Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 40 - 57)

WEDNESDAY 25 APRIL 2001

MR MICHAEL CROWLEY, MS JULIA SAUNDERS, MS SARAH MEEK AND DR IAN DAVIS

Chairman

  40. We need to go on to the other major part of your memorandum. I will wrap up on end use. As I understand it, ministers can revoke licences on the grounds that there has been a misuse of end use now. Government has existing power to do that, does it not? We have seen examples of this.  (Ms Meek) That is our interpretation. Our hope is that this Bill as we interpret it also contains those powers, although they are not explicit; there are no explicit powers as I read the Bill to do that. This is a new opportunity. This is the opportunity to revise legislation that is 62 years old and we are looking at how to do that best. The opportunity to do that best is go give Government power that perhaps is not used at the moment but it should consider using in the future. That includes end use.

  41. I was very interested in your footnote in your memorandum of the Belgian example. Historically I had never thought of Belgium as the best model to follow. Besides the fact that you draw our attention to this interesting comparison, has it worked? Do we know that? Are the Belgians a model in this respect?  (Dr Davis) I think it has worked. Strangely enough, I had to give evidence to the select committee in Belgium two years ago. Of course the scale and dimension of the export in Belgium is very different to what we have here, so that is another consideration. I guess it is easier for them to deal with a relatively small number of cases. Our understanding is that they have been relatively successful.

  Chairman: We will turn to licensed production.

Mr Berry

  42. Licensed production of course is anther way in which existing arms controls can be circumvented in quite a straightforward manner. What is less straightforward I guess is how licensed production overseas could be controlled. We now have consultation document proposals from government that were not there before, and you have commented on those. Can you briefly summarise your view as to the best way in which this obvious problem can be brought under control?  (Mr Crowley) Firstly, we recognise and commend the Government for itself recognising that there is a problem with licensed production and attempting to go part way in seeking to solve that. Our recommendation for control is in essence that UK companies seeking to establish a licence production agreement with other companies overseas have to get government permission and licensing before such an agreement comes into effect and that the criteria by which the Government would determine whether such a licence should or should not be given for that licence production agreement would be, firstly, whether the licence production agreement is likely to lead to the provision of arms or arms equipment that would be either used in the licensee's home country for human rights violations or could be exported to another country for human rights violations; in effect, whether the UK Government would allow a direct export of arms to that country or whether that would be refused on human rights grounds. That determination has to be made. Such licence production agreements must ensure that there are stringent controls on the level of production of arms equipment. Such licence production agreements should also have a no re-export provision, unless Her Majesty's Government allows or agrees such a re-export. For example, if there is a licence production agreement with a company in Turkey for the production of sub-machine guns, the numbers of sub-machine guns to be produced must be part of the licence production agreement and there also must be a provision by which that Turkish company or the Turkish Government has to come to the UK Government and request permission to export such weapons to a third country.

  43. The example of Turkey is a good one, given it has happened. I can see that this may well deter a UK company from establishing a subsidiary overseas to export arms from Turkey to a third country. Does not the whole process here of actually licensing the production agreement subject to end-use conditions, which brings us back to the previous point, become ever more complex? Can you give any examples of where such a regime has had the outcome that no doubt we all want?  (Mr Crowley) The US has such a control system for licensed production agreements with US companies and companies overseas. The level of armament production is strictly defined and also there is a no re-export clause without agreement by the US State Department. So that happens.  (Ms Meek) The principle of the US law is slightly different which is that licensed production is established for the purpose of that country only for the use of that country where the licence is established. We have a different situation with other countries, the European countries, in terms of licensed production. The idea is that it is actually an extension of the production facility of the parent company that then opens up new markets. So it is a slightly difficult comparison to make on other best practice because the preconditions are very different. I think what we are saying is that we as a collective are saying that we want our export controls to be rigorous; we want it to be clear that there are transparent procedures to be followed; and when things are outside those procedures that they are illegal or criminal. I think that it is almost tautological to then say that licensed production is exacting that same standard or rigour. I think that is what Michael was saying about encompassing it into a licensing procedure within the UK. That might be a few years down the line. We are not necessarily there yet. I think we are also considering more immediate proposals that would allow us to gain more information about licence production because it was very difficult to gain information on the number of facilities, the amount of equipment being produced and where it was being exported. There are powers in this Bill for example about the ability of the government to request information from manufacturers. We would like that to be extended so that those manufacturers would also have to supply information on their licensed production facilities and the amount of equipment those facilities were producing and how those recipients of that equipment were using it. That is one example of a short-term measure that could be put in place.

  44. Could I quickly ask on the US example: is there robust research evidence that suggests that that regime works effectively, or is the evidence that it is not too difficult to circumvent?  (Ms Meek) The US has a policy on its weapons. As you know very well, it has re-export conditions so that it has to be notified if the weapons it sells and produces under licence are re-exported. Unfortunately, the United States also has a policy of honouring armed opposition groups and they have occasionally used licence production facilities to arm such opposition groups. So it is very hard to say concretely black and white: "Yes, it has worked" or, "no, it has not".

Mr O'Neill

  45. Is it not also a product of the American impression of themselves, that they have the right to interfere in the affairs of other countries for whatever reason they see fit?  (Ms Meek) I think we are here to discuss the Export Control Bill.

  46. The fact is that you have got to look at the assumptions upon which this legislation in other countries is based, that it may not be quite the same as the assumptions on which we are operating.  (Ms Meek) What I said was exactly that, which is that I do not think the presumption of the US system is necessarily applicable to European countries which have undertaken licensed production.

  47. Therefore, the US example may not be relevant to this Act or a justification for a British position being adopted along similar lines?  (Ms Meek) I think that is what I said, yes.

Mr Worthington

  48. Can I look at this licensed production overseas issue? The Government is saying it does not want to have this licensed production undermining embargoes to which the UK is a party. You say that it is vital that transfers of arms are controlled to human rights and conflict crisis zones which are not subject to international embargoes. Could you give us a list of countries to which you would extend the effect of an arms embargo?  (Dr Davis) I do not think it is a question of extending an arms embargo but of ensuring that the criteria and things like UK national export criteria and the criteria in the UK code of conduct would also apply to these situations. There would be grey areas which again would depend on the type of equipment and be sensitive to the destination. I am not suggesting that all countries be excluded.

  49. It is not a true list of countries?  (Mr Crowley) The idea that we are proposing is that you use the same criteria for determining whether you are going to grant a direct export of arms to a country as for determining whether you are going to allow the licensed production agreement to take place. It is the same process. We commend the Government for recognising the need to prevent licensed production activities to embargoed countries, but that is not far enough. It should also ensure that licensed production activities do not facilitate human rights violations.

  The way that it can do that is by using the same criteria it uses for direct arms export controls to licensed production facilities.

  50. I am asking about countries that would be swept in by your provisions.  (Ms Saunders) There is currently no UN arms embargo, for example, against the DRC (Democratic Republic of Congo). Surely we will agree here that that would not be a suitable destination for licence production exports.

  51. We do, but there is a UN arms embargo.  (Ms Saunders) No, there is not.

  52. There is not? I do not think it is all that clear what is an embargo.  (Ms Saunders) There is a UN embargo and, of course, there is an EU and OSCE embargo or unilateral decisions. It is only, really, the UN embargo which has the strongest international powers and even they are very hard to enforce. So it needs to be brought down to the level of national legislation.

  53. So the DRC you would include. What else?  (Ms Saunders) I think it is also a question of end-users. There would be some countries where you might think that a particular end-user may be a police force known as a human rights' abuser whereas the army is not. You have to be quite sophisticated in your judgments.

  54. If you are going to be sophisticated you have got to be simple to start with. That means which countries are we talking about?  (Dr Davis) I think the simple principle is that we want to ensure that overseas licensed producers do not export arms manufactured under a UK licence to destinations to which the UK would not permit direct arms exports. It is ensuring the principles are the same. For example, the one case that we have had is in Turkey where a Turkish company exported 500 sub-machine guns to the Indonesian Police and it was manufactured by Heckler and Koch at the time which was owned by a UK company. This was shortly after the UK Government had rejected an application for a British company to export similar weapons to Indonesia. It is ensuring that that situation does not apply. That will depend on a case-by-case basis.  (Ms Saunders) There is also actually an interesting starting point for this, which is the list of countries of concern which comes at the end of the annual report. That would be my suggested starting point.

  55. There is another sentence in your evidence where you say that the indications are that unscrupulous exporters are locating production of arms outside the UK and EU in order to avoid strict controls. Can you produce that evidence?  (Dr Davis) There is the Turkish example, but I am not—  (Ms Saunders) There is also the example of armoured personnel carriers being produced in the Philippines which are modified from being defensive to offensive vehicles and they have been used in conflict in human rights abuses.  (Mr Crowley) Similarly, there is the case of Ottokar in Turkey, where 70 per cent of it is based on a Land Rover design, and Ottokar in the past have exported such armoured personnel vehicles to Pakistan and also to Algeria.

  56. Would it be possible for you to fill out what you have put there and give us a bit more evidence on this one?  (Mr Crowley) Yes, absolutely.

Mr Khabra

  57. Do you agree that one of the solutions to the problem of support of arms could be prior Parliamentary scrutiny of export departments by a Committee such as this?  (Ms Meek) Yes. I think we have shown quite a bit of support for the suggestions of the QSC that it be given a role in prior Parliamentary scrutiny. I think we generally support the recommendations contained in your most recent report of 6 March. Obviously we, as well as yourselves, are trying to find constructive, perhaps, solutions to the log-jam, if you like, with Government on the proposals, but we see it as an important role. Also, we are pleased that a lot of what is proposed in this draft Bill in terms of review of secondary legislation has been put on a statutory footing as well, so there is a continuing role for a Select Committee on this issue.  (Ms Saunders) I think in terms of licensed production, I agree there is a definite role there because licensed production is often setting up very long-term deals which would require long-term view, and I think it is a place where the wisdom of a Committee like this would be able to actually help provide that perspective and, perhaps, help balance more short-term interests that may be at play.

  Chairman: That is a positive note on which I think we should end this session. May I thank you very much. I leave you with one thought to consider which is not covered in any of the briefs we have received, and that is that this type of legislation is going to require enforcement. What if the enforcement bodies come forward and say they need more extensive powers to enforce it? Where will the line be drawn between that and civil liberties issues? May I leave that as a thought between now and the time we start to debate this Bill, because I think it is quite a serious point. Thank you very much indeed for coming and for the brief. I am sure it is an on-going discussion and debate we are going to have which is going to run into the next Parliament.





 
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