Select Committee on Defence Seventh Report


IX TRAFFICKING AND BROKERING : CLAUSE 5

1939 Act

90. The 1939 Act gives the Government power only to control physical exports from the UK. It does not allow the Government to impose controls on the involvement of persons in the UK or UK persons abroad in trafficking in goods between overseas countries or in brokering such deals.[149]

Previous consideration

91. The 1996 Green Paper referred to "growing concern" about trafficking and brokering activities, and sought views. The 1998 White Paper proposed controls on trafficking and brokering to countries subject to UN, EU, OSCE or UK embargoes; in relation to certain goods, such as torture equipment; and in missiles with a range of more than 300 km. The Government rejected calls to introduce such controls on all goods subject to export controls. Firstly, those involved would also be required to comply with the export control laws of the exporting country. Secondly, the enforcement of controls on trafficking and brokering would be less straightforward than the enforcement of actual exports; "resources for enforcement of such measures should be targeted on the most critical areas".[150] The Trade and Industry Committee welcomed the limited proposals on brokering, and suggested that they only be extended once experience had been gained of their enforceability.

92. The Defence Manufacturers' Association (DMA) have acknowledged the importance of addressing the issue of trafficking and brokering. In their evidence to the Trade and Industry Committee's 1998 inquiry, they noted that, whilst it was seemingly impossible to control the activities of brokers, "we fully recognise that some attempt to do so must be undertaken. This became particularly clear in late-1996, when the activities of the Isle of Man-based company Mil-Tech Corporation in Rwanda came to light, and thus brought the whole issue of brokering sharply into focus".[151] The DMA attached to their 1998 evidence a copy of a short unsolicited paper which they had sent to the DTI on the subject. Whilst they supported some form of controls, they did not believe that requiring such activities to be licensed through the DTI was practicable.

93. In our first Report, we supported a "more stringent national policy on brokering and trafficking which could act as a spur to international action". In our July 2000 Report, we went further, stating "some of the reasons given in the 1998 White Paper for resisting a further extension of national controls do not stand up to close examination". We concluded that "it is unfair to the honest exporter to leave a gaping loophole simply because of doubts about how completely it can be blocked". In oral evidence in May 2000 the then Minister of State at the FCO, Peter Hain, sympathised with this view in evidence, stating that "I am in the camp of wanting more and greater control on brokers ... There are judicial and practical problems about implementing that which everybody understands and those are the issues we are grappling with".[152]

94. In September 2000, the Secretary of State for Trade and Industry announced the Government's intention to introduce a system for licensing arms trafficking and brokering. Clause 5 of the draft Bill provides for powers to be taken over "trade in controlled goods". It is proposed that these should be wider than in the 1998 White Paper, in view of the particular dangers of trafficking and brokering to regions of conflict at a time when problems are emerging but before imposition of a full embargo is justified.[153] Comments are now invited on whether controls should apply to all Military List (ML) categories, or certain categories set out in the commentary. Similarly, it invites comment on whether a new licensing system should be extended to apply to British citizens or companies whose activities are wholly carried out abroad.

Definitions

95. It is suggested that all involved have a clear idea of the sort of activity it is now proposed to bring under control through a system of registration of brokers and licensing of transactions. Evidence from the DMA underlined the difficulties there will be in drawing the line of definitions such that, for example, the agents of companies are excluded, as are arrangements made by a UK company for direct supply between two other countries of spare parts for UK equipment. [154] There is some danger that, as the Exports Director of the DMA put it in relation to the law in Germany, "It catches the good guys and the bad guys have moved to Cyprus".[155] The Secretary of State accepted the importance of definitions in ensuring that the measures had the intended effects.[156]

Extra-territorial controls

96. There are practical difficulties in seeking to extend controls to activities by UK citizens or companies outside the UK. It would be difficult to detect breaches and yet more difficult to obtain evidence sufficient to secure a conviction in a court. We should be cautious about setting up a system which cannot be policed. But we share the consensus that controls on brokering which do not recognise the extent to which it is and can be carried on overseas would be incomplete. Written evidence from the UKWGA sets out the criteria which have been applied on establishing extra-territorial offences in other fields, including sex and drug offences.[157] The existence of criminal penalties may act as a deterrent. We note that other countries have a system which claims some extra-territorial jurisdiction. Whilst recognising the practical difficulties in policing activities outside the United Kingdom, we see compelling arguments in favour of extending controls on brokering and trafficking to activities outside the country and recommend that controls be introduced on the activities of UK citizens and companies wherever they take place.

Coverage

97. The Secretary of State also underlined his interest in defining the scope of goods to be covered. Cm 5091 sets out a minimum list of goods, broadly reflecting the categories used in defining the scope of limited arms embargoes. A wider list, presumably the whole Military List, might risk bringing harmless activities into the ambit of controls on brokering. Mr McLaughlin of Rolls-Royce warned of the scale of the effort required if the whole List were to be used.[158] But it would be easier to administer, and would leave those engaged in brokering in no doubt as to whether licensing and registration were required. Our experience of examining licences granted and refused for countries to which a "limited list" embargo applies argues in favour of simplicity.

Shipping etc

98. The UKWGA has suggested that those engaged in the actual transfer of arms, such as shipping agents, freight forwarders and airlines, should also be subject to a licensing regime.[159] There are apparently not many shipping agents likely to be involved. Those carrying arms are already under a licensing regime, presumably as a result of the potentially hazardous nature of their cargo. It is suggested that an additional layer of licensing would not prove unduly onerous on either the companies involved or on the machinery of government. The definitions of illicit trafficking in the Firearms Protocol in which the UK is playing a leading part are said to include the delivery and movement of goods.

99. Clause 5 of the draft Bill is drawn widely to cover activities which facilitate the acquisition or disposal of controlled goods. The explanatory paragraph in the text does not explicitly rule out the actual transfer of goods belonging to others. [160] Cm 5091 also states that it will be "possible to adapt the controls on trafficking and brokering to give effect to any future international understandings or commitments in this area, as well as for other reasons".[161] We share the Secretary of State's hesitation to extend controls too widely.[162] It would however seem perverse that those arranging for arms to be purchased for use in some area of conflict should be under a licensing regime, but not those responsible for arranging or undertaking their actual transfer. The Bill as presented should allow for the possibility of subsequent introduction of controls on the actual transport of controlled goods, and on those arranging for such transport, by an appropriate extension of the scope of "trade controls" as defined in Clause 5.


149   White Paper on Strategic Export Controls, Cm 3989, July 1998 Back

150   Ibid., para. 3.3.3 Back

151   HC 65, Ev, p.38 Back

152   Q.133 Back

153  Para 55 Back

154   Qq 80,85 etc Back

155   Q 85 Back

156   Q 245 Back

157  Ev, p 2, paras 5-6 ; also Qq 12ff Back

158  Q 89 Back

159  Qq16ff; Ev, p 3, paras 8-10 Back

160   Cm 5091, page16, para 58 Back

161  ibid, para 61 Back

162  Qq 253-5 Back


 
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