Select Committee on Trade and Industry Seventh Report


Scott Report legislation

6. In February last year we recorded our dismay that the Government should not have afforded greater priority to bringing forward a Bill to implement the recommendations made in 1996 in the Scott Report.[7] The Government's July 2000 Response noted that "most" of the Scott Report's recommendations had already been implemented by non-legislative means.[8] The Foreign Secretary told us in January 2001 that "the great majority" of the recommendations had been implemented.[9] He also noted that the delay in introduction had made it possible for the introduction of the much wider arms brokering legislation than had been originally proposed.

7. On 14 December 2000 Mr Hain stated in Westminster Hall that the promised draft Bill had not at that time yet gone to Parliamentary Counsel for drafting, but assured Members that "we want to publish it as early as possible next year ... the passion and power of the arguments advanced this afternoon will have a considerable influence on the timing."[10] When we heard oral evidence from the Foreign Secretary on 30 January 2001, almost five years since Scott reported, we raised the possibility of examining the department's instructions to Parliamentary Counsel if time was too short for us to be able to examine the draft Bill before a dissolution. He confirmed that the instructions had indeed been sent, and expressed the hope that the draft Bill would be introduced in time for it to be scrutinised and debated in the current session. He was not however able to announce a date of publication of the draft Bill.[11] On 14 February 2001 a Written Answer stated that the Government hoped "to be in a position to publish the Bill within the next few months".[12] On 6th March the DTI told us that they were unable to go beyond the terms of that answer, and that it had been the consistent practice of successive Governments not to disclose correspondence between departments and Parliamentary Counsel.[13] Given this Government's debt of honour to bring forward legislative proposals to give effect to the 1996 Scott Report, it would be deeply regrettable were at least a draft Bill not presented for proper parliamentary scrutiny during this Parliament.

EU Code of Conduct


  8. The EU Code of Conduct for Arms Exports was adopted under the UK Presidency in June 1998. Our February 2000 Report suggested that there should be greater transparency on the "denials" systems, including "at least the publication of figures on the number of recognised cases of undercutting".[14] The July 2000 Response recorded that the issue had been raised in the CFSP Working Group on Conventional Arms Exports with a view to reaching agreement on interpretation of the confidentiality provisions. The Government also agreed with our call for "a minimum level of transparency EU-wide" and agreed to raise the issue during the next annual review of the operation of the Code: and to publish the next (2000) consolidated Report of the annual review of the Code.[15]

Progress Report, December 2000

  9. The second annual report on the Code was agreed by the General Affairs Council on 4 December 2000. It records that the Code was "substantially strengthened and the first year's achievements consolidated" and cited the "considerable increase in the number of notified denials and consultations" as evidence of the Code's "rising impact". A common Military List has been agreed. A Common List of non-military security and police equipment is being prepared for submission to the Council, to enable the introduction of Community controls on equipment which can be used for internal repression. Denial notifications have been elaborated to include the reasons for the denial. We commend the real progress made in developing the European Union Code of Conduct.


  10. A common understanding has yet to be reached on what constitutes "essentially identical transactions", a crucial part of the mechanism designed to prevent "undercutting" — exports from one country of goods for which a licence has been refused by another. The Foreign Secretary agreed that such a definition should be possible, but was confident that its absence was not a big loophole. The United Kingdom has received three requests for consultations from other member states as a result of their considering grant of a licence where the UK had refused one. The Foreign Secretary told us that such cases were rare and almost always arose as a result of a difference of interpretation of the Code or of uncertainty as to whether the goods in question were "essentially identical". In two cases, the other states proceeded to grant a licence; the Foreign Secretary stressed that "it was not particularly traumatic".[16] Under the terms of the operational paragraphs of the Code, details of these cases could not apparently be made available to us.[17]


  11. There is regrettably little sign that other Member States are taking very seriously the suggestion that they should be more transparent in their reporting of the operation of arms export controls. The second annual report on the Code includes some references to national reports, in line with what it describes as "a national drive to increase transparency". In December 2000 Saferworld produced a detailed critique of each nation's reports. Austria, Denmark and Greece make no public report. The reports from those countries which do report evidently vary in substance. Few are as detailed as the UK Report. Even the reports made to COARM are stated to require harmonisation. In February 2000 we warned that "none of our European competitors have achieved the UK's current level of transparency" and that there were limits to which it could be expected that the UK would go when others did not follow suit. The Foreign Secretary agreed that "few of the other countries come anywhere near the transparency we have shown".[18] The Swedish Presidency offers an excellent opportunity to press for a minimum level of transparency in operation of the EU Code of Conduct, including a published annual Report from each state, and a minimum level of information on material licensed for export, as well as uniform reporting levels for the statistics published with the annual review of the Code. We recommend that the Government continue to press for greater transparency during discussions on the Code.

Applicant countries

  12. Our February 2000 Report concluded that an applicant state's willingness to conform with the criteria of the Code and comply with its operative paragraphs "should be regarded as a precondition for its accession to the EU".[19] The Foreign Secretary had told the Committees in oral evidence on 3 November 1999 that "It is not a condition, it is not in the Copenhagen criteria which was before this. One should stress the Code of Conduct itself is a voluntary Code ....".[20]

13. The Government's July 2000 Response was delphic as to how far the Code was to be regarded as part of the CFSP acquis with which candidates would have to comply.[21] Our July 2000 Report welcomed the Government's reminder that the acquis included the CFSP and recorded their conclusion that this covered the EU Code of Conduct.[22] The Government's December 2000 response agreed with our conclusion, and undertook to "continue to monitor developments closely as applicant countries progress towards accession".[23] The Foreign Secretary told us that he wanted to look at ways of drawing them more into the process in a structured way.[24]

14. There are problems with at least one or two accession countries. In the 14 December 2000 Westminster Hall debate, Mr Hain stated —

    "One of the problems is that the worst offenders, Bulgaria, Ukraine and Moldova, are supplying small arms — especially to Africa".[25]

Bulgaria is an accession country. The Foreign Secretary told us that there was a dialogue with Bulgaria on this issue and that problems arose from the absence of administrative capacity to implement agreed policies rather than from a lack of political will.[26] We recommend that, in all future bilateral discussions with applicant countries, the Government makes a specific point of pressing the need to conform to the EU Code of Conduct.

Multilateral & bilateral agreements

Wassenaar Arrangement

  15. The 1999 Annual Report included reference to the disappointing outcome of the December 1999 Wassenaar Arrangement review, expressing the Government's concern that few of the proposals to expand and deepen the scope of reporting had been adopted. It recorded that proposals to increase the range of arms covered by the Arrangement, including small arms and light weapons, had been blocked owing to "opposition from a small minority of participating states", and that proposals to extend the system of notifications to include the identity of end-users in denial notifications for dual-use goods had also been blocked. We raised this disappointment with the Foreign Secretary. He told us that "not every country shares our wish for transparency in this area", but that some progress was being made towards widening the scope of existing arrangements.[27] He felt unable to reveal in subsequent written evidence, even in confidence, the identity of those countries who had blocked the proposed extension of the scope of the Arrangement's operation.[28]


  16. In response to our recommendations in February and July 2000 on steps to encourage the USA to adhere to the EU Code, the Government noted that the US Government was required by legislation to try to develop an international code of conduct on arms transfers; that there had been "initial informal discussions"; and that "the UK looks forward to playing an active and constructive role in this work." The second annual Review of the code welcomes this development and records that "Member States consider it highly desirable that the United States and the European union should work together towards promoting common principles of arms export controls in third countries". The Foreign Secretary confirmed that he hoped to maintain and build on the expressions of interest in the US on developing an international code.[29]

Six-Nation Framework Agreement

  17. The Defence Committee has recently reported on the July 2000 Framework Agreement between six European arms producing states, following the July 1998 Letter of Intent.[30] The Agreement is intended to reduce bureaucratic controls of transfers of licensed goods and technology between the participating European states, without weakening export controls to other nations. The Defence Committee Report sets out in some detail the proposed system of Global Project Licences and the "white list" of pre-approved destinations. The Foreign Secretary assured us that the details of the Agreement were entirely consistent with the current UK regime and that there would be no reduction in the extent of reporting to Parliament.[31] We would welcome the inclusion in the next Annual Report of a note on progress in establishing the revised export control system under the Six-Nation Framework Agreement.

Small arms and light weapons (SALW)

18. All the three Annual Reports so far published have devoted some space to setting out the Government's concerns on small arms proliferation, and the measures they have undertaken or supported to deal with the accumulation of small arms in unstable regions. In November 1999 the Foreign Secretary set out cogently the reasons for this concern —

19. The first UN Conference on the Illicit Trade in Small Arms and Light Weapons will be held in June 2001. In advance of that, a Round Table was held in London on 13/14 February 2001 bringing together representatives of around 30 countries with a particular interest in the issue as a means of obtaining an international consensus in advance of the UN Conference. The Foreign Secretary forwarded to us a copy of his introductory speech and of the EU's plan of action.[34] There are a number of desirable outcomes —

  • a commitment to sell small arms only to state organisations, although any agreement will presumably have to allow for sales of sporting guns and ammunition;

  • making it easier to trace firearms back to their point of manufacture;

  • funding of programmes for surrender and destruction of firearms, to stop the recycling of weapons from one conflict to another, together with better management of stockpiles of surplus weapons.[35]

It will not be simple to gain a consensus within the EU, let alone globally.[36] If the initiative is even half successful, however, it could confer huge practical benefits on some of the world's most disadvantaged people. We warmly commend the Government's efforts to date in seeking a multilateral way forward to control the illicit flows of small arms, including the International Arms Surrender Fund proposed by the Foreign Secretary. Once the UN Conference has run its course, action must be taken to achieve more public identification of those arms producing and exporting countries which are holding up the emergence of an international consensus on the key issues.

7  HC 225, para 4 Back

8  Cm 4799, page 1 Back

9  Q 50 Back

10  HC Deb, 14 December 2000, col WH  Back

11  Qq 50-1 Back

12  HC Deb, 14 February 2001, col 140w Back

13  Ev, p 40 Back

14  HC 225, para 54 Back

15  Cm 4799, page 6 Back

16  Q 68 Back

17  Ev, p 38, 2 Back

18  Q 58 Back

19  HC 225, paras 57-8 Back

20  HC 225, Ev, Q 95 Back

21  Cm 4799, page 7 Back

22  HC 467, para 70 Back

23  Cm 4872, page 9 Back

24  Q 61 Back

25  HC Deb, 14 December 2000, col 39WH Back

26  Qq 66-7 Back

27  Q 71 Back

28  Ev, p 38, 3 Back

29  Q 71 Back

30  First Report of session 2000-2001, HC 115 Back

31  Qq 72-3, 79-80 Back

32  HC 467, Ev, Q 139 Back

33  Q 91 Back

34  Copies have been placed in the Library Back

35  Qq 84ff Back

36  Q 93 Back

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