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Mr. Berry: In speaking primarily to new clause 7 and the issue of revocation, I do so in the spirit of my speech on Second Reading. I warmly welcome the Bill. Together with other Government measures taken over the past four years, we now have a policy on arms exports and an attitude to controlling exports that did not exist previously. That contrasts sharply with the regime prior to May 1997. [Hon. Members: "Hear, hear."] I thought I had better get the "Hear, hears" at the beginning.

It is in that spirit that I wish to say that friends and supporters of what my hon. Friend the Minister is doing feel that we have a responsibility to point out ways in which the Bill can be improved. With other colleagues, I tabled new clause 7 in that spirit. I believe that the Government should have the explicit authority to revoke licences where end-use undertakings or other licence obligations have been broken. That should be an explicit authority in the Bill.

I heard what my hon. Friend the Minister said; namely, that the Government already have the power to revoke licences and that the new clause was unnecessary. If we look at past experience, we can see why some of us feel that the Minister is perhaps being slightly optimistic. With others, I had the pleasure of serving from the beginning on the Quadripartite Select Committee and we looked at

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recent experience. When I am told that the Government have no problems in revoking licences, I think of some examples that the Committee looked at in depth—in particular I think of Hawks spare parts, Indonesia and Zimbabwe.

First, I wish to refer to Indonesia. In July 1997, the Government announced new criteria to be applied to arms exports. These were warmly welcomed by all those who felt that it was time to get the trade under firmer control. I very much welcomed the criteria announced at the time. The Government said also at the time that it would be neither realistic nor practical to review existing export licences. The one area where that caused most concern was the existing outstanding licences for arms exports to Indonesia.

In May 1997, the Labour Government inherited 125 active export licences for Indonesia. I will not explain how we got into that position; others may wish to comment. As hon. Members know, there was particular concern about the export of Hawks to Indonesia, given the human rights violations in East Timor. The Government's view was that it was not realistic or practical to review existing licences. The Quadripartite Select Committee interviewed Ministers and produced a report that commented on the matter.

The Committee did not think it impractical to review 125 licences, but we made a note that the reason the Government felt that it was not realistic was based on legal advice about the potential for legal action by exporters if individual licences were revoked. We requested sight of that advice and, perhaps for perfectly understandable reasons, the Government declined to respond to that invitation. That is one example of where there is doubt about the Government's ability to revoke export licences if they so wished. In that case, we had a change of Government and a change of policy. That new policy was applied to new export licence applications—and full credit to the Government for applying it—but the Government felt that they could not review existing licences for fear of legal action.

The second example is much more recent. There were similar concerns about end-use and contractual obligations regarding the transfer of Hawk spare parts to Zimbabwe in February 2000. I shall briefly quote the relevant part of the Quadripartite Committee's report of July 2000:

As it happens, that contractual obligation was subsequently overridden by a ministerial licensing decision and an arms embargo was announced in May, but in February the argument was, "Gosh, we cannot go ahead with what we would like to do—restrict spares supplies to Zimbabwe because the aircraft are being used in the Democratic Republic of Congo—because of legal obligations". In the report of the Quadripartite Committee published in July 2000, that discussion was noted word for word.

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The key issue is that when the Government are deciding whether to revoke an export licence due to, for example, a breach in end-use undertakings, the Government must not be compromised by the risk of legal challenge by the exporter. The Minister, in good faith, has said that he does not believe that that situation need occur, given the Government's existing powers. I have provided him with two examples—there are others, but I shall keep my comments brief—where real concerns were expressed by Ministers at the highest level to the Quadripartite Committee about the Government's existing legal powers. By amending the Bill to include the power to revoke licences for breaches of export licence obligations, the Government would lessen the likelihood of legal challenge and send a clear signal that problems associated with end use were taken seriously.

I am pretty sure that there is no disagreement on that. In article 10(5) of the dummy order on export of goods, transfer of technology and provision of technical assistance, the following statement appears:

Those words happen to be the same, word for word, as the first subsection of new clause 7.

Roger Casale: Will my hon. Friend clarify his argument? Is he saying that, in the instances that he has mentioned, the licences should have been revoked simply because there had been a change of policy and a change of Government, or had there been material changes in the use to which those arms were being put and the circumstances in which they were being used?

Mr. Berry: Because of legal considerations, the Government felt under some obligation to supply spare parts that was contrary to the stated aims of the Government's arms export policy. That is the concern: that there was a conflict, arising from the fact that the Government did not believe that they could interfere with existing licences. For example, in the case of the supply of spare parts for Hawks in Zimbabwe that were used in the DRC, the company had an inherited legal obligation to supply spare parts, so the Government felt that, despite the fact that it was contrary to their policy, they could not act.

Given that the words that form the bulk of new clause 7 are already in the dummy order that the Government have published, how about another cut-and-paste job?

Given that the dummy order makes it clear what powers my right hon. Friend the Secretary of State wants and will take, I do not understand why those powers cannot be specified in the Bill. A similar argument arose in the previous debate, but we must not forget that problems have arisen in recent times over the revocation of licences. It is not entirely accurate to say that the Government have all the powers that they need, as the Select Committee evidence makes clear.

The power to revoke licences is vital, and should be included on the face of the Bill.

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4.30 pm

Dr. Cable: I wish to speak to new clause 3, which goes over much of the ground with regard to revocation set out so authoritatively by the hon. Member for Kingswood (Mr. Berry), and to new clause 4, which deals with the separate and important issue of price scrutiny.

With regard to new clause 3, many hon. Members are struggling to understand how the Government can use the excuse of legal difficulties to explain what they could not follow through on licences, yet at the same time assure people that no legal problem existed. My hon. Friend the Member for Richmond Park (Dr. Tonge) pursued the question of the Hawk aircraft and Indonesia, and the Zimbabwe case has also been mentioned. Until the hon. Member for Leeds, West (Mr. Battle) intervened a few minutes ago, I had not been aware that the revocation powers had been used successfully. I should be interested to know in which cases those powers had been used, as the impression given in the past was that serious legal difficulties attended their use.

However, the legal difficulties do not affect only those seeking to impose controls. The industry is naturally concerned about its reputation, but any export control system will mean that licences will be revoked occasionally. That is the nature of the industry, as I am sure that those involved are well aware. We believe that clarity in this matter would aid both the industry and those who want to impose controls. Therefore, we should set out clearly and explicitly what revocation means, and under what circumstances it can be invoked.

Regardless of one's views about specific cases or the merits of tougher controls, clarity is to be preferred to the rather mysterious and opaque processes that the Government appear to favour. That is why new clause 3 sets out the circumstances in which the Government would have discretion to revoke licences, and the circumstances in which licences must be revoked. When the breaking of end-use undertakings leads to revocation, the new clause specifies what effect that revocation would have. It would also give the Secretary of State specific powers to follow up and monitor the use made of exports. New clause 3 would therefore make the process much less opaque, and that greater transparency would be more satisfactory for everyone involved.

I am not a lawyer, but the non-governmental organisations have sought advice about the legal implications of the Bill. They have been told that the law is difficult, and that it is becoming more so. That is because more precedents have been established in which abuse of power is cited as grounds for disputing Government actions. That approach is becoming increasingly entrenched in the courts, where it is argued that the legitimate expectations of private persons often can be overridden where statutory duties or overriding policy interests are involved. It will become increasingly difficult for the Government to use their legal powers—such as they are—unless that problem is taken account of properly.

In normal circumstances, the Government would argue in a legal action that there had been a material change of circumstances, but that may not be adequate to allow the Government to enforce their authority in this regard. We want the Government to explain more clearly what their legal powers are, and they should give the House some examples of how those powers have been imposed successfully without causing serious friction.

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I should also be grateful for a description from the Minister of how the Government are taking account of the way in which the law is developing. That development and the scepticism of judges are, arguably, making it more difficult for the Government to introduce powers such as those needed for revocation.

New clause 4 involves prior scrutiny—an important issue. I shall not speak at length about that because other hon. Members who have chaired Select Committees or served on the Quadripartite Committee have studied that issue in detail. I shall summarise the key arguments, as I understand them. There has already been something of a game of ping-pong—the Quadripartite Committee reported in July and advocated prior scrutiny and the Government responded to that suggestion, and in a second round the Quadripartite Committee addressed the concerns that were expressed. An iterative process has already taken place, and many of the Government's objections to prior scrutiny have been very carefully considered. I hope therefore that the debate will be somewhat more advanced than those in the earlier stages.

As Labour Members have said, precedents for prior scrutiny exist in the very different political environments of the United States and Sweden. The Government keep arguing that because holes exist in the American system, we should not learn any lessons from it. I have never understood the logic of that argument. There may be holes in the American control system, but that probably has nothing to do with prior scrutiny, which is intended to serve other objectives.

I shall briefly summarise the three arguments that the Government have adduced for not ceding prior scrutiny, the first of which is constitutional. They argue that Parliament, acting in its legislative capacity, may duplicate or conflict with the Executive's role. People who specialise in public and constitutional law have given their advice and they see absolutely no problem with that. Perhaps the Government will explain in a little more detail why they view that as an immovable barrier. That is not at all clear to the lawyers, let alone to the generalists.

The second issue is commercial confidentiality. At the very worst, the integrity of Members and their ability to maintain secrets is being questioned, but perhaps that is not what the Government are worried about; they are probably worried about inadvertent leaks of confidential information. That issue has been argued through before and several key points have been made. First, a good deal of what might be viewed as important commercial information is already released in advance of a licence being agreed. I understand that the publisher of Jane's catalogues already has a process whereby information is exchanged. Codes of conduct and protocols have been developed, and there is not necessarily a problem.

Many of the issues that matter most to business involve the financial details of contracts. There is no reason why prior scrutiny should necessarily involve Members of Parliament considering those details. In any event, the flow of information is controlled by Her Majesty's Government and by the Minister, so MPs involved in scrutiny do not have unlimited access to all the information. If the process can be managed, with those necessary safeguards, most of us are far from clear why Members who serve on the Quadripartite Committee cannot be entrusted with safeguarding the necessary commercial information.

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The third argument that is adduced is that the process causes unnecessary delay. Again, it is far from clear why that should be so. The hon. Member for Ochil (Mr. O'Neill), who is Chairman of the Trade and Industry Committee, has already defused that argument in his witty way.

The scrutiny process operates in parallel to that in the civil service, so we are not talking about additional time; there is no inherent reason why we would add to the 20-day process, and those applications that are, in any event, highly politically controversial will not be completed within the 20-day rule. Most of those arguments have already been addressed by the Quadripartite Committee, which, as the Minister knows, is an all-party Committee of respected Members from both sides of the House. I simply hope that he will deal with that all-party wisdom slightly more sensitively than he did during the debate on the previous group of amendments and that we can make progress.

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