Select Committee on Defence Minutes of Evidence

Examination of Witnesses (Questions 100 - 112)



  100. Neither A or B are particularly attractive but the third one of a memorandum of understanding between governments on matters would be, in a sense, the preferable one?  (Mr Salzmann) That is the one which, certainly for companies who have told us their views, they would prefer. That would give a measure of control which the British Government and other interested parties would accept.

  101. That would accord with the representation we had from the NGOs.  (Major General Sharman) I think, too, picking up on the point Mr O'Neill made, many American sales, particularly to less sophisticated countries, are done government-to-government under the Foreign Military Sales scheme. Also, much of the rationale behind American controls is avoidance of the transfer of military technology, which is a much more powerful deterrent than it is for the UK.

  102. May we move on to the other aspect and that is the whole question of administrative licensing procedures, on which I think you may have a view, where Scott suggested that a whole host of things should be put on a statutory basis. The White Paper and this draft do not do that at all. In fact, it argues quite strenuously against it. I wonder if you would like to have any thoughts on the whole issue of administrative licensing procedures being put on a statutory basis?  (Major General Sharman) Generally we are disappointed, given the background of the Scott Report, in all of this, that the Government has not chosen to enact something in primary legislation or propose something which would satisfy some of the Scott recommendations, which were clearly to the benefit of the industry. He made a specific recommendation, the introduction of a system for granting licences that is fair and expeditious. We have given up lobbying on the basis of trying to get licence default acceptance after time.

  103. No one seems to support that.  (Major General Sharman) We are disappointed, of course, and we would have liked it but we understand the reasons, particularly as ministers always wish to consider things on a case-by-case basis. It is worth remembering what Scott said, I have already made one point this morning. He made no recommendations about a number of the issues that are now being proposed at all, and he was as keen to help industry as he was to achieve other things. We are disappointed but, again, that might be reflected in the secondary legislation. Our main concern, and I am very grateful to you, Chairman, because I know it is as much a concern of yours, is the time that licences take to process. It is a pity that Mr Knowles was not able to join us because he has a licence application which has never yet been refused, to which he sends a birthday card, I think he is about to send his third birthday card. There is a lot to be done to improve the process.

  104. Our Committee has a good record, if you look at our three reports, on appeals, refusals and on this limbo world of undeclared moratorium consent. The Pakistani case was one of them. You accept that there should not be—  (Major General Sharman) We understand why.

  105. I do not think there is any support for default. There is a suggestion that the review procedure of appeals should be established.  (Major General Sharman) There is an appeals procedure.

  Mr Salzmann: If you make it formal we would fully support that.


  106. What about the whole business of refusals, information refusals and information regarding refusals?  (Major General Sharman) Again, if a reason is given it is useful. I have to say in fairness that there has been considerable opening up by Government and the relationship now and access to information for individuals is much better than it was. One particularly encouraging breakthrough is the opportunity that industry has had to talk to desk officers in the Foreign Office, which was a completely opaque part of the situation before. That has helped people understand the reasons why things are difficult. We draw the attention of our members to the Foreign Office Commitments on the FCO website so they have a better understanding of whether they are likely to have a refusal. There is great scope for improvement and we do think that officials are often nervous because they themselves are uncertain as to what is meant, so we do hope the eventual outcome of this Bill will be much more clarification.

Mr Chope

  107. Looking at paragraph 67 of this document, where the Government says that it has a priority to reach decisions on export licence applications quickly, do you think that the Government is delivering what it says it intends to do in paragraph 67?  (Mr Salzmann) It is trying to do. The figures that the Government always quote are for achievement of the 20 working days target time scale, you very rarely have any sight of the—they quote 70 per cent target to achieve that—30 per cent ones and how much do some of the cases of the 30 per cent miss the 20 days. Certainly in the past in response to the publication of the annual reports we have proposed that it would be extremely useful to have an annex at the back listing details, going into much greater details of the turnaround of licences and in particular listing some details of the top 20 worst case nightmares, where the licences have been in the system for two or two and a half or three years. We are aware of some of these cases, but we are not aware of all of them, where licences have been in the system for over three years. We welcome that being in the Annual Report and being given some publicity.

  108. Name and shame?  (Major General Sharman) Yes. An early refusal is better than protracted uncertainty. If the business is at risk from delay, and we have plenty of such cases, then at least if there is an early refusal there is then an opportunity to appeal and provide more information and produce a more robust end user certificate.  (Mr Salzmann) Also, there would be some hold on the rival companies from the EU partner nations under the EU Code of Conduct if there has been a refusal. In one particular case the licence is still in the system over three years, the company knows that business has now gone way, the customer has gone to somebody else and that that somebody else has had no problem getting the export licence but the company has left the licence application in the system just out of curiosity to see how long it is going to take and see if they can get into the Guinness Book of Records.

  109. Do you have a similar story?  (Mr McLaughlin) I endorse what my colleagues said generally, in particular the point that an early refusal is better than a six or eight month—and we have experience of those as recently as last year—black hole approach. Under the EU Code a refusal is notified to other EU nations who should then require companies to comply. If there is no such notification then clearly we are disadvantaged by the six or eight month black hole.

  110. It is a point we made forcibly in one of our reports quite recently and gave a specific example.  (Mr McLaughlin) We would much prefer, whatever organisation or whatever sector of the defence industry is concerned, a regime where an early notification, albeit a refusal, was the preferred solution or outcome.

Mr Rowe

  111. It seems to the layman that for the Department to say, "This looks like being a very difficult one", quite quickly would be of help but not an outright refusal. Would that be helpful?  (Major General Sharman) Yes. Given that the number of refusals is quite small and that number approved, where they are not particularly controversial, is at least 70 per cent. You are right, that would be better.  (Mr McLaughlin) Because of the dialogue that my colleagues have already referred to, if there is an early notification or "red tagging", that there is a potential problem then because of the more open dialogue that would result it would be easier to track and follow it through from the company's point of view.  (Major General Sharman) It is also the company that has to explain to the customer. Customers do get very sensitive about these things and feel themselves affronted to be thought of as unsuitable or inappropriate. Again, an early reaction would at least mean that the Government and the company could work together on the right sort of response.


  112. Thank you very much. Do you think as a result of this Bill we are going to see more judicial reviews of decisions? Do you think a Bill of this kind or an Act of this kind will lead to a spawn in a judicial reviews of these decisions more than previously?  (Major General Sharman) I honestly do not know. Clearly if there is a clear body of law then it opens up the possibility. People have been very unsure. Companies are always in a very difficult position here because certainly under the current uncertain regime, they have felt that if they rock the boat too much then (and the same thing can happen in domestic defence procurement) things will be made difficult for them next time. If there is a clear body of law then I guess that companies may respond with some sort of legal action. Generally speaking, however, relationships are not adversarial.

  Chairman: Thank you very much indeed. Thank you for taking the time to come before us. These are early days and there are a lot more, not only on the shell of the Bill that is before us but on the draft secondary legislation. I think these committees in the next Parliament will be just as interested in that as this. Thank you very much indeed for coming.

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