Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)




  20. I can supplement that. Let us take the example of a case we know. Take Foyle Air for example; do you think they would actually have sought a licence to fly arms from Ukraine to Burkino Faso in the safe knowledge that the UK would not have granted a licence?  (Dr Davis) No, but that is the whole point: they probably would not have done but the fact that they did not apply for it, it then becomes a criminal offence. If we are able to catch up with them and there is enforcement, then you have some means of prosecuting them.

Mr Cohen

  21. In the case I gave, technically they would say it was the shell company and they were in the background. Are you going to say that every British individual should register he has some connection with a company overseas doing arms dealings?  (Ms Meek) I think there are two answers and I will only give one of them, which is where I feel more comfortable. It is not just export controls in isolation; we are also talking about the movement to reduce money laundering and trafficking in other goods, as Ian has said, and it is part of the international movement to have more transparency and openness and crack down on corruption. If we are talking about also moving forward on corruption and on criminalising other offences, this fits into that larger framework. (Dr Davis) I am not too sure either because it would obviously clearly require careful drafting. I would have thought there were precedents in other areas of territorial regulations, both for chemical weapons, the Misuse of Drugs Act and also the Sex Offenders Act, which all have extra-territorial provisions. There must have been these dilemmas within their provisions. Clearly this would need careful drafting. I guess that our stock answer would be that we would hope that the provisions did cover directors of shell companies in foreign companies. Again, you get back to the difficulties of enforcement. If you can criminalise that behaviour, that may stop it.


  22. Before we go on to end use, can I just wrap up on the issues of brokering? You quote the legislation in the USA where there is a requirement to register and extra-territorial legislation. Do you have any knowledge of the register and how many brokers have actually registered under the US arrangements? Is it a huge list? Have you any information that would be helpful to us? We all agree that the government is saying there is going to be a register. I wonder whether you think registration in this field has been fruitful.  (Dr Davis) I would like to say that we have the information but we do not. We have information on the number of applications each year for individual licences within the system but not the number of companies that register.

  23. If you have that information, we would be grateful if you would send that in.  (Dr Davis) Yes, we will do that.

  24. The second matter is this. Any government and parliament would have to consider the regulatory burden of any decision. You have sought to play that down if you extend it to shipping by saying, "Oh, well, after the general licences and the open licensing system, we are down to a handful of examples". Your actual draft implies that almost every shipping agent in the business of shipping arms would have to register and become part of the licensing process. That does not sound like a minimal additional regulation, I must say.  (Dr Davis) Our information from talking to shipping agents, and we ran a small workshop meeting in New York on this in July, is that there are probably only around 20 to 30 shipping agents specifically involved in shipping arms. We do not see that as a large regulatory burden.

  25. If government ministers say that this is a massive extension of a licensing process and therefore a very considerable regulatory burden, as they argue in the rest of this Bill, you would argue that in fact it is a modest one?  (Dr Davis) Yes.  (Ms Saunders) I think it is weighing up the burden against the actual human cost at the other end of this chain.

  26. I understand that. You are not weighing it up. We have to weigh it up.  (Ms Meek) The Government produced estimates in its consultative paper on the sterling cost of extending this licensing system to brokers. We are saying shipping agents are only a proportion of brokers as a whole. If the Government is realistic about their cost assessment, we are not talking about a huge increase on that existing estimate.

  Chairman: Could we turn to end use, which is another major part of your submission?

Mr Viggers

  27. There are some cases, are there not, recorded against us where, after due and proper inquiry, arms have found their way into countries not purported to be their final destination? For instance, the Scott Report reports on arms finding their way into Iraq, thought to be through Jordan, and there is a recorded case of a naval cannon which should have gone to Singapore, which found its way into Iran. This is the so-called end use where the original purchaser is not the final end user, so this is the question of end use. Ministers have made it clear that there is no specific measure to cover such a foreign end user and Ministers have made it clear that the draft legislation will not include provision for end use. Sure enough, we have the draft legislation and there is no provision for end user. Are you satisfied with that? What would you do about it?  (Ms Saunders) As you might expect, the answer is: no, we are not satisfied with that. We feel the responsibility for the country does not end when goods are waved off at Harwich, or wherever they leave from. I think we can look at the end-use question in two parts. The first part is about the documentation required that guarantees end use and the second part of it is the follow-through, the monitoring, the checking out of the end user and then the checking that the weapons remain where they are claimed to have gone. On the first part of that, on the documentation, we miss an opportunity here to consider if it is the right time to move towards a more standardised form of end-user documentation which would help back up all the other parts of this Bill, for example, with a fuller provision of information about the named individual as the end user. These kinds of things are not spelt out anywhere and there is no standard end-user certificate. Most people think there is but in fact there is not. This is where perhaps we should be looking at the international debate on this issue. Under the Vienna Firearms Protocol there is a discussion going in this direction. The next logical step is perhaps a standard certification system. All of this is totally absent from the current legislation or consultation document. I think that is a big missed opportunity. Secondly, in thinking about the follow-up, there is a mention in the consultation document about the increased use of embassies but my understanding of that is that it is a fairly ad hoc measure at the moment and not necessarily dedicated to qualified people doing it at the other end. This is one area where I feel that we should be moving into a much more systematised method of reporting, so that when the end-user documents come through there is a point at which for particularly sensitive countries and sensitive goods—and we are not talking about everything—and where there are obvious question marks, we have a system whereby embassies do check on the end user and, secondly, once the goods have gone, they have a period after delivery to go and check that they are still where it is said they were. This is the point where you can really get at diversion. I was disappointed to see that that is not part of the current package of measures.

  28. Dealing with these points in turn, you would tighten up on the original drafting of the end-use certificate and bring in a formal standard end-use certificate which you think would be more watertight?  (Ms Saunders) A number of other countries have already done this. At one end of the scale, Sweden has its own bank-quality certificate which is required to be used prior to export. In Germany they have a system whereby a named individual in the company that is exporting has to be responsible—that is now putting the burden on the commercial partner here—and one of the directors has to be responsible for end use, and perhaps that is a rather interesting measure. There is a variety of options one could discuss. For me the first step would be to make sure there are standards which are required during the licensing procedure to provide certain pieces of information and importantly the routes and the brokers and shippers who are involved in the transaction because this is often the missing link. This allows diversion again.

  29. Will you be putting forward suggested draft clauses to cover this?  (Ms Saunders) Absolutely, yes.


  30. I can understand why you want standardised end-use certificates but that does not require legislation. We can just prescribe them without legislation?  (Ms Saunders) Absolutely, and I do not think it would be something for primary legislation. I am talking about the discussion of end use that was held within the consultation document in that paragraph where it clearly says that the Government indicated it will already improve the system sufficiently.  (Mr Crowley) I want to follow up on something that Julia has said. Once there is evidence of diversion or misuse by the stated end user, there has to be provision in the controls for a revoking of that licence and an insurance that no further related goods or components or training or assistance will go to that company end user. That is not there at present.  (Ms Meek) Our reading of this Bill as primary legislation is about the powers it gives government. One of our concerns on end use very fundamentally is that we are not convinced that within this Bill there exist powers for the Government to take proactive steps on monitoring or even just to ask on an ad hoc basis in examining end use. We would like to see those powers put into the Bill and we will be able to provide drafting clauses that effect.

Mr Viggers

  31. Where you can demonstrate that there has been abuse of contract, you would insert provisions which would prevent a further supply of products to that supply chain?  (Ms Saunders) I think it is a case of shutting the barn door after only one horse has bolted, rather than letting the entire stampede follow, which I think is the situation we are in at the moment. There is no clear cut-off point which can be reported back and actually acted upon which would help enforce the decision that an end use is no longer a reliable destination for arms.

  32. Then your provision would presumably be superior to the contractual provisions and overide the contract and prevent further supply?  (Ms Meek) Correct, because that would be the responsibility of government, which I understand is superior to that of individual companies.

  33. I am just probing to see how far you go on this. Would you also seek to work proactively to pursue the company through whom the improper supply has happened? If you discover that an end user is not an appropriate end user but an illegal end use, would you then seek to retrospectively deal with that issue and perhaps pursue the supplier through whom those products are being provided?  (Ms Saunders) That would be a question of being able to prove that there was a reasonable expectation the company should have been aware of the risk of diversion or abuse. It is quite difficult to prove but perhaps you might want to pursue cases for example of breaking of UN sanctions and the Mil Tec case referred to earlier, which might be a case where you would want to pursue that kind of thing.

  34. In your very helpful briefing note to us you said: "The most effective system would include provisions whereby an end-use certificate takes the form of a legally-binding contract which contains a list of proscribed uses and a prohibition on unauthorized re-export." You are presumably putting forward provisions that would cover that?  (Ms Saunders) Yes.

Dr Starkey

  35. Can I follow up the second part of this which was your suggestion that follow-up checks should be carried out by embassy staff. We have had a practical example of the difficulties of this with the concerns about the misuse of British arms sold to the Israeli Government used against civilians in the occupied territories. There are two problems: firstly, that it is a rather dangerous situation for our embassy staff to go wandering around trying to check what is being used; and secondly, what was actually sold to the Israelis is equipment which is embedded in other equipment so it is difficult to decipher. What do you think is a practical way in which that wish for embassy staff to help to deter diversion of misuse of arms can be carried out?  (Ms Saunders) You refer presumably to high-tech and very complicated systems. This is why you need qualified staff to do it. That would underline that point. It would have to be somebody who knows what they are looking at, what kinds of weapons and the kinds of systems. This would be something for somebody with a military background, presumably more qualified to do it than others. Secondly, the point about sending British embassy staff into the firing line: I did not actually have that in mind, you will be pleased to hear. This is particularly relevant when there is diversion and it could be if you have exported X number of tanks into a particular country. I do not see that there is much of a problem in saying, "Where are those tanks now?" This can be done in situations of peace as well as war, of course. It would not be appropriate in every situation. I would not say it is their job to go and count the tanks whilst they are being used in an offensive but they may well count them on a day when they are having their usual contacts with the army of that particular country.

Ms Kingham

  36. I want to follow up on this point. Going back to the very beginning when you said that there was going to be no blanket decision that a country's human rights record should preclude it from receiving arms or arms exports and then linking that back into the situation about whether weapons or arms that are being sold could be misused in a country. I think you are making quite large assumptions, and I read from Julia Saunders' response here that the systems are in place or could be in place actually to monitor either end use or diversion or misuse of arms within a country and also linking that in some kind of systemic way to a human rights situation within that country. As we know, most conflicts nowadays are internal conflicts rather than between states and ensuring that systems are there to monitor. The situation in the Israeli-occupied territories has already been mentioned. There is a similar situation with Morocco and Western Sahara. How do you feel confident or what kinds of systems would you recommend to put in place to ensure that the overall human rights situation is monitored to ensure that misuse of weapons within that country cannot take place and that in future something could be done about issuing licences or enabling exports to go to those countries that could not be misused for internal oppression in a very practical and systemic way?  (Ms Saunders) I would not want to conflate the risk of diversion with human rights monitoring in this argument because I think that Ms Starkey's point was about the possible human rights abuse of weapons that are exports, whereas I was saying that in terms of diversion that is not necessarily something which is monitored during a war situation. Most of the exports would go to a country's army and in most cases British embassies would have standard continual contact with that country. For example, I was in the Philippines recently and it is clearly the case that the British embassy there has very close relations with the Philippine army, which is regarded as an end user to which we can export.

  37. But there is no systemic way of doing that. It depends on individual embassies and on contacts and the overall foreign policy objectives of the British Government in those individual counties. If you are arguing for this, it needs to be bolted on in an systemic way to ensure that it can take place, surely?  (Ms Saunders) Yes, and I started off by arguing for that. I think at the moment it is ad hoc. We would like to see something which was more systemised.

  38. Do you have any ideas of what that might be? I completely agree with you. I am failing to understand how that can be embedded into something like the legislation we are talking about today in a very practical way.  (Dr Davis) Partly it could be embedded in the secondary legislation and it could be set out in explicit criteria in the same way other aspects of brokering and licence production have been, in the sense that you have the rules set out in secondary legislation. There could be secondary legislation set up for the purposes of end-use monitoring and the use of embassies. Julia is right: there is sufficient staff in British embassies in sensitive countries, military attachés and the offices that deal with political security arrangements, to make that assessment. It is just about creating the political will and momentum to ensure that it happens. I think that could either be in secondary legislation or it could be set out in the same way as the Government's export controls. The Government has made a political statement that these are the criteria that should apply when licensing decisions are made and a similar political statement setting out these objectives that our embassies will undertake should also be drafted. Thirdly, there is also a role beyond government and a role for Parliament and non-governmental organisations. In the past we have argued for the end user to be identified in the annual report for strategic exports because, for example, at the moment you have an indication that shotguns are going to Kenya; they could be going to a game reserve or they could be going to the security forces. If that information was made available in the annual report, then it would allow parliamentarians and the public and NGOs to have an oversight which would contrast and add to the work done in embassies.  (Mr Crowley) At a certain level we would just be asking embassy officials to do what they normally do, or to change slightly what they normally do. I assume that embassy officials would be monitoring the national press and would have contacts with national human rights organisations and contacts with the police and the security services in the host country. If an incident of misuse of UK equipment, for example misuse of tear gas or armed personnel carriers or sub-machine guns, is reported, then again the embassy can relay that back to the UK Government and then the licence can be revoked. From limited resources, NGOs have managed on an ad hoc basis or in instances to get concrete evidence that UK equipment has in the past been misused. They have found tear gas canisters in Kenya that have been used in a confined space. They have pictures of armed personnel carriers in Indonesia that have been misused. If NGOs with limited resources can do this, then embassies, which are on the ground and are monitoring such incidents anyway, surely can channel part of their resources to do this? As Julia and Ian have said, it is all about political will. If this Government really wants to ensure that there is an ethical dimension to its foreign policy and that the export control is going to be effective, then resources have to be put into end-use monitoring. Once evidence does arise of misuse, then licences have to be revoked.

Mr Rowe

  39. It seems to me that if you have a reputable manufacturer who enters into a perfectly reputable agreement with a perfectly reputable government, and then further down the track that government gets involved in some kind of insurgency operation where individual commanders behave extremely badly, you saying that the licence be revoked. What effect do you think that that kind of control would have on the credibility of the arms industry as a whole? Do you think that people would be prepared to do business if three years or five years into a contract the situation changes on the ground in the way which even the government may not entirely have predicted and the whole thing suddenly just goes up in smoke?  (Ms Meek) With end-use monitoring, you are talking about a point in time; you are not trying to project what the situation can be in three or five years. I would assume—and I cannot speak on behalf of industry—that industry would like to be seen as being as responsible and, as you said, as creditable as possible and that therefore they would be willing to have consideration of the evolving situation when they have a long-term life in the country as the continued provision of equipment goes to that country and they would be willing to work with government and parliament. If the government felt that there was a situation emerging in that country that precluded the further transfer of equipment, then industry would be willing to accept that decision. That is the case for other countries; they are allowed to suspend licences until the situation changes.

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