report 2009, United Kingdom Strategic Export Controls Annual Report 2007.

77. EGAD’s submission to this inquiry stated that:

Whilst it is perceived that the current export control system, and especially the turnaround of licence applications, has recovered to a certain extent over the past year, we are concerned that this minor improvement has been due to efforts by the Export Control Organisation (ECO) and its advisory departments to put additional effort and resources into the processing of Standard Individual Export Licence (SIEL) applications.

It believes that this limited improvement has been achieved to the detriment of other aspects of the wider UK export control system. EGAD said that some of the Open General

109 HC Deb, 20 October 2011, col 363WH

110 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2010, HC 1402, p 30

111 Department for Business, Innovation and Skills, Department for International Development, Foreign and

Commonwealth Office and Ministry of Defence, United Kingdom Strategic Export Controls Annual Report 2010, HC 1402, page 31

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Export Licences that had been issued “have proven to be so unfathomable to interpret as to dissuade even expert export control practitioners from registering for them.” 112

78. When we asked EGAD about the deterioration in the processing of arms export licence

applications at ECO David Hayes (EGAD) said that:

It would be nice to think that part of the increase in licence applications is increased awareness, and that more people who should be applying for licences are applying. There is the problem that we have already spoken about, which is the large percentage of licence applications that really should not be licence applications at all and should be under some form of open licensing. Companies that either can’t or won’t, because of a lack of confidence in their ability to use these licences, go down that road and use them.

He also mentioned that there had been staffing reductions in ECO. Mr Hayes highlighted staffing reductions in the technical assessment unit, which is the first step in the approval process following the initial check of the licence application. He pointed out that when new staff were taken on there was an initial deterioration in performance, because of the training demand of the new staff. He believed that these factors had led to the service deterioration. 113

79. We asked the Secretary of State for Business, Innovation and Skills, Vince Cable, what

steps were being taken to reverse the declining trend in the processing of applications and how ECO would deal with the increasing number of licences requiring processing. Vince

Cable told us that “[

where there has been an argument about delay, performance has been improving. Something of the order of two thirds of all cases are cleared within the 20 days.” 114 Tom Smith, Head of ECO, confirmed that there had been a steady increase in the volume of export licences and that performance had suffered. He said that ECO had “started turning this around.” This was partly because ECO had “finally managed to stem this inexorable increase in individual licence applications.” There had been 9,600 applications in 2007; this had peaked at 16,700 in 2010 and then had reduced to 15,700 in 2011. He told us that: “we actually managed to succeed in what we have been trying to do for a little while, which was to allow exporters to do more business under open licences. That is quite a positive trend.” He informed us that ECO had “various plans in train in terms of increased efficiency and increased customer focus.” He was hopeful that performance in 2012 would be “significantly better.” 115

]

my understanding is that, although there are some major cases

80. We recommend that the Government in its Response to this Report:

a) sets out the specific steps it is taking to achieve its 20 and 60 working day targets for both processing and determining appeals for Standard Individual Export Licences (SIELs); and

112 Ev 41

113 Q 51 [David Hayes]

114 Q 81

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b) states whether it will be setting processing and determining appeals targets for Open Individual Export Licences (OIELs) and Open General Export Licences (OGELs) and, if so, what these targets will be.

The Committees further recommend that the Government in seeking to meet its arms export licence processing and appeal targets must comply in all cases and at all times with its arms export control policies as stated in the relevant legislation and in the Consolidated Criteria, and the Committees wish to be assured by the Government in its Response to this Report that this will be done.

Review of the ECO

81. In its submission EGAD suggested that there was “enormous scope” for a review of the

export control system in the UK. It believed that this would alleviate much of its current burden. It pointed out that the number of licence refusals continued to be “extremely small” at approximately 1% and said that there “must be a large swathe of current SIELs which could be safely and responsibly removed from the scope of the current SIEL system, and could be placed within the ambit of the OGEL or OIEL systems, instead.” EGAD considers that as the workload of ECO had increased, the “need for such a review has become increasingly pressing.” In calling for a review it said that it was “not seeking the movement of SIEL cases where there is the remotest doubt, based on past experience, that a licence would be issued by Government, but merely the movement of those cases where a licence will inevitably be granted.” 116 In its 2011 Report (HC686) the Committees recommended the Government “reviews the performance of the ECO and provide us with the results of this Review in its response to this Report.” 117 The Government’s Response to our recommendation was:

We are not conducting an overarching review of the performance of the ECO, but have been carrying out progressive and continuous improvements and reviews of aspects of the ECO’s performance, and will continue to do so. 118

82. In its Response the Government also said: “Work has also started on the review of the

Open General Export Licence (OGEL) system and we will report our findings to the Committees on completion of the review.” 119 In a further letter from the Chairman to the Foreign Secretary of 18 July 2011, the Committees then asked “by what date will the Government be reporting its findings following its review of the Open General Export Licence (OGEL) system and whether there will be consultation with outside bodies in the course of the review?” 120 The Foreign Secretary in his reply of 30 September 2011 answered:

116 Ev 41

117 CAEC, First Joint Report of Session 2010–12, 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, HC686, para 31

118 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, page 7

119 Government response to CAEC, First Joint Report of Session 2010–12, 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, Cm 8079, page 7

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The Government has conducted a first phase of the review of Open General Export Licences, which has concluded that there is scope for increasing the use of existing OGELs – with benefits both for exporters and for the ECO – through a number of measures, including: (i) creation of a “plain English” OGEL template; ii) standardisation of the terms and conditions of OGELs; (iii) improvements to the OGELChecker online self-help tool; and (iv) a study into ways of improving transparency in relation to the use of OGELs. A draft of the “plain English” OGEL has already been shared with industry representatives and their reaction was favourable. We will continue to consult industry and others on an informal basis during the course of the review. We will provide the Committees with a further report at the end of the year. 121

83. In the Oral evidence session with the Secretaries of State we asked, in the light of our recommendation in 2011 and EGAD’s comments, whether there were any plans to carry out a review of the ECO. Tom Smith, Head of ECO, informed us that the Government was looking at the scope for increasing coverage of open licensing; which would address the request of EGAD. He said that it was “very technical” and adds to the “scope of open licensing some technology which has been de-controlled by the international regimes, but where EU law has not quite caught up.” He was hopeful that hundreds of export licence applications could be taken out of the system annually. However, he pointed out that there was a need to ensure that the right level of risk assessment was applied to each application. There was a balance between “a quick answer for business and making sure that [ECO does] not cut corners.” 122

84. The Committees recommend that the Government in its Response to this Report:

a) sets out what specific aspects of the ECO’s performance it is reviewing, what conclusions it has reached in respect of each aspect being reviewed and what specific action it is taking as a result; and

b) states when it will be providing the Committees with a further report on its review of the OGEL system previously promised to be available at the end of 2011.

Transparency of arms export licensing

85. The Government’s review of its arms export policies and procedures is considered in paragraphs 175–270 below. However, because it relates directly to the Export Control Organisation, a specific aspect of that review—the transparency of the export control system—is dealt with here.

86. In his Written Ministerial Statement of 7 February 2012, the Secretary of State for Business, Innovation and Skills, Vince Cable, said:

My right hon. Friend the Foreign Secretary announced to the House on 13 October 2011 the conclusions of his review of defence and security export policy in the light of events in the middle east and north Africa.

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It concluded that there were no fundamental flaws with the UK strategic export licensing system. We share this view. However, the review did identify areas where our system could be further strengthened. To this end, he announced a package of proposals that included the introduction of a mechanism to allow the immediate suspension of pending licence applications to countries experiencing a sharp deterioration in security or stability, and a commitment to continue to work to improve public information on defence and security exports, including enhanced transparency of routine export licensing decisions and how we respond during a crisis.

We have worked closely in developing the suspension mechanism, and are pleased to report that this suspension mechanism is now in place. As a result of this change the Government have ensured that export licensing policy is now more responsive to rapidly changing circumstances overseas.

The new suspension mechanism will allow the Government to quickly suspend the processing of pending licence applications to countries experiencing a sharp deterioration in security or stability. Suspension will not be invoked automatically or lightly, but triggered for example when conflict or crisis conditions change the risk suddenly, or make conducting a proper risk assessment difficult. A case-by-case assessment of a particular situation will be necessary to determine whether a licensing suspension is appropriate.

Any decision to suspend will be taken by the Licensing Authority based on advice from relevant Government Departments and reporting from our diplomatic posts. Parliament, industry and the media will be informed of any suspension.

Suspension will be tailored to the circumstances in play and will not necessarily apply to all export licence applications to a country, but may instead be for applications for particular equipment (for example crowd control goods), or for applications for equipment going to a particular end-user.

If a decision to suspend is made, work on licence applications in the pipeline will be stopped and no further licences issued pending ministerial review. Once the suspension is lifted, applications will not be required to be resubmitted.

The Ministry of Defence will apply any licensing suspension decision to MOD Form 680 applications, for which it is the Government authority, and to the assessment against the consolidated criteria of gifting cases, which it co-ordinates on behalf of the Government.

Suspension will be lifted (or partially lifted) where the Licensing Authority considers it appropriate to do so.

Transparency is also crucial because confidence in the workings of the export licensing system needs to be shared by Parliament and by the public. The system should not just be working properly; it should also be seen to do so.

I am therefore announcing today a number of proposals to improve the transparency of the export licensing system. These proposals build on my right hon. Friend’s

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review [the Foreign Secretary], and we intend to seek the views of interested parties, including the representatives of exporters and non-governmental organisations, on how they will work.

The first proposal is to insert into all open export licences a provision requiring the exporter to report periodically on transactions undertaken under these licences. The Government will then publish this information.

The second proposal concerns information contained in standard export licence applications. Currently all such applications are made in confidence, which makes it

difficult to make public any more information than is already disclosed in the Government’s annual and quarterly reports. The Export Control Organisation considers that certain additional information contained in licence applications could

be made public without causing concern to exporters. I will explore ways of making

this additional information public while protecting any sensitive material.

The third proposal is to appoint an independent person to scrutinise the operation of the Export Control Organisation’s licensing process. The role of this independent person would be to confirm that the process is indeed being followed correctly and report on their work.

In considering these proposals we intend to consult the various interested parties to

reach an outcome which achieves the Government’s objective of increased transparency while at the same time imposing the minimum additional burden on exporters.

We will, simultaneously, be pursuing further changes to the strategic licensing system to make it more efficient and customer-focused, whilst maintaining the integrity of the process. Working together, my right hon. Friend and I remain committed to robust and effective national and global controls to help prevent exports that could undermine our own security or core values of human rights and democracy; to protect our security through strategic defence relationships; and to promote our prosperity by allowing British defence and security industries to operate effectively in the global defence market.

I intend to make a further announcement to Parliament, setting out the

Government’s conclusions and plans for implementing any further changes, before

the summer recess. 123

87. In March 2012 the Department for Business, Innovation and Skills published a Discussion Paper Export Control Organisation: Transparency in Export licensing – Discussion paper. 124 The purpose of the paper was to:

explain the background to the three transparency commitments made by the Secretary of State for Business, Innovation and Skills in his Written Ministerial Statement of 7 February 2012;

123 HC Deb, 7 February 2012, cols 7–9WS

124 Department for Business, Innovation and Skills, Export Control Organisation: Transparency in Export licensing –

Discussion paper, March 2012

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explain the key issues; and

ask a number of questions about implementation.

The BIS Department said that responses to the Discussion Paper would be accepted up to 20 April 2012.

88. The BIS stated in the Discussion Paper that the ECO’s published quarterly reports did not always meet the needs of readers and it therefore launched the Strategic Export Controls: Reports and Statistics website in April 2009. This provided a searchable database of data from which users could create bespoke reports which can be in a variety of formats and could be downloaded and saved to users’ computers. The UK is recognised as having one of the most transparent export licensing systems in the world due to the level of detail and timeliness of the reports. However, the BIS identified a number of “significant limitations” to the information provided:

i. The information only covers individual licences—no information is provided for open general licences apart from the number of registrations.

ii. There is no information on the quantity and value of items licensed under Open Individual Export Licences (OIELs) and under Open Individual Trade Control Licences (OITCLs), since these licences are not limited by value or quantity and applicants do not have to provide this information in their licence applications.

iii. The reports only provide information on the items licensed for export, not on quantities/values actually exported.

iv. The reports provide no information on end-use or end-users for the items licensed for export or trade.

BIS suggested that the simplest and most reliable method of collecting this data was to require exporters to report periodically on transactions under the licences they hold. It concluded that the key requirements of the reporting on the usage of open licences are that they must provide meaningful and timely data for publication, impose the minimum burden on exporters, and be operationally efficient for the ECO.

89. In considering making more routine licensing information available to the public the BIS was aware that it had taken measures to ensure confidentiality and commercial sensitivity. However, following a Freedom of Information ruling and after it became clear that not all information contained in licence applications is “truly sensitive or confidential”, the ECO considered that in many cases exporters would not object to its release. BIS will examine how to fulfil the Foreign Secretary’s commitment in his 13 October 2011 Statement for “enhanced transparency on routine export licensing decisions”. 125 BIS said that the key requirements are that the published material must improve public understanding of routine licensing decisions and not prejudice the legitimate interests of the entities concerned. 126

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90. The BIS considered that an element of independent oversight would help to increase public confidence in the Government’s decision-making process on strategic export licences. It proposed that: “The ‘independent reviewer’ would review the operation of the ECO by examining specific cases and certifying that the processes and procedures had been properly followed (or not, as the case may be).” The role would be part-time, not have statutory powers and would report to the Secretary of State. Reports of the independent reviewer would be published, either as part of the Strategic Export Controls Annual Report or laid before Parliament through a Written Ministerial Statement. 127

91. The Committees conclude that the Government’s commitments to introduce greater transparency into the export licensing system are welcome. The Committees recommend that the Government keeps the CAEC fully informed of the specific changes that will be made to achieve greater transparency of the export licensing system following the responses it receives to the Government’s Discussion Paper on Transparency in Export Licensing.

Priority markets for UK arms exports

92. In response to a letter from the Committees’ Chairman, 128 the Secretary of State for Business, Innovation and Skills, Vince Cable, provided the Committees, in a letter dated 8 December 2011, with a provisional list of Priority Markets for the UK Trade & Investment Defence & Security Organisation (UKTI DSO). The previous Priority List had been under review during 2011. He told the Committees that a final list would not be available before the early part of 2012, but promised to provide it to the Committees before the Oral evidence session with the Secretaries of State on 7 February 2012. 129 The provisional list of Priority Markets was as follows: Algeria, Australia, Brazil, Brunei, India, Iraq, Japan, Kuwait, Libya, Malaysia, Mexico, Oman, Pakistan, South Korea, Saudi Arabia, Turkey, UAE and USA. Four of these countries, Iraq, Libya, Pakistan and Saudi Arabia, are included in the FCO’s list of “Countries of concern”, in its most recent Annual Human Rights Report. 130

93. Despite Vince Cable’s assurance that the Priority Markets final list would be provided to us before the Oral evidence session on 7 February 2012 the Secretary of State’s letter dated 6 February 2012 with this information was received only after the evidence session had taken place. Vince Cable’s letter informed us that following a review the UKTI DSO final list of priority markets was:

127 Department for Business, Innovation and Skills, Transparency in Export Licensing Discussion Paper, March 2012

128 Ev149 – Letter from Chairman to Vince Cable dated 21 November 2011

129 EV 149 - Letter from Vince Cable, dated 8 December 2011

130 FCO “Countries of Concern” are: Afghanistan, Belarus, Burma, Chad, China, Colombia, Cuba, Democratic People’s

Republic of Korea, Democratic Republic of Congo, Eritrea, Fiji, Iran, Iraq, Israel and the OPTs, Libya, Pakistan, Russia, Saudi Arabia, Somalia, Sri Lanka, Sudan, South Sudan, Syria, Turkmenistan, Uzbekistan, Vietnam, Yemen and Zimbabwe as listed in the FCO’s, Human Rights and Democracy: The 2011 Foreign & Commonwealth Office Report, Cm 8339, April 2012 and “Foreign Office gives update on human rights in countries of concern”, FCO Press Notice, 16 January 2012

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Table 4: BIS UKTI DSO Priority Markets

Australia

Brazil

Canada

Europe/NATO/EU (as a collective market)

India

Indonesia

Japan

Kingdom of

Kuwait

Libya

Malaysia

Qatar

Saudi Arabia

Oman

South Korea

Thailand

Turkey

UAE

USA

Source: Letter from the Secretary of State for Business, Innovation and Skills to the Chairman of CAEC, dated 6 February 2012, Ev 156

Two of the FCO’s “Countries of concern” —Libya and Saudi Arabia—remain within the list of UKTI DSO’s Priority Markets. Algeria, Brunei, Iraq, Mexico and Pakistan were removed from the Priority Markets list following an assessment of the priorities of the UK industry. 131

94. When we asked Vince Cable why countries listed amongst the FCO’s “Countries of concern” remained in the UKTI DSO’s list of Priority Markets and whether this illustrated a lack of joined-up government he replied that there was “no absence of joined up government.” He said that the BIS worked with the FCO in this area and that the vast majority of countries that the Government exports to are “fully democratic; there is no question over human rights.” He said that in countries where there are human rights issues the Government applied “controls selectively”. 132

95. The Committees conclude that, notwithstanding the fact that the Chairman of the Committees wrote to the BIS Secretary of State on 21 November 2011 specifically requesting that the UKTI DSO’s final list of Priority Markets for 2011/2012 be made available to the Committees before Ministers gave Oral evidence on 7 February 2012, the Government was remiss in failing to ensure that the final Priority Markets list reached the Committees before Ministerial Oral evidence was given. The Committees recommend that in its Response to this Report the Government sets out fully the reasons why Libya and Saudi Arabia remain within the UK Trade and Investment Defence and Security Organisation’s Priority Markets list for 2011/2012 when both countries are also listed by the Foreign and Commonwealth Office in its latest Human Rights and Democracy Annual Report as being Countries of Concern.

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Trade Exhibitions

96. The Defence and Security Equipment International (DSEi) exhibition took place in London Docklands from 13–16 September 2011. The UK Working Group in its submission 133 informed us that three stands at the DSEi exhibition were closed because of marketing Category A goods. 134 One stand had promoted equipment that included leg cuffs, waist chains, lead chains and an “enhanced transport restraint system” that combined chains and cuffs. In 2007, the exhibition organisers expelled two companies, one British and the other Chinese, after they had found that the companies were promoting leg irons. 135 UKWG had raised the issue of restraint equipment being promoted at British exhibitions in its submission to our predecessor Committees’ Inquiry in 2007. 136 The current Committees were informed that at last year’s exhibition Caroline Lucas MP had discovered that the Pakistan Ordnance Factories (POF) and Pakistan’s Defence Export Promotion Organisation had both displayed promotional literature for cluster munitions. 137 Similar concerns about both Pakistani weapons producers had been raised at the DSEi exhibition in 2009. UKWG had raised with us in its submission to last year’s inquiry that POF had advertised cluster munitions at DSEi in 2009 and were under investigation. 138 UKWG said in its submission this year:

It is not acceptable that such illegal products continue to [be] identified by NGO researchers, journalists and MPs and not compliance or enforcement specialists working for event organisers and the UK authorities. Yet again we are seeing evidence that enforcement of existing UK legislation and resources and capacity to monitor and police defence exhibitions are clearly not adequate. 139

97. The Guardian reported that Thomas Nash, Director of Article 36 had said that: “It was totally unacceptable when cluster bombs were promoted at DSEi in 2009, but it's frankly baffling that the DSEi can have made the same mistake two years later.” DSEi were reported as saying that “it was investigating the breaches and said that its ‘robust and appropriate’ action showed its commitment to domestic and international law.” Oliver Sprague (Amnesty UK) responded that: “It is wrong that it falls to Amnesty International and other organisations to police the fair and that we have uncovered these materials after one quick cursory glance through the brochure, when they were missed by alleged vigorous scrutiny from both DSEi's compliance unit and the authorities." 140

133 Ev 52

134 Category A goods are those classified as requiring the most stringent controls (controls are exercised over all

activities relating to the trade in such equipment). This category covers, inter alia, cluster munitions, equipment used in executions and ‘torture equipment.’(see Box A, page 42)

135 “UK arms fair under scrutiny over ‘cluster munitions’ stall”, The Guardian, 18 September 2011.

136 CAEC, First Joint Report of Session 2007–08, Scrutiny of Arms Export Controls (2008): UK Strategic Export Controls

Annual Report 2006, Quarterly reports for 2007, licensing policy and review of export control legislation, HC254, Ev 63

137 Ev 39

138 CAEC, First Joint Report of Session 2010–12, 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, HC686, Ev 53

139 Ev 52

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98. In the Oral evidence session on 23 January, Oliver Sprague, when questioned whether the breaches were attributable to Government policy or administrative incompetence, said:

I certainly do not think that it is Government policy to allow companies to exhibit

torture equipment or cluster bombs. It is very clear from Government policy and cross-party support that these things are banned, illegal and should not be there. There is clearly a problem with the enforcement, policing and subsequent action that they are taking against transgressors, because they are doing it again, and it is not getting better. 141

Roy Isbister, Saferworld, added:

I can believe that it is just an administrative bungle if it is happening in the first place, but we have cases here where the law has been broken and there is documentary evidence that the law has been broken. As far as we are aware, there has never been a prosecution on the basis of this. Maybe if the Government policy got a little more active on prosecution for the next DSEi, it would make exhibitors a little more cautious about what they are willing to display. 142

99. When, in the Oral evidence session on 7 February 2012, the Committees asked the Secretary of State for Business, Innovation and Skills, Vince Cable, why DESi’s compliance

unit had not identified brochures advertising Category A material he said: “If offences are being committed, it is up to the authorities to ensure that we jump on them quickly and take actions.” He continued by saying that: “Caroline Lucas and others had identified material that was highly offensive but that was not illegal to advertise.” The Secretary of State said that: “There is a lot of close observation of what happens at that exhibition. It is not run by the Government and we cannot therefore directly control what it displays.” 143 Tom Smith, Head of the Export Control Organisation, BIS, said: “I also understand,

it is not necessarily a criminal offence to display a brochure, even if it is clearly for

something that we would never give an export licence to.” 144 Notwithstanding Mr Smith’s statement, the items being advertised were Category A goods and therefore, according to the advice provided by the BIS in its document Guidance on the impact of UK Trade Controls on Exhibitions and Trade Fairs the controls cover “any act calculated to promote” the movement of Category A goods “with no exemption for general advertising or

promotion.” 145 Any act calculated to arrange the supply of Category A goods from one third party to another does require a licence. The Guidance continues by stating that:

“Because the controls on Category A goods do not exempt general advertising or promotion, even the act of distributing brochures or marketing these products would require a licence if the goods were to be sourced from outside the UK and supplied to a third country.” 146

]that [

141 Q 27 [Oliver Sprague]

142 Q 27 [Roy Isbister]

143 Q 94

144 Q 95 [Tom Smith]

145 Department for Business, Innovation and Skills, Guidance on the impact of UK Trade Controls on Exhibitions and

Trade Fairs, April 2009, p 4.`

146 Department for Business, Innovation and Skills, Guidance on the impact of UK Trade Controls on Exhibitions and

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100. Following his oral evidence on 7 February the Secretary of State, Vince Cable, wrote to the Chairman of the Committees on 13 February 2012 as follows:

During my evidence session, The Committees asked about certain events at the

“Defence and Security Equipment International” (DSEi) Exhibition in September

2011.

This exhibition is a commercial event organised by the company Clarion Events. My department issued an Open Individual Trade Control Licence to Clarion Events to cover any activities which might take place at DSEi which might fall under the heading of “acts calculated to promote the supply or delivery of military goods from one overseas country to another” and therefore require a licence.

The terms and conditions of this licence made clear that no “Category A” goods – which would include cluster munitions and torture equipment – were to be exhibited at the exhibition. As has been the practice at past exhibitions, my Department and officials from other Government Departments worked closely with Clarion Events to assist them in ensuring that these conditions were adhered to.

On 14 September 2011, it came to the attention of Clarion that the company Beechwood Equipment were displaying on their stand a brochure which included certain Category A items. Clarion closed the stand with immediate effect.

On 15 September, Clarion were notified that literature promoting cluster munitions had been found in material from both the Defence Export Promotion Organisation (DEPO) of Pakistan and also the Pakistan Ordnance Factories (POF). Having consulted the relevant Government departments Clarion immediately closed the DEPO pavilion, which included the POF stand.

Both cluster munitions and leg shackles are classified as Category A goods and are subject to control under the Export Control Order 2008. Under Article 21, it is prohibited for persons carrying out activities in the United Kingdom or United

Kingdom persons anywhere in the world to “

the supply or delivery of any category A goods, where that person knows or has reason to believe that such action or actions will, or may, result in the removal of those goods from one third country to another third country”.

To successfully prove an offence has been committed, HMRC would need to show that the company’s action ‘will, or may, result in the removal of those goods from one third country to another third country’. Having an item listed in a catalogue may not in itself be sufficient to prove an offence has occurred. HMRC officers must make a judgement on the appropriate enforcement action to take based on the details of each case, including what action is proportionate and what is in the best interests of law enforcement. In these cases officers judged that the action taken by the organisers was proportionate and appropriate and there were not sufficient grounds to take further action.

The Committees also asked whether allowing people to exhibit catalogues for equipment whose export was prohibited represented a “loophole” in the law. I have

(c)

do any act calculated to promote

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asked my officials to look into this and I will write to the Committees again with my conclusions. 147

101. The Secretary of State wrote a further letter to the Chairman on 26 March as follows:

In my letter to you of 13 February, which followed up on points made about Defence and Security Equipment International (DSEi) 2011 during my oral evidence to the Committees on 7 February, I said that I would write further on the issue of whether the fact that the display of brochures related to ‘Category A’ goods was not necessarily illegal represented a ‘loophole’ in the law. I have looked into the matter and would like to take this opportunity to report back to you.

As things stand, I am not persuaded that the law should be changed. The Government’s intention is to work through the organisers of the DSEi conference to make clear to all exhibitors, especially those who have displayed unacceptable material in the past, that we will not permit them to exhibit material relating to “Category A” goods. If unacceptable material is found on display, we will ensure that the exhibition stand in question is closed down. I think that this, and not criminal prosecution, is a fair and proportionate response.

As I said in my previous letter, there are two issues: firstly, it is necessary to prove a link between the display of the brochure, and the eventual movement of the goods between two overseas countries; and secondly, the fact that HMRC must act in a way that is proportionate and in the best interests of law enforcement when deciding what, if any, action to take. In all the cases of this type that have come to light, HMRC have concluded that closure of the exhibitor’s stand by the event organiser was proportionate and that no further action was appropriate. We could legislate to widen the scope of the controls on advertising and promotion, in order to remove the link between the act of promotion and the movement of goods between overseas countries, but the additional test of whether a criminal prosecution was in the public interest would still need to be met, and I am not convinced that in practice it could be.

It is important to consider the scale of the problem. DSEi attracts around 1300 exhibitors. Despite the best efforts of officials from several Departments and of the organisers in ensuring that exhibitors are aware of the relevant UK law, it is of course a matter of regret that one or two exhibitors simply do not get the message. But it must be emphasised that such infringements have been relatively limited, with only one or two incidents of this kind occurring at each event.

As an alternative to regulation, I have however asked my officials in the Export Control Organisation to work even more closely, alongside colleagues in other Government departments, with the organisers of DSEi both in advance of, and during, the next DSEi event in 2013 in order to prevent such occurrences and to be even more diligent in our policing of the event.